GFPT Public Company Limited (GFPT) Earnings Call Transcript & Summary

Good afternoon, everyone. It's my pleasure to welcome you on our webcast. My name is Virach Sirimongkolkasem. I am manager of GFPT Group. First of all, I would like to thank you for your interest in GFPT. Turning to our agenda on Slide 3. First, I will briefly introduce GFPT Group business and explain about the vertical integrated chicken production and financial results in 2024, then I will discuss about the broader industry outlook and what we can expect for this year 2025. GFPT aims to be a carbon-neutral organization by 2030 and achieve net-zero carbon emissions by 2050. GFPT strives to be a leading chicken meat exporter and with it's full vertical integration. GFPT is part of sustainable development goal, SDG, which was incorporated in the company's objective and operations. For example: SDG 2, Zero hunger; SDG 4, quality education; SDG 5, gender equality; SDG 6, clean water and sanitation; SDG 8, decent work and economic growth; SDG 10, reduced inequality; SDG 13, climate action; and SDG 16, peace justice and strong institutions. For various awards and achievements of GFPT in 2024 including, we are certified to be a member of CAC for anti-corruption policy. Our latest CGR rating was for 5 CG symbols, excellent for 7 consecutive years and best IAA Awards from -- IAA Awards 2024 and great business. Next will be GFPT profile. GFPT Group is a vertically integrated chicken production starting from feed mill, grandparent, breeder farm, breeder farm, broiler farm, chicken processing plant and further processing factory. GFPT is listed in the stock exchange of Thailand under Agri business. Last year, the latest CG rating was 5 CG symbol, excellent and the share price at the end of January 2025 was THB 9.2 per share. Average stock price in the fourth quarter last year was THB 10.8 per share and the 22 weeks highest share price was THB 13.4 per share and lowest share price was THB 8.2 per share. Share outstanding 1.25 million share and at THB 1 per share for the market cap is about THB 11.5 billion and free float proportions of 64%. We have foreign shareholder about 8.4%. And our dividend policy is to pay not more than 50% of the net profit of separate financial statements after all deductions. Looking at the current shareholding structure, Sirimongkolkasem Family being a major shareholder hold 50.8%, 31% local individuals, 9% local funds, 8% foreign institution and 1% for the foreign individuals. Next will be the group structure. GFPT group structure is quite simple. GFPT is a parent company of the group. We operate the primary plant and further processing factory to produce fresh chicken meat and fully cooked chicken products. GFPT Group consists of 5 subsidiaries and 2 joint ventures. These subsidiary handle different aspects of the vertical integration. GFPT hold 49% on [GFN] and McKey. We use equity method to take 49% of JV performance in our profit and loss. Slide 12 show you the fully vertical integrated chicken production starting at feed mill, left-hand side. We currently have 2 feed mill facilities. KT1 produce animal feed and aquatic feed for domestic market, while KT2 produce chicken feed for internal use only. The major feed materials are corn and soybean in which corn are sourced locally and soybean and soybean meal are imported. For our chicken farm operation, we have 3 generations of chicken farm being, grandparent breeder farm, parent breeder farm and broiler farm. We import grandparent day-old-chick from overseas. Grandparent breeder and parent breeder raising cycle are about 60 to 65 weeks, while broiler are raised for only 40 to 42 days to reach the target rate. Our chickens are raised in the closed EVAP system in the -- with the strict biosecurity. We're highly concerned about animal welfare and environmental enrichment. We raised broiler in sustainable way with a minimal impact on the environment and the cost range of GFPT Group is, we are 100% owned farm policy. It means that we have no contract farming to make customer trust in our chicken meat quality. Our broiler also to GFPT, the parent company and GFN the second joint venture for chicken meat processing and producing cooked chicken product for exports. At the primary plant, chicken will be processed into main product and byproduct. Main product consists of chicken breast in a fillet, chicken legs and chicken wings for export to international markets, while byproduct are carcass, intestine, giblet which are sold for the domestic market. For the further processing factory, main product is processed as a fully cooked product, such as chicken nugget, chicken patty, chicken corrugate. Next will be GFPT timeline. Slide 13 shows GFPT Group timeline. GFPT Group has been in poultry business for more than 40 years. GFPT was established in 1981 to operate chicken processing under BOI privilege for exporting fresh frozen chicken meat. And during 1990s, we became a fully vertical integration by having our own parent breeder farms, broiler farm, feed mill and sausage plants. In 1992, we listed in the stock exchange of Thailand under the symbol GFPT and one year later, we joint venture with Keystone Foods Corporation, the U.S.-based company to set up McKey Food Services Thailand Limited to produce chicken nugget and chicken patty for export to McDonald store in Asia Pacific region, including Japan and Singapore. 2003, we did another backward integration by having grandparent breeder farms. 2008 we set up a new feed mill plant in Chonburi province called KT2 to produce chicken feed for internal use only. And in the same year, we also announced the second joint venture with Nichirei Foods Inc., which is the U.S. -- Japanese-based company to set up GFPT Nichirei Thailand Company Limited or GFN. The operation of GFN is quite similar to GFPT. GFN operates most [slaughter] house and further processing plants and mainly export processed chicken products to Japan and other international countries. And in 2010, we did stock split from THB 10 to THB 1 per share. And in 2017, we expand our sausage production capacity and focus on producing chicken sausage. McKey also finished the construction of its new further processing plant in Chonburi province. Currently, we are constructing new slaughterhouse at Chonburi province with the production capacity of 150,000 birds per day, new McKey further processing plant, the third plant -- cooked product capacity of 30,000 metric tons per year. Next will be the GFPT Group expansion plans. Our future expansion project for the next 3 to 5 years consists of the broiler farm raising capacity to reach 340,000 birds per day and GFPT primary plant with a capacity of 150,000 birds per day. And GFPT further processing plants with cooked product capacity of 24,000 metric ton per year. However, the expansion plan and investment budget can be adjusted depending on the change in the market condition and future competition. Next will be GFPT product line. Our product line consists of 3 categories being feed; farm; and food. For the feed business, we have various animal feed products such as swine feed, layer hen feed, duck feed and cow feed. For the aquatic feed consists of fish feed, shrimp feed and [prawn] feed. Our feed products are sold to farmer, animal raiser and feed wholesalers in Thailand. And for the farm business, we sell parent day-old-chick and broiler day-old-chick to chicken farmers. Live broiler also to GFPT, the parent company and GFN. We began to sell the cage free eggs since 2020. For the food business, fresh chicken meat and parts can be exported as fresh frozen and also in the domestic market, such as wholesale market, OEM factories and food services or QSR. The cooked chicken product are exported to international markets, mainly to Japan, U.K., EU and China. Processed food such as chicken sausage are sold in domestic market. Next will be 2024 snapshot. GFPT consolidated revenue in 2024 was THB 19.3 billion, increase of about 2% from 2023. The consolidated revenue breakdown by business segment, 50% food, 33% farm and 17% feed. Revenue breakdown by product consists of 25% chicken or export, dark blue one and 11% indirect export, the fresh chicken meat sales to OEM factory in Thailand and 10% chicken byproduct sales in the domestic market and 4% for the processed food such as chicken sausage and meatball. 6% animal feed, 4% fish feed and 7% shrimp feed and 28% live chicken sales to GFN and 5% day-old-chicks. Our export revenue is 25% and 75% are under domestic sales. And revenue breakup by currency at 22% U.S. dollar and the rest, 78% are in Thai Baht currency. Next will be GFPT market position. In 2024, GFPT Group ranked #2 in terms of Chicken export. GFPT, GFN and McKey altogether export 13% of the Thai chicken meat export, while we raise and produce chicken only 6%, ranked #6 in terms of chicken production in Thailand. GFPT export to U.K. 30%, 24% to Japan, 16% to Malaysia, 14% to China, 12% to EU and 7% to other countries. Our chicken export product 58% cooked and 42% raw. Next will be 2024 financial results. And as I mentioned earlier, the top line revenue in 2024 was THB 19.3 billion, increased about THB 335 million or 1.8% increase from last year mostly from higher revenue from food segment from higher sales volume of export processed chicken. The consolidated revenue from sales in 2024 consists of food, 50%; farm, 33% and feed, 17%. In 2024, revenue from food segment, about THB 9,604 million increased by THB 496 million or 5.5% increase year-on-year from higher revenue from export of chicken products from higher sales volume of export of chicken products. In 2024, we -- GFPT export 36,600 metric tons increased by 7,300 metric tons or 25% increase from 2023, mainly from higher sales volume of export to U.K. Revenue from farm was THB 6,435 million decreased by THB 130 million, a 2% increase year-on-year from lower revenue from selling price of live broiler. Revenue from feed sales was THB 3,275 million decreased by THB 31 million, a 1% decrease year-on-year from lower revenue from selling animal feed and aqua feed. Next will be the consolidated income statement in 2024 compared to 2023. As I mentioned, we have the top line revenue about THB 19.314 billion, increased by THB 335 million or 1.8% increase year-on-year, while the cost of goods sold was THB 16,645 million decreased by THB 154 million, 1% decrease year-on-year, while the gross profit in 2024 was THB 2,668 million increased by THB 489 million or 22.4% increase year-on-year. Cost of sales contributes about 86.2% in 2024 comparing to 88.5% in 2023, while the gross profit margin contributes about 13.8% in 2024 increased from 11.5% in 2023, mainly from the lower feed material cost, which is soybean meal and corn. Other income in 2024 was THB 342 million increased by 10% or 3% increase year-on-year due to selling, miscellaneous item and spare parts. SG&A expense into 2024 equal to THB 1,570 million increased by THB 125 million or 8.6% increase year-on-year since higher freight costs and higher export volume. SG&A as a percentage increased from 7.6% in 2023 to 8.1% in 2024. Profit from associates, was THB 834 million, increased by THB 300 million or 56% increase year-on-year from profit contribution from GFN and was THB 321 million increased by THB 199 million or more than 100% increase year-on-year from higher export volume of cooked chicken products, while profit contribution from McKey was THB 513 million increased by THB 101 million, 24.5% increase year-on-year from higher export volume of cooked chicken product as well. Interest expense of GFPT Group, in 2024 was THB 119 million, increased by THB 9 million or 8.5% increase year-on-year from higher interest rate expense as a long-term loan from related party interest. The income tax expense of GFPT Group in 2024 was THB 266 million, increased by THB [73.5] million or 38% increase year-on-year. And finally, the consolidated profit in 2024 was THB 1,974 million, increased by THB 597 million, 43.4% increase year-on-year from lower feed material costs and higher share of profit from associated companies. The net profit margin increased from 7.25% in 2023 to 8.2% -- 10.2% in 2024. Gross margin increased from 11.5% in 2023 to 13.8% in 2024 as well as the EBITDA margin increased from 16.8% in 2023 to 21% in 2024. And finally, the net profit margin increased from 7.3% in 2023 to 10.2% in 2024. And the average exchange rate in 2024 is about THB 35.3 U.S. dollar. Earnings per share in 2024 was THB 1.57 per share. And dividend payment in 2023 financial performance about THB 0.15 per share or equal to 13.7% dividend payout ratio. ROA in 2024 was 7.6%, up from 5.6% in 2023, while ROE, return on equity, in 2024 was 10.6%, up from 8% in 2023. Next will be balance sheet in 2024 comparing to 2023. The total assets of GFPT Group equal to THB 26,317 million increased by THB 984 million or 3.9% increase from last year, mainly from increasing in PP&E by THB 639 million and cash and cash equivalent about THB 491 million. We have total liabilities of about THB 6,824 million, decreased by THB 771 million or 10.2% decrease from last year from -- short-term loans from financial institution decreased by THB 700 million and shareholder's equity about THB 19.49 billion, increased by THB 1,755 million or almost 10% increase from last year. Next will be the cash flow activity in 2024. The consolidated EBIT in 2024 was THb 2,372 million, 40.8% increase year-on-year, while the consolidated EBITDA in 2024 was THB 4,055 million, 26.9% increase year-on-year and cash flow activity consists of the net cash received from operating activity about THB 2,311 million. The cash used in investing activity above THB 1,085 million, mainly in the fixed asset expansion in grandparent and parent breeder and the net cash used in financing activity about THB 762 million. At the end of last year 2024, we have cash about THB 2,101 million, increased by THb 491 million from 2023. The book value increased from THB 14.15 per share in 2023 to THB 15.55 per share at the end of 2024. Next will be the interest-bearing debt. At the end of 2024, the company had a total liability of THB 6.8 billion comprising of the noninterest bearing debt in amount of THB 2.4 billion and interest bearing debt about THB 4.4 billion. Interest-bearing debt consists of the short-term loans, mainly from the financial institution about THB 950 million and long-term loans, mainly from the related persons about THB 3,475 million of loans in Thai Baht currency. We have no exposure in foreign currency borrowing and the debt-to-equity was quite low, about 0.35x. Next will be the capital expenditure. Our 2025 investment budget is about THB 1 billion to THB 1.2 billion, mainly for the broiler farm, breeder farm and chicken processing factory expansion. We plan to increase the number of the chicken about 10% a year or about 20,000 birds per day per year. However, the broiler farm expansion plan can be adjusted due to the economics and industry situation. Next will be the global broiler meat market. In 2024, Thailand ranked #4 in term of chicken export and ranked #7 in term of chicken production in the global market. Thailand export in chicken meat to Japan 40%, 17% to U.K., 14% to EU, 9% to China and 20% to other countries. Chicken export product are 54% cooked and 46% raw chicken. Next will be the 50-year history of the Thai chicken export. Thai chicken meat export has been strong since 1973 and however, after the bird flu outbreak in 2004, Thai chicken industry still strong by switching from export fresh chicken meat to fully cooked chicken product. And the main -- after the major importers such as EU and Japan lifted the ban from fresh frozen chicken meat on Thailand since 2012, Thai chicken meat export has still be strong. In 2004, Thai chicken meat export break historical high with more than 1.2 million metric tons equal to THB 161 billion in terms of value. Next will be the global broiler meat market. Slide 32 shows the statistic of the top 10 of the global broiler meat market in 2024. For the global chicken production U.S. is the market leader followed by Brazil, China and EU. Thailand ranked #6 in terms of the global production. In term of the global chicken export, Brazil rank #1, followed by U.S. and EU. Thailand rank #4. In term of the global chicken import, Japan is the market leader, followed by Mexico, U.K. and EU. Next will be the commodity price. Slide 33 provides statistical data of the selected commodity price. The current price in 2024, the average is about THB 10.9 per kilogram, decrease from THB 12.1 per kilogram in 2023 as well as the soybean meal price. In 2024 was quite low, about THB 19.7 per kilogram, decrease from THB 21.6 per kilogram in 2023, while the average broiler price in 2024 was about THB 38 to THB 39 per kilogram. Slightly decreased from THB 40 per kilogram in 2023. And day-old-chick price in 2024 was THB 16.1 per chick, increase about THB 2 from THB 14.1 per chicken in 2023. The export price to Japan in 2024 was about USD 4,800 per metric ton, while the export price to EU about USD 4,100 per metric ton. Next will be the supporting and risk factor in this year 2025. Supporting factor consists of the global recognized foods safety standards with the trust compartment and traceability system ensure that this is controlled, while the growing poultry demand and rising population and economic boost demand for the affordable chicken. The cooked and processed chicken meat market growth, the rising demand for ready-to-eat and convenient foods and strong export competitiveness, Thailand rate leads in processed chicken export with the high production standards. Lower production costs, lower cost, enhanced price competitiveness for producer and the economic and tourist recovery. The food services growth, especially restaurant, fast food and street food. Move to the risk factor consists of the animal disease outbreak and hygiene risk. The global bird flu outbreak may reduce grandparent stock and parent stock supply and limited the broiler production and also the global market competition mainly from Brazil and U.S. I'll complete with the lower feed material cost, with corn and soybean meal. And also the cost volatility and rising expense, the weather risk, for example La Niña and [draught] may rise -- may raise the feed costs despite the expected price declines. The another risk factor consists of the non-tariff measure. Labor and environmental standards may limit the Thailand's poultry competitiveness and also the oversupply risk may increase, the production may lead to the market oversupply causing price decline and lower production profit. And the last one for the risk factor will be the geopolitical risk and trade impact. Russia-Ukraine war may raise the feed cost. Next will be guidance for this year, 2025. Our management provides 2025 guidance with the 2% to 3% growth from 2024 sales and anticipated GP margin would be around 13% to 14%, and SG&A percentage should be around 8% to 8.5% quite similar to last year. And other ratios such as financial costs, effective tax rates will be similar to the 2024 figures. And the CapEx for this year will be around THB 1 billion to THB 1.2 billion for the feed asset investment. The last topic will be the key statistic, which show you the key statistic relating to our [current] business. Chicken meat and feed business contributed about 70% of the consolidated revenue of GFPT Group. In 2024, export volume increased by 25% mostly from increasing in export volume of the cooked chicken product to the U.K., while indirect export that we sell to McKey in 2024 increased by 7% and the domestic sales volume like the carcass, intestine, giblet or other byproduct in 2024 is the same level as 2023. And moving to domestic feed market. Sales volume of animal feed decreased by 14% as well as the sales volume of the fish feed also decreased by 12% due to the strong competition and shrimp feed sales volume increased by 33% comparing to 2023. And we would like to thank all of you to join our webcast today. If everyone would like to have more information about the GFPT Group, including the latest annual report, our result presentation, please visit our website, world wide web.gfpt.co.th or contact our IR department. Thank you again and see you next time.