1Q18 Results PresentationMay 08, 2018 · 1Q18: Strong Baht/high tuna cost accounted for weak...

1Q18 Results Presentation8 May 2018

The information contained in our presentation is intended solely for your personal reference only. In addition, such information contains projections and forward-looking statements that reflect our current views with respect to future events and financial performance.

These views are based on assumptions subject to various risks and uncertainties. No assurance is given that future events will occur, that projections will be achieved, or that the assumptions are correct. Actual results may differ materially from those projected.

Disclaimer

Agenda

Key Highlights

Recent Developments

1Q18 Financial Results

Business Outlook

“Despite the challenging environment, we are

determined to sustain a cash flow generation and

improve our operation profitability for Thai Union

Group’s shareholders.”

Thiraphong ChansiriPresident and Chief Executive Officer

1Q18: Strong Baht/high tuna cost accounted for weak profits

GP

NP

3,360

869

Sales(THB mn)

29,703 -5.5%

YoY Chg % of sales

-26.2% 11.3%

-39.3%

OP25 -97.1% 0.1%

2.9%

Declined sales. 1Q18 sales declined YoY

driven partly by the Baht appreciation and

declining tuna sales during the quarter.

High raw material inventory costs. Gross

profit margin remained under pressure at 11.3%

resulted from a high raw material inventory price

as tuna price declined rapidly during 1Q18.

Strict cost control. Despite declined sales,

stringent cost control caused TU to deliver 1Q18

SG&A to sales ratio at 11.2% (down from 11.8%

in 1Q17). 1Q18 SG&A in Baht value declined

10.0% YoY.

Operating profit declined on weak

profitability, driven mainly by the high cost raw

material inventory and strong Thai Baht

appreciation.

Net profit declined YoY. Despite a weak

operating profits, the net profit was supported by

strong other income, and prudent FX and tax

management.

Remark: Operating margin = (COGS – SG&A)/sales

1,432

2,863

845

4,551

869

2,159

25

3,360

Financial Summary1

(THB million)

29,703

31,427

1Q18 Net Profit

down 39.3% YoY to

THB 869 million

Strong cash flow

improved debt ratio

Share price movement

20172

(Jan- Dec 17 )

-5.7%

20182

(Jan- May 7,18 )

-13.0%

2017 ND/E

1.38x

1Q18 ND/E

1.35x

1Q18 Net profit of THB 869mn, Solid cashflow improve debt ratio

Gross Profit

Total Sales

EBITDA

1Q18

1Q17

-26.2%

-97.1%

-39.3%

Q1’12

Q1’11

Net Profit

-24.6%

-5.5%

Source: 1TU; 2SET (Jan 4’17: THB21.1/share and Dec 29’17: THB19.9/share, Jan 3’18: THB20.7/share and May 7’18: THB18.0/share)

Operating Profit

1Q18

1Q17

1Q18

1Q17

1Q18

1Q17

1Q18

1Q17

Cash

generation

THB 1.4bn

1Q18: High priced inventory hurt operation performance

31,210 34,401 35,050 33,715

31,42734,818 35,185 35,105

29,703

16.0% 15.9%

14.1%13.4%

14.5%13.4% 13.2%

12.1%11.3%

3.9% 4.4% 4.5%

2.7%

4.6% 4.1%4.9%

4.1%2.9%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

-

10,000

20,000

30,000

40,000

50,000

60,000

1Q16 2Q16 3Q16 4Q16 1Q17* 2Q17 3Q17 4Q17* 1Q18

Total sales (THB mn) GPM NPM

% GrowthYoY

Sales 9.1 12.4 7.5 1.1 0.7 1.2 0.4 4.1 -5.5

Grossprofit

26.6 4.5 -12.4 -4.2 -8.9 -14.5 -5.6 -5.9 -26.2

Net profit -19.0 16.9 -1.9 19.1 16.4 -7.6 8.9 59.7 -39.3

Remark: Operating margin = (COGS – SG&A)/sales

*The 1Q17 and 4Q17 figures were restated mainly due to COGS reclassification

Agenda

Key Highlights

Recent Developments


Business Outlook

Mar 2018: Thai Union has joined forces with the Global Ghost Gear

Initiative (GGGI) in a drive to reduce the growing problem of

abandoned, lost and discarded fishing gear (ALDFG) worldwide.

Recent developments Innovation:

New Product:

Sealect Quick Meal, available now at Tesco Lotus and Tops market

Mar 2018: Yellowfin Tuna

Slices, the newest seafood

innovation from Thai Union’s

Global Innovation Incubator

(Gii), has recently received the

2018 Seafood Excellence Award

in the Best New Foodservice

Product category at Boston’s

Seafood Expo.

Sustainability:

Feb 2018: Nestlé S.A. and

Thai Union Group officially

inaugurated a demonstration

boat to promote and raise

understanding of human and

labour rights of workers in

the Thai fishing industry.

Recent developments

Awards Recognitions:

Apr 2018: Strong recognition from Asian investment

community, FinanceAsia’s Best Companies 2018

Thai Union has recently awarded in FinanceAsia’s Thailand Best

Companies 2018 for various categories:

#1 Most committed to corporate governance

#1 Best at corporate social responsibility

#2 Best CEO

#2 Best CFO

#2 Best at investor relations

#2 Best managed companies

z

Others:

Mar 2018: Prime Minister Prayut Chan-o-cha and his cabinet

members visited one of Thai Union Group manufacturing plants in

Samut Sakhon’s Muang district, during the mobile cabinet meeting in

Samut Sakhon and Petchburi

Mar 2018: Notification of the acquisition of 10.00% of T-Holding

Co., Ltd., which is 90% Thai Union Group's subsidiary from

connected persons.

Apr 2018: The increase of shareholding proportion by

buying of 28.46% newly issued ordinary shares of Thai Union

Feedmill Co., Ltd., which is Thai Union Group’s subsidiary,

resulting in 66.9% of total paid-up shares

Joining the leading Russian seafood enterprise

May 2018: Thai Union has continued its focus on

expansion with an agreement to acquire 45

percent of TUMD Luxembourg S.a.r.l (TUMD).

TUMD wholly owns three Russian companies,

collectively known as the DPR Group (DPR).

DPR is a retail focused fish and seafood business,

and it is Russia’s number one canned tuna

producer. DPR, which has sales of around

US$45m, operates in both frozen and ambient

segments, and owns brands such as Maguro,

Captain of Tastes and Rybar.

45% 51% 80%

Within 3 years

#1

2018

Equity Stake

Optional to increase Optional to increase

Agenda

Key Highlights

Recent Developments


Business Outlook

TU’s Consolidated Results

Results by Business Unit

“Rough sea …”

“… standing fast…”

“…Keep going.”

Joerg AyrleGroup Chief Financial Officer

The key take away for 1Q18 results

• Sales at THB 29.7bn and reported growth at -5.5%, mainly from Thai and US operations

• At constant exchange rates, sales would have decreased by 2.8% vs. LY, while the volume sales seen a small decline of 1.6% YoY

Top line challenged

• Weak GP margin at 11.3%

• All segments face with GPM dilution with except to S&M

• Tuna and Frozen business are the two most challenging segments in terms of profitability. PetCare margin under pressure

Record low GPM

• Prudent cost control prompts 11.2% 1Q18 SG&A to sales ratio, despite declined revenue

• Thai Baht strength increasing our cost base approx. USD16mn in 1Q18

Continued cost control

• FX management policy posted good FX gains of THB 581mn in 1Q18

• Tax savings mainly explained by lower operating performance

Non-operating items support net profit

• 1Q18 continue to deliver THB 137m positive share of profit

• Strong positive impacts from interest yield and tax savings

Stronger contribution from Red Lobster

1,700 1,700

1,500

1,690 1,700

1,900 1,950

1,980

2,100

2,300

2,000

1,800

1,550

1,480

1,700

1,800

800

1,300

1,800

2,300

2,800

Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18

Tuna prices are increasingly volatile

%Change

QoQ8.3% 8.0% 14.0% 1.2% -22.5%

%Change

YoY30.0% 17.3% 40.2% 34.8% -3.5%

1Q171,633

2Q171,763

3Q172,010

4Q17 2,033

1Q181,577

(USD/ton)

-22.5%

USD mn

31,42734,818 35,185 35,105

29,703

1Q17 2Q17 3Q17 4Q17 1Q18

SalesTHB mn

1Q18 Sales under pressure

1Q18 sales declined by 5.5% YoY to THB

29,703mn. Excluding the impact of Thai Baht

appreciation, sales would also declined by 2.8%

YoY, driven by:

Ambient seafood sales saw decline from weak

volume sales as tuna price declined sharply

during early 1Q18, resulting in declining selling

price for OEM tuna business.

For US subsidiary, while sales in USD were

almost stable YoY, the sales denominated in

THB are decreasing by 10% in value due to

USD depreciation vs. BHT for the same

percentage.

Frozen and chilled seafood export sales

affected by shrimp price decline by 14% YoY.

The US shrimp and lobster sales are also

affected by both USD depreciation and decline

sales volume

121,402 125,183 134,375 136,535

31,427 29,703

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2014 2015 2016* 1Q17 1Q18YoYGrowth 7.6% 3.1% 7.3%

895 1,015

-5.5% YoY

-15.4% QoQ

1.6%

9424,029USD mn

(-5.5% YoY)

1,054 1,065 942

1Q17 1Q18

1Q18 weak sales growth, compounded by FX impactRevenue growth component(THB million)

Remark: 1Shrimp & related business comprises of frozen shrimp and shrimp feed. 2Value-added & other products includes ready-to-eat products, frozen cephalopod, canned seafood, local products, bakery products, and

sales of scraps

-5.5% YoY

-2.8% YoY

Before currency impacts

29,703

31,427 +17

Tuna Shrimp

&

related

business1

Sardine

&

Mackerel

Salmon-

AmbientPet Care Value

added

& other

products2

USD

effect

EUR

effectLobsterOther

seafood -

Ambient

Salmon-

FrozenOther

seafood -

Frozen

-265+93

+53 -273

-265-170 +185 -66 -270

-1,086

+322

0%

-10% +13%+20%

-4%

-24%-8% +10%

-3%

-14%

-10% +4%

Brand, 35%

**FS - Brand, 6%

**FS - Private Label, 5%

Private Label, 54%

Strong growth in Thailand

Sales Breakdown by Business

Sales Breakdown by Geographic

1Q18 Sales contribution in key markets

marginally shifted in favor of domestic Thai

market, due partly to the company was focusing

more on selling product in domestic market to

offset weaker export sales as a result of intense

competition, TU continue to grow its new product

initiatives into Thai market

US market sales contribution was at 39%,

European market at 32% and Japan at 5%.

1Q18 branded sales mix slightly decrease to 41%

(down from 42% during 2017) leaving the private

label sales contributing the remaining 59% of

1Q18 sales

1Q18 total branded sales decreased by 7.8% YoY,

mainly due to the USD depreciation resulted in

weaker sales contribution from US branded sales

Private label sales also declined by 3.8% YoY due

to both volume sales decline and translation

impact.

Remark: *Others represent Asia, Australia, Middle East, Canada, Africa and South America

**FS stands for Food Service

44% 42% 39% 38% 39%

29% 29% 33% 32% 32%

7% 8% 8% 10% 12%7% 6% 6% 6% 5%

13% 14% 13% 15% 13%

0%

20%

40%

60%

80%

100%

2014 2015 2016 2017 1Q18

Others*

Japan

Domestic

Europe

USA

THB 29,703mn

1Q18

THB 136,535mn

Brand, 36%

**FS - Brand, 6%

**FS - Private Label, 6%

Private Label, 53%

2017

Emerging markets: Thailand and other EMs (China and ME)

We are focusing on the market where we have

less presence in the past, and now we can deliver

strong growth in these emerging markets.

1Q18 Thailand sales was at THB 3.5bn, up by

34.9% YoY. TU continue to grow its new product

initiatives into Thai market such as new tuna

meal product under brand Sealect, the frozen

seafood brand Qfresh and shrimp snack Monori

1Q18 Asia sales, ex-Thailand and Japan, was at

THB 1.8bn, up 40.8% YoY, driven by new market

growth initiatives in China and the Middle East.

2,549 2,803

4,317

3,342 3,439

1Q17 2Q17 3Q17 4Q17 1Q18

+34.9% YoY

Thailand salesTHB mn

1,274

1,737 1,686

2,1111,795

1Q17 2Q17 3Q17 4Q17 1Q18

+40.8% YoY

Asia sales (ex Thailand, Japan, but including China)THB mn

Thai Baht revenue underperformed USD revenue

since 2Q17 due to strong Thai Baht appreciation

against US dollar

Gross profit margin is weakened, due mainly to

high priced inventory and increased sales of

lower-margin commodity products.

Competition is increasing in the slowing market

environment. Retailer customers’ negotiation

very difficult with little ability to pass on raw

material prices.

Overall profit level of US ambient business is

limited

DOJ civil complains related legal fees further

depress profitability around USD5mn run-rate.

Some of our core businesses are suffering

2,800

3,000

3,200

3,400

3,600

3,800

80

85

90

95

100

105

110

Chicken of the Sea Sales

Sales (USDmm, LHS) Sales (THBmn, RHS)

USD mn THB mn

-10.0%

0.0%

10.0%

20.0%

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18

Profitability profile

GPM (%) OPM (%)

GPM 15.7 15.6% 14.8% 13.3%

14.5% 11.3%

19,020 19,501 19,927 18,141

4,551 3,360

-

5,000

10,000

15,000

20,000

25,000

2014 2015 2016 1Q17 1Q18

-26.2% YoY

4,551 4,669 4,6584,263

3,360

14.5%13.4% 13.2%

12.1%11.3%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

22.0%

24.0%

26.0%

28.0%

30.0%

1Q17* 2Q17 3Q17 4Q17* 1Q18

Weak gross margin from high raw material inventory pricesGross ProfitTHB mn

1Q18 Gross profit of THB 3,360mn, down 26.2%

YoY, mainly due to abrupt decline in raw material

prices and high priced inventory. The gross

profit was also affected by strong Baht

appreciation (10.2% YoY and 4.3% QoQ) against

USD.

1Q18 margin was at 11.3%, down 317bps YoY.

The margin remained under pressure due to:

A sharp decline in tuna raw material prices

(-22.5% QoQ, -3.5% YoY) affect gross margin

of tuna business, due to high price inventory,

US tuna business’ gross margin was under

pressure amid USD depreciation, rising tuna

raw material prices and shifting of sales mix in

favor of lower margin commodity products

THB currency appreciated against USD YoY

-26.2% YoY

-21.2 QoQ

GPM

Remark: *The 1Q17 and 4Q17 figures were restated mainly due to COGS reclassification

144

160

144 14450

70

90

110

130

150

170

1Q17 (USDmn,Equivalent)

1Q18 (USDmn)

16

Baht strength to Dollar caused us around THB 500mn in 1Q18Thai entities COGS related to exportsUSD mn

1Q18 average Thai Baht has appreciated against

US dollar by 10.2%, which shown relatively more

depreciation compared to the key competing

countries like Vietnam and Indonesia, where their

currencies appreciated 1.6% and depreciated

1.5% against US Dollar, respectively. Thai Baht

appreciation against US dollar significantly

outperform other exporting countries, resulting in

lower competitiveness of Thai exporters.

Due to a strong Thai Baht currency appreciation

of 10.2%, the company estimated that there are

approximately THB 500mn of Thai entity’s

expenses that incurred as a result of such

currency appreciation and that cannot be passed

on directly to our customers.

(per USD) Thailand

THB/USD

Vietnam

VND/USD

Indonesia

IDR/USD

China

CNY/USD

1Q17 35.12 22,901 13,274 6.87

1Q18 31.54 22,529 13,473 6.35

Appreciation/

(Depreciation)

% YoY

10.2% 1.6% -1.5% 7.5%

Currency movement, 1Q18 change YoYLocal currency per USD

Operating profit: Strong cost control continuedOperating ProfitTHB mn

Despite a strong cost control, 1Q18 Operating

profit was at THB 25mn, driven by weak

profitability from rising raw material prices.

Adjusted for FX impact, Operating profits should

remain at THB 432mn, down 67% YoY.

While revenue in Thai Baht term has shown a

decline of 5.5% YoY, 1Q18 normalized SG&A to

sales ratio remained at a controlled level of

11.2%, improved from 11.8% during 1Q17. In

absolute term, SG&A expenses declined by 10.0%

YoY to THB 3,335mn.

845

1,627

1,319

922

252.7%

4.7%3.7%

2.6%0.1%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

1Q17 2Q17 3Q17 4Q17 1Q18

-97.1% YoY

-97.3% QoQ

6,990 6,785 6,805

4,711

845 25

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2014 2015 2016 1Q17 1Q18

OP Margin

-97.3% YoY

OPM 3.5% 5.8% 5.4% 3.5%

2.7% 0.1%

Remark: *Base on the assumption that 70% of FX in particular period are realized

SG&A% 11.8% 8.7% 9.5% 9.5% 11.2%

Change in accounting policy and presentation

The effects of change in accounting policy and reclassification as at 31 December 2017 are disclosed as

follows:

As previously

reported

(Million Baht)

Adjustment

(Million

Baht)

Restated

(Million

Baht)

Balance sheet as at 31 December 2017

Inventories, net 43,360 (176) 43,184

Retained earnings as at 1 January 2017 26,528 (144) 26,384

Retained earnings as at December 2017 29,221 (176) 29,045

1Q17 Profit & Loss

Cost of sales (27,097) 221 (26,876)

Selling expenses (1,531) (115) (1,650)

Administrative expenses (1,914) (144) (2,056)

Profit for the period – Owners of the parent 1,469 (36) 1,432

The Group has changed the

accounting policy regarding the

recognition of certain

expenditures, which were

included in inventory cost by

recognizing such certain

expenditures directly in profit or

loss in order for the operating

results to reflect the current

business operation of the

Group.

The Group has changed the

presentation of certain

expenditures between cost of

sales, selling expenses and

administrative expenses in the

consolidated statement of

income.

These changes have been

applied retrospectively and the

effects of these changes are

disclosed hereafter.

EBITDA

Margin9.1% 9.2% 8.4% 8.3%

EBITDA supported by FX management and Equity IncomeEBITDATHB mn

2,863 2,874 2,9902,640

2,159

9.1% 8.3% 8.5%7.5% 7.3%

3.0%

8.0%

13.0%

18.0%

23.0%

28.0%

1Q17* 2Q17 3Q17 4Q17* 1Q18

-24.6% YoY

-18.2% QoQ

10,999 11,526 11,269 11,366

2,863 2,159

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2014 2015 2016 1Q17* 1Q18

-24.6% YoY

Despite a weak operating profit, TU reported

1Q18 EBITDA of THB 2,159mn. The increase was

driven mostly by prudent FX management and

income contribution from associates, mainly Red

Lobster and Avanti Feeds.

EBITDAMargin


1Q18 net profit supported by non-operating itemsNet ProfitTHB mn

1,432 1,411

1,7371,440

8694.6%4.1%

4.9%4.1%

2.9%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

1Q17* 2Q17 3Q17 4Q17* 1Q18

-39.3% YoY

-39.7% QoQ

5,092 5,302 5,254 6,021

1,432 869

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2014 2015 2016 1Q17* 1Q18

-39.3% YoY

NPM

Despite a very challenging operating

environment, TU reported 1Q18 net profit of THB

869mn, supported

The net profit was supported by:

Increased other income by 12% YoY,

Baht appreciation against US dollar put

pressure on profit margin, but resulted in THB

581mn FX gains during the quarter,

Associated companies continued to deliver

solid contribution of THB 301mn, up 13.1% YoY,

Prudent tax management and lower tax rate

resulted in lower tax charges during 1Q18.

Red Lobster investment continue to deliver solid

contribution despite fewer guest counts and

weather issue in the US. Interest income and

prudent tax management support the return from

this investment.

NPM 4.2% 4.2% 3.9% 4.4%


Normalized net profit was at THB690mnNormalized Net ProfitTHB mn

Norm NP

Margin

Excluding the one-off quarter-end items, 1Q18

normalized net profit was at THB 690mn,

representing 35.5% decline YoY

One-off positive items during 1Q18 of THB 179mn

comprised of:

Capital gain on sales of assets (+THB 140mn)

Tax credit from European ambient business

(+THB 39mn)

Remark: The normalized net profit still include the realized FX gains/losses from normal business operation

1,069

1,3721,590

1,374

690

3.4% 3.9% 4.5% 3.9%

2.3%0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

1Q17 2Q17 3Q17 4Q17 1Q18

-35.5% YoY

-49.8% QoQ

869 -79

690

1Q18

Reported NP1Q18

Normalized NP

-39

Rugen FischTax credit

-140

Capital gain

on sales of asset

1.10 1.11 1.10

0.30 0.18

2014 2015 2016 1Q17 1Q18

EPS: Facing operational headwinds

EPS*THB

0.30 0.29

0.37

0.30

0.18

1Q17 2Q17 3Q17 4Q17 1Q18

-39.3% YoY

-39.7% QoQ 1Q18 EPS was at THB 0.18. Challenging

operational headwinds was offset by supports

from non-operating items

Remark: *EPS in this slide represents fully diluted EPS based on current number of shares of 4,771,815,496

-39.3% YoY

137 -317 -33 -49 203

235 248 247 259 261

-128 -131 -134 -136 -127

22 38 300 160 -29

266 -162 380 235 308

0.06 -0.03 0.08 0.05 0.05

1Q18: First quarter remains seasonally strong

1Q17

Share of

profit

Other

Income

Finance

Costs

Income Tax

Net Income

EPS

(THB/share)

THB mn Red Lobster is a strong contributor to TU’s

1Q18 profits, adding THB 266mn to TU’s net

profits or was 44.1% net profit accretive

The restaurant report a slight decline in SRS,

but still deliver a seasonally strong 1Q18

EBITDA.

My Red Lobster Rewards membership loyalty

program grow faster than projected.

Off-premise sales continue to grow YoY, now

with over 470k active users.

RL will be reducing restaurant cost and

collaborating with TU to improve supply

collaboration.

2Q173Q174Q17

Red Lobster has contributed THB 266mn to the net profits

1Q18

5,544

2,938

1,369

2016 2017 1Q18

1Q18 Strong cashflow despite weak profitability

Annual Free Cash FlowTHB mn

1,049

1,751

280 -142

1,369

1Q17 2Q17 3Q17 4Q17 1Q18

Quarterly Free Cash FlowTHB mn

Remark: Change definition of Free Cash Flow; 1Cash Conversion Rate = FCF / EBIT; FCF= EBITDA-Changes in net working capital –

Change in other assets& Liabilities + non-cash expenses - CAPEX

Cash

Conversion

Rate10.48 0.79 0.12 -0.08 0.94

Cash

Conversion

Rate10.67 0.34 0.94

Despite rising raw material prices, 2017 Free cash

flow (FCF) remain positive at THB 1,369mn, due

mainly to profitable operation, destocking of

high-priced inventory and prudent capex

spending

Strong cash focused with continued deleveraging

balance sheet trend

Majority THB funding, reducing risk associated to currency volatility

Interest-bearing debts of THB 65,715mn

42%

2%

Long-term loan by maturityTHB 47,518 mn

By Maturity

2022 onwards

2021

2020

2019

Long-term

Debt

2017

Current

Portion

of Long-

term Debt

& finance

lease

Short-term

Loan

76%

2%

23%

76%

2%

EUR

98.1% 98.3%

0.9%

1.0% 1.7%

2017 1Q18

By Currency

USD

THB

THB 67,449mn THB 65,715mn

1Q18

23%

76%

2%

1Q18: Strong cashflow generation prompted debt repayment

+115

+600

+1,233 +70

+79

Free Cash Flow** THB 1,369 mn

Unit: THB mn

ND/E 1.38x

Kd = 3.21%

ND/E 1.35x

Kd = 3.04%

65,173+367

-1,159

-2,159

66,419

Net Debt

as of

31 Dec 2017

Net Debt

as of

31 Mar 2018

-393

Remark: *Included 1) change in loans to associates & other companies 2) change in investments in associates and other long-term investments 3) proceeds from sale of assets 4) dividend received and 5) change in non-controlling interest

**New definition of free cash flow, excluding income tax paid

Other

Investing &

Financing activities*

CAPEXOther non-

cash

expenses

Tax

payments

Net interest

paid

Dividends

paid

Change in

other assets

and

liabilities

EBITDA Change in

net working

capital

Income tax paid and other investing & financing

activities

Remark: 1ROE = Annualized quarterly net profit/ Average total shareholders’ equity2ROCE = Annualized EBIT / Average capital employed; where as Capital Employed = total assets - total current liabilities

(incl. current portion of long-term debt)

and EBIT = Total revenue – COGS – SG&A + share of profit in associates and joint ventures3Net WC day = INV day + A/R day – A/P day 4ND/E ratio = Net interest-bearing debt/ Total equity,

Net interest-beating debt = Total interest-bearing debt - Cash & Cash equivalents including ST investment

Net WC3

6.1%7.0%

8.4%8.1%9.1%

1Q184Q173Q172Q171Q17

1.35x

1.38x1.37x

1.33x1.34x

1Q184Q173Q172Q171Q17

ROCE2

ROE1 Debt to EBITDA

ND/E4

7.8%

13.0%15.6%

12.8%13.2%

1Q184Q173Q172Q171Q17

INV Days

7.616.37

5.645.705.66

1Q184Q173Q172Q171Q17

41,923 43,821 44,701 43,744 41,665

121

111113 113

129

1Q17 2Q17 3Q17 4Q17 1Q18

WC (THB mn) WC Day

39,130 40,418 42,155 43,184 40,691

132

119122

125

143

1Q17 2Q17 3Q17 4Q17 1Q18

INV (THB mn) INV Day

Improving D/E ratios; NWC turnover affected by lower revenue

US Civil case progress and settlement

• Tri-Union Seafoods LLC (Tri-Union) and Thai Union Group continue to fully support DOJ’s and

their investigation and still maintained conditional leniency with respect to the Investigation

under the DOJ’s Corporate Leniency Program. Provided we continue to fully cooperate with

the DOJ, neither Tri-Union nor any cooperating executives or employees within the scope of

the Investigation will face criminal fines, jail time, or prosecution.

• The civil cases are continuing. Plaintiffs have filed comparable lawsuits, which have been

combined with the original complaint into a single class action lawsuit. The plaintiff alleges that

Tri-Union violated U.S. antitrust laws, specifically Sections 1 and 3 of the Sherman Antitrust

Act.

• Tri-Union is presently unable to predict the probable outcome of these matters. Nevertheless,

Tri-Union is in discussions with some of its larger customers to discuss their complaints and

expects that selected resolutions by way of settlement could be reached within this year.

Agenda

Key Highlights

Recent Developments


Business Outlook

TU’s Consolidated Results

Results by Business Unit

Key operating impact: Key raw material prices declined YoY

Source: Thai Union Group and http://fishpool.eu/price-information/spot-prices/history/

Raw material prices

Declining, but picking up over last month

Decreasing compared to last year, but

clearly on upward trend over last 3 months

Tuna price at USD 1,800/ton in April 2018. 1Q18 average

price was USD 1,577/ton (-3.5% YoY, -22.5% QoQ)

Shrimp price at THB 160/kg in April 2018. 1Q18 average

price was THB 183/kg (-14.0% YoY, +4.2% QoQ)

Salmon price at NOK 71/kg in April 2018. 1Q18, average

price was NOK 62/kg (-8.6% YoY, +21.8% QoQ)

Exchange rate

Key operating impact:

USD/THB closed at 31.31 in April 2018. In 1Q18, average

USD/THB was at 31.54 (-10.2% YoY, -4.3% QoQ)

EUR/THB closed at 38.45 in April 2018. In 1Q18, average

EUR/THB was at 38.64 (+3.3% YoY, -0.4% QoQ)

GBP/THB closed at 44.07 in April 2018. In 1Q18, average

GBP/THB was at 43.93 (+1.0% YoY, +0.4% QoQ)

USD/THB EUR/THB

Continue depreciation from 2017

Brexit vote

Almost stable since Brexit vote

Thai Union’s global footprint

39%47%

3 strategic business segments

Ambient seafoodSales: THB 14,100 mn

PetCare, value added and

othersSales: THB 4,080 mn

Frozen, chilled seafood

and relatedSales: THB 11,522 mn

Frozen, chilled &

smoked salmon

Tuna business

Other seafood2Sardine & MackerelAmbient & Pouch

Salmon

Shrimp & related

business1 PetCare

Value-added

business3

Total 1Q18 sales: THB 29,703 mn

Other products4

58%42%

Sales Split:

33%

67%

9%

91%

14%Brand

Private label

Brand

Private label

Brand

Private label

Remark: 1.Shrimp & related business includes frozen shrimp, lobster, shrimp feed and value-added shrimp

2.Other seafood includes frozen cephalopod, crab, scallop, shellfish and other fish

3.Value-added business includes ready-to-eat products, maguro & cephalopod sashimi, local products, bakery products and snack

4.Other products include scrap, fishery and others

48% 51% 50% 56% 49%

52%49% 50% 44%

51%

88,822 96,849 93,883 90,158 83,314

- 1,000.00 2,000.00 3,000.00 4,000.00 5,000.00 6,000.00 7,000.00 8,000.00 9,000.00 10,000.00 11,000.00 12,000.00 13,000.00 14,000.00 15,000.00 16,000.00 17,000.00 18,000.00 19,000.00 20,000.00 21,000.00 22,000.00 23,000.00 24,000.00 25,000.00 26,000.00 27,000.00 28,000.00 29,000.00 30,000.00 31,000.00 32,000.00 33,000.00 34,000.00 35,000.00 36,000.00 37,000.00 38,000.00 39,000.00 40,000.00 41,000.00 42,000.00 43,000.00 44,000.00 45,000.00 46,000.00 47,000.00 48,000.00 49,000.00 50,000.00 51,000.00 52,000.00 53,000.00 54,000.00 55,000.00 56,000.00 57,000.00 58,000.00 59,000.00 60,000.00 61,000.00 62,000.00 63,000.00 64,000.00 65,000.00 66,000.00 67,000.00 68,000.00 69,000.00 70,000.00 71,000.00 72,000.00 73,000.00 74,000.00 75,000.00 76,000.00 77,000.00 78,000.00 79,000.00 80,000.00 81,000.00 82,000.00 83,000.00 84,000.00 85,000.00 86,000.00 87,000.00 88,000.00 89,000.00 90,000.00 91,000.00 92,000.00 93,000.00 94,000.00 95,000.00 96,000.00 97,000.00 98,000.00 99,000.00 100,000.00 101,000.00 102,000.00 103,000.00 104,000.00 105,000.00 106,000.00 107,000.00 108,000.00 109,000.00 110,000.00 111,000.00 112,000.00 113,000.00 114,000.00 115,000.00 116,000.00 117,000.00 118,000.00 119,000.00 120,000.00

1Q17 2Q17 3Q17 4Q17 1Q18

Ambient SeafoodChallenging operating environment

Sales (THB million) Quantity (Tons)

Gross Profit Margin (Percent) 1Q18 ambient seafood business sales were THB 14.1bn, down 1.7% YoY. While the volume sales declined 6.2%, the smaller sales decline was largely attributable selling price adjustment.

1Q18 Gross profit margin was at 14.0%, down 378bps YoY, driven by:

A sharp decline in tuna raw material prices (-22.5% QoQ) affect gross margin of tuna business, due to high price inventory,

US tuna business’ gross margin was under pressure amid USD depreciation, rising tuna raw material prices and shifting of sales mix in favour of lower margin commodity products

-1.7% YoY

-7.5% QoQ

-6.2% YoY

-7.6% QoQ

Brand

Private label

Brand

Private label

Total

Brand

Private label

41% 41% 41% 48% 42%

59%59% 59% 52%

58%

14,348 16,631 16,111 15,250 14,100

- 1,000.00 2,000.00 3,000.00 4,000.00 5,000.00 6,000.00 7,000.00 8,000.00 9,000.00

10,000.00 11,000.00 12,000.00 13,000.00 14,000.00 15,000.00 16,000.00 17,000.00 18,000.00 19,000.00 20,000.00

1Q17 2Q17 3Q17 4Q17 1Q18

18%21% 19%

17% 15%

17% 11% 14%17%

13%

18% 17% 17% 17%

14%

1Q17 2Q17 3Q17 4Q17 1Q18

30% 28% 30% 32% 31%

70% 72% 70% 68%69%

52,834 61,185 66,203 63,045

53,739

- 1,000.00 2,000.00 3,000.00 4,000.00 5,000.00 6,000.00 7,000.00 8,000.00 9,000.00 10,000.00 11,000.00 12,000.00 13,000.00 14,000.00 15,000.00 16,000.00 17,000.00 18,000.00 19,000.00 20,000.00 21,000.00 22,000.00 23,000.00 24,000.00 25,000.00 26,000.00 27,000.00 28,000.00 29,000.00 30,000.00 31,000.00 32,000.00 33,000.00 34,000.00 35,000.00 36,000.00 37,000.00 38,000.00 39,000.00 40,000.00 41,000.00 42,000.00 43,000.00 44,000.00 45,000.00 46,000.00 47,000.00 48,000.00 49,000.00 50,000.00 51,000.00 52,000.00 53,000.00 54,000.00 55,000.00 56,000.00 57,000.00 58,000.00 59,000.00 60,000.00 61,000.00 62,000.00 63,000.00 64,000.00 65,000.00 66,000.00 67,000.00 68,000.00 69,000.00 70,000.00 71,000.00 72,000.00 73,000.00 74,000.00 75,000.00 76,000.00 77,000.00 78,000.00 79,000.00 80,000.00 81,000.00 82,000.00 83,000.00 84,000.00 85,000.00 86,000.00 87,000.00 88,000.00 89,000.00 90,000.00

1Q17 2Q17 3Q17 4Q17 1Q18

Frozen, chilled seafood and relatedCurrency appreciation hurt competency

10%11%

10% 9%

8%

7%

9%9%

9%

6%

8%

9% 10%9%

6%

1Q17 2Q17 3Q17 4Q17 1Q18

Total

Brand

Private label

Sales (THB million) Quantity (Tons)

Gross Profit Margin (Percent) 1Q18 frozen and chilled seafood business sales were at THB 11.5bn, down 8.8% YoY, driven mainly by Baht appreciation against US dollar (-10.2% YoY) and falling shrimp price (-14% YoY), despite increasing sales volume.

Gross profit margin was at 6.4%, down 153bps YoY, driven by a strong Baht appreciation and intense competition from competing countries

US frozen business is facing operating headwind from its crab meat and lobster business due partly to currency devaluation.

Brand

Private label

Brand

Private label

-8.8% YoY

-24.7% QoQ

64% 65% 67% 66%67%

36% 35% 33% 34%

33%

12,635 13,685 14,494 15,307

11,522

- 1,000.00 2,000.00 3,000.00 4,000.00 5,000.00 6,000.00 7,000.00 8,000.00 9,000.00

10,000.00 11,000.00 12,000.00 13,000.00 14,000.00 15,000.00 16,000.00 17,000.00 18,000.00 19,000.00 20,000.00

1Q17 2Q17 3Q17 4Q17 1Q18

+1.7% YoY

-14.8% QoQ

PetCare, value-added and othersPetCare profitability under pressure

Sales (THB Million) Quantity (Tons)

Gross Profit Margin (Percent) 1Q18 PetCare and valued added segment sales were at THB 4,081mn, down 8.2% YoY with the sales from the value-added business declining. Pet food is seeing a marginal decline in sales due to product price adjustment to reflect recent decline in tuna raw material prices.

Gross margin has declined from last year, mainly driven by the PetCare business’ profit margin was under pressure due to high tuna raw material inventory price.

93% 90% 90% 89% 90%

7% 10% 10% 11% 10%35,900 36,884 38,454 39,862 37,638

- 1,000.00 2,000.00 3,000.00 4,000.00 5,000.00 6,000.00 7,000.00 8,000.00 9,000.00 10,000.00 11,000.00 12,000.00 13,000.00 14,000.00 15,000.00 16,000.00 17,000.00 18,000.00 19,000.00 20,000.00 21,000.00 22,000.00 23,000.00 24,000.00 25,000.00 26,000.00 27,000.00 28,000.00 29,000.00 30,000.00 31,000.00 32,000.00 33,000.00 34,000.00 35,000.00 36,000.00 37,000.00 38,000.00 39,000.00 40,000.00 41,000.00 42,000.00 43,000.00 44,000.00 45,000.00 46,000.00 47,000.00 48,000.00 49,000.00 50,000.00

1Q17 2Q17 3Q17 4Q17 1Q18

93% 88% 91% 92% 92%

7% 12% 9% 8%8%

4,444 4,502 4,580 4,548 4,081

-

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

6,000.00

1Q17 2Q17 3Q17 4Q17 1Q18

23%20%

16% 18% 16%

1Q17 2Q17 3Q17 4Q17 1Q18

Brand

Private label

Brand

Private label

-8.2% YoY

-10.3% QoQ

+4.8% YoY

-5.6% QoQ

Total

Global Presence

U.S. And

Canada

40%Europe

32%

Thailand

12%

16%

Others

US & Canada: Weakened Thai Baht sales driven by currency

1Q18 US and Canada sales was at THB11.8bn,

down by 10.4% YoY. While sales in US dollar term

remain relatively stable, most of the sales decline

was due to Baht appreciation against US dollar.

Chicken of the Seas reported negative margin

product mix in favor of lower margin products

and price negotiation is yet to take effect.

Frozen business is facing challenges from

disintermediation from customers

Red Lobster record strong profit contribution

13,190 13,467 13,753 14,054

11,821

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

1Q17 2Q17 3Q17 4Q17 1Q18

Sales:THB-10.4% YoY

-15.9% QoQ

Europe: Showing some bright spots

1Q18 European sales was at THB 9.4bn, down by

3.4% YoY.

While the volume sales has shown some decline,

TU’s European businesses has demonstrated the

ability to gradually repriced its product.

However, with the high cost inventory, profit

margin remain under pressured.

European salmon business and Rugen Fisch

continue to deliver operational improvement.

9,758

11,949 11,18310,295

9,422

0.00

2000.00

4000.00

6000.00

8000.00

10000.00

12000.00

14000.00

16000.00

18000.00

20000.00

1Q17 2Q17 3Q17 4Q17 1Q18

Sales:THB-3.4% YoY

-8.5% QoQ

Thailand: Focusing inward

1Q18 Thailand sales was at THB 3.4bn, up by

34.9% YoY.

Thai Union is focusing more on selling product in

domestic market to offset weaker export sales as

a result of intense competition,

TU continue to grow its new product initiatives

into Thai market such as new tuna meal product

under brand Sealect, the frozen seafood brand

Qfresh and shrimp snack Monori

Remark: *4Q16 figures were restated mainly due to reclassification of fishing fleet discontinued operations

2,549 2,803

4,317

3,342 3,439

0.00

1000.00

2000.00

3000.00

4000.00

5000.00

6000.00

7000.00

8000.00

9000.00

10000.00

1Q17 2Q17 3Q17 4Q17 1Q18

Sales:THB+34.9% YoY

+2.9% QoQ

5,9316,598

5,932

7,414

5,020

-1000.00

1000.00

3000.00

5000.00

7000.00

9000.00

11000.00

13000.00

15000.00

1Q17 2Q17 3Q17 4Q17 1Q18

Sales:THB

EM and Rest of the world: New market penetration

2017 Emerging markets sales of THB 5.0bn, down

15.4% YoY.

The weakness was driven mainly by lower sales

to Japan. However, the initiatives to sell frozen

products into China through both own brand King

Oscar and business partnership with Alibaba still

deliver good growth, albeit from low base.

Remark: *4Q16 figures were restated mainly due to reclassification of fishing fleet discontinued operations

-15.4% YoY

-32.3% QoQ

Remark: 1Shrimp & related business includes frozen shrimp, shrimp feed and value-added shrimp2Other seafood includes frozen cephalopod, crab, scallop, shellfish and other fish3Value-added business includes ready-to-eat products, maguro & cephalopod sashimi, local products, bakery products and snack4Other products include scrap, fishery and others

1Q18 Segment Profitability

THB 3,360 million

Gross Profit

Frozen, chilled

seafood and

related

PetCare, value

added and others

Ambient seafood

New segment

Total

Sales

(THB million)

Margin

(%)

Gross Profit

(THB million)

1,970

737

654

14,100

11,522

4,080

14.0%

6.4%

16.0%

29,703 11.3%

*Tuna business

*Sardine & Mackerel

*Ambient & Pouch Salmon

*Shrimp & related business1

*Frozen, chilled &

smoked salmon

*PetCare

*Value-added & others3

*Other seafood2

*Other products4

*Lobster

Agenda

Key Highlights

Recent Developments


Business Outlook

Business Outlook: There are moderate positive signals in 2018

Price increases were negotiated successfully for our Branded business in Europe and in the US and will become effective starting Q218

Spot prices and average inventory cost more balanced

Positive outlook on shrimp cost and improving market dynamics in US

Product innovations and Marine Ingredient business will go live this year

Continued cost management focus, new cost program of -1bn THB initiated

Strong cash focus with continued deleveraging balance sheet trend

Appendix

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

0

5

10

15

20

25

2013 2014 2015 2016 2017 2018

TU SET

Share Capital Information

Stock Information

Dividend Policy

At least 50% of net profit

Major Shareholders

THB

Bloomberg/ Reuters TU TB/ TU.BK

Share price (4 May 2018) : THB 18.30

Historical price :

52-week high THB 22.70

52-week low THB 17.40

No. of paid up shares : 4,771.8mn

Par value : THB 0.25

Market Capitalization : THB 87.3bn

Chansiri Family20.4%

Niruttinanon Family 7.2%

Mitsubishi Corporation

7.3%

Thai NVDR6.9%

Social Security

Office 7.1%

Others51.2%

Source: SET and TU

As of 30 March 2018

Free float : 67.4%

Foreign ownership/ Foreign limit 33.2%/ 45.00%

1Q18 Income Statement

Remark: *Including share of income from investment in associates

**1Q17 and 4Q17 figures were restated mainly due to COGS reclassification

***Normalized net profit exclude ALL one-off adjustments and items throughout the period

1Q18/ 1Q18/

1Q17 4Q17

Change Change

Sales 29,703 100% 31,427 100% 35,105 100% -5.5% -15.4%

Cost of sales (26,343) -88.7% (26,876) -85.5% (30,842) -87.9% -2.0% -14.6%

Gross profit 3,360 11.3% 4,551 14.5% 4,263 12.1% -26.2% -21.2%

SG&A expenses (3,335) -11.2% (3,706) -11.8% (3,341) -9.5% -10.0% -0.2%

FX gain (loss) 581 2.0% 590 1.9% 351 1.0% -1.5% 65.3%

Other income* 844 2.8% 750 2.4% 643 1.8% 12.5% 31.1%

EBIT 1,449 4.9% 2,184 7.0% 1,917 5.5% -33.6% -24.4%

Finance cost (505) -1.7% (498) -1.6% (533) -1.5% 1.5% -5.3%

EBT 944 3.2% 1,687 5.4% 1,383 3.9% -44.0% -31.7%

Tax 13 0.0% (199) -0.6% 230 0.7% -106.4% -94.5%

Profit (Loss) from discontinued operarion 10 0.0% 36 0.1% (37) 0.0% -72.5% -126.8%

Net income 967 3.3% 1,523 4.8% 1,614 4.6% -36.5% -40.1%

Net income (loss) attributable to:

Equity holders of the Company 869 2.9% 1,432 4.6% 1,440 4.1% -39.3% -39.7%

Non-controlling interests of the subsidiaries 98 0.3% 91 0.3% 173 0.5% 7.4% -43.6%

Earnings per share

Basic earnings per share 0.18 0.30 0.30 -40.0% -40.4%

Diluted earnings per share 0.18 0.30 0.30 -40.0% -40.4%

Exchange rate

THB/USD 31.54 35.11 32.95 -10.2% -4.3%

Normalized net profit*** 960 3.2% 1,069 3.4% 1,374 3.9% -10.2% -30.1%

Consolidated

4Q17*%

to sales(Unit: THB mn) 1Q18

%

to sales1Q17*

%

to sales

Statement of Financial Position as of 31 March 2018

Remark: *Including short-term investments

Cash and cash equivalents* 542 0.4% 815 0.6% -33.4%

Trade and other receivables - net 13,961 9.8% 16,344 11.2% -14.6%

Inventories - net 40,691 28.6% 43,184 29.6% -5.8%

Other current assets 2,630 1.9% 2,174 1.5% 21.0%

Total current assets 57,824 40.7% 62,581 42.8% -7.6%

Fixed assets 25,425 17.9% 25,261 17.3% 0.6%

Goodwill and other intangible assets 13,846 9.7% 14,080 9.6% -1.7%

Other non-current assets 44,957 31.6% 44,169 30.2% 1.8%

Total Assets 142,052 100% 146,092 100% -2.8%

Bank overdrafts and short-term loans 14,075 9.9% 15,365 10.5% -8.4%

Trade and other payables 17,048 12.0% 19,823 13.6% -14.0%

Current portion of long-term loans 796 0.6% 849 0.6% -6.3%

Current portion of debentures 3,149 2.2% 0 0.0% #DIV/0!

Current portion of finance lease liabilities 49 0.0% 47 0.0% 3.2%

Other current liabilities 607 0.4% 573 0.4% 5.9%

Total current liabilities 35,724 25.1% 36,657 25.1% -2.5%

Long-term loans from financial institutions 14,594 10.3% 14,712 10.1% -0.8%

Debentures 32,914 23.2% 36,169 24.8% -9.0%

Finance lease liabilities - net of current portion 138 0.1% 155 0.1% -10.7%

Other non-current liabilities 10,413 7.3% 10,348 7.1% 0.6%

Total Liabilities 93,783 66.0% 98,040 67.1% -4.3%

Non-controlling interests of the subsidiaries 3,721 2.6% 3,768 2.6% -1.2%

Total Shareholders’ Equity 48,269 34.0% 48,051 32.9% 0.5%

Total liabilities and shareholders’ equity 142,052 100% 146,092 100% -2.8%

Change(Unit: THB mn) 1Q18% to total

assets2017

% to total

assets

1Q18 Statement of Cash Flow

(Unit: THB mn) 1Q18 1Q17 Change

Profit before income tax 954 1,722 (768)

Adjustments for depreciation & amortisation expenses 709 679 30

Other adjustments (96) (384) 287

Changes in operating assets and liabilities 1,035 (2,862) 3,897

Cash flows receipts from operating activities 2,602 1,959 643

Net cash receipts (payments) from operating activities 2,532 1,695 837

Net cash payments for investing activities (1,052) (892) (160)

Net cash receipts (payments) for financing activities (1,857) (1,531) (325)

Net increase (decrease) in cash and cash equivalent (377) (728) 352

Cash and cash equivalents - opening balance 573 731 (158)

Exchange gain (loss) on cash and cash equivalents 6 (16) 22

Cash and cash equivalents - closing balance 190 (014) 204

CAPEX (1,233) (1,005) (228)

Management Est. Free Cash Flows* 1,369 1,049 320

Consolidated

Corporate website: www.thaiunion.com

IR website: http://www.thaiuniongroup.com/en/investor.ashx

E-mail: [email protected] Tel: +66 2298 0024

1Q18 Results PresentationMay 08, 2018 · 1Q18: Strong Baht/high tuna cost accounted for weak...

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