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-over-year).

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.

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.

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).

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 long-term 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 as well as 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 50.0 percent payout of our net profit with semi-annual payments.