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

Good evening from managers, analysts and bankers. Welcome to Thai Union's earnings call for the second quarter of 2022 financial results. Thank you for joining us today. We are here with Mr. Ludovic Garnier, our Group CFO.

Hi, good evening, everyone. Good morning.

[Interpreted] [indiscernible], Head of Group Accounting and Controlling.

Hello, everyone.

I'm Ratinan Wongwatcharanon, I'm the new Investor Relations Head. Hello, everyone. Okay. The session will be approximately 1 hour with 30 minutes presentation followed by 30 minutes Q&A. During the presentation, please ensure that you need your microphone at all times. When we open the floor for Q&A, please feel free to submit your inquiries in the chat box or you may unmute your microphone. Now please allow me to pass it over to Ludo to begin the presentation. Thank you.

Hi, everyone. Again, very happy to be with you tonight and to share our Q2 performance overall. I suggest maybe we jump directly into the topics. And we just want to give you the key watch out and the key takeaway for you for our Q2 numbers. And I'm sure you have seen this one. We do achieve a record high sales in Q2, THB 39 billion. We are very happy about this one. This is a new all-time high for us in terms of quarterly performance. We are growing by 8.5% compared to last year. Honestly, it's a bit higher compared to our expectation, if you do remember, when we give some kind of guidance 1 month ago, we said we don't expect to achieve a new record high. So we did a bit better compared to our own expectation. Different explanation on this one, and we will elaborate on that. But of course, our increasing prices, the volume growth and the positive FX are the key drivers for such a high performance. Talking about category, the PetCare and value-added growth is very impressive. I will be clear about this, while the ambient food also is also growing. The frozen business is declining compared to last year. You remember last year Q2 2021 was exceptional. So we were expecting some kind of normalization happening in the U.S., and this is what is happening in Q2. The gross profit is healthy. We did deliver THB 6.6 billion in terms of absolute amount of gross profit, gross profit margin at 16.9%. So here, you could say, compared to our recent track record, it's a bit behind keeping in mind we have some one-off impacting the gross profit margin, mostly the restructuring costs at Rügen Fisch. We will explain to you all of this after -- but overall, you see we have a bit of a decline of our gross profit margin. We are comparing to a baseline in last year, which was exceptionally high at 19%. So we had a bit of a decline, mostly coming from the impact from the inflation. Again, we will elaborate on that after. The OP stands at THB 1.7 billion, declining a bit versus last year, but maintained versus Q1 2022. Our SG&A are still high. We are still facing this large logistic cost same situation that we have been facing since 1.5 years. You can see here the cost impact is almost THB 600 million in Q2 coming from higher freight costs. So as a consequence, the SG&A percentage stand at 12.6% compared to 11.9%. Again, in the SG&A, we had a bit of restructuring costs coming from Rügen -- coming from our Rügen Fisch factory, I will elaborate further after this one. So the adjusted OP, if you do remove the THB 274 million Rügen Fisch restructuring costs, then the adjusted OP stands at THB 1.9 billion. Net profit at THB 1.6 billion, and I will elaborate on the 2 one-offs that we have I already talked about the Rügen Fisch one, which is THB 274 million at the OP level and net profit is THB 195 million impact. And then also we told you 1 month ago that there would be a one-off impact coming from the change in the fair value of relapse preferred units and the impact on the net income is THB 424 million. But overall, below the OP, we have different news. We have some positive news coming from the FX. We have some higher tax credit and we have some higher share of losses mostly coming from Red Lobster. So here, we just want to deep dive because of course, we told you that we have some large one-off impact. In our Q2 performance, we have 2 large ones. You can see on the bottom left, the 2 we try to elaborate. The first 1 is Red Lobster fair value. The impact in terms of other income is THB 564 million. And then we have the impact coming from the closure of our plant that we'd announced in Lübeck. So if I look at the bridge on the top left, you start from the THB 1.6 billion and then you add back the Red Lobster shares fair value impact, which is THB 424 million, which is net income level of the Rügen Fisch, restructuring costs and adjusted net profit stand at THB 2.243 million. You can see here on the right, we did -- we wanted to share with you the impact on the whole P&L. There is 1 tricky point to have in mind, which is the impact of THB 274 million of Rügen Fisch closure costs have to be split between cost of sales for THB 188 million and THB 86 million for the SG&A. But the impact in terms of OP stands at THB 274 million. And the impact of the fair value adjustments on Red Lobster preferred shares stand at THB 564 million, okay? So a total impact of the 2 one-off on the EBIT is THB 838 million, of course, we have some related tax impact from this one, which is THB 219 million. So that's why overall, at a net profit level, the impact is almost THB 619 million. I'm sure you will have some questions about this one, we will get back. But for you, just to keep in mind, these 2 significant one-off impacting our Q2 performance. Excluding this one-off, the adjusted net profit amounts to THB 2.2 billion. We do believe it's a very good performance to be compared to last year. Last year, adjusted performance from the one-off was THB 2.4 billion. It was all-time high. So at THB 2.2 billion, we are not that far. So we do believe the core business is doing well. The net profit margin at 5.8% also is something which is something very interesting for us. Moving on to the 6 months performance. You can see here, over 6 months reported numbers, sales growing by 12.3%. Gross profit grew by 5.1%, OP declining by 24.2%, but again, including here the Rügen Fisch restructuring costs, EBITDA declining by 22.2% and net profit declining by 18.7%. So we had a bit of a drop compared to last year. We were expecting that. We mentioned that in our guidance for 2022, this normalization was expected. But again, keep in mind that the net profit is impacted by both Rügen Fisch restructuring costs and the Red Lobster's fair value preferred shares. Moving on to the next one. So this is our story over the last 10 quarters in a row, you've seen some -- in terms of top line, I think the story is extremely good. Q1 '22 was really very attractive. If you do remember, we did deliver growth by 16.5%. Q2 '22 ended with a very strong growth, 8.5%. The gross profit has been going a bit down in Q2 at 16.9%. But again, if you do remove the impact coming from Rügen Fisch restructuring costs, and the adjusted gross profit margin stands at 17.4%. And I think very close to what we had in Q1. It's true that compared to last year, were at 19%. We have a bit of a dilution as gross profit margin. We don't deny that. And this is mostly coming from the inflation, and we will elaborate again on this one a bit further. So in terms of dividend, one good news. I think we -- the Board decided this morning to agree on the THB 0.40 per share. I think this is quite high, a bit lower compared to last year, which was at THB 0.45, but this is our second highest interim dividend. If you look at the track record that we have over the last 10 years. Dividend date, regarding date payment date are kind of usual. So I don't need to elaborate on this one. I think you are used to this one. If we move now to Red Lobster, and we mentioned that our Red Lobster was our key priority in the business, our key areas of concern over the past few quarters. You can see here our usual table on the left and then on the right, the table with our full year guidance on Red Lobster. So if I start, first of all, with the Q2 performance. So first of all, the share of profits coming from the operations from Lobster stand at THB 281 million for Q2 to be compared last year in Q2 '21 to THB 49 billion. So here, you can see a deterioration. Again, same story that we had in Q1. If you do remember, we said in Q1, we are impacted by Omicron. We are impacted by the inflation of the shortage of the labor. We have seen some improvements, yet we don't see the impact in terms of bottom line at Red Lobster. The share profit coming from the lease accounting is very close to what we had in Q1 '22, very close to what we had also last year on a few changes only coming from the FX, I don't need to elaborate further. The next line, other income is where you have the THB 564 million noncash impact that we talked about already earlier regarding the preferred shares fair value adjustments to be compared to last year, around THB 300 million. So in this time, we have 2 key topics. We have some more, but the key 2 key topics are always the interest on the preferred shares, which is the vast majority of this amount. So management fee that we're also collecting from Red Lobster and few other topics. But you can see usually every quarter. We have something in the past year. We have something like plus THB 300 million. This quarter, we have minus THB 300 million in Q2, and this is 1 of our key drivers. And again, the key component is the THB 564 million adjustment that we have in this quarter. Interest expenses, no big change compared to last year. Income tax were increasing, of course, due to the share of loss increasing coming from Red Lobster and also the fair value adjustment on the preferred shares. So bottom line, the impact on our net income is pretty significant and negative at THB 554 million. You can see a clear deterioration. Now if you remove the impact of the THB 564 million, you have a net income, which is almost at breakeven. So given this situation, we updated our full year picture. You can see here on the top right, our full year guidance for the share profit is now between THB 1 billion and THB 900 million. So here, we put in the medium THB 950 million. I think we need to acknowledge the fact that after 6 months, we have THB 500 million. And you know that usually H2 in terms of performance is not great compared to H1. Here, I think H1 was very specific, again, Omicron, inflation really impacting our business. So I do believe H2 will be a bit better compared to H1 in terms of losses. Yet we are planning to have for the full year the share of loss, which is around THB 950 million. The lease accounting adjustment, I think no change. I think we can target to be around THB 400 million for the full-year impact. Of course, you see the performance which has been deteriorating compared to last year. So there is a very strong focus on the cash preservation measures on how to reduce the cost and how to streamline the operations. And we will elaborate a bit more tomorrow, but we did a lot of changes at Red Lobster. On the quarter, we did change the operation organization. We did launch a very intense training program also for all the restaurants who want. We are determined to improve the quality of the restaurants. Of course, the situation in the U.S., the whole U.S. are facing with the inflation. So the situation of low guest count is certainly specific to Red Lobster, but into the whole industry. When people have to make some trade-off in their spending, of course, they will cut some discretionary spending, okay? We know that we are the only 1 being impacted by this one. Moving on to the next slide. We just wanted to provide you with a quick update on the preferred shares, fair value. So I think what we have -- we just wanted to recap what we have on the left. This is Red Lobster structure. We own 49% on a diluted basis of Red Lobster, 25% coming from the common units and 24% for the preferred units nothing new. This is the same structure since 2020 since Golden Gate exited from the business. Seafood Alliance owns 36% of the business, and we have a Red Lobster Management, 15% of the business. And just on the preferred unit, I just wanted to remind you what we did communicate earlier. So preferred unit at 10 years convertible preferred units, the maturities on 2026, and we had an interest of 8% on this one, 4% to be paid every year depending on the normal circumstances and then 4% to be paid at the end of the maturity period. And here on the top right, you can see the way to recall for this one under TFRS. So and the TFRS, the preferred units are considered to be a financial instrument. So what does it mean? It mean that every quarter, we have to calculate a fair value and the fair value is calculated through a present value of all the future cash flow. And of course, in this calculation, we are using a discount rate, okay? I think over the past few years, the discount rate has been very stable. So we do not see a lot of volatility on this one. But of course, you have seen with the 2022 interest rate increase. This has some impact on the fair value. And the fair value is going down. When the discount rate is going up, the fair value is going down. And this is why we had to record in Q2 '22, this expense by THB 300 million in Q2. You can see on the bottom right, also the chart of the U.S. interest rate since at the beginning of the year, it has been growing a lot. In July, there was another increase by 75 bps. And we do expect to have another increase to happen also in H2. And this is why in our Q3 and in our Q4, we don't plan to record any preferred interest on this one. Regarding '23, I'm sure you will ask the question. I think it's a bit too early at this stage, but maybe we can address this 1 in the Q&A. Another update also to provide to you is Rügen Fisch. So in Rügen Fisch, we have 3 different factories, and we announced earlier in May that we wanted to close 1 of the factory together to recoup all the production in -- from Lubeck to Sassnitz. And the idea is, of course, to optimize the cost and the efficiency. We have in our Lubeck factory, something around 200 employees. The closure is not effective yet. And the closure will happen next year in Q2 2023. Right now, we are discussing with all our employees there to see the ones who are willing to follow in the Sassnitz factory and the ones who are not. So considering all of this, we did record THB 274 million accrual. It's a onetime on this one at this at it's noncash, but of course, it will lead to cash out happening in Q2 to Q4 and also in Q1, Q2 next year. We have the new CEO Volker. You can see here his picture. He has been appointing at the beginning of May. And of course, this restructuring, which is a pure internal restructuring because, again, we are moving some production from 1 factory to another factory. There won't be an impact overall on our top line. We do expect there will be some positive impact in our bottom line because the efficiency will be improving. Just a quick update also in Q1, we told you we were selling the assets of our business. MerAlliance, TU business, Poland. It was effective. It was paid in Q2. So we don't have any more assets. We still have the company, which will be liquidated over the next month, but we don't have any more cost to provide -- to come from this restructuring. Having said that, I will now leave the floor to [indiscernible] to go through the view by segment.

Right. So this slide provides you a revenue component breakdown. [indiscernible] reported net sales grew by 8.5%. We benefit a lot from USD, but still with our FX, we grew by 6.2% over last year. You can see from the clean bar that our sales are strong, generating from almost all segments, leading the growth by PetCare, 1 of our strategic categories with 43% higher than last year. This is excellent result driven by strong demand and price FX. Another core segment like Tuna report almost double digit. Along with all ambient segments, which are performing very well, driven by OEM and U.S. branded. Shrimp, lobster and other seafood are normalizing. Remember, last year, performance was very exceptional. You can see it clearly from the chart at the right. Frozen was very strong last year linked to food service recovery in U.S. Therefore, we expect some normalization on frozen category this year. Next slide, please. A bit focus on the inflation. As you know, that inflation is skyrocketing everywhere and reached like 4 to 5 that gets high in U.S. and U.K. So we are not the only who faced inflationary environment. Impact to other logistics costs is quite massive, THB 560 million for Q2 and added impact to the first half of this year is THB 1.3 billion compared to THB 400 million the same period last year. Additionally, we are placing cost inflation in raw material and other components within cost of goods. So to protect our margin, we have actively taken several actions. We do [ fish flight ] hedging. This is not new. We continue doing it. We negotiated to pass on the cost through the selling price. We have second round, even the rate of flight adjustment in some markets. And on top of that, we ensure that our production is at highest efficiency. We keep ourselves agile in this dynamic environment. So overall, you can see from our [indiscernible] that our gross profit margin remained healthy for this quarter. Slide please. So in this slide, you have [indiscernible] of our key raw material, including to tuna, salmon and shrimp. Tuna is now back to the range of THB 1,600 in quarter 2 after reaching its peak in previous quarter. This is due to the improvement of catching and the fish supplies. Tuna price in July remained stable at THB 1,600. Shrimp is at THB 154 per kg in Q2, back to our normal range after the spike in Q1. Salmon is still on the high side at NOK 96 per kg, increased by 53% from last year. Good news is we have seen some improvement in July at NOK 85 per kg. Some good news on currency. As you know, that we are an export company, and we're benefiting from FX in this quarter, mostly from USD. But THB against USD depreciated by 9.7%. And on the opposite, Thai Baht appreciate a bit against GBP by 1.5%, and against euro by 3%. Free cash flow is positive by THB 0.9 billion in quarter 2, although first half is still minus THB 2.9 billion. EBITDA positive at THB 6 million offsetting by the increase in net working capital. Our inventory position is expected, especially for the U.S. market, partly to secure performance in the following quarters and partly resulted from supply chain disruption. We are monitoring this KPI very closely, and it will improve. We expect it to improve in the Q3 and Q4. Net capital expense at THB 1.8 billion, which is behind our plan for a reminder, our full year capital expenses are budgeted at THB 6 billion. Net debt increased to THB 68 billion at the end of Q2, net debt per equity at 1.09 increased from 0.99 ended December last year. This is still in the range of our guidance between 1 to 1.1. On the ratio. Return on equity is at 13.8%, ROE, return on capital employed at 8.4%, slightly dropped behind last year and previous quarter due to the softer profit. This situation will improve in next quarter as we expect to have some better net working capital. Moving to the chart in the middle of the slide. Inventory ended Q2 '22 is THB 52 billion, and inventory day at 139 days, quite high primarily caused by industry inflation and logistic disruption. Net working capital at 120 days following the increase in AI inventory, therefore, EBITDA at 5.2% and the for equity at 1.09 within our manageable range. And over to [indiscernible] for the next part.

Thank you, [indiscernible]. So this slide, you can see our 3 core business, Ambient seafood, Frozen & chilled, PetCare and value-add. So in terms of service in first half of 2022, Ambient seafood represent 43%, and frozen & chilled represent 37% of sales, and the last one PetCare and value-add represents 20% of sales. So our PetCare and value-add have significantly brought so the contribution increased from 17% last year to 20% this year. So in terms of mix between the private label and branded for the contribution from credit, they will increase from 58% in first half of 2021 to 61% in first half 2022, mainly because of the higher sales from PetCare and value-add and Ambient seafood wide brand and business [indiscernible] 39% of total sales. Moreover, we have the 3 new business which you can see at the bottom of the slide, we have the ingredients, supplements and alternative protein. For this innovative business, we have the target to achieve 10% of revenue with profit margin about 23% in 2025. So for this slide, you can see our [ onboard ] or core business, especially Ambient sea food, Frozen & chilled seafood PetCare and value-add. For Ambient seafood, even the high base in first half 2020 as people saw [indiscernible] third and fourth wave of COVID-19. The pro forma is still growing 1.3% compared to the first half of 2020 and grow about 12.4% from last year, which was normalizing from the high base. Frozen & chilled seafood business grow only from 23.1% from the first half of 2020 and 2.8% from last year, even last year was the exceptional recovery of the business from the low base in first half '20, especially in the U.S. food service business has temporarily closure from the impact of COVID-19. The last one, PetCare and value-added business category, which was significant growth of 56.7% from the first half of 2020 and 34.6% from last year as people had adoption more pets during the COVID-19, and there are humanization trend that people are treating their pet like family and prefer more premium food or expensive ingredients for them. On the right-hand side, the whole forecasting growing 17.2% from the first half of 2020 and 12.3% from last year. Thanks to our core business and our diversification, our margin has remained strong at 17.2% or 17.4% if we accrue as Ludo mentioned before.

[indiscernible], let me add on this 1 because I think it's very important for you to have it in mind. You do remember the Ambient seafood and the light blue that you have on the left, this is H1 2020, which is the first wave of COVID-19. If you remember at that time, we didn't realize an exceptional performance because, of course, we did the we did see a bunch reloading effect and many people buying a lot of sea food. So we said at that time, the performance is exceptional and it was 32. so here we are 2 years after. Hopefully, now we are at the end of COVID, but we do still increase compared to the exceptionally high baseline. We do achieve 32.4. Situation is a bit different for the Frozen seafood. Of course, Q1 2020 was a bit weak for exactly for the opposite reason. But I just want to highlight the performance in the PetCare 57% growth compared to 2 years ago. I think this is really fantastic. And overall, the top right, if you see 17% growth in 2 years in terms of top line this year this is exceptional, of course. We know we have some positive effects. But overall, it shows that our core business is really, really strong. You can see also the gross profit margin just below a very consistent except maybe for the Frozen where last year was exceptionally high, we mentioned that. But apart from what you can see at group level, this is very consistent overall and the achieving such a high performance in '22 in this context of hyperinflation, I think we can be very prudent and very happy about that. Back to you, [indiscernible].

EBITDA sale by geographies, we can see the performance, especially the U.S. and Asia as Thailand and China. In the first half this year, exports has significantly growth about 54% year-on-year and the contribution from [indiscernible] increased from 5% last year to this year, while [indiscernible] Thailand grew at 9% in China at 26%. If we break it down by business, the private label had the highest growth of 13% year-on-year. The contribution from the private label also increased from 53% last year to 57%, mainly from PetCare and value-added [ 53% ] business. Brands also increased about 2% year-on-year. We are able to increase selling it as well as volume growth. Let's go to our Ambient sea food business. So our sales have been growing strong 10.7% year-on-year, this driven by our product tuna, sardine & mackerel, and salmon in the main market, especially Asia and the U.S. The sales growth was also supported by higher selling price increasing volume and FX. This is all the back of volume growth of 1.6% year-on-year. The margin also listed decreased to 19.5% versus 22% in second quarter last year. This is mainly because of one-off expense from Rügen Fisch restructuring about THB 164 million. If we exclude in this one-off items, our profit margin was around 20.5%, in line with the past performance of low teens. In second quarter of this year private label growth higher than branded business. So the contribution from private label increased from 52% to 55% this year. Next. For our frozen and chilled seafood business, our sales declined 6.5% year-on-year after last year exceptional performance especially in U.S., as we mentioned before, and lower performance of feed and salmon business. However, this was offset by the strong recovery of food service business in Asia and higher selling price. Gross profit margin is also decreased year-on-year because of the market normalization in the U.S., especially lobster and crab. So the last one for PetCare and value-added business. They are significantly rose about 41.7% year-on-year on the back of volume grew 11.4%, thanks to our continued strong demand of PetCare product. We continue launching new in high value-added products portfolio expansion as well as sales growth from the packaging business. Gross profit margin remained robust at 29.5% in second quarter of this year, slightly higher from second quarter last year, mainly from one-off items of Rügen Fisch about THB 24 million in value-added business and last year is quite an exceptional performance with available raw material price and higher sales from the U.S. PetCare business. But if you look overall, you can see our proposition was in line with our past at high teens. So on the next slide, I invite Ludo for the closing part.

Thanks a lot, [indiscernible]. And here, we just wanted to provide you with an update on our guidance. You have now in Q2, our topline performance is a bit stronger compared to what we were expecting. So we did adjust up. Our revenue target for the whole year in Q1, we told you the full year target will be between 7.8%. We already revised up compared to our first assumptions. So now the revised debt is between 10 to 12 in for the whole year. We are 12% already after 6 months. So it means that maybe in H2, we not had exactly the same topline growth, but still, we will still be very high, I think. In gross EBIT margin and SG&A to sales, we keep the same guidance. Right after 6 months, we had 17.2% in the [indiscernible], of course, we have a bit of impacting from the restructuring. And we have also on the SG&A, we are 12.8%, so we're a bit higher. So we do expect to have in H2, some improvement in terms of profitability and our SG&A become decreasing a bit -- we do expect the logistic cost situation to improve, a bit less compared to what we were expecting at the beginning of the year, where we are seeing in H2, we're expecting the situation to normalize, okay? The situation will last until the end of the year. But we can see right now some good news in terms of logistic costs, but it's still a bit slower compared to our expectation. Apart from that effective interest rate, no big change, dividend policy, no change. CapEx, we maintained at THB 6 billion. We did have some cash in the CapEx because we sold some assets in Poland, as I told you in Canada. So we may have a bit of buffer. The net impact at the end of the year will be below this amount. I think we will update this 1 maybe in Q3. But overall, we just wanted to tell you that we do remain confident. We are very happy with the performance of the group in Q2. We have these 2 one-offs, which are polluting a bit the visibility of our numbers, fully understood this one. So I hope that here with the explanation we gave this is clearer for you. But again, I think a target topline of sales of 10% to 12% for the whole year would be something fantastic for us to realize, and we want to have some challenging targets. So this is the whole guidance we are giving to ourselves for the whole year. And now I think we can move to the next section.

Thank you, Ludo. Yes, so thank you for the presentation. Now please allow us to open the floor for Q&A. [Operator Instructions] Okay. Maybe if no questions coming from the floor yet. Maybe we can just raise a few that we have prepared in advance. So one of the key drivers, of course, is the fish price. Can you talk a bit about what is the fish price situation now? It went down to a low of THB 1,400 in June and now back to THB 1,600, can you share what is the outlook for the full year? And any impact to our gross profit margins?

Sure, [indiscernible]. And maybe we can get back to the one slide that we -- our usual slide on the raw materials that we have. If you remember, in Q1, we told you at that time, the average fish price was around 1,700, 1717 in Q1. We told you that there was some increase in March and then in April, and then we were a bit concerned, and we are saying we don't want to see some inflation here because if we see also some strong inflation on the fish price, this 1 combined with all the other inflation will become difficult. So we have some good news in Q2, and in Q2, the average fish price has been declining. And you can see at an average of THB 1,608, and we went down to THB 1,400 even in June. We don't expect this to maintain. You can see here the price in July has been going up a bit compared to June. However, it's still at 1,600. So very close to the average we had in Q2 in terms of performance. Now the outlook for the whole year. We just take the prices to go up again in the next months. We have some periods of the year where there is some fab which are forbidden to be used, and we will face with the situation. So here, the catches will drop. We know that this is happening every year. So no surprise on this one. So we do expect to have a bit of price increase in happening in Q3. And then in Q4, the price to drop again on this one. This is our usual seasonality on this one. But overall, we do expect the fish price to remain in what we call our comfort zone, which is between the 1,500 to 1,700, 1,800 that we have. We don't expect the fish price to get back to the $1,900 or $2,000 that we have seen and experimented a bit earlier this year. So here, we do expect the fish price in 2 worlds to remain under control for the rest of the year, a bit of inflation in Q3 and then drop again in Q4.

So we have a question coming from the floor. If the U.S. continues to increase the interest rate next year, which if it increases higher than our assumption, would Red Lobster book an additional loss from the revaluation of the fair value?

I think it's a good question. I think it's very unlikely. And maybe you can get back to the 1 slide where we do show the picture of the interest rates. What you need to keep in mind is this quarter, the situation is very specific. The Fed has been increasing a lot. And you can see that in 6 months, we started with 25 bps and then 50 bps and then 75 and then again, 75 here. I think this is the first time that we are facing with such an increase. It's really a massive increase, very unusual. But you know, of course, that the inflation is very strong. I'm sure you've seen that the inflation in Q2 was around 9% for the whole country in the U.S. and here, the Fed absolutely wants to see this number going down, okay? And this is why they have decided to take these very tough measures on this one. Of course, there will be some impact overall and some risk authorization happening in the U.S. We don't expect to face with such a high increase happening again. There will be some further increase -- this is coming from the consensus of the market happening in H2. This is what we have in our forecast, and this is why we do expect the fair value to remain at 0. We don't expect such a high increase to happen again in 2023. There may be some further small increase. I think right now, this is a consensus. But at this stage, the one-off impact that we had to record in Q2 is coming from these very abrupt and very tough increase happening in Q2. We don't expect this to repeat again -- and so we don't foresee to record any negative impact coming from the fair value adjustment also coming from the interest rate in the next quarters.

Okay. Maybe just a follow-up question on Red Lobster. How in terms of Red Lobster's operations, how soon do you expect Red Lobster to improve or to become breakeven in which quarter or when can we become breakeven for the full year?

So maybe we can get back to our staying on Red Lobster on this one. If you remember the seasonality of Red Lobster, if you look at 2021, normally, we make some profit in Q1 and then all the other quarters are loss-making. And usually the Q4 in terms of performance and profitability, the worst, as you can see here in Q4 2021 in a year where the performance was overall good. I think the challenges we are facing right now with the inflation and also the Omicron that we have been facing in Q1, I think we have been a bit too slow just to make it very clear, to increase our prices here. You remember what I told you in Q4 last year, we said we want to attract more guest count. So we knew there was some inflation coming at Red Lobster. So we took a strategic decision to say we don't want to increase our prices that high because we wanted to attract the guest count in Q1. Of course, we were not expecting the Omicron to come in. Now we have decided to have some significant price increase starting to happen in July and in August. You don't see yet the impact happening this quarter. The question is specifically when can we expect a breakeven quarter. I think we can expect some further loss to happen in Q3 and in Q4 2022. And this is why our full year guidance moves up from the minus THB 650 million that we shared with you at the end of Q1 to the minus THB 950 million that now we have for the full year. But I do expect that in Q1 '23, we'll get back to a profit in terms of share of profit, this is what usually we always deliver since many years at Red Lobster. It was not the case this year because of very specific conditions, okay? Keep in mind, this business has been facing in 2020 with the first wave of COVID-19 and they had to close many of their restaurants. And in Q2 -- in Q1 '22, it was a new store for them with this new Omicron variant. We expect, hopefully, that there won't be any more variants to come in and then to be back to a breakeven and even positive situation to happen in Q1 '23.

Okay. On logistics costs, how much can we expect for it to improve in the first half first -- second half of this year compared to the first half?

I think if you do remember, last year, back in 2021, if you look at the performance, Q1, Q2, Q3, Q4, the increase was happening again already a bit in Q1 and in Q2, but most of the increase really happened in Q3 and in Q4. You can see here from the top left chart. In Q3 and Q4 this year, we will see still a bit of inflation, but we are comparing to a baseline, which is quite high. So I think the increase will be much less in terms of absolute amount compared to what we had in H1. You can see here from the graph, the effect cost from Thailand to the U.S. has been dropping a bit, okay? This is a good news. We need to make sure this is -- this will be confirmed over the next months, you can see also the transit time is kind of flat, almost flat and even improving a bit on this one. So there is some good news. Yet overall, we have some pricing -- price increase in H1, which are still very significant compared to last year. But last year, in H2, the impact because of price was already quite late. So we don't expect to have such a high cost impact happening in H2. The cost impact should increase much less compared to the increase we have in our H2 2022.

Okay. A question on our global portfolio management. Do we have plans to close any more factories? Or will there be any extra loss items in the next few quarters? I think they're referring to the Rügen Fisch one-off item.

Sure. I think you know that we are always looking at our manufacturing footprint and the idea is always try to optimize this one. And I think we did some few closure of factory over the past few years. If you remember, we did 1 in Scotland a few years ago, we did 1 in Thailand last year also. And we had this 1 that we wanted to fix. I think with this one, we will be done for the year 2022. We don't have any more plan even for 2023, but we always remain very agile. The market conditions are highly volatile. Here, I think this change was requested. We wanted to do this 1 since a bit of time already. We knew that we had -- we are facing with the situation of overcapacity in Germany. And the fact that we were not the only shareholder over the past year, did not help, of course. And the fact that we had one fire happening in [indiscernible] so did not happen last year on this one. So now we execute our plan. This is a plan that we have. We wanted to execute. We are convinced this is the right plan. Of course, there is 1 hit to be taken, which is the restructuring costs and the amount is significant at THB 274 million but we don't expect for the rest of the year to have any other restructuring costs like this one. So it's a one-off impacting only our Q2 numbers. And again, we do expect some positive impact in our business. In Germany, we do -- we are convinced this is a change and something which is absolutely required to improve the performance of the business there.