Thai Union’s Q1 profit hit by currency exchange, Red Lobster losses
Thai Union reported a drop in net profit in the first quarter of this year, partially due to a loss from currency exchange and lower income from American dining restaurant chain Red Lobster Seafood.
The company earned a net profit of THB 1 billion (USD 30.8 million, EUR 28.2 million) in the first three months of 2020, down 20.2 percent year-on-year.
“The decline was mostly driven by foreign exchange loss and lower equity income from Red Lobster despite strong core business performance,” Thai Union said in its Q1 results, released 5 May.
The depreciation of the Thai baht has resulted in a loss of THB 262 million (USD 8.1 million, EUR 7.4 million) for the company during the period.
Thai Union incurred a loss of THB 18 million (USD 554,000, EUR 507,000) from its investment in associates in the first quarter, from a profit of THB 347 million (USD 10.7 million, EUR 9.8 million) in the same period last year, which was “mainly due to Red Lobster, along with other businesses in the U.S., being ordered to close down all of its outlets during the COVID-19 pandemic.”
Thai Union said Red Lobster has been impacted by the lockdowns in the U.S., with all dining halls being shut down and 60 percent being open for “take-out” service.
However, the “off-premise business” has proved to be a success as it “has been growing rapidly, reaching more than 300 [percent growth].”
According to the Thai company, Red Lobster currently has more than USD 200 million (EUR 183 million) in cash as it focuses on cost reduction and cash preservation. As part of the cost reduction measures, the seafood restaurant chain has put on hold advertising, implemented cap-ex and executive pay cuts, and is in the process of negotiating renewal and rent terms to reflect the new business realities created by the COVID-19 pandemic.
Thai Union paid USD 575 million (EUR 526 million) to buy a minority stake in Red Lobster in 2016.
Meanwhile, the Thai company said its sales in the first quarter rose 5.9 percent year-on-year to THB 31 billion (USD 954 million, EUR 873 million) mainly due to the growth of 16.2 percent in sales value from the ambient seafood business.
“The sales increase was attributable mainly to a strong sales volume growth of 6.7 percent year-on-year as consumers practice social distancing and more home cooking,” it said.
Thai Union’s ambient seafood category, including tuna, sardine, salmon, mackerel, and herring, mainly refers to shelf-stable items that are largely sold through retail channels and sometimes wholesalers.
The company said its frozen and chilled seafood sales went down by 5 percent in the first three months, but the increase in sales to retail sector and to Japan and other Asian markets has partially offset the decline in frozen and chilled seafood.
Thai Union said it has no problem with material issues in its supply chain operations or its production facilities because of the COVID-19 crisis.
The company’s skipjack tuna in April fell 2.9 percent to USD 1,400 (EUR 1,281) per metric tons (MT) from the average USD 1,442 (EUR 1,320) per MT in the first quarter. The prices of whiteleg shrimp in the month also decreased by 10.7 percent to THB 133 (USD 4.00, EUR 3.70) per kilogram, from THB 149 (USD 4.60, EUR 4.20) per kilogram in the first quarter.