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

[Foreign Language] Good morning, good day, management, fund manager, analysts and all participant online. I would like to welcome everyone here to the -- our Thai Union results conference call for the third quarter year 2020 results announcement. Today, the executive who are joining us today, including Mr. Joerg Ayrle; and of course, we have Mr. Ludovic Garnier, Head of Group Accounting and Controlling on the line dialing directly from France. Ludo, please unmute. You asked to unmute. Okay.

Hello, everyone. Hi, everyone. Good evening, good morning, everyone.

Okay. As usual, without needing to say much. I mean, this event will comprise most the presentation session, and then we'll end by the Q&A session. The whole session will be approximately 1 hour, and please do note to everyone this session will conducted in English language. So anyone who wish to raise any questions, please feel free to either type in your question in the chat box, in the Zoom comment box or, you can well, please raise your hand in your Zoom application, and we will be asking you to unmute, that way, we can keep it orderly fashion, okay? Without further ado, I would like to pass on the stage. [Technical Difficulty] Apologize. Facebook is delayed from the actual broadcast by about 10 seconds. Okay, without further delay, without further ado, I would like to pass on the stage to Mr. Joerg Ayrle, our group CFO, to start and commence this result presentation. Thank you very much.

Yes. Thank you. Thanks a lot, Best. Welcome, everybody. Good morning, and good evening and good afternoon to Europe, to the U.S. and here to Thailand. I'm speaking here today with khun Best and the team in front of lovely Bangkok's skyline. The blue sky in the background is, of course, the real picture that you see behind us, when you look out of our windows, well not quite. And we got to adjust for Ludo and his background. It is actually -- I think it's your living room, if I recall that, right? Yes, your office, exactly, exactly. So look, we do not know the results of the U.S. election today. We have one candidate who declared victory. And I think he had to stand corrected. But we'll see a little bit later. Maybe after this call, we know more. What I do hope that every one of you is healthy and safe, your families are safe, you're not affected by COVID. This is a very important thing for us. We -- as a food company, we take a lot of care of our employees, of our customers and consumers. And also you, we really want everyone to be safe. We are in a lucky situation here in Thailand that we have no actual cases. In Thailand, we can move around quite freely. I know in Europe, this is not the case. People are facing a lockdown in the U.S. The situation is not easy. We are updated regularly through the Board of Red Lobster and which state is in lockdown and which state has to close or kind of open restaurants and dining halls. So this is a very difficult situation. I hope you and all of our friends are healthy and safe and your families are as well. So without further ado, let's go in media space and talk about Page 1, or I think here it's Page 6. Look, I had probably the most relaxing Board meeting today in my whole 7 years' career in Thai Union. We had a great quarter. But I still want to raise a little bit of caution for the rest of the year. We don't exactly know where the year is headed. But let us take this time to really look at the numbers that we have. We have first time ever above THB 2 billion in quarterly net profit. And you'll see a little bit later why the actual underlying net profit is even higher than this. So amazing net profit result for the quarter. We have a strong top line growth. So we continue to take some advantage out of a difficult situation. But you will also see we have still ongoing difficulties around Red Lobster and some effects there. But we can really weather this and together with the underlying business that we have, we really have a strong result here. And look, the Frozen business is back on track. We had a lot of questions from you over the last quarter and at the end of Q2. And in some calls afterwards, how is the Frozen business doing, Frozen business back on track. Maybe one or the other small opco that we have, that has a lot of exposure to China, especially. We are a little bit behind, but there's a real growth trend coming back. We are above last year on frozen and profitability is improving. We've ended the quarter with revenues of THB 34.8 billion in top line. That's a 9.3% year-over-year growth. It's mainly driven by 5.2% volume growth. We see Ambient, our canned and Ambient business growing 12.4% year-over-year. Consumers do eat more Ambient seafood at home. They recognize that sea -- that Ambient seafood is a healthy and delicious product. And we see a lot of new customers and consumers coming into the category that, in the past, never consumed or ate canned seafood. And people do like it. They eat more at home. So this is a real positive for us. The Frozen business reported a 4.7% year-over-year growth. F&B outlets are opening up. Now, of course, we had some headwind -- some tailwind coming from European currencies. So without FX impact, growth was a little bit smaller, only 6.4%. That is still more than double-digit normal regular GDP. So really good, strong Ambient seafood growth. And Ludo has made analysis and put an analysis in place where he really showed for the last 3, 4 quarters, how the Ambient and the PetCare and the value-added business was growing in absolute terms quarter-over-quarter, year-over-year. So really great. And even the Frozen business in this quarter has achieved year-over-year value increase. Gross profit, 18.2%. And those of you who follow us on a regular basis, you will recognize this is now a real next level step up where we are seeing now for the second quarter in a row an 18% gross profit. Great result, 225 basis points above, mainly from Ambient, also from our PetCare business, also from our Frozen business. And when I say Ambient, I'm sure a lot of people think branded in Europe, but that is not the case. It is, in fact, our private label business here in Thailand that it has implemented a lot of plant productivity, a lot of efficiency measures in its business that has been able to really take advantage of scale effects, of synergies among the group, purchasing benefits. And it is our business in the U.S. that has continued additional demand from the market, and we're able to really have an extra demand that is not pantry loading, that is real additional incremental demand in the market. Operating profit, THB 2 billion. We have a little bit higher SG&A expenses as you will most certainly ask a little bit later on. We are at 12.4% of SG&A, mainly 2 reasons, some smaller reasons as well. Main reason is we have restarted investing in the top line and the marketing expenses. We do feel this is necessary to communicate with consumers. We do feel that it's necessary to get back into an NPD mode, bring new products out. And on top of this, we have decided to impair our business, our Canadian lobster business. If you recall, the plant burned down a couple of months ago; we are still in the process of considering what we do with it. We're most likely going to sell the business, but we have taken precautions and written off all the goodwill and all the assets in this. Net profit THB 2 billion, to be exact, THB 2.056 billion net income. That's a net profit up of 50% the prior year. We see even improvement in Red Lobster in this difficult period. Off Red Lobster, we see improvement. We see very prudent FX management. And we see improvement on share of profit from our nonconsolidated affiliated companies like Avanti Feeds in India, doing really well. So all around, we're really satisfied with this performance. But despite all this, I do want to raise a little bit of a voice of caution. We are in the middle of a crisis. COVID is with us. It will remain with us for quite a while. So it is very hard to predict how is the next quarter running. We need to be vigilant. We need to be on our feet. We need to act quickly. That is why we also will not later on give an outlook to all of you. We are happy we performed really well, and we take this quarter-by-quarter. We will continue our cash preservation measures. We will continue to be vigilant on cost. And our CEO, he has just announced inside the group that for the budget 2021 we will go really cautious on cost increments. We go really cautious on discretionary spending, and we want to maximize the benefits that we have during this crisis period. We really want to keep the improved business practices going forward. Next page. So 9 months, look, up -- reported profit up 74%, not a big surprise. Last year, we had a $60 million entry on antitrust, so that's not a super surprise. But if we even eliminate that, we have a massive increase in underlying profitability for 9 months, most of it coming from Q2. And now Q3, we have reported profit up 74%, and net profit up 15.1%, EBITDA up 6.4%. Operating profit up, 43%. Gross profit, up 17% and total sales up 6% for the 9 months. So we see some of this in our share price development. I think there has been a recognition that the business is doing well, and we are getting through this crisis in a very manageable way. We have improved our net debt-to-equity again back down to 0.97. Cash performance is really strong. I'm very proud of operating businesses that we have that are really managing CapEx extremely responsibly, that are managing discretionary spending extremely responsibly. For 9 months, we're at THB 4.8 billion in net income. The next page is our longer-term tracking on revenue, on gross profit and on net profit. And look, I still remember Q1 2018 when we were all sitting here, when we were explaining to you that basically our business didn't earn much money and we were on an 11.6% gross margin. We are now on 18.2% and Q2 was 18.2%. We're coming off 4 quarters before that. They were 16% -- around 16%. So if you look at these steps up from 12% to 15% to 17% to 18%, of course, there are some favorabilities that we see during the crisis. But it is also a real thank you to the organization, all our factories to be resilient during this period of time and to manage opportunities as and when they come. We have some key developments and business updates for you, thriving to the new normal. I think new normal is a term we're using. I think we are in a new normal. All key businesses are back to growth. Very, very happy to say that Ambient, as discussed, strong sales push in all key markets in Thailand, getting a bit weaker in Q3. I think Thailand, we can really see consumers have adjusted. The country is open again. So some of the favorabilities we had in Q2 have normalized back. But I really want to stress in all of this normalization back, in no case, have we lost anything compared to normal run rates. So the excess demand that we saw in Q2 and partly in Q3 is really going into consumption. And that is really important for us, because it shows that this trend will continue. And we see new consumers coming into the category. And if we can come now with NPD that we have in the pipeline, we will see that we can keep and retain these consumers. Frozen business is back on track. F&B is reopening. We have a lot of new channels, online channels. Grocery is growing well, so we're really happy. PetCare, value-add and other businesses delivered a 12% year-over-year growth. There's a really strong demand. This is how we have ended on top line in Q2. A lot of rewards -- awards and recognitions. We're really proud to see that there is recognition for what we do, and we're recognized by leading organizations. The Asian Excellence Awards have given khun Thiraphong Best CEO of Asia. We have Asia's Best CSR. We have best Investor Relations here. And khun Best, here right next to me, has been recognized as the Best IR Professional. Yes, hey, you can be proud of that. So very, very happy. We have been recognized by Intrafish in the Seafood Power 100, the most powerful people in the seafood industry. We have khun Thiraphong, of course, among them appearing here on place #1. So he's the most influential person in the seafood industry. But on place #46, we have Darian McBain, our Sustainability Director. And this means something. It means that the seafood industry has embraced sustainability as a very important pillar of its future survival and its future success. So we're very, very happy about that. We have received with khun Yongyut the Treasury Team of the Year award in Thailand by Assets Asia (sic) [ Asset Asian ] for 2020. Some great achievements that we have had here. And then on the next page, I think we have a couple more around sustainability. We've received the SDG Impact Award. We are recognized as a role model organization for best practices in human rights. And look, all of you who know me, this is very dear to my personal heart. I'm very touched by all the great things that we are doing. And of course, we've been included again in the FTSE4Good Emerging Index for the fifth consecutive year. Innovation. And we presented to you a couple of weeks ago in a special talk that we had our innovation drive. And we've done 4 new investments in food tech startups, through our Thai Union Corporate Venture Capital Fund. As you know, we've set aside $30 million into a dedicated CVC vehicle. And we've now deployed 4 investments, additional 4 investments, Alchemy Foodtech, Manna Foods and HydroNeo and we've put money into an alternative protein fund with VisVires New Protein in Singapore. And with this, we're really driving outside in innovation across Asia, that's not just Thai companies we're investing in. Manna Foods is an American startup with 3 amazing young entrepreneurs who are driving this. Alchemy Foodtech, a Singaporean couple that does special ingredients for improved glucose absorption in rice, especially for Asian population and Asian diners. And HydroNeo, a German supply chain technology enterprise. Plant-based. Seafood plant-based meat is in everybody's -- on everybody's top list. And look, maybe we didn't talk about it a lot, but we have products that we have rolled out in our OEM space. We are building an ecosystem around some of the food tech startups to drive innovation in food. So we really are on trend with this, and we are plugged in, insect protein, plant-based protein. We have here in Thailand, a business called Let's Plant Meat. It is doing exceedingly well. That is now in our second batch of the SPACE-F accelerator program. And through our Global Innovation Center, we've started to do a lot of businesses that we have. And for those of you who can join us tomorrow, where are we? At the Okura Prestige hotel in our analyst conference. Don't have breakfast. Come without having had breakfast, we have something for you, and we want you to enjoy some of the alternative delicacies that we have real right there for you to try. Next page. So yes, we're committed to bringing healthy and tasty alternative protein products to consumers, alternative diets. We strengthened. It also strengthens our sustainability vision. It has a lower environmental impact. The market is amazingly huge. And I'm personally very, very proud to be part of this, to be speaking to some of these young entrepreneurs that have really a very, very agile mindset. And I'm very happy that we as Thai Union can learn from them. But we can also contribute to them to grow more. Here on the page, a couple of products that we've launched in our private label space, under our own brands, under food service and under private label. And with this, I probably have talked too much already again, I'd like to pass to Ludo to give you a bit more substance.

Thanks, khun Joerg. Thank you for that. So if we go through the key takeaway of the quarter, and we mentioned this one in terms of financial results, we are very happy. Top line, we have a very strong growth. This is the third quarter in a row that we delivered some growth, 9.3% is very high. You need to keep in mind that for this quarter, which is a change compared to the previous quarter, we are benefiting from a positive FX impact. So if you exclude the FX, the growth is 6.4%, still very high. And this is mostly driven by our Ambient business in the U.S. and in Thailand, but also the other categories. The Frozen business and also the PetCare and value-added business are also growing, and we will show that in a bit. Gross profit margin is very high, 18.2%. This is the same performance that we achieved early in Q2. We are already very happy in Q2, and we maintained the same performance in Q3. It is to be compared to 15.9% last year. The key explanation for such high gross profit margin is the mix -- the mixed category. The Ambient business is very strong in terms of percentage in our business, but also the individual growth profit margin for each businesses are also good. In terms of OP, very solid OP at THB 2 billion, which is good. We have some one-off, and we'll talk about this one. Joerg mentioned this one, the goodwill impairment of the write of TU Canada for THB 183 million. If you exclude this one, then the OP would amount to THB 2.2 billion. SG&A percentage a bit high this quarter. Of course, we have the Thai Union Canada goodwill impairment, which is regarding this one. If you exclude this one, then the SG&A percentage becomes 11.9%. And this is mostly explained by some brand investment, and I will get back to this one. One of the key changes compared to Q1 and Q2 because we did already in Q1 and in Q2, some very strong operating performance, and we do the same in Q3. One of the key changes below the OP, we also have some good news on the different line. First of all, the share of profit is positive and Red Lobster is still negative. In Q3, we will show this one, yet recovering compared to the huge loss we had to face with in Q2 2020. Yet, they are still declining versus last year. I will get back to this one. As a result, our net profit is very high, THB 2.1 billion, increasing by 50% compared to last year. The other lines are also positive. We are benefiting from some FX gain. We have other income also, which are positive, and only the tax are increasing compared to last year. But as a result, very strong financial performance in Q3. Next, one of the key driver is, of course, the tuna price. And if you remember, we have this range where we say, okay, the tuna price can be in this range, and this is in line with our expectation. And you can see that in Q3 '20, the average tuna price was around USD 1,500. So it was quite okay for us. It was meeting with our expectation. You could see it in October, it went down at USD 1,300. Not a surprise, that was expected. We will see what's happening for November on the end December, but we were quite happy and quite lucky with the fish price in Q3 '20. Next, so just a quick focus on the sales. So the sales, we achieved THB 34.8 billion in Q3 2020, again increasing by 9.3% versus last year, 6.4% if you exclude the FX. And compared to Q2 2020, we are increasing by 5.2%. Once again, we want to insist this quarter, all the segments are growing. The Ambient business, the Frozen business and also altogether, the PetCare and value-added businesses are all growing, okay? In terms of region, Joerg mentioned this one. This is mostly thanks to the Thai OEM business, which is delivering and performing really well and also the U.S. operation. Over 9 months, we are just below THB 99 billion sales over 9 months, and we are increasing by 5% -- almost 6% compared to last year. So I think this is really one of the key factors for this year. Of course, we are benefiting from some push and an exceptional situation from the COVID-19, yet, the performance is still very good. Next slide is a view by segment. And here, you can see for Q3, where does the growth come from. And you can see a very strong push coming from tuna on the Ambient, but also on the other seafood, which is mostly our U.S. operation, U.S. frozen operation in the U.S. plus we have also the PetCare and the value added, which are growing, okay? So this is the first time since the beginning of the year that we have at the same side -- at the same time, all the 3 categories growing altogether. Of course, we are still facing some few headwinds for us from some segments, like sardine, mackerel, like shrimp or like salmon, where for the time being, this quarter, we were underperforming compared to last year. But overall, the picture is really good. I want to insist also on the FX, the 2 last boxes, green boxes on the top right, very strong effect coming from the euro and also a smaller one coming from the USD. If you remember, we were facing a negative FX impact over the last quarters, but this Q3, the situation changed. And now we are delivering some quite positive impact from this one. Next slide, please. So here, we don't have any big change. This is our traditional breakdown by geographies, by regions and also by business. The U.S. and Europe are increasing a bit compared to Q2 -- compared to 2019, 42% for the U.S., just below 30% for Europe. We have a drop in our domestic business in Thailand, around 10%. If you compare to '18 and '19, we are more around 11% and 12%. So we are suffering from the fact that we have less tourists in Thailand. And as a result, our domestic business is decreasing. In terms of breakdown between brand and private label, we don't have any significant change. Next, and I think this is the next achievement I want to insist on. We already mentioned in Q2 2020 when we delivered 18.2% that we are very happy with this performance, we are delivering the same in Q3 2020. The growth profit delivered is at THB 6.3 billion. And if you look at the increase compared to last year, 20 -- just below 25%. And we are very happy with this one. And really the good success of this quarter is to have, at the same time, again, all the categories increasing and improving compared to last year. Again, we want to remain very cautious. We don't know what will be the situation coming from COVID-19, and we are fully aware that we are benefiting in 2020 on some exceptional circumstances, okay? However, so far, over the 9 months, we delivered a growth profit margin at 7.6%. If you compare to the situation, the track record, we are always between 14% to 15%. We are very happy to deliver such a high performance. Next, OP is just the result of this one at THB 2 billion for Q3 2020, at THB 5.9 billion over 9 months, very strong recovery compared to last year. Again, the SG&A are a bit high, 12.4%, but they include the goodwill impairment of TU Canada. If you exclude this one, then we are at 11.9%. If you remember, we did communicate on this one in Q2. In Q2 we decided to delay some marketing campaign, and these ones were executed in Q3, both in the U.S. and also in Europe. And that's why our SG&A ratio is a bit high in Q3. Next, EBITDA is just a result. So we have very strong OP. But even between the OP and the EBIT, we have some good news. The share profit is back to profit. If you remember, in Q1 and Q2, it was a share of loss. So we still have a share of loss coming from Red Lobster. But this is offset by the gain coming from the other affiliate. And Avanti is clearly one of the key components and is doing really well in 2020. So EBITDA at THB 3.9 billion in Q3 '20, improving by 22% compared to Q3 '19 and improving also by 16%. So over 9 months, we are just below THB 10 billion EBITDA for 9 months 2020. Next one. So net profits, we discussed about this one, a 50% increase compared to last year. We had THB 2.1 billion. And if we talk about the other line, apart from the share of profit and the EBIT, we have also some lower finance costs. If you remember, we issued in Q4 '19, some perpetual bonds. So this is a key driver for the decrease of the finance cost. We are also facing some higher tax expense compared to last year. This is explained by the improved profitability compared to last year. So as a result, over 9 months, we achieved THB 4.8 billion net sales and the percentage of NSV is 4.6%, which is very high. Of course, in this one, and we added a quick note on this one. If you exclude the share of flows coming from Red Lobster, then the net profit would be more in the range of THB 5.7 billion, really growing also compared to last year. Next.

Let me add to this. If you take the THB 5.7 billion and exclude the share of loss from Red Lobster, we basically exceed prior year's net income after 9 months. So you see how strong this underlying earnings engine has been in our Ambient seafood business, especially here from Thailand, but also from our operations in the U.S., limited in Europe, but primarily with a base here in Thailand.

Thanks, Joerg. So if we get back to the slides, please. So the net profit, I just mentioned about this one, I think we can move to the next one. So here, we are talking about the adjusted net profit. So we have one significant one-off that we want to report for this Q3. This is related to our subsidiary in Canada, TU Canada. We did impair the goodwill for THB 183 million because we have some lack of visibility regarding the future of the operation there. And we have a very small tax-related items. Total is close to THB 200 million. So the adjusted net profit is at THB 2,255 million compared to last year. Next. EPS is, of course, just the result of these improving by 44% for the quarter and improving by 10% if you compare over 9 months, okay? No significant one-off to report there. If we just move to Red Lobster. So I guess we shared this slide already in the past. So just to say that we did sign the restructuring of the shareholding within Red Lobster. So we still remain a minority shareholder, but now we are the first one in terms of size. We -- if you remember, we communicated on the fact that now we have a new partner which is called Seafood Alliance, and we can communicate on the way that they are really on board now. And they are really helping us also on how to manage the business in Red Lobster. If you go to next slide. So here, you have the financial performance of Red Lobster. A few comments on this one. Q3 2020, we are still delivering a share of loss by THB 54 million, okay? If you compare to last year, Q3 '19, THB 34 million, we have -- we don't recover exactly to the same level as last year. Of course, if you compare to Q2 2020, where we are really facing a bleeding here, we are already recurring to Q2 '20. So the message here, we see some improvement of the performance. We are careful here, as you know and as you remember. Q4 is always a traditionally loss-making, the heavy losses in the quarter. So we want to see the development happening in Q4 '20, but we can see already some good signs in Q3 2020. Apart from that, the other income is quite flat. The interest expense, also no big change on this front. So overall, the net contribution from Red Lobster is positive in Q3 '20 at THB 82 million compared to THB 132 million in Q3 '19. Maybe one topic, Joerg do you want to comment on the refinancing?

There was a lot of discussion around the refinancing, a lot of questions that people asked. We have started the refinancing process. We are in active discussions with people here in Asia. We are in active discussions with financial advisers in the United States. If you look at the markets, the debt markets are actually very, very deep at the moment. You see that after a hike in interest rates at the height of COVID in April, May, interest rates are actually falling. And there is an absolute search for yield in the debt capital markets. So people have a lot of money to deploy. There are a limited number of assets out there where people can invest into debt. So we feel really positive that debt financing can happen. We've deleveraged the company. There's a lot of cash on the balance sheet. If you compare pre-COVID and post-COVID, we are actually doing really well through this crisis. We're not through the crisis. We're not at the end of it, and you see now the second wave coming. So we still need to be vigilant and careful. But if you look at cash generation and what we have on the balance sheet right now, we feel we can give another cut in -- in debt reduction and deleveraging. And what is left over to be refinanced, we feel there are people out there who should be able to take this. And as I said, we are in advanced discussions here in Asia, but we are also in discussions with others. And I feel quite confident that ultimately, debt financing is possible. And look, as I said before, we have invested a lot of money in Red Lobster. We are now the largest shareholder. We're very interested that this business will succeed. We believe it will succeed. We believe that we can reach $150 million in EBITDA in the next 4 to 6 years. And if the company needs financial support, we will be ready to provide, to an extent, financial support, together with external lenders refinancing is on its way.

Thanks, Joerg. Just back to the slide. So here, we wanted to add a quick reminder on the changes which happened at Red Lobster. We did communicate on this one. So I will go quick just to remind you that before we were owning 49% on a diluted basis and Golden Gate Capital were the key shareholders with 51%. And now you can see on the right, the new picture, we still have 49%. So there is no change in our common units on our preferred units, on a fully diluted basis. But now we have these new partners, Seafood Alliance, they own 36%. And then we had also Red Lobster management, who owns 15% of the business. One of the key developments of this quarter is we also confirmed with our auditor, that we will continue to record 25% of share of profit and loss coming from Red Lobster. It was a very long discussion because the transaction is quite complex, but now it was confirmed. Next. We just wanted to insist on some few developments performed by Red Lobster. So just for your information. Now we have 99% of the restaurants which are open. 94% of them are open for dining hall. Of course, the capacity is reduced compared to the situation before, in average, around 50%. We have some where we are a bit above and some others where we are at 25% only. And there are some few initiatives. We already mentioned this one, but I just want to insist on some few of them. We really -- they are really driving -- they are really driving a cost-cutting program. They are really simplifying the menu. They are trying also in few restaurants some outdoor dining. So here, we have some few examples of some initiatives where they are really trying to turn around the business and be very agile in trying also some new things. Next, cash flow situation. This is, for us, honestly, one of the good surprises this quarter. If you remember after Q2, Q2 performance in terms of cash flow was really exceptional at THB 5.6 billion. And we told you that we expect the situation to kind of normalize in Q3 and Q4. In Q3, the situation is still very good. We delivered THB 2.5 billion cash flow thanks to a very strong EBIT. Also, the net working capital is not back to the level we were expecting, which is good. However, we still expect some kind of normalization to happen in Q4. You can see over 9 months, we delivered THB 9.2 billion cash flow, very high and already higher compared to the previous year's 12 months performance. Next.

Let me just at that page, right? We shared with you our cash preservation program that we started end of March. And look, at the beginning we were sitting together on a weekly basis, 1 hour and reviewed cash flows, CapEx, SG&A, inventories, accounts payable. Accounts receivable, we went through overdue accounts receivables every week and we moved this to a biweekly rhythm. And I really want to thank the whole team, my own team here, khun Yongyut, Ludo, but also the team in the U.S., in Europe, here in Thailand, to really vigilantly and in detail follow-up very, very clearly on cash preservation. Cash preservation, and the cash preservation program, has been one of the most successful programs that we have run here in Thai Union under the umbrella of our crisis management team, including all the leaders of the company. And I can only say this has led, at least for me, I have learned a lot during this process. The power of expanded communication with so many people through the organization, a lot more communication, collaboration, sharing of information, and really the question of deciding in minutes and no longer deciding in months. That really has changed the way how we operate the business. We are much quicker in responding to issues. And this is the result that we see. And I have to say I really want to thank the whole team to continue on this very, very vigilant path.

Thanks. Thank you. Just a quick focus on the net debt. So here, kind of the same situation we are facing at the end of Q2, so we managed to decrease the net debt by THB 2.5 billion. One of the key changes of the quarter, we did pay some dividend. But even with -- even with this one, we managed to keep the net debt-to-equity ratio at 0.97, very close to what we have at the end of Q2. So very good development here. I go quick. Next one, just a quick one just for you to have in mind here, we are approaching now the maturity for some of our bonds. So we're initiating the discussion with some partners on how to refinance this one. That means very normal process. In terms of currency, we don't have any significant change. Very, very stable situation. Next, ratio. So here, you can see all the profitability ratio improving. Not a big surprise. We have quite a strong profitability happening in Q3 2020. Net debt-to-EBITDA is at 4.17. This is good. We said that the target for us was to be between 4 to 4.5. Net debt to equity, just below 1, I think this is also good. But also the net working capital indicators are good. You can see there the inventories, days in inventories, 123. And we have very strong performance over the last 3 quarters between 120, 122 and 123. This is good. And the same also for our net working capital situation. Of course, these 2 are one of the key drivers of the very strong cash flow performance in 2020. Next, and having said that, I think I will pass it through to khun Best to comment for the rest.

And for the key operating business and the operating factor, we have seen for the tuna -- key raw material pricing, the only key change comes on the tuna pricing, where we see the tuna price year-on-year increased by 23% and on quarter-on-quarter increase by 18%. While this has been a key cause of concern for a lot of investors out there, we have been clearly proven that during the third quarter, when the tuna price still stay within the range that we have been always indicating, we can still manage to maintain our margin at a very good level. Okay? And now toward the end of October, the tuna price has already been coming down to about USD 1,300 per ton. We believe that right now, I mean, which is already within our expectation. We believe that we can -- at this current price, we can still manage our raw material price and our cost structure very well. Outside of that, shrimp and salmon has been relatively unchanged. Otherwise, I mean, during the third quarter, in particular, we have seen a more positive benefits of the baht depreciating against key currency. U.S. dollar term, not so much. The third quarter U.S. -- Thai Baht against U.S. dollar would depreciate by only 2%, but versus the euro and pounds, we have seen the baht depreciation by 7% against both the key European currency. That has been part of the key reason that continue to drive our European sales in Thai Baht at least. In terms of the -- going down to Ambient seafood and segment details. I mean, clearly, Joerg and Ludo has been mentioning this before. We continue to see a strong Ambient growth, with the people continue to cook more at home and make their food at home. Now we have seen, clearly seen increased consumption here. And not only that, with the sales growth of 12% and quantity growth of about 9%, we clearly passed on some of those price increase to our customer. And as a result, our gross profit margin continued to be solid at 22%. We see most of this growth mostly in both OEM Thailand export and the U.S. market. For the Frozen business, we are now back to growth with sales of THB 13.4 billion during the third quarter. Now sale is up by 5% with -- and now with the sales already up to a more normalized level, we are now start seeing the gross profit margin resume toward a normal level of 11%. This is up from about 7% to 8% during the first 2 quarters of this year. And on PetCare value added, we continue to deliver a high-growth of 12%. This is clearly driven by the quantity growth, and the margin is continuing to be high at about 26%. Clearly, the strong drive towards innovative product both on the PetCare category and the ingredient category has been pushing the margin of this segment favorably.

Let me add here to this, and we don't talk about this very often. So this segment PetCare, value-added and others is really 3 parts, right? It's PetCare, it is the value-added segment, and it is primarily our can-making business, Asia Pacific Cans, it's an operation that we have here in Thailand that makes most of the cans that we -- the metal cans that we use in our production. And I want to -- I want to really flag and highlight this business. We usually don't talk about it. APC, that's how we call it internally, Asia Pacific Can, have gone through a transformation process that has led to a massive reduction in material cost to a dramatic reduction in quality cost by reducing sorting of cans, by being first time right, by a real, real strong improvement, operational improvement, done here by the team. And this is a really material profit contributor in this business and is in no way lagging behind PetCare or other businesses, an amazing progress that we see, and this is the second year in a row that they do this. I really want to put my hands out to the team of APC for their contribution also to our bottom line here.

Okay. Thank you, Joerg, for adding. I mean, we are now back to the growth by geography. Okay. I mean, clearly, we have seen a real strong growth coming from the U.S. market. The sales from the U.S. market has been growing by 27% compared to the same period last year. The growth was both driven by the ambient seafood and the frozen seafood. Of course, I mean, we continue to see the more home cooking. As during the third quarter, we see that the food service operation has resumed their business. So as a result, we are seeing increased demand of our frozen seafood as well. This is a big part that lead to growth in the U.S. and Canada market. On the other hand, European, we did not see so much of the organic growth in the market. The market has been growing by 7.2%. But as I do note earlier, I mean the Thai Baht has been depreciating significantly against euro and pounds by roughly about 7% as well. Excluding currency effects, we are seeing still some growth, but this will be much lower than 7%. For the Thai market, it has been declined by 14%. This is mostly due to the lower tourism activity. And we are continuing to have the lower sales in the local market, but our local capacity will be mainly serving for the overseas in export demand. The rest of the world was a mixed bag. While we have seen some experience or some decline in the Frozen segment that we are exporting outside, mainly to the market like China and Japan, we are still seeing the growth in the ambient seafood to the rest of the other market, like the Middle East and Africa, which has been growing very well. But overall, I mean, the sales in the emerging market and the rest of the world has been declined by about 7% in the third quarter compared to the same period last year. Otherwise, I mean, this is the mix. I mean, the sales has been very strong, growing overall at 9.3%, with a strong gross profit margin of 18.2% ties in with the record that we have made in the second quarter of this year, resulting in a gross profit of THB 6.3 billion, which is already an excellent profit that we made during the quarter. I'd like to pass this back to Joerg to discuss about what can we say?

Yes. Look, I mean, as I said before, I think we are in a volatile situation. We should be humble and be grateful that things went really well for us. We should be proud that our teams were able to manage any crisis situation, any COVID case, any suspected COVID case in all our locations. We had to close our office in Paris. In Europe, most offices are closed and people work from home. So I think -- look, I'd rather focus on things we can be very grateful about. And I don't think there's any time to be boastful or be overwhelmingly positive on how things have gone. Of course, things have gone well. Yes, this was a great quarter. This was the best quarter in our history. And in many ways, there are benefits coming our way during the COVID crisis. But I do want us to be cautious. The overall volatility of the business is there. There is an underlying volatility. I think we've been reacting to it really, really well. And look, I mean if you just look at here, at our displays here where we start with new products that have omega-3 essence inside, where we have -- what is this? Where we have tuna oil pills that we bring to market, where we have bone calcium, tuna calcium that we have as products. And we talk to customers and clients about it. But also here, we have our Parmentier brand that, together with Alexis in, our MD in Paris, we're relaunching and getting back to a growth momentum. So look, I think a lot of things went well, and I think a lot of our operators reacted extremely well in the U.S. Very, very good response to this crisis. But I think we need to stay humble. We need to stay careful. When you look at this day by day, and then we see how Q4 goes. I'm not pessimistic. I'm not negative. I'm the exact opposite of that. But I also don't want to -- I also don't want us to be now opening the party. We still have 3 months to go. Well, 2 months to go to close the year. A lot can happen in these 2 months. And look, we need to stay on the ball every day. We need to stay agile, we need to manage our costs. So that we get through the final steps to close out this year. I think it will be a good year, but we need to really be careful, manage this well, and I'm sure we will. People are on the ball. People are observant. But please do apologize, we're not going to give any guidance on how things go. The situation is too volatile for that. But I think if you look at the numbers and if you know the way Ludo and khun Best and I usually speak and give in between the lines indications, I think you get some -- some idea where we're going to be headed. But we still want to be careful. We need to be careful. Things can happen. It's a volatile situation. Europe is in lock down. The U.S. is in a hung election. And yes, things are as they are, and we have to manage them day by day.

I think we can look at Ludo smile as a clue for this.

If you want indication. Shall we move to the Q&A session, khun Best.

We're going to the Q&A session.

Let's start the Q&A.

We've got a lot of questions here.

Are there questions? Ludo, It's your pick. It's your pick.

Maybe I'll take the first one. We have some questions on the high SG&A percentage that we have for Q3 and what are the key drivers behind as we mentioned, and we have in this line, the goodwill impairment for TU Canada, something around THB 180 million, THB 200 million. If you exclude this one, we had 11.9% of NSV. Still a bit high, but mostly explained by the marketing campaign that we executed in Q3. If you remember, we delayed this one in Q2 because of the COVID-19 situation and now they were executed mostly in the U.S. and also in Europe. These are the key 2 items explaining the SG&A.

You want me to talk about Canada, Ludo?

Up to you. Pick up one.