Annual Review
Overview
The 2023 global economy showed resilience amidst challenges, including geopolitical tensions and especially inflation persistence, which is easing but remains above pre-pandemic levels. Thai Union effectively navigated these challenges through strategic measures that minimized impacts and was able to deliver positive momentum in the second half of the year, ensuring Thai Union's strong positioning for sustainable growth. The Group’s adaptability and strategic foresight have been crucial in maintaining its market leadership and setting the stage for future success in an ever-changing global landscape.
Thai Union Group PCL reported sales of THB 136.2 billion, decreasing by 12.5 percent compared to the previous year, mainly from exceptional performance of i-Tail in 2022, the U.S. Frozen rightsizing and Frozen price deflation, freight revenue normalization and Middle East USD shortage situation. Furthermore, overall sales volume decreased by 12.9 percent year over-year, resulting from soft demand across all categories and the U.S. Frozen rightsizing strategy.
2023 gross profit marked at THB 23.2 billion, down by 14.6 percent year-over-year. Thai Union continued to deliver a healthy gross profit margin at 17.1 percent, but slightly lower than the previous year, mainly from high fish prices (+7.3% year-overyear).
Thai Union reported normalized net profit at THB 4.5 billion in 2023, declining by 37.0 percent year-over-year (-28.0 percent year-over-year, if excluded i-Tail dilution impact). Normalized operation excluded THB 18.4 billion one-time non-cash impairment of Red Lobster and IFRS 5 reclassification. The decrease was largely driven by lower operating profit and unfavorable items, namely FX losses, higher finance cost, and lower tax credit. Normalized net profit margin was at 3.3 percent. If included these one-time items, reported net profit in 2023 was a loss of THB 13.9 billion.
2023 free cash flow was strong at THB 7.3 billion and returned to pre-covid level, driven by effective net working capital management and lower CAPEX, despite pressured EBITDA. Thai Union’s 2023 net debt to equity ratio was at 0.78 times, up from 0.54 times at the end of 2022 but still at a strong position.
The ambient seafood business remained the largest sales contributor for Thai Union with 46.9 percent of total sales in 2023. Frozen, chilled seafood and related business accounted for 34.7 percent of total sales, down from the U.S. Frozen rightsizing. PetCare business accounted for 11.1 percent, down from the exceptional performance in the previous year. Value-added and others business contributed 7.3 percent of total sales, relatively stable from the previous year.
The following are key factors which contributed to the Group’s 2023 performance:
1. CUSTOMERS STOCKING VOLATILITY IN 2023
In the first half of 2023, Thai Union’s performance was pressured mainly from high baseline last year and softer demand across all categories as customers managed their high inventory levels, especially in Ambient seafood and PetCare businesses. Additionally, tuna prices surged significantly in the first half of 2023 due to lower average catching rate; however, in the second half of 2023, we have seen sign of improvement from our customers starting restocking because of logistic normalization and lower raw material prices.
2. SEVERAL KEY DECISIONS HAVE BEEN MADE TO STRENGTHEN OUR CORE BUSINESS AND BE FIT GROWTH
Thai Union continued to divest loss-making business to optimize our manufacturing footprint and enhance competitiveness. Details are as follows:
1. Operational closed
- Lubeck plant was closed to increase operational efficiency in Germany
- China (Frozen) operation was closed
2. Business downsizing
- Scaled down several local businesses in Thailand (supplements, Ambient and Chilled)
3. Rationalization
- The U.S. Frozen business was rightsized and will now focus on profitability over revenues
3. ANNOUCEMENT OF INTENTION TO PURSUE AN EXIT OF MINORITY INVESTMENT IN RED LOBSTER
Since 2016, Thai Union has been a strategic partner and minority investor in Red Lobster. In 2023, Thai Union conducted a review of Red Lobster to identify areas for operational and financial improvement. On January 16, 2024, after detailed analysis, the Group determined that Red Lobster’s ongoing financial requirements no longer align with the Group’s capital allocation priorities and therefore pursued an exit from the Group’s minority investment. Following the decision to exit, Thai Union recorded a one-time non-cash impairment of THB 18.4 billion in the fourth quarter of 2023. In addition, Red Lobster-related transactions in 2023, mostly share of loss from operation and lease accounting, were reclassified to present under discontinued operations line under IFRS 5 (assets held for sale/discontinued operations), together with one-time non-cash impairment of THB 18.4 billion, amounting to THB 19.6 billion.
4. CURRENCY FLUCTUATIONS
Thai Union has approximately 88.5 percent of sales occurring in foreign currencies, mostly in the U.S. dollar, Euro, and British Pound. Thai Baht appreciated against the U.S. dollar during the fourth quarter of 2023 to 35.0 in December 2023. However, the Group’s policy is always conservative with systematic hedging, which covers more than 80 percent of anticipated sales to mitigate the risks from FX volatility.
AMBIENT SEAFOOD BUSINESS
The ambient seafood business recorded sales of THB 63.9 billion, down by 3.9 percent from THB 66.5 billion in 2022. Sales volume dropped by 12.7 percent from the previous year, mainly from soft demand and persisting high fish prices for nearly 3 quarters, partially offset by higher selling prices; however, OEM customers started restocking due to downtrend of tuna prices in the fourth quarter of 2023. Consequently, the gross profit margin stood at 19.0 percent in 2023, mainly impacted by high fish prices and lower sales volumes.
On average, the skipjack tuna price (WPO/Bangkok landing) during the year increased by 7.3 percent to USD 1,784 per metric ton from USD 1,663 per metric ton in 2022.
FROZEN, CHILLED SEAFOOD AND RELATED BUSINESS
Thai Union’s frozen, chilled seafood and related business recorded sales of THB 47.3 billion, contracted by 17.0 percent from THB 57.0 billion from the previous year, primarily from the rightsizing of frozen business in the U.S. which vanished both sales value and volume, softer demand in the U.S. market, and price deflation. Nevertheless, Thai Union’s strategy is to prioritize the U.S. Frozen on profitability rather than the size of revenue. In 2023, the gross profit margin improved impressively to double digit at 11.3 percent, thanks to favorable logistic costs and raw material prices, as well as portfolio rationalization.
The average shrimp price (60 pieces per kilogram) declined by 14.8 percent to THB 138 per kilogram in 2023 from the previous year at THB 162 per kilogram. The average salmon price in 2023 was at NOK 95 per kilogram, up 18.2 percent from the previous year at NOK 80 per kilogram.
PETCARE BUSINESS
PetCare business recorded sales of THB 15.1 billion, dropped by 30.6 percent from the previous year, due mainly to high baseline in 2022 and destocking issue, especially in the first half of the year; however, in the second half of the year sales and margin performance started to accelerate, and are anticipated to return to grow in the upcoming quarter (the first quarter of 2024). The gross profit margin of PetCare business in 2023 was at 20.5 percent, down from 26.3 percent in 2022, driven by lower sales volume, unfavorable product mix, and higher cost per unit.
VALUE-ADDED AND OTHER BUSINESSES
Value-added and other businesses recorded sales of THB 9.9 billion, down by 5.0 percent from the previous year, owing to high baseline in 2022 and soft performance of packaging, attributed to performance of its downstream canned business, partially offset by value-added and ingredient businesses growth. Nonetheless, the gross profit margin of Value-added and other businesses in 2023 remained healthy at 27.1%, thanks to lower raw material prices, especially steel and aluminum, production efficiency improvement, and new ranges of product, partly offset by lower sales volumes.
FUTURE PROSPECTS AND ACTION PLAN
Thai Union’s vision is to be the world’s most trusted seafood leader, caring for our resources to nurture generations to come. We also seek to continue to deliver healthy and responsibly sourced nutrition to our consumers globally, while creating longterm value for our stakeholders. Thai Union has made a commitment through the SeaChange® sustainability strategy, as part of our “Healthy Living, Healthy Oceans”. In July 2023, Thai Union announced a major update to SeaChange® with new goals and new commitments through to 2030, committing THB 7.2 billion (USD 200 million) to advance sustainability goals. This included actions across a wide range of topics to address such as the decline in biodiversity, tackling climate change, ensuring endangered species are protected, important ecosystems are restored, and that natural resources are managed sustainably.
In early 2024, Thai Union will launch its Corporate Strategy 2030, which will focus on its core business, centered around Ambient Seafood, Frozen, and PetCare. Through this, Thai Union’s management will advance ongoing strategies that strengthen its overall profitability and deliver long-term enhanced value for the Group’s shareholders.
As part of our guidance for 2024, Thai Union will focus on sales growth of 3.0 – 4.0 percent from a year earlier. We aim to reach the gross profit margin level at approximately 17.0 – 18.0 percent in 2024. The SG&A to sales ratio will be at approximately 11.0 – 12.0 percent. Additionally, we expect a slight increase in the effective interest rate at 0.0 – 0.5 percent in 2024.
In 2024, the total planned capital investment will be approximately at THB 4.0 – 4.5 billion as we focus on carrying out capital expenditure related to both existing and new business divisions and continue to improve and streamline our existing operations to achieve sustainable profitable growth.
Our key investment items during 2024 will be a culinary plant for ready-to-eat products, a protein hydrolysate and collagen peptide plant, and wet pet food in Thailand. Additionally, we will continue to invest in machinery and equipment, construction and improvements on buildings, as well as capacity expansion on our core businesses. Due to the ongoing continuous improvement in manufacturing and expansion of our existing business, Thai Union’s general financial health should improve further as positive cash flows increase.
We continue our commitment to deliver a high dividend payout ratio, with a minimum of 50 percent payout of our net profit with semi-annual payments.
BUSINESS OVERVIEW BY REGION
In 2023, sales dropped across all regions, especially in the U.S. and Canada; however, the U.S. and Canada market remained the Group’s largest market, contributing 40.7 percent of total sales, following by the European market which represented 29.6 percent of total sales. In Thailand, domestic sales accounted for 11.5 percent, posting soft sales led by lower demand across almost all categories, while Emerging Markets and the rest of the world contributed 18.2 percent of total sales.
Thai Baht depreciated against the Euro (up by 2.0 percent year-over-year) and Pound Sterling (relatively stable year-over-year), but contrastingly strengthened against the U.S. Dollar (down by 0.7 percent year-over-year).
Sales in the U.S. and Canada dropped significantly by 19.0 percent year-over-year in 2023, primarily from the rightsizing of the U.S. Frozen business as well as weak demand from destocking issue and economic slowdown.
Sales in Europe were almost flat compared to last year, as lower volume by 13.9 percent year-over-year, which was temporarily impacted by further price increases and soft demand from PetCare, was mitigated by rising demand for value-enhancing business.
Sales in Thailand contracted by 4.4 percent year-over-year, while sales in Emerging Markets and the rest of the world went down substantially by 16.5 percent year-over-year from high baseline last year, soft demand from destocking issue, and the U.S. Dollar shortage in the Middle East.
COMPARATIVE FINANCIAL RATIOS
| Ratios | 2020 | 2021 | 2022 | 2023 |
|---|---|---|---|---|
| Liquidity Ratios | ||||
| Current Ratio (Times) | 1.37 | 1.56 | 2.38 | 1.70 |
| Quick Ratio (Times) | 0.45 | 0.54 | 0.83 | 0.64 |
| Leverage Ratios | ||||
| Total Debt to Equity Ratio (Times) | 1.59 | 1.68 | 1.07 | 1.51 |
| Debt to Equity (Times)** | 1.05 | 1.14 | 0.68 | 1.03 |
| Net Debt to Equity (Times)** | 0.94 | 0.99 | 0.54 | 0.78 |
| Time Interest Earned (Times) | 5.22 | 6.21 | 4.29 | 3.00**** |
| Efficiency Activity Ratios | ||||
| Total Assets Turnover (Times) | 0.92 | 0.91 | 0.89 | 0.78 |
| Inventory Turnover (Times) | 2.89 | 2.71 | 2.59 | 2.19 |
| Accounts Receivable Turnover (Times) | 11.11 | 11.81 | 11.50 | 9.77 |
| Accounts Payable Turnover (Times) | 9.64 | 10.03 | 9.90 | 9.23 |
| Inventory Days (Days) | 125 | 133 | 139 | 164 |
| Account Receivable Days (Days) | 32 | 30 | 31 | 37 |
| Account Payable Days (Days) | 37 | 36 | 36 | 39 |
| Profitability Ratios | ||||
| Gross Profit Margin (%) | 17.7 | 18.2 | 17.5 | 17.1 |
| EBITDA margin (%) | 9.8 | 10.6 | 8.3 | 8.2**** |
| Net Profit Margin (%) | 4.7 | 5.7 | 4.6 | 3.3**** |
| Return on Average Equity (%) | 14.1 | 16.1 | 11.1 | 7.1**** |
| Return on Assets (%)*** | 6.3 | 6.9 | 4.9 | 4.0**** |
| Return on Capital Employed (%) | 9.2 | 10.1 | 6.8 | 5.6**** |
| Per Share Data | ||||
| Earnings Per Share (Thai Baht) | 1.26 | 1.66 | 1.47 | 0.93**** |
| Dividend per Share (Thai Baht) | 0.72 | 0.95 | 0.84 | 0.54 |
| Book Value per Share (Thai Baht)*** | 9.69 | 11.18 | 15.7 | 13.16 |
| * | Debt = Interest bearing debt only |
| ** | Pre-tax ROA = EBIT/Average total assets |
| *** | BV = Total shareholders’ equity / (outstanding shares – share repurchase) |
| **** | Profitability ratios are calculated on normalized number, excluding one-time non-cash impairment of Red Lobster (THB 18.4 billion) in the fourth quarter of 2023 and before IFRS 5 reclassification. |
FINANCIAL ANALYSIS
Sales
Thai Union reported sales of THB 136.2 billion in 2023 (down by 12.5 percent year-over-year), mainly from lower sales across all categories: PetCare (-30.6 percent year-over-year from an exceptional performance last year), Frozen and chilled seafood (-17.0 percent year-over-year), Value-added and others (-5.0 percent year-over-year), and Ambient seafood (-3.9 percent year-over-year). Furthermore, overall sales volumes decreased by 12.9 percent year-over-year, resulting from soft demand across all categories and the U.S. Frozen rightsizing strategy. The details are as follows:
- Ambient seafood recorded sales at THB 63.9 billion, representing 46.9 percent of 2023 total sales, decreasing by 3.9 percent from the previous year, mainly from volume shortfall and persisting high fish prices for nearly 3 quarters, partially offset by higher selling prices.; however, OEM customers started restocking due to the downtrend of tuna prices in the fourth quarter of 2023.
- Frozen and chilled seafood and related business reported sales at THB 47.3 billion, representing 34.7 percent of 2023 total sales, decreasing by 17.0 percent year-over-year, mainly from rightsizing strategy, softer demand in the U.S. market and price deflation. Nevertheless, our strategy is to prioritize the U.S. frozen profitability over the size of revenue.
- PetCare sales were at THB 15.1 billion, representing 11.1 percent of 2023 total sales, dropping by 30.6 percent from the previous year, mainly from high baseline last year and destocking issue, especially in the first half of 2023; however, in the second half of 2023 sales and margin performance started to accelerate and are anticipated to return to growth in the first quarter of 2024.
- Sales of Value-added and others business dropped by 5.0 percent to THB 9.9 billion from the previous year, representing 7.3 percent of 2023 total sales, decreasing from soft performance of packaging, attributed to performance of its downstream canned business, partially offset by value-added and ingredient businesses growth.
GROSS PROFIT
Thai Union reported sales of THB 136.2 billion in 2023 (down by 12.5 percent year-over-year), mainly from lower sales across all categories: PetCare (-30.6 percent year-over-year from an exceptional performance last year), Frozen and chilled seafood (-17.0 percent year-over-year), Value-added and others (-5.0 percent year-over-year), and Ambient seafood (-3.9 percent year-over-year). Furthermore, overall sales volumes decreased by 12.9 percent year-over-year, resulting from soft demand across all categories and the U.S. Frozen rightsizing strategy. The details are as follows:
- Ambient seafood: GPM was at 19.0 percent, declining year-over-year, due to high fish prices, lower sales volume and reducing freight revenues.
- Frozen and chilled seafood and related business: GPM improved notably to 11.3 percent, up from 7.7 percent in 2022, thanks to favorable logistic costs, good inventory management and raw material prices.
- PetCare: GPM was at 20.5 percent, down from the previous year mainly from lower sales volume, unfavorable product mix, and higher cost per unit.
- Value-added and others: GPM remained healthy at 27.1 percent, thanks to lower raw material prices, production efficiency improvement, and new ranges of product, offset by lower sales volume.
SELLING AND ADMINISTRATIVE EXPENSES (SG&A)
2023 SG&A expenses decreased sharply by 15.3 percent year-over-year, impacted from sales reduction, a fall in freight costs and profit protection plan. Additionally, SG&A to sales ratio during 2023 declined a bit over the whole year at 12.0 percent vs. 12.4 percent in 2022.
OPERATING PROFIT
The 2023 operating profit amounts to THB 6.9 billion, down by 14.1 percent year-over-year from THB 8.1 billion in 2022, mainly from lower sales across all categories, despite lower SG&A expenses. The operating profit margin in 2023 stood at 5.0 percent, marginally declining from 5.2 percent in 2022. FX GAIN/LOSS 2023 FX losses of THB 236 million compared to FX gains of THB 800 million in 2022, mainly from USD/THB exposure.
SHARE OF INCOME/LOSS FROM INVESTMENT IN ASSOCIATES
2023 reported share of profit from investment in associates was THB 679 million, compared to share of loss from investment in associates of THB 1,030 million in 2022, mainly due to Red Lobster investment exit decision. If included share of loss from Red Lobster of THB 1,219 million in 2023, normalized share of loss from investment in associates would be THB 540 million in 2023. OTHER INCOME 2023 other income was at THB 838 million, a decrease of 8.9 percent from THB 919 million in 2022, mostly from unclaimed withholding tax expense, partially offset by an increase in interest income and tax coupon.
FINANCE COSTS
Finance costs in 2023 were THB 2.3 billion, up 15.2 percent year-over-year. The increase was primarily from interest rate increases as the Group’s average cost of debt has been increasing a bit from some float rate debt portion (~21% of total debt).
CORPORATE INCOME TAX
The income tax credit was THB 620 million in 2023, declining from tax credit of THB 840 million in 2022. The decrease was mostly explained by the lower share of loss from Red Lobster. The effective tax rate was at -13.4 percent in 2023, compared to -12.8 percent in 2022.
NORMALIZED NET PROFIT
Thai Union reported normalized net profit of THB 4.5 billion, declining by 37.0 percent year-over-year (-28.0 percent year-overyear, if excluded i-Tail dilution impact). The decrease in net profit was mainly from lower operating profit and unfavorable items as follows: (1) FX losses of THB 236 million, compared to FX gains of THB 800 million in 2022, (2) higher finance costs, largely driven by higher interest rate, and (3) lower tax credit. The 2023 net profit margin was 3.3 percent compared to 4.6 percent in 2022.
The normalized net profit referenced above excluded one-time non-cash impairment charge from Red Lobster investment exit of THB 18.4 billion and Red Lobster-related transactions in 2023, which were reclassified to present under discontinued operations line under IFRS 5 (assets held for sale/discontinued operations), amounting to THB 1.2 billion in the fourth quarter of 2023.
Reported net profit, including aforementioned items, was a loss of THB 13.9 billion for 2023.
FINANCIAL POSITION
As of December 31, 2023, Thai Union’s total assets were at THB 165.5 billion, significantly declining by 9.4 percent from the end of 2022 at THB 182.6 billion, mostly driven by Red Lobster investment exit which the Group impaired the whole amount of investment in common shares and preferred shares.
Total liabilities stood at THB 99.4 billion, rising by 5.3 percent from THB 94.4 billion at the end of 2022, due mainly to higher current portion of long-term loans and long-term loans, partially offset by lower trade and other payables as well as short-term loans.
Total equity (including perpetual debentures of THB 6.0 billion) was at THB 66.0 billion, substantially decreasing from THB 88.1 billion at the end of 2022, due to Red Lobster investment exit and related one-time non-cash impairment charge recorded in the fourth quarter of 2023.
CASH FLOWS
In 2023, net cash receipts for operating activities amounted to THB 11.2 billion. Free cash flow improved massively to THB 7.3 billion, compared to THB 1.8 billion in 2022, thanks to well managed net working capital and less CAPEX spending, although EBITDA dropped from last year.
Net cash payments for investing activities were at THB 6.6 billion, increasing from THB 5.4 billion in the same period of last year, mainly from investments in corporate bonds and payments for short-term investments.
Thai Union recorded a net cash payment from financing activities of THB 2.4 billion in 2023, decreasing from cash receipts of THB 2.7 billion in the same period of last year. Financing activities generated cash outflow this year, due mainly to treasury buy back and i-Tail stock repurchase, while last year activities generated cash inflow due to net proceeds from i-Tail IPO.
Net decrease in cash and cash equivalents was at THB 2.3 billion in 2023, resulting in outstanding cash and cash equivalents of THB 14.2 billion as of the end of the year (including the impact from the use of Bank Overdraft).