Welcome to all of our analysts and fund managers to the analyst meeting for the fourth quarter of 2023. For today, Thai Union has the Thammachart Seafood products out in front. We have our salmon sausages and Happy Rolls for you to try as well. Before you leave, don't forget to take our SEALECT tuna products home with you as a souvenir from our event today. For today's agenda, in the first half, we will share our operating results, and we'll have a Q&A. Then we'll have a 10-minute break, and afterwards we will begin with Thai Union Feedmill. I'd like to introduce our executives who are here today. The first is Mr. Thiraphong Chansiri, the CEO of Thai Union, and Ludovic Garnier, the Chief Financial Officer of the group, and Ms. Sirirat Chaimongkolchai , the Assistant General Manager of Group Performance and Controlling.
Without further ado, I'd like to invite the executives to begin the presentation.
Good morning to all of the analysts and the executives of the financial institutions joining us today. We're going to share our fourth quarter results with you and the full year as well. If you take a look at the numbers for the fourth quarter, you can see that our sales were the highest in the past year. If you take a look at the numbers, the indicators, the various indicators, you will see that they demonstrate a recovery of the business that is quite clear. The first half of last year, we experienced a dropping in sales significantly due to destocking of students in every category. In the fourth quarter, the high sales are mostly due to our frozen business. It's a seasonal thing, and also the PetCare products.
If you take a look at our numbers, we've grown quarter-on-quarter at 4.8%, and this is a growth for quarter-on-quarter from the third quarter. It is mostly thanks to the PetCare business that grew by 20% or so quarter-on-quarter, and also our frozen business that grew 8%. For the entire year, if we compare year-on-year, our sales went down by 10.3% due to 2022 being a high baseline. Our PetCare business year-on-year went down by 17%, and our frozen business went down by 13.3%. Due to the lower sales volume, it went down by 8.2%. Nonetheless, this was offset by value-added products and other businesses that continue to grow at 7.3% year-on-year. Our gross profit margin in the fourth quarter was at a level that is very acceptable at 17.8%.
Compared to the year before, it went up by. Our gross profit quarter-on-quarter went up by 1.5% but dropped down 7.9% year-on-year. This is mostly because in the last year, we had a low volume, whether it's in terms of tuna, due to the higher prices, which led to an impact on consumption. PetCare was the same, dropping in sales, and our costs went up, and this impacted our profitability. Our operating profit went down year-on-year by 8.1%, just a bit, but at the same time, our margin is in a good level at 6.6% in the fourth quarter. Our net profit, compared to the year before, went up a bit. Quarter-on-quarter, it was up by 3.1%, and year-on-year, it was up by 0.4%. This is mostly the net profit.
The growth part of it is from the foreign exchange. Compared to the year before, we had a foreign exchange loss in the fourth quarter, and this is an overview of the fourth quarter for the last year. If we take a look at the next page, you will see that if we take a look at the bridge for net profit for last year in the fourth quarter, it was THB 1.2 billion. If we restate this from our dilution from i-Tail, it will go down to THB 1.14 billion. And this is to compare to the fourth quarter for this year. You can see that our gain for foreign exchange was over THB 500 million, and operating profit went down by THB 186 million. This affected our net profit, making it THB 1.243 billion.
On the next page, this is a look at our numbers that are important from our announcement to divest our investment in Red Lobster. We have booked THB 18.4 billion, a one-time in the fourth quarter, and this is a booking of the impairment, 100% of the impairment. So there's no need to worry or doubt if there's going if there are going to be any other recordings of this. There will be no further recognition for Red Lobster. We have applied the IFRS 5, and this is to discontinuing our operations for sale. And Red Lobster, at the moment, we're in the process of selling, and the sales price, if we have a gain, we will book it. If we don't have a gain, then there is nothing to put us in any negative or red territory.
So we're not expecting to get anything much from the sale, so we don't need to expect any one-time gain from Red Lobster. Red Lobster is considered zero from this point forward since the fourth quarter of last year. You can see that our transaction, this transaction, even though the number was quite high, it's a non-cash transaction. The impact on our balance sheet from 0.65, we expected it to be 0.84, but after the fourth quarter, after we closed that, the number was at 0.78 only. You can see that the balance sheet is still quite strong. This is why TRIS has maintained our rating and has not adjusted our rating. We are still able to talk to our bondholders. It gives us leverage with our bondholders. We've been able to waive the exclusion.
We've been able to exclude the impairment from the 2023 net income, and this has been well accepted. There are four bonds we have 100% approval for two bond sets, and we need approval for the other two. So this is something that we have been able to get through quite well. Moving on to the next page, you will see that we are still able to continue to pay our dividends at THB 0.24 per share. As explained, this is a non-cash item that is not impacting our business or our operations at all. Our business, if we do not include the impairment from Red Lobster, then we still have profit despite the fact that it is compared to the year before, it is a bit lower. It might be the net profit that is lowest in the 10 years past.
You can see that overall, our balance sheet is still strong, and we still have ability to pay our dividends continuously and at the same rate. On the next page, if you take a look at our new products, you can see that our business continues on. We have King Oscar, a new product, which is a pâté. It's in a tube form. And then we have a plant-based tuna product in Poland under the brand known as Laguna. We have SEALECT in Thailand, which has launched a new shrimp paste product. Thammachart Seafood also has launched its salmon sausage, and i-Tail is launching a new wet dog product known as Marvo. We also have awards and recognitions, as always. What's noteworthy is that we have been voted as the product of the year in France, and this is a product that we have promoted.
The sourcing of this product, which is Douaniné and Brittiné in France, and it's been well received. Something else that is important is that we have been accepted as a member of the Dow Jones Sustainability Index for the 10th consecutive year, and sustainability is still something that we continue to focus on. On the next page, this is another activity of ours. This is to protect the environment and to support the communities where we are located as part of our Healthy Living, Healthy Oceans initiative. Now we're going to take a look at the financial results, and I would like to hand things off to Ludovic to report further. Thank you.
Good morning, everyone. Very happy to be with you today. So here on the financials, the key takeaways of Q4. So first of all, the top line, we are back to growth compared to Q3, okay? So we are delivering the 4.8% top line growth compared to Q3. There are two key drivers, two key categories for this one, which are the frozen business and also the PetCare business. So if I want to focus first on the frozen business, I think we are growing by 8% quarter-on-quarter. This is kind of usual. The frozen business in Q4 is always quite strong. We have one good surprise, which is the level of gross profit margin. We achieved an exceptional 14.3% gross profit margin in Q4, and in Q3 will elaborate where this comes from. This is exceptional. You shouldn't expect this to happen every quarter.
The PetCare also is really recovering since Q3. We have some positive momentum on the PetCare. Maybe some of you attended the i-Tail presentation last week, but we are back to growth here by 22% quarter-on-quarter, and also the gross profit margin is exceeding 23%. So also very positive news coming from the PetCare business. The exit from Red Lobster, of course, this is one key event of the Q4. We did impair the whole impact. I will revert to this after, just to make sure you understand the bridge we have been providing a bit earlier. But the key message for you is to say, even after the impairment, our balance sheet remains extremely strong, okay? We have a net debt to equity, which is far below one, so we are extremely comfortable with this amount.
We did receive very positive news from TRIS and also very strong support from the bondholders. Overall, it went quite smoothly. One thing also that I want to highlight in Q4 is very strong cash flow generation, okay? So for the whole year, we have been generating a cash flow, a free cash flow of THB 7 billion, okay? Which is exceeding 100% in terms of cash conversion rates. Very happy with this one. This is a result from different things. Our EBITDA, of course, is a bit lower compared to expectation, but our CapEx was well managed, and also the net working capital is really under control in 2023.
If you remember, in 2021 and 2022, we have been investing something like 14, BHT 14 billion in our net working capital. In 2023, it's almost stable. So I think it's very good news, and it's a very, very good management.
If I move to the five-year pictures, so here you have the development on the net sales and the gross profit margin, and you can see the last two quarters, the gross profit story is very interesting, okay? We are always in the range of 18%. So 18.4% in Q3 and then 17.8% in Q4. The top line is still dropping compared to last year, 10%. This is what Thiraphong mentioned on this one, but overall, the traction is improving, and we are moving in the right track. We just wanted to get back also and to provide a bit more colors because, of course, our top line dropping by 12%, it's a huge change compared to 2022. So here you have the key drivers for this drop. So we drop overall by 12.5% of the whole year. There are different components in this one.
There is the first component, which is the i-Tail business, okay? The year 2022 has been exceptional for i-Tail. In 2023, the baseline is normalizing. This is 4% at Thai Union level. The next one, we told you also we wanted to right-size our U.S. frozen business. You remember, the U.S. frozen business, this is our largest OpCo in terms of revenue, okay? This is -2% for the top line in 2023. At the end of 2023, we are not completely done with the right-sizing, meaning there will be some further impact in 2024, and we will elaborate on our guidance. There will be, again, a bit of negative impact coming from the U.S. frozen right-sizing, but we are very close to the end now. We have seen also some very strong deflation in the frozen business.
The shrimp price went down, and of course, we had to adjust down our prices, and this is -1.5% impact also from our sales. The Fed has been normalizing in 2023, so we had to adjust also down our prices, and this is -1.4% in our top line. Then we have a box which is called Middle East, okay? And Middle East, for us, it's a very important region. It's not a very profitable region for us, but we do sell a lot of volume to this region. And we have some countries like Egypt where they have been facing with some USD shortage issue. They have some deflation of the local currency, and they cannot have access to the USD. So because of this, we lost some business in 2023 because of that, and this is 1% at group level.
Then we have the last box, which is all the other net for 2.6%. It's a combination of the packaging business, the ambient, and all the others. But we just wanted to explain to you again the decline by 12.5%. We acknowledge it's a huge change compared to last year, but box by box, I think we understand the overall picture. Also, in 2023, we took some very strong decisions, and now we are really fit for growth, I would say. And we just wanted to recap what we have. There is no new news here, but just for you to understand what we have been doing. So first of all, we have been closing some operation. We have been closing one factory. In Germany, we told you it was effective in Q2.
2023 is part of our Rügen Fisch, our ambient business, and we have been consolidating two factories into one factory. We believe, moving forward, we'll be much more efficient now in Germany. We have also been closing our frozen operation in China, okay? It's a very small operation. We don't talk a lot about this one, but it has been the loss-making over the past few years, and now we know we have some very specific action plan for each of the loss-making businesses. On top of this, also, we have been right-sizing some of our businesses in Thailand, like our supplement business, our domestic ambient business, our shrimp business also. All of them, we have been right-sizing the structure just to make sure that we are fit for growth. The last part on the right, the U.S. frozen business, we already mentioned about this one.
This OpCo was performing a top line between $900 million-$1 billion of revenue two years ago, and now it will be between $600 million-$700 million. So it hurts our top line at group level, but we believe it will be beneficial for our profitability because this business has a low profit. And then we have launched also Strategy 2030, okay? A very strong analysis of what we want to do moving forward. And as part of this one, we have different initiatives to review our cost structures, the way we want to operate, to review also the loss-making business, and where do we want where are the avenues for growth, okay? We don't talk today about Strategy 2030.
You will hear in the next quarters once we are completely finalized with analysis, but we can expect some more things to happen in the next years on this one. And the goal is always the same, to be really fit, to have a lean structure, and to be fit for growth. Just an update, regarding the freight prices. And we told you the year 2023 was excellent from this point of view. The freight prices have been normalizing much quicker compared to our expectation. There is, of course, one watch out in Q4. At the end of Q4, we will lead to the Red Sea issue. In our Q4 numbers, we hardly have any impact, very small impact. Maybe we have a bit of delay in some of the deliveries in terms of costing, Gross Profit Margin, selling price.
Almost no impact because it happens really during the last 2 weeks of 2023. However, it's a watch out. It's a watch out for us. Why? Because it means the lead time is extending a bit by one or two weeks, okay? You can see also the prices. You can see here the prices in January 2024, they increase a bit, okay? We are still very far away from the record high prices we had at the end of 2021, beginning of 2022, okay? Nothing comparable, okay? Watch out for us. We want to watch out carefully for the situation. On the bottom, you can see some numbers related to the inflation. I think overall, we have some good news, okay? The inflation rates are trending down everywhere.
You can see here in the U.S., also in Europe, and also in Thailand, we even have some deflation in Thailand. But this is positive news because it has been putting a lot of pressure on the business over the past few years. Just a quick update on the effects. You can see in Q4, the Thai baht has been increasing versus USD, but has been losing a bit versus euro and GBP, but overall, we are kind of comfortable with these rates. On the fish prices, you can see the tuna prices went down very significantly in Q4. You can see the average is around $1,500 in Q4, and you can see also in January, something around $1,400, okay? Very positive news. We are extremely happy about this. We have been losing $500 in two quarters, okay? So this is brutal.
We always told you that when we are facing such a high decline of the fish price, our profitability of our ambient business is penalized, okay? Why? Because we have to adjust down our selling prices while we are still operating, processing the fish, which is a bit expensive, okay? So it takes usually one quarter, two quarters, and then after, we get back to normal, and Khun will elaborate on this one. The salmon prices are still high. They are increasing again in Q4. This is normal. This is the high season. You can see in June also, they are increasing. We don't expect to see the same inflation that we have seen in 2023, but the salmon prices do remain high.
The shrimp prices, you've seen they have been very soft for the whole year 2023, and in Q1, they are increasing a bit, but they are still in the comfortable zone. So just a quick update on Red Lobster now, and I think this is the last time you will see this slide. So first of all, regarding the performance in Q4, the share of loss from operations is THB 450 million. The share of loss from the whole year is slightly exceeding THB 800 million, okay? So this is a bit higher compared to our guidance of THB 700 million that we gave at the end of Q4. So the losses are a bit higher compared to our expectation. A few things for this one. I think in terms of top line, it's doing okay. They are still facing some challenges in terms of profitability.
Again, we are not happy with this decision, and I think it shows that we took the right decision to move away and to exit from the business. So overall, you can see over the whole year, the share of loss from operations was THB 800.818 million, and the share of loss from accounting was THB 400 million, okay? So the total contribution of Red Lobster is a share of loss for THB 1.2 billion. I just wanted to get back one second, if you don't mind, to the table that we had at the beginning. Khun, if you can get back to the slide number six, please. Just to make sure that you understand this one. So here you have two tables, okay? On the left, you have the Q4 numbers. On the right, you have the full year numbers, okay?
So now we come to the full year numbers to make it easier. What we call normalized numbers, these are the numbers you should compare to. These are the numbers comparable with 2022, okay? You don't have any impact of the impairment in this column. You don't have any impact of IFRS 5, okay? So really, please refer to these numbers. In these numbers, you still have a share of loss from Red Lobster in Q4, okay? So the $400 I just mentioned, this is included in the line share of profit, okay? So this is really comparable to all our historical numbers. Please refer to this one. And this is what we call normalized numbers. And then we do two things. The first thing is we do fully impair Red Lobster, okay?
We mentioned that the impact is 18.4%, and you can see here, this is the 18.4% you can see, okay? This line should have been recorded in the line other income, okay? Normally, in a normal business, okay? This is the one thing. We fully impair everything, and the impact of the impairment is 18.4%. But then we do a second thing, which is we do apply IFRS 5, okay? What does it mean, IFRS 5? It means when we decide to exit or to discontinue one business, you can reclassify all your financial items in one specific line at the bottom. Why do we do that? Because next year, in 2024, when we recompare, you recompare with the baseline 2023, which will be reclassified, and where all the items related to Red Lobster will be isolated in one line discontinued operation, okay?
So you can see here, we do reclassify thanks to this IFRS 5. We do reclassify the 18.4% below, okay, at the bottom, and we do reclassify also the THB 1.2 billion share of loss I just mentioned. The whole contribution for the year of Red Lobster is being reclassified in this one. So the 1.2% is not an additional impairment. This is just the year-to-date, the 12-month share of loss coming from Red Lobster, okay? So when you combine the two, this is 19.6%, okay? 19.6%. You have two components, the impairment of 18.4% and then the share of loss from 1.2%, okay? There is one topic that we have not been able to reclassify, which is all the tax credit coming from Red Lobster. And we had very long discussions with auditors.
From my point of view, it would have been easier to reclassify also all the tax credits from Red Lobster in this line, discontinued operations. They did not accept this one, and the argument is to say we will use this tax credit in the future, which is indeed a good argument. But for the P&L comparison, it will pull you to bid next year, okay? So keep in mind, everything from Red Lobster is being reclassified to this line, discontinued operation. This is what we call DO line, except for the tax, okay? The tax is not being reclassified, okay? So I hope this is clearer with that. So I just get back to the normal slide. I just have one more two few more slides. So here we talk now about the ratio. Here we have some few good news, okay?
First of all, the level of inventory is decreasing in Q4, okay? We told you this is really one of our focus. Over the whole year, the inventory is declining compared to last year and compared to Q3, which is good. You can have a look also at the net debt to EBITDA, okay? The net debt to EBITDA, the comparable number, is 4.64%, 4.64%, okay? However, after the IFRS 5 reclassification, once you remove the share of loss from Red Lobster, the numbers become 4.19%, 4.19%. So I think it's a much better number, and the idea is to continue to improve further in 2024. The net debt to equity, as we mentioned, you can see it's increasing to 0.78% in Q4, but this is still a very comfortable zone. You know we call the one between one to one. This is our comfort zone.
We don't have any issue being lower compared to this amount. So if I move to the net debt bridge, you can see the net debt has been increasing between 2022 and 2023, okay? From THB 47 billion to THB 51 billion. Again, the free cash flow has been quite good. In 2023, this is THB 7 billion. You can see the EBITDA was THB 11 billion. The CAPEX was really under control, a bit below THB 5 billion. But the good news is you don't have any negative impact from the net working capital, okay? If you look at the same bridge for 2022 and the same one for 2021, we had a huge amount of our free cash flow being invested in the net working capital. In 2023, this is not the case. We are stable.
The idea in 2024 is to have the positive impact from that and to have a decrease of our net working capital. Then, of course, we have been paying all the taxes, all the interest, and the dividend. This is normal. This is happening every year. Then we have been investing in 2023. We have been investing some additional i-Tail shares. It's not a new topic. We have been buying back also some Thai Union shares. But if you remove all these investing activities, then our net debt will be flat if you remove all the investment we have been doing in 2023. But overall, very strong financial statements. And lastly, you can have some updates regarding our debt. You have the key components by currency, also by maturity. By currency, there is no big change compared to last year. It's very comparable.
Then by maturity, you will see there is one thing which is specific. We have the bonds we talked about, okay? This is THB 12 billion. We have to present these bonds at the end of December in current, okay? Why? Because at the end of December, we don't meet with the covenant criteria. We know that last week, we get the consent from the bondholders, okay? So this amount at the end of December is in current. In March, it will be reclassified to non-current. It's a bit weird. It's a bit confusing from my point of view, but these are the accounting standards, and we cannot do anything against that. Now I will leave it to Khun to go through the business performance.
Now I'd like to talk about the business performance. From our group profit for 2023, the contribution from Ambient Seafood is 47%, and this increased from the year before, which was at 43%. The Frozen and PetCare, their contributions went down. Frozen is at 35%, and PetCare is at 11%. Value-added contribution is at 7%, which is the same as the year before. The pie chart down below, you can see the split between our branded and OEM. You can see that for the Ambient Seafood, branded is higher than OEM at 57%. OEM is only 43%. For the other three groups, the majority comes from OEM. If we take a look at the growth in terms of our product lines, to the right-hand side, you can see for our sales, it went down by 12.5%. If we compare it to the year 2021, it went down by 3.5%.
It's only Frozen that went down by 19%, and this is a result of our strategy of right-sizing for the frozen business in the U.S. The three other groups, their sales went up. Ambient Seafood went up by 8.4%. Value-added went up by 9.7%. PetCare went up by 2.7%. If we take a look at the Ambient Seafood group, our sales for the fourth quarter was at THB 15.69 billion, but our sales are basically the same and not that different from the quarter before. Our gross profit margin is at 7.4%. You saw in previous slides, the tuna prices in the fourth quarter were at about $1,500, down from the quarter before, which was at $1,800. We'll see a reduction in the price in October, November, and December, and onto January of this year.
We can see the demand for OEM growing since the middle of the quarter. If we look at our gross profit margin, you can see that it's at 17.4% again. This is due to the drop in the tuna prices because we still have a stock for products at higher cost, and we need to adjust our selling prices to reflect the price of tuna at the current time. This is information by quarter going back seven years. If you look at the blue line, you can see the average. If you look at the yellow line, you can see the gross profit margin line. In the fourth quarter of 2023, in December, the price was highest at 2,300 in October 2017, and it went down. Our gross profit margin went down to 14% due to the peak of the tuna prices.
For our Ambient Seafood overall, we have sales of THB 63.9 billion, and the gross profit margin is at 19.0%. This went down a bit compared to the year 2022. This is because of the continuing for three quarters. And we see the impact of OEM demand. Another factor that is affecting our sales for the Ambient Seafood segment is the freight revenue, where we have impact from the normalization of shipping prices. And in terms of our strategy, we'll continue to develop our products, and we're focusing on newer innovations to continue to be a leader in the market. And for 2023, we continue to have product development in the U.S. and in Europe, and we have products under the brand King Oscar expanding in the U.S. market. And salmon under King Oscar has higher sales at number two in the market.
Let's take a look at our cold storage in Ghana. The construction is almost completed, and we're getting ready to commercialize in the next month. We expect a positive effect from this because we'll be able to reduce our costs. In our frozen business, the sales are at THB 12.5 billion, and the sales have increased by 8% quarter-on-quarter. This is due to our salmon products that are selling well during the festive season. If you take a look at the gross profit margin, you can see that it went down quite high to 14.4%. This is an all-time high for us. For the entire year for the frozen business, we have sales of THB 47.3 billion going down. Sales dropped 17% year-on-year. This is due to right-sizing in the U.S., and it's a price deflation.
The shrimp prices also went down by about 15% compared to the year before. There are also other products in the frozen business like crab meat and snow crab, where the market prices went down as well after they reached their highest peak in 2021 and 2022 due to demand from the food service segment. In addition to our right-sizing in the U.S. that we talked about, we also have strategies to develop our other businesses, such as our feed. We have a portfolio rationalization, and we have increased the contribution of the higher-margin products, and we've reduced those of lower margin. For instance, we have increased the sale of the products for sea bass feed, which have a higher margin than other fish feeds. And the gross profit margin is quite high and acceptable at over 10%. And this is thanks to our right-sizing strategy.
In terms of PetCare, we have a drop of 17% year-on-year in the sales for PetCare. You can see a growth that is high at 22.5% quarter-on-quarter. This is two quarters in a row that we're seeing high growth. The gross profit margin is at 23.4%. The demand for our products that we're seeing returning in every market, whether it's from the U.S. or Europe and also other markets. We also have the strong effects, good effects, positive effects from our partners, our joint ventures with them, our partnerships with them. We are seeing more demand for the products that will be on sale in the next quarter. For the entire year for PetCare, the sales are at 15.06 billion THB, and sales dropped 30.6% year-on-year.
The main reason is the lead time in the shipping, which has gone down, and it is normalized. So customers do not need to have a higher stock as they did before. This has affected us in the first half of 2023 before we could see the performance improve in the second half of the year. In terms of our new factory, it has a trial run already, and we expect commercialization to begin in the beginning of 2024. After we finish construction of the factory, we expect our production to increase by 18.7%. For the distribution channels, we have the products at Mr. DIY that has more than 700 branches, and we continue to expand in other sales channels. As for our value-added products, the sales were at THB 2.7 billion, and this is about the same as the quarter before.
If we take a look at the volume, it went down by 17.8% year-over-year. If we take a look at the year before that, the sales went up 7.3% in terms of sales. This is a result of increased demand for ingredients and value-added RTE and bakery products as well. The gross profit margin was at 26.2%, which is at a very satisfactory level. The overall picture for the value-added and other products is at THB 9.9 billion, and the gross profit margin is at 27.1%. That went down a bit. Sales dropped by 5% year-over-year because of packaging and because of the Ambient business. We still have sales that increased thanks to our ingredient and value-added RTE products that offset the sales drop in packaging. The gross profit margin is at 27.1%, and we're seeing more positive impact because of packaging.
The products of steel and aluminum have gone down. In terms of culinary, we have our non-halo products. We started in October 2023, and we're going to expect the halo plant to be completed by the end of March in 2024 and our production capacity to go up by 38%. We have our collagen hydrolysis production line as well, and it should be commercializing in the second quarter to be able to handle or cater to the demand from new customers. ZEAvita is still number one in the market, and we just launched our plant-based tuna product under Laguna. And then we have our outlook. In terms of our outlook for 2024, we expect that our revenue will continue to grow, will return to higher levels, and will continue to develop in a positive way. In the first quarter, we expect a softer landing.
Nonetheless, our revenue will pick up in the second and third quarters. Our top-line growth is a bit low at 3%-4%. Our assumptions have led to these numbers, and they're not as high as you may want, but we have our raw material prices for tuna, which was at $1,800 per ton. In 2024, we expect the prices to be at $1,700 per ton for tuna. In the first quarter, the raw material prices have gone down to $1,300, and this could be because of the chilled storage. They're full. They're at capacity. This might be an impact from chicken as well. Production is adjusting upwards, and the use of fish may not be as high as needed, not as high to meet the fish that is being delivered to the ports. So we're seeing more pressure on the prices.
We believe this is a good thing. The prices of fish have gone down, tuna has gone down, and this means we can sell more, and we can increase production as well. The second thing I'd like to point out is that the foreign exchange rate. Last year, we set it at 33.5. Last year, it was 35. So our analysts, you might decide what exchange rate you'd like to use, and this will affect our Thai baht profit numbers, making them lower. We have our right-sizing, which we will see the impact this year. These are three factors that have affected our target growth and our sales. We've set them at only 3%-4% year-on-year, even though our PetCare, we expect to grow by no less than 15%.
Nevertheless, we will continue to try to be conservative so that we don't disappoint you. Our gross profit margin is set at 17%-18%, and our SG&A is 11%-12%. Our tax rate is increasing 0%-0.5%. CAPEX is in a lower range because we invested much already. If you remember, our CAPEX is usually at THB 5 billion-THB 6 billion, but this year, it's only THB 4 billion-THB 4.5 billion. In terms of our production capacity, we have enough capacity for every category. Our factories are always ready, and our dividend policy continues to be the same, at least 50% dividend payout ratio. This is the guidance for 2024. Thank you.
If anyone has any questions, you can raise your hand and pose your question. Red Lobster in Thailand is still open. So if you're interested in going for a meal, you can. It will continue to be open.
I'd like to ask about the value-added business, the new factory that you opened at the end of last year. Right now, what is the utilization rate, what %, and what you're going to open, the additional opening, how will it affect your utilization rate? And for this group, what is the outlook for 2024? What product will be the growth driver for your value-added business? Thank you.
So maybe I take care of this one. So here, I think you are referring to the new culinary factory that we have been building. We have different components in this factory. One of them was commissioned at the end of Q4, but this is at the end of Q4. So you almost have very little contribution, I would say, in Q4, and you have some other parts that are supposed to be commissioned in Q2. Okay? So in 2024, we expect to see some ramp-up, but the impact will still be small also from this one. The key products that we will make here, it's a combination of very different value-added products, some dim sum, and a lot of things that we are producing also in culinary. So 2024, it will be a ramp-up. Okay? It will be the first time we will be running the factory.
So we don't expect a lot of top line, bottom line coming from this one. But then moving forward, 2025, we do believe, really, that in the long term, that will be a very strong component of the growth of our business. Okay? But for the time being, 2023, small contribution. 2024, top line will come. It will not be fully utilized yet, but then it will grow up. And then 2025, you will have the full effect of the new factory.
It's a new factory, so we need to audit domestically and also a foreign audit. So it will take a bit of time. And the production capacity for this factory will allow us to be able to produce more, 2 times what we're producing right now. And our 3 older factories, we had brought them and put them together in one. And this new factory will enable us to stress and elevate our business and our customers to be able to capture more global-level customers like McDonald's, for instance. And you'll see growth from 2025 onwards. This is our plan.
And another question I have is about the gross margin that you set at 17%-18%. Can you break this down in terms of business groups? Where are you expecting the higher margin compared to 2023, or what business group will the margin be dropping from 2023?
So I think no surprise. You had the PetCare expectation. Last year, the PetCare Gross Profit Margin will be one of the highest. We are expecting all Gross Profit Margin to recover compared to 2023. The Ambient business will recover compared to 2023, but not that much. One of the priorities we have for 2024 in the Ambient business is to recover the volumes. Okay? You remember, over the past two years, we had to increase a lot of our prices. In 2024, we have less pressure coming from the fish price, which is good. And in some countries, we may be able even to decrease our prices. So the priority is really to regain some of the volume we lost in the Ambient business. So we are still planning the Gross Profit Margin for the Ambient to increase a bit, but not that much compared to 2023.
The frozen business, I think we told you we are very positive on this one. You can see over the past two quarters, the gross profit is very interesting. So it will grow further in 2024, again. Don't expect we are generating 14% gross profit margin every quarter. This is unusual. We have some reversal of inventory also in this Q4. So the target will be something between 11%-12% moving forward, so improving also for the frozen. The PetCare, you heard during the i-Tail earnings meeting, they are targeting 2022-2023, again recovering compared to 2023. Okay? Value added, there will be different components than this one. It could be kind of flat because right now, we have some negative impact at the beginning coming from the new factory that we have. We cannot expect to deliver the same kind of gross profit margin.
Maybe this one will be kind of stable compared to 2023. Overall, you could see, 2023, we end the year at 17.1% gross profit margin for the whole group. The guidance is 17%-18%. Of course, we want to end up in the high range of the guidance. We don't want to end in the low range of the guidance and want to be a bit also conservative here. We are expecting all the businesses to recover in 2024.
The overview for 2024 should improve in every category, the overall picture. For the Ambient group, our volume should grow, and our production will increase 10%-20%. For the frozen business, and thanks to our U.S. right-sizing, our margin overall should improve. And for the PetCare business, we expect a growth as well because of growing sales and increased volume. Therefore, their production cost should lower. As for TFM, it should also improve in the future. So every business of ours, we expect that this year, we will see a recovery. It may not be like before COVID, but we expect to see an upward trend. Are there any other questions here? I'd like to ask about the target for this year in terms of your sales. You expect to see a 3%-4% year-on-year growth.
You mentioned a bit about the impact of right-sizing from your frozen in the U.S. And this year, will we see this in the first half as well? And have you factored in the sales that are disappearing from the U.S., from the frozen business? And the second thing is, in terms of sales, I want to ask the CEO about the first quarter. It might be softer, right? Is this a cause making it softer year-on-year because you have a 3%-4% year-on-year growth target, and you expect the sales to disappear for the entire year for the first quarter? Will we see the year-on-year growth yet, or what factors are causing things to recover slowly? Does it have anything to do with the Red Sea?
So I did take care of this one. So a few things on the sales. So you're right. We have an overall guidance, which is 3%-4%. We do acknowledge it's not very exciting. Okay? It's not very exciting. There are different components for this one at group level. First of all, the FX will be negative. This is our plan. Okay? The average for 2023 was around 35. Our budget assumption for the USD is around 33.5. Just this change is costing us 1.2%-1.5% of growth. Are we right? We're getting the 33.5? We don't know. We will see this, of course, next year, but this is a component which is there. There is also the price deflation. Okay? The fish prices continue up. We mentioned this one. The assumption for the whole year for 2024 is around 1,700% compared to 1,800.
I told you also we are planning to decrease our prices in some countries if we can. There is one thing which is not improving. It's the situation in the Middle East. Okay? We told you in 2023 that we have been facing some shortage of U.S. dollars in some countries. We don't see that situation improving in 2024. So for the time being, our assumptions for the Middle East is the situation will continue in 2024, and then we will not benefit from any upside coming from this one. And then the frozen business, we do most of the right-sizing already in 2023. Okay? The vast majority is performed in 2023. However, we had some commitment with some customers for two years, so you will see some tailwind also from this one in 2024. So if I go by category, for the group, it's 3%-4%.
The Ambient will be, I would expect, between 2%-3%, slightly below in terms compared to the overall group numbers. PetCare, you heard they are targeting 15%. The frozen business will be almost stable. Okay? Why will it be stable? Because we will expect our U.S. frozen business to be growing a bit in USD but to be almost zero after the impact of the FX. And then our chilled business and the feed business should be growing a bit. Okay? But the frozen will be kind of stable. This is what we're expecting. And the value added also will be growing a bit. Okay? And this is why you have overall this 3%-4%. Agree. It's not very exciting. We want to be conservative. Also, we missed the guidance by far in 2023, so we prefer to be a bit conservative for 2024.
For Tuna, in the first quarter, the prices have come down quickly, and so the sales prices have to go down first. And the volume, it hasn't been impacted yet. So this is a timing thing. When the prices go down, then we will see promotional activities, more promotional activities. We'll see this in the second, third, and fourth quarters. So in the first quarter, we're going to suffer a bit. And I think that, actually, things are better, but the first month numbers, we're not going to push too much because you will receive too high of a guidance, and then it'll be too exciting, and then we'll have to adjust. So we've adjusted, so it's about soft. But let's wait for the next quarter. The first quarter has come down significantly, and we didn't expect the fish prices to come down so much.
All right. It sounds like the first quarter, we see the sales impact. It might be because of the sales price, but I'm not sure whether the volume right now, if we compare with the first quarter of last year, what is it like? What's the comparison? And the second thing is your margin. You have a range of 17%-18% for this year. The question is, for the fourth quarter, the prices of fish haven't gone down. It's about 18, right? And so the numbers that you have for the margin, are they too conservative? Because in the first half of this year, we should see a margin improvement thanks to the lowering cost.
I take care. So in Q1, we are planning to have a top line growth overall at group level. Okay? However, it will be below this guidance. This is what we do expect to see. As Jude Hoffman mentioned, our profitability will be a bit penalized in Q1. So when we say softer Q1, it's mostly from a profit point of view. But in terms of top line, we should target some growth to happen in Q1. But the growth rate will not be impressive, I believe. It will be below our guidance. This is right now our expectation. But then after, in the next quarters, Q2, Q3, Q4, you will see some continuous improvement on this one. And I think this is mostly related to our Ambient business. We told you when we had one specific graph on this one.
When the fish price is declining like this and, in general, it continues to drop further, we have to adjust our selling prices straight. Okay? But remember, we have, depending on the location, 3-6 months of fish. So, of course, we have to process this fish. So we're not processing straight the cheap fish on this one. So this is just the normal impact on this one. There's nothing to worry. Q1 is always a low season for us if you compare historically, but we just wanted to give you a watch out on that from a profitability point of view.
Our production capacity has increased already. Right now, it's increased, and you can see that it's not less than 10%. It's already picked up by the end of February. We want to have more fish so that we can have more for sale. And the price of fish right now, tuna is THB 1,300, so we want to buy more. We want to have more, but it's hard for us to find storage. It's difficult to find storage, even though we would like to have more fish, more tuna. And one more question about the Red Sea. The situation in the fourth quarter, it might have had a small impact, but up to now, we see the development of the Red Sea in terms of your sales volume.
You have adjusted prices, including the freight cost. Can you tell us about that?
So here, the key impact for us from the Red Sea is just to see the delay to be a bit longer. So we lose one to two weeks. Okay? We have our factories in Seychelles, very close to this area, and also some of our sales from Thailand going to the East Coast of the U.S. are going through that. So we see a bit it's a bit longer. Yeah, we lose one or two weeks. And yes, the cost has been increasing a bit. So yes, we have to increase a bit our selling prices. Absolutely correct. How long will it last? This, we don't know at all yet. And again, it's really not comparable to the situation we have been facing two years ago. Okay? Two years ago, it was a horrible situation, which lasts one and a half years.
Now, it seems to be much more under control. Okay? But it's a watch out for us, of course, because we know we could see that the situation can change quite quickly on this one. So here, we say nothing to worry for the time being. We are middle of February. We don't see any drop in the volume, not at all. We don't see that happening. Just a watch out because we know it can move quite quickly with a global issue.
Thank you, Ad. My question is, we saw four projects, new projects that will come in the second quarter. How much that we should estimate for the depreciation or other overhead costs that are coming into second quarter onwards? How much that we I mean, you already factored in the gross margin assumptions for this year.
So I think for the PetCare, I think they did share the numbers, an impact of THB 200 million just for the PetCare factory, which is the largest CAPEX that we have. Okay? On the others, it will depend exactly on the date of commissioning. Okay? The core store is not commissioned yet. Okay? So this will come a bit after. So I would assume it's something between THB 300 million-THB 400 million if you add all the 4 projects together. But you won't have yet the full-year impact in 2024. Okay? So it will be something between THB 200 million-THB 400 million. It is part of the guidance, of course. Yes.
And then in this assumption, do we have actually, because we have to trial run for maybe one or two quarters, do you already have the lineup of the customer demand in the second half of this year, or should we expect the real commercial run in fourth quarter this year? How could it be delayed for the revenue recognition from the external customer?
Yeah. So we do have always a ramp-up. Okay? So when you open a new factory, Martin Hoffmann mentioned, you have an audit process. You need to have all the customers visiting the factory and then agreeing with the factory. So we are in this process, right, depending on which product you are talking about. So you always have a ramp-up. Like the culinary I mentioned about, you start with very low volumes, and then quarter after quarter, it just keeps increasing. So in 2024, we won't have yet the full-year impact of these four projects. We won't have. Okay? But we'll have the beginning of the ramp-up. Okay? The PetCare will start. The culinary will start also. The cold store is a different story. We don't produce. Okay? We just have some fish coming into the inventory.
So this will be up and running, we're assuming, Q2 or Q3 already. But on the rest year, you will see some pickup in the volume, mostly starting in Q3 and in Q4.
Our cold storage is a cost reduction. When the cold storage is opened, we don't have to rent, our rent will go down. For the other factories, we're moving on gradually. This is in our guidance already. We'd like you to know that our production capacity is sufficient enough. If there is any case where anything unexpected, for instance, we have higher sales than expected, we are ready to increase our production capacity. But right now, for instance, the PetCare, the factory, the new factory, their production capacity has gone up, but their guidance is at 15%, right, of growth. What if it goes up to 20% or 25%? In terms of capacity, it's enough. We have enough capacity to handle higher-than-expected growth or sales.
What about Red Lobster, the case where the business may drop? The raw materials that you are sending them, have you allocated? Are you managing your raw material sourcing for Red Lobster for so many branches, 500-600 branches?
We are only sending them shrimp, and the value is not that high. It's not that significant because we're only selling the value-added items to them. According to our plans, once we exit from Red Lobster, we will be able to sell to other brands more easily. So we will continue to look for new customers. And at the same time, Red Lobster right now has no plans to reduce its number of branches.
You said 150-200 branches drop, right?
No, that's not in their plan. The plans they have right now, the banks want them to continue on. But in terms of selling the business as is, we're doing that as fast as possible. There are no plans. Thank you.
I'd like to ask a few questions. The first question is, could I have the assumptions for the fish prices for 2024: THB 1,700?
As I told you, THB 1,700. That is what we said last year, at the end of last year. And if the fish prices are at THB 1,700, then the gross margin that will improve. We know that in the first quarter, the gross margin may not be that great, but that's all right.
If it's going to improve, what quarter will we see the improvement?
If it's going to improve, it will probably be in the third or fourth quarter. We have to take a look at the prices adjusting upwards. Right now, they're adjusting downwards, so we're buying fish at a cheaper price. If you see the tuna prices go back up to $1,400, $1,500, that is when the margin will improve.
But isn't it right now the price is at $1,300?
The analysts we have been marked at $1,400 and $1,500, we expect the gross profit margin to turn around, right?
And the second question is about the tax for Red Lobster. This year, because of last year I'm not sure if I understand correctly or not. The tax credit for Red Lobster, it's significant, sizable. If this year, you expect to sell off your shares but you don't sell, will you still have this tax credit? What should the tax rate be for this year?
So in 2024, we don't expect to have any tax credit coming from Red Lobster. We don't. Okay? So we expect starting Q1, we stop recording any share of loss from Red Lobster, and we stop recording any tax credit. Okay? Even if we sell, if we don't sell, we don't expect any more upside coming from this. There was a question with the auditors regarding what do we do for the 2023 tax credit. Okay? These one are given. We have them. We own them. Nothing will happen. Even if we sell them, we are able to use them moving forward. The only point is moving forward and starting Q1, 2024, we don't plan to receive any more tax credit from Red Lobster. Okay?
What if the revenue are at 6.5? What tax will you have to pay?
The tax will be if it's abroad, if it's revenue from Thailand, we won't have to pay any taxes because we have BOI privileges. In the guidance, we already said that we expect the effective rate to be higher by 0.5%.
What is the? For the interest rate. Interest rate.
Yeah. For the tax rate, we assume we get back where we were before Red Lobster. Okay? Meaning we had an effective tax rate of 6%-7% overall at group level. Okay?
How much tax rate again, effective tax rate?
6%-7%.
6%-7%. 6%-7%. [crosstalk]
This is an average of Thailand where we have very low tax. Okay? The U.S., where we have 25%. And Europe, also, where it's moving, depending on the countries, between 20%-30%. So if you look over the past few years, before all the tax rate from Red Lobster, it was always something between six, seven, 10%, let's say, of the profit before tax. Okay? So we do expect in 2024 to be back to a situation of tax expense. Okay? The last few years, if you look at the overall P&L, we have a situation of tax credit, which is very unusual, which was only linked to Red Lobster. 2024, we don't have any more Red Lobster, so we don't have any more of this positive tax impact. So we get back to a normal tax expense situation.
Okay. Thank you.
Coming back to the Red Lobster exit. I'm not sure. When you sell Red Lobster, what's the situation right now? Do you have any interested buyers?
Right now, we're in a period of preparing information, the data. The process is once we are ready, then we will hire an investment banker, and the investment banker will find potential buyers for us, and there will be a bid process. This will probably take three or four months, but this has no effect on us. Actually, we should stop talking about Red Lobster altogether because the full impairment is zero. We have it at zero. Because it's already zero and we don't expect any gain, we have no provision for gain. It's zero. Red Lobster is done and over with.
We're just waiting for the sale to happen, but we do not expect any value to be gained, any significant value to be gained. So we'd like everyone to.
I have one more question and two more questions about Red Lobster. The first is, I'm not sure if they have a cash flow problem. If they have a cash flow problem and they don't have any cash injection, their debtors will take care of the cash injection.
No, it won't be us. We are a shareholder. That's all we are. And we have exited. We are going to exit. We are not going to inject any more money into Red Lobster.
And the second question is, if we sell if you can sell your share in Red Lobster, this will be a loss?
No, there's no loss. There is no loss anymore. It's all done. There will be no next tax credit either. No, there will be nothing. Everything is zero. Other people stop eating beef. I'm going to stop eating lobster.
And what about the freight cost? Is there an upward trend for the freight cost from the Red Sea? Can we quantify if it goes up significantly?
It has gone up. If you go through the Red Sea, it will go up, and we have to. I don't think there is anything significant when it comes to the freight cost. I think everyone understands if you need to go through that route, then, of course, you have to pay more. It was the same with COVID. All of the different routes had issues with the freight cost, and we've gotten through that situation, so we're not worried about the Red Sea situation right now.
It's just that we're receiving the items more slowly by two weeks. And you remember that in the past, we had freight issues that were impacting us by months, but it's not as bad this time, so we don't have to worry about long-term impact from the freight cost. The time has only gone up by two weeks.
But that increased cost, are you passing those on to your customer?
Yes, we are adding them into the price.
Okay. Thank you. No more questions from me.
I'm from KCS. I'd like to ask about page 17. On page 17, we see the sales for the quarter and the tone for the first, second, and third quarter. The gross revenue is soft, right? Is there any difference from before?
So here, what are you comparing? Because if you're
comparing to the first quarter of 2023.
Yeah. I think the first quarter of 2023 was very soft indeed in terms of top line. Okay? You can see here declining by 10%, and also the gross profit margin was exceptionally low also at 15.1%. So we do expect to improve, okay, versus this gross profit margin. Now, if you look at bottom line, we do expect to have a lower net profit compared to what we had in Q1. If you see below the OP, we had some positive news coming below the OP last year.
Sorry, I cannot get you.
Top line should be growing in Q1. I mentioned that already.
Bottom line is lower.
Yeah. This is the expectation.
Bottom line is lower.
Yes.
So, compare because of the tuna price, tuna price quite low in the first quarter, so is the main reason of the bottom line underperform?
That's correct. Yes. Yes.
Okay. If we compare to the fourth quarter of this year, the sales of the OEM Tuna is still higher than the fourth quarter, right?
Yes. Yeah.
The Ghana cold storage, is it able to help us to store more tuna?
It will help, but only starting in Q2. So it's not commissioned yet. Okay? Q2, 2024, it will help us. But as Country Hapun mentioned, it will help us in terms of cost. Okay? Because here, we consolidate some cold storage we are renting now to a cold store that we own by ourselves, so we expect to be more efficient, okay, and to have more capacity also. But the impact will start in Q2, 2024. Okay?
Okay. Okay. Thank you, Punta.
Are there any other questions? If there are no other questions, then I would like to take some questions from the online audience.
Going forward, what will be the investment thesis of TU as a whole group? This is more toward core business, or given that Red Lobster leaves a very scar on TU pilot decision assumption?
Not sure. Not sure to get it. Can you repeat again? Can you?
Okay. Going forward, that will be the investment thesis for TU as a whole group. Is this more towards core business, or given that Red Lobster leaves quite a heavy scar on TU prior decision assumptions?
We will focus on our core. Yes. No more restaurant. Big scar. Yes. On my back. [crosstalk]
Okay. In the second question, do you still see other investment plans within 2024, 2025?
Well.
As I mentioned today, all of our burden we don't have much burden left. We're feeling quite light. If we take a look at the balance sheet, we have room to invest. We are looking for investment opportunities right now. Other than that, we have our Strategy 2030. With the outside environment that is changing, our production capacity that we have, we're focusing on increasing our productivity, increasing our capability in terms of competitiveness. We want to review our structure overall, our processes, so that we can be more flexible. We want to be leaner. We want to be more competitive. We're looking for opportunities. The opportunities that we're looking at are based on our core business, and this is what we are looking forward to. The last question.
Can you comment on the impact on the Global Minimum Tax implementation in full year 2023?
So here, we are analyzing. So you heard there will be some 15% minimum tax rate to be implemented. Depending on the countries, the timeline could be 2025, 2026. We are discussing right now with the tax authorities in Thailand. Okay? So there will be some impact on the BOI. Yes, likely to be, but we don't know yet what will be the format. There will be some form of compensation from what we understand, but so far, we don't have yet the whole view. Apart from Thailand, we don't have any exposure. All the other countries, now, we have some tax rates exceeding the minimum tax rate of 15%. So we believe, especially the only remaining country where the regulation will have to change, but so far, we don't have yet the final picture. So it's still an analysis and more to come in the next quarters.
One more question. The trend for tuna consumption, how much growth are we seeing in the few years? How many % per year?
The growth in canned tuna will be during COVID, it went up quite high, but then it went down. It normalized after COVID, and especially in the last year. Due to the high inflation, the higher raw material prices, that led to the selling prices all over the world in retail to go up by two times. And so consumption has gone down significantly. We hope that the raw material prices that are cheaper right now will enable us to stimulate consumption. If you ask about the trends, then, of course, we expect it to grow in single-digit numbers, but it depends on the price as well and also on the economic situation globally. Right now, it is volatile.
It is fragile, and this will affect consumer decision-making.
If there are no other questions and time is up, if you have any other questions, you can ask through our IR channel. Thank you very much for joining us.