Thai Union’s Q2 sales hit record on petcare, value-added businesses, but profits drop

Thai Union reported record sales figures in the second quarter of 2022 mainly thanks to higher demand for its petcare and value-added products.

Thai Union’s sales rose 8.5 percent year-on-year to THB 38.9 billion (USD 1.09 billion, EUR 1.07 billion) between April and June 2022, with gains also coming from higher prices and favorable foreign exchange rates, the company reported in its Q2 2022 results, released 8 August.

However, Thai Union’s net profit dropped 30.7 percent year-on-year to THB 1.62 billion (USD 45.3 million, EUR 44.5 million), which the company attributed to the impacts of the adjustments in the fair value of the preferred units of its U.S. affiliate Red Lobster, and the restructuring costs related to the closure of its Rügen Fisch plant in Lübeck, Germany announced earlier this year. The increase in prices of raw material – in particular the high cost of salmon – were also a hit to the company’s bottom line, and it blamed sky-high freight costs for an additional hit of THB 560 million (USD 15.7 million, EUR 15.4 million) between April and June.

Sales of Thai Union’s petcare and value-added products rose “exceptionally” to THB 8.13 billion (USD 227.5 million, EUR 223.5 million), up 41.7 percent year-on-year, which Thai Union attributed to “continued strong demand for pet food, higher selling prices, new innovative products, portfolio expansion to new customers, higher value-added and packaging sales, and favorable foreign exchange.”

Thai Union also reported gains in ambient seafood sales, reaching revenue of THB 16.91 billion (USD 473.3 million, EUR 464.7 million), up 10.7 percent year-on-year, which it attributed to a combination of elevated prices, growing demand in Asia and the U.S., and the depreciation of the Thai baht. Thai Union’s ambient seafood category, which includes tuna, sardine, salmon, mackerel, and herring products, mainly refers to shelf-stable items that are largely sold through retail channels and sometimes via wholesalers. 

Thai Union said, given its strong performance in sales in H1 2022, it has decided to raise its sales growth target this year to between 10 and 12 percent, up from the previous target of 7 to 8 percent growth.

“Business diversification continues to be the cornerstone of our ongoing growth path, reflected in our results for the second quarter, which remained robust despite the impact of two one-off items,” Thai Union CEO Thiraphong Chansiri said. “Consumers around the world continue to be drawn to our healthy and nutritious products and, by delivering new and innovative products, we are excited to be attracting even more customers to our global portfolio of brands.”

However, the company’s sales of frozen and chilled seafood products fell 6.5 percent year-on-year to THB 13.9 billion (USD 389 million, EUR 382 million). The company attributed the drop to “market normalization” in the U.S. foodservice sector, following on robust growth in 2021 and a decline in the performance of the company’s feed and salmon businesses.

Chansiri said inflation hit all-time highs in some of Thai Union’s key markets, causing the combined overall cost of its raw materials, utilities, packaging, and ingredients to rise by 13.7 percent in H1 2022. Thai Union’s logistics costs in the first six months also rose to THB 1.3 billion (USD 36.4 million, EUR 35.7 million), mainly due to the hike in freight rates.

Thai Union paid an average NOK 97 (USD 9.97, EUR 9.77) for a kilogram of salmon in the second quarter, up 53 percent from a year earlier, and it paid an average of USD 1,608 (EUR 1,579) per metric ton of tuna, up 21.5 percent year-on-year. Its average price paid per kilogram of whiteleg shrimp rate in the quarter rose 7.4 percent year-on-year to THB 154 (USD 4.33, EUR 4.24).

The company said it had begun work on a new cold storage project for tuna products in Ghana in June 2021 that is scheduled for completion in H1 2023. It also continued construction on a facility producing ready-to-eat products and a protein hydrolysate and collagen peptide plant for its ingredients business, which are both expected to in Q1 2023.

“Thai Union remains on track to achieve our 2025 financial and business targets, but we recognize that economic conditions continue to present a challenge, including inflationary pressures in many markets, rising interest rates, and ongoing supply chain issues, “Chansiri said. “So we are firmly focused on cost-efficiency, continuing to strengthen our core businesses, and building value-enhancing operations.”

Photo courtesy of Thai Union