Following record highs in net profit and sales in the third quarter of 2022, Thai Union has posted drops in its net profit for three straight quarters, including in the second quarter of 2023, despite improved performance from Red Lobster, its global restaurant chain.
The Bangkok-based seafood producer earned a net profit of THB 1 billion (USD 28.6 million, EUR 26.1 million) between April and June – down 36.7 percent year over year – a drop due mainly to “unfavorable nonoperating items such as a negative impact from foreign exchange losses, lower tax credit, and dilution … on i-Tail [Thai Union’s pet care brand] net profits,” the company stated.
In Q2 2023, Thai Union reported sales of THB 34.1 billion (USD 973.8 million, EUR 889.6 million), down 12.6 percent year over year, with declines occurring across the majority of sectors, such as pet care, frozen and chilled seafood, and value-added products.
The improved performance of Red Lobster and other income sources, however, partially offset the decline in second-quarter net profit compared to the two previous drops, Thai Union stated.
The turnaround for Red Lobster, which Thai Union acquired in 2020, began early this year as the restaurant chain contributed a profit of THB 20 million (USD 571,200, EUR 522,000) to Thai Union’s bottom line in Q1 2023 “thanks to [the] seasonality and success of [the] Lobsterfest campaign.”
Red Lobster’s share of loss during Q2 2023 was THB 189 million (USD 5.4 million, EUR 4.9 million), marking an improvement compared to its loss contribution of THB 383 million (USD 10.9 million, EUR 10 million) in the same period last year. This less extreme loss was due, in large part, to “price increases, lower cost of goods sold, and lower labor costs from our turnaround strategy.”
These much-needed improvements, though slight, could not have came at an opportune time for Thai Union.
But Red Lobster began to right itself in February 2023, when it launched a new frozen line – a core piece of the restaurant chain’s multipronged turnaround plan. The launch included packaged retail products now available in 5,200 stores and online in the U.S.
The improved performance has also enabled Thai Union to reduce the restaurant chain’s expected share of loss for this year to THB 500 million (USD 14.3 million, EUR 13 million) from the THB 600 million (USD 17.1 million, EUR 15.7 million) the company announced previously.
In addition, Thai Union said it expects to lift a USD 65 million (EUR 59.4 million) guarantee in September 2023, which it issued in 2022, because Red Lobster has reached a required floor on earnings before interest, tax, depreciation, and amortization (EBITDA).
However, Red Lobster was hurt by its holding in i-Tail. The pet care business' sales tumbled 41.8 percent due to lower demand, particularly in the U.S. and Europe, negative product mix reviews, and a drop in freight rates. Thai Union reduced its majority stake in i-Tail from 99.5 percent to 77.8 percent following the subsidiary’s listing on the Stock Exchange of Thailand in December of last year.
Elsewhere, Thai Union’s frozen and chilled seafood business sales decreased by 17.3 percent due to the normalization of seafood prices and the lower volume caused by the “rightsizing” of its frozen business in the U.S. Higher sales of salmon and feed products partially offset the decline in its frozen and chilled seafood business.
Thai Union’s ambient seafood sales bumped up 1.3 percent year over year, which the company attributed to elevated prices and promotional efforts, particularly in the E.U. Thai Union’s ambient seafood category, including tuna, sardines, salmon, mackerel, and herring, mainly comprises shelf-stable items that consumers typically buy through retail channels and, sometimes, wholesalers.
Despite the year-over-year declines in sales and net profit in the second quarter, Thai Union said the results have already improved from the first quarter. Its sales over Q2 grew 4.3 percent from the first quarter, while its net profit was up 0.7 percent quarter over quarter.
Thai Union CEO Thiraphong Chansiri said though H1 2023 “has not been easy,” the company has started to see “early signs of a recovery” in many markets in the second half of 2023.
“Looking ahead to the remainder of 2023, Thai Union will reinforce its profit protection plan measures globally to improve profitability, targeting cost savings and greater cost efficiencies in all operations. We remain optimistic about the longer-term outlook,” Chansiri said.
Along those optimistic lines, Thai Union launched the next stage of its sustainability strategy, SeaChange 2030, in July 2023, under which the company committed to spend THB 7.2 billion (USD 205.6 million, EUR 187.8 million) through 2030 to ensure 100 percent of its seafood comes from sustainable sources.
Photo courtesy of Thai Union
