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

Good morning, management, analysts, bankers, investors and distinguished guest. I would like to give you a warm welcome to our first Analyst Meeting of 2022 for quarter 4 of 2021 result presentation. And once again, we meet each other virtually. I hope you are well and safe and sound. So today, our event is divided into 2 parts. The first part would be Thai Union Group quarter 4 result announcement, which will take approximately an hour with 30 minutes afterwards for the Q&A session. Then follow that, we will have a 15-minute break, and then we'll follow by Thai Union result announcement. So the executives joining us today for the first part would be our President and CEO, Thiraphong Chansiri.

[Foreign Language]

Then our Group CFO, Mr. Ludovic Garnier.

[Foreign Language] Good morning, everyone.

And then our Investor Relations Manager, Kalvalee Thongsomaung.

[Foreign Language]

So as usual, Khun Thiraphong will present to you the key highlights and recent developments. And then followed by the financial results with Khun Ludovic, and then Khun Kalvalee would then continue with the financial result by business unit. Khun Thiraphong then will end the presentation part with the 2022 business outlook. Any questions you may have, please feel free to type in the chat box. [Operator Instructions] For the presentation, please feel free to download in the IR section from Thai Union website or in the chat box. Our team will keep sending you the link so you can always have the access to the link. Without further ado, allow me to begin the presentation.

[Foreign Language]

Thanks a lot, Khun Thiraphong. Good morning, everyone. I'm very happy to be with you today. Just to share, first of all, some full first feedback on the Q4 numbers. And Khun Thiraphong already mentioned this one, so I will be quick on this one. We are very happy with the performance in Q4. For us, it's an all-time high sales. We are exceeding THB 38 billion. The gross profit margin is also very stable, very consistent compared with Q1, Q2, Q3, exceeding the 18%, it's a bit unusual for us. In Q4, we always have a push from our Frozen business, which is always a bit dilutive in terms of growth profit margin, but here we did succeeded in maintaining a high gross profit margin also in Q4. The OP is only increasing by 2%, it's THB 2 billion. Overall, I think it's a very good performance, also very consistent with Q1, Q2 also and Q3. Of course, we are impacted in the SG&A with all the increase of the freight cost and logistic costs. We will get back to this after. The share of profit is recovering, mostly thanks to Red Lobster, which is generating less losses compared to last year when we detail that a bit further. However, Avanti, which is our second very large associate company, is decreasing a bit compared to last year. We are facing with some shortage of workers in their factories plus also they are facing with a large recall in the U.S. We talked really about this one in Q3. Bottom line, 1.9%, increasing by 32%, the numbers is excellent. Maybe just one last thing to mention on the top line is the impact of FX. We are benefiting from the depreciation of Thai baht in Q4, same situation by the rest of the year. The impact in the top line is around 5%. So if you do remove this FX impact, the sales are still increasing by more than 10%, so double-digit growth. It's a bit unusual for us, and we are very happy about this one. And you will see also something very interesting in the category. And then you see that every category are growing. We wanted also to present you a quick overview of our achievement on the Blue Finance. And I think this is one of the key achievements where we are really proud this year. On the right, you will see all the different activities that we have been doing all along the year. We have been refinancing something like $800 million of sustainable-linked loan and also debt on this one. So we did issue some SLL and SLB. I don't remind you what does it mean. You have the warning. I think you are familiar with that now. It was the first time something like this was issued in Thailand. It was also the first time for us to issue and to raise some money in Japan. We received a lot of questions, a lot of interest, a lot of excitement regarding this refinancing activities. And I think we -- the goal is by 2022, half of our debt income being linked with sustainability. And by '25, the goal is to move to 75% of sustainability-linked loans or bonds. We did also for the first time a credit rating from the Japanese credit rating agency. We did receive an A-. We are very pleased with this one. This is equivalent to the Thailand sovereign rating. So very happy about this one. We did also receive A+ rating coming from the TRIS agency. This is kind of usual we are used on this one. But overall, basically one of the key achievements we have been doing this year with a lot of progress in this area. Just our usual overview since 2017 and so you can clearly see the progress. You can see that over the last 8 quarters in a row, we have been growing in terms of top line. Of course, we know that part of this one is explained by the FX. The FX in '20 and '21 is much more favorable compared to what we had before. Still, the performance is very interesting over the last 8 quarters. And also we look at the gross profit margin, in 2017, '18, we were around 13%, 14%. And we told you, okay, we will work on this one, and we want to improve the situation. And you can see now since Q2 2020, we almost delivered every quarter gross profit margin around 18%. 18% for us is very high. We told you beginning of last year, anything above 17%, we would be happy. Now we want to deliver a bit more. So we are happy with this 18%, of course. Part of the reason of this one is explained by the logistic cost increase. So you have a -- we do increase our price in order to absorb these logistic costs. So you have an increase in the gross profit margin, but then you have also an increase in your SG&A percentage just below. But look at the net profit margin. We had 5% in Q4. I think this is very interesting if you compare to all the Q4 before. We are really exceeding this one. Again, in Q4, we always have a push on our Frozen business in terms of mixed products because of Christmas and because of different activities. So usually, Q4 is a bit less profitable. But here, we did manage to maintain the profitability. The net profit margin above the 5%, and I think it's a very good success. We are still facing a lot of challenges. In terms of supply chain, you have seen now our graph that we presented in the beginning of the year. The container costs from the container moving from Thailand to the U.S. is still very high, almost 5x what was existing before COVID-19. The lead time from Thailand to the U.S. is still also very high. We are still looking for the improvements. We see very small improvement in terms of operation. But so far in terms of number, in terms of cost and in terms of delay, we don't see a real significant impact. We did communicate at the end of Q3, the impact over 3 quarters was something around THB 900 million. And you can see the impact in Q4 is even higher. It's almost THB 700 million. So the situation in terms of cost is not improving. It's even deteriorating further. So we are still facing these issues. It will continue to affect us in H1 '22 for sure. The question is will it improve in H2 '22? We do expect to see some improvement happening in the second half of '22. We also mentioned at the end of Q3 that we are facing with some challenges in the packaging and also in the ingredients. I'm sure you've heard about the aluminum and the steel inflation. And on the ingredient, it's mostly the oil. We are using a lot of sunflower oil. For instance, and here, we are facing very significant inflation. Of course, what does it mean for us and the solution for us is to try to mitigate this inflation, is to have some very strong commercial discussion with our customers, with the suppliers and with the retailers in order to pass through the tariff increase. We are right now in the middle of this process. It's not an easy task, of course. There is one good thing, which is all the food companies are facing with the same inflation issue. So everyone is facing some price increase. I think there was a lot of communication also in the newspaper, in the press. So everyone is going in the same direction and everyone understand that we are facing kind of a unique situation. We are not scared about this one. I think for us, it's a usual challenge. It's not easy, of course, but we are really used to do that. And now we hand over to Khun [ Gav ] to go through the fish price and also the category view.

[Foreign Language]

Thanks a lot, Khun [ Gav ]. So just our usual slide on Red Lobster, maybe I will start with the last, the quarterly performance of Red Lobster. So we have a share of profit in Q4 amounting to THB 147 million. We are largely improving compared to last year. Last year, it was minus THB -321 million. No surprise, you remember, Q4 is always the lowest point in terms of sustainability for Red Lobster. We are strongly improving compared to last year. The second line, now you know this one, we have some share of profit from the lease accounting, THB 100 million, it will be the same adjustment going forward, but the amount will be reducing year after year. And then all the other line, other income, interest expense and income tax are improving compared to last year. So bottom line, the contribution from the loss in Q4 is just at breakeven compared to a loss by THB 200 million last year. If you move to the top right, the share profit for the full year, you can see here the real improvement compared to 2020. Of course, 2020 was a very unique year because of the first wave of COVID-19 in the U.S. and Red Lobster had to close many restaurants during that year. And we did generate in 2020 a loss by THB 1.2 billion, if you do remember, a huge loss for Red Lobster. In terms of operations, you can see very clear improvement at THB 178 million compared to last year. So strong improvement. We are still a bit behind the level of 2019 and 2018, where the loss was around THB 130 million, THB 140 million. However, keep in mind, one thing, in our '21 numbers, we have been benefiting from some support measures from the U.S. government. We will elaborate a bit on this one in the adjustment, but we did benefit from something like THB 120 million, what we call PPP loan forgiveness. So in fact, your real reference point of share of loss from operation should be something around THB 300 million. I will get back to this in the guidance 2022. The second line, you know what is this one, THB 637 million for the whole year on lease accounting adjustments. So the net impact to total and the share profit is around 8 million -- THB 800 million in '21. Strong improvement compared to '22 -- compared to 2020. Of course, we want to increase further in the years to come. There is one watch out, which you see on the bottom right. You can see here, we do see a challenging start for Red Lobster in 2022. Of course, we are facing the Omicron variant in the U.S. A very different situation compared to 2020, where we had to close most of our restaurants. Here, we have almost all our restaurant being opened. We had to close some of them -- all of them in Canada, which is something like 20, 30 restaurants in Canada for a few weeks, but now they are reopened. However, that was a clear impact on the guest count. The guest count number is decreasing, not only on Red Lobster but also for the whole restaurant industry. And we are also facing the same situation that what we mentioned in Q3, some inflation on the COGS, also some inflation on the labor cost and still some shortage in the number of workers in the restaurant. So overall, '21 very strong turnaround compared to 2020. We are happy with this one. Challenges to come in 2022, and I will elaborate more on the strategy from the Red Lobster in the next part. And now I hand over to Khun [ Gav ] for the numbers.

[Foreign Language]

[Foreign Language]

Thanks a lot, Khun Thiraphong. Just a quick update on 2 new joint ventures that we signed and we did agree in Q1 '22. So it has no impact, of course, in 2021. The first one on the left is just a follow-up. You will remember, we did the acquisition of 10% of RBF in H2 2021. We have Avanti, also, which is one of our historical partner in India. And here, we did agree on the joint venture, the 3 of us in India for -- we will start the commercial company. And then depending on the success for this company, we will build a factory or not, here the ID to be able to distribute in India, some products made in Thailand by RBF. We have a lot of expectations behind this one. It seems to be very promising. Of course, we need to see the first results. We have minority share in this one only 19% for us, and the majority partner will be RBF. And then Avanti will own 30% of the shares. The second one is in Thailand. So JWD is one of our historical partners. They are the expert of managing the cold storage for us. So we did sign a joint venture with them. So one of our largest factory, TUM, we build a new cold storage together with them, and they will be managing the cold storage for us. I think for us, it's a good news. It's one way for us to secure our raw materials, and you know that in our business, it's absolutely key. Now in terms of impact on the business, it should be quite limited in the future. Just a quick update also on our SPACE-F and CVC activities. SPACE-F, we are now in the batch number 3. Here, remember this is -- SPACE-F is our incubator and accelerator. So we have 19 new startups just joining, half-half between the accelerator and between the incubator. Very exciting, again, project, and we hope to help them growing and to learn from them. If you do remember, the idea and the goal behind the SPACE-F was to be able to build an ecosystem around innovation around food tech, also start-up. On the bottom, we mentioned this one, the CVC. You have here a whole portfolio that Khun Thiraphong already mentioned, the new investments we performed in '21. So we'll not elaborate on this one. As you can see in terms of majority of investments are right now in the Alternative Protein. However, we also want to grow more in the functional nutrition and also in the value chain technology. And here, we are having some very nice discussion. Just to give you a quick highlight. Flying Spark, which is one of our first CVC investment company from Israel, it's right now building a factory in Thailand. We are very happy with that. We will partner also with them in the IDs for Flying Spark to provide some ingredients to our PetCare business and also to some other companies in Thailand. But this is exactly the way we're going to go. We want to partner with the CVC activities. We want to learn from them and also to accelerate in terms of innovation. So moving to Red Lobster. Red Lobster, I think I told you that we were facing with some challenges at the beginning -- at the end of '21 and beginning of '22. So you can see maybe I start with the guidance for next year on the bottom left. So the guidance in terms of operation is to be between THB 350 million to THB 450 million. And so you can see in this column, we put THB 400 million, which is the midterm guidance. If you compare to '21, of course, it's a deterioration. The reporting numbers for '21 is THB 178 million, but I told you we are benefiting from some one-off in '21, and we don't expect this one-off to happen again in '22. Again, this one-off were around some supporting measures from the U.S. government to the whole restaurant industry. And I tell you that if you do remove this supporting measures in '21 impact then your reference point in '21 will be around THB 300 million. Yet, we are still planning for a deterioration, an additional THB 100 million loss at THB 400 million because we are facing all these issues, these inflation on the COGS and also on the labor cost. There is one good news, which is on the lease accounting adjustment. It was the first time, we did recall this one in '21. So there was the full impact of '21 and also a bit of catch-up with 2020. We do expect this impact to decrease in '22. Again, for you to remember, it's a pure accounting adjustment. There is no cash impact at all behind this. So bottom line, net impact we do expect to have on the share of profit is around THB 800 million, okay, which is very similar, very close to what we deliver in 2021 but much better compared to 2020 where the loss was around minus THB 1.2 billion. Of course, we are not happy with this one. Right now, we are in some priorities. You can see on the top right, we are working on some immediate actions on how to address the Omicron variant in the U.S. We have some initiative, of course, to increase the guest count. And I think the COVID-19 situation is improving in the U.S. They have less and less cases per week. So the people will get back to restaurants. We took also some cash preservation measures, and we keep also our some measures on how to protect the safety and the health of our employees. On top of this, we are working also on some medium and more long-term strategic initiatives. We push a lot in terms of quality in order to have some great food on this one. We push a lot also in terms of execution. We want to really improve the experience of the consumers getting back to the restaurants. We want to make sure that they will be served very quickly, and they will be happy about that experience on this one. The Off-Premise is one of the success we had over the last 2 years. It has been developing and growing a lot. We want to keep this Off-Premise business to be much more significant compared to what it was before, before COVID-19. The focus on the value is also something which is very important. We told you that it is one of the key changes coming from the COVID-19. The people are really focusing on the value. So what does it mean? We did launch several initiatives like the from 3 From the Sea or the 10 for -- $10 launch. So you have many things here in order to make sure we bring some quality products at an affordable prices for the consumers. Marketing, also we did change our marketing spending. It was mostly focusing on media and TV before the COVID-19. And now we are doing much more on the digital activity, TikTok, also some other stuff in this front. So good things happening in Red Lobster. Of course, we want to improve. We would like to have a better guidance for '22, but we want to be a bit conservative on this area because right now the whole restaurant industry, not only Red Lobster, is facing this kind of unique challenges. However, we do believe that in the midterm, we will succeed in turning around the picture in Red Lobster. Just a quick update on the '22 guidance for the whole group. So here, you have the guidance for 2022. And just for you to remember, of course, '21 was a record high year. Record high year in terms of sales, gross profit and OP and also net income. We are still planning for further growth in 2022. So the sales target is between 4% to 5% top line growth. The gross profit margin target is to be between a range between 18% to 18.5%. In terms of SG&A, we believe the situation with a high SG&A margin will remain high. Next year, we will still be facing with this logistic costs. And also, we want to -- we do want to invest more in terms of marketing activities next year because we are launching a lot of new products. Interest rates, we don't expect any material change compared to '21. It's quite stable from one year to another year. CapEx is something which is also very important. I think the last 2 years, we have really been increasing our target of CapEx. We have not been very successful in 2020 and '21, and we had a lot of delay in some of our key projects. However, we do want to invest. We have a lot of very interesting projects, right now, which are currently being built. Khun Thiraphong mentioned the protein factory. We have also the new culinary factory being built in Thailand. We have a cold store in general. So we have many very large projects being built right now. In 2020 and '21, we were impacted by the COVID-19. There was a bit of delay in the building, but we are fully determined to invest and we want also to show the confidence and the trust of the management within the future of the group. So we are really determined to spend this money in 2022. The dividend policy remains the same. We want to pay at least 50% dividend payout ratio. I just get back on the first one on the sales. So 4% to 5%. We did achieve 6.5% in '21, 6.5%. However, we have a large portion of this one, around 2.5%, which is due to FX. If you remove the FX over the full year, we did achieve 4%. So on top of this 4% organic growth in '21, we want to achieve another 4% to 5% top line growth in 2022. So we believe it's a stretch. Of course, growing compared to '21, which was record high, will be difficult. We have some challenges, but we are very confident for the future. Khun Thiraphong, anything you want to add on the guidance?

No. Sounds good.

Just moving on to the SeaChange. Just a quick update, SeaChange is our sustainability program. I don't want to elaborate because we have been discussing a lot about this one. So you have the 4 pillars. We have been working around. We have all the commitments. We have been taking over the last few years. We have been quite successful in meeting with this requirement. There is one new thing maybe for you, which is on the greenhouse gas emission. We will announce in Q2 '22 our ambition. That was the last one, which was remaining. Apart from that, the sustainable packaging, the Tuna commitment will remain here. And we will continue to keep this one as part of our core business. Khun [ Thong ] I think we are back to you. I have done with the presentation.

Well, thank you very much, Ludovic for the presentation. [Operator Instructions] [Foreign Language]

[Foreign Language]

[Foreign Language]

Yes, just -- last one just to make it very clear. We did not close any of Red Lobster [Indiscernible]. We just closed our Lobster activity in Canada. There is nothing related to Red Lobster in Canada. And it will all be impact, we have already taken into consideration in our numbers. So we don't expect any further impact in our numbers.

[Foreign Language]

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Okay. Moving on to sustainable financing. How much can we save for the financing cost as we move to sustainable financing in our long-term targets?

On this one, I think, first of all, we start already from the financing cost, which is a bit low already at TU. So we did manage quite well over the last few years. The expectation is we can save a bit more few bps from dozens of bps in terms of interest rates. It will not be huge. Why? Because our baseline is already quite low, plus we have already a track record in terms of sustainability, which is very strong. However, we do believe that moving more into Blue Finance is something we have to do because it's going in the right direction, and we are doing well when we push in that direction.

Okay. Maybe just talking about the targets for each core business -- on each businesses. Can you please give a breakdown growth target?

[Foreign Language]

Okay. And maybe a follow-up question is on the overall growth target. Is this more on the conservative side?

[Foreign Language]

What about for the gross margin and the SG&A to sales target? Is it also on the conservative side? I understand we will have help from one cost savings; two, contribution from the higher-margin new businesses; and three, from the operating leverage impact as the sales grow.

I think on the gross profit, I think we are targeting between 18% to 18.5%. If you do remember, 2020 is a new record high for us at 18.2%. So basically, we want to confirm this performance. I don't think it's really conservative when we plan to grow compared to your best performance ever. For sure, we are implementing right a lot of measures on how to improve our cost in the factories with further automation. But you need to keep in mind also that we are facing with inflation on the packaging, on the ingredients and also on the raw materials. So it would be a challenging one. So for the GP, I don't think it's a conservative assumption. I think it's a straight one. On the SG&A, you could see all over the year that the logistic costs have been really in the increasing side, and we don't see an improvement. And we are expecting some improvement already in Q1 '21, it did not happen. So here, we prefer to be a bit cautious on this one. Plus we also want to invest a lot in marketing. We told you that in the supplement activities, for instance, we are launching some new products. There will be some marketing investments behind. So the 2 key drivers for the high SG&A percentage next year will be, first of all, the logistic cost, and we do expect this one to remain very high all along the year, and we do expect the marketing costs also to be increasing compared to last year. Of course, we have the new business, and we will have some contribution coming from the new businesses. But right now, the scale is not that huge. We said yesterday that the combination of our 3 new businesses: ingredients, supplements and also Alternative protein was something around THB 900 million. Keep in mind that behind some of them have the supplement, it's a completely new business for us. We are launching a new trademark. So we need to have a lot of marketing activities behind. So overall, we believe our assumptions are in the right range for the growth profit and the SG&A.

Okay. On the next question, for the freight cost impact of THB 1.6 billion in 2021. Does this imply that Thai Union profit, if there has been no freight cost issue, it would be THB 1.6 billion higher than reported?

I think it's a bit quick to do like this. We would have loved to. I think there is one good thing, which is THB 1.6 billion is clearly the impact of additional costs for us that we have been discussing with all our customers, with all our suppliers on how to pass through some of these tariffs. So we don't say how much did we finally manage to pass through to our customers. But the net impact is at minus 1.6. Of course, for us, it was a very negative impact on the business also in terms of lead time between Thailand and the U.S., and this is why also we have such an increase in our inventories. But I think overall, if you look at the OP, because if you look at the OP, we see the net impact. We have been very successful overall in 2021, passing through this THB 1.6 billion additional cost to our customers and retailers. It's not easy. I can tell you it's ongoing discussion with the customers. We are also trying already to optimize our operation and to see how we can decrease this amount. You could see with the Q4 numbers, the amount has been increasing a bit more. So we don't see really the improvement in terms of operation.

Okay. Moving on to the FX assumptions. What are your underlying assumptions for the baht to U.S. dollars in 2022? And what is your view on the FX? The second part of the question is how much cost increase so in terms of packaging and raw material have you seen so far in 2022 compared to last year?

On the FX, so our assumptions for the USD is THB 32 for $1 and THB 38 for EUR 1 for '22. And the FX, we will see right now, we are still this front a bit better. We are around 32, 33. Over the last few weeks. Of course, you are aware of the situation in Europe and all the tensions between Russia and Ukraine, there could be some volatility. There will be, for sure, some volatility in the FX in '22. Again, we are used to that. You know that in 2020 and '21, we have been quite lucky with the FX because the Thai baht has been depreciating. So we do expect the situation to continue in '22. We don't expect some very significant change compared to the situation we have been facing in '21. But of course, now in our baseline, we have already this positive effect. So maybe we will have benefit from some additional FX positive impact in 2022. On the cost increase in the packaging and raw materials, it's very difficult to give an overall number. We do see some inflation, first of all, on the packaging. And you have heard about the aluminum, the steel. So depending which packaging you are talking about, you will have some increase which are double digit by far. Sometimes it goes up to 30%, 40% on some specific products. We have some very large inflation. We have also the same on the ingredients with some very strong inflation on some oil business. For the time being, we don't have such a high inflation on the raw material. Khun Thiraphong mentioned that we don't expect to see a very high inflation on the raw material, okay. Of course, this is something we closely watch out. You could see it in Q4, there was an increase in the fish price, but it's not completely unreasonable. So we do believe that with our friends, with our expertise, we can discuss and we can manage with our customers. Again, it's not easy. The good thing, again, I mentioned is all the food companies are facing with the same situation. So we are not the only one to request for some price increase to our customers. Just one last point, meaning on this one, we always try to optimize, and we work on our recipes to see how can we decrease and mitigate the impact of this inflation. And that's why we do believe that our gross profit margin. We are quite confident we will be able to maintain a very high performance in '22.

[Foreign Language]

Okay. For the next question, could you please share what is driving the increase in SG&A to sales ratio next year?

Sure. Maybe I can take this one. So first of all, you could see -- we always talk about the logistic costs. And you could see the impact in Q1, Q2 was something around THB 200 million. In Q4 '21, it was increasing to THB 700 million. And we do expect the very high cost to remain in 2022. So the first explanation is we do expect the very high risk to cost to remain during the whole year. The second explanation is we are determined to increase further in the marketing activities. I mentioned to you about the supplements. We have the new brand, the ZEAVITA, we are launching in Thailand. There will be some significant marketing activities for the first time in Thailand. Plus also we believe after the normalization happening in 2021, we want to push further for our branding business in Europe and also in the U.S. So we have here again some plan to invest further. We have some new products that we believe will be very interesting for everyone. So we have clearly the desire to push further for the marketing and to support the sales in 2022. So these 2 key topics, the logistics cost by far is mention number 1; and mention number 2 is the marketing activities.

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What has been your price increase in the fourth quarter of '21? And to which product in particular? Also, do you expect that we will have the same price increase trend in 2022?

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Ludovic, I think -- is it -- I think it's about the same, right? [Foreign Language]

Moving on to some questions on i-Tail. In addition to the U.S., Japan and China, are there any regions that you plan to expand i-Tail too?

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Another question on i-Tail is how much net profit contribution in 2021 or in terms of percentage to you?

We don't provide any numbers specifically on i-Tail, maybe you had the opportunity to attend at the end of last year specific station organized by consumer front and also i-Tail management. We did share some numbers regarding top line also gross profit. But at this stage, we don't provide any specific numbers in net profit contribution for i-Tail. You will see our segment information, the contribution coming from PetCare, packaging and value-added product. And PetCare is clearly the majority of this number. So you can already get a view on the sales and also the growth profit, but clearly, we mentioned that already several times. For us, this is one of the most profitable segment that we have within TU.

Okay. A question on Red Lobster. Will they require any capital increase?

As this stage there is no discretion in this direction. Of course, you know there were some losses over the past few years, but there is absolutely no discretion going this since for 2022. Clearly, the intention for us is to turn around the business. I told you we have a bit of challenges over the last few months, but the whole year 2021 was a huge improvement compared to what we had before. So at this stage, there is nothing -- no plan like this in our plan.

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Okay. And a question on our gross margin assumption. Is it true to assume that the 18.5% gross margin assumption, which is the high range is for the assumption that the inflation impact for TU is high? For example, raw material will be higher than it is now. The 18% is the case that all raw material prices are not high than what a Thai Union is seeing at the moment?

I think there are different things behind this growth profit target. Of course, you're right, the assumption of getting the reinflation of the raw materials of the ingredients and packaging is one of the first assumption. You're absolutely correct. But then our ability also to pass through this inflation, this tariff increase to the customers will be a secondary important topic and very large assumption. If we are successful in this one then it will be the high range of the gross profit margin. If we are not, then we will be in the low range on this one. The execution also in our factories and the fact we can deliver and we have all our factories up and running the whole year, and we told that will not be affected in '22 by the COVID-19. You know that in 2021, we have a few months where we have to close some of our factories and it has a negative impact, of course, in our cost. We do expect the situation to improve and not to have any stoppage of our activities and our supply chain in '22. So depending on these 3 large topics, the first one, the reinflation coming from all the direct materials and also our ability and the success on not of the commercial negotiation with our customers. And the last one, the execution of our supply chain that will be the 3 key topics to do the -- if we will -- and if we will end up with a high overall range of our gross profit.

[Foreign Language]

For our -- if we compare the 2022 guidance to our 2021 actuals, the gross profit margin is the same, SG&A is the same. Red Lobster is the same. Then the sales growth would be 4% to 5%. Could we assume that the net profit growth would be 4% to 5% as well in 2022?

We do not provide any specific guidance regarding net profit. But I think gross profit margin and SG&A, we expect to be the same around 2021. Keep in mind also in '21, we benefited from some very large FX gain, the line just below the OP. And of course, it's very difficult to predict what will happen in '22. So for me, this is one of the key topics that we have the key uncertainty, depending on how are we in terms of FX gain, we will be able to deliver some gross bottom line or not. I think Khun said, I think you understood and you heard Khun Thiraphong, we are confident for next year. We are very happy with '21 performance, but we are very ambitious and we want to push further in this direction.

The next question might be from [Foreign Language]

[Foreign Language]

Okay. We have a question on managing the freight cost. I believe Khun Thiraphong already answered this. So please allow us to move on to the next one. Could you update the situation in India for Avanti?

Sure. And it's a listed company, so you can get back to the local communication, if you want to get all the details. What we share is, this year, they have been facing with different issues. The first one is shortage in terms of labor force in the factories. Of course, India was affected by the COVID-19. On this part, I think situation is really improving. There are less and less COVID-19 cases and the situation is really under control. So I do expect that the operation will really improve next year. We told you that there was one negative one-off happening for Avanti in '21, and there is some specific communication on their side about this one. They had to face significant operation in the U.S., a recall in the U.S. Now we believe all of the impacts are included in the numbers, and we don't expect these situations to happen again next year. So we are quite confident that next year, Avanti will be able to get back to growth on the field. They were also facing with some challenges due to the inflation. We are facing exactly the same challenges in our feed business. We do believe that next year, the feed business and the frozen business also the food business is very dynamic, will get back to growth.

Okay. For the next question [Foreign Language]

[Foreign Language]

For the next question, will we be affected by the situation in Russia?

[Foreign Language]

Okay. Maybe a final question. This is on RBF. Now that the share price of RBF is declining, do we have any policy to increase the holding in the company?

[Foreign Language]

Okay. I think there are no more questions from the floor. So let me pass it back to Khun [ Tom ] to close the session.

So thank you very much executive for all the answers to the question. Before we move on to the 15-minute break, allow me to give you a little bit of introduction before Thai Union Feedmill comes up. So the session for TFM will last around an hour with the Q&A included. [Operator Instructions] And the executive who will be running the session would be [Indiscernible] who's President of Global and Frozen and Related Business; and Mr. Bunluesak Sorajjakit TFM CEO; and Sukson Wongchuwong TFM CFO as well. So I hope you will enjoy the session -- as you enjoy this session, and see you next quarter.

[Foreign Language]

Thank you so much. Have a good day. Stay safe.