i-Tail Corporation Public Company Limited (ITC) Earnings Call Transcript & Summary

Good morning, and welcome, everybody to the Analyst Meeting for Fiscal Year Quarter 4 2024 results. And we have been honored by the executive to present some information starting from Khun Pichitchai Wongpiya, the CEO; Khun Pornchai Tatiyachaitaweesuk, CCO; Weerawit Keeratikulset Assistant CFO. And I'm Neroli Goldman, Head of IR. And today, we are going to give away new products as well. We have within treat -- pet treat [indiscernible] and these are the products under [ ChangeTer ] brand and we also have Bellotta with new packaging. Without further ado, we are going to deliver the presentation for about 15 minutes and then we will take about 1.5 hours for the Q&A session. [Operator Instructions]. Khun Pichitchai, the floor is yours.

Good morning on Valentine's Day. I'm not sure if it's Valentine's Day or not because we don't have a lot of people here. I'm going to deliver some updates for quarter 4 of 2024. As this is the last quarter, so I'm going to give the updated information of the full year in 2024. Starting from taking a look at Q4. For Q4, and sales is about THB 4 million -- THB 4.7 billion. If you look at the breakdown at the bottom, most of the sales from Americas -- about half of the sales are from Americas. Compared to Q4 last year or [ 2023 ] it is considered flat or a little bit lower. In Europe, if compared to Q4 2023, there's a little drop here. I will give you the details later on. And in terms of Asia and Oceania, the increase is about 7% or [ THB 1.7 billion ]. In terms of year-on-year, it is quite flat or a little bit decreased. So the drop of the volume is about 3% for Q4 and premium mix plus 5% and FX about minus 3% in Q4 volume compared to Q4 in 2023, a little bit increased about 3%. Gross profit is about THB 1.2 billion or gross margin about 25.5%, which is a little better compared to Q4 last year. And net profit is about THB 800 million, which is 3% increase or the net margin is about 17% or 16.8%, a little bit better compared to the same quarter of previous year. So this is the overview for Q4. As mentioned earlier, if we look at the whole year last year, the sales was about THB 17 billion, which is a 14% increase compared to 2023, the gross profit THB 4.9 billion, which is 62% higher than last year or the gross margin is about 87% -- 28%; OP margin 18%. Compared to last year about -- which is about 60% better than last year in terms of net profit. So if you look at all these numbers, everything is better than before, but we are not complacent as I -- as you already know. 2023 is a very low base here. So even if we see a better number for our indicators, I'm not going to say that it is supposed to be like that. But right now, we are -- we can say that we are in the normal situation. The sales volume last year is about [ 103,318 ] tons, a little bit better than before. New customers, we got 83 new customers last year, which accounts for THB 460 million in sales. New products launched, THB 1.3 billion, which is about 8% and the total SKU last year account for 5,000 SKU (sic) [ 5,140 SKU ] last year. So this is the overall feature of the whole year of 2024. In terms of dividend payment, it has just been approved by the committee yesterday. On the second half, we are going to pay the dividend from THB 0.40 -- this year we are going to pay [ THB 1.15 ] per share and this is about 96% in 2023. So it's quite satisfactory for shareholders. If we compare to dividend yield -- if you look at the dividend yield with the share price at the end of the year, it's about 5.2 %. The record date -- the payment date is going to be April 25, 2025. So let's take a look at the overall picture of the global market. Only cat and dog market, last year 2024, it was about [indiscernible] million and the growth is quite high. If we look at premium and mid-priced groups, the dark blue and the light blue graph, we expect the growth to be faster than the economy products. So i-Tail is in -- most of the products are in premium and mid-priced group. If we look only at wet cat and wet dog food, if we take this part, because i-Tail is in the wet food, the dark green one is wet dog food. The light green one is for wet cat food. Actually, the dog food market is larger than cat food, but if we remove the dry food, wet cat food market size is actually larger than wet dog food. We can see the growth, similar growth about plus 5%. And for pet food market, the growth is expected to be about 5%. So let's think about how -- with i-Tail products being sold, if we convert the value to the market price, normally it would be 3x of FOB to shelf price. The market share of i-Tail in the wet cat market is about 6%. So this is like benchmarking of our business for the global market of wet cat to see what kind of share we have for the -- in the global market. So let me pick up -- pick Americas market for cat and dog food because this is the largest market. The value last year was about USD 60 billion and the growth in the last 5 years, in average [ 42% ] projection is about 5%. The outlook in this market, the growth in retail volume and retail value, we expect to see the growth. And for functional claim whether a treat or snacks, it's in the mode that a growth is quite faster than other products, whether wet or dry. And for the online market, we expect to see a large growth in the Americas. Cat food is expected to grow fast, very fast. And if we look at different brands, there are several attempts to grow in independent brand and for -- and there are some acquisitions for large customers, for example, Blue Buffalo owner had a -- it got group of issues and one of the brands in Europe. And we can see that there are some consolidations going on in the market. For key achievements last year, if I look at 3 parts, commercial, operational excellence and innovation. For commercial, we grew in global brand and leading brand, which accounts for 4x compared to previous year. One of the reason is maybe because of the lower base. But anyway, we have the pipeline with this customer until 2027. Our business with retailers, the first retailer and the highest retailer in America, the growth is about 30% compared to 2023 and as mentioned earlier. Our growth, we focus on private label, and we achieved in private label our retailers in Canada or Australia. And in terms of operations last year, for the whole year last year, we started the production of our new plants where we decided to invest about 2 or 3 years ago. So the production capacity is -- grew by about 20%. And we already have ASRS construction in the first quarter of 2024. Once the construction is complete, the warehouse will be fully automated and it will help us in reduction of cost. In terms of innovation, i-Cattery last year, we set up i-Cattery in 2023. But last year, about midyear of 2024, we got accreditation from AAALAC. AAALAC is a non-profit organization that accredited companies or public organizations, universities that have -- that use animal in their tests before launching a new product. For example, for cosmetic products, they use animals in experiment to see if there is any allergic reaction. In our category, we have about 50 cats to see and we were accredited for good treatment to animals. We do not harm them and hygienic conditions for pets and people who work in our center are assured. So we are only one pet food company who received this accreditation and we are the first private company that received this accreditation. Other accredited entities are universities and public organizations. And another innovation is we registered about 20 patents and some of them are in the process of registering and some of them are already registered. And last year, we also gained recognition for Best CFO, Best IR, ESG and Manufacturing awards. Last year, we were quite glad that we were listed in SET50 and we launched the strategy for 2030 under the project Tailwind. And we communicated a Tailwind in November last year. In the last slide, I will give you some updates about the tailwind project. And may I ask Khun Pornchai to give you the update on your product.

Last year, we launched about 1,300 SKUs (sic) [ 1,320 SKUs ] for new products. So among these products, the value is about THB 1.4 billion or 8% of the sales. These are just some examples. These are our premium products. Just take a look at the first one, Two-tone sachet. Two-tone sachet here have been well accepted by our global brand and private label customers and also important brands. So when you squeeze it, it will have 2 colors just like toothpaste. And this is -- this was already launched in Germany last year with retailer sales, we were one of the first companies in Europe. And for chicken broth on the right bottom, we launched this one for global brands and private label in 2024 as well. This is already launched. And this is functional and treat. So we call this functional treat. So this is already launched as well. And the other one that I would like to give you the example is in Australia in Q2 on the top right corner. We got new customers in Australia, and we launched this product with them as well. And on the left bottom, Tender shreds. These are shredded dog food, which was launched with the fourth global brand in Q1. These new products, of course, at the beginning, we did not see a lot of sales, it took time. And the launch products in global brand -- for global brand, at the end of Q3, we still have a consistent shipment of these products. So these are some brief examples for our new products, which was launched in 2024. So this part is not comprehensive. This is not exhaustive. And 1 part is innovation and the other part is differentiation of the cost. For example, for Two-tone sachet, we have not seen any other product in the market in this nature. So let's take a look at ESG. ESG for our group, we have the goal in 2030, i-Tail have made some progress in this aspect. There are 3 pillars that I would like to discuss with you. The first one is net zero emission, greenhouse gas emissions that we are going to reduce. And the target is by 2030, we are going to reduce greenhouse gas emission by 42%. This graph shows you that in 2024 compared to the base line in 2021, the decrease is about 2%. You might wonder why last year, we did better than this year. One of the reason is that the volume of year 2023 was quite low base. So the outlook or the emission -- the greenhouse gas emission was low in 2023. If we do not have any measure to handle this, the number might be even worse. And in terms of stakeholders, for example fishers, we conduct some programs or training for fishers to make sure they have a safe environment and to organize training for them so that they understand how to recruit as well. And in terms of manufacturing for plant,compared to 2023 we reduced waste to landfill. The waste that will be dumped in the landfill which was decreased by 30%. And the hands out that -- the handouts that we distributed to you, the number might be different because on the slide, it's the number from 11 months, but on the screen is for 12 months. Next topic, business performance. All right. So let's take a look at the business performance. This screen shows you the performance of 2024 where the sales come from THB 17 billion, 50% comes from Americas and it's consistent. Last year, it was 50% as well and this year, it's still the same. And for Europe, there's a little bit of change, about a 3% increase. And the growth in Europe is due to new customers. And as mentioned earlier, we have the full sales team in Europe. So the sales team grew and we got new customers, the existing customers are retained. And for Oceania, a little bit decreased from 37% to 34%. And in terms of the sales dollars for Oceania, there is no decrease, but the volume decreased. The main reason is -- comes from customers in Japan. The currency exchange rate result and even if they take new customers and they accept the price, but the volume is not that high because the total spend is limited by the currency exchange rate. And for -- if we look at the total market, the cat food is still in the proportion of 70%. Last year, it was 72% and this year, it was 70%, but there are some increase in the share here, increase in the dog food share. And this year, 18% compared to last year, 16%. The treat is consistent 12%, which is not different from last year. If you look at the right hand side. The right-hand side, we divide customer groups into, for example, world pet food brands or global brands, it's improved. Improved from where, if you ask. For world brand and global brand, our #1 customer, we achieved beyond our goal because we opened new market for this global brand customer whether in Latin America and in Europe, there was not a large growth previously, but this year, the growth is higher than last year, about 5%. But for brand owners or importers, there is a drop of 5%. This is a sensitive group because sensitive to the price. We increased the price that's true, but for the volume, even if the prices increased, the volume is a little bit decreased, but not significantly because we've got new customers to compensate the loss. So the decrease is about only 5%. For private label, this is still the group of customers that we can rely on in terms -- under the current economic situation. So the sales is consistent and the dollar sales can be maintained even if the prices increase, we can still maintain the sales. So for private level. Most of the customers are in America and for -- private label is consistent because private label in Europe is still consistent because they are resilient to price increase but not as well as customers in America because for America, the brand is quite which brands are premium, which brands are not. In Europe, in private label, probably we are still focusing on this group, but we will be more selective for private label who we will accept only those in private product market because the margin is quite good. But for lower margin, we have to consider the voluntary because we focus on absolute profit margin as well. And for our brand the growth is quite high for brand export. And we export to our neighboring countries and Middle East. The growth is quite good. But for the domestic market, we have not achieved the goal. Even if -- in domestic market, they love wet meat, but the market is not that good. So the proportion of sale is decreased for domestic brand and our own brand is about 2%, which is the same. So let's take a look at Americas market. If you look at the overall picture, we can see that for Q-on-Q, the growth is quite well, for values are not high for Americas for Q-on-Q. For year-on-year, the growth is about [ 6.6% or 7% ]. In terms of volume in Americas market the growth is quite well about 5%. And year-on-year, the growth is about 2%. If you look at the whole year about 4.5% for sales volumes for -- minus 4.5%. So America is still the main market which is quite good. If we look at Q-on-Q, last year we had some new retailer customers in Canada, and these are retailers customers that we launched the new product for them and the trend is quite good. In 2025, we have some new products and good progress for forecast for new customers in Canada. And for Americas retailer, these are not main retailers in America. What I'm sharing with you, these are retailer in America, the growth and they started to include their own brands in Americas market. For America, it's going quite well, especially in retailer and global brand growth. So you can see in this screen that we are doing quite well in America. In dollar sales, this growth is about 14%. And in terms of volume, it's consistent at 0.5%. Asia and Oceania, the proportion is about 32 -- 34% in Asia and Oceania. In -- the overall picture of the sales dollars is growing by 4.5% for dollar sales and for the volume, it's minus 4.5%. So all in all, for Asian and Oceania, Japan is try -- is quite problematic for volume. And that's why the volume is increased by 4.5%. But in dollar sales, it doesn't look that bad for. And Australia is our driver for the growth of sales because Australia, we have new -- 2 new customers, 1 of them is retailer and the other of them is retailer brand. And some other customers in Indonesia and neighboring countries or Taiwan still have some growth, about 2% to 4%. So Asia and Oceania is considered going well. And we can see that the sales proportion is still consistent from 74% to previously. And in Europe, the growth is quite high because in Europe, we already have the full thing in Europe and to drive the sales for private label and imported brands. The reason for the sales growth is mostly from imported brands. And in Europe, the growth is in dollar sales year-on-year, the growth is about 40%. In terms of volume, the growth is about 50%. The driver Europe for new products, we focus on treats in this market because for treat whether cat soup, as we mentioned many times already, cat soup is growing very well, and we still have some line product for cat soup. And for functional treat, it's also growing well. In Europe, in England, Germany, we still also have some new customers and also in Spain. So let's take a look at the percent mix. Percent mix, things are consistent for the whole year for all quarters, the proportion is not changing so much about 54% or 55%. For mid-priced products, about 45% compared to 2023, we can see a good growth and this can drive percent mix very well and this reflects on the profit margins as well. And Khun Weerawit will clarify further on this part.

Good morning. The next agenda is financial performance of quarter 4 and full year of 2024. This is the graph and we only added Q4 in this graph. The sales is about 4.7 billion and the gross market provision of Q4 is about 25.5%. If you look at the overall picture of the full year is about 27%. But as mentioned earlier from Q3 is 27.7% as the result of universal inventory for the outdated products. So if we remove this group the gross profit will decrease from 27.7% to 27.1% for the whole year. So -- if you look at Q3, if you remember, the numbers I reported earlier, the gross profit of 29.5%, which includes reversal. So if it is removed, it will be only 28%. But in Q4, it is 25.5% because there is no reversal in Q4? We already used up all of those. And why gross profit is still dropping? There are a few reasons why the gross profit is about 25% compared to Q3 at 28% after removing or reversal. The first one is depreciation. Depreciation is -- as we fully depreciated for i-Tail [indiscernible] I mean, new plan, this is why the gross profit is a little bit decreased. And the second reason is that in Q4 to support the sales so that it can increase, we have rebate program. The discount for promotion to stimulate the sales and this had impact on the gross profit margin as well. And the other reason could be the fish price and the cost of raw material which increased in Q4. This had an impact for the gross profit as well. And the last reason is a strong baht value -- stronger baht value will have impact on the decrease of gross profit margin. These are the reasons why the gross margin is decreased compared to Q3. But in terms of the whole year, we're still doing well. The gross profit margin is 27.7%. If compared to last year, it was about 20%. In terms of the net profit, is still doing well for the whole year, about 20.3%, for Q4 is about 16.8%, which decreased compared to Q3 24 -- 22%. With the reasons that I mentioned earlier, and we also had some cost, for example, consultant cost for transformation project tailwind that we already presented in last year. I cannot share with you the clear value or e fee, but the consultant fee that had impact on SG&A to sale of Q4, it's about 11%. The consultant fee is not only for our transformation, it also includes personnel development and other plans and program. We hired consultant tell look at quality management as well. So we include the consultant fee for everything and the cost is about 3.4%. If we remove the 3.4%, the SG&A to sales will be about still 9% for Q4. If I look at the whole year, SG&A to sales for the whole year, if you look at the number, it's about 9.3%. So 1.9% is missing. So we have about 0.4%, which meets the guidance that we presented earlier. Okay. The next slide, please. The cost of goods sold, the same proportion. We have raw material about 1 out of 3, for packaging and ingredients 1 out of 3 and overhead. And for Tuna price, as mentioned earlier in Q4, the raw material price increased a little bit from $1,410 to $1,500. And this is due to the impact from Q4, and we also have the strategy for proposal of price and some mechanism to propose the price to the customer to reduce the fluctuation of the price. Chicken price. Chicken price has been reduced. That's why our COG is better. We might have some impact from the fish raw material, but we still have some benefit from chicken price. And our value from Q3 to Q4 is quite flat, but the bad news is the fluctuation is quite high from [ 30 to 34 ] but the average is about 34. And we are still conducting for forward for 100% for the sales to reduce the fluctuation in our [ prices ]. And the freight cost. The freight cost is reduced from Q3 to Q4. And it helps for [indiscernible] anyway the FOB is about 90% which doesn't have a lot of the impact on the freight cost. Aluminum cost had increased a little bit which had impact on the packaging price but not much because we had lost some contract and we still have some stock that we can have lower cost for aluminum. So let's take a look at the cash cycle days on the right-hand side. It's about 149 days for Q4, and we still met the target of 150 days. If we compare to Q4 last year, which is quite low, Q4 last year it was 146 days and we are able to receive cash in only 149 days. If you look at the details, the payable turnover days from 71 days to -- receivable turnover days from 71 to 75. The main reason why -- the reason for the increase from Q3 is because of the higher sales volume. We had more orders compared to Q3. So that's why the receivable turnover is better. And inventory turnover is 103 days compared to our target of 100 days. So 3 days lower compared to Q3. The reason is that we could be able to release some stock and for Q3 from -- we are doing better. And for trade payable turnover days, a little bit decreased which is not significant. So overall picture is very good. For cash cycle days, we did better than our target. For ROA and ROE, we did well. ROE, we are still at the target of 15%, a little bit decreased from Q3 because of the gross [ profit ] margin, as I mentioned earlier. For interest-bearing debt to equity, the number is 0 because we do not have any loan from the bank. We only have credit liability about THB 45 million on the 31st of December. Next, effective tax rate or ETR. In the year 2024, the ETR was about 3.8%. We should still compare with the guidance of 5% and in 2024, we did not have an impact of global minimum tax or inventory. So we were able to [ avoid ] GMT in 2024. The next slide, a lot of information is here, but I would like to explain only the concept of tax rate of 2025 for i-Tail [indiscernible] and the principle of Pillar 2 GMT that will impact it will start to be effective on the 25th of December last year and it came into force on the 1st of this year and it will be effective on the ultimate parent company with more than EUR 750 million in revenue and the Thai Union Group, the parent company had a revenue beyond this threshold, that's why Thai Union Group is in the Pillar 2. At the same time as i-Tail is a part of Thai Union that's why i-Tail had the obligation to comply with this law. According to the [indiscernible] normally, they would consider the parental company and allocate the subsidiaries in each country. When we look at the focus on Thailand, for example, under Thai Union, what are the companies under Thai Union and there might be some companies who pay 27% tax rate already because they don't have EOI or lower than 15%. For example, i-Tail with ETR lower than 15% and we calculate from this ETR that have to pay 15% first. For example, a hypothetic number that currently Thai Union paying is 7%, we have to add 8% to become 15%, and it will be allocated to all subsidiaries in Thailand by considering the profit incurred -- the profit under Pillar 2 and go for minimum tax [indiscernible] not following the profit in the financial statement, the profit needs to be adjusted. And I believe it is not in referral to revenue or revenue law which is quite competitive. Once it is allocated, each company will receive allocated tax that we have to pay. And from my calculation on the right hand side, the top-up tax rate of ITC group in 2025, the top-up is about 3% to 4.5%. So the effective tax rate guidance of 2025 is about 7% to 8.5%. So this is after allocation and cost and we have to pay to the revenue department and then we have to pay again. The next time of payment will be at 2027 according to the law because -- I mean 15 months after year 2025. So 15 months we have to pay in 2027 and for the first filing the time frame can be extended to another 3 months. The tax rate here is calculated from the guidance or the budget that we prepared for year 2025. If there are any other factors that have impact on the sales or the profit [indiscernible] fluctuating this is just the guidance for you to see [indiscernible] that's see the mitigation impact. I think the OI or the revenue department might issue some [indiscernible] and maybe things will become clearer -- more clear in the future to mitigate this in terms of mitigation of this impact, but it will fall within the range that I mentioned earlier. Next topic, outlook for 2025. The outlook for full year. We would like to present to you the outlook. The sales growth is about 13% to 15%. If we can maintain the growth, we can meet long-term target in 2,023 of [ THB 1 billion ] organic growth and about [ THB 500 million ] in organic growth, which already increases our road map. For gross profit, we expect to grow by 10% to 12% compared to last year 2024. SG&A, we expect 9% to 10%. So it might look high compared to last year as we've mentioned earlier, it might be due to consultant fee, which will be included. The CapEx is still THB 1.5 billion. Dividend payment, we still maintain the same policy at least 50% net profit. But you could see this last year, we paid a dividend at 96%. The key strategic focuses of this year for us to achieve. We still expect to grow in Americas and Europe especially for private label that we still have low access increase of share of wallet and also to acquire new customers as mentioned by Khun Pornchai, [ our Euro chief ] and we have 14 in Europe. So we are going a throttle. And we are still in wet treat and functional pet food, and we will focus on supplements or -- in this year and next year as well. In terms of the transformation program or project Tailwind, this is another driver for our OP. In the next few slides, I will deliver some more explanation. Furthermore, the new projects of this year in this pipeline as you can see here, we have about [ USD 30 million ] in M&A [indiscernible] that we are quite serious to identify the target and right now we have made some progress. And we have some consultants who help us in identification of the areas and categories that we need to conduct M&A. And we categorize the target [indiscernible] contact or to approach the targets. And right now is -- we are in mid-February, and we could see the picture Q1 this year. We have the sales more than 90% of the budget or the target.. So this is quite a significant progress. As mentioned earlier, the opportunity for growth for private label, this is something that the consumers are still watching us, and we expect to grow in this segment. The economic situation across the world made customers to turn to private label and for pet parents to focus on health and progress of their pets. And I think this is a good opportunity for us. We try to adapt ourselves to be in line with the current opportunity in the market. There are still some risks because of the economic situation, as I mentioned earlier and the consumer spending they are more careful about their spend -- spending. As mentioned, many quarters we have developed the products that will fit the spending of our consumers, and we need to adapt ourselves as well. Import tariff as we already know, the President -- the new President of the United States, he is quite serious on this. We don't see anything clear, but we need to be prepared in our preparation. If the pet food tariff across the world is increased including in the America, the competitiveness between us and our competitors outside America might not be changed, but if the tariff is increased, it will be beneficial for the domestic manufacturers in America. So we need to wait and see. And let's get back to M&A. This is something we are focused as well. Are we going to have some footprint in Americas. This is another factor we are considering as well. And another risk is the exchange -- currency exchange rate for Japanese yen or Chinese yuan that will have the impact on U.S. dollar and higher costs for imported products. But this slide is the updates for each quarter. What has been changed -- in this slide, we disclose the name of the customers. Actually, this is a public information. We don't need to keep confidential the name of the customer. So we think disclosing the name is not -- is not wrong. So this is to growth in 2024 for each company except General Mills, which is the owner of Blue Buffalo brand. You can see negative number here. But other customers, the sales volume and sales value, we could see the growth for both and in average is about 3%. I think this slide is an indicator that in business, we can see consistent growth. This is the project tailwind or transformation program that I mentioned earlier. In November last year, we eventually discussed the target of this tailwind project. This is a 3-year project, and it's been 1 year already and it's going to end in the end of 2027. And the uplift would be about USD 50 million. And at the end of last year, we were a little bit ahead of the program, about 104% compared to the target of the program. And we use the term 3 value stream and 3 functions, including commercial, manufacturing and procurement. In terms of commercial, this is the large chunk that we expect that the annualized OP uplift at the end of the program might contribute about plus/minus THB 35 million, an increase of the sales to have increased OP and core manufacturing to reduce the cost and to increase production efficiency, which can contribute about USD 10 million to USD 12 million for OP. For procurement, we have a program to discuss with our suppliers and to have a clean sheeting to see the products that we sell, what are the composition of the cost, so that we could understand better the cost structure of our supplier and able to buy in lower cost. So this is a little bit smaller chunk about USD 5 million to USD 6 million. And in total, for this project, right now, we are so far ahead of the target. And this is the last slide for this meeting.

All right. Let's move on to Q&A session. Before we start the Q&A session, could you please scan the QR code on the screen maybe now or maybe after the end of the meeting so that we can receive your feedback. So let's open for Q&A. [Operator Instructions]

May I ask the target of 2025, the sales plus 13% to 15%. And the assumption is that the sales volume will grow? And what about the price? And what about FX?

For 2025, we expect that the sales volume will grow about 16% and the price about 3%. FX right now is about 6%. This is something that we are looking at 6% for FX, actually, it's negative. If you note the volume is 16% value or price adjusted is 3%. So in total 19%. So according to our guidance, 13% to 15%, so there will be the impact of FX. So FX in 2024, it was about THB 35.5 (sic) [ THB 33.5 ] plus-minus. But in our guidance, we use the exchange rate of THB 35.5. So there will be translation difference. And we also have sensitivity analysis for FX for THB 1 change. The impact is about 0.8%.

And in terms of the assumption for sales?

The assumption for sales, we expect that the growth may come from many factors. The first factor is the global brand or label brand will be the important factors. We look at this group as we will take the same proportion of 49% to 50% because the growth rate is quite good, and the product pipeline is quite intense. So for the global brand, the proportion will be about 50%. And the rest of them will be different. The rest of them may be 16% to 17% will come from private label. And for a private label, Americas might contribute to about 17% for private label, because for our product label, they accept the price well and they love premium products, and we still have some projects with private label in Americas with a pretty high value. So we are focusing on Americas consumers for private label.

Just now, you said that the price will increase by 3%. So in your point of view, the tuna price will increase? Or do we -- is it because we focus more on premium products? Could you please share with us.

In terms of fish price, the target this year -- the forecast is that the price will be higher than last year compared to the fixed price last year. It was the average price $1,438 according to the website and this year, it will be higher. So because of this mechanism, mechanism of price, the price will be a little bit high.

Okay. So right now, the price is locked until when for the tuna price and other raw material price?

You mean locking of the raw material price? It depends on the raw material, for example, the chicken price, we have long-term contracts. So the price is locked. So we will get the same rate -- at a certain rate. But for tuna price, we post the price for tuna price consistently, but it will be consistent with the mechanism for proposed price. For example, the tuna price we have a stock of tuna price. So it depends on the cycle of price adjustment when we -- if we have to propose to the price to our customers, it's not according to the calendar year. So it could be any month of the year. So it would depend on which cycle you are in.

So may I ask you about aluminum price as well. If we think about 1 out of 3 for packaging, what does it account for? What does aluminum account for packaging?

Aluminum price, I don't have exact percentage. I have to go back to check information. But normally, aluminum is the primary packaging for us. We have a primary and secondary packaging. They are two-part. But for the exact percentage, I need to get back to you later in terms of the percentage.

So for the GMT tax 7.5% to 8%, is it going to be used forever? And what about next year, is it going to be real?

We need to review this annually because this is calculated from the budget that we hired our consultant to come up with the budget. So it's growth income, adjusted profit for 2025. But for 2026, we need to recalculate.

Let me ask a little bit more about tax. The assumption of 7.5% -- is [ 45 ], right?

Yes, because -- TEU relate to be 15% under [ 14% ]. But once it reached 14% and allocated to subsidiaries in a different country, as some companies are already paying 20%. They don't have to pay more. But this will be allocated only for those who did not pay as high. So 15% is allocated to i-Tail. But I would like to emphasize that this is ETR. If we calculate the net profit impact, it will be very low because the EBT is divided by...

But also the percentage of the cost of chicken and tuna, what is...

Tuna about 50% and chicken is about 30%.

Half of what?

Half of the -- raw material in 1/3 and 50% of raw material is fish, 30% of raw material is chicken and the rest is other raw material.

So the long-term contract for chicken and a shorter-term contract for tuna right? And what does the [ Lat Am ] look like?

Currently, at the current price, the current price is the price for about 2-month period. We look at this is the cost.

Let me ask -- I would like to add a little bit to answer the questions on aluminum. This is not the absolute number. This is the estimation. This is calculated from aluminum tray for cans, we don't have the overall picture. But for aluminum tray, we don't -- we have less than 1%. But for aluminum can, we will get the information for you later on. This is a very good question. We need to collect more data on this.

Let me ask a little bit more about GMT. So in quarter 1 of 2025, do we accrue?

In terms of booking, we are still waiting for the subordinate law to be issued. But according to the principle, the budget of the first quarter, for example, if we need to pay THB 100 million extra, so it will be included in the accrued income tax. It will have to be paid 18 months ahead or June of 2027. In terms of cash, right, but accrue is set up in quarter 1.

And this one, if the investor ask is there any practice for the parent company to allocate the tax rate to the subsidiaries by profit contribution?

Yes, by profit contribution, but not the profit that you see on the financial statement, the profit needs to be calculated under the principle of Pillar 2.

So if we talk about fairness, the auditors will verify this, right?

Yes, we have KPMG as our auditor to verify and we hire EY to look at the tax and allocation of tax, and we also have KPMG to audit this as well. So in terms of length or fairness, it's in line with the law because according to [ royalty decree ], the allocation will need to be in line with the profit. It's a parent company allocated tax to the subsidiaries. They need to have an agreement and they to submit the agreement to the revenue department. And under that agreement, of course, the auditor will need to verify the agreement as well.

Let me ask about the raw material. If you look at the overall picture, of course, you could lock price for the chicken. But for beef and oil and other raw materials or ingredients, is the price increase? Maybe the raw material that we lock up the price if you compare it to other raw materials, do you see the increase and how much?

In terms of ingredients, we locked the price of these ingredients. Is it increased? Some of them increased because of the inflation, the minimum wage, which was adjusted to why there or some increase of the price, but the increase of price will be reflected on the pricing that we propose to our customers as well.

Let me add a little bit for a project and one of the pillar is procurement. And we try to optimize the cost. As mentioned earlier, by clean sheeting, it allows us to buy materials with low cost. If we can have a long term book, it will help us reduce -- reduction of the cost for fluctuation of raw material price. But any raw materials even some of them cannot be done this way, for example, for tuna, the fluctuation is quite high, depending on the catching. Even if we want to pick the price for the whole year, we are not able to do that, and we try to do as best as we can.

So that means the effective pricing, let me discuss to our customer, the effective pricing can shift, right? Is there any period, for example, if we say 3%. Is there any period for effectiveness?

For the period, the period has already agreed -- already been agreed with our main customer for the price volume. These have been fixed. But for these customers, if there are other factors, for example, steel price, if steel price increase and the price increase in the whole industry. And of course, we can negotiate with the customers if we have the evidence to submit to our customers at that -- there is the increase of the price across the country or across the continent, we can increase the price from the agreed price.

Let me ask a little bit more about tariff. If we look across the board for those who export the product, the pet food to the U.S. If you look at some major competitors in different countries, most of them -- most of them are in Thailand, right? So our target -- so the overall structure -- if we look at the old structure, what are the risks in terms of tariffs? But because I think we need to focus on in Thailand.

Yes, that's correct. Our competitors for wet pet food and fish-based product, most of them are in Thailand. So we need to see if the U.S. government made an announcement, we expect to be in April, we will know what would the tariff look like? Will it be increased or not? And what would be the impact? And actually, in our association, we discuss and try to forecast what would be the rate of increase. And nobody knows, we don't want to guess the number. But if the price increase, if the tariff increase across Thailand, the tax rate will increase in the same rate. I don't think they will increase the rate differently among different industries. So if the rate has increased, we need to see maybe in Thailand and in neighboring countries, what would be the competitive advantage. We are not talking about the U.S. If we compare to our competitors in Europe, in Europe, Trump already said that the tax rate in Europe will be about 25% across the board. So we need to see what would be the number for pet food in Europe. If the prices increase, what about in Thailand. If the increase in Thailand is 25%, that means everything will be the same in terms of competitiveness. 25% increase in Thailand and in Europe. So the competitiveness in Thailand and in Europe will be the same, which is zero. But those who are impacted are the consumers in the U.S. So if you ask me, if we want to import from Europe, in the U.S., they imported a lot of products from Europe and Thailand. Can they adapt? And for wet pet food or fish-based products, I think they will take time to adapt. And of course, the cost on their side will be increased as well. For example, for fish-based products and the import price to process -- [ imported costs ]. And in Thailand, we are the major players. What about import duty? Can they still maintain competitiveness? So the problems will fall on those in the Americas, so they need to consider if they want to increase the tax and what would be the increased rate. And they already made an announcement in Europe but not in Thailand. But on our side, I don't think we are at high risk, if we need to compete with those in other countries with increased tax rate in China, because in China are not competitive already. So we need to focus on our competitors in Thailand and in Europe.

The other question, quarter 1 which is a little more seasoned, and we are -- so we have a positive side. We have -- we could lock up our customers. And this year, do we still consider quarter 1 as a low season? Is there any change?

It's still the same. Quarter 1 is still low season compared to other months in the whole year. But if we compare to -- from quarter 4 this year and last year, if we compare quarter 1 this year to quarter 4 last year, we believe that quarter 1 is better than quarter 4 last year. But quarter 1, if we compare to 2025, quarter 1 is still a low season.

Why is it better? Is it because we have some new customers? Or is it because the customers are more active?

In terms of customers, the growth, it's quite good in all groups. Slow growth are in imported brands in quarter 1 -- quarter 1 is still the same, not a lot of growth. But for global brands, there is a consistency in the launching of new products, plus the forecasted products. For example, our main customers, the growth is about 7%. Of course, the average number of each quarter would be different, but there are still some growth for each quarter. So quarter 1 of this year will be better than quarter 4 last year. And if we compare with quarter 1 in 2024, it will be better than quarter 1 of last year as well.

Let me get back to answer the question of aluminum can. Already found some data. About 38% for aluminum can. And aluminum tray, Pornchai already said that less than [ 1.1% -- 0-point something ].

And this is for raw material, right?

For packaging, in the whole group of packaging, 38% aluminum can and 0.2% for aluminum tray. For total packaging -- and in total packaging.

Let me ask about the sales of quarter 4. I understand there are some delayed shipments. I understand why it's lower in Europe. Is it because of the seasonality?

In Europe the sales quarter 4 decreased a lot. This does not have anything to do with the delay or the vessel. i-Tail did not delay. There was no delay from the i-Tail side. But delay was because the customer was not able to have the vessels. And of course, we have some important brands as our customers they still have the impact in selling premium products. In Q4 this year, they buy in lower volume. But the overall picture of Q4, the main players are in Americas. And in Q1 this year, the delay is due to lacking of vessels.

And in year 2024, the growth is about 14% and the sales of 2023 is quite low base. And in 2025, the growth is 13% to 15% based on the larger base.

And in terms of existing customer and a new volume from new customers, and the main contribution in 2025 will be from new customers. And our new customers will include those in America and Europe. I focus on America and Europe, because in Asia and Oceania, we do not focus on new customers that much. For Americas, the new customers come from private label and important brands. These two groups will be the main customers to drive sales. And on European side, we focus on imported brand than private label. But in the Americas, private label is more focused. And the main driver is also new projects. In the presentation, we already showed you this year 2025, we have some new projects in the pipeline, which accounts for about USD 30 million, and which include a lot of customer growth, but it does not end here. Our new customers, including new products, $30 million means new product growth on top from our budget, $30 million we still have some pending with a significant number. It doesn't mean -- which is not 1-digit million dollar, but the number is not confirmed. That's why we cannot tell you the number. But the confirmed number is $30 million for new product. And for new customers, this is separate from new products. For new customers, we will give you the information for each quarter later on because we do not have the confirmed number, but for new products, it's already confirmed. That's why I were able to tell you the number.

For Europe, customer forecast on imported brand. In Q4, the sales power was impacted. Was it impacted from quarter 1 or from other segments?

In the same segment, the same segment, but in the group of newer customers. In England, for example, because we dedicate a lot of import in England, Germany and Spain, in Italy and France. And we have a queue up of new customers. We call this in imported brand, not private label groups. And we already have the queue up in that group. But for private label, this is another separate group. The answer is that we focus on imported brands, the same group. But we are quite selective. We will be -- those who have the buying, purchasing power and they order products quite well. And if I remember correctly, I already mentioned that in 2025, we do not focus on dollar sales only. We will include sales volume as well that we would like to focus on, and we would like to drive the sales volume so that the absolute number of profit on can be better. According to our guidance, we would like to drive the gross profit margin, which is the percentage of the growth and the growth volume will contribute as well.

Let's move on to the gross profit margin. OP will be increased by 10% to 12%. So the gross margin will be about 27%, which is equal to in 2024, which did not include inventory reversal. So for depreciation or cost overhead, which were increased, we will be net with the increased volume. That's why the margin is the same? Or do you assume that you will have more premium products?

I'm not quite clear what you were asking.

The gross margin in 2024, not including inventory reversal, it was 27%. In 2025, it was 27% as well. Some factors, we could see -- we will see some improves and what be the main?

Actually in 2025, we will see a little bit of drop even at the growth. I admire your for fast calculation. Of course, there will be a little bit of a drop due to depreciation. In 2024, the depreciation was in Q4. And 2025 depreciation for the full year from January to December, this is the first factor and the second factor is the minimum wage, which was announced on the 1st of January. If you only look at the minimum wage, the increase was 2% from 352 to 367. This is another factor which had impact to gross profit margin. That's why the gross margin of -- from 2024 to 2025 tend to drop a little bit. And the other part is raw material cost. As mentioned earlier in 2025, the cost will be higher. This is another factor, but not a lot of impact. So if you make a calculation, you will see a small drop. So the factor that contributed to the margin this year compared to last year.

Okay. So if the volume is increased -- the fixed cost, it's reduced. What are other factors?

Project tailwind is another factor. As mentioned, actually tailwind is a front load fee in year 2024, we did not get any benefit from tailwind. But in 2025, we started to gain some benefit actually starting from January, it will be accumulated along the year. So whatever we have done in '24, we will get the benefit in this year.

And what about consulting fee? What year does it cover?

Consulting fee will cover all the years. And at a proportion -- this is a portion for OP uplift because this is a long-term project, similar to success-based basis.

But there is no fixed or fixed plus success.

Right now, it's variable.

SG&A for year 2025, we do not include the cost for transmission and consulting. Can it be in the range of 7% to 8% which is the same as before?

Yes.

Let me get back to M&A a little bit. I'm not sure -- this year, let me see, anything clear this year and what would be the size of M&A?

To be clear -- to see the picture, we are going to approach maybe to conduct due diligence with them. I believe these are going to happen this year. But it's going to be successfully done deal, I think there are -- there will be so many factors. As I mentioned today, we already identified the group of the companies we are going to approach. And I believe that if we approach many companies may be we will discussed further with some of them. Deal size, I think organic growth is THB 500 million. So maybe we would be able to close a bit about 2 to 3 deals to be able to release THB 500 million.

And I could see just some of the amendment for the objective of the investment. Is this a part of the M&A scheme?

That was -- that didn't have anything to do with M&A. We just expanded our scope because we included some supplement. That's why we need to add a small objectives of the company?

And you mentioned investment in the U.S. I'm sure if we constructed the plant, the manufacturing costs will be higher than the plants in Thailand. What is your point of view, if you need to have some production in the U.S.?

As I mentioned earlier, if the tariff is higher and if we need to manufacture in the U.S. First of all, we utilize the advantage. How are we going to utilize the advantage of the cost in the U.S.? And how are we to -- how -- what can we contribute to the M&A? From my point of view to raw materials, organs of animals, the cost is quite low in the U.S., we can leverage the cost. But for wet food the capacity, I think we can leverage this capacity for land-based meat raw materials with low cost to contribute -- we can utilize our skills and expertise for real meat to contribute to lower cost and to differentiate our products.

I have two brief questions. Just now, you said that you're working on new clients, and which can be something material? Can you please confirm that this is already included in the 13% to 15% sales growth of 2025? Or it's going to be an upside price?

If we talk about the products, $30 million that was on top. So this is not included in the 13% to 15% because the number was calculated earlier.

So besides $30 million, you mentioned the other one part, which is not included, right?

No, not included.

When are we going to see the number?

We can see clearly the number of $30 million on top of $30 million, we expect to realize by August. So you will see the number gradually, right?

Yes. So I have one more question in calculation of the global minimum tax, 7% to 8% have we included potential BOI privilege? The question is that -- is it enough to have any kind of upside on this part? Or is it stretched already?

We did not include any potential because there is no additional announcement from BOI. Back then BOI said that they would have cash grant to mitigate impact. But right now, they still have different meetings with authority and there is no formal notice. So right now, there is no mitigation measure.

So after the litigation impact announcement is issue we will [ see bit more clarity? ]

From what I work, I'm not sure if it's true or not, for example, for tax credit, if you have tax credit, of course, you have additional payment for accrual, but a certain number will be lower.

In CapEx at THB 1,500 million. What is included? Could you elaborate?

Mainly in THB 1,500 million. The main part is capacity increase. The capacity increase is -- it's more of not increase of the cap. I mean increase of the scale, expertise, effectiveness, induced a reduction of production cost [indiscernible] that we already discussed earlier. So the payment that we have to pay this year and we invested in 2024 and the other half of investment is in 2025. This is the main amount and some other investments are in new technology and products. And we have developed advanced technologies and also to increase capacity, reduction of the cost, and to increase competitiveness and on some part come from replacement as well as, for example, replacement of old machines, outdated machines, so to increase the yield and reduce cost. And finally, QC or sustainability that we need to invest more and also ESG. So these are the main investments.

Not including M&A, right?

No, M&A is not included.

So let's get back to another question. The vessel issue of -- vessels from that result in the shift from quarter 4 to quarter 1 this year. Are we going to have the same problem? Is the problem resolved already?

We need to be a little bit pessimistic because this is the game from shipping line. They try to maximize their revenue. So they limit the number of vessels, and they want to increase their price. And for those who do not pay, they kick those out. So we still have to rely on our customers. But in our point of view, we try to allow our customers to have a forecast in advance. In terms of production, we don't have any problem with that. If the customers are able to conduct a forecast, if they can negotiate with the [ shipping ] line, you will see less problem. In the last quarter, we could see some improvement, especially for our main customers. We could see things went better, especially for vessels, but for some other customers with smaller scale, they did not have negotiation power they needed to admit the situation. So in my point of view, the problem will still not fully resolves.

GP guidance, GPM of almost 27%, which is similar to last year. I understand that previously, you were talking about -- you were talking about 25% or something. The increase of 2%, can it be the result of transformation program only? Or is there any other factor?

One of the factors is transformation program. The other factor is cost improvement, costs saving and other projects that we include. For example, CapEx for us, for example, to have new technology, new machines, new automated machine, which can reduce the cost for us in the future.

So it was not included earlier, and it was included now?

No, it was included earlier. So actually, it was THB 1.5 billion in 2024 and right now it's still THB 1.5 billion. It's already included in our plan, but the number is included gradually.

Let me ask another question in relation to tariff. If the tariff is increased at the same rate, maybe the burden will be passed to the consumer? Why are you so confident? If you have to take the burden of the tariff, how is it going to be allocated among brand owners or producers, manufacturers or consumers?

Comparing to the cost in the past when we increased the price, we increased the price across the country. And this is how I make the comparison. Because our customers who buy products in Thailand from i-Tail, they need to buy the product anyway because they don't have these kind of products, [ whether ] in their own country. So they have to buy products in Thailand. So they don't have any other choices because we are more competitive. For tariff, if we assume that tariff will be increased, if the tariff really increase the customers. In general, the customers need to bear the higher cost for 100% because we are using cost plus base with our customers. If they do not have no choice, they cannot manufacture their our own product. If they go to European manufacturers, actually, other manufacturers in Europe are not competitive compared to us in Thailand. So we are quite -- we have the edge over them. If the tariff is increased -- if we compare the tariff increase with Europe, the competition is still the same. We still have the advantage, the advantage over our competitors in Europe.

I'm not sure if the question is that if the tariff -- let's say, it's 10%, who will bear the 10% [ in the chain? ]

Of course, the importer of the brand owner, they have to pay 10%. Their cost will be 10% higher. Will they be able to shift the burden to the retailer or not? It depends on how they're going to it. If we increase the price by 3% to 5%, maybe the shelf price is not increased. But if 10% is increased across the board, I am confident that the shelf price will be increased. Even American consumers, it's bad luck for them because they have to pay higher.

Is it going to be as high as 10%?

It depends on the buffer for each sellers. If you look at only our sales and the brands in shifting the responsibility of the tariff to the consumers. Of course, there will be the pressure on their side to try to reduce the price, but the first burden is borne by the importer, because import tariff is higher. So they have to face this situation. Will it be our burden is in the future.

Let me ask about the manufacturer in the U.S. I would like to know what kind of products they are manufacturing? And can they adapt themselves if the tariff is increased?

Most of the products there are not the same as in Thailand. Most of the products in Thailand are a real meat. But there in the U.S., there would be a [ loaf ] or chunk just like chopped liver like chunk in gravy or [ loaf ]. So the appearance of the products are not the same, of course.

Second question is that -- let me answer the second question. In the U.S. capacity, they have high capacity from their customers, the customers who escape from there to us because we took the largest share of wet pet food that do not have the capacity. So that's why their customers have to shift to Thailand.

Last question. You could see that in the U.S., they are focused on -- they put less focus on climate change in ESG under the new government. And in Thailand, we invested quite a lot on these matters. So the competition and these barriers that contribute to our success in the future, what would be the change in the future when they put less focus on these matters?

This is a good question. In my point of view, you need the new government put less importance on these matters. I believe that the brand owners still see the importance of these matters. As the brand owner, they need to win more customers. And there are a lot of studies and surveys from Nielsen or any other researchers. Most of the consumers are in Millennial or Gen Z group. They focus a lot on ESG compared to other age groups. And we can see the increasing trend, increase number. I believe that the brand owner will never -- will never drop these.

I think maybe the Q&A session ends here. If you have more questions, you may contact us Investor Relations and see you again in the next quarter. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]