Thai Union reports positive Q4 sales, announces buyout of TMAC joint venture
Thai Union posted sales of THB 36 billion (USD 1.1 billion, EUR 970 million) in the fourth quarter of 2018, which the company said was driven by strong volume growth in its frozen and chilled seafood segments and its pet care business.
While its quarterly sales were up 3.7 year-over-year in value, the Bangkok, Thailand-based seafood giant saw its annual sales decline 1.2 percent in value, to THB 133.3 billion (USD 4.1 billion, EUR 3.6 billion) which it blamed on the appreciation of the Thai baht against the U.S. dollar. In its 20 February filing statement, the company said excluding the impact of foreign currency conversion, its annual sales would have increased by 0.5 percent year-on-year.
The company registered an 11.4 percent increase in the fourth quarter in gross profit, which reached THB 5.4 billion (USD 172.8 million, EUR 152.6 million), though its annual profit in 2018 fell 2.2 percent to THB 18.9 billion (USD 604.9 million, EUR 534 million), which the company said was due to higher prices for raw material and volatility in foreign exchange rates.
Thai Union’s net profit dropped 13.4 percent year-over-year in Q4 2018 to THB 1.2 billion (USD 38.4 million, EUR 33.9 million), and sank 13.4 percent year-over-year in the full year’s accounting, reaching THB 5.2 billion (USD 166.4 million, EUR 146.9 million).
The company said sales in North America “continued to play an important role in the company's revenue,” accounting for 39 percent of total sales, while Europe contributed 30 percent. Thai Union also benefitted from Thailand’s domestic market growing to 11 percent of its total sales. The combined Asia Pacific, Middle East, Africa, and South America sales regions contributed the final 20 percent of Thai Union’s sales.
Thai Union said the lower figures were partially due to Chicken of the Sea’s legal settlement in relation to several lawsuits relating to price-fixing accusations, which cost the company THB 1.4 billion (USD 44.8 million, EUR 39.5 million) in the second quarter of 2019. It also experience losses related to the closure of its subsidiary, Edinburgh Salmon Company (ESCo), for which the company took expenses of THB 489 million (USD 15.7 million, EUR 13.8 million), and an investment impairment of THB 87 million (USD 2.8 million, EUR 2.5 million) from its subsidiary TMAC.
In a separate announcement on 20 February, Thai Union announced it would purchase Mitsubishi’s 49 percent share in TMAC for THB 110 million (USD 3.5 million, EUR 3.1). TMAC, a shrimp farming business launched in 2012, will pursue Global Aquaculture Alliance Best Aquaculture Practices (BAP) four-star certification in 2019, and the move was made “to eliminate potential conflict of interest” between Thai Union and Mitsubishi “by allocating actual cost for this [certification] to Thai Union,” the company said in a statement.
Separately, Thai Union’s investment in the Red Lobster restaurant chain, originally made in 2016, is still bleeding losses for the company, though less in 2018 than in 2017. Even though the company opened the first Red Lobster in China – in a mall in downtown Shanghai – in December 2018, Red Lobster cost the company THB 137 million (USD 4.4 million, EUR 3.9 million) last year. In its financial statement, the company remained bullish on its investment, which is a joint venture with FYM Restaurants, the operator of China’s Morton’s Steakhouse restaurants. Thai Union said the opening of the first Chinese Red Lobster was “part of the American casual dining chain’s plan to tap the Chinese market and their growing demand for quality seafood.”
"Despite challenging market conditions, we stayed firmly focused on operational excellence and profitability improvement,” Thai Union CEO Thiraphong Chansiri said in a press release. “The good results from last quarter gives us confidence that 2019 will see a stronger and successful year.”
In 2019, Thai Union has set the target of achieving a 5 percent increase in organic sales growth and a 15 percent gross profit margin.
“The company aims to maintain stringent cost control initiatives to keep SG&A-to-sales ratio at around 10 percent level,” it said. “These should result in further profit recovery in 2019.”