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. 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, 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, and I will discuss about the Thai broader 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 emission 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 operations. For example, SDG2, zero hunger; SDG4, quality education; SDG5, gender equality; SDG6, clean water and sanitation; SDG8, decent work and economic growth; SDG10 produce equality; SDG11, sustainable safety and communities; SDG12, responsible consumption and production; SDG13, climate action; SDG16, peace justice and strong institutions. Next will be GFPT's awards for various awards and achievements of GFPT in 2025, including SET ESG rating with AA score. And we are also certified to be a member of CAC for anticorruption policy. And our latest CG rating was 5 CG symbol excellent for 7 consecutive years, and we also achieved Best IR, Best CEO and Best CFO from IAA for 2025 in agri business. Next will be GFPT Profile. GFPT is a vertical integrated chicken production starting from feed mill, grandparent, parent breeder farm, breeder farm, broiler farm, chicken processing plant and frozen processing factory. GFPT is listed in the Stock Exchange of Thailand under agri business. And last year, CG score was 5 CG symbol excellent. And our share price at the end of July was THB 9.8 per share and average stock price in the second quarter of this year was THB 8.8 per share. The 52 weeks highest share price was THB 11 and the lowest share price was THB 8.5 per share, and we have outstanding share 1.25 billion shares at THB 1 per share. Our market cap is about THB 12.3 billion and free float about 65%. We also have the foreign shareholder portion about 9.9%. And our dividend policy, we pay not more than 50% of the profit from separate financial performance after tax deduction. And the current shareholding structure, Sirimongkolkasem family being a major shareholders holds about 49.9% and 32.6% local individuals, 7.6% local funds, 9.3% foreign institutions and only 0.6% 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 frozen processing factory to produce 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% on GFN and McKey. So we use equity method to take 49% of the JV performance in our profit and loss. Next will be the GFPT fully vertical integrated chicken production. Starting at the feed mill in the left-hand side, we currently have 2 feed mill facilities. KT1 produced 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 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 farms, parent breeder farm and broiler farm. We import grandparent breeder chick from overseas. Grandparent breeder and parent breeder raising cycle about 60 to 65 weeks, while broiler raised for only 40 to 42 days to reach the target weight. Our chicken are raised in the closed EVAP system with strict biosecurity. We're highly concerned about the animal welfare and animal enrichment. We raise broiler in a sustainable way with a minimal impact on the environment. Our core strength is we have a 100% own farm policy. So it means that we have no contract farming to make our customer trust and our chicken meat quality. All of our broiler are sold to GFPT, the parent company and GFN the second joint venture for chicken meat processing and producing cooked chicken product for export. At the primary plant, chicken meat will be processed into main product and byproduct. The main product consists of chicken breast, chicken legs, chicken wings and chicken products for export to international markets. While the byproduct carcass, intestine and giblet and others, are sold to the domestic market. At further processing plant, the main chicken meat is processed at fully cooked product such as chicken nugget, chicken patty, chicken croquette and burger. Next will be GFPT time line. GFPT Group has been in poultry business in Thailand for 45 years. GFPT was established in 1981 to operate chicken processing under the BOI privilege for exporting fresh chicken meat. And during 1990s, we became a fully vertical integration by having our own private breeder farms, broiler farms, feed mill and sausage plant. In 1992, we listed in the Stock Exchange of Thailand under symbol GFPT and 1 year later in 1993, we joint ventured with the 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's in 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 called 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 Incorporation, the Japanese-based company to set up GFPT Nichirei Thailand Company Limited or GFN. The operation of GFN and GFPT is quite simple. GFN operates both slaughterhouse and food processing plants and mainly export processed chicken product to Japan and other international countries. In 2010, we did the stock split from THB 10 to THB 1 per share. And we expanded the sausage production capacity in 2017 and focus on producing chicken sausage. McKey also finished the new construction of the further processing plant in Chonburi Province. And currently, GFPT is constructing new slaughterhouse at Chonburi Province located near the new McKey further processing plant with a production capacity of about 150,000 birds per day for the full capacity. Next will be GFPT Group expansion plan. The expansion plan in the future for the next 3 to 5 years consists of the broiler farm raising capacity to reach 340,000 birds per day and also the new primary plant with a capacity of about 150,000 birds per day. And the last one will be GFPT further processing plant with a cooked product capacity of about 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 GFPT product line. Our product line consists of 3 categories 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 aquatic feed consists of fish feed, shrimp feed and frog feed, all feed products are sold to farmer, animal raiser and feed wholesalers in Thailand. Moving to the farm business. We sell parent DOC and broiler DOC to chicken farmers, live broiler are sold directly to GFPT, the parent company and GFN only. We also start to sell cage-free eggs since 2020. The last one will be the food business. Fresh chicken meat and parts can be exported as fresh frozen chicken and also sold into domestic market, such as wholesales market, OEM factories and QSR. The cooked chicken products are export to international countries, mainly to Japan, U.K. and EU. The processed food such as the chicken sausage are sold in the domestic market. Next will be the snapshot in 2025. GFPT consolidated revenue was THB 18.8 billion, decreased about 2% year-on-year. Our consolidated revenue breakdown by segment of 48% food, 35% farm and 17% feed. The revenue breakdown by product consists of 23% chicken direct export, the dark blue one and indirect export that we sell fresh chicken to OEM factory in Thailand, like McKey for 10%. 11% in terms of chicken byproduct sales in the domestic market and 4% for the processed food such as chicken sausage and meatball for the domestic market. For the feed business consists 6% animal feed, 3% fish feed and 8% shrimp feed. And the last one will be the farm business 28% live chicken sales to GFN and only 7% DOC sale to outside. And our export revenue is about 23% and 77% in domestic sales. But in terms of the revenue breakdown by currency, we sell in terms of U.S. dollar about 20% and the rest 80% in terms of Thai baht currency. Next will be GFPT market position. In 2025, GFPT ranked #2 in terms of export. GFPT, GFN and McKey altogether export 12% of the Thai chicken export, while we produced chicken only 6%, ranked #7 in terms of Thai chicken production. GFPT Group export, 51% to Japan, 26% to U.K. and 12% to EU, 6% to Singapore, Malaysia 4%, China 4% and 3% for other countries. We mainly export in terms of the cooked at 86% and only 14% in terms of the raw chicken export. Next will be the financial results in the second quarter of this year, GFPT consolidated revenue in the second quarter of this year was THB 4,648 million, decreased by THB 233 million or 4.8% decrease year-on-year, mostly from the revenue of the food segment from lower revenue from export [indiscernible] chicken and also the export of chicken meat. The consolidated revenue from sales in the second quarter of this year consists of Food segment 48%, Farm segment about 36% and Feed segment about 16%. And in the second quarter of this year, the revenue from Food segment was THB 2,270 million, decreased by THB 109 million or 4.7% year-on-year from the lower revenue from export of chicken products and from lower sales volume of the total export. The company's total export in the second quarter of this year was 8,100 metric tons dropped by 400 metric tons or 4.7% year-on-year from decreasing in export volume of the raw chicken to China. Revenue from farm was THB 1,668 million, decreased by THB 19 million or 5.1% year-on-year from lower revenue from selling DOC from lower sales volume and selling price of the DOC and revenue from feed sales was THB 764 million, decreased by THB 34 million or 4.3% year-on-year from lower revenue from selling fish feed from its lower sales volume. Next will be the comparison between the second quarter of this year and second quarter of last year. The total consolidated revenue was THB 4,648 million, decreased by THB 233 million or 4.8% year-on-year, while the cost of goods sold was THB 3,862 million decreased by THB 203 million or 5% year-on-year, while the gross profit was THB 786 million dropped by THB 30 million or 3.7% year-on-year, mainly from the revenue -- lower revenue from sales, while the cost of sales in the second quarter of this year contributed about 83.1% of revenue from sales, slightly decreased from 83.3% from last year, while the gross profit margin contributed about 16.9% in the second quarter of this year, slightly increased from 16.7% from last year. And other income in the second quarter of this year was THB 101 million, increased by THB 9.6 million or 10.5% increase year-on-year from higher selling miscellaneous items and spare parts, while the SG&A expense in the second quarter of this year equal to THB 349 million, increased by THB 5 million or 1.5% year-on-year since higher fuel cost and SG&A percentage decreased -- increased from 7.1% in the second quarter last year to 7.5% in the second quarter of this year. And the profit from associated was THB 135 million in the second quarter of this year decreased by THB 62 million or 31% decrease year-on-year from the profit contribution from GFN was only THB 3.5 million decreased by THB 85 million or 94% drop year-on-year from the lower selling price of the domestic sales of chicken parts and chicken byproducts while the profit contribution from McKey was THB 132 million decreased by THB 3 million or 2.5% year-on-year. And the interest expense of the group in the second quarter of this year equal to THB 21 million decreased by THB 4.8 million or 18.5% year-on-year from lower interest expense from the outstanding loan decrease and the interest -- and the income tax expense in the second quarter of this year was THB 67 million, decreased by THB 1 million or 1.7% year-on-year from the lower corporate income tax. Finally, the consolidated net profit in the second quarter of this year was THB 601 million, decreased by THB 41.5 million or 6.5% year-on-year from the lower revenue from sales and lower share of profit from associated companies. The net profit margin decreased from 13.2% in the second quarter of last year to 12.9% in the second quarter of this year. Next will be the comparison between the 6 months of this year and 6 months of last year in terms of consolidated income statement. The total revenue for the 6 months of this year equal to THB 8,916 million, decreased by THB 615 million or 6.5% year-on-year, while the cost of goods sold in the 6 months of this year was THB 7,505 million decreased by THB 557 million or 6.9% year-on-year, while the gross profit was THB 1,411 million in the 6 months of this year decreased by THB 57 million or 3.9% from last year. And the cost of sales for the 6 months of this year contributes about 84.2% of the revenue from sales decreased from 84.6% from last year, while the gross profit margin contributed about 15.8% in the 6 months of this year, slightly increased from 15.4% from the 6 months of last year. And the income -- other income in 6 months this year equal to THB 184 million, increased by THB 10 million or 5.7% from last year from the higher selling miscellaneous item and spare parts. And SG&A expense in the 6 months of this year equal to THB 658 million decreased by THB 51 million 7.2% year-on-year from lower freight costs from lower sales volume of the chicken export and the SG&A percentage decreased from 7.44% in 6 months last year to 7.38% from the 6 months in this year. And the profit from associated was THB 283 million decreased by THB 236 million or 45.5% year-on-year from the lower profit contribution from GFN and interest expense. In 6 months of this year was THB 43 million decreased by THB 10 million or 19.2% year-on-year from lower interest expense as the outstanding loan decreased and income tax expense in 6 months of this year was THB 103 million increased by THB 0.5 million or 0.5% year-on-year from the lower deferred tax revenue. And finally, the consolidated net profit in the 6 months of this year equal to THB 1,118 million decreased by THB 163 million or 12.7% year-on-year from the lower revenue from sales and lower share of profit contribution from associated company. And the net profit margin decreased from 13.44% in 6 months last year to 12.54% in 6 months in this year. Next will be the financial ratio in terms of the profitability. The gross profit margin increased from 16.7% in the second quarter of last year to 16.9% in the second quarter of this year. And the EBITDA margin in second quarter of this year is quite similar to second quarter of last year, about 24.1% and the net profit margin decreased from 13.2% in the second quarter of last year to 12.9% in the second quarter of this year. And the average selling -- exchange rate equal to THB 32.6 per U.S. dollar in the second quarter of this year. Earnings per share in the second quarter of this year equal to THB 0.48 per share and dividend payment was THB 0.2 per share or 10.3% dividend payout ratio and the expected ROA in this year was 8.1% and the expected ROE in this year was 10.5% that we calculate from the information of the 6 months of information of 2026. Next will be the balance sheet. The total asset of GFPT Group equal to THB 28,719 million, increased by THB 855 million or 3.1% from last year from the increasing in cash and cash equivalent by THB 950 million. And GFPT Group total liability equal to THB 6,151 million, decreased by THB 16 million or 0.3% from last year from the short-term loans from financial institution decreased by THB 150 million, and the shareholders' equity was THB 22,567 million, increased by THB 871 million or 4% increase year-on-year. Next will be the cash flow activity in the second quarter of this year. The consolidated EBIT in the second quarter of this year was THB 692 million, 4.6% drop year-on-year as well as the consolidated EBITDA was THB 1,021 million, 4.7% drop year-on-year. And the cash flow activity in the second quarter of this year, we have net cash received from operating activity THB 1,752 million and net cash received from investing activity, THB 246 million, mainly in the fixed asset expansion and also the grandparent and parent breeder farms. And the net cash used in financing activity about THB 555 million. And so the cash ending at the end of June was THB 4,480 million, increased by THB 1,296 million from previous year. The book value increased from THB 17.3 per share in 2025 to THB 18 per share at the end of June in this year. Next will be the interest-bearing debt. At the end of June this year, the company has a total liability of THB 6.15 billion, comprising of the noninterest-bearing debt in the amount of THB 2.55 billion and interest-bearing debt in amount of THB 3.6 billion. And the interest-bearing debt consists of the short-term loans, THB 130 million and long-term loans, THB 3,470 million. All loans in Thai baht currency, we have no exposure in the foreign currency borrowing and the net debt-to-equity ratio was only 0.27x. Next will be the capital expenditure. The investment budget in this year is about THB 1 billion to THB 1.2 billion, mainly for the broiler farm, breeder farm expansion and also the further processing expansion. We plan to increase the number of the chicken about 10% a year or equal to 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 2025, Thailand ranked #4 in terms of chicken export and ranked #7 in terms of chicken production in the global market. Thailand export product to Japan, 39%; U.K., 16%; EU, 14%; China, 7%; and other countries, 24% and we mainly export in terms of cooked 53% and 47% in terms of the raw chicken. Next will be the history of the 50 years of Thai chicken export. Thai chicken meat export has been very 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. After the major importers such as EU and Japan lift ban from fresh frozen chicken meat from Thailand since 2012, Thai chicken meat export has been very strong. And in 2025, Thai chicken meat export break historical high with more than 1 million and 1.3 million metric tons or equal to THB 165 billion. Next will be the global broiler meat market. For the global chicken production, U.S. is the market leader, followed by China, Brazil and EU and Thailand ranked #7. In terms of the global chicken export, Brazil is a market leader, followed by U.S. and EU, Thailand ranked #4 and in terms of the global chicken meat import, Japan is a 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, about THB 12.2 per kilogram increased from THB 10.8 per kilogram in the second quarter of last year as well as the soybean meal price in the second quarter of this year was THB 15.4 per kilogram, slightly increased from THB 15.2 per kilogram in the second quarter of last year. And the average broiler price in the second quarter of this year was THB 37 to THB 38 per kilogram decreased from THB 40 per kilogram in the second quarter of last year, while the DOC price in the second quarter of this year was THB 16.2 per chick, decreased from THB 18.5 per chick in the second quarter of last year. And the export price in the second quarter of this year consists of the Japan export price equal to USD 4,700 per metric ton, while the export price to EU was USD 4,400 per metric ton. Next will be the supporting and risk factor in this year. Starting from the supporting factor consists of the global recognized food safety standard with the trust compartment and traceability system ensure disease risk control. The growing poultry demand, rising population and economic boost demand from affordable chicken and also the cooked and processed chicken meat market growth, rising demand for ready-to-eat and convenience food and with the strong export competitiveness, Thailand list in the processed chicken export with high production standard with the lower production cost, enhance price competitiveness for producer. And the last one will be the economic and tourist recovery, which boost the food service growth, especially restaurant fast food and street food. Moving to the risk factor consists of the animal disease outbreak and hygiene risks. The global bird flu outbreak may reduce grandparent and parent supply limiting the broiler production, the global market competition such as Brazil and U.S. outcompete with the lower feed material costs and the cost volatility and rising expense like the weather risk like El Nino and La Nina may raise the feed cost despite the expected price decline and the non-tariff measurement like the labor and environmental standard may limit the Thailand poultry competitiveness. The oversupply risks increased the production, mainly the market oversupply causing the price decline with the lower producer profit and the geopolitical risks and trade impact like the Russia and Ukraine may raise the feed cost. Next will be the guidance in this year. Our management provide 2026 guidance with no growth from 2025 sales, and we have the anticipated GP margin about 15% to 16% and SG&A percent expense should be around 7% to 8% of the revenue from sales. The other ratio such as the financial cost and effective tax rate will be similar to 2025 and the CapEx about THB 1 billion to THB 1.2 billion for the big asset investment. And the last topic will be the key statistic showed relating to our core business. The chicken meat and feed business contribute about 70% of the consolidated revenue of GFPT Group. In the second quarter of this year, export volume decreased by 5%, mainly from decreasing in export volume of the raw chicken to China and indirect export volume to McKey in the second quarter of this year also decreased by 13% year-on-year and the domestic sales volume in the second quarter of this year increased by 7%. And moving to the domestic feed market. Sales volume of animal feed decreased by 22% year-on-year as well as the fish feed sales volume decreased by 34% year-on-year. And the shrimp feed sales volume increased by 3% comparing to the second quarter of last year. And we would like to thank you to join our webcast today. If anyone 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.