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

Hello, and welcome to ITC's Fiscal Year '25 Earnings Presentation. Thank you for joining us. Today, we are joined by the management team consisting of first, Khun Roy, our CEO; Khun Yuwaporn, our CFO; and our newly appointed CCO, Khun Pahk; and our Head of IR, Khun Pimphat. Okay. Before we begin, please note this session will be in Thai. For our international callers, we have an in-house translator available. [Operator Instructions] So without further ado, please let me pass on to Khun Roy.

Hello, everyone. Before we go into the details of the numbers, I'd like to share some information with you about the external environment. As you can remember, last time we updated you the world market regarding the movement of pet treats. And we also spoke about the projections for the global market. Right now today, we would like to share more details. We know that many of you have questions about the competition from China and Vietnam, what that is like. And our answer is that China and Vietnam, their businesses cannot compare to ours. Our size is much -- many more times bigger. We are more advanced than they are. They are behind us by several years. And today, we're going to share some information to support this. These numbers are from the Americas, which is the biggest market for this industry or the imports for 2025 for both wet and dry food, the total cat and dog category, the imports, imports by the America from the different countries. Looking at the numbers, Thailand is in the lead by far compared to China and Vietnam, which are much lower on the scale. We are about 8x as big as China supply, 8 to 9x that of Vietnam. And this is information we wanted to support that competition from China and Vietnam. Is there competition? There is, but is it very intense? No, it is not intense yet. And on the left, the yellow numbers that you can see that is an update about the U.S. tariffs for you. And now we're going to share -- our plan is to share external information with you from now on in each meeting that we have to answer any questions or allay any of your concerns. All right. Let's now have a look at the fourth quarter or the full year numbers. For 2025, we -- our overall performance is very satisfactory. You can see it's surprising or perhaps not a surprise because the Americas is a key driver for us. The American region alone one continent year-on-year, we grew by about 18%. And this is what helped our company last year to grow by 9.2% in U.S. dollar terms. This is the hero for us, in fact. The premium mix is something that we continue to monitor and report on and why is this important? Because the premium mix for us, we consider it by the price per unit and this is kilogram, of course, how is important is an indication in part of the solid sales volume and our net margin, it's an indication again. We focus on a balance between a premium and mid-price. ITL is a company whose production is to scale. Therefore, we need the volume in our system. We cannot focus on value. And we're also going to update you on the dividend payout.

Let's take a look at our financial performance. As I told you, let's start with the fourth quarter for 2025, our sales closed at THB 4.780 billion. In U.S. dollars, that is $148 million. And the growth in U.S. dollars grew by 3% quarter-on-quarter and 7% year-on-year. And this is growth that is quite high and something that's very satisfactory. And as many of you know, the exchange rate, we have an impact of that and that affects our sales in Thai baht. So we grew 1.2% quarter-on-quarter and 1.8% year-on-year. In further detail, let's look at the graph below. The sales year-on-year for the fourth quarter of 2024 to the fourth quarter of 2025, the major factors were increasing sales, our product mix, our pricing effect and of course, the foreign exchange or FX. The negative -- the most important negative factor is FX, of course. And overall, we continue to grow in terms of Thai baht when we have an update. Let's now take a look at the adjusted gross profit. The adjusted gross profit, we exclude the reversal of inventory provision from our -- from our gross profit margin. And therefore, our adjusted gross profit is THB 1.243 billion, and our adjusted gross profit margin is at 26%, which is quite high. From the THB 1.24 billion, we grew 4.3% quarter-on-quarter and 3.9% year-on-year. And take a look at the orange part, the operating profit, we have operating profit of THB 720 million, operating profit margin of 15.1%. If we take a look at the change quarter-on-quarter, it's minus 1.1% compared to our gross profit margin -- gross profit, it's still positive. As operating profit, why is it negative? This is due to the effects from our SG&A to sales increasing compared to the last quarter. And the main items are the shipping costs to our customers. Those percentage increased compared to the sales price. But year-to-year, we continue to have growth that is high at 8.4%. And lastly, our adjusted net profit. This excludes the transformation costs. Quarter-on-quarter and year-on-year, they both reduced quarter-on-quarter went down by 2.1% year-on-year by 3%. The reason for this, the most important reason is the other income from interest, which went down and this is in accordance in line with the market mechanisms with the market movement. There are other -- 2 other things. We have FX loss, which grew a bit in the fourth quarter and interest expense that also grew a bit, just a bit. The interest expense, many of you may be wondering why we have the interest -- an increase in interest since we don't have any loans. We have credit facility with banks, and we have to utilize those funds so that we can maintain that particular funding. And the expense that has been incurred, this is something that we believe is acceptable. And this year, we have started to utilize and that's why there is an increase in interest. Our sales by region, I think Pahk will go over this for you. So I'm going to skip this for now. Let's take a look at our full year results. We closed the year at THB 18.223 billion. In U.S. dollar terms, it's $554 million, growing 9.2% year-on-year in terms of U.S. dollars. And in terms of Thai baht, it grew 2.8%. It's better than our quarter-on-quarter numbers. Now look at the graph down below, you can see the positive factors and the negative factors. FX is still the main negative factor that has led to our sales growth that is not as high in Thai baht terms. The adjusted gross profit, we closed at THB 4.6 billion. Our gross profit margin was reported at 25.1%. This went down 4.5% year-on-year. And why has the adjusted gross profit gone down? If you can all recall, we have details in the next slides for you. In 2024, that was the year in the second and third quarters, where we had a premium mix in a higher proportion, higher than our target range in fact. And this was due to the raw materials cost for tuna, which was -- the costs were lower. And this is one of the reasons why our gross profit margin in 2024 in the middle of the year was quite high, let us say, special high. In terms of our operating profit margin, operating profit was at THB 2.667 billion, going down by 18.2%, mostly because of the lowering gross profit margin, as I explained earlier. And our SG&A to sales also increased. This led to our operating profit margin being impacted. And in terms of adjusted net profit, we reported the number at THB 3.432 billion. The adjusted net profit margin is 18.8%, going down 12.3% year-on-year. And the reasons are similar to the fourth quarter reasons. Moving on, on this page, we are sure that you are quite familiar with this paragraph. We've reported on this for the past few quarters on pet treats. What we want to point out with this bar graph is that if you can take a look at the orange line, this is the contribution of our pet treats as a percentage from our total pet food sales. In the fourth quarter of 2025, we went up to 18.6%. And this helped our gross profit margin. This has helped us to achieve a strong gross profit margin. Moving on, we can tell you now we have for the Q&A session. Our Board of Directors has approved the dividend payout at THB 0.45 per share. Overall, THB 0.85 per share, and we will pay THB 0.45 per share in April. And this represents a 85.6% dividend payout ratio, which is quite high compared to the market. And this is to show the trends. The sales on this page are in dollar terms, U.S. dollar terms. If we look at the bar graph, that is the sales and the line above that is the volume. The key takeaway that we want you to have from this page is that in terms of growth, in terms of volume and sales, we continue to grow continuously. There might be some drop in the first quarter, and you can see that this is when normally, it's a normal cycle for us. And this is a bit clearer -- let's look at this. It's a quarter-by-quarter analysis for you. We look at the first, second, third and fourth quarters and across 3 years, 2023, 2024 and 2025. The key takeaway for this slide is that our sales have grown every year despite the impact from the tariffs or the exchange rate. And this is something that we have been able to manage well. We continue to export without any issue. This is repeating what we already talked about earlier. If you look at the dotted line, the line squares, this is the abnormal parts of the years. We have the adjusted gross profit margin and adjusted net profit margin that are a little lower. And the reason is because of the drop in sales during those periods. In 2024, you can see that we have the impact from the tuna prices and the premium mix. And so in 2024, it was a bit high compared to 2023. In 2025, things have returned to a normal range compared to 2 years ago. And the sales in Thai baht may not have grown much compared to the U.S. dollar numbers, but we do continue to grow nonetheless. And here, we have the key ratios for you. On the top are the ratios that deal with our [indiscernible] and they are quite similar in each quarter. What we'd like to point out is that the days inventory outstanding went up in the fourth quarter of 2025 to 109 days. If we take a look at the inventory amount, it also went up. The main reason for this is the input transit. And once it normalizes, it might be an issue of cutting off at the end of the year. We expect normalization later. This is usually for products that we are unable to send out to customers because their warehouses are full and that means that we have to retain these products as inventory. In the first quarter of 2026, we expect this number to reduce and return to a normal range. Down below are cash cycle delays, let's skip that because. Let's move on to the profitability ratios, return on assets and return on equity. What we'd like to explain further from the graph is look at the return on assets in the fourth quarter of 2025, it went down to a lower level compared to other periods to 11.6%. The main reason for this is we have some assets that increased, one was inventory and the derivative assets whose numbers went up regular increase. And the cutoff period in the fourth quarter led to a lower ratio as well. And this is something that is not -- it's not normal for the company, but we expect it to return to our normal range soon. Moving on. This is about the tuna prices and the chicken prices and the exchange rate. In terms of the tuna prices, the tuna prices in the beginning of 2024 were quite low, lower than normal ranges. We can see that it went down to USD 1,333 per ton. In 2025, it's USD 1,500 to USD 1,600 per ton and the chicken prices have been relatively stable for a while. And in terms of the exchange rate for the U.S. dollar, you know that the numbers right now, we're looking at the appreciation of the Thai baht. And this slide also repeats things that we saw earlier. We have the assets. There's nothing -- there's no significant change that we need to mention for you. The key message that we want to share with you is that, ITL as a company to be continuous without any loans has a very strong financial position. We are very resilient. Regardless of any prices, we have great flexibility and M&A is still within our plans. If there are any companies that we might want to purchase, we are going to join them, it is possible. We don't need to rely on outside financing. So our balance sheet position does support our future growth. Now I'd like to pass this on to Pahk, our CCO.

This slide shows ITL's numbers for 2025. Let's look at Pet treats, which is a key growth driver for 2025. In 2025, our sales was at THB 17.876 billion, that's a 2.8% growth year-on-year. If we take a look at the pet treats, we grew by 30 or so percent thanks to demand from global players. In 2025 in the fourth quarter, the cat food went down a bit, but it is a key contributor at 60%. Dog food is 21%. Pet treats grew significantly from 13% to 19%. And this is a segment that has grown in terms of percentage points growing the last. So we're looking at the effects of it helping to increase our gross profit margin as well. In terms of the channels, you can see that the global pet food companies remain strong with them. They are 50% of our sales. The private label is about 16% to 17%. And this is an area for continuous growth. And in 2025, this is the year that pet treats has had a positive impact on our growth and profitability. And we looked at pet treats as a growth driver. This slide shows that shows what our product mix is and our value position. In 2025, we see the premium mix for ITL is above our target range of 47% to 50%. This is something that our target is to create balance for the economies of scale and for greater efficiency. In terms of quarter on a quarter basis, we remain in a manageable state. In 2025, the entire year is at 50.9%. This is above our target range that we communicated earlier. What is important is that we have not up-sell our prices, but we have worked together with our customers to add value, whether it's in terms of formulation over materials or functionality or the product itself. Overall, our strategy is to maintain this level of premium products and the mid-priced portfolio as well so that we can continue to be efficient and continue to cater to our customers' demands. And on the next page, you can see this is a demonstration of our new clients on a regional basis. In 2025, we gained overall more than 40 customers, including well-known importers in every region, you can see that AOA is -- we were able to secure the highest number of new customers at AOA, 15%. Americas is 12 new customers and Europe is 12 new customers. What is important is that these customers, they are not just trying out our products. This is a long-term relationship that we have secured with them and is a multiple SKU launch. And we expect the numbers to continue to increase as our products have already reached the market, and we are seeing increasing sales for our products. The sales volume overall was at 112,000 or so tons also an 8.8% increase year-on-year. And we launched 2,000 or so new products valued at THB 1.8 billion. And this shows that our strategy is not just finding new customers, but also creating a client period for new product NPDs and for new clients in various regions around the world. Our new customers, they will support our growth margins. On this page, this is our sales and our core growth drivers. For 2025, we had total sales at THB 18.223 billion, growing 2.8% year-on-year. The Americas account for 58% of that growth. And the growth in the Americas has grown, thanks to our global brands there. They are one of the key drivers. There are private labels that have grown very well and continue to be a growth driver for us this year as well. The demand for the existing customers shows resilience in terms of demand and they continue to grow. They are our top customers, our top customers continue to grow. In Europe, the contribution is 14%, similar to the year before at 16% and Asia and Oceania reduced a bit from 34% in 2024 down to 28% this year due to the increasing economy -- increasing competitiveness and the slowing economy. And Americas -- the Americas is not only the biggest market, but also a quality income source for us and also a source of future growth. And I would like to recap my region for you. Let's begin by the Americas, which is our main market. The full year 2025 sales growth was at 17.8% year-on-year, despite the tariff headwinds or the increase in logistics costs. Demand continues to come in, whether it's private labels or the global brands. And if we take a look at the fourth quarter in the Americas, the growth was 17.8% year-on-year and 9.2% quarter-on-quarter, whether it's new sales or projects with our global partners, our new product launches that have been ramped up in the fourth quarter, the numbers are quite clear, and these numbers will be translated into information for you in 2026. In terms of volume, we grew 11.2% year-on-year and 3.7% quarter-on-quarter. The volume went up quite significantly. This is real demand. It's not price driven. In 2024, I told you before that we have been able to increase our client base in the Americas by 12 customers. And they are -- they have high potential, and we look at them as sources of future growth for us, and we will roll over the benefits from these customers in the coming years. The Americas continues to be a market that we remain confident in terms of scale and visibility and quality, and we can see only growth from that continent. In Europe, the sales went up 12.9% year-on-year, going down just a bit quarter-on-quarter by 6.4%. This is due to pricing pressure from the competition that was quite in the European market. The results in 2025 for Oceania, we have seen a slowdown in the source of losses from the global brands in some of the markets, specifically from China and Japan. In the fourth quarter 2025, our sales dropped 9.7% quarter-on-quarter, and this is due to a global brand account. If we remove the global brand contribution. Our other customers in AOA that are importers were able to retain their value mostly dropping just slightly. And so these volumes declined 3.5% quarter-on-quarter. So the impact on the volume wasn't as much as we expected. But the sales, again, were impacted significantly by the global brand due to their high level of SKUs and the average price impacted us. So overall, for 2025, the sales went down by 16.7%, mostly as I told you from the global brand contribution from China and Japan, which have declined. The main customers in AOA, we're still seeing volume at a stable level. Japan is rebounding more slowly than we expected. There is perhaps there's not innovation -- not enough innovation to offset that impact, but we are becoming more proactive in terms of our product focus and we are increasing innovations to hopefully bring demand to a more favorable level. And the change is mostly from the global brand exposure, negative exposure there. Once the mix returns to balance, the situation stabilize.

And we also need to update you in terms of our Tailwind transformation program. Tailwind for 2025, what we were able to achieve was at about 20 or so million in terms of benefits. The value stream has not changed. We are still a commercial manufacturing procurement. As at the end of last year, we had achieved more than half of our target. The Tailwind project is a program that is 36 months long. It will end in March or April in 2027. And right now, we have already achieved -- we have already come halfway in terms of the target. I'm going to share a few examples with you, but to help you visualize our actions. Let's begin with an example that is commercial based. For this project, program Tailwind has helped us in terms of providing market insight, market intelligence, allowing us to identify the opportunities. So Chunks & Pate segment, for instance, is one of the outputs of the Tailwind program. And this gives us the opportunity for greater growth and it also opens up new markets for us. And this is an output that is quite tangible in terms of the Tailwind program. Let's look at procurement now. What we have done under the Tailwind project is to use the market insight or intelligence to help us achieve a clean sheet. One product that we buy from outside, what we try to do is we do a cost breakdown with that. And we use that -- we use the market information to see the movement and we try to create index pricing that we can use in our negotiations and our renewing contracts with our customers. We have stronger information, stronger reference points that allow us to do better in terms of negotiations. I'd like to share these 2 examples with you. And Project Tailwind, as I mentioned earlier, we have already come -- we already reached the halfway mark in our target. And from this point onwards, we are going to prepare for life after April 2027. Our partner, our consultant will be with us until 2027. And part of the work that we have already done is to prepare our team and prepare a system for all of this work. Once we don't have the consultants, we will be able to carry on without the consultants because we understand the importance of this project. I'd also like to provide an update on our sustainability activities. Many of you might be familiar with this slide. Our sustainability agenda is in line with that of the group, the SeaChange 2030, we have 11 areas that we focus on. And the orange -- the ones with the orange outline are areas that relate to ITR, whether ITR is the lead in these areas or supporting player. The work that we have done in terms of sustainability slide. Let's skip this slide. Let's talk about sustainability. I am happy to report that in 2025, ITL, in terms of greenhouse gas emissions, we were able to decrease that level by 22% compared to our baseline of 2021. I'd like to share with you that this decrease is an absolute greenhouse gas emission, which means that we are not seeing per product or per ton. This is our total greenhouse gas emissions that we have been able to achieve -- absolute total greenhouse gas emissions decreased by 22% despite the growth in our volume and our sales, absolute greenhouse gas emissions has decreased, and this is an achievement that we cannot overlook. In addition to this, let's now take a look at our use of water. This number is per ton finished product. Our use of water has gone down from 2023 and 2024 and 2025, where we've seen continuous decrease or reduction in our water use and this also affects our overall cost. In 2026, what are we going to do, whether it's in terms of ITL or for the Thai Union Group, many things that we have already started. We will continue with -- and aside from what we are continuing to do, we have newer initiatives as well, for instance, our carbon calculator tool. This is a symbol that we hope to launch in 2026. The intention is to go all the way down to the product-level to calculate, for instance, if you buy this product from us and the carbon emissions, what the level will be. What does this mean? This means that our customers will be able to compare this with others. They will be able to keep track of Thai Union's activities. This will show our customers that when they purchase our products, Thai Union is actually helping them protect the environment. In the green house gas emissions reduction we continue to work on. We're going to install biomass boilers, and this will help to reduce our carbon footprint in our factories. And lastly, we have the traceability digital platform, this is at a group level and ITL is also benefiting from this platform. Traceability will improve because it's digital, the reaction time will become shorter as well. For 2026, what is the outlook like? We know that many of you are interested in targets. Let's begin with the sales. I'd like to talk in U.S. dollar terms. Our growth and targets for 2025, we're looking at 9% to 12% growth. And this means that for 2026, ITL is intent on growing 3x compared to the global market. The global market projections for growth are about 3% to 4%. What we are doing, we are challenging ourselves 2 or 3x to the global market growth, in Thai baht terms is 8% to 11%. The gross profit margin we plan to maintain 23% to 25%. Many of you may ask, there is no more tariff support and how are we going to see strong results on this and why are we going to maintain a gross margin of 23% to 25% compared to 2025. The main reason for this is that we're going to take some of the funding to help us grow 3x the global market size compared to global market. We need that silver bullet to help us, 23% to 25% is an appropriate for us. We're going to use part of our margin to help us achieve that. SG&A to sales will be from 9% to 10%, no different for 2025, and our transformation continues the full year cost in CapEx will be THB 1 billion. We are continue to grow. Therefore, we need to invest in our factory, in our organization to enable us to be ready for that future growth. This is 2026 full year guidance. So there's no need to wait for the Q&A. We know that you are very interested about M&A. Let me go ahead and tell you about M&A without even being asked. The CFO has told me that I cannot say too much about this, but I will share with you as much as I can. In the last 3 months, I have traveled to talk with potential clients 3 times now. I've gone every month flown there to talk to them. Development and progress is becoming more tangible. And aside from meeting and speaking with them we have spoken to many different concepts. We talked about how we will work together and it's a high level discussion. It's a high-level discussion. And this is something that we will continue to work on. And the next time that we see you, I hope to be able to have more solid information or perhaps even good news to share with you. Thank you.

Thank you for joining us, and we hope to see you again in the next coming quarter. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]