The quarterly gross profit margin improved significantly to 15.15 per cent from 13.8 per cent.
Additionally, the quarterly operating profit jumped up 54.6 per cent to THB 1,454 million from THB 940 million a year ago. The higher operating margin was primarily the result of low tuna and shrimp raw material costs and a weak Thai baht. Other contributing factors included the continually improving pet care business, the strong branded ambient seafood business in Europe, as well as better overall margins in its US subsidiaries.
Net profit dropped 19.0 per cent to THB 1,231 million from a year ago. This was the result of an absence of a sizeable FX gain of as much as THB 1,125 million which was reported last year, when compared with a FX gain of merely THB 264 million in this quarter. As a result, Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) also declined slightly by 6.6 per cent to THB 2,755 million in 1Q16.
However, the acquisition of Rügen Fisch contributed to the company’s overall encouraging sales growth as the transaction regarding this acquisition was completed in early February. Moreover, the company’s emerging market strategy has begun to show positive results from its Middle East joint venture.
Additionally the company boasted better operating performance this quarter, compared with a year ago and cash flow generation continued to stay very strong, while the quarterly free cash flow surged to THB 4,483 million, compared with the full year of THB 11,664 million in 2015, the company’s strongest financial year yet.
Mr Thiraphong Chansiri, President/CEO of Thai Union Group PCL (TU) commented: “Despite the seasonal low period, we have still managed to generate a 9.3 per cent increase in sales for this quarter from a year ago. Our 2016 first quarter performance is on track to achieve our full year target. This is another example of our resilience and ability to grow, despite challenges faced by both the global and Thai seafood industries. Volatile foreign exchange rates; tuna and shrimp prices; uncertain global economic conditions and sustainability issues faced by the country have not discouraged us from outperforming the industry. This is thanks to our teams’ efforts in achieving efficiency and cost savings to boost our margins, together with the consolidation of Rügen Fisch into the Thai Union family.”
“Also, our financial position has improved thanks to strong free cash flows. This has allowed us to bring our net debt-to-equity ratio down to 0.69x from 0.76x at the end of 2015. This means that we are ready for any new investment opportunity that could further support our growth strategy,” he added.
Based on the company’s sales in 1Q16, the tuna category still commanded the largest share of business, accounting for 38 per cent of its business. This was followed by shrimp and related business (26 per cent); salmon business (9 per cent); sardine and mackerel business (9 per cent); pet food business (7 per cent); and value-added and other products (11 per cent).
Additionally, from this year, the disclosure of sales information will be divided into 3 categories (previously 6) which are; ambient (shelf-stable) seafood (49 per cent); frozen, chilled and related seafood (39 per cent); and pet care, value-added and other products (12 per cent).
The new classification should better explain the growth dynamics and margin trends of our business, given the different key channels these categories are serving now.
Currently, sales contribution from our own brands is stable at 43 per cent in the first quarter, with the balance being our private label sales. On the other hand, the US remained our largest market at 41 per cent in 1Q16, followed by Europe at 32 per cent, Thai domestic market at 8 per cent, Japan at 6 per cent and other markets at 13 per cent.
