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, I am Manager of GFPT. 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 the second quarter of this year. Then I will discuss about the broader industry outlook and what we can expect in this year. GFPT aims to be a carbon neutrality organization by 2030 and achieve net zero carbon emissions by 2050. GFPT strives to be a leading chicken meat exporter with its fully vertical integrated chicken production. GFPT supported the Sustainable Development Goals, SDG, which was incorporated in the company's objectives 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 Reduce Inequality, SDG 13, Climate Action and SDG 16 Peace, Justice and Strong Institutions. Next will be the GFPT awards. We achieved various awards of 2024, including we are certified to be a member of CAC for anticorruption policy. And the latest CG rating was 5 CG symbol, Excellent for 7 consecutive years, and we also achieved the best IAA awards from IAA Awards 2024 in Agribusiness. Next will be GFPT profile. GFPT Group is a vertical integrated chicken production, starting from feed mill, grandparent breeders, breeder farm and broiler farm chicken processing plant and further processing factory. GFPT is listed in the Stock Exchange of Thailand under symbol GFPT. Last year, the CG score was 5 CG symbol, Excellent and the share price at the end of July was THB 9.7 per share and average stock price in the second quarter of this year was THB 9.41 per share and the highest price for the past 52 weeks was THB 13.1 per share and the lowest price was THB 8 per share. We have a share outstanding about 1.25 billion THB 1 per share and the market cap is THB 12.16 billion and free float portion is 67%. And we also have the foreign shareholder about 8.6% and the dividend policy, we pay not more than 50% of the profit from separate financial statement after all deduction. And the current shareholding structure, Sirimongkolkasem family being a major shareholder holds about 51.25%, 34.5% local individuals, 5.7% local funds, 8.5% foreign institution and only 0.1% for the foreign individuals. Next will be the GFPT Group structure. GFPT Group structure is quite simple. GFPT is a parent company of the group. which operates primary plant and further processing factory to produce both fresh chicken meat and fully cooked chicken products. GFPT Group consists of 5 subsidiaries and 2 joint ventures. Each subsidiary handle different aspects of the vertical integration. GFPT holds 49% for both GFN and McKey. We use equity method to take 49% of the JV performance in our P&L. Next will be GFPT fully vertical integration chicken production. Starting at feed mill, we currently have 2 feed mill facilities. KT1 produced animal feed and aquatic feed for domestic markets, 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 farms being, grandparent breeder farms, parent breeder farms and broiler farms. We import grandparent day-old-chick from overseas. Grandparent breeder and parent breeder raising cycle about 60 to 65 weeks, while broiler are raised for only 40 to 42 days to reach the target weight. Our chicken are raised in the closed EVAP system with a strict biosecurity. We're highly concerned about the animal welfare and environmental enrichment. We raise the broiler in a sustainable way with a minimal impact on the environment. All our broilers are sold to GFPT and GFN for chicken meat processing and producing cooked chicken product for export. At the primary plant, chicken will be processed into main products and byproducts. Main product consists of chicken breast, in a fillet, chicken legs and chicken wings for export to international markets, while the byproduct consists of carcass, intestine and giblet are sold for the domestic market. At further processing plant, main chicken meat is processed as a fully cooked products such as chicken nugget, patty, chicken croquette and chicken steamed. Next will be GFPT time line. GFPT Group has been in poultry business for 44 years. We were established in 1981 to operate the chicken processing under the BOI privilege for exporting fresh chicken meat. And during 1990s, we became a fully vertical integration by having our own parent breeder farms, broiler farm, feed mill and sausage plant. And in 1992, we listed in the Stock Exchange of Thailand under symbol GFPT. And 1 year later, we joint venture with the Keystone Food 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's store in the Asia Pacific region, including Japan and Singapore. In 2003, we did another backward integration by having grandparent breeder farms. In 2008, we set up a new feed mill plant in Chonburi Province, KT2 to produce chicken feed for internal use only. And in the same year, we also announced the second joint venture with the 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. In 2010, we did the stock split from THB 10 to THB 1 per share. In 2017, we expanded the new sausage production capacity and focus on producing chicken sausage. And McKey also finished the construction of its new further processing plant in Chonburi Province. And currently, we are constructing the new slaughterhouse at Chonburi Province with a production capacity of 150,000 birds per day. And McKey also finished its new further processing plant, the third plant with a cooked product capacity of 30,000 metric tons per year. Next will be GFPT Group expansion for the next 3 to 5 years consists of the broader farm raising capacity to reach 340,000 birds per day. And the second one will be GFPT primary plant with a production capacity of 150,000 birds per day. And the last one, the GFPT further processing plant with a cooked product capacity of 30,000 metric tons 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 the 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 and aquatic feed consists of fish feed and shrimp feed. Our feed products are sold to farmer, animal raiser and feed wholesalers in Thailand. For the farm business, we sell parent day-old-chick and broiler day-old-chick to chicken farmers. Live broiler sold to GFPT and GFN only. We also began to sell cage-free eggs since 2020 for the food business, the 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. Cooked chicken products are exported to international markets, mainly to Japan, EU and China and processed food such as chicken sausage are sold in the domestic market. Next will be the snapshot. In 2024, GFPT consolidated revenue was THB 19.31 billion, increased by 2% from 2023 and consolidated revenue breakdown by segment, 50% food, 33% farm 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 and 10% chicken byproduct sales in the domestic market, 4% processed food, chicken sausage and meatball, and 6% animal feed, 4% fish feed and 7% shrimp feed and 28% live chicken sales to GFN and 5% day-old-chicks sales to outside. For our export revenue is about 25% and 75% for the domestic sales. The revenue breakdown by currency, 22% U.S. dollar, while the rest is 78% in Thai baht currency. Next will be GFPT market position. In 2024, GFPT ranked #2 in terms of chicken export. GFPT, GFN and McKey altogether, we export about 13% of the Thai chicken export while we raise and produce chicken only 6% ranked #6 in terms of Thai chicken production, and we mainly export to U.K., about 30%; Japan, 24%; Malaysia, 16%; China, 14%; EU, 12% and 7% to other countries. Our chicken export product, 85% cooked and 42% in terms of the raw chicken. Next will be the financial results in the second quarter of this year 2025. The consolidated revenue in the second quarter this year was THB 4,881 million, increased by THB 42 million or 0.9% year-on-year, mostly from higher revenue from farm segment, from higher revenue from selling day-old-chicks and selling live broilers. The consolidated revenue from sales in the second quarter consists of the Food segment, 47.7%, the Farm segment, 36% and the Feed segment, 16.3%. And in the second quarter of this year, the revenue from Food segment was THB 2,326 million, decreased by THB 116 million or 4.8% year-on-year from lower revenue from export and chicken product from lower sales volume of export chicken product and lower selling price of the domestic sale and chicken parts and chicken byproducts. The total export of GFPT in the second quarter of this year was 8,500 metric tons decreased by 500 metric tons or 5.6% year-on-year from decreasing in export volume to U.K. and Malaysia. While the revenue from farm was THB 1,757 million increased by THB 211 million or 13.7% increase year-on-year from higher sales volume of the day-old-chick and live broilers. Revenue from feed was THB 798 million, decreased by THB 53 million or 6.2% year-on-year from lower sales volume and selling price of animal feed and also the lower sales volume of the shrimp feed. Next will be the consolidated income statement in the second quarter of this year comparing to second quarter of last year. As I mentioned, we have the total revenue about THB 4,881 million, increased by THB 42 million or 0.9% increase year-on-year, while the cost of goods sold was THB 4,065 million decreased by THB 85 million or 2% year-on-year, while the gross profit was THB 816 million increased by THB 127 million or 18.4% increase year-on-year. Cost of sales in the second quarter of this year contributed 83.3% of the revenue from sales decreased from 85.75% from last year, but the gross profit margin contributed about 16.7% in the second quarter of this year comparing to 14.25% from the second quarter of last year, mainly from the lower feed material cost, which is soybean and soybean meal. The other income in the second quarter of this year was THB 92 million, increased by THB 9 million or 11.3% year-on-year from the selling miscellaneous items and spare parts. SG&A expense in the second quarter of this year equal to THB 344 million, decreased by THB 14 million or 10.4% year-on-year from the lower freight cost and lower sales volume of chicken export. SG&A percentage decreased from 7.9% in the second quarter of last year to 7.05% in the second quarter of this year, and the profit from associates was THB 197 million, decreased by THB 81 million or 29% decrease year-on-year, mainly from profit contribution from GFN was THB 62 million, decreased by THB 75 million or 55% year-on-year from the lower selling price of domestic sales of chicken parts and chicken byproducts. While the profit from McKey was THB 135 million decreased by THB 6 million or 4% year-on-year from lower export volume of cooked chicken product. The interest expense in the second quarter of this year was THB 26 million decreased by THB 6 million or 18% year-on-year from lower interest expense as the loan outstanding decreased from financial institution decrease. Income tax expense of the group in the second quarter of this year was THB 69 million decreased by THB 0.5 million or 0.8% year-on-year. And finally, the consolidated net profit in the second quarter of this year was THB 642 million, increased by THB 59 million or 10% increase year-on-year from the higher revenue from sales and lower feed material costs and the net profit margin increased from 12.1% in second quarter of this year (sic) [ second quarter of last year ] to 13.1% in the second quarter of this year. Next will be the comparison between 6 months of this year 2025 to comparing to 6 months of last year 2024. And the top line revenue was THB 9,530 million, increased by THB 165 million or 1.8% year-on-year, while the cost of goods sold for the 6 months of this year was THB 8,062 million decreased by THB 46 million or 1% decrease year-on-year, while the gross profit was THB 1,468 million, increased by THB 211 million or 16.8% for the 6 months of last year. And the cost of goods sold percentage for the 6 months of this year, about 84.6% comparing to 86.6% for the 6 months of last year, but the gross profit margin contributed about 15.4% in 6 months of this year comparing to 13.4% in 6 months of last year from the lower feed material cost, which is corn and soybean and soybean meal. The other income in 6 months of this year was THB 174 million, increased by THB 0.07 million or 0.04% year-on-year from selling miscellaneous item and spare parts. And SG&A expense in the 6 months of this year equal to THB 709 million decreased by THB 43 million or 5.8% year-on-year from lower freight costs and lower sales volume of the chicken export. SG&A percentage decreased from 8% in the 6 months of last year to 7.5% in the 6 months of this year, and the profit from associate was THB 519 million, increased by THB 9 million or 2% year-on-year from profit contribution of McKey about THB 354 million, while the profit contribution from GFN was THB 165 million. The interest expense of the group in 6 months of this year, about THB 53 million decreased by THB 8 million or 13% year-on-year, mainly from lower interest expense as the loan outstanding decreased from lower financial institution. The income tax expense of the group in the 6 months of this year was THB 103 million, decreased by THB 17.5 million or 14.5% year-on-year. Finally, the consolidated net profit in the 6 months of this year was THB 1,281 million, increased by THB 232 million or 22% year-on-year from higher revenue from sales and lower feed material costs. And the net profit margin increased from 11.2% in the 6 months of last year to 13.4% in the 6 months of this year. Next will be the profitability ratio in this year. The gross profit margin increased from 14.2% in the second quarter of last year to 16.7% in the second quarter of this year as well as the EBITDA margin increased from 22.7% in the second quarter of last year to 24.1% in the second quarter of this year, and the net profit margin increased from 12.1% in the second quarter of last year to 13.2% in the second quarter of this year and the average exchange rate in the second quarter of this year was THB 33.1 per U.S. dollar. The earnings per share in the second quarter of this year was THB 0.1 per share and dividend payout ratio in 2024 was 12.7% or equal to THB 0.2 per share. And expected ROE this year was 9.6%, up from 7.6% in 2024 as well as the expected ROE in this year was 12.8% increase from 10.6% in 2024. Next will be the balance sheet. The total asset of GFPT Group equal to THB 27,252 million, increased by THB 935 million or 3.55% from last year, mainly from increased in cash and cash equivalents by THB 1,082 million and property, plant and equipment, about THB 219 million increase. GFPT Group had a total liability of THB 6,724 million, decreased by THB 100 million or 1.5% from last year from short-term loans from financial institution decreased by THB 500 million, and the shareholders' equity was THB 20,528 million, increased by THB 1,035 million or 5.3% increase from last year. Next will be the cash flow activity in this year. The consolidated EBIT in the second quarter of this year was THB 739 million, 7.6% increase year-on-year, while the consolidated EBITDA was THB 1,176 million, about 7% increase year-on-year and the cash flow activity in the second quarter of this year. We have net cash received from operating activities about THB 2,126 million and net cash used in investing activity about THB 270 million, mainly in fixed asset expansion and the grandparent and parent breeder and the net cash used in the financing activity about THB 771 million. As a result, the ending cash at the end of June was about THB 3,184 million increased about THB 766 million from previous year. The book value increased from THB 15.5 in 2024 to THB 16.37 at the end of June of this year. And as of June 2025, the company had a total liability of THB 6.7 billion, comprising of the noninterest-bearing debt in amount up to THB 2.75 billion and interest-bearing debt in the amount of THB 3.97 billion, and the interest-bearing debt consists of the short-term loans above THB 500 million long-term loans, THB 3,470 million and all loans are in Thai baht currency. We have no exposure in the foreign currency borrowings, but the debt-to-equity ratio was only 0.33. Next will be the capital expenditure. The 2025 investment budget is about THB 1 billion to THB 1.2 billion, mainly for broiler farm, breeder farm and chicken processing factory expansion, and we plan to increase the number of the chicken about 10% or 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 Thai chicken production in the global market. Thailand export chicken meat to Japan, 40%, 17% to U.K., 14% to EU and 9% to China and other countries about 20%. And we mainly export 54% in terms of the cooked chicken product, while we export 46% in terms of the raw chicken. Next will be the 50-year history of the Thai chicken export. Thai chicken meat export has been strong since 1973. But after the bird flu outbreak in the beginning of 2004, Thai chicken industry is still strong by switching from export fresh chicken meat to fully cooked chicken product. And after the major importers such as EU, Japan lift the ban from fresh frozen chicken meat from Thailand since 2012, Thai chicken meat export has been very strong. And last year, 2024, Thai chicken meat export break historical high with more than 1,200 million metric tons or THB 161 million. Next will be the global broiler meat market. Slide 32 shows the statistic of the top 10 countries of the global broiler meat market for 2024. For global chicken production, U.S. is the market leader, followed by Brazil, China and EU and Thailand ranked #7 in terms of the total global chicken export production. And the global chicken export, Brazil ranked #1, followed by U.S. and EU, while Thailand ranked #4. And the global chicken meat import, Japan is the market leader, followed by Mexico, U.K. and EU. Next will be the commodity price. Slide 33 provides statistical data on selected commodity price. For reference, the corn price in the second quarter of this year was THB 10.8 per kilogram, slightly decreased from THB 11.1 per kilogram in the second quarter of last year and the soybean meal price in the second quarter of this year was THB 15.2 per kilogram decreased from THB 20.7 per kilogram in the second quarter of last year and average broiler price in the second quarter of this year was THB 40 per kilogram, slightly increased from THB 39 per kilogram in the second quarter of last year and the day-old-chick price in the second quarter of this year was THB 18.5 per chick increased from THB 16.8 per chick in the second quarter of last year. And the export price in the second quarter of this year to Japan is about USD 4,800 per metric ton and the export price to EU was USD 4,400 per metric tons. Next will be the supporting and risk factor in 2025. Starting from the supporting factor consists of the global recognized food safety standard with a trusted compartment and traceability system ensure the disease outbreak as well as the growing poultry demand from rising population and economic boost demand for affordable chicken and cooked and processed chicken meat market growth from rising demand for the ready-to-eat and convenience foods and the strong export competitiveness. Thailand leads in processed chicken export with the high production standards with the lower production cost from lower cost, enhance price competitiveness for our producer. And the last one is the economic and tourism recovery, especially for the food service growth from the restaurant, fast food and street food. And moving to risk factor, which consists of the animal disease outbreak, including the hygiene risk. The global outbreak may reduce the grandparent and parent supply with limit the broiler production. It's also come from the global market competition, especially from Brazil and U.S. outcompete with the lower feed material costs comparing to Thailand and the cost volatility and rising expense from the weather risks like La Nina, El Nino and drought situation may arise, the feed cost despite the expected price decline. And non-tariff nature such as labor and environmental standard may limit the Thailand poultry competitiveness and oversupply risk also another concern from increase in production, mainly the market oversupply causing the price decline and lower production profit. And the last one is the geopolitical risks from -- and the trade impact. For example, the Russia and Ukraine war may raise the feed cost. Next will be the guidance in this year 2025. Our management provides 2025 guidance with a 2% to 3% growth from 2024 sales and anticipated GP margin in this year will be around 15% to 16% and SG&A expense should be around 7.5% to 8% and the other ratio such as the financial cost and effective tax rate will be similar to 2024 figures. And 2025 CapEx will be around THB 1 billion to THB 1.2 billion for the fixed asset investment. And the last one will be the key statistic. Slide 36 will show you the key statistics relating to our core business. Chicken meat and feed business contribute about 70% of the consolidated revenue from of GFPT Group. In the second quarter of this year, export volume decreased by 6%, mainly from decreasing in export volume of the cooked chicken to U.K. and Malaysia, while the indirect export volume to McKey in this year is quite similar to the second quarter of last year. And the domestic sales in the second quarter of this year increased by 3% from the second quarter of last year and moving to domestic feed market. Sales volume to animal feed decreased 10% year-on-year, while the fish feed slightly increased by 2% year-on-year and the shrimp feed sales volume decreased by 4% comparing to the second quarter of last year. We would like to thank all of you to join our webcast today. If anyone would like to have more information about GFPT Group, including the latest annual report or results presentation, please visit our website, www.gfpt.co.th or contact our IR department. Thank you, and see you next time.