Annual Review
Overview
Thai Union reported strong core business in 2021 with top line growth and consistently high margins, which helped mitigate the impacts from ongoing supply chain challenges
Revenue
2021 sales were at a new high of THB 141 billion, up 6.5 percent year-over-year, boosted by the frozen and chilled seafood business (up 17.8 percent year-over-year), PetCare and value-added business (up 17.9 percent year-over-year), and higher FX gains. This was partly offset by a normalization of the ambient seafood business (down 6.0 percent year-over-year), after 2020’s pantry-loading during the pandemic.
Gross Profit and Margin
Gross profit in 2021 was THB 25.7 billion, up 9.9 percent year-over-year. Thai Union continued to deliver a high gross profit margin at 18.2 percent in 2021, mainly thanks to a margin surge for the frozen and chilled seafood business. The gross profit margin for PetCare & value-added and ambient businesses also grew nicely, despite higher raw material prices and freight costs.
Operating Profit
2021 operating profit was at THB 8.26 billion, up 5.6 percent year-over-year, supported by strong core business, despite higher SG&A costs. SG&A-to-sales ratio was at 12.4 percent in 2021, due to higher logistics and marketing expenses for both core and new businesses.
Net Profit and Margin
2021 net profit was an all-time high at THB 8 billion, up 28.3 percent year-over-year, thanks to strong core operations with top line growth, consistently high margins, lower share of loss from associates, and higher FX gains, which helped mitigate the impacts from ongoing supply chain challenges. The 2021 net profit margin was remarkable at 5.7 percent.
Cash Flow and Net Interest-bearing Debt to Equity
2021 free cash flow remained positive from strong EBITDA, amidst a temporary impact from negative net working capital change from a high inventory of finished goods and goods in transit on delayed shipments and container shortages. Thai Union’s 2021 net debt to equity ratio was at 0.99 times, which was below the internal target of 1.0 times, representing a healthy financial position.
Dividend
Thai Union announced an interim dividend of THB 0.45 per share for the first half of 2021 performance and a final dividend of THB 0.50 per share for the second half of 2021 performance. This made a 2021 full-year record-high dividend of THB 0.95 per share, implying a dividend payout ratio at 57 percent.
AMBIENT SEAFOOD BUSINESS
Ambient seafood sales were THB 58.95 billion, representing 42 percent of 2021 total sales. Ambient seafood sales dropped 6.0 percent year-over-year, as a normalization effect from 2020’s pantry loading during the pandemic. However, gross profit margin was maintained at 21.4 percent, thanks to our cost efficiency management.
Ambient seafood delivered both higher sales and margin compared to pre-COVID levels in 2019.
Average skipjack tuna price in 2021 was at USD 1,406 per ton, up 1.5 percent year-over-year. The 2021 average tuna price was in Thai Union’s manageable level.
FROZEN, CHILLED SEAFOOD AND RELATED BUSINESS
Frozen and chilled seafood sales were THB 58.42 billion, representing 41 percent of 2021 total sales. Frozen and chilled seafood sales grew strongly at 17.8 percent year-over-year, with a margin turnaround in 2021. These were driven by a business recovery in shrimp and lobster, reflecting improving foodservice and retail businesses in Asia and the U.S. Thus, gross profit margin rebounded to 11.8 percent in 2021, supported by strong demand, lower conversion cost, and favorable product mix.
Frozen and chilled seafood sales expanded strongly thanks to a favorable product mix, compared to pre-COVID levels in 2019, and delivered a firm margin.
The average shrimp price (60 pcs/kg) in 2021 was at THB 138 per kg, down 6.7 percent year-overyear. The average salmon price in 2021 was at NOK 59 per kg, up 2.4 percent year-over-year.
PETCARE, VALUE-ADDED AND OTHER BUSINESSES
PetCare, value-added and others business sales were THB 23.7 billion, representing 17 percent of 2021 total sales. PetCare, value-added and others business sales increased 17.9 percent year-over-year in 2021, thanks to PetCare’s strong demand, new products launched, a broadening portfolio with new customers, and higher sales of value-added products and packaging businesses.
The gross margin of PetCare, value-added and other businesses stood at a high level of 26.3 percent in 2021, thanks to a focus on profitability and new, innovative products launched.
Petcare, value-added and other businesses’ sales and margin expanded remarkably, compared to 2019 pre-COVID levels.
Business Overview by Region
2021 sales in key regions; the U.S. (43 percent of total sales), Europe (28 percent of total sales), and Thailand (10 percent of total sales), grew strongly thanks to the solid recovery of frozen and chilled seafood sales, as well as the Thai Baht’s depreciation against key currencies; USD/THB (up 2.2 percent year-over-year), EUR/THB (up 6.0 percent year-over-year) and GBP/THB (up 9.6 percent year-over-year).
Sales growth in the U.S. was up 9.6 percent yearover-year in 2021, driven by FX gains, the recovery of frozen seafood sales, and the strong demand of the PetCare business. These were partly offset by the normalization of the ambient seafood business due to lower demand and container shortage effects.
Sales growth in Europe was up 4.1 percent yearover-year in 2021, driven by FX gains, higher sales volumes in the ambinet branded business, particularly in France, Germany, and Italy, thanks to our strong branded positions in Europe.
Sales growth in Thailand was up 9.7 percent year-overyear in 2021, due to the recovery of in the frozen seafood segment, healthy sales growth in ambient seafood and strong demand in the packaging business.
Future Prospect 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.
With our global business portfolio, we have focused on continued performance improvement as part of our 2025 targets, driving towards an EBITDA of USD 450 - 550 million. We are committed to innovation as a key differentiator and we put sustainability at the heart of our operations and all of our decisions.
As part of our guidance for 2022, Thai Union will focus on sales growth of 4 - 5 percent from a year earlier. We aim to reach a gross profit margin level at approximately 18.0 – 18.5 percent in 2022. The SG&A to sales ratio will be at approximately 12.0 – 13.0 percent. Additionally, we do not expect any material change in the effective interest rate from 2021.
In 2022, the total planned capital investment will be approximately at THB 6.0 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 in order to achieve sustainable, profitable growth.
Our key investment items during 2022 will be a culinary plant for ready-to-eat products and a protein hydrolysate and collagen peptide plant 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.
COMPARATIVE FINANCIAL RATIOS
| Ratios | 2019 | 2020 | 2021 |
|---|---|---|---|
| Liquidity Ratios | |||
| Current Ratio (Times) | 1.66 | 1.37 | 1.56 |
| Quick Ratio (Times) | 0.55 | 0.45 | 0.54 |
| Leverage Ratios | |||
| Gearing Ratio (Times) | 1.74 | 1.59 | 1.68 |
| Debt to Equity (Times)** | 1.16 | 1.05 | 1.14 |
| Net Debt to Equity (Times)** | 1.07 | 0.94 | 0.99 |
| Time Interest Earned (Times) | 4.06 | 5.22 | 6.21 |
| Efficiency Activity Ratios | |||
| Total Assets Turnover (Times) | 0.89 | 0.92 | 0.91 |
| Inventory Turnover (Times) | 2.82 | 2.89 | 2.71 |
| Accounts Receivable Turnover (Times) | 9.56 | 11.11 | 11.81 |
| Accounts Payable Turnover (Times) | 8.49 | 9.64 | 10.03 |
| Inventory Days (Days) | 128 | 125 | 133 |
| Account Receivable Days (Days) | 38 | 32 | 30 |
| Account Payable Days (Days) | 42 | 37 | 36 |
| Profitability Ratios | |||
| Gross Profit Margin (%) | 15.9 | 17.7 | 18.2 |
| EBITDA margin (%) | 9.5 | 9.8 | 10.6 |
| Net Profit Margin (%) | 4.1 | 4.7 | 5.7 |
| Return on Average Equity (%) | 9.0 | 14.1 | 16.1 |
| Return on Assets (%)*** | 4.6 | 6.3 | 6.9 |
| Return on Capital Employed (%) | 6.5 | 9.2 | 10.1 |
| Per Share Data | |||
| Earnings Per Share (Thai Baht) | 0.80 | 1.26 | 1.66 |
| Dividend per Share (Thai Baht) | 0.47 | 0.72 | 0.95 |
| Book Value per Share (Thai Baht) | 8.90 | 9.69 | 11.18 |
| * | Debt = Interest bearing debt only |
| ** | Pre-tax ROA = EBIT/Average total assets |
FINANCIAL ANALYSIS
Sales
2021 sales were at a new high of THB 141 billion, up 6.5 percent year-over-year, boosted by frozen and chilled seafood (up 17.8 percent year-over-year), PetCare and value-added (up 17.9 percent year-overyear), and higher FX gains. This was partly offset by a normalization of the ambient seafood business (down 6.0 percent year-over-year), after last year’s pantry-loading during the pandemic.
In 2021, the Thai Baht moved against key currencies as follows; USD/THB (up 2.2 percent year-over-year), EUR/THB (up 6.0 percent year-over-year) and GBP/THB (up 9.6 percent year-over-year), which supported sales growth. Excluding the FX impact, Thai Union’s sales in 2021 still rose 4.0 percent yearover-year
2021 sales volumes decreased 1.2 percent year-overyear, as a result of lower sales volumes in ambient seafood, despite higher sales volumes of frozen and chilled seafood and PetCare and value-added.
Gross Profit
The 2021 gross profit margin and gross profit rose to 18.2 percent at THB 25.7 billion (up 9.9 percent year-over-year), driven by:
- Ambient seafood: The gross profit margin remained resilient, despite a decline in gross profit due to lower sales from normalization effect.
- Frozen and chilled seafood: The gross profit margin and gross profit increase due to a recovery in food service operations.
- PetCare, value-added and others: Gross profit increased from strong sales of PetCare and packaging. The gross profit margin was maintained and well-managed despite impacts from the pandemic, higher raw material prices and freight costs.
Selling and Administrative Expense (SG&A)
2021 SG&A expenses increased 12.0 percent yearover-year, to THB 1.9 billion, mainly due to sharp rising logistics costs estimated at THB 1.6 billion in 2021
2021 SG&A to sales ratio was at 12.4 percent, up from 11.8 percent in 2020, as a result of higher freight and marketing costs for our core and new businesses.
Other Income (Including Share of Income From Investment in Associates)
2021 other income was at THB 1.8 billion versus THB 1.6 billion in 2020. There was a one-off impairment booked in 2020 other income, while we received a higher management fee from Red Lobster in 2021. Apart from that, Thai Union continued to record a consistent interest income from its investment in Red Lobster’s preferred units.
FX Gain/Loss
Thanks to prudent FX exposure management, Thai Union reported 2021 FX gains of THB 922 million (versus THB 90 million in 2020).
Finance Costs
2021 finance costs were stable at THB 1.7 billion, equivalent to 2020. Cost of debt was 2.6 percent during 2021, down from 2.9 percent during 2020.
Corporate Income Tax
2021 income tax expense was at THB 742 million versus THB 724 million in 2020. The increase was in line with the higher operating profit of the Company.
Net Profit
2021 net profit was a record-high at THB 8 billion, up 28.3 percent year-over-year. The 2021 net profit margin was at 5.7 percent versus 4.7 percent in 2020. The increase was thanks to strong core operations with robust top line growth, consistently high margin, higher FX gains, and lower share of loss from investment in associates. These helped mitigate the impacts from ongoing supply chain challenges in 2021.
Financial Position
As of December 31, 2021, Thai Union’s total assets were at THB 166.6 billion, an increase of 15.2 percent from end-2020 at THB 144.6 billion, mainly thanks to higher cash and cash equivalents, inventory value, investment in subsidiaries and joint ventures.
Total liabilities increased to THB 104.4 billion (up 17.5 percent from THB 88.8 billion at end-2020), mostly from the pre-financing plan for long-term loans reaching maturity in early 2022.
Current liabilities increased by 9.2 percent from end-2020, due to a larger amount of loans reaching maturity. The non-current liabilities rose by 25.6 percent from end-2020, given sustainability-linked term bonds and loans were issued during 2021.
Total equity (including perpetual debentures of THB 6 billion) increased by 11.6 percent (up THB 6.5 billion) from end-2020 to THB 62.2 billion, thanks to strong net profit during the year.
Cash Flows
During 2021, net cash receipts from operating activities were at THB 6.3 billion. Positive cash flow was mostly driven by profitable operations (EBITDA: THB 14.9 billion in 2021).
Net cash payments for investing activities were at THB 8.1 billion, increased from THB 3.7 billion at the same period of last year, mainly due to cash payments for a new investment in an associate company, R&B Food Supply PCL (RBF) of THB 3 billion, Rügen Fisch shares buyout of THB 1.7 billion, and an acquisition of shares in Clover Corporation for THB 0.7 billion during 2021.
Thai Union recorded net cash receipts from financing activities of THB 4.6 billion during 2021, which was largely due to cash receipts from long-term loans from financial institutions and debenture issuance.
Net increase in cash and cash equivalents, including exchange losses, was at THB 2.7 billion, resulting to outstanding cash and cash equivalents of THB 9.1 billion as of the end of the year (including the impact from the use of Bank Overdraft).