Good morning, and welcome to the analysts and bankers and all of the fund managers to the third quarter of 2023 results meeting. I'll be your MC for today. Thai Union has on display today our apple pie product. And we have 2 new products as well. We have some shrimp products for you to try out in the front of the hall for product tasting. And for today, the first half will be an announcement of our operating results, and then afterwards, we'll have a Q&A session. And I'd like to introduce, I'd like to introduce our executives. We have Mr. Thiraphong Chansiri, our CEO, and Mr. Ludovic Garnier, our CFO, and also Ms. Lattinun Wongwatthananon, Head of Investor Relations. I'd like to ask Mr. Thiraphong to begin the session, of course.
Hello, everyone.
Today, we have the results of the quarter, third quarter to share with you, and the key highlights of the third quarter are that we see signs of recovery that are very clear compared to the last quarter. If we take a look, you can see in terms of sales, even though they dropped by 17% year-on-year, we have volume that has dropped because of restocking, destocking, and also the higher tuna prices. And this led to a drop in sales by about 2% and falling freight revenue as well as, has affected us. The sales have gone down for all of our categories, whether it's PetCare, whether it's frozen foods, and the frozen food is due to our right-sizing.
We have to admit that the interest was higher for us, and we need to change our trading business model, and we have to choose businesses that are interesting and provide a favorable margin. Ambient went down by 7%. Also, we have our other categories that dropped as well. In this quarter, our gross profit margin is at 18.4%, which is a high for another quarter. The drop in gross profit has gone up 8.4% quarter-on-quarter, and the drop year-on-year is because of the effects in our PetCare, Ambient, and value-added gross profit decrease. We have profit from the frozen business in the U.S. It is a record high for over the last 9 quarters. It's increased by 22% quarter-on-quarter.
We're going to be talking about quarter-on-quarter numbers more than year-on-year, because last year was the highest, one of the highest years for us. So this year is a year to reset the baseline. From this point on, you will see signs of development, positive development. The raw material prices for tuna have dropped in the third quarter at about $1,700, and for November, they went down to $1,600. And we may see recovery. We don't think that the raw material prices will go up to $2,000 next year, but we will continue to monitor. As for net profit, even though we have a high operating profit, net profit is at THB 1.2 billion.
This is an increase quarter-over-quarter, and we have a negative impact from our foreign exchange loss and a dilution effect from i-Tail as well. And we also, this has been partially offset by our reduced share of loss from associates. So quarter-over-quarter, we are seeing improvements in numbers. On this slide, we'd like you to see our net profit at THB 2.5 billion. We have the dilution from i-Tail at about THB 324 million, and we have the foreign exchange loss of THB 1 billion. We have the increasing interest. And on the next page, you can see for the nine months, our sales went down by 13%, and our gross profit went down by 26%, and our operating profit went down by 15%. EBITDA went down by 20% and net profit went down by 44%.
Gross profit went down by 16%, that is, not 26. Last year, we had a dividend payout, and we repurchased shares in i-Tail, and this led to our net debt increasing. But if you take a look at our capital use, CapEx, it's gone down compared to the target that we set, and this is because of a delay in construction. But overall, our financial status is very strong, so there is no need to worry. Next page, you can see our development. We have new products. We continue to launch new products, especially like in the United States. We want to increase our pouch business, and this, we call it a packet. We conducted a study, and consumers are more familiar with the word packet than pouch.
To garner interest, Chicken of the Sea collaborated with McCormick, which is a seasoning manufacturer, and this is to launch new products. They're working together. They're also doing co-branding. In terms of our PetCare, we have products in the country. They are premium products. Hawesta is introducing new tuna products as well, and we also have our frozen and chilled businesses of, for instance, Burger King in Japan. We have new innovative products there as well. This is a new customer, and these are new products that we are working together with Burger King in Japan on. And lastly, what I believe adds value is Panda Express. We have launched the Apple Pie Roll. This is the first time for Panda Express to offer a dessert. And the response has been very favorable.
At first, they ordered 60 shipping containers, but the order has gone over 100 now, and this will lead to more product launches in the future in terms of dessert. We are hopeful that there will be savory items as well. In terms of awards, we continue to receive much recognition, whether it's in HR or sustainability or human rights or innovation. We've received many awards. On the next page, you can see our efforts in terms of protecting the environment and working with our local community. This is part of our Healthy Living, Healthy Oceans initiative. We work with aquaculture, the Aquaculture Improvement Project, and on the lower left, you can see an important project of ours. We are the first factory that has announced zero wastewater discharge. There is no water that leaves our production system.
No water is released into the environment, and this has been a challenge, but we have been successful at one of our factories already, and we have our 2025 goals to expand to our 5 main factories, whether it's in Ghana or in Thailand. In addition to this, we have been ranked first for seafood stewardship. This is for the third time. These are highlights. On the next page, you can see we are confirming our decrease in paid-up capital. We wrote off unsold shares of around 117 million. And we have another set of around 200 million shares, and altogether, this will be a decrease of 5%. And today, we are looking at repurchasing shares, continuing to look at this. This is to lead to benefit for our shareholders, increased benefit for our shareholders.
I would now like to hand things over to Ludo to continue to explain on the financial details.
Thank you, Thiraphong. I'm very happy to be with you this morning. I just want to give you the key takeaway of operation and financials in, in Q3. I think for me, the key takeaway is really the recovery from our core business in Q3. Overall, we are very happy with the growth profit margin and the OP margin development in Q3, and we will explain to you business by business, where does it come from. You will see the key impact coming from the frozen. Overall, you see the GP is improving by 8% quarter-on-quarter. We have a bit of more flexibility coming from the raw materials. You will see in the next slides, when we share the raw materials, we can see a bit of decrease.
It's a bit quicker compared to expectations, so we have some good news to announce to you here. We are, we have also starting since last year, portfolio rationalization. Khun Thiraphong mentioned in our frozen US business, you know, that we are right-sizing, the business, and it has some impact in our top line. It's our key, one of the key driver for top-line shortfall. And also in Q2, we told you about the PPP, the profit protection measures we have been implementing around the whole group, in order to protect the bottom line. And I think, it delivers some impact in our GP margin and also OP margin. So we do achieve 18.4% gross profit margin, okay? This is the second-best ever performance, for TU.
And I think in the current context of inflation, of recession in Europe and also in the U.S., I think this is a very strong performance. The frozen category is really the one which is recovering the most. You, if you remember, last year in 2022, especially in the U.S., we have been facing some challenges, okay? At that time, we were having too much inventories, okay? And the raw material prices were declining, okay? So we have been fixing, we have been consuming all these inventories, and now we are back in a much better situation. So you will see the GP margin is recovering from 6%, which was record low last year in Q3 2022 to almost 13%, this quarter.
You will see that all the components from our frozen category, being, our frozen business in the US, our frozen business in Thailand, our chilled business in Europe and our feed business, you will hear a bit more about TFM, after, are doing well, overall in Q3. Pet care is also recovering. This is very good news. You know that they were-- they've been facing some challenges in H1. They were not aligned with the expectation. We see the orders picking up, okay? I'm sure many of you, maybe you have been attending i-Tail, analyst call, but we see some improvement happening in Q3, mostly in the top line, okay? Really improvement quarter-on-quarter. We see also our large customers, from the US getting back and ordering again, okay?
So we hope that this is the end of the destocking effect that we have been talking about since the beginning of the year. We will have also in Q4 some new capacity. We mentioned to you, we had few large, very large CapEx projects over the past few quarters, and these ones will be commercialized. So we had the culinary one. We told you here we are consolidating three old factories that we were having in Thailand into one brand-new one. So this one is being commercialized, okay? And the capacity increase will be almost 38%. Also, we mentioned in our ingredient business that we are commercializing our collagen factory on this one, and this is happening right now in October and in November. There are two lines in this new factory.
The collagen one will be effective in Q4, and then the protein one will be commercialized at the beginning of 2024. Finally, Thiraphong mentioned this one, the financial health of the company is very strong, and we have been rated A+ by TRIS, aligned with last year, there is no change. There is one change on the outlook from stable to positive, but from positive to stable, sorry, but overall, still very strong financial health and no issue at all on this one. So in a nutshell, very strong performance from the core business. If you move to the five-year pictures, in the next slide, you can see. So here, top line at almost at 34 billion THB, almost aligned with our top line in Q2.
Of course, if you compare to last year, last year, we are very close to THB 41 billion, okay? So it's a strong decline compared to last year by 17%. Again, some drivers on this one. First of all, the logistics situation, you will see that the next slide is back to normal, okay? And you know that in 2022, we had to increase a lot our prices in order to absorb the freight cost increase, okay? We had the opposite situation in 2022, 2023. We have some deflation on the prices because of the freight cost normalization. So this is one impact. Also, I told you that we are right-sizing our business in the U.S., the PetCare business also has been facing some challenges, and overall, the demand is a bit weak in some of our categories.
But the good news is really in the profitability. And you can see here the orange line, 18.4. The record high was back in Q2 2021 at 19%, okay? But behind this record, the 18.4 that we are delivering in Q3 is the second best ever. So I think it's showing that we're in the right direction, in the right track to really improve the performance. Some good news also on the freight cost. We mentioned that already in Q2, confirmation. In Q3, the prices increased a bit, but we are still in the very normal situation, okay? So compared to last year, we really have some decrease in our top line just coming from this effect. Overall, I would assume we have very detailed calculation, which is 1%-2% top line drop.
I think it's a bit underestimated because, of course, when we buy some raw materials, you have also some freight cost inside. So I would expect the real impact for us is, in our top line, is more in the range of 3%-4%, compared to last year. So overall, good news on this one, and this is also one of the key explanation from the drop of our SG&A in Q3. We believe this is sustainable, okay? We don't expect to be back to inflation, and in fact, we do expect some more good news on the freight cost from next year.
Just at the bottom of the slide, you can see also different graph regarding the inflation in Europe, in the U.S., and also in Thailand, and you can see that the trend is improving. Okay, we have been facing since the beginning of the year with very high inflation across all regions, but mostly in the U.S. and also in Europe. You have all been seeing, of course, the interest rate increase applied by all central banks. Since the situation seems to be moderating much better. Okay, Thailand is a bit different situation. The inflation has been much less compared to the situation in Europe and in the U.S., but we do believe gradually we get back to a situation which is much more under control, okay?
Which is good for our business, because you know that one of the key challenge over the past two years was really the very high inflation we had to cope with, okay? So here, any flexibility we can have on this one would be easier for us in our business. Some good news, also regarding the raw material prices, and in Q2, we told you that we were expecting the fish price to decrease in Q3 and in Q4, and we told you also that we're expecting to be in a range of THB 1,700 at the end of December 2023. Okay, the good news is we are already there in September, okay? So the decrease is a bit quicker compared to expectation. The catches are a bit better overall, and the trend seem to continue also in October, okay?
The first information we get from October is to be around 1,600-1,700, but more in the trend of 1,600. It's not confirmed yet, so this is good for us. One of the key impact also for our top line in 2023 is the wait-and-see attitude for many of our customers in the U.S. for our OEM business, okay? We do believe with the fish price declining like this, we will see the sales picking up already in Q4 and also in 2024. So very happy to hear about this one. You can see also the salmon price, which was record high in Q2, is releasing, okay? We moved from 109 NOK to 83 NOK per kg, so this is good.
You know, the fish price, the salmon price, has been really fluctuating a lot over the past two years. You can see that from the graph. The shrimp price continued to remain low, okay? It increased a bit to 123, but in Q3, but overall, it really remains under control, okay? And this is good also for our business. So overall, less pressure coming from the raw material prices in Q3. Moving to currency, good news also, of course, you know that we are mostly 90% export business, so when the Thai baht is strengthening, this is good news for us overall, okay? And this is the case in Q3. You can see the average is 35.2, still decreasing a bit compared to last year, where it was more in the range of 36.4.
But overall, compared to Q1 and Q2, the dollar is improving and the Thai baht is weakening, okay? And same situation also for the GBP and for Euro. We are happy about this situation. In the short term, it can trigger a bit of FX losses, because you know that we are doing some hedging, okay? So we are always running after the spot rates, and I will elaborate a bit more on this one, but we do believe for the long term and for the competitiveness of our factories, of course, this is much better situation. So happy also about that. So we just wanted also to elaborate a bit on the FX, and I can tell you the FX, it's a very complex topic, okay? We did some deep dive already in the past.
So here we choose Q3 2023 compared to last year. Line, which is called FX, which is below our OP. But keep in mind, in fact, we have some FX impact in every line, okay? In our line sales, in our line costs, in every line. So here we try to focus on the key lines coming from the hedging, our hedging strategy, okay? Maybe I just want to get back first to last year, Q3 2022, okay? You can see below the OP, we were enjoying almost THB 800 million, seven hundred and ninety-two million baht positive FX. And you have the breakdown between financing, and last year it was mostly coming from the operating, okay? Activities for 636.
But of course, in our line sales also, we had the line coming from the adjustment from the hedging, okay? And last year it was negative by almost THB 900, okay? We told you, we remind you, we want to have a very conservative hedging strategy, okay? We don't want to try to speculate, okay? We really want to make sure that we are delivering the spot rate, that we are confirming when we are doing the hedging rates. So last year, you can see from the operation, the net-net between the sales adjustment and the operating activities below the OP was slightly negative by THB 200. This year, it's improving a bit. We don't have a big upside below the OP.
You can see it's only THB 17 million, but also you can see the sales adjustment in the top line also is much lower compared to last year, okay? So here, roughly the same situation compared to last year. We are not enjoying yet of the very strong USD, but this will come in the next quarters. I think the challenge is coming Q3 from the financing activities, and you can see we have some FX losses by THB 285 million in Q3 2023. So where does it come from? On this one, there is one key component, which is, you know that we are funding the rest of the group in Europe and in the U.S., also from Thailand, okay? So we have a lot of intercompany loans to the U.S. and to Europe, okay?
We do some hedging also on this intra-company loan, and here the change in Q3 was unfavorable for us. This is why it did trigger some FX losses in... We do believe this is a major part. We don't believe there will be more parts happening in Q4 or as significant as this one. So we take the hit here in Q3 from this one, but we do believe there will be some recovery in the next quarters to come, and mostly also in 2024, when we do expect the interest rate to release a bit. So we did provide you with some graph also to try to help you. We can have more discussion if there are any question on this one, but we have some FX losses in Q3 2023.
Now, moving to Red Lobster. Different story. If you remember in Q2, we told you we have some good news coming from Red Lobster, and we are quite happy with the development in, in H1, okay? Different story in, in Q3. We are back to a challenging situation at Red Lobster, okay? You know that from a seasonality point of view, Q3 and Q4 for Red Lobster, it's always a weak season, okay? There is no surprise on this one, and we did provide our full year guidance at the end of Q2. We knew that H2 will be, will be a loss, but you can see here the loss from the operations amount to THB 395 million, which is higher compared to our expectation. So where does it come from?
The key impact is coming from the headwinds the restaurant industry is facing in the U.S., okay? The whole restaurant industry, but especially also the casual dining, where Red Lobster is operating, okay? You know that the U.S., they are facing with some recessions, so many people, they choose not to go to the restaurants or when they go to the restaurants, they will move from fine dining to casual dining or from casual dining to QSR. So they are all trending down. And even the people who go to each restaurant, they will trending down also. They will move from the premium to the value offering proposition, okay?... We told you also that we were launching a new promotion in Q3, okay? And the promotion was called Ultimate Endless Shrimp, okay?
The price point was $20, $20, and you can eat as much as you want, okay? For those who have been in the US recently, $20 was a very cheap. The rationale for this promotion was to say, we knew the price was cheap, but the, the idea was to bring more traffic in the restaurants, okay? Because Q3 and Q4, it's always a season where we don't have much traffic in our restaurants, so we wanted to boost our traffic. It did work, okay? The traffic went up in Q3 2023, okay, 2% by 2% compared to Q2, and almost by 4% also compared to last year.
So there was really an increase in the traffic, and we have been stealing some market share from our competitors, because our competitors, they have been losing some traffic in the same period. But something which was different from our expectation is the proportion of the people selecting this promotion was much higher compared to expectation. What does it mean? It means that the people coming to Red Lobster, they were really looking for a very strong value proposition, very strong value proposition. And of course, we know on this promotion, we don't earn a lot of money at $20. We don't, okay? The idea was to bring some traffic. We get some traffic, increase, not to the level we're expecting, but still, we are growing compared to last year and compared to the previous quarters.
But bottom line, in terms of financial performance, it did not deliver what we were expecting, okay? And this is one of the key reason for the losses we generate in Q3 2023, okay? Of course, since then, we have been adapting our policy. We have been increasing our prices from $20 to $22 and then $25. We do believe it's a very strong promotion. It's one of the iconic promotion for Red Lobster, so we want to keep it in the menu, but of course, we need to be much more careful regarding what is the entry point and what is the price point we are offering for this promotion. So this is the key driver for this one. Apart from that, there is no change for the others.
We don't have any preferred interest, same situation than in Q2 and in Q1. And we'd said for the whole year, 2023, we will not record any preferred interest. We have some upside in the income tax. It's a bit higher also compared to our expectation. The income tax calculation is a bit complicated, you know, for Red Lobster. We have some fixed tax credit coming from the goodwill amortization we had in the U.S., so every quarter, we enjoy the same tax goodwill amortization. The amount is also flexible, depending on the losses, and of course, the losses are kind of significant in Q3, so we have significant tax credit from this one. We have also some tax credit coming from the tips. Also, at Red Lobster, which is always a bit difficult to predict.
We have also, we are doing a tax consolidation, you know, with our frozen business and ambient business in the U.S. Last year, our frozen business was generating some losses. This year, we don't have any more losses coming from our ambient and frozen business, so we are able to recognize more tax credit coming from Red Lobster. Given this performance in Q4, we adjust down our guidance for the whole year, okay? If you remember, the initial guidance for Red Lobster for the full year was THB 600 million, okay? We said we want to achieve half of the losses we delivered in 2022, and last year it was THB 1.2 billion, okay? In Q2, we told you the situation is improving, so we moved to THB 500 million.
Of course, now we're in Q3, the performance is worse compared to expectation, so the full year guidance now is adjusted to THB 700 million, okay? So we are not happy with this one. However, if you take a step back, compared to last year, it's still a huge improvement compared to last year. Yet, we are not happy with the operation. The cash situation, of course, and the covenant are under pressure at Red Lobster. You can understand that given the Q3 performance, this is under pressure. It's not the first time. We had this situation already last year. We told you the cash situation, the covenant, they have been under pressure roughly at the same time. Keep in mind also that Red Lobster has been repaying a portion of their debt in August, okay? $25 billion, okay?
So they have a remaining debt, which is around $230 million after these repayments. They had to perform these repayments because last year they were in a situation of excess cash flow, and this is why it triggers the debt repayment by $25 million. In terms of covenant, also, at the end of August, Red Lobster missed their EBITDA covenants, okay? And there are different mechanism which can apply in this situation. So we have been curing this EBITDA covenant at the end of Q2. So we have been providing a new loan by $2.8, or let's say $3 million, to Red Lobster in October. So you don't see that yet in our September flow in numbers, but you will see that in our Q4 numbers, okay?
So this is one way for us to get rid of this shortfall. It was not a huge amount, $2.3. We're not happy with this one, but yet we decided that we want to continue to support the business. Few changes also we announced on the management. So we did appoint Horace as the CEO of the company. Horace has been working for Red Lobster for decades. He was a General Counsel. We still have Paul Kenny, who is very strongly involved in the business. He is back in his role of Chairman of the Board, okay? And he will focus, but he will still help us also on the operation. Given the performance also, we have appointed some advisors to help us. Okay, what are the strategies we want to elaborate for Red Lobster?
And we have different options which are on the table. Okay, we are contemplating that. It's not a new news, you know that we are thinking about what do we do with Red Lobster, over the next quarters, and, and years. So here, we do expect some development to happen in, in Q4. And lastly, I mentioned to you that we are always reviewing our pricing strategy. Overall, we told you we have been increasing the pricing, we're getting the Endless Shrimp, and we are always also adjusting the promotion intensity just to make sure that the margins are in line with the, the expectation. Quick overview regarding the ratio that we have in our net working capital. You can see the net working capital is quite close compared to last year.
Some ratios are deteriorating a bit, of course, compared to last year, because the performance has been deteriorating a bit. But overall, please look at the net debt to equity and the net debt to EBITDA ratio. The financial performance and the financial health of Thai Union is still very strong. We don't have any worry on this side. Next slide, we have a quick overview regarding the net debt development, and you can see on the left, the free cash flow. We are quite happy with the free cash flow. In 2023, we have THB 4.5 billion, but the EBITDA is not huge, of course, but overall, the CapEx are really under control, and also the net working capital is really under control. Okay?
So situation on the free cash flow is good, but we have been doing some financial activities over the nine months, okay? And namely, you can see we have been buying back some shares, some Thai Union shares, almost by THB 3 billion. We have been buying back also in Q2, some i-Tail shares for THB 700 million. You can see also, of course, the impact from the dividend, also from the, from the interest and the tax we pay. But the key drivers are really the share buyback program and the i-Tail buyback program. You can see also that i-Tail has been investing in long-term corporate bonds. So in Thailand, we exclude this one from the net debt definition. In Europe, that would be different.
We'll keep this one, so for me, it's a bit left pocket, right pocket. But the practice in Thailand for the 1.4, which is mentioned here, is to include this one from the net debt. So overall, you can see net debt growing to THB 54 billion, but the gearing, the net debt to equity, is still at 0.65, so still a very comfortable situation. Finally, here you can see our details regarding the details of the debt by currency, by maturity. We have an increase in the short term that was expected. We knew it was coming. We told you also that in Q2 there will be a significant amount of refinancing to be performed in the year 2024. So we are already starting to work on this, on this one.
There will be different component on this one, and the refinancing will happen in over the next quarters. No concern on this one at all. And now we leave it to Khun Gigi to explain to you the performance by category.
For the overall picture for our business, you can see that the business, the ambient seafood business for the first nine months increased from 42%-48%, and the lowering of our numbers has come from the frozen and chilled business. We did right-sizing, and that was the reason why, and so the frozen and chilled business went down from 37%-35%. Another business that dropped as well was our PetCare business. The PetCare business for the past year, it was high numbers, so this year we have customers destocking, and that has resulted in a drop from 14%-10%. For our value-added in other businesses, it's basically the same at 7%.
If we take a look, if we compare with the past two years, in 2022, that was our very a year for very high figures, and this year we have the freight prices, the normalization, and this has led to a drop in the freight revenue, and that has led to a negative impact. If you take a look at two years ago, the Ambient seafood was growing at 10%, and our value-added businesses went up by 12%. As for frozen and chilled seafood, even though our sales went down by 17% because of our strategy, but if you look at the gross profit margin, it has improved, and this is a significant sign. It's back to double digits at 10%. Let's take a look first with our Ambient seafood business.
You can see that the sales have dropped by about 7% compared to the year before, and the baseline was high, and this is mostly from the drop in volume. The sales volume dropped by. We have an offset by 5%. If we take a look at the gross profit margin in quarter three, you can see that there is an improvement. The first quarter went down to 18% because of the higher fish prices, and in the second quarter it was 19% or so, and in quarter three, it is at 24, 20.4%. Mainly, we have, we see we are seeing lower raw materials prices, especially for salmon, which has gone down quickly.
If we take a look at the nine months, the sales for ambient seafood has reduced a bit, by 2% compared to the year before, and this is because of the sales volume that has dropped by 23%. We have challenges from inventory destocking, as mentioned earlier, and in the third quarter, we're seeing improved signs. Tuna prices are going down, as Khun Chang or Khun Thiraphong mentioned earlier. It's down from $2,000 to $1,600, and in the third quarter, we are seeing customers, OEM customers, who were waiting and seeing they're starting to restock. We expect that in quarter four, we will see more orders from this group of customers, and thanks to the lower tuna prices.
In terms of gross profit margin, the 19.5%, and this is a small decrease compared to the year before, but it is still a strong number for the group. As for our newer products, as mentioned before, we are trying to launch new products that help to add margin for the group. We have the; this is new packaging. Usually, we focus on canned products, but we're looking at this new packaging to enter newer customer segments. The next business is frozen and chilled. Overall, in the third quarter, we're seeing a drop, continuous drop from the third quarter of last year, down by about 22%, and we are faced with the market prices dropping down, normalizing, and we have a strategy to reduce our seafood. Our fish products.
Because of a volatility in the prices, and it wasn't leading to profit for the company, so we have reduced those products that are not bringing in margin. So the gross profit margin for the third quarter, thanks to this strategy, our gross profit margin has increased significantly from 7.9% in the first quarter, up to 9.6% in the second quarter, and up to 12.9% in the third quarter. And you can see that this is a new record. It's smaller than the third quarter of last year, just a bit. Overall, thanks to the strategy for our seafood products, our gross profit margin is in double-digit territory.
If we look at the sales for 9, for the 9 months of this year, for frozen and chilled, it's gone down by 18% because of the reasons that I mentioned. We have discontinued those products that are not bringing in margin. For instance, we have shrimp, some SKUs. Our overall gross profit margin for the 9 months has improved and is in double-digit territory, namely at 10%. Thai Union is producing NPD, new NPDs, new products, and we're giving importance to improving production efficiency to improve cost as well. For our feed business, we continue to be profitable in the third quarter, and you will get to hear about this in the next session. Normally, for the fourth quarter, it is a high season for the frozen business, and so we have great news when it comes to the products.
If you take a look at our investment costs for shrimp, the prices are starting to increase from the third quarter. This is mostly due to demand, improved demand, and in the fourth quarter, we expect to see continuous improvement. For our PetCare business, it's gone down because of the reasons mentioned before, because of the destocking of our customers. In the third quarter, we also had the highest numbers at THB 6.2 billion. And we have a negative product mix, and we have premium products that are numbers are dropping, but we want you to take a look at the sales for the third quarter compared to the second quarter. You can see a recovery, a clear recovery, up to 19% from the second quarter, and we have customers returning with pre-orders, especially from the US and Europe.
In the fourth quarter, we expect to see a continuity in this. Our gross profit margin has gone down compared to the year before because of the high baseline and also because of the investment costs that have increased, and the product mix, the premium products have dropped. This has led to our gross profit margin not being that nice of a number, but the number right now is 19.4%, which is still favorable. The nine months of sales for PetCare has... The gross profit margin has gone down to 19.2%. Sales is at 26.3%. For our PetCare business, they have a goal for the year at sales of a drop of 26%-27%.
For PetCare, we continue to pursue co-creation using our brands for marketing and launching new products to meet the demand of customers and also to increase our distribution channels. For instance, we have CJ Express, TikTok, MR. D.I.Y., and Big C. We also have the new pet food factory, which is in its trial run right now, and we expect that in next year, in the second quarter, we will be able to commercialize that. And the last category, their value-added and others business. Even though the sales has dropped a bit by from the year before, it's dropped a bit. We have the packaging business as well. If you take a look at Q on Q, you can see that there's a recovery.
We have growth of 19.4% quarter-on-quarter for sales, and we have increased the better selling prices, and we're seeing recovery across all categories in demand. Our gross profit margin has improved to 28.9%. Even though it's compared to the third quarter of last year, it's a bit smaller, but it's still a good number. The sales for the nine months of 2023, we're seeing a 28%, the gross profit margin is 27.4%. Thai Union Ingredients is starting to manufacture. We expect full capacity at the beginning of next year. We have goals to reach 75% within 2024, utilization rate for future culinary. For guidance, I would like to invite Khun Thiraphong to speak.
For our guidance, we have adjusted our year-on-year top line to -10% to -12% from -5% to -6%, and our gross profit margin is at 16.5%-17.5%. SG&A, we are confident that we can continue to maintain this at 11%-12%. And for our effective interest rate, we expect it to increase about 0.5% to 1%. CapEx, we have decreased this number to THB 5 billion-THB 5.5 billion, down from THB 5.5 billion-THB 6 billion. And as for our dividend payout, it's the same. Mainly or mostly for the third quarter, we are seeing recovery that is quite distinct.
In the fourth quarter, we are confident that in terms of profit income, we will see growth, and it will be a good quarter, especially thanks to the overall raw material costs, which are on a downward trend. We're looking at $1,600, and we expect it to go even lower than that up until the beginning of next year, and this is a good sign. As mentioned earlier, this year, this is a new baseline for us after we faced the destocking situation and the inflation, high raw material costs, significantly lower volume. From this moment on, especially next year, I believe that we will be cautiously optimistic. We have an outlook that is good, and our core business, our ambient seafood business, is still very strong. There, I don't see any impact.
We're waiting for material prices, and we believe that the market will see higher volume and our production capacity is ready and we've expanded that. That means that we have lower costs. That will improve our margin for ambient seafood business. As for the frozen business, this year is where we will end our right-sizing strategy in the U.S., so we believe that we will return to a lean and strong position, and we're ready to continue forward next year. As for PetCare, you, I'm sure you already listened to i-Tail, and today we have a goal to continue to grow in that business to the years ahead. And as for the feed business, this is a year for restructuring of the business, and I believe that next year it will re-strengthen.
So overall, I am quite pleased, and I believe that next year will be a good year for Thai Union. Thank you. If you have any questions, we welcome you to ask them now.
Hello, I would like to ask Mr. Thiraphong to please share. For Red Lobster, you have -$700. What about next year?
At this moment, I believe that as we mentioned, we have hired adhvisors to review, consultants to review the RL business in terms of strategy, and I believe that I would like you to wait a bit. Once our plan is clearer, we will be presenting the details to you....
At this moment, in the short term, after we have adjusted the Endless Shrimp price up to $25, we are seeing an improvement in the numbers, an upward trend in the numbers, compared to when we had the pricing of $20. What we will continue to monitor is what we don't have much information on, which is the economic environment in the U.S. What the economic landscape will be like. From the eighth month and the ninth month, we have seen customer spending, and this is something that we need to review. Are there any other questions from anyone here in the conference hall?
I would like to ask about the short term for the fourth quarter. The trend for sales, will it improve compared to the third quarter for every group? And what about the margin, the value added?
You have a new factory, will this help the margin for quarter four compared to quarter three? Will it improve, or will there be the impact from depreciation?
So here for Q4, we do expect some improvement in our top line. We do expect Q4 to be the strongest quarter in terms of top line compare in the whole year, 2023. We do expect to still decline compared to last year, but in a much more reasonable way compared to what we've been delivering in Q3. Okay, so this is for the top line. I think we'll have some good news, because especially on the raw material prices. Gross profit margin, we don't expect to be at 18.4%, okay? We expect to be lower compared to this one. Different reason for this one. The first one is when you see some fish price decreasing, very often our selling prices have to be adjusted down, okay, while we are still consuming the expensive fish.
So very often you will see one quarter where the gross profit margin is decreasing a bit, but then after, it will recover. Okay, so we do. And also the mixed product in Q4 is different compared to Q3 and Q2. We have more sales from our frozen business, and even if the frozen business is recovering, overall, it's diluting for our business. So we do expect the gross profit margin to decrease in Q4 compared to what we have in Q3, yet we do expect to be at a good level. So the operation should remain strong in Q4. This is really the guidance we can give you for the end of the year.
Mr. Ludo, and about FX, do you expect FX to return to again in fourth quarter?
For the full year? No, I don't think so.
For the first quarter?
For the first quarter, I do expect to have some gain, yes, but it will not recover the whole amount. So for the full year, we should have a loss for the whole amount. Of course, always difficult to predict. I can tell you, we really try to forecast and predict.
Mm.
It's always difficult to forecast and predict.
Okay, thank you very much. If there are any other questions? In the fourth quarter, the gross margin will drop a bit compared to the third quarter, but our overall results will be positive quarter-on-quarter, and we believe that we will see recovery from this point on. I'd like to ask about your CapEx. Your CapEx that you revised downwards to about THB 500 million. Have you ever—do you have any projects that have been delayed or changed in cost? We haven't. It's more a delay in construction rather than anything else. Every time we have plans, when we actually implement them, this is something that happens every year. Our contractors are delayed, a delay. There's a delay in construction. We have weather issues, rain. There's no drop in the size of our investment. Which project has been delayed?
The culinary and PetCare projects have been delayed.
I think the big projects have a bit of delay. This is normal. Okay, the culinary and PetCare extension also. Overall, we are seeing for the very large project we have, we have few months delay. Okay, nothing to worry about. We are commercializing right now.
I'd like to ask about 2024. In general, roughly, your sales will grow compared to this year, but if we take a look in terms of volume and pricing, what is your outlook? For volume, it should increase, and the raw material prices should, on average, come down. That's our outlook. What about the raw material prices? You, it's going to go down, that means your selling prices will go down as well. Yes, and the gross margin should improve, right? Because of the utilization rate. What about your SG&A? What should the normal level be for SG&A?
I think on the SG&A, we want to reinvest next year a bit, especially in the marketing support. We had to cut over the past 2 years because the inflation was very high, and we do believe it's not sustainable, especially for our branded business in Europe and the, in the US. So here, the, we did not finalize yet all the expectation. We'll communicate in our Q4, but the guidance should be, we should see some increase, a bit in terms of SG&A percentage. Not that much, but a bit, because we want to reinvest more, again, behind our branded business. On the freight cost, there shouldn't be too much changes, compared to last year, so this should be kind of flat compared to last year. Yeah, I think something around 12, 12 plus-
Twelve plus.
I would say should be, should be our long term.
Yeah, 12. Cannot be 11?
Would be some good news. Keep in mind also the when you have 11 minus-
Mm-hmm.
It means you have to cut some spending. Okay? We have to cut some hirings, we have to cut some bonuses, accruals, these kind of things. We don't expect to do this every year. At one stage, we want to give more ease also to the business.
Sometimes the SG&A is lower. It doesn't mean that's good. I believe that if the SG&A, if we expect it to increase next year, that is to cater to our growth. What we want to do is to reinvest in our brand, whether it's in the U.S. or England or France. I believe that we want to see sustainable growth, and if business returns to normal form, we would like to reinvest in this area. This year is a lower year because we're facing abnormal circumstances. We have profit protection. Should we take? Do we travel or not? Do we increase our human resources or not, or should we wait till next year? And so lower numbers doesn't mean a good thing. So next year should be an appropriate number. And I'd like to ask you about your, your balance sheet and all for next year.
Will it be at this level, or will it improve? CapEx.
For the balance sheet, you mean?
No, no, CapEx. CapEx next year.
For the CapEx, we do expect some decrease.
Decrease.
Again, it's not finalized. Keep in mind that over the past two years, we had some very large project. Okay, we have some new factories, in Thailand, the new culinary factory, the new PetCare factory, the new cold store in Ghana. For the next few years, we don't have such a large project, okay? So we are finalizing the numbers. Again, we will release the guidance in our Q4 communication, but overall, we are targeting some drop compared to the current level that you see here. How large will be the drop? We need to finalize a bit better, but we expect to see some decrease overall for 2024.
Ludo, about Red Lobster.
Mm-hmm.
Regarding to your promotion, do you satisfy with the customer guest count?
I think the guest count, we're expecting more upside.
More upside.
We did see some upside, but again, it happened in a quarter where the whole industry was facing some challenges.
Mm.
And I think if we had not done this promotion, the traffic would have gone down. Of course, we're not happy with the result, bottom line. Okay, why? Again, because the preference was very strong for the customers visiting us, okay? And that was completely unexpected, very different from all the numbers we have seen before. And it clearly show that the people in the US, they are looking for value proposition, really looking for that, and they go to restaurant A, B, or C just because of that, okay? And I think we have been underestimating, this one. This is why we had to adjust also our prices. Honestly, if you go to the US, now, you don't get anything for $20. So $20 was low. So we have been adjusting this one to $22, and now it's $25.
I think $25 for such a promotion; it's much better for us. And here, we can also earn some money also at this level. Okay? Keep in mind also that we are pushing some other promotions, so depending on the year, we are doing different promotion campaign, okay? So we will move to some other promotion campaign.
When the $25 price effective?
It's already effective.
Already effective.
Already effective.
The fourth quarter is a low season period, so do you, do you expect that the customer will decline?
We-
-because of the price and also the seasonality?
We do expect a bit of the decrease, that's correct. But we don't expect that much coming from this one. We do believe that with the other proposition also, we can attract some traffic still in the restaurants. Q3 and Q4 are always low season. That will not change, okay?
Mm-hmm.
Red Lobster, in terms of profitability, is making a lot of money in Q1 of current year. This will not change. That will be the same also next year. So if you look at the full year guidance, we plan for a loss in Q4, which is kind of comparable compared to what we did last year, okay? Very close to what we did last year, but still improving compared to what we achieved in Q3.
I'd like to ask in Thai about your promotions like this, does it draw people who don't normally enjoy these kinds of menus? Does everyone come just for this menu? It does draw new customers as well. That's why our guest count has improved. But the people who come, are they all here for this particular menu item? Yes, this is something that has happened. With this campaign, we were expecting an increase of 20% in customer traffic, but the actual number was up to 40%, and this led to us having to adjust to a higher price from $25. In New York, it might be up to $30 in New York, for instance. You have to understand that this promotion is a promotion that Red Lobster has never done before, and Endless Shrimp in the past, it was only on Mondays, once a week.
But because we looked at the economic situation and we wanted to do something that was different for a change, something that we do every day instead. So the preference, we're not sure what. We wanted to see an improvement of 20%, but in reality, because of the economy, the preference went up to 40%, and so we had to readjust prices upwards. And I'd like to ask about your consultant who has come in to review your business. Do they have a solution, and can they implement a new solution, and how long will that take? It won't take long. Take about two months. Starting from? So if you implement in January. So this is like a promotion that is just buying you time, is that right? The promotion you have.
It's not buying us time, it's a promotion that they have on a regular basis, and the consultants are in to help with set continuous plans. And the consultants are helping with the front office and back office? Yes, especially in terms of operation. So we're happy with the marketing campaign that you have right now? Yes, but it's not only the only campaign that we have. We have to have continuous campaigns. We cannot just rely on one campaign. We have to create variety, and there might be new promotions to add on to this promotion. Are there any other questions? I'd like to... Yes.
Hi. I just have one question about gearing, please. Gearing, yeah. So, we've seen that your debt goes up about THB 6.5 billion since the end of last year, net debt. Half of it goes to share buyback, somewhere around that. Just like to ask about the rationale for taking on more debt to do share buyback, 'cause your free cash flow is, based on slide 23, just sort of barely enough to cover operations and CapEx. Thank you.
This one? Yeah, you're right. We've been doing some large share buyback program over the past two years on this one. If you think this is, of course, one way for us to manage our liquidity, and this is also to try to optimize. We've seen the share price development over the past few months. We do believe right now they don't reflect the real performance of the company, so it's a question of opportunity also for us, and it's also one way for us to improve the, the EPS. Now, in terms of cash flow management, you have to keep in mind, where do you come from the past two years? We have been facing very high inflation, okay?
So if you look at the net working capital compared to two years ago, we have been investing a lot in our net working capital, but we do expect this will reverse, okay? So we do expect the cash flow generation to be quite strong in 2024. As soon as the fish price will be decreasing, you will see the inventory cost decreasing also mechanically. This is what we always see. So we don't have any specific concern. You're right. Right now, the amount of share buyback is quite large compared to our free cash flow, but if you, if you analyze this over the past few years, I think it makes sense, to, to, to do this program. And we just announce and execute another, another batch of, share buyback. I think overall, the cash performance, 2021, 2022, was impacted by the inflation.
2024, we should see some real improvement. So we do, we do expect the level of net working capital to really drop in the years to come, with the deflation impacting the tuna prices and the other raw materials.
Just... Thank you. Just one extended questions on your answers just now, please. When you say that you think that the level of share prices at this point doesn't reflect the value of the company, can you share with us any internal calculations or anything in mind? What do you think is fair, or what do you think is undervalued?
Well, P/E below 10x, is it fair? Number one. Dividend yield, 5%. So that's how we see it. We are not listing the company for 10x P/E multiple. So if we don't see the right value, we are willing to buy back the share, and we have that capacity to do that. You can see that our net debt to equity is 0.65, and we will continue to do that if we don't get the right value.
What is the right value, Khun Thiraphong?
It should be more than this. Okay, I cannot tell you-
Thirteen, fourteen?
Of course, if 15.
Fifteen?
15 would be the right value, right.
15 would be the right value?
Yeah.
I think you are the one to tell us, huh? When you look at the consensus from the analyst, it's much higher. This is why we rely on you guys, and we say the share price should be higher.
No, but I'm curious about Khun Thiraphong's view and then maybe, yeah, Mr. Ludo's view as well. Yeah. 15 times?
Yes.
Analyst target price should be 50% higher than now?
I do hope so. That's what we are. We list for.
Okay, that makes our job easier then. Yeah.
Yeah.
Thank you.
Okay.
Well, if EPS is higher-
Yeah.
Our policy is to pay not less than 50%.
50. So you mean, you mean the dividend policy-
Dividend must be higher.
Okay. Okay, let's move to Rick. I'd like to ask about the frozen seafood business. Your gross margin has improved in the third quarter at 12.9%. Is this sustainable? And your strategy, you are still trying to reduce those businesses that are not leading to margin. I'd like to know about your targets that you set before. You had targets before of going down from $800 million-$900 million, down to whole $600 million or so, and how far have you gone in this progress? Right now, we have achieved our target already, and the main cause for our gross margin improving is because of our right-sizing strategy over there. We used-...
It took us six quarters to rightsize the business from $1 billion downwards, and we have cleaned up our inventory in the past periods as well. After this, the business in the U.S. will be right-sized, and we will be able to focus better. As for our frozen business in Thailand, it is already strong. We are focusing on value-added items. The market is quite stable. Thank you. I'd like to ask another question about Red Lobster. The performance for each quarter is good and might be soft, with an alternation between these two. The auditors, have they mentioned this performance? No, there has been no mention. Thank you. Are there any other questions from the conference call? If we need to write off Red Lobster, what would the book value be at this moment for Red Lobster?
I think at this stage, it's a bit too early to speculate. I think Thiraphong mentioned that we're exploring different strategies on Red Lobster. So depending on the output of this one, there could be different impact on this. So we don't want to speculate on that. Depending on the options we choose, there may be some impact in the value for assets. That's correct. So I think you will hear more in Q4. We have not finalized any decision. Again, we let the advisors work on this one, see the different strategies.
About what's the value?
The value right now in our books, we have something close to THB 20 billion total exposure. Total, okay? If you include common shares and preferred shares. Initially, the initial investment at Red Lobster was $575 million back in 2016, okay? Now, if you look in our balance sheet, you can see quite clearly we have something like THB 20 billion, a bit less, maybe THB 19 billion.
To be precise, what? THB 19 billion.
19 billion. So half of it is equity and half of it is preferred shares.
No, we have majority of preferred shares. I would say we have one-fifth, which is common shares, and the rest is preferred shares. Okay? So 80% preferred shares, 20% for the common shares. Okay, because the common share value has been declining since 2016 because of the share loss we record every quarter, while the preferred shares have been increasing a bit when we were recording some preferred interest.
I'd like to return to the dividend. I'm not sure if I remember this incorrectly or not, but last quarter, you said 70% payout. Is that correct, or am I incorrect? For the first half of the year, we can pay whatever, but for the entire year, it has to be no more than 60%. And this is the covenant concerning our bonds. We cap it at 60%. Are there any other questions from the conference hall? For Red Lobster, your other income from preferred shares right now, you forecast at zero for the entire year. Given the high interest rate in the U.S. for next year, if the interest rate is peaking and it goes down in the U.S., other income for these shares, what do you expect? Do you expect a return next year?
I think you are right in the substance, where if the interest rates are going down, we should be able to record some preferred interest at Red Lobster. Okay. Will it be at the same level compared to what we did two years ago? We don't know yet. I think it's a bit too early to mention that. We need to see the interest rate curve. You know, it has been increasing very quickly in a short period of time. Right now, there is no scenario where it goes down very quickly. I think the idea is to see the interest rate decreasing gradually over the next few quarters. Okay? We need also to assess the overall financial health of Red Lobster.
It's a combination of different criteria you have to take into consideration, and we will communicate more in our Q4 communication regarding the guidance for both the operation, the lease, and also the preferred shares from Red Lobster.
Thank you, Kap.
Okay, let's move to the Q&A from online. About the ambient business in Q4, selling price, in Q3, selling price increased around 5%, and how about in Q4 as our tuna price continue to decline?
I think we mentioned that the fish price was declining. When the fish price is decreasing, you can expect our selling price to be decreasing, okay? This is mostly for OEM business. Remember, for our branded business, we have sometimes some yearly or some six months agreements, so you will see kind of a mixed effect. We don't expect inflation or increase of our selling price to happen in Q4, given on the overall trend on the fish price. So we do expect stable price or because of the mix, maybe a bit decreasing compared to Q3.
Okay.
The raw material prices are going down. This is to the advantage of the branded business. For OEM, they need to adjust all the time. This is the reason why we see that for quarter four, the gross margin might go down a bit. This will be the main cause.
When you mentioned the negative impact on the lower demand from U.S. side, what are the magnitude we should expect and when have we seen some impact in the Q3?
... In any category? Overall in the US or in a specific category?
I think overall, of the category.
Okay. I think you, you've seen the situation in the U.S., okay? The recession that they're facing, the inflation is very high, so people are taking care really about the value, okay? So we had to increase our prices over the past two years, quite significantly, to absorb the inflation. So we have seen some negative impact in our volume. I must say that overall, we are doing well, okay? Our brand business in the U.S. is doing, is doing good, and we want to continue the direction. But very clearly, we had suffered a bit from the decline of the volume overall in the U.S., but also a bit in Europe, because of the prices we had to increase.
This is why for 2024, where we expect less impact from the inflation, where we expect some decreasing fish price, we believe we'll be able to decrease our selling prices, and that will have a positive impact in our volumes.
The lowering economy, I think that this will lead to an advantage for us. But because the tuna in the first half of the year was expensive, if today the tuna prices continue to go down to a lower level, this will help us increase in terms of ability to sell. And as for shrimp, for this entire year, is at an all-time low, the raw materials, so this will help our consumers.
Okay, in the next question about the ambient business. There are many factors, such as lower tuna price, lower selling price, and possible lower selling volume from the demand impact. What would you expect the net impact to ambient business in Q4 and in the next year?
We do expect some increase in Q4. We told you that since the beginning of the year, especially our OEM, OEM business has been soft for the ambient business. But as soon as the fish price is decreasing, and this is what is happening now, we do expect the sales to recover, okay, quarter on quarter. So we do expect in Q4, the sales for the OEM to increase. For our branded business, for the ambient, a bit different. You know, Q4 is always a low season for our branded over ambient business, and we don't expect any many change from that. But overall, we should have some positive impact in Q4 from that.
The next question, could you guide for normalized sale and margin for the frozen business in the next year? What is the sale and margin for the Q4? Can we use 12% in gross profit margin in the new base?
I think, I think, right now, the performance of Q3, of course, is, is high, okay? It was of the best performance we've been doing. We need to make sure this is sustainable, okay? Keep in mind, there are different components in our frozen business. In Q3, they are all doing well, which is good. We are very happy with this one. Again, we provide more details for guidance in our Q4 communication, but a bit less than 12%, I would say. 11.5%-12%. You know, initially that our guidance for the frozen business was always around 10%, 9, 10%. Now, due to the downsizing of our U.S. frozen business, we expect to increase a bit our guidance. We'll confirm that again in Q4, but I will expect some uplift coming from this exercise, okay?
So 11.5, 12, 12% should be the right thing for Q4.
About our RL question: Regarding a loss from RL, could you elaborate again how our All-You-Can-Eat strategy is positive in the business? As you mentioned that we can more traffic, but the price per head is still the same. Do we get a loss from this strategy?
So clearly, in, in Q3, you could see from the numbers, we get some losses when we are sitting at $20, and this is why we had to react strongly, okay? So there are two work streams, I would say, at Red Lobster. One, which is managing the situation in the, the short term, okay? We are really monitoring very closely the situation in order to improve the operation and the efficiency and the marketing also at Red Lobster. Okay, this is a constant focus. We have some people from Thai Union helping at Red Lobster. And then on the flip side, we, as Khun Rit mentioned also, we have the support of the advisors to see what do we do in the mid-term, and also in the long term with the business, how can we transform this business?
This is right now the focus where we are working on.
Okay, and we have 2 minutes left. About the last question. Under the last year's section, please update your situation of DPR Group.
Russia? Russia. No. Wait, which, which group are we talking about?
Russia. Russia.
DPR.
DPR. DPR. I don't know. I think so.
Actually, the fourth quarter is the worst quarter of the year for RL.
Usually, yes.
Refer to your assumption, it mean that the fourth quarter loss may be lower than the third quarter. What is the reason?
Because in Q3, we have a specific impact from UES, the shrimp. We don't expect the same to happen in Q4, okay? The loss that we generate in Q3 is higher compared to what we generate in Q3, okay? So in Q4, there will be some loss. If you look at the full year guidance, quite aligned with last year, but we do expect some improvement compared to the Q3 performance.
Oh, okay.
Okay. We believe the UES, it's a one-off.
The third quarter is worse than usual, so it seems that the fourth quarter will improve, right? That's how it seems. A second ago, you said that in the fourth quarter, the gross margin for frozen would be about 11.5%-12%. But if it normalizes, then how much should it be for your new strategy? As Ludo mentioned, it used to be 90%-10%, right? And right now it's at about 12%. We believe that it's going to improve, but we are taking a look just to be certain. If you want the numbers right now, then it should be 10+. That should be about right. Close to 11%, I would say, somewhere around there, and we will provide guidance in our next meeting.
But what we can see an improvement in, the main reason is because of the improvement in the US picture. As you know, the US is a trading business, and the trading margin is low, so it causes a dilution in terms of our frozen business, making it look lower. But the frozen business is improving, and the overall picture will get better. One more question about the frozen business, that a second ago you said, right sizing. You've done it for six quarters. We're just seeing the sales. They're smaller for the past three quarters, but you've done this for six quarters, right? So that means that in the second, third, and fourth quarters of last year, you were doing right sizing already? Yes.
We need to tell you that actually, when I said six quarters, I was talking about loss for six quarters, because that loss, it took us time to strategize on how to move forward, and we had lost about two quarters of time due to the right-sizing, and we have gradually lowered. When you right-size or you leave a category altogether that you're not interested in, it takes time to lower the stock, to get rid of the stock, and to not buy new stock. So it takes, it takes much time. What about the fourth quarter? Is it... Are you still right-sizing?
Yeah, I think, I think if you compare to last year, of course, we are still dropping, because compared to last year, we are rightsizing. Do we rightsize further? No. I think we are, we are where we want to be. Some topics like the lobster, we say we want to exit from the lobster in the U.S. We will sell still a bit of lobster next year because we have some commitments, sometimes with some customers, that we cannot stop. So we still have a bit of impact of the right sizing next year, but it will be very small in terms of total impact.
So, how long are we gonna see the sales at 14,000 again?
I think already in 2024, you will see the sales picking up. Okay? So there will be a net impact. Remember that when we talk about the frozen U.S. business, it's one component of our frozen business, but we have also a frozen business in Thailand. We have our chilled business in France. We have our feed business, and we do expect all these three to grow also and to be able to offset the impact from the downsizing in the U.S. Okay? In 2023, the downsizing effect in the U.S. was washing all the rest. Okay? We don't expect the same to happen again in 2024.
Thank you.
Okay, the last question. Could you please update the situation of the business after last year?
In Russia, very simply, business is in a good... It's recovering. It's on a positive trend. The problem with Russia is because of the situation today, from being unable to import products from anywhere, they are not allowed to import from Europe, and Thailand has also blocked. So Russia is standing alone, is using raw materials or products domestically or from China at times, and therefore, the overall business is good, but the synergy that we were hoping for is not meeting our expectations because of the regulations that are resulting from the war in that area. And the size of the business is so small, so it's not that significant for us in terms of our overall numbers.
Because we have run out of time today, Thai Union would like to thank you, and we apologize for in the beginning when there were technical difficulties making it difficult to provide proper interpretation. Thank you for joining us today. We'd like to invite you to take a break for about 10 minutes, and we will continue on with Thai Union Feedmill. Please do enjoy the coffee break outside.