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

[Interpreted] We're going to begin the meeting for today, and we believe everyone is in attendance now. And I'm going to speak English now. Good morning, everyone, and welcome to i-Tail's Second Quarter 2025 Analyst Presentation. My name is [ Gisada ], and I will be your host for today's session. Today, we've changed our video format to MS Teams. Therefore, please excuse any technicalities that may arise. Before we begin, let me take a moment to introduce our management team who are joining us today, our new CEO, Khun Roy; our CCO, Khun Pornchai; our new CFO, Khun Yuwaporn; and our Head of IR, Khun Pimphat. Today's session will begin with a presentation on i-Tail's second quarter performance followed by the Q&A session. As the presentation will be held in Thai, we have an in-house translator live during the session. To enable this, please click on more and select Language Speech and enable the interpreter language. Now I would like to hand over to Khun Roy to walk us through the presentation. Thank you.

[Interpreted] May I have the slide, please? I would like to begin with the world market for pet food. The projections are that the cat and dog food for 2025, 3.5% growth, we're looking at USD 177 billion. If you look at the wet category, both cat and dog is 3.2% until the year 2030. This is at USD 48 billion. Cat food. The wet is growing -- cat food is growing faster than dog food by about half. And from our estimates, i-Tail will get 6% of the market share in the wet cat food market. If we zoom in on the 2025, the second quarter for 2025, for the second quarter, for us, we have many good news factors to share with you. Let's look at the volume first. The volume compared to last year, we grew by almost 10%. If we take a look at the U.S. dollar sales, we grew by about 7%. It's incredible that there are many factors that led to our performance not meeting all of our goals, whether it's the lowering of the premium mix and also the ForEx. Overall though, our sales for the second quarter were recorded at THB 4.473 billion. Gross profit was at 25%, and our operating profit was at 14.7%. If you remember last year, we talked about the European market and AOA and you'll see that we have more details on this. We closed the gap for these 2 regions and we will provide more details later. On the next slide, for the first half of the year, the first 6 months we are seeing the same thing. We have volumes of increasing U.S. sales 8% and this is offset by the exchange rate and the premium mix. And we have sales of THB 8.7 billion compared to last year, it's only grown by 1.5%. The gross profit for the first 6 months is at 24.6% and the adjusted net is at 18.3%. I'm going to pass the microphone on to my colleague.

[Interpreted] On this slide, you can see the trends for our sales as well as our gross profit margin and our net profit margin. If we talk about the trends, you can see that the blue or light blue, sales are relatively stable, but an important driver for our volume growth has increased. And as Roy explained a second ago, there are other factors that have led to a lowering of our sales in terms of the Thai baht, especially due to the exchange rate. And another factor is the product mix. Last year, we -- compared to the year, we had premium mix that were higher than usual, more than expected, and that was about 47% to 50% in line with our guidelines. As for gross profit margin and net profit margin, gross profit margin, you can see in 2025 we have improved a bit compared to the quarter before, which was at 24.1%. And compared to the year before the same quarter, the second quarter of 2024, there's a significant difference. Most -- the major reason is due to the mix of the products. The product mix for 2024 -- for the second quarter of 2024 was higher at about 75 -- 56% compared to the second quarter of 2025 at 46-point or close to 47%. And therefore our gross profit margin has dropped. There are other factors as well. For instance, in 2024, we had reversal, we had revision element, we had depreciation. And this is increased because of our plant depreciation in [indiscernible]. We have begun to operate this year. And in the end, the labor costs have increased as well in line with the newly announced minimum wage and the most important factor is the product mix. As for our net profit margin and the adjusted net profit margin, it's also close to last year. This is about the trends for the tuna prices and the chicken prices. The tuna prices have gone down a bit compared to the first quarter, while the chicken prices have gone up a bit. But we'd like to emphasize the exchange rate, the second quarter, it might have a 36.9 in the second quarter of 2024, but in the second quarter of this year it's at 32.8, and that's a significant difference. And here are the -- we have days payable, days inventory, the key message for all of these numbers is that they are relatively stable ever since 2024 up to 2025 and they meet our targets. With regard to return on assets and returning equity, overall the numbers have gone down in line with the drop in our operating profit. Dividend. Everyone is asking about our dividends. Everyone wants to know what they would be like. At present, the Board has approved the interim dividend for 2025 at THB 0.40 per share. This is in line with our 2024 dividend payout. If we look at the dividend payout ratio is at about 87%, 87% of the net profit for the first half of 2025. In terms of business performance, I will hand things over to Pornchai.

[Interpreted] This demonstrates our strength for i-Tail for the first half of the year. If you take a look on the left-hand side, I would like you to take a look at our treats. Overall, this is a segment that has led to favorable profit and this category year-on-year has made great progress. We've grown from 11% to 13% compared to the first quarter of last year. And the cat food has also increased to 70% and dog food is 17%. Let's take a look on the right-hand side. You can see from our portfolio, our customers are quite strong, especially those -- you can see the world pet food brands. These are the global brands, especially during economic times whether it's in Americas or in Europe or in Asia. i-Tail's strength is -- comes from our global brand customers. They continue to work with us and they have led to increase sales, increase product for us. We also have more private label growth in the second quarter of this year. The private label segment has grown. This is a quarter-on-quarter growth. And I'd like to reemphasize that our private label customers, we choose only those customers to focus on premium products. And brand owners or importers, there's a mix. There are mid-price customers and premium customers. And I would like to move on to the next slide. Let's take a closer look at our product mix. Usually we consider premium products to be higher profit and mid-priced. We said before that there's about a 10% difference and that is in general. Our mid-priced products, it's not that they're not profitable because we're looking at the sales price to kilogram. If you remember, in many quarters in the past we have reformulated. We have adjusted the net weight so that -- to lower the price and some items were mostly premium -- I'm sorry, some products will move to the mid-priced segment. However, our profit continues to be favorable. Our gross profit is still in positive territory. And as for the premium segment, this is within our targets. Our target, we want it to be from 47% to 50%. This is our target range. This is a healthy range. And on the next page, you can see the development for i-Tail. Before the retaliatory tariffs issue, whether it's i-Tail or whoever, we were all determined to find new customers to increase our new customer base, whether it's in Europe or in Asia. And for the first half of this year, we have 26 new customers. As you can see, 35 of the customers are in the States. Even though we are facing new tariffs, we have customers who are still happy to work with us. 35% of them are at the U.S. And in Asia, we have 11. And in Europe, we have 4. And before we did these numbers, we have new customers in Europe as well as in Turkey. And in the third quarter, we will provide details on that and we'll also provide new numbers concerning our customers. These 26 new customers, you can see on this slide, aside from them, we also have new products that we launched with a total value of about THB 1.6 billion. These were launched in the first half of 2025. And this demonstrates i-Tail's growth both in terms of customers. Our current customers are strong in terms of the portfolio, and we also have new customers joining us as well. On the next page you can see our sales contribution and the Americas contributed 58%. If you remember, in the first quarter, we said that Americas was at 60%. In Americas, we have -- the numbers have gone down a bit because we have evolved in the European market and we will provide more details about that. But the growth in Europe has led to a bit of a drop in the Americas. On next page, let's take a look at each zone. In the Americas, we are facing the tariffs, but in the Americas everything continues to be possible. Quarter-on-quarter, year-on-year, our numbers have remained very favorable. We are very strong in the Americas. Our customers, we co-created them, and this has been very favorable for us. And it's strong in terms of private label, new customers and global brands as well. This is what has led to the growth in the Americas. In the U.S., we have new products that we have launched with many of our new customers as well with the private labels we're working with and their sales continue to achieve the same momentum. USD 600,000 per week and this continues. We are going to close sales or close the deal with many more customers. We had positive news last night. We expect a new category with this customer, we're 99% sure. We expect to see shipments coming in for quarter 3 or quarter 4 and we will provide more details. In our European market, we have seen growth from the first quarter. The second quarter, the customers in Europe, we have seen a return of demand. We expect higher sales in that region. Quarter-on-quarter, we're looking at 15.2% increase in sales and we expect to see more in the third and the fourth quarter as well. Overall, for the European market, they have a burden in terms of the sales price. Their economy has led to the market to be concerned about pricing. And in terms of Asia, we have seen progress quarter-on-quarter in Asia. There's an upward trend, but there will be some obstacles in terms of the exchange rates. But we do see progress, a 7.6% quarter-on-quarter rise in sales. We have increasing -- we're doing well in terms of products like our sachets. In certain markets where the profit is strong, like in Taiwan, we continue to see momentum, and we have 4 new customers there as well in Taiwan. This is in terms of Asia, this is the market that we can rely on. Australia is also within this region. We have customers -- new customers in our first quarter who continue to place orders. And Asia and Australia, we expect 80% -- we're 80% sure that we will have retailers who will buy premium products in an increasing number. These are importer brands, leading brands in Australia and in Asia that we're certain we'll be moving from our competitors to buy with us. And in the third quarter or the fourth quarter, I will provide more details on this. This is a positive development for us in Asia and Australia. And let's hand things back to Khun Roy.

[Interpreted] Many people ask about the U.S. tariffs, what have we done or how have we prepared? And we're going to use this opportunity to -- take this opportunity to share our ongoing actions with you. Let's begin with the orange. Last time we talked about our awareness of the U.S. tariffs and how it impacts our business as well as our customers because most of our business is in America. We have set aside support, financial support. I don't want to call the subsidization, but this is to support our customers. And this is -- we continue with this. The conversation between us and our customers, the common answer that comes out of it is that with more clarity on the tariffs, they expect that we will help them a bit and they themselves will also find ways to support themselves and the consumers. We will adjust the prices and push things to the customers. We continue to monitor everything. We now know that the tariffs on the Thailand from the U.S. will be 19%. We will therefore discuss with our customers. The next steps that we will take, whether it's on our side or on their side or their side with retail as well. Take a look at the blue now. This is something that we continuously do. We have already done. We didn't wait for the tariffs to be put in place. The tariffs however may have made us expedite our actions in this regard. And we continue to reform. We will continue to reformulate and we will focus on the American market because this has to do with the tariffs. Looking at green now, we will begin to study. Thai Union Group has many factories. One of them is in Vietnam. We could move our production base for certain products. Can we move into Vietnam? We are looking at this. Vietnam was at 20% for Thailand. Before last night, we assumed 36% compare end before last night. As of yesterday, the option was still very viable, but the impact will lower today as we know when the tariffs are. And looking at the yellow. Of course, the Americans, there will definitely be an impact so we will focus on other countries, other regions. And this is our short-term and mid-term actions. As for our long-term actions and longer-term actions, I don't want to use the word longer term because whatever we're doing, we will continue to do. Innovation is something that is very significant to our business. Pornchai mentioned new products that we have launched that are at about THB 1.6 billion in value and this is something we have done, and we will continue to do regardless of the tariffs. Cost control management is also a part of project tailwind. Last year, we launched the project and we will continue to do this. We are starting to see results, and we will share numbers with you in the coming days. And many people are also asking about M&A for i-Tail regardless of the tariffs. M&A is something that we will continue to study. In the last quarter, Pornchai talked about this. And today, we will provide more details. What have we done? We discussed that already. In this slide, we're going to look at what -- how are we compared to others, compared to other countries, what are our strengths? I believe that many of you are interested in Vietnam because before this Vietnam is at 20%, right, the tariffs. Vietnam as a pet food exporter compared to Thailand. Thailand is at 8 to 10x. I will repeat myself, for pet food in Vietnam also, as well as pet food that is sent out of Vietnam. Thailand is at 8 to 10x more Vietnam. Therefore, if we look at development for Vietnam, for the pet food industry, their development is not that advanced compared to Thailand. And this is one of our observations. We also have other strengths. We believe that Thai Union Group, we have access to raw materials whether it's seafood or chicken. We also have our innovation base, thanks to our track record. We also have new products launched with our customers. We believe that these are our strengths. Operations is also another strength of ours, whether it's i-Tail or Thai Union manufacturing is in our DNA and we have the ability to scale up or scale up or scale down depending on the case. Compared to our competitors or manufacturers in the U.S., I would like to remind you that the pet food that we produce, we focus on mid-price and premium segments. This require -- is labor intensive. Manufacturing in the U.S., they focus on automation. Therefore, our product groups, their skills in terms of production, we use different skill sets. I'm not going to say they're better than us or we're better than them. We have different skill sets. That is the limitation. If they plan to invest in the same segment as we are in, they would have to expand. It would require significant investment on that on their side. At the moment, their capacity is closer to maximum compared to their output. We need more clarity in terms of what materials they need from other countries, their production costs, their impact, of course, they will face this. This is something that depends on the profile of each manufacturer depending on where they import from. And this is something, of course, that will lead to some impact. And I need to explain a bit what we see on this next slide. How much will the tariffs impact us? This is again of course based on our assumptions of 36%. If we sell at THB 100 per piece, this product once it arrives to the retail shelves, it'll be at THB 250 to THB 300 because in between there will be value-added impacts. And if I speak in simple terms, let's look at THB 300. If the tariff is at 36%, then THB 100 will be THB 136, right? Everything is maintained. Nothing changes, then the retail price should be THB 336. THB 336, this is 12%, a 12% increase. And this is the mathematics of this. The retail price is 12%, not 36%. So that 12% is a significant. Yes, it is for us based on our research for pet food. The price elasticity is at about 0.8%. What does this mean? It means that if the price increases by 1%, the volume will go down by [ 1, 0.8% ]. And if we look at this price, if the retail price has gone up by 12%, then the volume will go down by 10%. This is truly mathematics. The 10% volume that drops does, of course, it impacts us, and that is why we have taken actions such as our reformulation. We have put together a support, financial support for our customers. And this is an explanation of our logical thinking and how we come to our projections. The transformation project, it is an ongoing action for i-Tail. It's not something that we just began to do. We announced this since the last year, the end of last year. What I can tell you is that in the first half of this year, we have been able to realize about USD 7.5 million. This is what we have been able to -- this is our benefit. I'm not going to go through all the bullet points, but I just want to reassure you that our gross profit we are looking at a positive development. And aside from the tariffs, there are many other things that we are engaged in and continue to move forward on. For instance, innovation, take a look at our signing of -- an MOU signing with Chulalongkorn University in terms of research on nutrition. We also had an exhibition regarding pet nutrition, looking at ingredients and nutrition. And this is something that we will continue because our strategy involves innovation, continuous innovation. In terms of sustainability, this is our commitment, whether it's within the realm of Thai Union or i-Tail. And I can share this with you, our carbon emissions for 2024 for i-Tail compared to the baseline of 2021, carbon emissions have gone down 17%. Many of you may ask about 2023, we went down by 19%, but this year is almost 17%. Does that mean things are worsening? No. I would like to explain that our volume dropped in the past. Therefore, for our carbon reduction was higher and this is, of course, understandable. And our volume has increased for 2024 compared to 2023. So the production of greenhouse gas emissions was 70% in also strong. We also have an example of solar panels that we're going to increase by 2.2 megawatts. Something new for you is our management responsible agriculture in terms of chicken meat. Why chicken? Many of you may know that seafood and chicken are the main ingredients for i-Tail. Seafood, we have addressed this. Under the leadership of Thai Union and we will focus on chicken because this is a key ingredient for i-Tail.

[Interpreted] Let's take a look at our outlook for 2025. We would like to -- we don't need to worry anymore by the 36%. We're going to look at the 20% scenario. The sales growth, our target is at 3% to 5%. In terms of volume growth, we believe that we can initially grow to 12% to 15% and this is consistent with the -- reimbursed in half, consistent with the first quarter. And in terms of the exchange rate, this is a main obstacle for us. It's something that we need to slow down in terms of sales growth in terms of Thai baht. And our gross profit margin, we have revised our guideline numbers. We have adjusted them upwards to 23% to 25%. The main reason for this is due to our operating performance in the first half, our margin has not dropped. We are very satisfied with our profit, with our numbers. We are taking a look at various factors including the volume. We expect our profit margin should not be worse than before. And SG&A to sales, we have equipped it from the previous numbers to 10% to 11% mostly due to our lowering of our top line, our costs, our fixed costs for the most part. And for CapEx, we had it at THB 1.5 billion, but we have adjusted it down to THB 1.2 billion. This is to manage the situation, the current situation, which there does remain a certain level of uncertainty and we are looking at longer-term profit. Overall, we have projects, we have the warehouse, the ASRS warehouse, many of you know about this. In the beginning of next year, we should be able to open the facility and begin using it. This is a project that will help our cost savings next year as well. Our dividend policy remains the same and we always pay more by the policy. Pillar 2. This remains the same. As what we communicated earlier, what we want to emphasize is that we have begun to record our Global Minimum Tax. Last year, we did not record this. The last quarter we [ established this ] and we also have the tariffs that we expect to impact us. They are lower than the guidelines we provided in the first quarter, the Global Minimum Tax overall for this year. The effective tax rate should be higher by 0.5% to 1%. Overall with our financial numbers, it will be up to 5% to 6% only. This is our balance sheet. I invite you to see our strength. If we look at our financial statements and our balance sheet, we can see that we have cash and cash equivalents and short-term investments so that's most of the assets are there. And if we want to do M&A or further invest, we will be able to do this quickly because we do not need to rely on outside financing. Looking at liabilities and our shareholders' equity, we have practically 0% interest-bearing debt, which means that interest does not negatively affect our P&L and we still have the ability to adjust if there are any unforeseen incidents. As we do not have any interest-bearing equity, we will not sustain any negative impact. We are very strong financially -- very strong financial position, despite the uncertain economic situation. And I'm going to pass things back to Khun Roy.

[Interpreted] Our sales for the first half of this year, our sales continue to grow. We are an exporting company. Therefore, we talk in U.S. terms. We have [ sales up 7%, volume 10% ]. And we're looking at 25% gross margin which is very healthy. We don't have any debt. Liquidity is very high. Our position supports us for future M&A. We have high level of flexibility, liquidity. We talked about production already, whether it's for i-Tail or for the group. We have a high level of flexibility that we can rely on now that we know the U.S. tariffs. And lastly, our dividend payout ratio is at 87% and we expect that this will help us for this year. We don't have an M&A slide, but I'd like to talk about this because I know that many of you may have questions about our M&A. In the past 3 months, the first quarter ended, Pornchai told you about our firm. And in the next 3 months for M&A and the past 3 months, we -- M&A, we had initial meetings with 3 companies. These 3 companies were their markets, they are focused in North America. These 3 customer -- companies have different strengths, but they also have something that i-Tail does not have or something that i-Tail has not developed well yet. For instance, they may have a branded business. They have a product group that is something that i-Tail has not fully developed yet. For instance, freeze dried products. These 3 companies, they’re North American focused. This is aligned with our target. We will continue to stick with our beliefs. We will focus on companies that have strengths that can complement our strengths. For instance, the branded business or the product group that they have where -- that i-Tail does not yet possess. And this is what I can tell you about M&A developments for i-Tail. If there are any questions, we welcome you to share them with us.

[Interpreted] I would like to ask about the outlook for your net sales. If we take a look at slide on Page 22, the U.S. tariffs where you said the top 3 pet exporters: Thailand, Vietnam and China. It looks like we have the lowest rate compared to our peers. So is it possible that our volume -- the exporting volume from China and Vietnam, will it become Thailand's volume? Are there any upsides? Is there any upside from the recently announced U.S. tariffs?

[Interpreted] Of course, it's possible. But if we look at the numbers first, Vietnam and Thailand were not that different. Thailand is 19%, Vietnam is 20%. And I shared information on the Vietnamese market with you, the pet food market there and their exports as well. Theirs is not as well developed as Thailand. We are 8 to 10x bigger than them in that regard. So of course there is opportunity for us. Is there a significant impact right now? I don't think the impact is that significant. As for China, of course, looking at the numbers today, the numbers are quite different is. But what we don't know is, in the end, what will the number be for China. From my personal observation, I think that China is a very giant, large market, many manufacturers are interested in the local or domestic market. Therefore, the impact -- what would the impact be? We'll have to take -- we'll have to see what the final tariff will be for China.

[Interpreted] I'd like to ask Roy about the support for tariffs in the U.S. I'm not sure if I understand correctly, you're helping yourselves, helping your customers and the consumers.

[Interpreted] Let's say that 19% tariff in the U.S., if we look at different segments, it's not possible to separate everyone. We can't take the 19% and divide it by 3. We have to understand first the tariffs. It's not our responsibility, but it's something that we cannot control. And lastly, I'd like us all to focus on the retail price impact. 19%, it seems like a lot, but the retail price impact, it will be divided by 3, right? So the consumers will have to -- they will have to be responsible for one part. And we cannot continue to divide by 3 all the time. We do have support for our customers but we are flexible to reduce or even stop providing that support. So it's like increasing investment costs. This is an increase in investment cost. We cannot provide continuous support at a higher ratio.

[Interpreted] And the third -- and the second, do we have to provide support for the retail price in the U.S., is there an adjustment in the U.S. yes, just yet?

[Interpreted] We have already started provided that support, but I cannot provide into the details. We have indeed provided support to our customers. Our intention is to protect our volume. We don't want the volume to disappear significantly. At the same time, we have -- we are also strengthening our relations with our customers. The movement of the customers, as far as we know, there is one customer, a global account, that's all I can share with you. I can't give you the name. This global customer of ours, the global account, they have submitted a price increase into retail and it will be effective from the 1st of September. We have already submitted this price increase so we will start to see an impact of that. And we need to monitor all of these with the increasing prices, what will the impact be on the volume.

[Interpreted] So I'd like to ask for the third quarter, how far have you gotten in securing your orders? And now with the 19% in tariffs, will we see -- how much of an impact will we see?

[Interpreted] Today, our customers have also just learned about the 19% tariffs. Before this, our sales were in line with our targets before the 19% was announced. Asia -- the Europe market improved, Asia improved, Australia improved, Taiwan continued on well, the Americas was already very strong for us and we expect the American market to continue to be strong for us. Before this, we were looking at 36% and we still continue to see strong demand from the American market. We have a strong relationship with our customers.

[Interpreted] And next year, with the full impact of the tariffs, what impact do we see on i-Tail's growth?

[Interpreted] We all want to answer. We are working on our budget for next year. What we have to take into account and what we want all of you to understand is that the American market is the main market, about 50% historically for i-Tail. The 19% tariff was just announced last night. So we have to recalibrate, reconfigure things now based on this clarification. We continue to expect internal growth year-on-year and we will not forget our set intentions whether it's innovation outside of the U.S. we will continue that.

[Interpreted] I would like to talk about the retail price again. Could you share some numbers? What do you expect the numbers to be for your global brands? Could you share some numbers with us?

[Interpreted] Let's talk about. Let's give a number in ranges for you. We actually cannot share their numbers with you, but we can provide a range. It's almost closer to a 2-digit number. It's very close to a 2-digit number. The sales price is towards the end of the last single-digit number, closer to a 2-digit number.

[Interpreted] If we compare Thailand and the U.S.? How big is the difference in terms of production costs?

[Interpreted] This is a difficult question to answer because the products that they produce, we don't. So it's not something that you can easily compare in terms of their current products. If we were to do the same products that they produce, we would have to make so many adjustments because there is this more -- it's not the style of product that we produce. So again, it's not something that we can easily answer.

[Interpreted] I would like to add to that. I'm not sure if this perhaps will help. If we take a look at their cost structure and look at our cost structure, there are 3 parts: materials, raw materials, packaging and labor overhead and depends on the product, the nature of the product. In Americas, they take bread products and they create -- sausages, for instance. Ours is real meat. So in terms of production, in terms of raw materials, of course, the costs are different. So it's very difficult to compare us to them. There is the portions for raw material and labor, for instance, are different because they use automation and the categories are different. Product categories are different.

[Interpreted] This is for transformation cost. This transformation cost, if we compare it to the second quarter, if we ignore the transformation cost, what would the percentage of sale be and how much more of the transformation cost will you be including?

[Interpreted] You mean SG&A, right? SG&A, right now, the percentage to sale is going to develop. It'll be 2%. SG&A is in the guidance slide. You can see that transformation cost is 2.4% to 2.6% of SG&A. This is added on to the regular level for us.

[Interpreted] And how long will you continue to include the transformation cost?

[Interpreted] Our project will end in the first quarter of 2027. So this number will continue to be used into 2027 on average, yes.

[Interpreted] And I'd like to ask about M&A as well. Could you please share about the North American market? The size, how big is it and what are you looking at in terms of M&A in North America?

[Interpreted] I'd like to ask for clarification of the question. You're asking about the size of the North American market, or you're looking at the M&A size that we want in North America?

[Interpreted] I'm asking about both. And do you expect your M&A deal to end this year, to conclude this year?

[Interpreted] Will our deal be concluded this year? Let's talk about that. No, it cannot be concluded this year because this is already the eighth month. As I told you earlier, second quarter, for us, the key progress in our M&A was initial meetings only. Therefore, before we will be able to close the deal, it will take more than 4 or 5 months. And in terms of M&A in North America, that is the biggest market for pet food for the global market. North America is the biggest. It's probably at about USD 60 million -- not million, USD 60 billion compared to the entire world market. It's USD 60 billion from USD 164 billion. So the American market is very significant proportionately.

[Interpreted] And the last question was, what about the products? You're going to hold discussions with your customers.

[Interpreted] Allow me to remind you of our M&A logic. Again, allow me to remind you about our M&A logic. Zone A, B, C, our studies or our approach, we have looked at the market, we have looked at the product groups and we have looked at each segment or market to see how close or how near or far they are to our core business. The farther they are from our core business, then the opportunity for success is, of course, lower. What does it mean by far from our core business? I tell the considerations to be OEM manufacturer in Thailand, right? If they are a manufacturer in the U.S. then OEM -- this is one OEM step away from us. If they are a branded business in America, then they are 2 steps away from us, for instance. And we take a look at the different segments to see the growth, the profitability and we plot it all in a graph like this. Zone C is the easiest for us. If it's too far away from us, then the growth is not so significant for us. Zone A, Zone B is in the middle. It's something that we have to consider how we will approach them. Would it be perhaps a joint venture or we make a partnership? That is the logic for M&A and I'm sharing a lot with you, but I'm trying to share with you what our targets will be. As I mentioned, we are talking with 3 different companies. And those companies each have their own strengths. One is strong in terms of brand, one is strong in terms of manufacturing, but they have products that we do not have at the moment. But it is a segment that we are interested in. So we have to look at this on a case-by-case basis, but I would like to remind you all that our target is to grow by USD 500 million from M&A. We have up to 2030 to do this. And we have estimated already that we probably have 2 to 3 deals, which will lead to the possibility of achieving our USD 500 million target. Each deal, of course, will not be USD 22 million to USD 30 million. I hope this provides some clarification.

[Interpreted] I would also like to ask further questions. First of all, the guidance for the entire year where profit is 3% to 5% and in the first half is 1%. I just want to make sure I understand correctly. In the third quarter, can you tell us about your orders?

[Interpreted] The sales growth, as we mentioned earlier, we expect for the second half of the year, we will have greater growth in the first half of the year. And in terms of securing our orders, we cannot provide numbers and percentage, but I just want to share with you that our -- the orders that we are receiving are in line with our expectations.

[Interpreted] And I would also like to ask about the front load, we didn't see this in the first half, right?

[Interpreted] Front load for the first half. No, our customers, whether they -- regardless of the zone, they do not buy to stock or to hedge against the tariffs.

[Interpreted] And the premium mix, you need to adjust the U.S. prices, right? So for the long term, what is the gap? What percentage do you want? Do you expect a lowering of prices for the premium mix? Or...

[Interpreted] Right now, we are budgeting for the next year. We expect to remain in the target range, 47% to 50%. Right now, the guideline -- where we expect 47% to 50%.

[Interpreted] And I would like to add a bit more detail. Premium mix for i-Tail, we look at the price to kilogram. The changing of prices, retail prices can, of course, affect our product mix. We have been putting in a lot of effort to help our customers and helping ourselves as well. If production costs were to reduce -- we could lead -- that could lead to a drop in prices, but this target range is still 47% to 50%. Will there be a significant impact? I don't think so.

[Interpreted] I have 2 questions. I would like to ask about the premium mix on Page 14. Have you adjusted your mid-price and premium segment?

[Interpreted] Can you explain your question again?

[Interpreted] You said you have adjusted the weight from some products and they're now mid-priced, have you adjusted everything?

[Interpreted] We did not adjust as what you are suggesting. What we have done is, I'm going to try to answer, what we adjusted was the price point in the formula. For instance, say the net weight was 100 grams, right? And we talked to our customers saying let's reduce 100 grams down to 80 grams and from 80 grams down to 60 grams, for instance. That is one method. If we decrease the net weight, then the price point will lower. And when the price point lowers, then the premium price per kilogram will decrease. And some products, even though they make -- as they make 20% to 30% -- 20% to 25% profit, for instance, because of the drop in the price point, they are switched from premium to mid-priced products.

[Interpreted] And in addition to what Pornchai said, I would like to add that our definition for mid-priced premium products, the definition that we gave to them, this -- we have been -- we have defined our products as such for the last year.

[Interpreted] The year before, a year before we had a different definition. The mid-price has increased in this first half of the year, right? I'm not sure if the premium products, the value is the same. Are we seeing it? Where is the change coming from the premium or mid-price, the value compared to last year?

[Interpreted] The first 6 months, I would like to remind you that our volume grew by 12.2%. So our base is bigger. Our volume we measure in terms of weight. Our volume has increased. And the question is -- I think your question is the premium products, are we selling less of the premium products, right? On a bigger base with a growth of 12.2%, what I can tell you is that our 12.2% growth in the first 6 months, the key driver is from our mid-price products. The absolute number of day premium, has it gone down? I don't think it has gone down significantly. It was probably close to the same number before -- as before. I hope I answered your question.

[Interpreted] I'd like to ask about the second half of this year, will this trend continue? Your mid-priced products, is it because of a change in consumer purchases, consumer behavior?

[Interpreted] I'm not sure whether I should tell you or not. Can I tell them? Yes. Okay. For the premium products, the new products, we have launched so many and these new products, they are premium, whether in terms of price, per kilogram or the profit margin that is strong. The trend for us to hit our target is very positive. The chances for us to hit our targe are higher.

[Interpreted] I would also like to add to what Pornchai said, the proportions it has to do with our growth as well. In terms of bad term, as Pornchai told you, it was what he told you. But in terms of proportions, we'll have to share later what the range will be.

[Interpreted] And the last question is about the Global Minimum Tax in the second half of the year, how are you going to record this tax? What will it be like?

[Interpreted] Probably recorded on a quarterly basis.

[Interpreted] I'd like to ask about the new products. You said that you have amounts coming in the first half. How much more will we be seeing in the second half of the year? The first half is quite significant compared to overall sales.

[Interpreted] In the second half, we expect to see another large amount. In general, it should not be less than the numbers that we showed you today. Our new products are launched in the end of third quarter and continue on into the fourth quarter. So in the second half of this year, the numbers would be around these numbers or perhaps even more in terms of new products.

[Interpreted] If we take a look at the volume growth, the guidelines for this year, you said 10% to 15%. But looking at the sales that are at about 3% to 5%. Is it -- are we looking at a drop in FX or the selling prices that is leading to a dip in your overall sales compared to growth?

[Interpreted] Can you take a look at this slide? In the dotted lines, our sales has gone up 5% year-on-year, right? If we take a look at the same -- the change due to 10.5% increase in volume, a 2% increase in pricing and 4.9% drop in premium mix and the FX dilution, all in comes out to 1.5% year-on-year.

[Interpreted] If we take a look at the full year, then this will probably be a mix like what we're looking at here for the first half of the year. In your guidance, you said sales growth of 3% to 5%. Will this drop everything down?

[Interpreted] It'll be in terms of the proportion, they may be different because the premium mix for the second half of the year, we expect the premium mix to improve. And therefore, our numbers might change, but we do believe that the dilution will result from FX for this year. But once the tariffs have been clarified and there is more clarity, we expect the FX to improve and this could lead to a change in the percentages that you're seeing.

[Interpreted] Roy talked about flexibility, price elasticity. If you look at 20%, the selling price for retail will not increase that much, right? So why are you so aggressive in terms of sales growth? Is there something that you are worried about in particular?

[Interpreted] The 20% is something that we just learned about last night. Don't forget that. The tariff impact actually impacts us this year for 4 or 5 months. And we also have to consider -- the other things like the 19% tariff that was just announced last night. You remember on this page we actually had the 36% scenario because we expected that we could speculate, but we decided not to speculate. We need time to review the new developments. Aside from this, a key driver for growth for i-Tail is our innovation, our new product development. We are not able to react within just a few months and economic growth or significant growth. This is why in the beginning, when the tariffs were first announced, we set up a support fund for our customers because we knew that new product development, we could not rely on that. It would not be immediate enough to help us there.

[Interpreted] Can I ask about the proportions for the customers, the global brand and each region? If it's 100%, the U.S., Europe and AOA, what is their contribution? If the global brands, they are in -- they're located in the Americas, the global brand is about 45% to 48% of 100%, but global brands overall for us they are located in the Americas. There are some in other countries but not many. The majority of them are in the Americas. And I'd also like to ask about for EU and AOA, what is the private owner brand label? What is the proportion?

[Interpreted] Private label is small, less than 10% for private labels in Europe. Europe is mostly importer brands and private labels we are seeing more private label customers, but we do not expect the private labels in Western Europe to grow significantly because we are very selective. We don't focus on private labels that want lower prices and AOA is the same. Retailer brands is not up but not as much as 10%. Global brands in AOA are in Japan and we are starting to see some evolution for brands in China to about USD 15 million -- USD 10 million to USD 15 million.

[Interpreted] In your 26 new customers, are they brand owners or private labels?

[Interpreted] The 26 new customers are mostly brand owners. So the retailers -- we don't have any new retailers.

[Interpreted] And for your new product development, the value of THB 1.6 billion is this all new orders?

[Interpreted] There's a combination. We have our current customers and our new customers included in there. The new products are mostly from the newer customers. The new customers, we also consider to be new products. They don't have -- they had to continue to groom their market though, the volume hasn't grown by much yet.

[Interpreted] And in China, they are very competitive in terms of pet food production. You have new customers. Which segment is using your OEM services?

[Interpreted] We'll meet great customers. They recognize our strengths. They can buy from their own factories if they want to, the ones that choose to buy with us recognize our strengths.

[Interpreted] In Europe and the AA, the global brands is still quite small, right? And the global brands can grow in other regions, right?

[Interpreted] Global brands, there is a global brand that is buying more from us in Latin America. A global brand form Latin America that is fine with us. Brazil is the biggest market in Latin America, but the import taxes are very high. If we look at everything included, it's about 50% to -- all the taxes included, it's 50% taxes. Global brands that can grow in Latin America that are buying with us, they have to be premium products. There is no way that they will try to export mid-priced products to the Latin American market or Brazil. The Latin American importers, they import premium products.

[Interpreted] Can I ask about the tariffs? There was inflation in the U.S. 2 or 3 years ago. There was a time when the prices went up by 20% and demand dropped. I understand our volume dropped significantly as well because of that. Are we concerned that there will be an impact because of the tariffs right now? Will there be an impact like that similar to what happened in the past in the U.S.?

[Interpreted] I think you're talking about the COVID times, right?

[Interpreted] Yes.

[Interpreted] During the COVID times, that was 2023, which was a year where almost all of our customers, at the same time, they stop -- they bought less with us because of the issue of global logistics. The global logistics has normalized. Their inventory has gone up. They were doing destocking. I think you're talking about that time, right? So it's different issues then. Consumption in the American market or around the world even has not dropped. If we take a look at the directions, you can see that the productions have gone down a bit but wet cat -- and wet cat food is growing at 3.6%. So I believe that you're talking about these projections. If we take a look at these projections, they can provide you some reassurance.

[Interpreted] And product tailwind, what do you paid out and the benefits that you've received? What has been the difference?

[Interpreted] We're not -- zero sum at the moment, but we expect to see the benefits lead to positive output or positive records in the future.

[Interpreted] There are no further questions. Is that correct?

[Interpreted] I'd like to ask one more question. You said you have -- you said you set aside funds to support your customers. How are you helping them? Are you lowering prices or are you providing incentives on top?

[Interpreted] In principle, we set up the support fund just sort of in the form of a rebate to increase our volume. Our goal is to maintain our volume. That is why we set that fund up.

[Interpreted] And you talked about the earnings that have grown 2%. Is this because of the pricing and the premium mix?

[Interpreted] The premium mix, are you looking at the impact of internal pricing? Pricing on this slide refers to if we remain in the same category. So if we're looking -- not looking at mix, the pricing can continue to grow. The pricing, the mix -- the premium mix is -- it does have a significant impact as we wanted to see the overall impacts of each segment or of each area.

[Interpreted] Are there any other questions? If there are no further questions, then we would like to thank all of the analysts joining us today. And if you have any further questions and require further clarification, please do email us and we will see you in the next analyst meeting. Thank you very much for joining us today. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]