Thai Union Group Public Company Limited (TU) Earnings Call Transcript & Summary

Good day, management, investor and all participant online. I would like to welcome everyone to Thai Union Group Year 2019 Result Announcement and live webcast. Today, the executive who are joining us today include Mr. Joerg Ayrle, Thai Union Group CFO.

Hello, evening.

And Mr. Ludovic Garnier, Head of Group Accounting and Controlling.

Hello. Good evening.

And myself, Best Waiyanont, Investor Relations Manager. The event today will comprise approximately 40-minute presentation session. We go through what happened financially on the year 2019 and fourth quarter of 2019, and we have the remaining 20 minutes, for the Q&A session. Please do note that this session will be conducted in English. Should you have any question, please type in the question box and click send. We will raise those Q&A after the presentation is finished and within Q&A session. Now without further ado, I would like to pass on the stage to Mr. Joerg Ayrle, Thai Union Group CFO, to start the briefing. Thank you very much.

Okay. Thank you, Khun Best. Good evening here in Asia, good morning in the U.S., and a good day in Europe. Look at this prospect that we have here, look at the delicious seafood. You can enjoy the sandwiches you can make out of the fantastic products we have. An avocado tuna sandwich with some lime, that's just exactly the right entrance to a nice dinner with your family or at a barbecue or somewhere else, and that's why I'd like to introduce to you Thai Union. Most of you know us very, very well. But before I get started in Q4, I'd like to really remind you with regards to what's going on in China, with what people are facing. We really think of our colleagues there, our Thai Union colleagues, our friends in China, and we encourage all of you to take precautions, wash your hands with sanitizers or with soap and be healthy. So before we talk further, we go right into the numbers. Q4 '19, we do see a very solid operating profit, which continued despite a weak top line from FX volatility and falling tuna prices. These are the 2 key themes you will hear throughout this presentation, a weak top line, as a result of very, very strong Thai baht and falling tuna prices that we see. Our sales came in with THB 32.8 billion, that is on a reported basis, an 8.8% and contraction. We exclude the FX impact, it's 3.7% year-over-year reduction, mainly from our Thai-based Ambient Seafood business, which is very, very dependent on the raw material pricing, and you will see it on one of the later slides, that in October, November, tuna price dropped as far as $900 per ton, which is -- I have never seen that since I was in Thai Union. So look, top line, very depressed on a very strong Thai Baht that is causing more and more problems for the Thai exporting industry. Tuna raw material prices declined. Strong sales volume growth. So we grew our volume by 2.7% year-over-year, especially from growth in the Frozen business and from the Frozen business in the U.S. 16.1% in gross profit margin, THB 5.3 billion in the quarter. This all is flat compared to a year ago and considering that our revenue dropped by 8.8%, being flat year-over-year in gross profit means we have a real improvement in gross profit margin, up 122 basis points year-over-year, continued focus on high margin businesses, gross margin recovery, continued recovery in Ambient and Frozen and the branded tuna business in Q4 really was a very strong gross profit driver. THB 1.537 billion operating profit, that is a 2.6% increase in the quarter year-over-year, also a quarter-over-quarter change of plus 1.4%. We were 4.7% in terms of OPE in terms of revenue. We have been able to flex our SG&A cost somewhat. We've exceeded last year's SG&A percent from 10.7% to 11.4%. That's not great but given the very strong revenue decline, we feel this is still moderately positive, but we do need to continuously focus on SG&A prudence. What we have not done in Q4 is rein in our marketing expenses. We believe that given the weak top line at this moment, it is very prudent to invest in the top line, invest in the marketing, into our new product development or product launches and support our brands in top line growth. Net profit is THB 1.057 billion, 3.2%, that's year-over-year contraction by 13.6%, primarily from one-off effects that we had a year ago from 2 insurance claims that we had plus -- so a year ago, we had 2 insurance claims where we received money from the insurance, which was recorded as Other income. We have some higher tax expenses. And then we also have 1 correction of financial support that we gave to a start-up that we invested in -- not exactly start-up. We supported this business, Nutrifish in France for some time in order to learn about a certain technology. We have impaired this alone on this investment, and that is weighing on our net part. If we look at the whole year, we end the year with THB 5.2 billion in net income. And please be reminded, this is always excluding the onetime legal -- U.S. legal-related settlements of THB 1.4 billion that we had in Q2 2019. You'll recall, we accrued another $60 million before tax in -- to support us during this antitrust litigation. We've excluded this for the purpose of this management report, so THB 5.2 billion year-over-year normalized net profit, and I think the highlight on this chart is -- there are 2 highlights: one, operating profit grew 21%, EBITDA grew 9%, that's really great despite a 5% sales contraction; and the second is a massive production in our net debt to equity, primarily from a THB 3 billion real cash-driven debt paydown and the issuance of our perpetual hybrid debenture in the magnitude of THB 6 billion, which is recorded as equity and not as debt. So 2 basic measures: profitability metrics are really up this year compared to '18; plus we have achieved our deleveraging plans and are now in a net debt-to-equity range of 1.07, so below 1.1, which is a really good starting point for 2020 and shows a very healthy balance sheet. If we look at the long-term development around our gross profit margin and the revenue, I think this is a very noteworthy page because what you can see here is if we look at 2017 and the first half of '18, we were really struggling to keep our gross margins. Q1 '18 with 11.6% gross margin. So there was a real pressure on gross margin quality, and we've come out of this and stayed in the range of around 16% ever since mid '18. And in the last 3 quarters, we've either been on or exceeded the 16% range. Q4 was 16.1%, is a really, really strong quarter in terms of gross margin, and we are very proud that we -- despite the revenue challenges, despite an 8.8% revenue drop, we have been able to keep a very strong and very healthy gross margin. At this stage, I'd like to remind all of us that with the current Thai baht level of -- or in Q4 of below THB 31 to the dollar, this typically translates to a real operating loss of $50 million in [ fits ] because we're unable to transfer this to our customer prices. So at this very strong Thai baht level, we do have a depressed profitability. And if we then can still turn out a 16.1% gross margin, with the net profit levels that we have seen, this is a really, really positive sign for our underlying financial strength and the healthiness of our business. A couple of recent developments. SPACE-F, and you will hear more about SPACE-F is the world's first real large food tech incubator here in Thailand. We've joined up with my Mahidol University and the National Innovation Association. We have invited 23 startups from Germany, India and Norway, Singapore, Thailand and the U.S., who have pitched food tech ideas and we've accepted them into our incubator and our accelerator program, and the key focus areas of this incubator and accelerator includes wellness, alternative protein, packaging solution, smart manufacturing, nutrition and other topics. We have started this together with the NIA and Mahidol to really shift focus and shift gears in terms of how can we bring outside-in innovation closer to Thai Union and tap into some of the real innovative minds in our industry. And in order to celebrate this and to show the first results, we will have a demo day, on March 5, here in Bangkok. So everyone who happens to be in Bangkok or who wants to drop by for a visit. Please join us, there's a QR code there to reserve a seat, and we will have pictures by all of the companies, we will have showcases, and we will also present the capital market showcase around Thai Union and talk a little bit more about the 2025 vision that our CEO has and that the board is pushing us towards, and we will reveal a little bit more about healthy living and healthy oceans and how this is associated with Thai Union. So please do join us, and you will hear a little bit more about our 2025 strategies and directions. Another topic that I personally find a real great showcase for an Asian large multinational is to embrace here, this global speak out whistle-blowing platform. We're expanding our compliance program. We had a whistle-blowing platform before, but now we'll work together with NAVEX Global, a leading operator for compliance and whistle-blowing help lines. And we have here in many different languages, and approachable by anyone inside the company or outside the company, a speak out reporting hotline, compliance reporting hotline. And with this, we will drive transparency and ethical behavior in Thai Union and bring us even more into the forefront of ethical code of conduct. Wuhan, of course, we all understand is a very difficult situation. Our friends have in Wuhan -- we have donated products to the supply chain there to help feed people who have the need or where it's difficult to get to a sustainable food supply chain. So we have a system -- we help here in this crisis situation in China. New product initiatives, I'd like to have 3 showcases here and Best, you have to help me on the third 1 again. Number one, Tuna Fitt, SEALECT Tuna Fitt, it's a new product, has no trans fats, no MSG, high [ indiscernible ] content, and we have a wellness program associated with the 200 participants joined and this is a new product that we have launched here in Thailand that really dives into what our plans -- healthy nutrition, a healthier lifestyle, and it's a really great showcase on how we can make a difference with good and healthy products. We've also launched, in the United States, lemon-infused, lemon-flavored, King Oscar brisling sardines, a very new flavor and taste in our sardine lineup, great product, and we're launching this in the U.S. And then last but not least, we have a new product here in Thailand, again, diving in chili flakes and tuna flakes together in a dry product that is then sprinkled over rice and can be consumed with rice. A lot of protein content but also a lot of great spicy herbs, Thai herbs. The products is called, and I really have to turn to...

For Thai consumer in the audience, this is called Nam Prik Pa Waen and is made by well-known chef, call -- by the name of Pa Waen who make great Thai chili paste.

So Na Prik Pa Waen, well, I hope I had it. So please look at this, but it's really spicy. But I -- it is really good. Awards and recognition. I'll dive over this. Again, we've been recognized by several leading associations in company management and sustainability, Investor Relations, crisis management, innovation, and I think this is really good to receive recognition beyond our quarters. My last page today, before I pass over to Ludo is about dividends. We are presenting to you a 17.5% dividend increase compared to '18. We've already paid THB 0.25 interim dividend for the first half year, and we will issue another THB 0.22 final dividend to make up to THB 0.47, THB 0.47 dividend per share. The payment date will be 22nd of April, 2020. And it's a sign again of our very strong dividend payout, 59% dividend payout on net profit -- on reported net profit, and it's a 17.5% increase and showcases also a little bit our really strong underlying profitability and our belief in the cash-generating ability of Thai Union. And with that, I'll pass it to Ludo to tell us a bit about -- more about the details. Thank you.

Thanks a lot, Khun Joerg. So here, the key takeaway for Q4 '19. So first of all, let's face it. We are facing a changing situation in the top line because our reported top line is declining by 8.8%, and the majority of this is coming from the FX, minus 5.1%, and the organic growth is minus 3.7%. Again, this quarter, same situation that we have faced in Q1, Q2, Q3. We are very -- we are facing a very strong depreciation of euro, GBP and USD. And here, you can see the impact year-on-year, minus 11% for the euro and minus 8% for the USD and the GBP. So once again, a very strong impact. Excluding this impact, so the organic is declined by 3.7%. And this 1 mostly is coming from the Thai Ambient operations and also Europe, and [indiscernible] this one. The volumes on the opposite are growing by 3%. We have a specific situation in the frozen and chilled seafood business, which is growing, especially in the feed business, where the volumes are really growing. One achievement where we are very happy and very strong, and I'm very proud about this 1, is the gross profit. The gross profit in margin in Q4 '19 stands at 16.1%, compared to 40.9% in Q4 '18. Overall, the gross profit margin are improved in all our categories and all our segments, but particularly, in the Ambient and the Frozen businesses, even if this was sometimes performed to the detriment of the volumes. This gross profit margin improvement, almost offset the top line decrease. So to the amount -- the gross profit is slightly declining versus last year, but not that much. SG&A, we mentioned this 1 already, we managed to decrease a bit. We decided to focus and to continue to do some marketing cost to support the top line. So they are dropping by 2.8%. However, from a relative amount point of view, they are growing to 11.4% versus 10.7% last year. As a result, the OP, operating profit is really recovering, at 1.5%, growing by 2.6% year-on-year on this one. However, we don't see this recovery in the bottom line. While in the meanwhile, in the nonoperating items. We are facing some decline in the income. First of all, we have a one-off in impairment of an investment. We'll get back to this one, plus we are benefiting also last year from some insurance claim regarding our manufactory in Ghana and also our chilled business in MerAlliance for something like THB 120 million. Plus we are also facing this year with higher taxes, mostly coming from the improved operating profit. One thing we don't mention here and the key takeaway, that's something which is very important for us because it was a commitment from us, the cash performance and the decrease in net debt was clearly one of the key target for Thai Union in 2019, and we made it -- we will get back to this one again. So here, our usual draw from the tuna price that we have. You can see in Q4 '18, a huge and sharp drop compared to Q4 '18 by almost 33%. If you remember, our story is we can manage when we have some gradual increase or decrease. However, when you have such a drop, it's very difficult or us to manage. It's difficult for us to manage for our OEM business because, of course, first of all, we need to process all the fish that we have in inventories, and it takes a bit of time. And in the meantime, sometimes, to decrease our selling prices, because in the tenders, of course, the customers, they will see this fish price dropping. However, THB 950, as Joerg mentioned, is kind of a record low. It has been a long while since we have seen such a small amount. However, you can see here, just indicate for January 2020, we are back to a more normal [indiscernible] which is $1,350, and we expect this [indiscernible] price to remain for the whole 2020. So on Slide 20, the top line you can see that for the Q4 '19 performance, as I said, it's a decline by 8.8% and minus 3.7% before currency impact. So we achieved THB 32.9 billion in terms of sales. And again, the key drivers for this one are the Ambient business, mostly coming from the fish price which is dropping by -- from the tuna fish price -- which is dropping by 33%. On the full year, so we achieved THB 126 billion, declining by 5.3% compared to last year and declining by 1.4%, excluding the FX. So again, on the full year, and this is really the story for 2019, the impact of the FX drop and the appreciation of the Thai baht versus our key currencies for us, USD, euro and GBP is really significant. However, in terms of organic sales, we also have a drop, but this is quite limited to 1.4%. Here, you can see on our bridge, our bridge by segment, in that you can see the key contributors, the drop are the tuna segment, the shrimp segments and [ indiscernible ] segments, as we said, mostly coming from the fish price in drop Q4 '19. We have also some growth coming from the lobster and the value-added business. We are very happy with the development of this business and these segments in Q4 '19. But here, again, you can see we have 2 very large boxes for the FX. The first one coming from the USD, minus THB 900 million, and the second one coming from the euro/GBP, it's combined altogether, minus THB 945 million. So here, you can see total THB 1.8 billion, THB 1.9 billion just coming from the FX, which is a massive impact for us. Without this impact, the result on the top line would be really different. On the revenue structure, so a little bit of change. And I like this chart because you can see the development over the last 5 years. So key components. First of all, you can see a decline in the European and the U.S.A. to 28% and 40%. So this is coming from -- partially from the FX. And you can also -- you can see also an increase on the domestic market. We are very happy on this one. We started 5 years back at 8%. And but now the Thai domestic market represents 12% of our sales. This is a huge achievement. This is something we wanted to develop, and we do it. On the breakdown by business, we don't have a lot of changes, or more decent situation. So we'll move quickly on this one. So gross profit. This one, I would like to insist a bit on this one. Why? Because if you remember, 2 or 3 years back, we are facing a very volatile gross profit. And now we are saying, okay, we want to stabilize, and we want to increase our gross profit margin to a level of 15%, 16%. And here, you can see over the last 3 quarters, we have been over-delivering compared to the 16% target. So overall, very happy about the gross profit margin. Of course, from an absolute amount, we are still declining versus last year by 1% due to the top line. However, on the full year, we achieved a record high gross profit by THB 20.1 billion, first time it is for the last 5 years, and we are growing by 6% versus last year. And over the full year, our gross profit margins stand just below 7% at 15.9%. We are very happy about this one, clearly. Again, the key contributors for this one, we are recovering almost everywhere and especially the Frozen and the Chilled business, which we have challenged last year, are reimproving versus last year. On the full year, we are growing almost everywhere. OP. So OP, as a result of the gross profit improvement, the SG&A are slightly declining by minus 2.8%, growing again due to the top line decrease in terms of relative amount. So we achieved a THB 1.5 billion OP in Q4 '19, slightly above last year by 2.6%. And the OP margin stands at 4.7% versus 4.2% last year. Over the full year, so which is THB 5.6 billion. So here, you can see, I think this graph is very interesting. You can see the challenge we are facing in terms of OP over the last 2 years, '17 and '18. We were achieving an OP between 4.7% to 4.9%. And then in 2019, we increased by 21%, and we are very happy about this one. We work around on the front. Of course, we are not yet back to the level of 2015 and '16, which were record high, around THB 6.8 billion. However, we are very happy with this performance. EBITDA. So here, we represented the EBITDA. We're taking a one-off from the antitrust. Just for you to remember, the impact of the antitrust that we accrued recorded in Q2 '19 was 1.8% on the EBITDA and 0.4% on the tax, the net impact was 1.4. So here, we achieved over the full year, the THB 12 billion EBITDA. This is -- you can see over the last 5 years, this is record high. We are very happy about this development. Of course, this is coming from the OP improvement and this is also coming from the share of profit, which is quite strong, mostly coming from anti-feeds on this one. Even if, again, we had in this one some one-off and I will get back to this one again. But on the EBITDA, and this is part of the definition for the very strong cash generation in 2019, EBITDA was strong, so the cash generation is also very strong. Net profit, as we mentioned, so here, we achieved THB 1 billion, THB 1.1 billion versus THB 1.2 billion last year, slightly dropping versus last year by 13.6%. Why? Mostly, again, because the other income is declining, something there like THB 400 million. Part of this one is coming from the impairment we recorded on our investment and part of it is recorded from some one-off we recorded last year on some insurance claim in Ghana and in our chilled business. So the total drop of the other income is something like THB 400 million, plus we have also some increase in the tax expenses. Last year, in Q4 '18, they were as basically low. Now we get back to a more normative situation. Over the full year, we achieved THB 5.2 billion, so growing by 0.5% versus 2018. Again, we are happy about this development on the net profit. Slide 27. So this year, the adjusted net profit. So we have 1 one-off to report, which is the impairment of one of our -- in exactly 2 years ago in a company which is called Nutrifish. Just as a reminder, Nutrifish is a French company who was specialized in the marine mature ingredients, and they were basically processing some fish [ skins ] in the salmon. We knew from the beginning that this business was risky. However, we were very willing to learn from these businesses because we have some ideas to develop this kind of business although -- from our Thai base of operations and we have learned a lot. Obviously, this is company was in a difficult economical situation, plus they were facing some technical issues and some as issues in accesses to the raw materials. We have been working a lot over the last 2 years with them, and the technical issues have really improved, and we are very happy about this one. However, for the timing, we are not able to fix the last point, which is the access to the raw materials. So the company is now in a very difficult cash situation. This is why we decided to take a very conservative approach and to impair the whole amount of the investment that we did 2 years and the last year also on this one. So the impact is THB 173 million recorded in the line Other income in Q4 '19. And this is really adjustment we want to report for this quarter. EPS, so EPS is just a consequence of all what we say, so decreasing by 13.6% in Q4 '19, but year-on-year, increasing by 0.5%. And again, very happy about this growth. So Red Lobster, as you know, Red Lobster traditionally loss-making in Q4. And this, it happened again. So the net impact coming from Red Lobster is a loss by THB 165 million in Q4 '19. So the breakdown. Everything is almost the same for the Other income, the finance costs, which are quite kept stable all along the quarters. The domain changes are coming from the share of profit. Share of profit for Lobster achieved a loss by THB 243 million versus last year, they were at most THB 200 million. So we have a deterioration of the performance of Red Lobster in Q4 '19. Let's be very clear, not happy with this performance. We work very closely with the management there to talk about the business and to turn the situation. If you look at the story and the performance in 2019, Q1 and Q2, Red Lobster really improved their performance. The guest count was improving, however, unfortunately, in Q3, '19 and in Q4 '19, there was a turnaround and now currencies is weaker compared to last year. Income tax, we discussed that already, quite difficult for us to predict this one, kind of choppy quarter after quarter. So last year, we had a tax expense by THB 113 million. This year, we have tax expense by THB 38 million, so we tried -- to a bit more conservative here. I think we are -- although we are right on the full year amount but sometimes quarter-by-quarter, we had some surprises, especially Q4 '18. We were a bit aggressive in the tax forecast, and that's why we had in Q4 '18, such a big tax expense. Now in '19, I think we are more conservative. We don't have such big swings happening every quarter. The -- so on the Slide 30, this is lead, our performance in terms of cash flow. We are very happy about this one. That was clearly one of the key targets and the key focus of the whole group and the whole management in 2019. And we see historically high, THB 3.6 billion. Free cash flow in Q4 '19, very, very high. So where does it come from? We could try to explain that. So part of this one is coming from the fixed price drop. Of course, if the fish price is lower, so the cost in our inventories will be lower, plus we managed to decrease also the volumes that we have in the inventory. So we have less pressure coming from the -- on the net working capital in Q4. The EBITDA, as we mentioned, is good in 2019, we are very happy about this one. Plus also we did some specific focus and some specific programs, such as factoring, implementation in the U.S. and also in Europe. For the timing in Q4, I think, the impact are not big, not big, however, it helps also. Of course, we don't think such a performance is sustainable, THB 3.6 billion in 1 quarter is really, really record high. Over the full year, so we managed to deliver THB 7.1 billion free cash flow, from the last year, THB 8.4 billion was really, really high. Of course, you always need to look at the long term. The THB 8.4 billion that we delivered in 2019 was partially explained by the low THB 2.9 billion that we delivered in 2017 because, of course, price was increasing in '17 and then dropping in '18. So we have less pressure in the net working capital. '19, we have kind of the same story, plus very strong EBITDA. The impact on this one on the net debt. Moving to Slide 31. So we had at the opening of the year, a net debt amounting to THB 64.4 billion, and we managed to drop by to THB 55.2 billion. Again, that was clearly one of the other target that we had within the group over the last 2 years, we said that we were below above 1.3, 1.4 net debt-to-equity ratio, and we stayed in quite a while. We are willing to get back to 1, 1.1. Here, we managed to get to 1.07. So very happy about this one. The key drivers are the EBITDA. So here, you have the EBITDA, including the anti-trust, be careful on this one, which is THB 10.2 billion. Again, if you add back THB 1.8 billion, then you reconcile with the THB 12 billion that I was mentioning before. The other key driver is the CapEx, THB 4.6 billion. We continue to massively invest in our facilities, in our operation, but also the interest paid, the dividends also and also, we have the issuance of the perpetual debentures. If you remember, in Q4 '19, we issued THB 6 billion. But the organic performance is really declined by THB 3 billion. We managed to -- we paid THB 3 billion of the net debt, and we are very happy about this one. The focus will continue on this one, but I think the achievement that we did in 2019 is really good and excellent. On the funding, there is no much change by currency, almost the same situation by maturity. Of course, we had a bit of a shift because we refinanced some of our debt. So now, the long-term debt is 75% versus 65% last year, and you can see here the breakdown by maturity. But I can go quick kind of clean on this one. The ratios or the ratio, the usual ratio, again I don't need to comment all of them, and we just insist on the net debt to equity, 1.07. We said we want to get back to a range to of 1 to 1.1, why exactly will we want to be a bit better. That's good. We want to continue this one. Net debt to EBITDA, we are right now at 5, and to be between 4 to 4.5. So here, we can improve a bit, but the net working capital also here is quite a good achievement, 105 days and THB 77.6 billion, I think we are very happy about this one. Now having said that, I will give it to Khun Best to comment further on the financial results by [indiscernible]

In for the [indiscernible] impact, we have seen that during the fourth quarter year 2019, tuna price is -- I mean, volume. I mean on top of everything, we have heard that the currency has played a big part in terms of affecting the share price and put pressure on share price that -- on the revenue, apologies, on revenue, that the fourth quarter revenue has been declined by 8.8%, and if we strip that off, the impact of the FX, the revenue will continue to be declined 3.7%. This chart clearly illustrated that the tuna price has also fall by 33% compared to the same period last year. And this is a significant portion of whats -- explain why our organic sales, even excluding FX, has been declined. Otherwise, I mean, we have seen the more or less stable run through price for the shrimp and salmon. This chart has been clearly demonstrated that U.S. dollar during the fourth quarter and British pound has been depreciating about 8% compared to Thai baht and the EUR has been depreciating about 11% compared to Thai baht over the same period during the year '18. Therefore, I mean, in terms of Ambient seafood, as a result from all the currency depreciation against Thai Baht and the falling raw material price, the Ambient seafood sales has seen a decline by 11%. But to note, that during the fourth quarter, we have seen the quantity or the volume declined only 1.4%. So most of these are due to the falling and declining pricing. However, if we look closer, we have seen that the branded canned tuna margin has been at a very solid level at 25%, up almost 800 basis points. Obviously, there has been coming back -- at some cost of the OEM business, where when the tuna price has been falling. They have to digest the high cost inventory. Nonetheless, we have seen that the profitability improvement has outweighed. And despite the declining revenue, we have seen a very solid gross profit margin to offset most of those declined revenue, resulting in improved profitability, generally, for the Ambient seafood segment. For the Chilled and Frozen business, so we have seen these sales decline only marginally, but to note that during the fourth quarter year 2019, the revenue, the quantity of sales volume increased by 10%. And for the full year, the growth hit even more pronounced at 12.8%. Most of these growth are driven by both the sales growth in the U.S., Frozen seafood segment and the sales growth of Aquafeed from our subsidiary Thai Union Feedmill. And not only that, we continue to see the gross profit margin improvement, of both year-on-year, during the fourth quarter year 2019 and for the full year, year 2019 as well when compared to the same period last year. For the PetCare, value added, we have seen the full year 2019 revenue growth right about 2% and the quantity of growth by about 3%. And please do note that the gross profit margin has continued to improve to about 200 basis points compared the same period last year. We have seen that the why PetCare are suffering from the currency issue and the fact that during year -- fourth quarter 2018. PetCare is delivering an abnormally high sales and if the high base, we have seen as a contraction during the fourth quarter year 2019. But nonetheless, we have continued to deliver a solid margin in PetCare and value-added has continued to be a profit -- a great profit contributor to our company. So for the geographic mix, we have seen that the U.S. has delivered some sales contraction. It was about 2% compared to the same period last year. This is mostly as a result of the U.S. currency depreciation. But if you look at the largest business in the U.S., which is the Frozen Shrimp business -- the Frozen Seafood business, that has continued to grow, to deliver strong growth. If we exclude the FX impact, the fourth quarter sales in year 2019 would be just about 1.7% compared to the same period last year. Of the European sales, we have seen the sales decline by about 15% compared to the previous year. These are mostly attributed to the weak currency, the euro account has been weakened against Thai baht, but nonetheless, part of these are also due to volume decline by the fact that we have put on the price recovery program that has been putting some pressure on volume, but nonetheless has improved our profitability very strongly, that's why, despite the sales decline, we have seen the branded margin has been improved to offset that on the profitability level. On the Thai business, we have accomplished a strong growth throughout the year. For the full year, we have seen a sales growth of 10% compared to same period last year. And this has been driven by both the product launch that we actively push our entire market and more focus on the Thai Frozen business. On the emerging market, we have seen -- why we have seen some weak growth from the market like the Middle East, where -- which are very heavy tuna focused. And with the tuna prices in falling, but we are still happy to say that the Chinese -- the sale to China market continued to deliver a sales growth of 4%, although, I mean, the Coronavirus has really pay a risk going forward into year 2020 at least, or at least for the first half of this year. For the segment profitability, we have continued to see that the PetCare has continued to contribute -- a good chunk of the gross profit contribution, now contribute roughly about 20%. And Ambient Seafood and Frozen has continued to deliver a strong profit growth -- profit margin improvement compared to the previous year. And with that, we will go to the business outlook, I would like to pass on the camera to Mr. Joerg.

Okay, great. Thank you, Ludo. Thank you, Khun Best. Look, this is the time of the year where we come out with an outlook, with the business outlook, what does 2020 bring. We'll give you some guidance, but we also wanted to frame a little bit the key pillars that we're going to look at in 2020 and how we believe we can drive where we want to drive our performance. And look, the headline here is we remain committed, committed to our strategy, committed to be the world's most innovative seafood operator, delivering highly nutritious and responsible food products to ensure sustainable value for our stakeholders. We are absolutely committed to the steps we took in the last years to enhance our product portfolio, to remove lossmakers, to drive margin accretion, to drive our P&L quality. And here, we want to look at 4 pillars that we believe shape a little bit the discussion over the next couple of months. And 1 is we started to talk about innovation a lot, and I think this whole discussion around innovation is more and more percolating towards a discussion on what are the new value-enhancing businesses that we're going to enter into. You've seen our investment in the marine ingredients, the [ refinery ] but also protein and flavors. You've seen our discussions around added value, added value is a very strong growth driver but also things that are maybe not as new but that have played a little bit of a side discussion always. The PetCare business, we've not spent a lot of time to talk about PetCare and what PetCare can bring to the overall -- our discussions today, in today's analyst meeting, one of you asked a question on what are the key value drivers in PetCare? And yes, this is about similar themes that we see in human food: nutrition, [ nutrition hands], pet food, treats, convenience, but also alternative protein. So we see, for example, PetCare team has teamed up with one of the incubator venture startups that we have. On insect, can we take insect protein, mix it into pet food and create new and healthy and nutrition-enhancing, a product for our pets. So new businesses, new value-enhancing businesses, and we believe they will be a major driver for EBITDA growth going forward. Strengthening our core business was always one of our key areas of focus, call it operational excellence, call it organic growth drive, call it rejuvenation, enhancement of our business also underlined with innovation, the strengthening the core businesses is absolutely on top of our head. Without this, we would not be able to earn the gross margins and the cash flows to finance our overall portfolio development. We have a number of existing strategic investments, and we need to put much more focus on creating value and enhancing the value creation in some of these strategic investments. One of which, of course, is Red Lobster. We have participated there for 3 years, and we will need to participate more, and we will need to contribute more to the discussions in the management team and make better decisions for a turnaround of the operational business to focus on the share of profit. We have a great deal structure. We have great earnings accretion for us because of the deal structure, but we really have to get into guest count growth and drive value here. We will not invest more money into this business. But we will invest more time and more focused to run this business. We have our partners in India, Avanti, Avanti Feeds, an amazing value story, and we have a joint venture with Avanti Feeds, Avanti Frozen, and we also want to invest more and really explore this market to see how can we leverage and strengthen our operations there. And last but not least, and of course, strategic investments in Thammachart Seafood, that will be a good growth driver in 2020. Our investment in Russia where we don't see yet the value enhancement that we need and that we want. So you will see a lot of more activities in that field to say the investments that we've made, the strategic investments that we have in our portfolio, we need to drive more value creation out of those. And then last but not least, and this is now really part of our DNA leadership in sustainability. We are looking at our sustainability program, SeaChange. We will go into the next phase of investment forward. We are not standing still. We're not taking all the positive feedback that we get for granted. We need to do more every day, and this is not just some department that is doing a little bit here, this is really ingrained in the DNA and in the operations of the business. Sustainability, leadership and sustainability in human rights and in climate change topics that we are discussing more and more. These are the 4 pillars that I'd like to highlight at this stage where we talk about healthy living and healthy oceans. You see the theme is going really much more into what do we contribute to our customers and to our consumers, who consume great products that we bring on the table and what do we contribute to the environment and to the people we work and live with? Last but not least, for those financial people among us. We, of course, have put a guidance document together again around sales, we believe a 3% to 5% growth is really the benchmark we want to drive. We have good ideas in 2019, the ultra strong Thai baht made it a bit difficult. For us, the very weak tuna prices made it a bit difficult for us to really drive, but we had volume growth of nearly 3%, so it's not like we have no growth plans, there are growth plans, and we believe if the stars are aligned in 2020, with a little bit weakening Thai baht, with the normalizing of the fish price with double-digit growth in PetCare, with Thammachart Seafood that we're consolidating, with the strengthening of our oil business, we believe 3% to 5% is a possible growth breadth. You've seen the last couple of quarters, 16% gross margin is really what we want to claw at and where we want to see. This is what we want to keep as our benchmark, so we want to drive in the guidance as something on or above 16%. SG&A will remain 10% to 11% range. We don't see a material impact on our effective interest. There's probably going to be some accounting back from the perpetual structure that we have, sort of a little of probably a slight reduction of interest payment but a slight increase in related dividend. CapEx is going to be THB 4.9 billion, around THB 5 billion so we are rather determined same as '19 to keep these numbers on CapEx, to not overinvest and really keep in our focus around automation and productivity and dividend policy stays the same, more than 50% dividend payout. And maybe with this, we jump into the Q&A. I don't know, do we have the first questions here?