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

Good morning, everyone. Welcome to Thai Union Group Analyst Meeting for the Second Quarter of 2024. My name is Nonwan Kidwa Taisan, and I will be your MC for this event. Today, we are proud to present you our innovative product. This is John West, ECOTWIST, and you may already have seen it outside at the booth. And later on, you will get to know more about this during the presentation. Moreover, today, we present you our souvenir from our own brand, SEALECT, which includes SEALECT clip Tuna [indiscernible] in spring water and SEALECT tuna pens which showcase tides of power. And today, I would like to introduce to you our management who will be the key speakers today, starting with Kun Thiraphong Chansiri, our President and CEO and followed by our Group CFO, Mr. Ludovic Garnier. And last but not least, our Head of Investor Relations, Kun Pinyada Saengsakdaharn. And the session today will take around 1.5 hours, starting with the presentation and followed by the Q&A session. And after that, we would like to invite you to enjoy the lunch with our management [indiscernible]. So without further ado, I would like to pass it on to Kun Thiraphong for the presentation.

[Interpreted] Hello to all the analysts and the fund managers and financial institution heads. This is -- we're taking an opportunity to report on our second quarter results and the first half for you and also the outlook for the second half. For the second quarter, it has been a period that emphasizes our continuous growth and a recovery in our results, starting from the first quarter our sales have grown by about 4%. But more importantly the gross profit margin is at the highest level out of the past 3 or 4 months at 18.5%. Other than that, in the past period, we have reduced costs by 200 million shares. This is the second -- the second set, we have a third set left. And we would like to inform you once again so that you don't have to call us and ask why we have announced that we will sell because this is the requirement from the Ministry of Commerce requiring us to announce sale, and we were not able to sell in 3 days and to reduce the capital. So the second set will reduce as well. So there's no need to be surprised. And unless these days are quite new, we're easy to surprise. John West as well is something we've seen a launch -- an innovative launch and a key launch. And John West in the future, you will see that this is thanks to our ECOTWIST innovation that has been developed from GIC, our Global Innovation Center, and we also have a patent for this. Normally, If you can remember, our tuna products, when we have products. So we have proportion in three or four cans at a time. We have a plastic sleeve, but this time, to achieve our sustainable packaging goals and also to lead to a selling advantage because no one else can do this. We have a special glue script and this is of the same purpose. This is a recyclable material. And this is something that we are very proud of. And we have received -- it has received a lot of positive feedback. We continue to pursue this effort. We will continue to monitor feedback from customers. And if we are as successful as we hope to be, then we hope to see expansion of this into other markets, whether it's France or Italy or the United States. And aside from this, we have also announced our dividend payout, our interim dividend payout at THB 0.31 per share or a payout of 59%. And also, you all have frankly already heard the results for i-Tail, the performance results presentation, and they have done exceptionally well. And we're seeing a recovery, and we have been helping for after we had the destocking issue in the past year. And we hope that all of you our investors will be at ease now. And then we're also seeing the PetCare trends, improving trends, i-Tail [indiscernible] thanks to its outstanding performance results and its improved share price, i-Tail has been included in the [ SET50 ] in December -- in the past year. And this is also something that we are very proud of. And other than that, Thai Union feed now. We informed you as now we have, again, favorable results, whether it's in Thailand or in Indonesia. And in Indonesia, many of you asked and you know now that there is much potential for growth. We will be putting all of our effort in terms of management, our executives, they're flying into Indonesia, we will do everything it takes next month, I, in fact, will be in Indonesia. I haven't been there for quite some time now, but I will be there to take a look at the shrimp feed business and also to visit with the factory with our factories there and our chicken to see as to update the situation -- get an update on the situation to see our competitive situation. This year is a year that after we have not had to travel to the U.S. in the past 2 years. This year, I have had the chance to go to our operations. I went to almost all of them, whether they're in Europe or in Africa, and we have plans to go and see our customers and competitors in Spain, will be going to spend next month. And we also have new customers in many other countries that we've never been to, whether it's in Turkey, Latvia, Slovania, in Greece, we will be there to take a look and also to visit Ecuador as well in October. And these are some positive developments that we'd like to share with you. Our financial and competitive status is improving. Now look at our performance results. Our operating results for the second quarter, we grew at 4%. In the first half of the year, we had about THB 60 billion and total sales or SG&A scores grew up the group. SG&A may have gone up a little bit, but the main reason is because of our investment in our brands and this is our strategy moving forward. We will invest in our brands, whether it's in these states, in Europe, we will have increased investment. So it might look a bit high over the past period. Our balance sheet, if you take a look, you will see that our net debt to equity is at 0.82x. This is a low figure. Many of you are wondering why we want to take a loan from i-Tail. And allow me to explain that the goal is to manage our corporate funds. We don't have any other objectives. So there's no need to worry that we're going to use the money in inappropriate way or an unsuitable way, our balance sheet allows us to have these intercompany loans and the i-Tail loan from them will actually be depositing -- depositing the money at a lower interest rate. So this loan will actually lead to advantage for i-Tail. They will receive higher interest rather than -- rather then depositing it at a lower rate. Do we want to do M&A? M&A will come from i-Tail. i-Tail is the growth engine for us right now. They will have opportunities to share their expansion plans by future. And whenever they need money for M&A, the conditions are that they can recall loan at any day, any time. So there's no need, if i-Tail needs the funds, we can pay back loan. So we want everyone to rest assured that we're handling this. So many people are worried by the year -- the day before after i-Tail announced that it would allow you to take a loan. We would have to announce that it would take this to the Board. That is because the Stock Exchange Commission, stock exchange of Thailand require us to report this. So there is no need to become alarmed. And as for the second quarter, as we mentioned, we acquired by 4%. Our gross margin was 18.5%, and this is the highest in the past 12 quarters. Our operating profit is at THB 2 billion. This is at a very high level, relatively high. In our net profit, we do admit that we have an issue with the cost, high funding cost. And our net profit is still at a very good level, though, at about THB 1.2 billion. And on the next page, you can see the bridge that shows our profit we have by NCI, higher NCI and this is due to our minority interest in i-Tail and their e-mail, and our company has been doing very well in this respect. And so on the next page, this is about our dividends. We are still seeing a high level of dividends, and we would like to pay higher than this, but it's not in the card risk right now. Right now, we're not paying more than 60%, and we pay out twice per year. and we will continue to do this. And moving on, this is our ECOTWIST. Let's show the video. [Presentation]

[Interpreted] It's very easy. It looks very, right, but it was very hard to come up with. It's a sustainable efforts, sustainable packaging material change using instead of plastic. This is a great challenge for us, but it's -- it's been a very successful development. And on this page, you can see our marketing efforts in every market whether it is in the United States or in France or in England, in the U.K., we are very active, continue to be active in this regard. And a big product launch. This is in the States. We continue to launch new products there. We have the frozen products, and we have our food service, and we've been doing very relevant. Our marketing, whether it's in the U.S. or Europe, we are being aggressive in every channel, retail, food service, cup stores, we will continue to put more effort in that in those areas. And in the second quarter, we also received awards, whether it's i-Tail going into the SET50 -- being listed in SET50. We have certificates, corporate governance. We have FTSE4Good, and we also have sustainability, our activities in sustainability in the second quarter -- the past quarter. And you can take a little bit of details, and I'm going to pass things on to Ludo to discuss the financial performance.

Thank you so much, Kun Thiraphong and welcome, everyone. Very happy to be with you today. I think we have some positive news to share with you, as usual, we will start with the key takeaway. The operations are recovering very strongly in Q2. The sales are accelerating compared to Q1, 3.6%, and we will elaborate where does it come from. I think the gross profit margin should be the very good surprise for you, 18.5%. This is very high. Also, we have some key drivers you heard i-Tail yesterday, you had TFM also this morning. These are some of the key components, but there are some other components also. The union sales also are recovering. We have been at a challenge last year, and this is clearly one of our key targets for this year. Okay, we want to regain some volume in the Indian business. We have some positive news on the demand coming from the U.S., also from the Middle East. the Middle East were very soft last year. Now they are recovering the gross profit margin of the ambient category, even if it's still declining compared to last year, is recovering quarter-on-quarter as per the expectation. PetCare performance, we get back to almost where we were 2 years ago, which was the best year ever for i-Tail. So hopefully, we can continue in that direction. And the last point, the free cash flow generation was extremely high for us in Q2, okay? We are exceeding the THB 5 billion for the first 6 months of the year. And also, I will explain where it's coming from, but I think it's a good success. So here on next slide, you have our 5-year story. You can see here the gross profit margin, 18.5%. This is our second best ever performance. Okay, the record high for us was 19%, and it was performed in Q2 '21, okay, in the context of COVID, a very different situation, okay? And we explain where does it come from. You don't see that reflecting yet in the bottom line. You see the bottom line, it's 3.5% net profit margin. We had a bit of FX loss. We will explain where this comes from and Kun Thiraphong mentioned also the increasing expenses and some other impacts below the OP, but the OP pretty close to THB 2 billion for Q2, we're extremely happy with this one. So just a quick deep dive on the sales, and it's easy to comment because we have some green everywhere. So this is nice. So top line growing by 3.6%. We are benefiting from FX, okay? So it'd be very clear, especially the USD, the USD average was 36.7% in '24 compared to last year, it was 34.5%. So we are benefiting from that. And for you to remember, this is very different from our budget assumptions. Our budget assumption was [ 33.5% ], and we have been enjoying a much better FX rates since the beginning of the year. I mentioned also the demand in the U.S. and in the Middle East, which is recovering, okay? And this is good news. We don't see yet this happening in Europe, okay? So our business in Europe is still facing some challenges. So you can see the volume growth is there. It's 1%. It's not yet very impressive, but we are on a good track. And we have some mixed performance between the frozen category, which is still declining, the PetCare, which is very dynamic and the other categories which are growing. The gross profit margin, I mentioned, growing by 14% compared to last year, second best ever performance gross profit margin mostly supported by the PetCare. The frozen also, the value-added also is recovering. The Ambient is the only one declining still versus last year, but we're on a good track compared to Q1. We are clearly recovering. So if you move to the OP, OP margin at 5.6%, clear improvement compared to last year, 11% in terms of growth compared to last year. We have some SG&A increase in Q2. So just maybe a few words on this one. First of all, you have a negative FX impact, the FX is positive on our sales and GP but you have the same impact on the SG&A. We also push for the marketing expenses, okay? We told you at the end of '23, we lost some volumes in our branded business. We don't accept that. So we want to increase our marketing expenses. We cut maybe a bit too much during the year '22, '23 because of inflation. So here, the idea is to push and to strongly support for our brands. And then we have some consulting fees. Maybe you heard i-Tail mentioning about this one. They have a growth transformation project at their level, there are some extra costs. So these are some of the key highlights for our SG&A. So the ratio is 13%. Normally, we are always something around 12%. So it's a bit higher. There is no concern on this one. The net profit, THB 1.2 billion and THB 1.2 billion is increasing by 14% compared to last year coming from a strong OP. We have some positive news on the other income. The share of profit also is a good news, mostly coming from Avanti. Remember also that we sold LDH in Q1. So in fact, we have less associates compared to what we had last year. But Avanti performance has been really improving. But then after we have some increasing costs coming from the finance costs, coming from the tax and also coming from the minority interest, as it was presented by Kun Thiraphong in the initial bridge. So just a quick one on the FX. We had some positive news, the USD, the GBP and Euro are still very strong versus THB. You can see over the past few days, there were a bit of changes. And in July, you see the USD has been decreasing to [ THB 36.3], since the beginning of August, it is decreasing a bit further. So we are watching out what is happening here in the next months to come. The Yen, of course, has been record low. Let's see also -- you heard I'm sure that the Bank of Japan increasing the interest rates, so that should be improving in the next quarters. So we provided you also a quick focus on the FX and I'm sorry because FX is always very technical, quite complex to explain to you. So just to try to make it simple. We just focus on some lines which are only ready to FX. So we have the line 1 and 2. One is sales adjustments, where we had a loss of 300 million. And then we have a line which is below the OP FX gain and loss, where we have a loss by THB 200 million in Q2. And there are two components in this one, the financing and the operating activities. So first of all, to explain the sales adjustment. I think the easiest is to look at the graph that you have on the top right, you can see the blue line, this is a spot line, okay? And the orange one, this is our hedge rates. And you can see our hedge rate is increasing, but the spot rate has been increasing even further. So we are always running after the spot rate. And this is why this is generating some FX loss in our sales adjustment for us, okay? Below same story for the operating activities, you can see the operating activities is mostly coming from the difference between the orange line, which is the same that you have on the top and the blue line at the bottom, this is the AR transaction rate, okay? When we are paid. This is exactly the amount that we do receive. Again, here, we have some negative same situation that in Q1, but a bit more, okay? And then in terms of financing activities, we have some impact coming from the interest rate and the valuation of our hedging strategy for the [indiscernible] loan. That is one thing you don't see on this graph is we try to hedge, we are very conservative that in all our transactions, okay? So we always increase include in our selling price, the cost of this hedging. So when you look at these numbers, you could see oh it's a net-net impact, which is very negative for TU, it's not the case. It's not the case, why? Because we reflect this in our selling price, okay? So part of -- part of NSV is also offsetting this impact. On the raw materials, we have also -- this is delivering as per the expectation. We told you in Q1 that we're expecting this tuna price to be at the bottom, and it has been increasing almost to $1,500 in Q2. And then you can see in July, almost to $1,600. So this is exactly what we were planning on this. We do expect Q3 to increase around $1,600 and in Q4 to decrease a bit around $1,400. But overall, over the whole year, the tuna price would be much lower compared to our initial expectation, which was around $1,650. The shrimp you can see have a bit of ups and down. But overall, the shrimp price remained very cheap. Salmon, different story here, the salmon has been expensive over the past 2 years, and it is being expensive. Next one is to just watch out on the freight prices. Of course, there was the issue with the Red Sea, which was already there in Q1. This is continuing. Right now, we don't see an improvement on that. And also in Q2, we have seen a bit of pressure on the container because China was trying to push for the containers to be delivered in the U.S. okay? So you can see the price of a container from Thailand to USD has been increasing close to $6,000, and the lead time also has been increasing to 45 days, okay? So this is a watch out for us. We keep monitoring for this one. We are still far, far away where we were 2 years ago during the crisis, and we don't expect the freight cost to be in that range. However, this is something we keep monitoring. On the Slide 24, I think we have many good news to share with you. The inventories are decreasing, okay? So we had THB 47 billion you can see in the middle compared to THB 53 billion last year. I think this is a positive development. I told you one of our targets for '24 is to have our net working capital and especially the inventories decreasing, okay? So this is happening and this is a good sign. On the top right, you can see the net debt to EBITDA. I told you also that one of our targets for 2024 was to have this ratio below the 4, okay? And you can see in Q2, we are at 3.78. So this is happening quicker compared to my own expectation. So this is a good news. Again, we have a strong cash flow generation happening in Q2. Net debt to equity is stable, and I will elaborate in the next slide about this one. So net debt, you can see here on Slide 25 is decreasing, okay? It was THB 51.5 million at the beginning of the year. it's THB 51.4 million. And despite the share buyback. So you can see on the right, we have a big box, THB 3 billion of share buyback program. This is the third one we have been doing. Despite this one, we managed to decrease our net debt. I think it's a very good sign. How do we explain that? We have a strong EBITDA in H1 by THB 6.5 billion. And then you can see the next box is very important. The change in net working capital, okay? Keep in mind, in '21, '22, we have been investing in THB 15 billion in net working capital because of inflation. Here, for the first time, we see some decrease by [ 2.6 ] and expect it will continue further in the quarters to come. And then you can see the CapEx, [ THB 1.5 billion ]. It's a bit soft. From that point of view, we have a full year target, which is THB 4 billion to THB 4.5 billion. So there should be some acceleration in H2. All the other topics are very usual topics. But overall, very happy with the development on the net debt. So Kun Thiraphong already mentioned this one. So here, we talk about the i-Tail loan, and they were probably some questions on this one. It's very easy. It's a win-win situation for the Union and for i-Tail, okay? So they have a lot of cash on their balance sheet. We very often have to refinance our normal financing. You can see -- here the graph we show you at Thai Union level, our financing and what we have to refinance in the next years to come. So here, you have one opportunity for i-Tail to increase the interest income, and there is one opportunity at the same time for Thai Union to decrease interest expenses, okay? So again, it's a win-win situation. We gave you here a bit of details. The idea for us is just normal refinancing, okay? There is no hidden agenda. We're not talking about M&A to come in the very short term, nothing about this one. But you can see, '24, we have THB 9.5 billion to be refinanced, okay? And in '25, we have THB 12 billion to be refinanced. This is very normal. We have been doing the same last year, okay? So we will have to make a decision on the perp. For you to remember, we did issue 5 years ago, some perpetual bonds. We have to -- we have the right to record this perp by November. We have not decided yet what do we do? We have a few options, which are on the table. We could not do anything, just continue with this perp. We could reissue some new perp, or we could refinance through a traditional funding, okay, still an open discussion for the time being. But you can see on top of this, we have THB 3.5 billion bonds to be refinanced by the end of the year. And then next year, we have THB 12 billion. So here, the intercom loan will be up to THB 11 billion. There are two components, a long-term loan up to THB 6 billion also and revolving by THB 5 billion. A few things. First of all, we have also a condition that we cannot borrow more than 75% on the cash available at i-Tail, okay? So in no case, we can borrow the whole amount of cash available at i-Tail. And also, i-Tail, if they need because is very high in our agenda regarding M&A. They can recall for the amount very quickly, okay? So for the revolving from one day to another day and for the long-term part, I think they have a notice period of 30 days, okay? But it makes a lot of sense. Of course, there is one condition. It will have to be approved by the EGM of ITC. This one will happen at the end of September, okay? So it's happening tomorrow. End of September, we will go to the EGM, we will explain to the shareholders the ID. it's a win for i-Tail, it's a win for TU, so we do expect to have some positive feedback coming from the shareholders. Of course, Thai Union will not be able to vote for this one, but we are kind of positive. We believe it makes a lot of sense from a finance point of view. Next one is very stable. You can see here, this is our -- the structuring by maturity, by currency. We don't have any big change on these ones, so I go quick. Next one, we just report the results in our blue finance. And you can see on the left, we had two waves of blue financing. We have what we call Blue Financing One, and then on the right, the Blue Financing 2, okay? So we did achieve or the KPI for the Blue Finance one, and we did achieve all of them for the Blue Finance to except one of them, where we missed the target. So first of all, we are very happy to deliver five KPI out of six. We missed one target, which is the absolute greenhouse gas emission. But it shows that here we have some real target. These are challenging targets, okay? So we are not doing anything wrong here. We want to beat the numbers. But I think production and the purchase of seafood has been higher compared to our own expectation initially. But we want to get back and to catch up. We have a fourth KPI, which has not been tested yet. It will be tested next year. And for you to remember, right now, we have roughly 60%, 65% of our net debt, which is linked to sustainability KPI by next year, by 2025, we want to have 75%. And I think we're on a good track to achieve this number. Very quickly, also a view on the share buyback. So just for you to remember, over the past few years, we have been doing three different programs of share buyback. As per regulation, this is mandatory for us to try to resell, okay? It's forbidden for us to share buyback -- to do a share buyback program and then you can't sell directly, okay? So don't be confused. We all have to communicate to the stock exchange of Thailand. We try to resell if we're not successful, then we can cancel, okay? This is what we have been doing with first and the second program. The third program we have been rebuying 200 million shares, also this one, we'll have to do something in the next quarters or in the next years. So we have 3 years to do anything we want on that one. And then I will pass over to Kun Kwan for the business performance.

[Interpreted] Thank you, Kun Ludo. Hello to everyone. For business performance, we will take a deep dive into the different business categories. First, we'll begin with the categories. We have Ambient, Frozen and PetCare and value-added. You can see that in the past 6 months, we have recorded THB 69 billion and our sales contribution comes from the Ambient business, mostly, which is the main factor. And PetCare is seeing some development in terms of increasing revenue. Usually, PetCare has a sales contribution from about 10%. But in this quarter, it has grown significantly to about 12%. And the growth for every category has gone up, except for the Frozen business. On the next page, this was our second quarter numbers, became with the Ambient and the sales year-on-year, it's increased by 1.4%. This is mostly from the sales volume that is increased by 3.1%. And if we look at the Ambient sales, it comes by private label customers and also branded customers. Private label customers are mostly from demand in the U.S. and Canada as well as the Middle East. Because the Middle East the year before, they had an issue with hard currency, and now they are showing signs of recovery. And our branded customers, you can see that there are increasing sales from America and Chicken of the Sea brand. And our executives have told you earlier, we have been doing the marketing campaigns continuously to boost our sales and to increase our sales volume. As Brazil's quarter-on-quarter, there has been an increase by 1.2%. Nevertheless, in terms of sales volume, it's gone down by 5%. And this is due to the situation of the Red Sea. China has been hastening the exports in U.S. is going to increase tariffs. And then has led to -- this has led to a shipping container shortage in that area. And right now, the tariff that is going to -- has already taken effect. The increased tariff has already taken effect. And in terms of gross profit margin. The latest [indiscernible] for Ambient at about 19%. This is an increase of about 2.3% from the quarter before. And this is an ongoing momentum, and we are seeing recovery and development to a stage that is close to what we are happy with. In the first half of the year for Ambient Seafood -- if anyone is unmuting their mic, could you please turn your mic off. In the first half of the year, for the Ambient category, we have regained our top line momentum. And you can see that in the first 6 months compared to the 6 months of the last year, we're seeing an increase by about 7%. Our gross profit margin is still lower than what we were hoping for in the first half at about 18%. And this is a result of the fish prices that were higher, and they are now lower. Our business update for you in the past, we have been doing many things to achieve cost savings and increase our sales. For cost savings in July, we had an opening of a factory for frozen fish, at about 8,000 metric tons of capacity to help us save costs in terms of rental. And in terms of marketing, we are also doing advertising continuous promotion to build our brand awareness. And this is a look at the tuner prices as our executives have mentioned, in the past, the prices have gone down for three quarters. But right now, the prices are starting to rise. In the second quarter, it's about $1,500. And in June and July, the growth momentum is -- seem to increase in the second quarter. So it is bad -- you can see the price is increasing. Here is look at the Frozen category. In the second quarter, the performance for the Frozen category in terms of Q1 quarter-on-quarter looking at 13% quarter-on-quarter increase. And this is driven mostly by the increasing volume of 5%. And this is thanks to branded and private label customers. In the second quarter, it was similar to when we boosted -- reorders are being boosted because the third and the fourth quarter is a high season for the U.S. in our gross profit margin, it's gone down a bit from the last quarter. This is due to temporary resonate because of age inventory for our Frozen business in Thailand. And in the U.S. and also the feed business, we have a gross profit margin that is increasing visibly. And in terms of sales for the Frozen category, we're seeing a year-on-year drop and also a decrease in the volume as well. This is a result from the softening the U.S. and also the rightsizing, which began in the middle of the second quarter of last year. So comparing this period with it, we're still seeing some effect from that. And our rightsizing has led to gross profit margin increased by 1% year-on-year. In the past 6 months, the Frozen business, the top line is challenging for us. It's gone down by 12% year-on-year. And as I mentioned earlier, we have been doing rightsizing the -- in the second quarter, and this is affecting our sales. Nevertheless, if you take a look at the gross profit margin, you will see that we have an increase -- a 2.4% increase in comparison to the 6 months before. Since year we are doing rightsizing, it's finished -- rightsizing is finished. So for the gross profit margin, for the Frozen business, we expect it to be in a range that is about 10% to 12%. And we have an improved margin. We are looking for new warehouses to see [ running cost ]. We're also trying to produce products that are more innovation-based and to boost the sales of the Frozen category. [indiscernible] that we are revising our targets. Look at the PetCare business in the second quarter, you can see that the sales as well as the volume is strong growth momentum. Sales grew by 41% year-on-year and volume grew by 21% year-on-year. And this is a return -- due to a return of demand in U.S. and in Europe. And in Germany, we're seeing a lot of demand increase there. As quarter-on-quarter PetCare continues to do well. Sales have gone up 13%. And in terms of quarter-on-quarter volume is about 10% quarter-on-quarter increase. And you can see that the PetCare business has been able to deliver an all-time high gross profit margin at 31.3%. And this is their strategy. They have been doing more studies. They've been increasing their premium price mix in our portfolio and in the first half of 2024, they have a problem mix at 55% compared to the same period of last year, which was at 45%. And the sales for PetCare have increased significantly in the first half of the year. This has led to i-Tail, having revision of its targets. If you attended the i-Tail Analyst Meeting, you will have seen their revised targets. Their sales have increased from 15% to 18% to 19%. The gross profit margin is now -- the guidance is at 24% to 26%. And for SG&A, it's increased a tiny bit as well. And lastly, our value-added category in the second quarter, sales growth year-on-year growth and the gross profit margin has done -- we have seen good performance there. This transfer value and has gone up THB 60 billion year-on-year. And nevertheless, the volume has gone down 5% year-on-year. And the sales volume decrease due to product volume decrease and the value doesn't lead to much profit, but our sales are supporting this with packaging and ingredients and value-added products that we have. And the gross profit margin for the second quarter is at 26.5%, mostly due to raw material prices for the packaging the steel, the aluminum that are [indiscernible] have cheaper prices. This is supporting our value-added gross profit margin numbers. And for the value-added first half, [indiscernible] have a high potential growth and the business update we -- in terms of business day we have culinary plant to uplift our margin. We're looking for new channels for packaging and for ingredients and for alternative protein, we continue with our operations. And that is the performance by category for you. And now it's time for the outlook that we are revised, and I would like to turn things over to Kun Thiraphong.

[Interpreted] Right now, we are in the month of August, the eighth month of the year, and we are very confident that this year will be a good year for us for our group of companies. For top line growth, we are adjusting from 3% to 4% up to 4% to 5%. And our gross profit margin, we're adjusting from 17% to 18% up to 18% to 18.5%. SG&A, we're also adjusting a bit from 11% to 12% up to 12% to 12.5% and our interest rate, we will increase --from 0% to 0.5%. This is the same. This is -- there's no adjustment for this. CapEx is the same, no adjustment because I believe that in the next few years, we will be able to maintain a low CapEx level. And our lesser level -- is at THB 4 billion. And our dividend, we will continue to pay out continuously as usual. The factors that we're doing quite well. We are seeing upward trend, especially with the fish price we expect it to increase to about $1,700 in the third quarter, but it hasn't reached that level. And when it does increase, it will start to weaken and the average price for fish will be lower than last year. And this is something that will help with our sales and to allow us to move forward significantly in the market, and this is an opportunity for us. And also in terms of interest, which I hope the trend will start to come down if interest rates are lower, then that will help us with our cost, we'll be able to lower our costs even more. and the foreign exchange rates is at a satisfactory level, we are seeing some appreciation, but this is a level that we are happy with. Nothing that we're worried about. In terms of our company, I would like to inform you that we are not being complacent, even though we are seeing sort of developments. i-Tail has shared with you about their growth acceleration program for 3 years. And that is something that we have at -- hired a Mackenzie is a financial adviser to help Mr. [indiscernible] as a consultant to help. We have a transformation program of our own for 2 years. And this is something that is going to allow us to change to restructure the biggest restructure that we've ever had. And we continue to transform from a silo to [ Popco ], we're going to break through all of the barriers to achieve more fluidity and liquidity. And this is something that we would like to share with you next month.and we will provide all the details for TU and for i-Tail. And again, we will share this with you. In the near future, we just would like to inform you that is coming out, and we have cost competitiveness. This is something that we're very keep to achieve. We want to be the most competitive in the industries where we thrive, and we will continue to be aggressive on this front. I believe that this year, based on our actions and the developments that we've seen, the positive trends and also with our human resources, I am much more confident. The past few years were ones that were very challenging for us. But today, I feel that 2000 -- 1997, 2008, those were so difficult parts, and we made it back and from going to see whether it's competitiveness. There's nothing very difficult for us. I believe that we will remain highly competitive. And therefore, we are quite comfortable, quite happy, quite satisfied, whether it's in the U.S. or in Europe, even though there are issues or changes politically in many countries, the election is taking place for our company, our business should not sustain much impact from that. In the U.S., people are very worried about a recession -- possible recession there. We don't see that happening just yet. We don't see any signs of that happening yet. In terms of the competitive field. And I believe that the elections at the end of the year, the sentiment won't be too bad, I believe, until the beginning of next year. And in my view, going the United States is something that the business for us will return will improve and will present more opportunities for us. And after we have restructured, we rightsized our frozen business in the U.S., we are ready to grow once again the U.S. [indiscernible] as Chicken of the Sea, we continue to develop that, and we see support in the market. So I'm very positive. In Europe, I believe that we have already gotten past the difficult stage. The interest rate in Europe and the U.K. and the EU. The interest rates are doing better, and this should make things easier for us in Europe, things should improve there as well. And this is briefly what I'd like to share with you. If there are any questions, then please, we welcome all questions.

Thank you very much for the presentation. And we will now move on to the Q&A session. For those who join online, you can send the question through the chat box or the Q&A function. And for those who participate here, you can raise your hand and our team will assist you here.

[Interpreted] I'd like to ask about the Ambient business in the second half of the year. I understand that in the second quarter, the volume has dropped down due to partly the delayed shipment. In the third quarter, the volume, the sales volume will be better than the second quarter. And the second half of the year, if we incorporate headwinds, dealing with the economic slowdown abroad, do you believe the volume will be better than the first half?

[Interpreted] Yes, it will get better than the first half for sure. And in the third quarter, we will see an improvement from the second quarter. The second quarter, we had a delayed shipments significant due to the lack of shipping containers. In the third quarter for shipping containers, things should be better. And we are quite confident that the second half will be a good half.

[Interpreted] And the second half, the growth will come from which side, Europe, the States or the Middle East, and I'm still talking about the Ambient category?

Compared to last year, the growth would come from the U.S. and Middle East mostly, same than in H1 and also Europe should recover in H2 for the Ambient business.

Mr. Ludo, about the new pen of culinary pen. How much the depreciation will increase from this new plan?

So the investment was THB 1.2 billion just we need to remember, and we have an average of depreciation yields, I think, which is around 8, 9 years. If you do the average between the buildings and the equipment.

[Interpreted] The culinary plant is not a new business. We are combining three factories. And in this year, their revenue will increase to about THB 2 billion. It's not that we need to develop something new. This is actually expanding on what we already have and the condition of the factory is -- it's very high status, and we are pursuing world-class customers, whether it's restaurant chains, for instance.

[Interpreted] The new plant, when you opened it in this third quarter, what will the utilization rate be?

I think here, there will be a ramp-up. Just need to remember, [indiscernible] was correct for the new culinary. We have been consolidating three factories, okay? So we almost finalized over transfer from the old factories, the new factories. And then there will be a ramp-up curve. So right now, it's as per the plan. Of course, you don't start 100% from the beginning. So we expect it to take two, three quarters to really go to where we want it to be. But we are quite positive. Initially, it was a bit slower compared to the expectation, but now we are back on track compared to our plan. okay? We have different waves. We have to win for all halal products -- win for halal products, and this is as per the expectation.

[Interpreted] Looking at the guidance, it looks like you're implying that the second half of the year, you expect gross margin to be on an upward trend. And will this be driven by what business mainly yesterday with i-Tail, they said that the second -- the third quarter, the margin would not be as good as second quarter because the second quarter was so good.

So here, you're right. If you look at the full year guidance, we have a gross profit margin, which is just below 18% over the first 6 months, and we have a full year guidance, which is 18%, 20.5%. So yes, it means that H2 will be improving. The key drivers will be mostly the Ambient and the Frozen business, okay? The Ambient we told you in H1, they were overall decreasing the gross profit margin compared to last year. We expect this to improve further next year. But you are right also on the i-Tail. From the communication they did yesterday, they said the broad profit margin in H1 will be higher than H2. So i-Tail will not be the key contributor for the GP margin improvement, but we do expect the other categories to contribute to the improvement.

[Interpreted] I'd like to ask and time -- the Ambient business, the gross margin in the second half is better than the first half? And what are the reasons? Is it the product, the market?

So a few things. First of all, we have been absorbing the impact of the fish price declining in Q1 and in Q2. Now this is almost behind us, okay? We also took the benefit to buy a lot of cheap fish during that period of time. So right now, we are starting to process the cheap fish price. And right now, the prices are going up, meaning we can keep needs upside for us. But that will be one of the key driver for us for the gross profit margin improvement, which is expecting to happen in Q3 and in Q4. We also mentioned that the branded performance has not been great in H1 to be front in Europe, the U.S. is a different story, but in Europe, and we do expect the performance to improve the marketing activities we have been doing will help for us in terms of top line, we believe, in Q3 and in Q4. So this is a combination of all these different factors.

[Interpreted] Okay. And for the Frozen business, do you think that in the second half of the year, the gross margin will be better than the first half as well. And aside from the feed, the frozen business, what reasons are there for this?

So here in the Frozen business, we have different components. The largest one is our Frozen business in the U.S. okay, which is buying some of their products from our Frozen business in Thailand. We have also the feed business and we have our [ Chile ] business in Europe. So components. The two first ones by size, they are the largest one. We do expect some improvement, indeed in the gross profit margin in H2. Remember what Kun Kwan mentioned to you in Q2, we have some hedge inventory accrual, which is negatively impacting the gross profit margin. It's not huge, but still we do expect to be able to reverse this one. Just for you to remember, we had a very conservative policy regarding the inventory, why because we use this one to put pressure on the local management, okay? But sometimes, it means that we have to accrue for some products and we know we will sell them, okay? So just temporary downside than upside after. And we do believe also the U.S. operation will improve right now, the demand in H1 has been soft. We expect it will improve a bit, not crazy, but it will improve a bit in H2. The feed business is in a very good momentum. You could hear this morning, we believe this will continue. And the Chili business also in European is doing well. We had one challenge in H1, which was our frozen business in Thailand. We do expect this to recover in H2.

[Interpreted] That means that the Frozen business, the sales for the first half have gone down year-on-year. That means that in the second half, you'll see increase year-on-year, right?

I think overall, it will depend a lot on the U.S. The U.S. market has been much softer compared to expectation. So it will be much closer from breakeven. So slightly positive or negative, but it will be better than what you have seen in Q2, definitely, okay? So quarter-after-quarter, we do expect some improvement.

[Interpreted] And my last question, SG&A for the first half, it's higher than the full year guidance. That means that the SG&A to sales for the second half will go down half and half, right?

Yes, that's correct. I think if you compare to our guidance, the phasing of our marketing activities has been a bit different compared to what we plan initially in the budget, meaning we spent more in Q1 and in Q2 compared to what we had in the budget. So you're absolutely correct, yes.

[Interpreted] I'd like to ask about the fish stock in the first half that was cheaper -- this cheaper stock. Can you -- how much longer will it last for how many more months? Before this, we buy and keep the fish stock for about 2 months. But during cheaper periods, we buy for up to 3 months stock. And if the price is higher, we will reduce our position. But right now, the price is not higher. Our stock is 2 or 3 months. And I'd like to ask about SG&A in the first half. That is quite high. This mostly is up from the marketing or consultant fee, which is the bigger factor? And in the second half, it's going down, the consultant fee. Will that go down as well? Or are you going to maintain it? And the reduction will be from the marketing, the bigger drop in the second half?

You have four different impacts in the SG&A. You have FX. FX is the biggest impact that we have on this one, then we have the marketing phasing. And you're right, we mentioned the marketing was very high in H1. In terms of relative percentage will decrease a bit in H2. We had also the people costs, which have been increasing. In Q2 '23, we had some reversal on the bonus accrual. The performance was not good. So we had to reverse on the bonus accrual. It was an upside at a time. You don't have this upside happening in Q '24. This is why you see this increase, which is happening. And then the rest, the consulting fees. Now we have some programs which will last 2 years, so we don't expect any drop compared to this one, okay? Keep in mind, the marketing activity, this is very important for us. We told you at the beginning, we want to regain the volume. So we are very happy. And in fact, we would like to push further if it was possible, I think we have been a bit too passive maybe over the past 2 years in terms of marketing activities, okay? So we need to repeat the momentum.

There is one question from online. Do you expect margin to further improve in the third quarter of 2024?

Yes. We do expect to have in Q3 the highest gross profit margin of the year and then after to drop a bit in Q4. This is our normal seasonality Q2 and Q3, usually gross profit margin is very interesting, Q1 and Q4 because of the mixed products and the mix theory, it's always a bit lower. So yes, we do expect some improvement compared to what we are in Q2.

[Interpreted] I'd like to ask about your target for [ GPM ] what assumption for the fish price for the entire year. And you mentioned that this year, the prices may not be as high as you expected. But is there -- are there other upsides for GPM?

So the key one, you're right, is the fish price. Right now, our big forecast is $1,450, $1,450 for the skip jack for the whole year. We do expect in Q3 this fish price to increase a bit up to $1,600 and an art to decrease to $1,400 in Q4, okay? So if you look at the full year, indeed, the raw material would have been much cheaper compared to our own assumption, okay? Apart from that, we do expect a volume push impact. So the efficiency in our factories will also improve in H2 compared to H1. So these are some of the two key drivers which will help driving the gross profit margin in H2. Keep in mind also the demand is very strong, okay? You heard the TFM business, the i-Tail business, we expect this good momentum to continue, okay? And right now, we are facing some challenges in Europe, in our branded business and also in the further business in Thailand. We do expect this to improve in H2. So overall, the demand should recover.

All right. Did we factor in this into the TPM target?

Yes.

[Interpreted] And the second question, could you explain the Olympic event? Is it affecting the economy in Europe?

No. So usually, we don't see a lot of impact coming from this one. I'm very happy it seems to be a success so far. But we don't see any drop or an increase in our sales traditionally from that, okay? We'll have to see. It's ongoing. It's not finished yet. But usually the most relevant factor for us is the weather, okay? If the weather is good and the people will eat more tuna and the weather is not good if it's raining a lot, then they want it a lot, okay? And so far, the weather hasn't been very good for the summer time. And I heard it has been improving. So that will be the key driver. But the Olympics, we don't expect much from that.

[Interpreted] I'd like to ask about the effective tax rate for this year. What will -- how much will be because the second quarter is quite low?

Yes, you're absolutely correct. I think the effective tax rate is between 3% to 4% in Q2. We have different impact [indiscernible] some positive one-offs impacting the tax. It's a net impact of THB 70 million. We have also some negative one-off impacting the other income. So overall, in terms of net income, it's so wash for us. We do expect the effective tax rate for the whole year to be between 6% to 8%, okay? This is our treasury guideline, plus 1, minus 1 from time to time, but we still believe that this is the right guidance for the whole year. But you're right in Q2 is slow. We don't expect to stay that low for Q3 and Q4. So it will increase back to our guidance.

[Interpreted] And I'd like to ask about long-term ITC yesterday, they talked about their 2030 goals and for TU, what is your position?

So here, we will have a specific session in September Kun Thiraphong mentioned this one. We want to deep dive on three things, okay? So we want to talk about our strategy 2030, okay? We want to talk about the transformation program we are launching for Thai Union. And we want to talk also about the growth acceleration program we have at i-Tail. So we have three key topics. In one section, so it's a teaser for all of you to come. This will happen in the first 2 weeks of September, okay? So we are defining exactly the date. That should be very interesting, okay? We will talk about a bit more regain our strategies, our view, we try to touch every topic. We thought maybe it would be too short to cover this one during this session, and we want to combine also TU together with i-Tail. okay? So in one session, you can cover all the key topics, okay? So please come. The date has to be finalized, but it will happen in the first or the second week of September, and then that will answer all your questions.

[Interpreted] In 2030, we have our strategy goes, we'll tell you next month.

May I ask about the CG report that you're going to have at this -- will the waiting for TU improve? You don't have a CG rating right now. Yes, we have returned. On Slide 50, in Thailand, there's a drop. What's your view for the second half?

I think you are correct. In Q2, we have a drop in the domestic business. It's not that much a concern to be frank on this one. So we do expect to see some recovery happen in Q3 and in Q4. Overall, for the full year, we are quite happy with our domestic. We have in Q2, indeed, a drop, which is happening. It happens from time to time. You have also to consider the baseline was high also for this quarter. So no specific concern.

[Interpreted] Usually, each quarter, you talk about value-added. And is there anything to share with us this time?

Yes, I think in the value-added category, we have different components. We have our packaging business. Our packing business is doing good, okay? And this is one of the key driver for growth for us over the past few years. And now 2, 3 years ago, our packaging business was focusing only in Thailand. The idea for us is to move up and to use our packaging business also for our business in the U.S. and in Europe and this has been happening over the past 2 years. And this is one of the explanation why this category has been growing. Apart from that, we have also our value-added business, where we have culinary and other value-added products from Ambient and Frozen. This is also growing. And then we have our ingredient business, okay? We are quite happy with the development of our ingredient business. Right now, the crude oil business in general is very positive, at group level is still small. We know we have also a refinery. The refined oil is improving, okay? We have one refinery in Germany that we are filling up and if this is really improving. And then we have our new factory, the collagen factory, which has been commissioned a few months ago. And also here, we can see some progress, okay? Apart from that, we have the supplement business, but these are smaller business, the key businesses for you to keep in mind, packaging, value-added and ingredient business.

[Interpreted] If we have -- if you have a chance, we'd like to invite you to see our new factory, the culinary plant, if you have the time, we will invite you. Today, we don't have any products to share with you. So there's nothing to share about we are selling well. Everything we have is selling well. Are there any other questions from there anyone here in the hall?

As there is no further questions, I would like to thank everyone for joining us today. And don't forget to join us for the lunch with management at the [indiscernible] room next to this room. Thank you for your time.

Thank you, everyone. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]