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 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. First, I will briefly introduce GFPT Group business and explain about the vertical integrated chicken production and financial results in the third quarter of this year 2025, then I will discuss about the broiler industry outlook and what we can expect in this year. 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 with its fully vertical integrated chicken production. GFPT supported sustainable development goals, SDG, which was incorporated in the company's objectives and operation. 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 inequalities; 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 anticorruption policy. Our latest CGR rating score was 5 CG symbol Excellent, and we also achieved IAA awards in terms of Best IR, Best CEO and Best CFO in agribusiness. GFPT Group is a vertical integrated chicken production starting from feed mill, grandparent breeder farm, breeder farm, broiler farm, chicken processing plant, further processing factory. GFPT is listed in the stock exchange of Thailand under agri business. And last year, the latest CG ratings score was 5 CG symbol Excellent. Our share price at the end of October was THB 10.3 per share, and average stock price in the third quarter of this year was THB 9.74 per share. And the highest and lowest share price in the past 52 weeks, the highest price was THB 11.2 per share, while the lowest share price was THB 8 per share. Our share outstanding at 1.25 billion shares and THB 1 per share and market cap is THB 12.9 billion and free float portion 67%; and foreign shareholder, 8.6%. Our dividend policy is to pay not more than 50% of the profit of separate financial performance after all deductions. Looking at our current shareholding structure: Sirimongkolkasem family being a major shareholder, holds 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 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 fresh frozen chicken meat and cooked chicken products. GFPT Group consists of 5 subsidiaries and 2 joint ventures. Each subsidiary handles different aspects of the vertical integration. GFPT holds 49% on both GFN and McKey. We use equity method to take 49% in JV performance in our P&L. Slide 11 explains about the vertical integrated chicken production of GFPT Group, starting from the left-hand side at feed mill. We currently have 2 feed mill facilities. KT1 produce animal feed and aquatic feed for domestic market, and 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 from overseas. For our chicken farm operation, we have 3 generations of chicken farms 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 around 60 to 65 weeks, while broilers are raised for only 40 to 42 days to reach the target weight. Our chickens are raising a closed EVAP system with a strict biosecurity. We're highly concerned about animal welfare and environment enrichment. We raise the broiler in a sustainable way with minimal impact on the environment. Our cost range is GFPT 100% own farm policy. We have no contract farming to make our customer trust in our chicken meat quality. All of our broiler are sold to GFPT and GFN for chicken meat processing and producing cooked chicken products for export. At the primarily plant, chicken will be processed into main products and byproducts. Main product consists of chicken breast, chicken legs, chicken wings and in a fillet for export to international markets. Byproducts consist of carcass, intestine and giblet which are sold for the domestic market. At boiler processing plant, main product is processed as fully cooked chicken products such as chicken nugget, patty, chicken croquette. Slide 12 briefly shows GFPT Group's time line. GFPT has been in poultry business for 44 years. GFPT was established in 1981 to operate chicken processing under BOI privilege to export 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 plant. And in 1992, we listed in the Stock Exchange of Thailand under symbol GFPT. And in 1993, 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, and in 2008, we set up a new feed mill plant in Chonburi Province called KT2 to produce chicken feed for internal use only. 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, the parent company. GFN operates both slaughterhouse and further processing plant and mainly export processed chicken products to Japan and other international countries. In 2010, we did the stock split from THB 10 to THB 1 per share. And in 2017, we extend our sausage production capacity and focus on producing chicken sausage. McKey also finished construction of its new further processing plant in Chonburi Province. Currently, we are constructing the new slaughterhouse at Chonburi Province with a production capacity of 150,000 birds per day. McKey further processing plant, with cooked product capacity of 30,000 metric tons. Next will be GFPT Group expansion 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 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. Our aquatic feed are fish feed and shrimp feed. Our feed products are sold to farmers, 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 broilers are 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 sold 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, U.K. and China. Processed food such as chicken sausage are sold in the domestic market. Next will be 2024 snapshot. For the year 2024, GFPT consolidated revenue was THB 19.3 billion, increased by 2% from 2023. Our consolidated revenue breakdown by segment are 50% food, 33% farm and 17% feed. Revenue breakdown by product are 25% chicken direct export, the dark blue one; and 11% indirect export, like the fresh chicken meat sales to OEM factory in Thailand, like McKey. 10% chicken byproduct sales in the domestic market and 4% processed food such as chicken sausage and meatball. 6% animal feed, mostly we sell swine feed and 4% for the fish feed and 7% for the shrimp feed. 28% we sell live chicken to GFN our second joint venture and only 5% we sell day-old-chick to outside. Our export revenue is about 25% and 75% are domestic sales. Revenue breakdown by currency, 22% U.S. dollar and the rest 78% are 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 export about 13% of the Thai chicken meat export, while we raise and produce, chicken. Only 6% rank #6 in terms of chicken production in Thailand. GFPT export 30% to U.K., 24% to Japan, 16% to Malaysia, 14% to China; 12% to EU and 7% to other countries. Our chicken export products are 58% cooked and 42% in terms of the raw chicken. Next will be the financial results in the third quarter of this year 2025. GFPT consolidated revenue in the third quarter 2025 was THB 4,741 million, decreased by THB 310 million or 6.1% decrease year-on-year, mostly from lower revenue of Food segment, from lower revenue from export processed chicken products. The consolidated revenue from sales in the third quarter consists of Food segment, 45.7%; the Farm segment, 36.6%; and the Feed segment, 17.7%. In the third quarter of this year, revenue from Food segment was THB 2,168 million, decreased by THB 323 million or 13% drop year-on-year mainly from lower revenue from export of chicken products from lower sales volume of the export of chicken products. The company's total export of chicken products in the third quarter of this year was 7,900 metric tons, decreased by 1,700 metric tons or 7.7% drop year-on-year from decreasing in export volume of processed chicken to U.K. Revenue from farm was THB 1,736 million, decreased by THB 12 million or 0.7% decrease year-on-year due to lower sales volume of the live broilers. Revenue from feed sales in the third quarter of this year was THB 837 million, increased by THB 26 million or 3.2% increase year-on-year from higher sales volume of the shrimp feed. Next will be the consolidated income statement in the third quarter of this year comparing to the third quarter of last year. As I mentioned already in the third quarter of this year we have the total consolidated revenue of THB 4,741 million, decreased by THB 310 million or 6.1% drop year-on-year. Cost of goods sold was THB 3,778 million, decreased by THB 488 million, 11.4% drop year-on-year, while the gross profit was THB 963 million in the third quarter of this year, increased by THB 178 million or 22.7% up year-on-year. Cost of sales for the third quarter this year contributed about 79.7% of revenue from sales, decreased from 84.5% from last year, while the gross profit margin contributed about 20.3% in the third quarter of this year, increased from 15.5% from third quarter of last year, mainly from the lower feed raw material cost, which is soybean meal, corn meal and fish meal. Other income in the third quarter this year was THB 92 million, increased by THB 6 million or 6.6% up year-on-year. SG&A expense in the third quarter of this year was THB 350 million, decreased by THB 63 million or 15.3% drop year-on-year since lower freight costs and lower sales volume of the chicken export. SG&A percentage decreased from 8.2% in the third quarter of last year to 7.4% in the third quarter of this year. And the profit from associated was THB 113 million, decreased by THB 94 million or 45% drop year-on-year, mainly from profit contribution from GFN was only THB 0.8 million, decreased by THB 56 million or 98.6% drop year-on-year from lower selling price of domestic sales of chicken parts, chicken byproduct and also the lower export volume of the processed chicken. While the profit contribution from McKey was THB 112 million, decreased by THB 38 million or 25% drop year-on-year from lower export volume of the cooked processed chicken. Interest expense of the group in the third quarter of this year was THB 25 million, decreased by THB 6 million or 19.5% drop year-on-year from lower interest expense as the outstanding loan from financial institution decreased. Income tax expense of the group in the third quarter of this year was THB 77 million, increased by THB 11.1 million or 16.8% up year-on-year. And finally, the consolidated net profit in the third quarter of this year was THB 715 million, increased by THB 174 million, 32% up year-on-year from lower feed raw material costs. And the net profit margin increased from 10.7% in the third quarter of last year to 15.1% in the third quarter of this year. Next will be the comparison between 9 months of this year and 9 months of last year in terms of the income statement. We have total consolidated revenue of THB 14,271 million, decreased by THB 145 million or 1% drop year-on-year, while the cost of goods sold was THB 11,840 million decreased by THB 534 million or 4.3% drop year-on-year. And the gross profit margin was -- gross profit was THB 2,431 million, increased by THB 389 million or 19% up year-on-year. Cost of sales for 9 months of this year contributed about 83% of revenue from sales, decreased from 85.8% from last year, while the gross profit margin contributed about 17% in the 9 months of this year comparing to 14.2% in 9 months of last year, mainly from lower feed material costs. Other income in 9 months of this year was THB 266 million, increased by THB 6 million or 2.2% up year-on-year, while the SG&A expense 9 months of this year equal to about THB 1,085 million, decreased by THB 107 million or 9.2% drop year-on-year since lower freight costs and lower sales volume of the chicken export. SG&A percentage decreased from 8.1% in 9 months of last year to 7.4% in 9 months of this year. Profit contribution from associated was THB 631 million in 9 months of this year, decreased by THB 85 million or 11.8% drop year-on-year. Profit contribution from McKey for the 9 months of this year equal to THB 466 million, while profit contribution from Japan was THB 166 million. Interest expense of the group in the 9 months of this year was THB 78 million, decreased by THB 14 million or 15% drop year-on-year, mainly from lower interest expense as the loan outstanding decreased from financial institutions. Income tax expense of the group in the 9 months of this year was THB 180 million, decreased by THB 6 million or 3.4% drop year-on-year. And finally, the consolidated net profit in 9 months of this year was THB 1,996 million, increased by THB 405 million or 25.5% increase year-on-year from lower feed material costs. And the net profit margin increased from 11% in 9 months of last year to 14% in 9 months of this year. Next will be the profitability margin. Starting from the gross margin increased from 15.5% in the third quarter of last year to 20.3% in the third quarter of this year as well as the EBITDA margin increased from 21.7% in the third quarter of last year to 26.8% in the third quarter of this year. And finally, the net profit margin increased from 10.7% in the third quarter of last year to 15.1% in the third quarter of this year. And average exchange rate in the third quarter of this year was THB 32.3 per U.S. dollar. Earnings per share in the third quarter of this year was THB 0.57 per share and dividend payment was THB 0.2 per share or equal to 12.7% dividend payout ratio. And expected ROA in this year was 9.9%, increased from 7.6% in 2024 as well as the expected ROE in this year was 13.1%, increase from 10.6% in 2024. Next will be balance sheet. The total assets of GFPT Group equal to THB 27,584 million, increased by THB 1,268 million or 4.8% increase from last year, mainly from increasing in cash and cash equivalents by THB 1,574 million; and property, plant and equipment increased by THB 342 million. GFPT Group had total liability of THB 6,336 million, decreased by THB 488 million or 7.2% drop year-on-year from short-term loans from financial institution, decreased by THB 570 million. And shareholders' equity was THB 21,248 million, increased by THB 1,756 million or 9% increase from last year. Next will be the cash flow activity. Consolidated EBIT in the third quarter of this year was THB 822 million, 28% increase year-on-year, while the consolidated EBITDA was THB 1,269 million, 16% increase year-on-year. And cash flow activity in the third quarter of this year, we have net cash received from operating activity about THB 4,462 million, net cash used in investing activity about THB 710 million, mainly in the fixed asset expansion and grandparent and parent breeder, and the net cash used in financing activity about THB 875 million. And at the end of September, the cash was about THB 409,079 (sic) [ 3,675 ] million, increased around THB 712 (sic) [ 648 ] million from previous year. The balance sheet -- in the Slide 26, the book value increased from THB 15.5 in 2024 to THB 16.95 at the end of September this year. Next will be the interest-bearing debt. At the end of September, the company had a total liability of THB 6.34 billion, comprising of the noninterest-bearing liability in the amount of THB 2.44 billion and interest-bearing debt in amount of THB 3.9 billion. The interest-bearing debt consists of the short-term loans about THB 430 million and long-term loans about THB 3,470 million. All loans are in Thai baht currency. We have no exposure in foreign currency borrowing, and the debt-to-equity ratio was only 0.3x. Next will be the capital expenditure in Slide 28. Our investment budget in 2025 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% or 20,000 birds per day per year. However, the broiler farm expansion plan can be adjusted due to the economics and industry situations. In 2024, Thailand ranked #4 in terms of the chicken export and ranked #7 in terms of the chicken production in the global market. Thailand export chicken meat products to Japan, 40%; U.K., 17%; EU, 14%; China, 9%; and other countries, 20%. And the chicken export product, 54% cooked chicken and 46% raw chicken. Next will be the history of the Thai chicken export for the past 50 years. Thai chicken meat export has been very strong since 1973, but the bird flu outbreak in 2004, Thai chicken industry is still strong by switching from export fresh chicken meat to fully cooked chicken products. 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. In 2024, Thai chicken meat's export break historical high with more than 1,200 million metric tons or about THB 161 million. Next will be the global broiler meat market. Slide 32 shows the statistic of the top 10 in each category. For example, import, export, domestic consumption. For global chicken production, U.S. is the market leader, followed by Brazil, China and EU and Thailand ranked #7 in terms of the production. And in term of global chicken export, Brazil ranked #1, followed by U.S. and EU, while Thailand ranked #4. And in term of 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 the selected commodity price. For reference, the corn price in the second quarter of this year was THB 9.8 per kilogram, decreased from THB 12 per kilogram in the third quarter of last year. Whereas, the soybean meal price in the third quarter of this year was low THB 13.4 per kilogram comparing to THB 19.3 per kilogram in the third quarter of last year. Average broiler price in the third quarter of this year about THB 38 to THB 39 per kilogram, slightly decreased from THB 39 to THB 40 per kilogram in the third quarter of last year, while the day-old-chick price in the third quarter of this year is quite high at THB 18.5 per chick, increased from THB 17.5 per chick in the second quarter of last year. And the export price in the third 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 ton. This is quite similar to the second quarter of this year. 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, growing poultry demand, rising the population and economic boost demand for affordable chicken and cooked and processed chicken market growth, rising demand for ready-to-eat and convenience food, strong export competitiveness. Thailand leads in processed chicken export with the high production standards and lower production cost, enhanced price competitive for our producer. And the last one for the supporting factor is the economic and tourist recovery. Food service growth especially restaurant, fast food and street food. And moving to risk factor in this year consists of the animal disease outbreak and hygiene risk, like the global AI outbreak may reduce the supply of the chicken with EU limits the broiler production. The global market competition, especially from the Brazil and U.S. outcompetes with the lower feed material costs, the cost volatility and rising expense, weather risks like El Nino, La Nina may raise the feed cost despite the expected price decline, and non-tariff nature like the labor and environmental standard may limit the Thailand's poultry competitiveness and oversupply risk can occur anytime that cause the price decline and lower profit of the producer. And the last one will be the geopolitical risks and trade impact, like the Russia and Ukraine war may raise the feed cost. Next will be the guidance in this year. The top line revenue should be no growth from 2024 sales and anticipated GP margin will be about 16.5% to 17.5%, quite high comparing to last year. And SG&A expense is quite low at about 7% to 7.5% and other ratios such as financial cost, effective tax rate will be similar to 2024 figures. And the CapEx in this year will be around THB 1 billion to THB 1.2 billion for the fixed asset investment. The last topic is about the key statistic. We show the key statistics relating to the core business. Chicken meat, our food business and feed business contributes about 70% of the consolidated revenue of GFPT Group. In the third quarter of this year, export volume decreased by 17%, mostly from decreasing in export volume of the cooked chicken product to U.K., while indirect export volume to McKey in the third quarter of this year also decreased by 6% year-on-year and the domestic sales volume in the third quarter of this year slightly increased by 1% year-on-year and move to domestic feed market. Sales volume of the animal feed increased by 6% and the fish feed is the same level as the third quarter of last year. And the last one, the shrimp feed sales volume increased by 11% comparing to the third quarter of last year. 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 or result presentation, please visit at our website, www.gfpt.co.th or contact our IR department. Thank you again, and see you next time.