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

Good afternoon, everyone. It's my pleasure to welcome you on our webcast today. My name is Veera Titayangkaruvong, IR Manager of GFPT. First of all, I would like to thank you for your interest in GFPT. Turning to our agenda on Slide 3. I will briefly introduce GFPT Group business and explain about the vertical integrated chicken production and financial results in the first quarter of 2025. Then I will discuss about the broader industry outlook and what we can expect in this year 2025. GFPT aims to be a carbon-neutral organization by 2030 and achieve net zero carbon emission by 2050. GFPT strives to be a leading chicken meat exporter with fully vertical-integrated chicken production. And GFPT also supports sustainable development goals, 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. We achieved various awards and achievements of GFPT in 2024, including we are certified to be a member of CAC for anticorruption policy and we -- the latest CG rating was 5 CG symbol, Excellent for 7 consecutive years. And we also achieved best IAA awards from IAA award 2024 in Agribusiness. GFPT Group is vertical-integrated chicken production starting from feed mill, grandparent breeder farm, breeder farm and broiler farm, chicken processing plant and further processing factory. GFPT listed in Stock Exchange of Thailand under Agribusiness. And last year, the latest CG score was 5G symbol, Excellent and our share price at the end of April this year was THB 10.1 per share and average stock price in the first quarter of this year 2025 was above THB 9 per share. And 25 weeks, the highest share price was THB 13.4 and share price was THB 8 per share. We have a share outstanding 1.25 billion shares and THB 1 per share and market cap THB 12.6 billion and free float portion about 67%. We also have foreign shareholder portion about 8.6%. And dividend policy, we pay not more than 50% of the profit from separate financial performance after all deductions. Looking at our current shareholding structure, Sirimongkolkasem family being a major shareholder holds about 51.25% and local individuals about 34.5%, local funds 5.7% and foreign institution about 8.5% and only 0.1% for the foreign individuals. Next will be the Group structure of GFPT Group. GFPT Group structure is quite simple. GFPT is a parent company of the Group, which operates primary plant and further processing factory to produce fresh frozen 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 holds 49% on both GFN and McKey. We use equity method to take 49% of the JV performance in our profit and loss. Next will be GFPT fully vertical integrated chicken production. Slide 11 explains about the fully vertical integrated chicken production starting at feed mill. We currently have 2 feed mill facilities called KT1 and KT2. KT1 produce animal feed and aquatic feed for domestic market, while KT2 produce only chicken feed for the internal use only. The major feed materials are corn and soybean. Corn are sourced locally, whereas soybean and soybean meal are imported from overseas. For our chicken farm operation, we have 3 generations of chicken farms being, grandparent breeder farms, parent breeder farms and broiler farms. We import grandparent day-old-chick from overseas. The grandparent breeder and parent breeder raising cycle around 60 to 65 weeks, while broiler are raised for only 40 to 42 days to reach the target rate. The chickens are raised in the closed EVAP system with the strict biosecurity, and we're also highly concerned about the animal welfare and environmental enrichment. We raise broiler in a sustainable way with a minimal impact on the environment and the cost range of GFPT. We are 100% owned farm policy. We have no contract farming to make sure that customer can trust in every our chicken meat quality. Our broiler aslo to GFPT, the parent company and GFN, the second joint venture, for chicken meat processing and producing cooked chicken products for export. At the primary plant, chicken will be processed into main products and byproducts. Main products consist of chicken breast, chicken in a fillet, chicken legs, chicken wings for export to international markets, while byproducts are consists of carcass, intestine, giblet which are sold for the domestic market. At further processing plant, main chicken meat is processed as a fully cooked products, such as chicken nugget, chicken patty, chicken nugget, chicken corrugate and also roasted chicken. Next will be GFPT timeline. Slide 12 briefly shows GFPT Group timeline. GFPT Group has been in poultry business for more than 40 years. We 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 symbol GFPT and one year later, in 1993, we joint venture with the Keystone Food Corporation, the U.S.-based company to set up the McKey Food Services Thailand Limited to produce chicken nugget and chicken patty for export to McDonald's store in Asia Pacific region, including Japan and Singapore. In 2003, we did another backward integration by having grandparent breeder farms. And in 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 Food Inc., the Japanese-based company to set up GFPT Nichirei Thailand Company Limited or GFN. The operation of GFN is quite similar to GFPT. GFN operates both slaughterhouse and further processing plant and mainly export processed chicken products to Japan and other international countries. In 2010, we did stock split from THB 10 to THB 1 per share. And in 2017, we expand the sausage production capacity and focus on producing chicken sausage. McKey also finished construction of its new further processing plant in Chonburi Province. And currently, we are constructing new slaughterhouse at Chonburi Province with the production capacity of 150,000 birds per day, the new McKey further processing plant, the third plant -- that cooked product capacity of 30,000 metric tons. Next will be GFPT Group expansion plan. Our future expansion project for the next 3 to 5 years, the broader farm raising capacity to reach 340,000 birds per day and also GFPT primary plant with a capacity of 150,000 birds per day. And the last one will be GFPT further processing plant with the cooked product capacity about 30,000 metric tons. 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 aqua feed. Our aquatic feed consists of fish feed and shrimp feed. And our feed products are sold to the farmer, animal raiser and feed wholesaler in Thailand. For the farm business, we sell parent day-old-chick and broiler day-old-chick to chicken farmers. Liver broiler also to GFPT and GFN only. We began to sell cage-free eggs in 2020 for the food business. Fresh chicken meat and parts can be exported as a fresh frozen and also in the domestic market, such as wholesale market, OEM factories and food services QSR. Cooked chicken products are exported to international markets, mainly to Japan, EU, U.K. and China. Processed food such as chicken sausage and meatball are sold in the domestic market. Next will be 2024 snapshot. In 2024, GFPT consolidated revenue was THB 19.3 billion, increased by 2% from 2023. The consolidated revenue breakdown by business segment, 50% food, 33% fine and 17% feed. The revenue breakdown by product, 25% chicken direct export, 11% indirect export, like the fresh chicken meat sales to OEM factory in Thailand for further processing and export. 10% chicken byproduct sales in the domestic market and 4% for the processed food, such as chicken sausage and meatball. 6% for the animal feed and 4% for the fish feed, 7% for shrimp feed and 28% live chicken sales to GFN and 5% day-old-chicks. Our export revenue is 25% and 75% under domestic sales. The revenue breakdown by currency at 22% U.S. dollar and the rest 78% are in Thai baht. Next will be GFPT market position. In 2024, GFPT Group ranked #2 in terms of chicken export. GFPT Japan and McKey altogether export about 13% of Thai chicken meat export, while we raise and produce chicken only 6%, ranked #6 in terms of chicken production in Thailand. GFPT export 30% to U.K., 24% to Japan, 16% to Malaysia and 14% to China, 12% to EU and 7% to other countries. Our chicken export products, 58% cooked and 42% raw. Next will be the financial results in the first quarter of this year. GFPT consolidated revenue in the first quarter of this year was THB 4,650 million, increased by THB 123 million or 2.7% increase from last year, mostly from higher revenue from Farm segment, from higher revenue from selling day-old-chicks and selling live broiler. The consolidated revenue from sales in the first quarter of this year consists of the Food segment 47.7%, Farm segment 36.3% and Fed segment 16%. In the first quarter of this year, revenue from Food segment was THB 2,219 million, increased by THB 25 million or 1.1% increase year-on-year, mainly from higher revenue from export of processed chicken from higher sales volume. The company's total export in the first quarter of this year was 8,700 metric tons increased by 400 metric tons or 4.8% increase from last year from increasing in export volume to Malaysia and Japan. Revenue from Farm was THB 1,690 million increased by THB 166 million or 10.9% increase year-on-year due to higher revenue from day-old-chick and live broilers, while revenue from feed sales in the first quarter of this year was THB 741 million decreased by THB 68 million or 8.3% increase year-on-year from lower revenue from selling aqua feed. Next will be the consolidated income statement comparison between the first quarter of this year and the first quarter of last year. As I mentioned earlier, in the first quarter of this year, we have the total consolidated revenue of THB 4,650 million increased by THB 123 million or 2.7% increase year-on-year, while the cost of goods sold was THB 3,997 million, increased by THB 39 million or 1% increase year-on-year, while the gross profit was THB 652 million increased by 84% or 14.8% increase year-on-year. The cost of sales in the first quarter of this year contributed about 86% of the revenue from sales decreased from 87.5% from last year, while the gross profit margin contributed about 14% in the first quarter of this year increased from 12.6% from last year, mainly from lower feed raw material cost, which is soybean and soybean meal. Other income in the first quarter of this year was THB 82 million decreased by THB 10 million or 11% year-on-year due to selling miscellaneous items and spare parts while the SG&A expense in the first quarter of this year equal to THB 365 million decreased by THB 5 million or 1.2% decrease year-on-year since lower miscellaneous costs and lower freight costs and SG&A percentage decreased from 8.1% in the first quarter of last year to 7.8% in the first quarter of this year. The profit from associates in the first quarter of this year was THB 322 million increased by THB 90 million or 39% increase year-on-year mainly from the profit contribution from McKey was THB 218 million increased by THB 78 million or 55% increase year-on-year mainly from higher export volume of the cook processed chicken, while the profit contribution from GFN was THB 103 million increased by THB 12 million or 13% increase year-on-year from higher export volume of cooked processed chicken. The interest expense of the Group in the first quarter of this year was THB 27 million increased by THB 2 million or 7.9% increase year-on-year from lower interest expense as the outstanding loan from financial institution decreased. The income tax of the Group in the first quarter of this year was THB 34 million, decreased by THB 17 million or 33% year-on-year. And finally, the consolidated net profit in the first quarter of this year was THB 638 million, increased by THB 173 million or 37% increase year-on-year from lower feed raw material costs and also higher share profit from associated company. The net profit margin increased from 10.3% in the first quarter last year to reach 13.7% in the first quarter of this year. And next will be the profitability ratio in the first quarter of this year. Starting from the gross profit margin increased from 12.6% in the first quarter last year to 14% in the first quarter of this year as well as the EBITDA margin increased from 20.5% in the first quarter of last year to 24.4% in first quarter of this year. And finally, the net profit margin increased from 10.3% in the first quarter last year to 13.7% in first quarter of this year. And average exchange rate in first quarter of this year, about THB 34 per U.S. dollar, same level as the fourth quarter of last year. Earnings per share in the first quarter of this year was THB 0.51 per share and dividend payment in 2024 was THB 0.2 per share or equal to 12.7% dividend payout ratio expected ROA in this year was 9.7%, up from 7.6% in 2024, as well as the expected ROE in this year was 12.9%, up from 10.6% in 2024. Next will be the balance sheet. The total assets of GFPT Group equal to THB 26,528 million, increased by THB 211 million or 0.8% increase from last year, mainly from increasing in cash and cash equivalent by THB 555 million and investment in associates of THB 220 million. GFPT Group has a total liability of THB 6,394 million decreased by THB 430 million or 6.3% from last year from short-term loans from financial institution decreased by THB 500 million. And shareholders' equity was THB 20,134 million, increased by THB 641 million or 3.3% from last year. Next will be the cash flow activities. Consolidated EBIT in first quarter of this year was THB 702 million, 28% increase year-on-year as well as consolidated EBITDA was THB 1,132 million, 22% increase year-on-year. And for the cash flow activity in this year, we have net cash received from operating activity about THB 1,212 million and net cash used in investing activity about THB 168 million, mainly in fixed asset expansion and grandparent and parent breeder, and net cash used in financing activity about THB 485 million. At the end of March of 2025, the ending cash was THB 2,659 million, increased by THB 373 million from previous year. The book value increased from THB 15.5 in 2024 to THB 16.06 at the end of March of this year. Next will be interest-bearing debt. As of March 31, 2025, the company has a total liability of THB 6.39 billion, comprising of noninterest-bearing liability in amount of THB 2.4 billion and interest-bearing debt in the amount of THB 3.97 billion. The interest-bearing debt consists of short-term loans, THB 5,500 million and long-term loans, THB 3,470 million on all loans in Thai baht currency. We have no exposure in foreign currency borrowing and the debt equity was only 0.32x. Next will be the capital expenditure. In this year, 2025, the investment budget is about THB 1 billion to THB 1.2 billion, mainly for the broiler farm, breeder farm and chicken processing factory expansion. And we plan to increase the number of chicken by 10% a year, about 20,000 birds per day per year. However, the broiler farm expansion plan can be adjusted due to the economic and industry situation. Next will be the global broiler meat market. In 2024, Thailand ranked #4 in terms of chicken export and ranked #7 in terms of chicken production in the global market. Thailand export chicken meat to Japan 40%; U.K. 17%; EU 14%; China 9%; and other countries about 20%, and we export 54% cooked and 46% raw chicken. Next will be the history of the Thai chicken export for 50 years. Thai chicken meat export has been very strong since 1973, but after the bird flu in 2004, Thai chicken industry still strong by switching from export fresh chicken meat to fully cooked chicken products. After major importers such as EU, Japan lift ban from fresh frozen chicken meat on Thailand since 2012, Thai chicken meat export has been very strong. And in 2024, Thai chicken meat export break historical high with more than 1 million -- 1,200 million metric tons. And next will be the global broiler meat market. Slide 31 shows statistics of the top 10 countries of the global broiler meat market for 2024. For the global chicken production, U.S. is the market leader, followed by Brazil, China and EU. Thailand ranked #7 of the total global chicken production. In terms of the global chicken export, Brazil ranked #1, followed by U.S. and EU. Thailand ranked #4. In terms of the global chicken meat import, Japan is the market leader, followed by Mexico, U.K. and EU. And next will be the commodity price. Slide 32 provides statistical data on selected commodity price for reference. The corn price in the first quarter of this year was THB 10.7 per kilogram, slightly increased from THB 10.4 per kilogram in the first quarter of last year, while the soybean meal price in the first quarter of this year was THB 16 per kilogram decreased from THB 21.4 per kilogram in the first quarter of last year. And the average broiler price in the first quarter of this year was about THB 38 to THB 39 per kilogram, same level as in the first quarter of last year and the day-old-chick price in the first quarter of this year was THB 18.4 per chick, increased from THB 14.2 per chick in the first quarter of last year. And export price in the first quarter of this year, the export price to Japan was about USD 4,800 per metric ton, while the export price to EU was about USD 4,200 per metric tons. Next will be the supporting and risk factor in 2025 for the supporting factor consists of the global recognized food safety standard with the trust compartment and traceability system ensure disease control. And also the growing poultry demand, rising population and economic growth demand for the affordable chicken. Cooked and processed chicken market growth, rising demand for ready-to-eat and convenient foods and also the strong export competitiveness. The Thailand leads in processed chicken export with high production standards with lower production costs, lower cost enhance price competitiveness for our producer. And the last one for the supporting factor is the economic and tourism recovery. Food services growth, especially restaurant, fast food and street food. Moving to the risk factor consists of the animal disease outbreak and hygiene risk. The global outbreak may reduce grandparent and parent supply limiting broiler production and also the global market competition, especially for the Brazil and U.S., but compete with the lower feed material cost and the cost volatility and rising expense, weather risk, like El Nino and La Nina and also the drought may arise, the feed cost and despite expected price decline. The other risk factors are the non-tariff nature, labor and environmental standard may limit the Thailand poultry competitiveness, also the oversupply risk that may increase the production mainly to the market oversupply causing price decline and lower production profit. And the last one for the risk factor is the geopolitical risk and trade impact like the war between Russia and Ukraine may raise feed cost. Next will be the 2025 guidance. Our management provides 2025 guidance with 2% to 3% growth from 2024 sales with anticipated GP margin about 13% to 14% and SG&A expense should be 8% to 8.5%. And other ratios such as financial costs and effective tax rate will be similar to 2024 figures. 2025 CapEx will be around THB 1 billion to THB 1.2 billion for the fixed asset investment. Next will be the key statistics. Slide 35 shows key statistics relating to our core business. Chicken meat and food business contribute about 70% of the consolidated revenue of GFPT Group. In the first quarter of this year, export volume increased by 5%, mostly from increasing in export volume of the cooked chicken product to Malaysia and Japan, while the indirect export volume to McKey in the first quarter of this year decreased by 6% and domestic sales volume in the first quarter of this year increased by 3%. And moving to the domestic feed market. Sales volume of animal feed increased by 23% and fish feed decreased by 20%. Shrimp feed sales volume slightly decreased by 2% comparing to the first quarter of last year. And we would like to thank all of you to join our webcast today. If everyone would like to have more information about GFPT Group, including the latest annual report and results presentation, please visit our website www.gfpt.co.th or contact our IR Department. Thank you again and see you next time.