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

Good morning, everyone, and welcome to ITC's First Quarter '26 Earnings Presentation. [Operator Instructions]. We will also be making a slight adjustment to today's format. We'll begin with the financial performance section, followed by a short Q&A around just the financial performance for the first 30 minutes of the session. We will then move on to the commercial updates and outlook for the second half of the session before resuming the Q&A until the presentation ends at 11:30 a.m. today. Please note, we will also prioritize questions from participants in the room first before taking questions from online. [Operator Instructions]. [Operator Instructions]. Now without further ado, please allow me to introduce you to our management. First up, Khun Roy, the CEO; Khun Yuwaporn, the CFO; Khun Pahk, CCO; and Khun Pimphat, Head of IR. Now over to you, Khun Roy.

I'd like to ask someone else to start first.

Hello to everyone. And let's begin with the key takeaways of the first quarter for 2026. It was a quarter that led to great satisfaction for us in terms of our performance results. Let's begin with a look at the USD sales, which grew by 28.6% year-on-year compared to last year. And the sales for 2026, the first quarter were closed at Thai baht equivalent of THB 5.2 billion. This is mostly due to every weekend, our sales at USD 163 million. This is whether it's in the Americas and Europe or AOA. And the growth in our customers mostly come from our global brands and from our private labels, we saw significant growth in those areas. In terms of gross profit margin, it is in line with the guideline that we provided earlier at 24.3%. This is mostly driven by the premium mix. And if we compare it with the first quarter of 2025 and 2024, the fourth quarter of 2025, our GP margin is in a range that is quite high. And our margin, as we informed you earlier, it is driven by the premium mix and the production volume. And the change is within a limited range and driven by these 2 factors. And the third thing that we would like to highlight is our treats. We have highlighted this since the past year. This is a product group that is outperforming, and it is in high demand in the market. And the growth has been quite significant in line with our expectations. In the first quarter, if we take a look year-on-year, we grew almost [ 105% ] with sales of THB 1.1 billion. And the effects from the war, the key message is the same as what we communicated earlier. We continue to monitor everything closely. And our sales in the Middle East have been significantly impacted with 1% to 2%. And in terms of the supply chain, -- we continue to also keep an eye on this and the impact is limited. The utility costs, as we mentioned earlier, are within a range of 2% to 3% of our total sales. And as for the freight cost, it is also in 2% to 3% of sales. Therefore, the impact -- there is an impact, but it is limited. Moving on, let's take a look at the performance for the first quarter of 2026. Our USD sales surged by almost 30% year-on-year. In terms of Thai baht, it grew significantly. If we take a look at the graph on the bottom, you can see the bridge from the first quarter of 2025 to the first quarter of 2026. There are 4 main factors of sales volume, product mix, pricing effect and the FX exchange. And this is mostly positive. It is only the foreign exchange that is negative. The exchange rate right now is quite -- Thai baht has appreciated. And the average exchange rate is at THB 33.4 to $1. Right now, it's THB 31.6 to USD 1. As I mentioned earlier, the impact from the foreign exchange will be passed through to the customers, and you can see the result of this in our pricing effect. It has offset the negativity of the foreign exchange. And the pricing effect is another factor that has led to an impact. We have the tariffs as well. In the first quarter of 2025, if we compare it to that period when there were no -- in 2026, we had the tariff announcement. The meaning behind this is that one of our customer groups where we sell in the Americas, and we have absorbed the tariffs that led to a price inflation. And this is what partly led to the pricing effect compared to the foreign exchange, it is higher. And another factor is the mix. We'd like to reemphasize that the mix in 2025 was at 51.5% and the product mix also has a positive effect. The sales volume is quite clear. Our sales volume increased. If we compare in tonnes, it went up by 8%. In terms of sales, it has a 15% effect and the product mix has about a 2.3% effect. Gross profit margin is changed in a limited range compared to other quarters, and this is a level that we are quite satisfied with. In terms of OP, it's THB 762 million and operating profit margin is 14.7%. If we compare quarter-on-quarter, compared to our GP if you look in our terms, our OP is 5.9% quarter-on-quarter. Gross profit is 1.8% quarter-on-quarter. What are the impacts? Is the savings or perhaps the SG&A efficiency, we have been able to achieve better management in this regard, leading to growth in our operating profit were higher than our gross profit. And gross profit year-on-year is 23.1% growth and operating profit is 36% year-on-year growth. Our adjusted net profit is THB 991 million. It increased 9.2% quarter-on-quarter and 24.9% year-on-year. And sales by region, this is a quarter where we are very happy because it's green in every region. In the Americas, we grew 22% year-on-year, mostly driven by our global brands and private label, and you will be given more details in the commercial section of our presentation. And in Europe, it grew almost 50% in the first quarter of 2025, it was a year where Europe was impacted by customers' destocking. This quarter, we're seeing a return to positive momentum, thanks to private labels. And AOA grew slightly less than the other regions, but still in a positive range with 9.4% year-on-year and 8.9% quarter-on-quarter. And on this page, this is our USD sales for a 3-year period, including 2026. And the highlight is where we look at the year-on-year for each quarter, you can see the numbers are green, and this is -- if we focus on the first quarter, you see that there is growth in every first quarter, and this is the highest since we've ever seen since we entered the market at about 30%. And on this page, if we look at the Thai baht, it's in the same trend as the U.S. dollar, it softened a bit due to the exchange rate in every quarter. What we would like to highlight is amidst the volatility and the external factors of each year, if we look at the red, the green line and the blue line, which are the adjusted gross profit margin and adjusted net profit margin, you can see that the numbers are relatively stable, and this has been -- this is what has happened over the past 3 years. On this page, we take a look at the key ratios. You can see from the graph, there isn't anything that is too exciting that we need to report about. Our cash cycle days, you can see within no more than 150 days, and this is as planned. And I would like to remind you that if you can remember, in the fourth quarter, we talked about our inventory that might be a bit high compared to other periods. This is because of a stocking of finished goods for some customers, which we were unable to send out at the end of the year due to our customers having very full warehouses. And things are returning to normal now and days outstanding has gone down. ROA and ROE are on an upward trend in line with our positive performance results. Moving on. This is a look at our supply and the raw materials prices for tuna and chicken. Looking at tuna first, in the first quarter of 2026, the price went up, and this is as expected, forecasted by everyone in general. The tuna prices are affected by the oil prices, and it was almost 1,700 in the first quarter, and this is on an upward trend. We're looking at 1,800 to 2000. Nevertheless, it will be mitigated by things that we mentioned earlier. This is a macroeconomic effect is due to the war, but it is in our plans to manage our supplies and to negotiate the prices with our customers. In terms of the chicken prices, it's relatively stable. We source our chicken supplies within the country and the impact is limited with regard to the war. And in terms of the exchange rate, if we compare the fourth quarter of 2025, it is in a relatively same level, even though it's at THB 31.6 to the U.S. dollar. We expect it to be between THB 31 to a little over THB 32 per U.S. dollar, and this is in a range that is limited, and it is within the range that we forecasted. And lastly, this is our balance sheet. Our balance sheet, you can see that it is, again, relatively stable, whether it was the end of the year or in the first quarter. The proportion of our assets have been maintained for this quarter compared to the last year per our profile, we do not have any interest-bearing debt.

For the commercial side, the first headline is about the Pet treats. We grew almost 100% from the last year, and you can see that -- you can see the contribution on the left-hand side from the first quarter, we grew -- and pet food went down a bit because our pet treats grew significantly and dog food also went up from 16% to 19%. And on the right-hand side, you can see the channel movement. The private label is something that we're very happy with due to our strategy, and it went up to 21%. And our World pet food company, our key contributors are stagnant at about 50% of the business and the brand owners and importers went down slightly. In terms of Pet Treats, you can see that this is a growth -- key growth driver for this quarter. It went up to 20.8% of total sales, and this is the highest level that we've seen for treats thus far. The trajectory is very clear and all the way up to 20 or so percent. The trend has -- we've seen this trend since the last quarter of 2025. And we are quite confident -- actually, we saw this back 2024, we have NPDs with our customers, and we can expect this momentum to continue. This is our core growth. This is the ratio of our premium mix in the first quarter of 2026, it's 51.5%. You might ask why our trees have grown so well, what's going on with the premium mix? If we take a look in the channel movement that I talked about just now, the private label was a strategy, a growth strategy for us. And we've got up to over 20%. And this is what has led to our premium mix remaining in the same range as before. And on the next page, you can see this is about our new customers. The volume has gone up by 14.3% year-on-year. And if we take a look at our new customers, we have 3 new customers in Americas despite the headwinds and demand remains resilient. And in Europe, it's the same story. We have 4 new customers. And in Asia, we also have 4 new clients. The new products that we are launching in the first quarter are worth about THB 400 million. And we launched about 200 or so SKUs. And in each region, you can see that we went up overall 21.8%. The Americas is the core driver, contributing 60% and stable year-on-year. Demand is very clear, very strong. And in terms of the global brands and the private label, that is one of the focuses, which has led to positive results in the first quarter for us. Europe has rebounded in the fourth quarter of last year, the fourth quarter of last year. We saw different from this quarter, this quarter, we're seeing a pickup, and we expect things to continue to rebound to continue growing as before. In Asia and Oceania, it might be growing not as fast as the other regions, but it is a bit slow, whether it's in Japan or in China, but I'll discuss the details per region in just a bit. Let's take a look at the Americas. We grew 22% year-on-year. And quarter-on-quarter, we also grew almost 9%. This is for every category, whether it's our global pet food players, our private label, where we have a growing market share and the demand of our -- demand from our existing customers continues to grow as well. It's both in terms of value and volume, especially in terms of our private labels, I would like to reemphasize that we continue to have a growing market share, a growing expansion with private labels, and we have launched new products as well. The overall picture is that the momentum, we expect it to continue to be positive, to be on an upward trend, and we're going to be launching more new products. We have sachet expansion, which we continue to focus on in the second half of the year. And in the Americas, this is -- the focus is on execution, speed to market and service excellence to capture growth in this region. And in Europe, you can see that year-on-year, we grew significantly. We have a low base in 2025, but quarter-on-quarter, the results are very positive. In the fourth quarter, we rebounded and in the first quarter, we continued the positive momentum. We have price optimization with our key customers. Demand is continuing to return for Europe and the private labels have also performed quite well in Europe. And this year, we're seeing an overall rebound and NPDs are the key drivers for Europe. The outlook for this region is that we will continue on our path to recovery and the focus will be on the margin discipline and a mix upgrade to lead to higher profitability for our European region. And let's now take a look at Asia. In Asia, we are seeing a return -- a recovery, this is Japan, Taiwan and Australia. And we are growing in terms of not just value, but also volume. Year-on-year, we've grown almost 10% and quarter-on-quarter, we've grown about 9%. The focus here is what we mentioned earlier, which is on functional products or aging -- focusing on the aging pet population, which is what the market is demanding a focus on. And we're looking towards to more innovation with our customers. We expect to see better numbers in the second half as well. And we need to have a more disciplined execution because the demand in Asia may not be as strong as in the Americas or in Europe. So we need to continue to fight on this end.

So I'd like to provide a quick summary. In the first quarter for this year compared to the last quarter, year-on-year, we grew quite well, whether it's in Thai baht terms or U.S. dollar terms. But one fact that you upon -- updated you on was in the first quarter, quarter-on-quarter comparison. Last year, we did not have the impact from the U.S. tariffs. We had one portion of our sales of DPD to the Americas. And compared to last year, we have some inflation in the numbers. Some of our customers last year, they did not receive products from us due to their inventory management. They were phasing for quarter 1. We're quite lucky that for this quarter, our performance is quite positive. We have those assisting factors. And I'd like to repeat once again that many things that we had planned for last year, we're beginning to see the results of what we put in action last year, and we're going to continue with our strategy. We're going to focus on execution, whether it's in terms of innovation, or private label channels, whether it's in terms of the regions with regard to Europe, for instance. One other thing I would like to add is that our learning from last year or the past years in the first half will be soft. We have a lot of work to do. Last year, we had an imbalance in terms of work. The second half of last year we were -- it was quite exciting for us. And this year, we are looking to balance or normalize things as much as possible. That does not mean that this year, every quarter will we want to -- we want to achieve a smaller gap. The seasonal factors are out of our control. Customers might launch quarters in their fourth quarter. We might ship things in the third quarter. These are things that are out of our control because of seasonal demand. But whatever we can balance, we will balance. There are many reasons or many factors that have led us to -- that have led to our positive results in the first quarter. We'd like to remind you that the global market, our projections for growth are 3.5% per year. When we announced our guidance for 2026, I remember saying that our intention is to grow 3 to 4x of our projection. In the first quarter, we have overdelivered, and we will continue to monitor the next quarter. Let's take a look at the slide. Last time, there were questions from the floor about our Chunk and Pate products. And these are products where the value is not that high. And the question was how can we what impact will we have from the margins? Today, we'd like to share that our team has done research in terms of the retail pricing. And we looked at an online shop known as tui.com. And what we want to share is that the Chunk and Pate segment, the retail price per kilogram, there are many -- the prices vary, from 8x the lowest price, as you can see from the graph on the left. Chunk and Pate doesn't have just cheap products. And you asked what will we be selling at what price level? We want to balance -- we want to have a balance with every range. Of course, we want to sell high value, high margin. But at the same time, our production facility is quite large. And so we are very mindful that the volume is important. It has -- it is significant. We will try -- we will attempt to capture a wider share. And I hope that this answers the question that you had in the last meeting that we had together. This is public information. So of course, the product might change. They might have promotions, but this is the range that we're seeing. In terms of M&A, we need to update because everyone is quite interested in our M&A. There is a development that is very positive, and I can provide more information this time. We have a clear target, which is in China. And this is a wet pet food manufacturing company, and it includes treats as well. We're looking to work with a partner to invest, and we will be a minority investor. Let me repeat again, this interest -- this target is in China is with wet pet food and treat manufacturing, and we have a partner that will be investing with us, and we -- ours will be a minority share. This is all that we can disclose at the moment. We -- what process are we in? We are doing due diligence right now. Our due diligence is ongoing. And once everything is successful, if we are successful, we should be able to conclude things within the next 2 to 3 months. And this is because the due diligence is ongoing. Let's take a look at geopolitics, all right? The war taking place in Iran. Yuwaporn mentioned a bit on this. We have less than 1% of our business that has to be routed to this area. We don't have to worry about shipment to this area that much. We have a transit time that might be impacted by 10 to 15 days. This is a direct impact. The freight cost will increase 70% to 80% of our sales are FOB, which means that the client is responsible for the shipping costs. So we do not have any impact in that regard. 20% to 30% are where we have to bear the shipping cost. And right now, we are in an ongoing process of negotiating with our customers to increase the prices, not just for the freight, but also for the product. And this is the direct impacts of the Middle East conflict. The raw material costs are also impacted. Any raw materials that are related to oil, for instance, the plastic packaging is directly impacted by the oil prices. We do have a 3 months inventory stock for these materials. And this is an average. Some might be more than 3 months, some might be less than 3 months, but on average, it's about 3 months. What we are seeing in terms of our production cost, we will see from May onwards, we will start to see the impact from this increase in prices. As for price recovery, we -- this is ongoing for us. What I expect is that starting from June or July, starting from June or July, not 100% immediately, we will see a price effect. Why are they starting at the same time? Because each customer -- we have -- with each customer, we have different inventory holding. The timing is different. There is a time lag in terms of the price recovery. So that's a quick look at the geopolitical impact.

And I'd like to add on to what Roy said, GDP, the 20% to 30%, this is where we export to the client. We pay the shipping cost upfront, and there is a time delay from where we request a refund for that shipping cost. And you -- many people may ask about things going up, the price is going up, the cost going up. And will this lead to a drop in demand from the customers? This is something that we are aware of and that we are monitoring. If you remember at the end of the year, when we faced the imminent tariffs, our research showed that price elasticity is 0.8%. So that means that the studies say that if the prices go up by 1%, then the volume will disappear by 0.8%. This is the information that we talked about that we shared with you at the end of last year. If we take a look at what is actually happening, the U.S. tariffs, even though despite the U.S. tariffs, we're still looking at an upward trend. Yes, when prices go up, people do buy less. But if we take a look at last year as an example of real life, it's actually the opposite. But don't worry, we continue to stay on top of this. We're keeping a close eye on this. And we don't see anything in our clients' forecast in terms of a change in volume, any clear change in volume. And let's talk about tailwind now. This year, this is the -- we're coming into the last phase of our Tailwind project. It's a 36-month project. It's supposed to end in April last year. So this is -- we're entering the last 12 months of the project. So far, the momentum has been quite good. If we take a look at the performance of the results based on the first quarter, if we -- it's actually USD 34 million. This is the actual benefit. In 2027, the full year, we're looking at OP uplift of USD 50 million. This is 12 months compared to our base year 2023. Everything looks good. So we're going to continue on. What we continue to do -- again, this is the end of the program. We are preparing our team, our personnel to take things take over from our consultants. We will continue with these efforts. And we continue to focus on continuing to lead the charge on our own after the consultants withdrawal. In terms of sustainability, we, again, will continue on with these efforts, take a look the right of the slide, we are providing vaccines for the communities that we operate in. And this is a very tangible initiative for the community, and we will continue on with this. The other projects that you can see on the slide are things that we will expand upon the connectivity to life at sea. What does this mean? This means that we will support the our tuna vessels. We are following our group leader. We want them to have access to WiFi, so that they can communicate more with everyone onshore. This is a social development and social initiative. And on the way on the left, we can see traceability. As a group, this is something that we have done together. We will be digitalizing this. And this will increase traceability and increase the precision and accuracy of traceability as well. The outlook for us for the full year, we're going to maintain our guidance for the full year. So I'm not going to read the numbers out because there is no change from our guidance that we provided for the full year. The first quarter, we have positive results, right? So your question are we going to make any adjustments? Well, it depends on the next quarter because the situation in Iran continues on -- everyone thought that it would be over quickly like with the situation with Ukraine and Russia, but they are already in their fourth year of war. And with Iran, we're going to continue to monitor things. This is something that needs to be followed closely because what is happening in Iran is different from the U.S. tariff situation, which affected the Americas. And what's happening in Iran is affecting the oil industry, which is affecting the entire world and is also affecting each and every industry. So it's not that it's affecting just America or Europe, it is affecting everyone. So we would like to continue to monitor things for one more quarter.

I would like to thank every investor for sharing -- joining us today. And if you have any other questions, you are welcome to contact our IR office, and we look forward to seeing you in the third quarter. [Statements in English on this transcript were spoken by an interpreter present on the live call.]