Annual Review

Gross Profit

Gross profit in 2020 passed the THB 23 billion mark for the first time at THB 23,418 million, up 16.4 percent year-over-year, resulting from aforementioned strong sales performance and margin improvement.

The ambient seafood business showed a gross margin improvement to 21.1 percent in 2020, compared to 19.4 percent a year earlier. The margin enhancement was mainly attributed to strong sales and a favorable mix in the ambient business, resulting in a higher overall gross margin compared to the previous year.

The year saw the gross margin of our frozen and chilled seafood and related business at 9.7 percent, down from 10.2 percent during 2019. This was mainly due to the ongoing COVID-19 pandemic situation which presented challenges to the food service industry. However, despite the global.

pandemic, there was no major impact and facilities continued their operations during the year, thanks to stringent hygiene measures applied in all of the Company’s operations.

The gross margin of PetCare, value-added and others business improved to 26.7 percent in 2020, on the back of sales value and volume increases of 7.7 percent and 2.8 percent year-on-year, respectively.

Selling and Administrative Expense (SG&A)

Our SG&A to sales ratio during 2020 was at 11.8 percent, down from 12.9 percent a year ago. The decrease in ratio was partly attributable to the U.S. antitrust litigation fees of THB 1.9 billion recorded during the second quarter of 2019. Excluding such fees, the SG&A to sales ratio in 2019 would represent 11.4 percent.

Operating Profit

The 2020 record operating profit of THB 7.8 billion, up 103 percent year-over-year, was driven by both overall operational improvements and prudent cost saving initiatives. EBITDA in 2020 reached a record THB 12.9 billion, driven by improved profitability.

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

During 2020, other income was at THB 1.6 billion, an increase of 3.5 percent from a year ago. Interest income received from the Red Lobster investment in convertible preferred units was unchanged from the same period a year earlier.

FX Gain/Loss

FX gains significantly declined 81 percent year-over-year to THB 90 million, as a result of lower FX volatility.Finance CostsFinance costs in 2020 were THB 1.7 billion, down 16.1 percent year-over-year. The decrease was mainly thanks to the issuance of the perpetual bond during 4Q19 which resulted in a decrease in the effective interest rate to 2.91 percent, from 3.27 percent during 2019.

Corporate Income Tax

During 2020, income tax expenses increased to THB 724 million, from THB 158 million accrued in 2019. This increase was mainly contributable to an improved underlying operational performance during the period. The 2020 effective tax rate was at 9.9 percent, versus 3.6 percent in 2019.

Net profit

Thai Union reported its first ever annual net profit above THB 6 billion at THB 6,246 million, up 64 percent year-over-year, mainly thanks to the strong business operations during the year. Excluding the U.S. antitrust litigation fees in 2019, the Company’s 2020 net profit still delivered growth of 20 percent year-over-year on a normalized basis. The 2020 net profit margin was 4.7 percent, compared to 3.0 percent in 2019.

Assets

Total assets at the end of 2020 amounted to THB 144.6 billion, an increase of 1.9 percent from THB 141.9 billion as of end-2019.

• Net trade receivables were THB 11.3 billion, down 9.7 percent or THB 1.2 billion from THB 12.5 billion in 2019. Accounts receivable turnover was up to 11.11 times from 2019 levels due to decreased average accounts receivable and improved sales. Accounts receivable days as of 2020 declined to 32 days, lower than 38 days in 2019 as the Company continued to demonstrate improvements on its collection efficiency.
• Despite a sales increase, inventory days during 2020 decreased to 125 days, from 128 days in 2019, resulting from improved inventory management efficiency from higher product demand. Net inventories in 2020 were up 4.5 percent from end-2019 to THB 38.5 billion, partly due to rising raw material prices.
• The asset turnover rate increased slightly to 0.92 times in 2020 from 0.89 times in 2019 thanks to improved sales of 4.9 percent in 2020 compared to the previous year.
• The current ratio in 2020 was at 1.37 times, which declined from 1.66 times in 2019, mainly from a larger amount of current portion of long-term loans at end-2020.
• Property plant and equipment totalled THB 26.7 billion, an increase from THB 25.9 billion in 2019 due to normal capital expenditure activities during 2020.

Liabilities

Total liabilities in 2020 amounted to THB 88.8 billion, representing a decrease of THB 1.3 billion from THB 90.1 billion in 2019.

• Trade payables were THB 10.8 billion, down 9.1 percent from THB 11.8 billion in 2019. Trade payable days were down to 37 days, thanks to the Company’s continued focus on supply chain finance programs to improve overall payable efficiency. The accounts payable turnover rate was at 9.64 times compared with 8.49 times a year earlier.
• Bank overdrafts and short-term loans increased by 19.4 percent to THB 13.5 billion from THB 11.3 billion in 2019.
• Long term loans decreased by 17.4 percent to THB 36.9 billion from THB 44.6 billion, also thanks to continued debt repayments from record high EBITDA and capital expenditure bring brought under control during 2020, as well as part of Company’s long-term debt being shifted to the current portion of long-term debt as they would be due.
• Interest-bearing debts were THB 58.4 billion, down 2.5 percent from THB 59.9 billion a year earlier.
• The proportion of long-term debts (including the current portion) was at 77 percent of the total interesting-bearing debts.

Shareholders’ Equity

• Equity attributable to shareholders of the Company in 2020 amounted to THB 52.2 billion, representing an increase of THB 3.7 billion from THB 48.4 billion in 2019 as the Company recorded higher retained earnings during the year.
• Total liabilities to equity ratio in 2020 decreased to 1.59 times, from 1.74 times in 2019, mainly thanks to higher profitability and continued regular debt repayment.
• With a significant improvement in reported net profit and strong cash performance, Thai Union was able to conduct a THB 1.5 billion share repurchase program, repay THB 3 billion of debt, and still be able to achieve a respectable net debt-to-equity ratio of 0.94 times in 2020, down from 1.07 times a year ago.
• Return on average capital employed in 2020 was at 9.2 percent, a significant increase from 6.5 percent in 2019, mainly thanks to strong profitability as seen from improving EBIT of 38.9 percent year-over-year, while there was a net impact of the accrual for U.S. antitrust litigation fees of THB 1.4 billion during 2019.

Cash Flows

In 2020, net cash receipts from operating activities were at THB 13,432 million. Positive cash flow was driven mostly by profitable operations (EBITDA: THB 12,959 million). Inventory days during 2020 dropped to 125 days, from 128 days a year ago, thanks to higher sales that outpaced higher inventory, resulting in better.

inventory management efficiency.

Net cash payments for investing activities were at THB 3,736 million which is well on track with the revised capital expenditure plan of THB 3.7 billion (from THB 4.9 billion planned at the beginning of the year).

Thai Union recorded a net cash payment for financing activities of THB 8,203 million during 2020, largely from regular debt repayments during the year, including interest paid on perpetual debentures and lower cash received from investments in affiliates.

A net increase in cash and cash equivalents, including exchange losses on cash and cash equivalents, was at

THB 1,597 million, resulting in an end-2020 cash and cash equivalent balance of THB 6,286 million (including the impact from the use of a Bank Overdraft).