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

[Interpreted] In the first half, we're going to present the results for Thai Union. And then after that, we will have a 10-minute break. And then you will have the quarterly results for Thai Union Feedmill. I would like to introduce the executives who are joining us today, who will be presenting. The first is Mr. Thiraphong Chansiri, CEO; and second is Mr. Ludovic Garnier, Group CFO; and third is Ms. Ratinan Wongwatcharanon, Head of Investor Relations. Without further ado, I would like to invite our executives to present.

[Interpreted] Hello to our analysts. Thank you for the interest you're showing today. Today, we're going to share the results of quarter 1 for 2023. And as we had forecasted since last year, for the first quarter, it should be a soft quarter. The reasons -- the main reasons are due to logistics, the shipping containers. This is normalized from last year where we faced many problems. And our customers, many of them therefore, have past purchased in large amounts to offset the shipping delays. And at the moment, things have normalized. And our customers in the first quarter, they are restocking so that their inventory is normalizing as well. And this has caused our sales for this quarter to soften. And you can see that the freight cost, at the moment, the trend -- equal to or less than what we experienced pre-COVID. And then with lower freight costs, this demonstrates that we have a higher volume. In addition to this, our sales for the first quarter, another reason that has caused impact are the raw material costs for tuna. And in the first quarter, this is something normal. The first quarter, the price is quite low. We get [indiscernible] and it has produced significantly. And the tuna cost has gone up to -- and it's begun to soften, and it's at about $2,000 and [ $1,980 ]. The tuna cost continue to be high. And in the third quarter, towards the end of the ninth month of the year, the cost should drop. And in the first quarter, we've had issue of El Nino. And with higher temperatures in the oceans, the tuna -- the fish may not be swimming in schools -- in big schools. And in the third quarter, we expect -- the ninth month, we expect that the temperatures should improve and there won't be El Nino and the fishing situation will normalize. And these are the main reasons. And in terms of logistics as well, logistics has affected our Ambient seafood, our Chilled and Frozen -- looking at a drop of 10% on sales [indiscernible] margin, the growth has dropped by 15% -- percent of sales dropped by 15.1%. And our operating profit is THB 796 million. Our SG&A has dropped, thanks to the drop in shipping costs. So it's about 12.1% compared to what we were experiencing last year. Our net profit is at THB 1.022 billion. it's dropped by 41% year-on-year. In the first quarter, our results may seem that it's soft. And what most people are interested in is Red Lobster. This is a key highlight for the first quarter, our share of profit from Red Lobster. We can see a change in the trend for Red Lobster and a trend that what we're expecting something else. Instead Red Lobster [indiscernible]. We have not recognized them. The interest rate is still high. This year, we don't expect to have minority interest in i-Tail as well. We may have a 22.18% [indiscernible] net profit for i-Tail. And i-Tail dilution, the net profit for last year was THB 1.3 billion. Our net profit has gone down about 21%, this is overall. And on the next page, let's look at the share buyback before the silent period. We bought 44.8 million shares back before the silent period, where we have been allowed to buy up to 200 million shares. So we still have room to move -- continue buyback. And we have new and innovative product launches as well. We have launched plant-based tuna under the brand, John West, in the Netherlands. And the second is our SEALECT Tuna. We have fresh ingredients included, and we have launched products with collagen, hydrolysate and collagen. And then Red Lobster -- over 5,000 stores for Red Lobster, we've launched our frozen seafood under the brand Red Lobster. And this is being managed, we have taken up the SPACE-F. In terms of the FoodTech, we will launch our latest batch in March. And if you remember, we had USD 30 million in budget. We have used about USD 10 million so far. So we do have room to grow in this space. On the next page, there's not much. This is about sustainability. So let's just continue forward. In terms of SeaChange, we haven't yet -- we'll announce our commitment for 2030, 2030 SeaChange, regarding labor and the environment and climate change, we have announced our commitment for net zero by 2050. And this is the direction that we are headed in. On the next page, this is good news that I would like to share with you that we had received awards from Global Banking & Finance Awards. We received altogether 5 awards. And we're still surprised and happy to continue to be recognized like this. Up to 5 awards we received. And I'd like to pass the mic on to Ludo now to share the financial results.

Okay. Thank you so much, Khun Thiraphong, and welcome, everyone. Very happy to be with you today. We wanted to start the presentation with a few takeaways for you. And you can see the first one is obvious, Red Lobster. Finally, we generated a profit in terms of share of operation this quarter. I think we are very happy about this one, it's not a complete surprise. This is a normal year where in Q1, this is the high seasonality for Red Lobster. And I will elaborate a bit more, but this is 1 of the key achievements for this quarter and a very good news that we are moving in the right direction. And the second one is I want to highlight the SG&A topic. And we told you over the past few quarters, we have been extremely impacted by the extension of the lead time between Asia and the U.S. and also by the increase of the freight cost. So here, we clearly see in Q1 some normalization. And the normalization happening is much quicker compared to what we're expecting, okay? And I will show you after some graph where you see the lead time we are back to where we were before the crisis. And also in terms of freight cost, we are back to where we were before the crisis. Of course, it has a negative impact for us in terms of sales because we have been recharging now to our customers the past year, and of course, we are losing this revenue freight, okay? So it has a negative impact for us. But we do believe for the long term, it's very positive for the business to get back to a more normalized situation. Also in Q1, we have some FX gain. You can see here, THB 215 million in Q1. You know that over the past few quarters and in Q4 and in Q3 last year, we have been facing some volatility. Here, we are back to a situation where we have some FX gain and I think this is good for the business. The balance sheet is extremely strong. Since we did the i-Tail IPO, we told you the net debt-to-equity is far below our guidance. Now it's -- at the end of Q1, it has been increasing a bit, but still very low at 0.57. And Khun Thiraphong mentioned that in our Q4 communication. M&A, which -- it was not one of our priority over the past few years, is now back on top of our priorities, okay. It will take a bit of time. We don't want to buy everything. We want to be extremely selective on this one, but this is back on top of our priorities. And the last one, we want to continue and to maintain the same strategy. And the strategy for Thai Union over the past few years is to focus on bottom line. Top line for us is less important, but improving the gross profit margin and improving the bottom line is really something which is very important for us. Innovation is 1 of the key steps for the improvement of this bottom line. And I think we are in a good range for that. So if I want to elaborate a bit on the logistic costs. You have here the usual graph we have shown you since last year. And you can see the freight costs re-declining you compare to Q1, Q2 2022. Now we are paying sometimes even below compared to what we have been paying before the crisis. And the lead time also at 33 days on average, we are back to a very normal situation for us. So very positive. We told you last year that every quarter, we were suffering from negative pricing from the freight cost, and you have seen last year our SG&A growing and growing quarter after quarters. Now you see the opposite situation, SG&A dropping. Of course, 1 of the parallel impact is to see an impact, a decrease of our net sales from this one because we have to give back to our customers part of the freight cost. But overall, we do believe it's a good thing. On the inflation also, you can see here some usual graph on some of the utilities. We are using some oil, some coals -- gasoline. We have some good news here also. Depending on the regions, you can see some normalization. So we have less pressure from this one, yet we are still facing some inflation. And in the next chart, I will talk about the fish price inflation that Khun Thiraphong already mentioned. The strategy for us is always the same. We have to increase our prices to maintain our margin, plus also, we have to be very efficient in our operations. We continue to review the recipes of our product and to remove the expensive items. There is no change, and that will be the case for the whole 2023 year. So just talking about the fish price. And if you compare to the guidance we gave you at the end of Q4, the fish price in Q1 is higher compared to expectation. You can see here the average for the Q1 is around $1,800, which is much higher compared to our expectation. In April, the fish price has been continued to grow. So we do expect the fish price to be around $2,000 in Q2. And then after, we do expect some kind of reduction in Q3 and also in Q4. Yet we have to admit that in Q1, the fish price, the tuna price has been much higher compared to our own expectation. We weren't expecting this. And this is also 1 of the explanations for the soft performance in Q1. Keep in mind that when there is such a change versus the forecast, very often, the customers just wait and see. They will stop ordering? They will say, "Okay, we want to see a bit where the fish price will go." We have seen that already in the past. So when the fish price is going to the opposite direction or expecting because everyone was expecting a decrease of the fish price in Q1, it didn't happen. They wait and see. And I think this is also 1 of the key drivers for the softer demand we have been facing also in Q1. The salmon price also very high. In Q1, you can see here, on average, exceeding the NOK 100, this is all-time high for this one. Since last year, we have been facing a very difficult situation with the salmon. We know how to rate. We have to do some price increase on this one yet. On this one, the price high and is adding some pressure on the market. To the opposite, the shrimp price is kind of normalizing in Q1 this is a good news, I think, for us, THB 168, increasing a bit versus the 2 previous quarters. But compared to the Q1 '22, it's really dropping, and I think this is a good news for us. So overall, inflation coming from the fish price is really here, and we have to face with this situation. On the next chart, we just provided you with an overview since 2016. Just to remind you how volatile the fish price was, and also we put out our Ambient gross profit margin since then. And you can see that here, there are some ups and down, of course, in the fish price, okay? And we have already been facing the situation where the fish price is exceeding the $2,000. We have already been facing the situation, you can see, back in 2017. And even earlier. If you get back 10 years ago, we have been facing with this situation. Of course, temporarily, our growth profit margin can be impacted. And you can see here in Q1, the Ambient gross profit margin is decreasing a bit on this one. But you can see after very -- quickly after we are able to recover. And really this is something -- really one of the message I want you to keep in mind. We will recover in overall non-gross profit margin and we are confident about this one. We also wanted to provide you with an update on the fish inventories. From time to time, we do provide you with some updates. You can see here the breakdown of the catches by species for 2023 Overall, since the beginning of the year 2000, the level of catches has been kind of constant year-on-year. There is no big change. And you can see here on the bottom, I think the graph is the most important. You can see the green part are all the stocks where we don't have any issues, which is a vast majority of the tuna species. We have some red where, here, we need to have some improvement. So here, we are following very carefully the guidance coming from all the scientific community. We know especially on the yellowfin, in general, we have to be careful on this one. But overall, we are quite kind of confident the vast majority of the fish we are using is skipjack and there is no issue at all in terms of resource for the skipjack. And I think this is a good thing. We are also extremely careful on all other species, albacore, bigeye and there are no big concern on the level of catches for this one. Just a quick a bit also on the currency. You have seen it in Q1, we have been facing with the Thai baht appreciating versus all the major currencies, versus the dollar, versus the euro and also the GBP. If you remember, in Q4, it was dropping quite a lot. So here, good to see this kind of development happening in Q1. So now moving to Red Lobster. So this is our usual focus on Red Lobster. This is a good news. Earlier this quarter, we are able to generate profits from the share of operation amounting to THB 121 million. THB 121 million, of course, compared to last year where we did deliver THB 243 million, this is a huge improvement. And I think it's a good sign for us that we are in the right direction. We have been doing many changes since last year at Red Lobster, changing the management, reworking the menu, working also on the menu prices. We had to increase our prices a lot in the U.S. We have in Q1, 2 very big events in the U.S. We had the Valentine's Day and we have also Lobsterfest. And these 2 very big events, we have managed in the right way at Red Lobster in Q1. And these are the 2 key drivers for the strong performance in Q1. If you compare to a few years ago, we are not yet back to where we were before COVID. But we are very close. When we are before COVID, it was THB 140 million, so Q1 '21. We are just behind. It's a good sign. Yes, I want to manage your expectations. We still have a lot of work to be done. And the situation at Red Lobster is highly volatile, so we need confirmation over the next quarters. And you will see in the next slide, even if here in Q1, they are slightly overexceeding our expectation, we don't change our full year guidance, meaning for the next quarter, we expect a loss. Of course, we'd be more than happy to beat our forecast for the year 2023. But if you look over the past 2 years, we have to be a bit careful with the guidance of Red Lobster. But overall, Q1, we are on track, and that's a good news for us and a good confirmation that when we are really putting some pressure and making the right changes, we can deliver some right results. On the share of profit coming from the lease. There is no surprise, the amount will be decreasing year-on-year gradually until 2030, I guess. Preferred interest, Khun Thiraphong mentioned this one. You have seen some interest rate increase for the interest increase fully aligned with our expectation. We don't have any surprise. The guidance for the full year is we will not record any preferred interest in '23, exactly the same guidance that what we had in the end of 2024. The interest expenses are rising a bit. Of course, you see the interest rate increasing a bit. The income tax is a bit higher compared to our expectation. Always very difficult to forecast the income tax savings from Red Lobster. It's a combination of many different things. But we were able to recognize some tax credit in Q1. But overall, positive net income contribution from Red Lobster and also the share profit from operation is the first time since 2 years. So very happy about this one and it is a good achievement. So if you move to the full year guidance. And I did share already with you that we are maintaining our full year guidance at THB 600 million loss for the full year for the share of operation. We don't change also our lease accounting adjustment. That should be kind of stable. Only the FX may impact a bit positively or negatively this impact, but we know already the amount. You can see here also on the pictures, the different value propositions we are doing, something which is very important in the U.S. The U.S. consumers are very sensitive to price, of course. All the restaurants have been increasing a lot their prices over the past few years -- the past 3 quarters. So everyone now is pushing for some promotion. And we need to make sure we have always a very good value proposition. I can feel that the brand equity of Red Lobster is very strong for the very large promotion like Lobsterfest or like the Shrimp Fest also. But we had to do what are we doing in between because, of course, we can do this kind of promotion all the time. So here, we need to reinvent and we need to be a bit more creative. What are we doing between these 2 big events that we have? And this is why the team right now is working on how to propose new menu, new meal, very attractive from a value proposition. Why? Because here, all the other restaurants, chain of restaurants, they are reacting very strongly. They are very aggressive on the promotion. And they're always trying to attract, giving some very large portions at a cheap price. We're in the seafood so our positioning at Red Lobster is a little bit premium segment compared to the other so we cannot compete directly with all the others, yet we need to have some value proposition in our meal. The U.S. rate, I already mentioned about this one. But overall, good achievement in Q1 at Red Lobster. We are happy with the results. Just a quick overview regarding the net working capital. You can see here the net working capital is kind of stable compared to Q4 '22 at THB 53 billion. If you compare to Q1 '22, we have an increase, it was THB 48 billion, THB 49 billion in terms of inventory. And you can see just below the net working capital at THB 55 billion, increasing a bit versus Q4. This is normal. You know that usually in Q1, especially Europe and the U.S., the Ambient business are always building their inventories in Q1. And this is happening. We have some good news also on the frozen side. We told you last year we were facing some challenges with too high inventories in our frozen business in the U.S. This is decreasing. So it's going in the right direction. We are not yet completely done with this one, but overall we are happy with the development. So here, the inventory is kind of a mix between some businesses re-declining their volume of inventories and some other businesses building their stocks for the high season, which is Q2 and Q3 for us. Net debt-to-EBITDA, we increased a bit. You can see we are moving from 3.67 to 4.07, but we are still in the very low range of our target. So quite happy about this one. And the net debt to equity, we are far, far away from also our target, which is between 1 to 1.1. So quite happy also about this one. So next slide, here, we have our net debt bridge. So you can see here, the net debt has been increasing a bit in Q1 from 50 -- THB 47 billion at the end of Q4 to THB 50 billion at the end of Q1. You can see, as it was mentioned above, the free cash flow is almost at breakeven in Q1. And usually in Q1, we always have some negative free cash flow because we always increase our inventories a lot in Q1. And if you get back to last year, I think our free cash flow was negative by THB 3 billion. So here, still negative in Q1. But I think it's quite a good performance, only negative by THB 200 million. And you can see here, the EBITDA at THB 2.5 billion, the increase in net working capital by THB 2 billion, and the CapEx are under control at THB 1 billion. I think we are a bit understanding compared to our full year guidance in terms of CapEx. And then you can see on the right, we have been investing. So first of all, we told you that we have the Treasury, the share purchase program that we have. So this is an impact of THB 700 million in Q1. And also i-Tail has been investing some of the cash that it raised during the IPO for a bit more than THB 1 billion. So these are the 2 key drivers for the net debt increase in Q1. But overall, we do believe it's under control. I remind you the guidance we have for the whole year. We want to see a decrease of the net debt over the whole year, very clearly on this one. And the key drivers for this one will be the EBITDA and also the net working capital that we want to reduce over the whole year and the CapEx being under control. And the last slide I want to comment is on the interest rate. You know about this slide. You know the vast majority of our interest rate is fixed by 72%. We are a bit exposed on floating rate for 28%. But I think overall, this is under control, and there is no big change apart from this one in the breakdown by currency or in the breakdown by maturity. And now I will leave it to Wongwatcharanon to comment on the business performance.

[Interpreted] Let's take a look at the businesses. First of all, we have the overall outlook. We have 4 main businesses. And in the first quarter, there has been a bit of change. Our Ambient seafood has an increased contribution up to 46% this year. And the Frozen and Chilled and PetCare, their contrition has dropped compared to last year, and Value-added is at about 7% about this new amount. And on this page, the most important thing is that our sales in each category have softened. As mentioned earlier in the fourth quarter, in our earlier meeting in the fourth quarter, they have a softer demand for each segment. Last year was high base as well. And as you can see, our Ambient seafood, even though this year, it's gone down a bit, if we compare, the numbers are acceptable. There's a 14% increase [indiscernible] this year they come down by 15%. PetCare has also gone down by about 22%. And Value-added is at an acceptable range, and it's 27.3% for gross profit margin. So the entire group in the first quarter, even though our sales are down by about 10%, if you look at the base... Let's look at each business, Ambient seafood first. The overall sales has dropped a bit. This is because of the increasing sales price. OEM and branded products have increased the prices and this has affected our volume. The volume has dropped. For instance, for our OEM products, the volume in the first quarter was at minus 16%. And if you look at the proportion between the brand and OEM, you'll see that our brand products have a greater contribution and OEM contribution has dropped. The main reason for our decrease in sales -- another reason is the price of fish, which is high in the first quarter, especially in March at $1,980, as Ludo informed you. And we're looking at higher fish prices. And so orders have been postponed or delayed, and it's more like a wait-and-see strategy. And our customers' orders are beginning to return, and we're looking at a positive outlook for quarter 2. And in the second half of this year, we expect everything to normalize. As for our branded products, they are growing at 4% and OEM is down by 8.6%. And some brands in some countries are still strong. What we are trying to grow in our brands, products that meet the needs, the health trends and wishes to -- we're looking at higher gross profit margin products. And looking at Hawesta, for instance, this is a snack bites and it's herring. It's been launched in Germany. It's popular in Germany. And we have line extensions for herring to attract younger generations. And in Italy, Mareblu. We also had new products there -- we lowered the amount of oil for health and well-being purposes. And for our frozen and chilled seafood, for the first quarter, we still have the same recession concerns, especially in the U.S. The market price for seafood in the U.S. has dropped since 2021. And at the moment, the price for seafood is beginning to normalize. And the sales have been impacted, especially for -- for shrimp and lobster especially. And we're still seeing growth year-on-year. And the gross profit margin is at about 7.9%, it's dropped a bit compared to the fourth quarter of last year. But compared to 2022 in the same quarter, the prices of our -- the raw material prices, shrimp, for instance, and salmon have grown in the first quarter. The price for salmon has grown 33% year-on-year and shrimp is 9% year-on-year. If you look at the price of shrimp in April, we'll see that the price in April dropped. It's a significant factor. It's come down to THB 134 per kilogram, and this is a good sign. So in the quarter -- second quarter, we expect a better margin. And for frozen seafood, our strategy -- one of our strengths is that we can pass on the cost to our customers. And our main -- most of our produce is OEM. And so this is more flexible than branded products, and we continue to focus on value-added products and innovation and line extension and building brand awareness, Qfresh. And we have collaboration with various brands with our customers. For instance, see the pictures down below. So we have operations, we have automation -- using more automation to reduce the cost. And you'll see the value-added product highlights that were introduced in the first quarter. We continue to develop our products so that we can serve the customers in our average market. For instance, we have Red Lobster, we have 1 SKU from the new 4 SKUs. We have BB Shrimp, we have chilled salmon, [indiscernible]. What we're trying to build growth in is the shrimp. It's not just breaded shrimp, where we have breaded shrimp with filling to make it more interesting. And we have an advantage in terms of taste, and we have co-creation products with Qfresh. Qfresh itself has also increased its awareness and has more accessibility in Big C. We have adjusted our menus as well, buy-in menus and takeaway menus as well. And this is in collaboration with Top Chef Thailand. This is an example of our collaboration. And the third business, the PetCare segment. For the first quarter, we saw a drop of about 22%, mostly due to the volume dropping by about 21%. And the margin has gone down to 18%. And similar to our other businesses, the demand has softened and customer inventory has gone up, and there's also the high price of fish. And the price of fish is higher than our expectations, so it's led to a wait-and-see strategy for many. And the sales volume dropping leads to higher production cost per tonne, and that's why you're seeing the overall drop in our performance. But we do see encouraging signals for our PetCare segment. And we expect that in the second quarter, we will see a recovery -- a quarter-on-quarter recovery. And in the second half, we'll also see normalization. The growth in the PetCare segment, we are focusing on the 2 main markets, which are existing markets like the U.S., which is a high potential market. And we have China, we have Europe. In China, we had announced a 10-year exclusive partnership with Jiabei. They will be selling online and off-line. They will be offering our i-Tail products in China and in Europe. We have been talking with many customers in many countries. We have drinks for pets in Europe, and this will be -- we'll like to export in the second quarter. And we also have a deal with a supermarket in the U.K. who'll act -- with 1 of the Big Four supermarkets in the U.K. And we expect to start excluding the second quarter as well. And in terms of our collaboration with new customers, we -- this is growing, and we are seeing definite signs of improvement in growth in this area. And we announced our PET movie theater, 3 branches in Thailand, Mega Cineplex, EastVille and 1 other area. And this is to -- we're also looking to improve brand awareness and awareness of our products. We have a CVC, whether it's Orgafeed or Flying Spark. Flying Spark. We will launch the production facility in May. This is the fruit fly larvae products facility, the first of its kind in Thailand. And lastly, our Value-added products. The sales have gone down by about 9.5%, mostly due to the mix between our cost prices and our drop in volumes by about 2%. And the Value-added and Others include many businesses where they have now our own value-added products or our packaging impacting protein ingredients or supplements. Our new businesses continued to grow well in the first quarter, especially in terms of ingredients. And you can see that our gross profit margin has gone down. But in the first quarter, it's at 27.3%, which is still high. This is a sector that has a good margin, a strong margin. as expected. We also expect that we will continue to focus on higher profit margin products. And if we categorize these, we can see 57% comes from the Value-added products. And we're going to have a new factory in the third quarter [indiscernible]. It's almost completed. And we expect to be able to start producing in the third quarter. And we have packaging, it's contributing 17%. We have our own production for customers and are seeing a drop in the first quarter year-on-year. But our customers in Europe and in Poland are still showing strong demand, and we're still -- we still see room for growth. So for packaging, we are continuing to increase high-margin products, whether it's for sustainability packaging. And at the moment, we have customers who are using printed cans from cans with labels. This is a high-margin product. And for our value-enhancing business, it's at about 10% contribution. And we still continue to see good growth from last year. And as per our ingredients, we have a protein hydrolysate and collagen peptide plant, which we expect to start production. It's 99.5% progress. Once protein hydrolysate and collagen peptide plant production begins, we will see the contribution -- higher contribution by up to 30%. We also have a feedback from 7-Eleven, and we have positive feedback from our products in the shelves across 11,800 stores. And we just won an award, the best-selling award from Watsons. And customers are showing great interest. And our alternative protein, you probably had the chance to taste it outside the hall here, and this is under the brand, John West. And it's being sold in the Netherlands. We have 2 SKUs, 1,400 stores, and it's also available online. And for the outlook for 2023, I would like to invite Khun Chan to present.

[Interpreted] I still -- I am very confident in our outlook for our businesses even if in the first quarter things have softened a bit. And we believe that this is a short-term headwind. And we believe that in the next quarters, we will see recovery and we will see ultimately normalization. We're confident in our fundamentals. And at this moment, we are stronger than ever, whether it's in terms of our cost savings, our productivity improvement. Today, we are doing it. We're growing in these areas even more. And for Red Lobster, we're looking -- we're seeing good signs. And so at the moment, we want to increase our -- we decided to send 6 of our managers to help the team there, and we're doing workshops to prepare the budget for 2024. And they will begin in June until the next year. And so at the moment, we believe we are headed in the right direction. We're doing things properly. Key highlight for Red Lobster is the cost control. Whether it's the food cost, labor cost, they are all in line with our targets. And what's important from this moment on is our top line, our guest count. We have to entice customers -- more customers to come to our branches. And so for our guidance, we have increased our -- we have adjusted our top line from 5% to 6%, we've adjusted to 3% to 4%. The drop of 1% is from ForEx because the budget that we had set, we set it at -- we used it at THB 35, but we expect the Thai baht to appreciate. So the adjustment is not anything significant. Our gross profit margin, we still want to achieve 17.5% to 18%. And SG&A, we want to decrease it to 11% to 12%. And our effective interest rate will increase 0.5% to 1%, and CapEx will be at a normal level at THB 6 billion to THB 6.5 billion. And normally, we never reach this amount. And as for our dividends, we will continue to pay out dividends twice a year, at least 50% dividend payout ratio. So we want our analysts -- all of the analysts and those joining us online to rest assured if you look at the consensus from analysts, I'm confident that we will beat the consensus, and we should not have any issues in this regard. So I'd like to end the presentation on that note. And if you have any questions, please, we welcome them.

[Interpreted] If you have any questions, you can raise your hand and our staff will take a microphone to you.

[Interpreted] I'd like to ask about El Nino. You talked about this earlier, that it should improve in the second half of the year. And these seasonal changes, they happen in May to July, right? I'm not sure, if the temperatures drop in the second and third quarter or this adjust -- will this cause a rise in the cost of tuna? What is your expectation?

[Interpreted] There is no limit. It doesn't have to say -- it's not necessarily May or June. The temperatures are higher than before since the beginning of the year, and this has caused fish -- a drop in the ability to catch fish, and the price has gone up higher than USD 2,000 and the volume is dropping as well due to the higher prices. The prices are on a downward trend though, downward trend about USD 1,980. And we forecast for the third quarter, the prices of fish will drop by more than the current range, price of more than $2,000. It just goes to show that the price can go up.

[Interpreted] And if we took a look at the year, when we had El Nino, I think it was 2016, the margin -- our margin was quite high. Is it possible that this year, we might see a trend? A similar trend.

[Interpreted] If you look at Slide 18, you'll see that the prices went up, and it went down to $1,500 as well. You won't see prices stay or stabilize at a high level for long. So I just -- I think we are quite happy with our trend. And we're not concerned, majorly concerned about this. In the second quarter, we're seeing -- we're starting to see the numbers. We're seeing improvement quarter-on-quarter. It's on a better trend.

[Interpreted] I'd like to -- Red Lobster -- let me ask about Red Lobster, the share trend. Can you talk about EBITDA? What do you expect for EBITDA?

So we don't communicate specifically on net loss to EBITDA. I think you see the learning from the last quarter. I think, overall, we can say, you can see for the net profit. You can assume the EBITDA has been strongly improving compared to last year. So if you compare to the net income compared to last year the contribution, you can see very clearly the EBITDA improvement. So it has been improving a lot. We told you in Q4 that there were 2 covenants to be met by Red Lobster, 1 on the Q3 and 1 on the H2. So the one in Q3 was delivered. So we don't have any issue with these funds. So now they have to deliver the EBITDA for the year-end. The year-end is at the end of May. So far, they're on track. We do believe that we'll be able to deliver with this one. But again, we have some very large promotion, which are supposed to happen in May, during the last months of the year end. So far, again, we are on good track on this one. We are positive on this one. But we do remain careful on this one. We know the situation is highly volatile, But this is what -- why we have decided to do all these changes in Red Lobster. And the performance in Q1 is showing we are in the right direction, Again, we told you that the full year guidance remains the same at minus THB 600 million for the whole year. So don't expect to have some benefit from Red Lobster every quarter, unfortunately. But we want to see that quarter after quarter. We confirm this good news and that we are in the good direction. We also keep in mind that the situation in the U.S. is difficult. You have recession. You have a lot of competition among the restaurants. So we need to make sure that we always have a very good value proposition for everyone. And overall, we told you we have since a few years a challenge of guest count at Red Lobster. This is not yet fixed. We need to fix this one and we need to transform our operations. So we have been doing since last year a lot of training in operations. Please keep in mind also that in 2021, during the COVID-19, we had to lay off a lot of people. So we have to hire again in 2022. So we have a lot of new people in our restaurants. So we need to train them and to make sure the execution is always the same and always good quality because we want the consumers to come to our restaurants. And very important, we want them to come back again. We don't want them to be disappointed with the speed of the service or with the quality of the food. We are making some progress. We still have a lot of progress to be performed.

[Interpreted] The increase in our prices, I think, it's gone up to a level where we can control the cost and our cost control is good. This is good news. In the first quarter or the third quarter, we're seeing positive signs. As we mentioned in their fourth quarter, which will end in May, we believe that we will be able to deliver. And today, we have spent much time with the budget. So I would like you to remain patient. But we are confident that our budget will go down by half -- and there shouldn't be any problem.

[Interpreted] I'd like to ask in Thai. The first question is, you said Red Lobster would cover the -- in the second quarter of 2023, will the profit be better than 2022?

Yes, definitely. We want to improve every quarter. So here, the guidance for the full year '23, we want to decrease the loss by half, okay? It was minus THB 1.2 billion last year. For this year, 2023, it will be THB 600 million. So yes, we want every quarter to improve.

[Interpreted] We have half of loss -- if it's half of loss, the second question is, I mean, not really sure, your guest count, what does guest count mean? Is -- has it improved?

[Interpreted] The guest count has not improved. But what has helped for increasing our sales is the increased prices. Don't forget that inflation is higher than 10%. And so our prices have also been increased by that amount. We have to increase our guest count, whether it's by promotions or through a good value for our guests, for higher quality of the food, better service. And over the past 12 months, we have -- we're seeing the results of our efforts over the past 12 months.

[Interpreted] So that means that the promotion that you talked about, is it Valentine's, for instance, that it has increased the guest count? But...

[Interpreted] No, we're not happy with the results yet. And today, this is, on occasion -- we have promotions based on occasions. And we want our customer base to improve. So it will take some time. But this month, we have Mother's Day. This is another highlight, just like Valentine's. And we're hoping that there won't be any floods and that we will see an improvement in our guest count.

[Interpreted] And one other thing is your cost, whether it's salmon or tuna or whatever, for Red Lobster, in terms of sales and the business for TU and for Red Lobster, the prices that you're selling at right now, can they cover the cost, the increase in cost? And will there be a possibility of adjusting the prices?

[Interpreted] First of all, Red Lobster, like I said, we have adjusted the prices to cover. We've already been successful. And the good news is that our raw ingredients and material prices have dropped. The prices have dropped. And there's been a crash in the raw materials, whether it's lobster or shrimp. So the cost for Red Lobster are quite good for us. And as for Thai Union in terms of OEM, we are not facing any problems. We buy and we sell at the regular transactions. What's challenging for us is the branded products. For this year, especially in Europe, we have to increase the selling prices. And this is a challenge for them. When we increased the prices, that will, of course, affect their volume. But the good point is that the private labels are cheaper than the branded products, and this helps -- in Thailand, helps us to cover these effects.

[Interpreted] And for Avanti, it's better as well, right?

[Interpreted] Yes. And going forward...

We do believe Avanti will improve. Generally, last year, they were impacted by our recall in the U.S. Now it's over. So we do believe the performance of Avanti will be improving moving forward. And you can already see in Q1, part of our share profit improvement is due also to Avanti. The key impacts with Red Lobster, but Avanti also, its attribution is also improving a bit.

Just to make sure, the contribution from Avanti, in our first quarter is their fourth quarter, right?

No, we do an estimate of their Q1. So we...

Estimate one...

We do an estimate one, of course. It's a listed company, so we have exactly the set of information. So we take an estimate, Sometimes we are a bit above, sometimes a bit below. So sometimes you have to catch up the quarter after. But we do estimate their quarterly results.

And do you correct it when they announce the actual results?

Of course, of course, we have to. And we catch up every quarter. Nothing new on this one. We have been doing this since many years.

[Interpreted] Also in the balance, your guidance for the full year and for the quarter, there's a big gap. Mr. Chan, what do you think about this?

[Interpreted] For the third quarter, we will catch up. And in the second quarter, the outlook -- it's better than quarter 1. Quarter 1 is a bit weak.

[Interpreted] And for the numbers of Q-on-Q for quarter 2 will be better than quarter 1?

We do believe yes. Quarter-on-quarter, Q2 will be improving versus Q1.

This year will be better than last year?

Q2 last year? I think overall, in terms of top line, we should be kind of stable. We'll see some normalization. We don't expect to have such a big drop in terms of sales that we have seen in Q1. So Q2 we will see some improvement.

It's slowly improving?

Yes, yes, slowly improving. The growth will happen mostly in Q3 and Q4 in terms of top line. This is our plan right now for the year.

But gross margin in the full year is quite challenging for...

Yes. That's correct. I think when you look at Q1, it's a bit challenging. Yet, we do believe you will see some improvement already in Q2, further in Q3 and further also in Q4. And at the end of the year, we expect to be back to a normal level, which will be higher than this. But on average over the whole year, we do expect to be within this range, yes.

But on the other hand, Red Lobster seems that our budget is quite underestimated, right?

We will see at the end of the year. It's too early. Right -- now, you're right, in Q1, the Q1 performance is a bit above our expectation, But if you see our guidance over the past few years, we have to be conservative. Can be highly volatile, at least in one, the situation at Red Lobster is highly volatile from one quarter to another quarter.

[Interpreted] Question, the tuna -- the increase in tuna price, do we have a stock, we have a higher stock? Is our stock higher than usual?