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Annual Review


2017 continued to be challenging for Thai Union with key raw material prices rising significantly. Despite an unfavorable external environment, the company managed to report a record performance both in terms of revenue and net income. Thai Union posted record high sales of THB 136.5 billion and exceeded, in terms of US dollar, the revenue mark of USD 4.0 billion for the first time. Sales growth was 1.6 percent from the previous year in Thai baht terms, and 3.9 percent in US dollar terms. The underlying sales growth was driven by both volume expansion as well as price adjustments to reflect rising raw material prices during the year.

Thai Union recorded a 2017 net profit of THB 6.0 billion, growing 14.6% from the net profit during 2016. While the company faced a challenging raw material price environment, the weak operation was offset by stringent cost control, prudent foreign exchange and tax management, and an increased income contribution from our investment in Red Lobster.

Thai Union’s free cash flow during 2017 operations was positive thanks to strong EBITDA generation and tight control on capital expenditure. The company’s interest-bearing debt rose to THB 67.3 billion while keeping net debt to equity stable at 1.38 times at the end of 2017.

The ambient seafood business saw gross profits decline during 2017 mostly from unanticipated rising tuna raw material cost which could largely not be passed to customers and which put pressure on our branded tuna business margins. On the other hand, the frozen, chilled and related seafood business managed to improve its gross profits from growing sales volumes during 2017. We continue our strong growth focus on PetCare and value-added items, as seen in the segment’s revenue growth amidst unfavorable of raw material prices which led to price pressure and some margin compression.

The ambient seafood business remained the largest sales contributor of Thai Union with 45 percent of 2017 total sales. The ambient seafood revenue growth was driven mainly by product price adjustment to reflect rising tuna raw material cost. Frozen, chilled seafood and related business accounted for 42 percent of the total sales. The segment’s sales growth came from volume growth during the year primarily from increased domestic and export revenue in our Thailand base shrimp operations and the acquisition of Canadian-based lobster supplier Chez Nous during 2017.

During 2017, the U.S. market remained the company’s largest market with a contribution of 38 percent to the revenue. Thai Union’s European business has contributed 32 percent of total sales. Thailand domestic sales accounted for 10%, the sales contribution improving from 8 percent a year earlier. Besides the product repricing to reflect high raw material prices, growth in Thailand came from new product launches such as the frozen seafood brand Qfresh and our new shrimp snack Monori. Other important markets were Japan at 6 percent, while markets such as Africa and the rest of Asia made up the remaining 15 percent of Thai Union’s sales. Especially our strategic initiatives in the Emerging Markets and China are showing first signs of being future growth drivers.

The following are key factors that contributed to the company’s 2017 performance:

  1. Tuna raw material price increased 31% from 2016

    In 2017, the average tuna raw material price was USD 1,860 per ton, up 31 percent from the 2016 average price. The increased tuna raw material prices prompted cost pressure, especially in the branded business, particularly in France, UK and Italy, where selling prices tend to be inflexible during the short term. As the tuna business is a major contributor of the ambient seafood business, the segment’s gross margin declined to 15.5 percent during 2017, down from 17.0 percent a year earlier.

  2. Salmon price stabilized during 2017

    In 2017, the average salmon raw material price was at NOK 61 per kilogram, down 3.7 percent from the 2016 average price. Overall, the salmon raw material prices became more stable with reducing effects from salmon farming disruptions during 2016. As a result, Thai Union’s European salmon operation has been gross margin positive throughout the year.

  3. Focus on value-added shrimp production and export

    During 2017, Thailand’s shrimp production remain stable from 2016 level with the country’s total output at approximately 300,000 tons, due to the prolonged raining and flooding in some aquaculture areas. The 2017 average Thailand shrimp price (60 pieces per kilogram) slightly increased 3.0 percent from the 2016 level to THB 183 per kilogram due to general inflation. However, Thai Union has continued to focus its emphasis on producing value-added product, resulting in improved profitability for shrimp product exported from Thailand.

  4. Strategic investment in Red Lobster contributed to net profit growth

    In 2016, Thai Union made a USD 575 million strategic investment in Red Lobster, the world’s largest seafood restaurant chain. During 2017, the investment has added net contribution of THB 760 million to the company’s net profits, mostly from the interest income from the convertible preferred units and tax credit as a result of the investment. The operational performance of Red Lobster has been below expectations and the standalone business has not been net income positive. Red Lobster is the world’s largest seafood restaurant company with annual revenue of USD 2.5 billion and operates over 750 stores globally through own-operation and franchisee.

  5. Currency fluctuation

    Thai Union has approximately 90 percent of sales occurring in foreign currencies, mostly in USD, Euro and to some degree in GBP. Despite currency volatility with the Thai Baht appreciating significantly against the USD, the company managed to grow revenue in Thai Baht term. Through a prudent currency hedging management, the company capitalized on the Thai Baht appreciation, which resulted in significant foreign exchange gains of THB 1,256 million during the year. The majority of these foreign exchange gains are derived from derivative contracts to de-risk our trade activities, under Thai GAAP, these gains are reported under currency gains and losses.

  6. Prudent SG&A expense management

    Given the difficult external environment during 2017, Thai Union focused on internal cost efficiency, active cost control and various cost efficiency initiatives implemented during the year. As a result, our 2017 SG&A expense increased only 2.3 percent year-over-year. This resulted in SG&A to sales ratio of 9.8 percent, which is stable from a year ago and below the company’s SG&A to sales ratio target of 10 percent. Included in this are one-time restructuring charges associated with delayering our European headquarter organization, one-time expenses from relocating our San Diego office to Los Angeles to form a combined regional office as well as cost related to the reduction of manufacturing labor in Ghana.

  7. Balance sheet leverage remains above our target range

    Despite our abstinence in acquisitions, the 2017 net debt-toequity slightly increased to 1.38 times compared to the 1.37 times at the end of 2016. The marginal increase was attributed to the increase in inventories as a result of high raw material prices as well as strategic inventory build ups at the end of the year. Overall, the ratio is still well below our debt covenant threshold of 2.0 times. Net debt was higher at THB 67.3 billion, from THB 65.9 billion in 2016.

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The ambient seafood business recorded sales of THB 61,145 million, up 0.1 percent from THB 61,077 million a year ago. While the average selling price improved 3.2 percent as the company repriced its products to reflect high tuna raw material price during the year, the volume sales declined 3.0 percent compared to 2016 to 364,721 tons. Gross profit margin of ambient seafood declined to 15.5 percent from 17.0 percent a year ago, mainly driven by rising tuna prices, which posted a challenge to Thailand-based export business as well as European branded business.

On average, the skipjack price (WPO/ Bangkok landing) during the year increased 30.5 percent to USD 1,860 per metric ton from USD 1,425 per metric tons a year ago. While repricing of our tuna products supported the average selling price, part of the volume sales had been compromised during 2017, which resulted in a marginal sales growth during the year. Ongoing product price negotiation should help alleviate the impact of the high raw material price and support margin recovery into 2018.


Frozen, chilled seafood and related business recorded sales of THB 57,315 million, up 2.7 percent from THB 55,832 million a year ago, thanks to increased sales volume. 2017 sales volume increased 3.8 percent to 248,255 tons. The sales growth was driven by the acquisition of Chez Nous in Canada into our Lobster business during 2016 as well as improved seafood exports from Thailand. Shrimp price was relatively stable from a year ago, with 2017 shrimp price (60 piece per kilogram) average at THB 183 per kilogram marginally increased by 2.6 percent from 2016 average price. The gross profit margin slightly declined to 9.2 percent from 9.4 percent a year ago. Salmon prices became more stable during 2017 with average salmon price at NOK 60.8 per kilogram, down 3.7% from 2016 average salmon price. As a result from price stability and continued product price adjustment, Thai Union’s European salmon business profitability improved during 2017.


During 2017, we have carried out a few important financing and investment activities as followed:

  1. Thai Union secured THB 24.5 billion long-term financing for Red Lobster Deal

    TU has issued the biggest-ever bond amounted to THB 12,000 million, which attracted strong support from institutional investors, and were oversubscribed 2.6 times. The tenors were 3, 5, 7 and 10 years with coupon rate ranging from 2.49% to 3.94% p.a. TU also secured THB 12,500mn in long-terms loans with Bangkok Bank PCL, Bank of Ayudhya PCL, and Siam Commercial Bank PCL were Lead Managers. In total, TU secured THB 24,500mn to secure long-term financing for our Red Lobster investment

  2. Thai Union increased the shareholding in subsidiaries, Pakfood Public Company Limited (PPC) and Yueh Chyang Canned Food Company Limited (YCC)

    Thai Union acquired additional shares in subsidiaries, Pakfood Public Company Limited (PPC) and Yueh Chyang Canned Food Company Limited (YCC). The company increased shares in PPC from 77.44 percent to 99.74 percent in September 2017; and shares in YCC from 82.93 percent to 99.55 percent in November 2017. The increase in shareholding of subsidiaries targets at enhancing collaboration, synergy among the company’s subsidiaries, as well as allow the company to fully capitalize on the subsidiaries’ operational performance.

Future Prospect and Action Plan

In 2018, we expect a year of continued sales growth driven by three main sources:

1) organic expansion of our existing business through growing volume sales and product repricing, 2) growth in our new business divisions Emerging Markets, Foodservice and Marine Ingredients through product and process innovation and further venturing into new markets, and 3) improve business collaboration with the company’s affiliates and subsidiaries. Together, they will drive our sales and support the company’s strategic target to reach USD 8.0 billion by 2020 as a sum of all its consolidated businesses and strategic investments.

On the back of continued sales growth expectation into 2018, Thai Union expects its profit margin to improve in 2018 due to 1) a continued business turnaround for the European salmon business, 2) tuna business product repricing, 3) turnaround in our North American Lobster business and 4) introduction of new innovative products. Aside from the growth in our business operations and margin expansion, the company will continue to focus on prudent cost control on all levels of the organization.

Thai Union continues to prioritize the following five key areas of operation into 2018:

  1. Operational excellence
    • Continue to negotiate and reprice our products to reflect actual costs
    • Focus on cost productivity in plants and SG&A functions and achieve improved profitability and efficiency of existing operation
  2. M&A / Post Merger Integration
    • Red Lobster continues to support business growth, net income contribution and international expansion
    • Improve business integration and collaboration globally
    • Maintain conservative on new M&A with focus on smaller deal sizes rather than large acquisitions
  3. New Businesses
    • Further penetrate into Emerging Markets and utilize the company’s global brand presence more effectively with focus on South East Asia, China and Middle East / Africa
    • Full commercial launch of our Marine Ingredients business to utilize the company’s co-product at higher value
  4. Innovation
    • Expand our Global Innovation Incubator (Gii) to cover our PetCare and Frozen Shrimp business and re-align Gii efforts around packaging technology, process innovation, by products valorization and the continued re-invention of the tuna category
    • Successful commercialization of Gii projects, both on new products and processes initiatives
  5. Sustainability
    • Expand our SeaChange® and Tuna Commitment sustainability programs to address our commitment towards plastic packaging as well as our support to the global ghost gear initiative
    • Demonstrate leading capabilities in responsible sourcing and fair labor

Total planned capital investment will be THB 4.8 billion as we continue to improve and streamline our existing operations in order to achieve sustainable long-term growth as well as the capital expenditure related to the new business division. Key investment items will be machinery & equipment, construction and improvements on buildings as well as investments into our SAP based enterprise system. Due to the continual expansion of our existing business, the general financial health should improve further as positive cash flows increase.

Our dividend policy to pay at least 50 percent of our net profits, remains unchanged. We plan to continue our practice to pay a half yearly interim dividend.

Thanks to our prudent management and positive cash flow profile despite difficult environment, we have managed to report record profits and an increased dividend payment to THB 0.66 per share for operating year 2017, up from THB 0.63 per share in 2016. Thai Union has consistently paid dividend every year since the company’s listing on the Stock Exchange of Thailand in 1994.

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Ratios 2015 2016 2017
Liquidity Ratios      
Current Ratio (Times) 1.47 1.01 1.71
Quick Ratio (Times) 0.48 0.29 0.47
Leverage Ratios      
Gearing Ratio (Times) 1.29 2.00 2.03
Debt to Equity (Times)* 0.81 1.39 1.40
Net Debt to Equity (Times)* 0.75 1.37 1.38
Time Interest Earned (Times) 5.55 5.66 4.02
Efficiency Activity Ratios      
Total Assets Turnover (Times) 1.11 1.06 0.95
Inventory Turnover (Times) 2.91 3.06 2.85
Accounts Receivable Turnover (Times) 8.09 8.83 9.48
Accounts Payable Turnover (Times) 11.66 10.77 9.43
Inventory Days (Days) 124 118 126
Account Receivable Days (Days) 44 41 38
Account Payable Days (Days) 31 33 38
Profitability Ratios      
Gross Profit Margin (%) 15.6 14.8 13.3
EBITDA margin (%) 9.2 8.3 8.3
Net Profit Margin (%) 4.2 3.9 4.4
Return on Average Equity (%) 11.9 11.8 13.7
Return on Assets (%)** 7.8 6.4 6.0
Return on Capital Employed (%) 12.0 10.5 8.9
Per Share Data      
Earnings per Share (Thai Baht) 1.11 1.10 1.26
Dividend per Share (Thai Baht) 0.63 0.63 0.66
Book Value per Share (Thai Baht) 9.60 9.06 9.32
* Debt = Interest bearings debt only
** Pre-tax ROA = EBIT / Average total assets


An Overview

2017 was the 8th consecutive year of record sales for Thai Union and the record net profits at THB 6.0 billion. Despite the business operation facing the challenge of rising tuna raw material prices, the company managed to deliver annual revenue that surpassed USD 4.0 billion for the first time.

The average tuna raw material prices increased 30.5 percent compared to the previous year to USD 1,860 per ton during 2017. Average shrimp and salmon prices were relatively stable from 2016 average price level. While Thai Union managed to pass on some price increase to customers through product repricing, the rapid rising tuna raw material price situation has put pressure on the company’s overall profitability.

2017 domestic shrimp production remain stable from 2016 level with the country’s total output at approximately 300,000 tons, due to the prolonged raining and flooding in some aquaculture areas. Our shrimp & related business continued to grow in term of revenue and volume sales, thanks to increased domestic shrimp exports, more focus on higher margin value-added products.

While the high raw material prices put pressures on the operating performance of the company, the stringent cost control, increased income contribution from the strategic investment in Red Lobster, and prudent foreign currency and tax management supported the record net profits of THB 6.0 billion, an increase of 14.6% compared to 2016 net profits.


2017 sales set another record at THB 136.5 billion (+1.6 percent year-over-year), surpassing USD 4.0 billion mark (+3.9 percent year-over-year), where the growth was driven by both product repricing from high raw material situation as well as organic sales volume growth through new market penetration.

The ambient seafood sales contribution was at 44.8 percent during 2017, down from 45.5 percent in the previous year, as the segment sales was stable from the previous year. The 2017 frozen, chilled seafood and related business sales contribution improved to 42.0 percent, up from 41.5 percent in 2016, due to an increase in domestic shrimp exports and salmon product repricing. PetCare, value-added and others business segments contributed the remaining 13.2 percent of total sales (13.0 percent in 2016).

The U.S. market remains Thai Union’s largest market with sales contribution of 38 percent of total sales, down from 39 percent during 2016, mainly due to the US dollar depreciated 6.9 percent against Thai Baht during 2017. Sales contribution from the European markets was at 32 percent (from 33 percent during 2016). Thai market sales contribution improved to 10 percent, up from 8 percent, due to improved sales volume and new product launches. While Japan market’s contribution remained at 6 percent, unchanged from the previous year.

2017 branded sales mix slightly increase to 42% (up from 41% during 2016) leaving the private label sales contributing the remaining 58% of 2017 sales (from 59 percent during 2016). While declined in sales contribution, the private label sales continued to show growth rate of 1.0 percent compared to 2016. Contribution from sales to the Foodservice channel stayed at 12%, half in branded and half in private label.

Gross Profit

2017 gross profit was at THB 18.1 billion, a decline of 9.0 percent year-over-year. The gross margin declined to 13.3 percent from 14.8 percent in 2016, driven mainly by a rise in tuna raw material prices.

The ambient seafood business showed a gross margin contraction to 15.5 percent (from 17.0 percent in 2016). Lower profitability was due to the rising tuna raw material prices during the year, which put pressure on both branded and private label ambient seafood business segment.

With the salmon production situation become more normalized and 2017 salmon price stable from 2016 average price level, the frozen, chilled seafood and related business gross margin was relatively stable at 9.2 percent (from 9.4 percent in 2016). The gross margin of PetCare, value-added and others business was lower year-over-year, mainly due to the high tuna raw material price and some cost reclassification.

Selling and Administrative Expense (SG&A)

2017 SG&A expenses increased by 2.3 percent year-over-year to THB 13.4 billion. Due to the continued stringent cost control, the 2017 SG&A to sales ratio was at 9.8 percent, stable from 2016 level. Thai Union managed to prudently control cost below the company’s target cost ratio of 10 percent.

Operating Profit

2017 operating profit was THB 4,711 million, down from THB 6,804 million during 2016, mainly due to rising tuna raw material prices. While the SG&A cost ratio has partly offset the impact of the declining gross margin, the 2017 operating profit margin still declined 161bps year-over-year to 3.5 percent.

Other Income (including share of income from investment in associates)

2017 other incomes increased by 89 percent year-over-year to THB 2.6 billion, mainly due to the Interest income from the investment in Red Lobster that contributed to the company’s other incomes for the entire 2017 as well as strong earnings in our associated company Avanti Feeds Ltd., India.

FX Gain/Loss

2017 FX gain was at THB 1,256 million, up from a gain of THB 84 million in 2016. The increase in FX gains was due mainly to the significant Thai Baht appreciation of 6.9 percent against US dollar. While the Thai Baht appreciation was a challenge to Thai Union export business profitability, a prudent foreign exchange management partly support the net profit growth during 2017. Majority of the FX gains are a result of risk mitigating hedging activities for our operational trade business which is reported as FX gains under TFRS.

Finance Cost

2017 finance cost was at THB 2,141mn, materially rose by 36.2% YoY (from THB 1,572mn during 2016). The rise was primarily driven by annualized increased debt to fund the investment into Red Lobster (acquisition was closed in October 2016). Interest-bearing debts as at end of 2017 amounted to THB 67,297mn, versus THB 65,918mn as at end of 2016. In addition, effective interest cost for 2017 was 3.21%, from 2.99% during 2016.

Corporate Income Tax

2017 income tax credit was at THB 98mn, from the tax payment of THB 583mn. The tax credit was contributable to lower-thannormal income tax expense in 2017 which primarily came from tax benefits derived from the investment into Red Lobster, new income tax regulations in France, tax effects from United States tax rate adjustment as well as the decrease in deferred tax liabilities as a result of tax rate reduction in France. Moreover, the loss-making European salmon business still provided some tax credit for the company.

Net profit

2017 net profit was at THB 6,021mn, increased by 14.6% from THB 5,254mn in 2016. The increase was mainly driven by beneficial income taxes, an increase in other income contributed from Red Lobster and Avanti investments, FX gain and a stringent SG&A expenses control. Net profit margin was at 4.4 percent, up from 3.9 percent a year earlier.


Total assets in 2017 amounted to THB 146.3 billion, representing an increase of THB 3.9 billion from THB 142.4 billion in 2016.

  • Net trade receivables were THB 16.3 billion, down 0.4 percent or THB 68 million from THB 16.4 billion in 2016, in contrast of the growing consolidated sales. Accounts receivable turnover improved to 9.48 times from 8.83 times in 2016, due to a lower average accounts receivables and continued sales growth supported by selected factoring programs. 2016 accounts receivable days declined to 38 days from 41 days in 2016.
  • Net inventories increased by 9.4 percent to THB 43.4 billion from THB 39.6 billion a year ago due mainly to a higher tuna raw material price and strategic inventory buildup. As a result, 2017 inventory days increased to 126 days from 118 days a year ago.
  • Asset turnover rate decreased to 0.95 times in 2017 from 1.06 times in 2016 due to a higher growth rate of total assets, mainly from the strategic investment in Red Lobster, made during late 2016. Moreover, the investments did not contribute to the consolidated sales due to the nature of investment holdings.
  • Current ratio improved year-overyear at 1.71 times in 2017 from 1.01 times in 2016. Similarly, the quick ratio improved to 0.47 time from 0.29 times. The improvement of both ratios was mainly due to the short-term bridge loans were refinanced into a long-term debt instrument during 1Q17, thus significantly reduced current liabilities.
  • Property plant and equipment totaled THB 25.3 billion, increased from THB 23.3 billion in 2016 partly due to the capital expenditure for both organic growth, new businesses and our IT infrastructure.

Total liabilities in 2017 amounted to THB 98.0 billion, representing an increase of THB 3.1 billion from THB 64.9 billion in 2016.

  • Trade payables were THB 19.8 billion, up 13.7 percent from THB 17.4 billion in 2016. 2016 trade payables days increased to 38 days from 33 days in 2016, thanks to better management of trade terms with suppliers as well as focus on supply chain finance programs to improve overall payables. The accounts payable turnover rate improved to 9.4 times compared with 10.8 times a year ago.
  • Bank overdrafts and short-term loans decreased by 59 percent to THB 15.4 billion from THB 37.0 billion in 2016 due to the debt refinancing from short-term bridge loan to long-term debt instruments in early 2017. • Long term loans increased by 99 percent to THB 51.0 billion from THB 25.6 billion as the company refinanced its short-term debt to long-term debt instruments during 2017.
  • Interest-bearing debts were THB 67.3 billion, up 2.1 percent from THB 65.9 billion a year ago. The proportion of long term debts (including the current portion) was at 77 percent of the total interesting bearing debts, due mainly to the short-term bridge loan refinancing during the year.
Shareholders’ Equity

Equity attributable to shareholders of the Company in 2017 amounted to THB 44.5 billion, representing an increase of THB 1.2 billion from THB 43.2 billion in 2016 due mainly to the company continue to record net profits during the year.

  • Total liabilities to equity ratio in 2017 marginally increased to 2.03 times, from 2.00 times in 2016 mainly due to an increase in working capital requirement to fund increased inventory level as a result from rising raw material price.
  • With an absence of significant M&A activities during 2017, the company’s net debt-to-equity ratio remain at 1.38 times at end-2017, stable from 1.37 times a year ago. This ratio is still well below the debt covenant threshold of 2.0 times but is higher than our long-term target range of 1 to 1.2 times. Net debt was at THB 67.3 billion, from THB 65.9 billion in 2016.
  • Return on average capital employed in 2017 was at 8.9 percent, down from 10.6 percent in 2016, mainly due to an increase in debt funding for the Red Lobster investments. The return on average equity in 2017 increased to 13.7 percent from 11.8 percent in 2016 thanks to record net profit during the year
Cash Flows

In 2017, net cash receipts from operating activities were THB 6,817 million. Positive cash flow was driven mostly by profitable operation (EBITDA: THB 11,366 million) during the year despite a challenging operational outlook. A continued rise in tuna raw material prices resulted in higher inventory value and a negative net working capital of THB 2,471 million during 2017.

Net cash payments for investing activities were THB 2.4 billion (from THB 29.4 billion during 2016) due to normal capital expenditure activities and a lack of M&A investment activity during the year.

Thai Union recorded net cash payment for financing activities of THB 4,551 million, due to the debt repayment as well as dividend payment during the year.

Net decrease in cash and cash equivalents, including an exchange loss on cash and cash equivalent were THB 158mn resulting with the end-2017 cash and cash equivalent balance of THB 815mn (excluding impact from the use of Bank Overdraft).

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