International food and beverage manufacturing company Thai Union posted a loss of THB 17.2 billion (USD 477.5 million, EUR 442.9 million) in the fourth quarter of 2023, culminating in the write-off of its investment in the Red Lobster seafood restaurant chain, according to the company’s latest results report.
Thai Union originally upped its investment in Red Lobster in 2020, taking a larger stake in the chain as part of a consortium that bought out Golden Gate Capital’s remaining equity stake. However, in January 2024, after several consecutive periods of poor performance, Thai Union announced it aims to pursue an exit from its strategic partnership and minority investment in Red Lobster Master Holdings, which it has held since 2016.
“During the past years, the combination of the Covid-19 pandemic, sustained industry headwinds, higher interest rates, and rising material and labor costs have impacted the Red Lobster business, resulting in prolonged negative financial contributions to the company and its shareholders,” Thai Union said in a 16 January announcement.
Following that announcement with its Q4 and full-year 2023 results, Thai Union said the decision to exit from the chain came from a review of Red Lobster that sought to identify areas where it could enhance operational and financial aspects of the chain. After its analysis, the company concluded that the ongoing financial demands of Red Lobster no longer coincide with Thai Union’s priorities. Consequently, the company decided to divest from its minority investment in Red Lobster.
As a result, Thai Union recorded a one-time, non-cash impairment charge of THB 18.4 billion (USD 510.7 million, EUR 473.8 million) in the Q4 2023.
The share of Thai Union’s losses stemming from Red Lobster also continued to rise in the fourth quarter, reaching THB 552 million (USD 15.3 million, EUR 14.2 million), which was up THB 456 million (USD 12.6 million, EUR 11.7 million) year over year, largely due to “industry headwinds, including higher material and labor costs and high interest rates,” Thai Union said.
According to Bloomberg data dating to 1996, the quarterly net loss of THB 17.2 billion (USD 477.5 million, EUR 442.9 million) was Thai Union's largest to date, but the company said its financial outlook remains robust, as affirmed by its Thai Rating and Information Services Rating, which partners with S&P Global to rank business performance. The company maintained its A+ status in its most recent review.
Excluding the impairment charge, Thai Union saw its normalized net profit increase 0.4 percent year over year to THB 1.24 billion (USD 34.4 million, EUR 31.9 million) in Q4 2023, mainly due to favorable foreign exchange gains.
Thai Union reported Q4 2023 sales of THB 35.5 billion (USD 985.2 million, EUR 914.2 million), down 10.3 percent year over year, with the company attributing the dip to lower sales of its frozen, chilled, and ambient seafood products.
Quarter over quarter, though, Q4 2023 sales actually rose 4.8 percent, mainly thanks to record sales of its petcare products, which increased 22.5 percent compared to Q3 2023.
Thai Union attributed the growth in petcare sales to “restocking from key customers, especially in the U.S. and Europe, along with higher selling prices and new co-creation products.” Though performance of the company’s frozen and chilled seafood struggled year over year, it also saw improvement quarter over quarter, driven by robust salmon sales during the holiday season.
In 2023 overall, Thai Union’s normalized net profit fell 37 percent year over year to THB 4.5 billion (USD 125 million, EUR 116 million), primarily due to lower operating profit, foreign exchange losses, rising finance costs, and declining tax credits, the company said.
Its sales also dropped 12.5 percent year over year in the period to THB 136.2 billion (USD 3.8 billion, EUR 3.5 billion), with decreases seen across all of its business segments, including petcare (down 30.6 percent year over year), frozen and chilled seafood (down 17 percent year over year), value-added (down 5 percent year over year), and other categories.
“There were some significant challenges during 2023, with inflationary pressures across all markets where Thai Union operates and an ongoing cost-of-living crisis that has impacted consumers’ spending power,” Thai Union CEO Thiraphong Chansiri said. “Despite these headwinds, Thai Union continued to demonstrate resilience, which has been reflected in an improved performance in the fourth quarter, supported in part by the successful implementation of our profit protection plan across our entire business.”
In 2024, Thai Union aims to raise its sales by between 3 percent and 4 percent year over year and spend capital expenditure of between THB 4 billion and THB 4.5 billion (USD 111 million and USD 125 million, EUR 103 million and EUR 116 million).
Additionally, as part of Thai Union's initiatives to foster long-term expansion, the company has continued to work toward achieving goals outlined in its SeaChange 2030 sustainability initiative, centered around the mantra of “Healthy Living, Healthy Oceans.”
“While external challenges will persist in 2024, I am confident that Strategy 2030 will sharpen our focus on Thai Union’s core businesses of ambient seafood, frozen, and petcare, which will help us drive stronger profitability and value for all shareholders,” Chansiri said.
