Thai Union sales down but net profit edges up in third quarter

The company reported net profit of Bt1.31 billion on sales of Bt34.17 billion. However, normalised net profit from operations in the third quarter adjusted for impairments from Edinburgh Salmon Company amounted to Bt420 million, bringing the adjusted net profit to Bt1.7 billion. The net profit margin improved to 5.1 per cent from 4 per cent in the second quarter.
Gross profit improved to Bt5.37 billion quarter on quarter, while the gross profit margin was 15.7 per cent compared to 14 per cent in the second quarter, marking the best gross-profit performance since 2016. Inventories of higher-priced raw materials, particularly in the shrimp business, along with the baht’s appreciation, contributed to ongoing market volatility.
Thai Union’s ambient seafood sales in the third quarter were Bt16.80 billion, up 0.4 per cent year on year. Sales contribution from the frozen and chilled seafood business fell 8.1 per cent year on year to Bt13.03 billion, and PetCare and value-added product sales fell 5.4 per cent to Bt4.33 billion year on year due partly to the baht’s appreciation against the US dollar at 1.2 per cent year on year.
In the first three quarters of 2018, North America contributed 39 per cent of total sales, followed by Europe at 31 per cent, the Thai domestic market at 10 per cent, and other markets at 20 per cent.
Tougher market competition in North America, together with the appreciation of the US dollar, saw the sales of frozen and chilled seafood, particularly shrimp and lobster, decline in value while the volume of the frozen and chilled business also declined by 3.5 per cent in this key region.
However, the China and the Middle East markets continued to grow, with sales contributions improving due to the launch of new products and strong marketing and sales efforts.
The operating profit is Bt1.83 billion, up 33.1 per cent year on year. The stringent cost control prompted one per cent selling, general and administration (SG&A) expenses to decline year on year. 
However, the SG&A-to-sales ratio increased slightly to 10.4 per cent in the third quarter, compared to 10.3 per cent in the same period last year due to revenue weakness.
Strong working capital management led to improved earnings before interest, tax, depreciation and amortisation of Bt3.22 billion in the third quarter. Thai Union reduced net debt-to-equity ratio to 1.40 times in the third quarter compared to 1.41 times at the end of the second quarter.
“We increased our gross profit margin and net profit was the best since 2015, resulting from solid operation support, significant operational improvement and stable raw material prices,” said Thiraphong Chansiri, Thai Union’s CEO.
“Thai Union will continue to expand its business portfolio through business diversification while continuing aggressive development of product innovation,” Chansiri added.
Thai Union recently introduced the Thammachart Seafood premium store, The Lobster Lab, at Alibaba’s retail chain Hema in Shanghai. This take-out and sit-down restaurant concept serves live lobsters from North America and meets Chinese consumers’ growing demand for tasty and nutritious seafood. 
In Europe, Thai Union’s Marine Ingredients business unit recently commissioned a state of the art fish oil refinery plant in Rostock, Germany to produce high-value refined tuna oil which is high in DHA, one of the key components in infant formula, dietary supplements and clinical nutrition. Completing the “dock to door” tuna oil supply chain is Thai Union’s first step in valorising the whole fish to its full potential, the company said.