I'd like to get started. Good morning on behalf of Thai Union Group. We'd like to welcome the analysts, bankers, and fund managers for our meeting to present the operational results for the second quarter and the first half of 2023. My name is Waranaya Lee Vaturong. I'll be your MC for today. Outside of the meeting room, we have a special display on SeaChange, which is our strategy for sustainability, SeaChange 2030. This is building on our strategy that we announced in 2016 to change the face of the seafood industry, to take care of people and take care of the world sustainably. We also have a display of our shrimp feed and fish feed just outside the meeting room as well, from the various brands.
In the first half of the meeting today, we're going to hear from a presentation for Thai Union, and we'll have a question and answer as well. We'll take a break for 10 minutes, and then we'll continue on with Thai Union Feedmill. I'd like to announce the names of the executives joining us today. We have the President and CEO, Mr. Thipong Dunshiri. We have Mr. Ludovic Garnier, the Group CFO, and we have Mr. Adam Brennan, the Global Director for Sustainable Development. We also have Ratinan Wongwachananon, who is the Head of Investor Relations. Without further ado, I'd like to invite our executives to begin.
Sawasdee Ka, good morning to all of the analysts joining us today, as well as the representatives from the various financial institutions who are here as well for the announcement of our results, operational results for the second quarter and the first half of the year. For the second quarter, this has been a very good quarter for us. It shows momentum in a better direction, despite the fact that our profit has gone down a bit by 13% in the last year. Our gross profit is at 16.9% compared to the year before. What is good about this is that our operating profit that continues to grow to 8%. Nevertheless, our net profit has gone down by 30%. This is mostly because of two things.
First of all, our foreign exchange loss. The second is the dilution of the impact of our holding in i-Tail. This has caused our net profit to drop a bit, but I want to inform you that this year has been a challenging year so far. Very challenging. I myself, have been in this industry for 35 years. I have never seen a condition so volatile and for so long. I'm sure all of you know that it's because of inflation, the higher interest rates and the weak economy, which is taking place all around the world, and this is something I have never seen in my entire life span and my span of my career. There, this year, everything is weak, whether it's in the U.S., whether it's in Europe, whether it's in China or Asia or Africa.
We're seeing weakness all around the world in the economies globally. Our business, we need to adapt and adjust. For instance, with the interest rates, it's very, these are very important, and this is a pressure on every company to manage their financial status more closely, more rigidly, so that we can deal with the increasing finance, financing costs. Many things have changed, and the trading model with a low margin might be something that we need to reconsider, how we should move, how we should deal with this moving forward, because the cost of funding has changed. If you're not that old right now in your life, you may have never seen high interest rates like this. In the past 20 years, I think we've been very lucky to have a situation where the interest rates have been low continuously.
The tuna prices are also high, all the way to $2,000 US dollars, and they have remained at this rate for a longer time than usual. This is for two quarters already. In the 3rd quarter, it's possible that there, if the prices go down, it may only go down slightly, mostly because of the FAD ban, where we're not allowed to use FAD. FAD fishing is banned or FAD fishing aggregate devices are banned, meaning that these fishing people have to do school fishing. We see that if the fish price goes down, then we'll have to look towards that happening in the 4th quarter, but it may not go down by much.
La Niña is becoming El Niño, and El Niño this time around, we expect it, according to the news reports, is going to remain for a longer period than usual. These are things that we have to continue to stay on top of. At the same time, the tuna prices and the high, the shrimp prices are the lowest because of the over large supply, whether it's in Ecuador, India-... Even though Thailand's shrimp production may not increase that much, but we're seeing more shrimp production around the world. At the same time, in the United States, there is a, a high level of stock for last year, and right now, we're in a period of destocking. If you take a look at the imports in the United States, at this moment, they have gone down to about 30%, by 30%.
The reason is because of high levels of stock and prices requiring them to destock. Shrimp consumption is increasing because the prices for shrimp are down, and there are promotions. Red Lobster normally does not have an Endless Shrimp promotion, but now they're having this every day. We are one of the organizations that use shrimp the most in the United States. I was over in the States for about 10 days for meetings, and so if you're interested in anything about Red Lobster, please do ask me. I visited 21 branches, and I saw a upward trend for Red Lobster. Over the past 12 months, we have seen progress, and whether it's been in QSC, which is quality, service, cleanliness, these are all on an upward trend.
We are very confident, even more confident than before, in our management of Red Lobster, that we will be able to turn things around and continue on a positive path. Ludo will probably share the goals with you, after we have already shared the... We will talk about the guidance for Red Lobster as well later on. Overall, it's been two quarters, and I feel that we have passed the lowest point, so there's nothing exciting at the moment. If you want to ask about the upside, I think we have to keep our eyes on this for a while, and I would like to talk to analysts to think more about the downside risk, the downside risk. Our share prices have never come down this low before.
Don't even want to tell you that this is the lowest price, because THB 18, we thought it was low. THB 15, but it's gone down to THB 12 now. Nevertheless, our PE multiple is about, at about nine-10. As a listed company, what do you consider the PE to be? It's up to the analyst. We continue to move ahead with strong management. Even though we did have a stock repurchase, we paid dividends. Our net debt to equity is at about 0.6, and we're still able to continue to pay out our dividends. We have a 70% dividend payout. This is higher than usual because we don't want the dividend payout to be lower than the years before. This is to appease our shareholders who continue to trust in us.
On this page, you'll see that our sales have gone down by 13%. It's all across the board in all categories. Tuna has gone down, pet care has gone down, and shrimp has gone down. These reductions, the causes for tuna are the high cost, and consumers are careful in their purchases because they don't want to purchase in advance by too much, because they're worried that the prices for tuna will go down. As for shrimp, the prices have gone down significantly, making or driving our price, sales prices down as well, and this has affected our overall profit. For pet care, we're having destocking, and the advantage is that I'm sure that you're on top of this. Our major customers, public companies like Nestlé, for instance, they continue to show top-line growth and a high margin continuously.
This is a confirmation that our, the pet food business is still strong, and this is what I want to share with you. Our gross margin, we've done quite well. Our growth may not be so great, but our cost control is something that we're doing internally. It's our main focus, and you can see that our drop in costs will continue. It has been continuing. We have automation as well. We're continuing that, and we give importance and to this, and Ludo will share this with you. He will talk about, the fact that our operating results may not be that great, but we have a profit protection plan. We are reducing our costs, we're controlling our hiring, we're controlling our traveling. We're looking at costs that are unnecessary, and we will continue to do this moving forward.
As for our newer projects and investments in automation and also our commercial activities, we won't be dealing with that, that much or doing anything with that much. Our operating profit, SG&A, has gone down, which has led our operating profit to be more than last year by 8.2%, even though our net profit has gone down, and it hasn't gone down that much compared to last year. If we take the dilution impact from i-Tail, if we exclude that, there hasn't been much change in the profit if we exclude that item. On the next page, you'll see what has caused our net profit to drop from last year, from THB 1.6 billion down to THB 1 billion. We had our dilution impact, you can see on this page.
We began with THB 1.3 billion net profit. We had a net Red Lobster preferred share, which is in the positive range. We have adjusted our preferred share. After so there's no effect from Red Lobster. Our Forex loss, last year we had a profit of THB 500, this year we lost by THB 200, so it's all together minus THB 748 million. Our finance costs are higher, and these are the main reasons for our drop in the net profit. Our operating results have improved. Our finance costs have led to a drop in our profit and Forex as well. For the entire year, for foreign exchange activities, we're not looking at a loss in this area.
We have a strong Forex management process, and while the interest rates are volatile and our sales may not be according to plan, we may have too much hedging in the second quarter, for instance. These are things that we would like to share with you today. On the next page, you'll see that for the first half of the year, our sales have gone down by 11.3% at $66.7 billion. Our share price, I don't want to speak, talk too much about this, but you can see that it's gone down by 14%. The first half, it went down by 23%, and I've never seen our prices at this, at this level.
Our net debt to equity has gone up a bit, mostly because of our share repurchase, whether it's for TU or i-Tail, that we bought 1% more, increased to zero. Our end net debt to equity has gone to 0.64 times. On the next page, you can see that we announced our dividend payout at 30 satang per share, this is under 100% BOI, so we don't have to pay taxes, we will pay this out on September fourth. The next page is a summary of our share buyback programs, we all bought altogether THB 14.88 average price, we purchased altogether THB 2.976 billion.
We just announced our process, and this is according to the Ministry of Commerce, to try to sell the shares, but then if we can't, then we have to reduce our investment. This is something we have executed already. We're not allowed to share any details, though. Just follow the process. Our goal is, as I informed you, we have a financial status that is sufficient enough, and the value of our price shares is low, and we're interested in investing in this. Let's talk about Blue Finance now. We have achieved our 3 KPI targets, and this has allowed us to lower our costs in terms of interest, which is about $200,000, and this has helped us with sustainability. We have a goal for the future to start at 75% and then make...
Go all the way to 100% Blue Finance. The next page, this is about our new and innovative product launches. For Portugal, we have launched new products, and these are. This is branding. We have a shop in front of our factory in Peniche. It was an industrial city before, but it is now becoming a tourist attraction, and it says, "World's best surfing." During the surfing season, there will be lots of people there. We also have investment or new launches at John West. We have new plant, plant-based tuna there. This is in the U.K. and the Netherlands. Flying Spark is a startup from Israel that we have supported, and they have a new factory, and they are, they have commercial operations in Papua already.
Also, Mareblu has new product launches as well in terms of different kinds of salad. This is what we'd like to share with you about our innovations so far. On the next page, this is our commitment to protecting the environment and also supporting the local communities where we have active participation. This is part of our Healthy Living, Healthy Oceans initiative, and these are, on the next page, are some awards that we received in the quarter, the last quarter. This is something we're very proud of, whether it's about sustainability, finance management. We received the Most Attractive Employer in Thailand award, and this is something that we want to continue to build on and improve. We want to invite and attract talented individuals to join us here at Thai Union.
We have Genova, which is a premium brand in the United States of ours. It received the PEOPLE's Food Awards, and we also have a risk management. We've been recognized for our risk management. This is something we have taken seriously for the past few years, and this is the first time that we received recognition in this area. We got the ASEAN Risk Awards 2023. This is something that I wanted to share with you. That you can see the fish catching or the increase in prices of fish. Fishing is becoming more difficult because of the temperatures in the seas. The fish are swimming deeper, and the school fish don't swim in schools of fish so much anymore. They are, they're more separated, distributed.
If we can't catch fish so much, it is possible that this could lead to a recovery of the marine environment, and that would mean that we'll be seeing more fish in the future. I believe that not long from now, when fishing improves, we will see more fish. I just wanted to show through these pictures that I've been in this industry for 35 years. Skipjack, the size of the fish was 3 kg-4 kg. In this picture, the Skipjack is 9 kilograms, and on average, it's all the way to 7 ki lograms -8 kilograms on average. This is something that I've never seen before, so that's why I wanted to have these pictures taken and to show you, to show you the, the change in the, in the size of Skipjack, for instance.
I'd like to invite Adam to share about sustainability with you right now. Thank you.
Thank you, Kantarapong, good morning, everyone. Sustainability is a key part of Thai Union's business, last month, we launched our SeaChange 2030 strategy. As our investors, we felt that it's important to take you through this new strategy so that you can understand why we believe it's so urgent to act and why it's so important for us as we move forwards. I'll take you through also some of the key commitments that we'll be working on as we look towards 2030. Next slide, please. With our SeaChange 2030 plan, this is our sustainability strategy to help reshape the seafood industry and really provide unified solutions for both people and planet to better sustain a future for all. Next slide, please. Sustainability is not new for Thai Union. We introduced our first sustainability strategy back in 2016.
Our sustainability strategy is known as SeaChange. In 2016, we focused on two fundamental areas related to the Thai Union business. These areas were both related to our tuna supply chain. We set out to maintain healthy fish stocks and to protect the well-being of the workers on board the vessels. There are many other components of this strategy. These were the two fundamental areas because at that point in time, we recognized that there's an opportunity here to show what leadership looks like. That there is also a risk to our business in not acting.
There was a bright spotlight in 2016 on the seafood industry and some of the risks that it can contain. We are very proud with the progress that we have made since 2016, but we now believe it is the opportunity, the prime opportunity to reset the vision as we look towards 2030. With our initial strategy, we dedicated $100 million towards the activation of our initial commitments. What we saw between 2016 to today is that those $100 million essentially became license to operate. We went out with very ambitious commitments in tuna and worker well-being. Over time, the rest of the industry caught up to us, that today we are not put at a competitive disadvantage. We have supported the industry in raising the bar and the global standards for the seafood industry.
We really hope to do the same now as we look towards 2030. For our new 2030 strategy, we will be investing $200 million towards the activation of these commitments. There are a number of reasons why we believe it is so important to take sustainability so seriously. Number one is to make sure that we regain and retain our leadership in sustainability. Being a leader in sustainability is a constantly evolving term. Only because we are leaders today, doesn't mean that we can sit still and maintain that industry leadership position in 2030. Science continues to evolve, and we have to continue to evolve as the latest science come into play, but also as the rest of the industry continues to improve. Also, we've looked at the regulations as we look towards 2030.
Europe, the U.S., are key markets for Thai Union. We've analyzed all of the upcoming regulations in these markets, and we've taken these into account in terms of what they will mean for the Thai Union business, in terms of being mandatory and essentially a license to operate. We also believe that through sustainability, there is a key business opportunity. When I created our 2030 strategy, I analyzed all of our biggest customers' sustainability strategies. They all have their own 2030 commitments, and we can position Thai Union so that we can help our retailers activate their own commitments. We believe that this is going to be a must for long-term business and is really a key business opportunity to support some of our private label customers...
Then also, as we look at our own operations, there is also significant savings that can be made with our own operating efficiencies. So these are a few of the reasons why we have taken sustainability so seriously, and why we are dedicating such a large sum of money towards 2030. Next slide, please. When we introduced our 2016 strategy, we were really focused on four of the SDGs. These were number two, around zero hunger; number eight, around providing safe and decent work; number 13 is around climate action; and 14 is life below water. As I mentioned, in 2016, we really set out to maintain healthy fish stocks and to protect the workers on board the vessels.
With this new strategy, we take a very holistic look at our group impact, and going for the first time beyond just our tuna supply chain. With this new strategy, we will be working and activating 10 of the sustainable development goals. These are all of the goals that are material to Thai Union Group's business. Next slide, please. Within our 2030 strategy, we have two thematic pillars. The first is making sure that we protect the people around our business. These are our own workers, these are the workers in our supply chain, and these are the people that reside in the communities where we operate. Then secondly, is to protect and help restore our environment. Thai Union is a seafood company.
Our biggest product is tuna. We are inherently reliant on the health of the world's ocean to provide that raw material. It's in our best interest to make sure we understand what leadership in this space looks like, and we can begin to tackle global crises like climate change and biodiversity. Next slide. Within our strategy, we'll be working towards five future outcomes. Social and labor has been at the heart of our strategy since 2016, and will continue to be at the heart of our strategy as we move towards 2030. Although we don't own any vessels, although we own very few farms, we have a responsibility to make sure the workers in the supply chain are protected and treated fairly. We will continue to reinforce our existing work in this area and accelerate some of this work to other supply chains.
The next is on health and wellness. We are, again, a seafood company. We rely on blue foods. Blue foods has a significant role to play in the future. We have a growing global population, which means that the demand for protein is also going to increase. Demand for healthy, nutritious protein that comes at a low environmental impact, and we believe that seafood and blue foods have a significant role to play in tackling food insecurity. Then as we move over to the planet, we're gonna be focusing on climate change. Okay, you've all heard of the term global warming, but today, we are at the point where we're talking about global boiling. July was the hottest month on record, and again, we are reliant on the health of the world's oceans. It is our duty to help protect the resources that we are reliant on.
The second is around biodiversity and making sure that, again, we are protecting the local environment, but we are also protecting the fish stocks that we are reliant upon. When a fish stock collapse, it can take decades to recover, we have to make sure that we are acting and sourcing responsibly. The last is circularity, and supporting the circular economy to make sure that we are operating with increased efficiency and a reduction in waste. With under these 5 future outcomes, sit 11 interconnected commitments, and I will not now take you through the detail of all 11 commitments, but I do want to call out some of the key highlights. The three headline goals are those that are at the top. The first is our path to net zero emissions. I just spoke about the urgency on acting with climate change.
Now, tuna is generally a low carbon-intensive protein. Shrimp can be a little bit higher, but certainly less than other types of more traditional proteins. We still believe we have a role to play as we move towards decarbonization. Thai Union have set out an ambitious plan to align ourselves with the Paris Agreement, and to make sure that the planet maintains a temperature limit of no more than 1.5 degrees Celsius. What that means for Thai Union is we'll be working to reduce our absolute greenhouse gas emissions by 42% over scopes 1, 2, and 3. Scopes 1 and 2 are our own operations. This is what we're in direct control of. These are the emissions coming from our own factories, our own facilities. What's important here is the inclusion of scope 3.
Scope three are the emissions that sit upstream and downstream of Thai Union. This actually represents nearly 90% of our total greenhouse gas emissions, which is why we believe it's so important that we act. Between now and 2030, we will reduce our carbon footprint by -42%. In addition to that, we also recognize that the planet needs to move towards net zero. The best science indicates that we need to do that by 2050. We have aligned ourselves with this target, and we will work towards a net zero target by 2050. The second area is around responsible wild-caught seafood. We've already done a huge amount of work within our tuna supply chain.
We're going to be accelerating that work as we look towards some of our 2025 goals, but we also want to take those learnings and apply it to other species that Thai Union is sourcing. With this new commitment, we are extending our wild caught boundary to include 6 additional species beyond tuna. These six species, plus tuna, represents about 90% of Thai Union Group's wild-caught volume each year. Then the third area is around aquaculture. This is the first time that Thai Union Group has an aquaculture commitment, and what we will be working on is predominantly our shrimp supply chain, to really replicate some of those work that we've done in tuna, i.e., protecting the workers in the supply chain, making sure the local environment is protected, making sure that we have traceability down to the farm level, but also traceability within feed.
Feed is so important because it can be linked to deforestation. We need to be working with the farms that we source from and their feed suppliers to understand where the raw materials are coming from, and to make sure that it's not associated with deforestation. Then the fifth area that we're going to be working on is antibiotics. Those are the five new areas of our aquaculture commitment that apply across the group, that will see us working towards 100% responsible aquaculture products by 2030. Those are our three big headline goals. There are eight other goals that sit interconnected beneath them. They range from a number of different areas like nutrition, ocean plastics, ecosystem restoration. We're going to be continuing our work on CSR and building up some of our programs in the communities.
We're also going to be working on best-in-class manufacturing. Okay? We have high hopes for increased automation in our industry, we also want to make sure that the only thing that comes out of our factories are seafood products. That means no wastewater, no waste to landfill, and no food waste. We're really supporting the circular economy as we move forward, and we're able to demonstrate to the industry what best-in-class manufacturing can look like. We're also going to be focusing much more on our land-based impacts, looking at responsible agriculture. When we look, for example, at our i-Tail business, one of their key raw materials is chicken, we're now extending our SeaChange strategy to also include other material impacts across the group. Next slide, please.
For each of these 11 commitments, as I said, I don't want to take you through the detail now, we have a detailed one-pager. These are available on our SeaChange website. If you go to the next slide, you can see an example of this one-pager for ocean plastics. Why is it so important that we have these 11 commitments? Where did they come from? Why do we need to act? What is our approach going to be? What is our target in terms of tackling this issue? What is our action plan as we look towards 2030, with some of the key steps that we're going to take? Next slide, please. I just really want to conclude by saying this is a very ambitious strategy.
This really helps to redefine what leadership looks like, but we will be working with a broad network of stakeholders between now and 2030, so that we ensure we raise the bar for the entire industry. We can help pave the way to what good looks like. We can help pave the way in terms of what works and what doesn't work, but we need to work with all of the industry to help raise the bar. That means we will be working with our competitors on a pre-competitive basis to help align and drive the sustainability agenda. We'll be working with NGOs, who can help provide governance and oversight into our progress and provide expertise. We'll be working much more closely with our customers, who also have a key role to play in engaging the consumers on sustainability topics.
Also, the likes of our investors, who also have a key role to play in making sure that we help to raise the bar of not just the seafood industry, but all industries as well. That is a short overview of our 2030 strategy, and appreciate you taking the time. Thank you.
Thank you, Adam. We've invited Adam to share with us today, and we want all of you to know Thai Union's commitments for 2050. It's net zero, we just launched our new sustainability commitments and strategy for 2030 as well. This is our plan for 2050, as we informed you earlier, sustainability is part of our strategy, part of our business strategy, we want to continue on as leaders in this pursuit. We want all of you to rest assured that our investments in sustainability will help our business will help strengthen our business. From this point forward, we will be looking at commercialization from a sustainable basis.
We'll have training for our employees, all of them, especially our sales force, so that they can share our story and that they can expand on this with our customers all around the world. This is extremely important because our customers, all of our customers, have announced their intentions to commit, have this 2050 commitment as well. We are an important part of making their success possible, and we want to help them achieve this. By helping them to achieve this, we will have a strong relationship with, with our customers, and we'll have stronger relations going forward.
Thanks a lot, Vaturong, thanks a lot, Adam. Very happy to be with you today. A few insights for you on this Q2. Few takeaways. The first good news is, I think overall, the operations have been improving. You remember in Q1, we told you that the, the operations were very weak, the OP was very low, and I think here in Q2, we can clearly see a recovery of our OP in Q2. Also we have some good news also to share with you on, on Red Lobster, okay? Red Lobster, you will see, the numbers, but the financial performance is strongly improving, compared to last year. This is, a very good news, and I will elaborate, on this one a bit later. The second one is, is on the ambient business, which is our core business.
We are back to growth, okay, in terms of sales. Sales are growing. Not a lot, 1%. Volumes are still declining, but I think it's a good news to be able to achieve some top, top line growth in this challenging environment. We have also very good news on the growth profit margin and the ambient business, and here, Gigi will elaborate a bit more on this one. We are quite happy with the ambient performance in Q1. If you do remember, in Q1, we told you that we had been stopping some of our promotional activities, especially in Europe, because we were negotiating with the retailers. The price negotiation now are ended, we have been increasing again our promotional activities in Q1. Okay, this is... In Q2.
This is one of the key driver for the growth happening in Q2. We have also some good news from our frozen business. The gross profit margin recovery was something which was expected, and it happened in Q2. Again, we will have to elaborate on this one. We will talk about our US frozen business. If, if you know, our US frozen business is a pure trading business. We have decided to rightsize this business, to decrease a bit the sales we are doing in the US. We are currently operating in different categories, and we want to de-risk a bit this business.
Some categories which made sense a few years ago in the context of very low interest rate, don't make any sense when you are in a context of high interest rates, and we'll elaborate a bit more on this one. Overall, the recovery is strong. You could see moving, growth profit margin moving from 6.6% to 9.6%. This is good. I think the dividend payout is also a good news for the shareholders. We decided to have a high payout also, this for this half year, just to show our confidence. We have confidence on this one. Finally, SeaChange 2030. I don't need to elaborate on this one. Adam already did before, but we are very happy and very proud. Okay? Just to tell you that we don't have any choice.
For us, it's a must, okay? Over the past few years, Thai Union, we, through different commitments, clearly show that we are leading the path in terms of sustainability. We have to continue, okay? Overall, worldwide, the situation is not improving with the sea temperature, with many things. We have- will have to move on, on this path, and it will be good for the long term of the business. Now, moving to raw material prices. We are facing kind of a unique situation, okay? Talking about the tuna, we are facing a very high inflation, okay? The tuna price, on average, compared to last year, have been growing by 24%, okay, and is around $2,000 per ton in, on average for Q2, okay? This is higher compared to expectation.
In Q1, we told you we're expecting the tuna price to decrease a bit in Q2. We did not see that very clearly, okay? Here, the fish price in Q2 was higher compared to our expectation, and it's kind of unique to have this situation of high tuna price for two quarters in a, in a row. I'm sure we'll elaborate on what is our forecast view for the Q3 and Q4 in the Q&A session. The salmon price also is record high. In Q2, you can see on average it's 109 NOK per kg, record high for, for Q2. There is one good news, which is over the past few months, the salmon price has been decreasing, okay? We do expect some further reduction to happen in H2. The shrimp, completely different situation, okay?
Here we see a lot of deflation. In fact, in the shrimp business, you have record low prices over the past 11 years, okay? Very unique situation. We see also some deflation happening in the crab and in the lobster. If you look at the, the frozen category, you will see you have a very strong negative, you have a very strong deflation happening there. Very different situation compared to the, the ambient. If you like, look at our top line in the frozen, you have a volume drop, mostly coming from our US rightsizing, but also a very negative pricing effect, which is very different situation compared to our ambient. A very unique situation, challenging, but also interesting for us. We have some good news. The freight cost, now we are back to where we were before COVID.
You remember, it was one of the key driver for the inflation for us over the past two years, and now it has been moving back to normal. Of course, we have to give it back to our customers, okay? This is also one of the, the explanation from our top line weakening in 2023. The inflation is still high everywhere. You have a few graph here to go through, but overall, it's declining a bit, okay? In the U.S., you can see in Europe and also in Thailand, month after month, you can see the inflation rate decreasing almost everywhere. Still high, but overall decreasing. We do believe here the trend is going in the right way. Of course, main question regarding to consumption, what is the level of consumption?
Here you have some graph regarding our key regions, namely the U.S. and also Europe. You can see overall, the retail sales in the U.S. have been growing, year-on-year by 1.5%. The sales also in the restaurants have been also growing a bit. The unemployment rate in the U.S. is still low. Overall situation in the U.S. seems to be kind of okay, recovering a bit. Not very exciting, but we are not in a context of recession. Different situation with Europe. Here you have many countries and many large countries which are already in recession. You have here all the numbers. It doesn't mean it's a bad thing for us, okay?
Remember, of course, our products overall are really affordable, even when we are facing a context of recession, normally the impact is not that negative for, for our business. Of course, we need to acknowledge that here, the macroeconomic conditions between Europe and the US are very different, one from, from the other. On the currency side, it's going the right direction for us. The USD is appreciating versus dollar. In Q2, it's appreciating versus Q1, but it's aligned versus last year, so there is no big change on this one, but overall, no big change in Q2 on this one. One of the, the thing we wanted to focus on was on the FX loss in Q2. This is one of the key driver for the net profit drop compared to last year.
Last year, we had very large, positive FX gain below the OP, okay? This year, we had the opposite situation. We have some negative effects in Q3 below the OP. Here we just wanted to, to give you a focus and to try to explain. Sorry, it's always very technical, very complex, so we try to simplify, but we have two key lines, okay? There is one line, which is called sales adjustment, okay. This line is included in our net sales revenue, okay? You can see last year it was negative by THB 300 million, but this year it is positive by THB 120. On the right, you can see a graph where we are comparing the forward rate that we have, the average forward rate that we have, compared with- compare with the spot rate, okay?
Here, the average spot rate, this is the blue line. Here, when you have the orange line, which is exceeding the blue line, this is generating positive gain for us. Okay? When this is the opposite situation, it is triggering some negative impact for us. Here, you need to look at the past six months on this one. You can see over the past sisix months, the orange line has been above the blue line for the past 6 months on average. Okay? This is why we have a positive THB 120 million in Q2 2023. Last year, we had opposite situation. The blue line was exceeding the, the yellow line, the, the orange line, this is why we had some negative impact on the sales adjustment. Okay?
This is one component. Then you have another component, which is below the OP, the FX. You can see here we have a negative effect by THB 250 million compared to a THB 500 million gap last year. Here we give you the breakdown. We have some negative impact coming from the FX and the financing activities, but not very different compared to last year. Then also, we have some FX loss coming from the operating activities. Here, again, you have some graph on the right to explain to you. Here you have to compare what is the AR rate on average that we have compared to the spot rate, okay? When you have the blue line at the bottom, which is exceeding the yellow line, this is triggering some FX gain for us, okay?
This is what happened last year. You can see in Q2 last year, the blue line was always exceeding the yellow line, and it did trigger some very significant FX gain, okay? You can see now in Q2 23, it's also exceeding a bit, but not that much compared to last year. Plus, also, we have in Q2 23 some over-hedging impact, okay? Our sales are a bit below what we were expecting, so we did have a bit of over-hedging that we had to release in our P&L, and we have some negative impact coming from this one. This is why, overall, in Q2 23, we are generating some FX losses compared to a situation of FX gain last year. Our, our usual focus on Red Lobster, again, we told you we are happy. The situation in Red Lobster is improving.
You can see from the share profit, the share of loss in Q23, we had THB 94 million loss, compared to THB 281 million loss last year. This is a massive improvement. This is going in the right direction. Maybe I want to insist a bit more on the next slide. Here we are working very closely with the Red Lobster management on defining their strategy and different actions. We went together with the head of strategy and the head of M&A also, to Orlando, and including myself and some people from our strategy team, to work very closely with them. To details what should be the pillars of their strategy for the next year. We did agree here.
You have the 3 pillars that we have around traffic, around the guests, regarding also the operational excellence. We have been working very closely with the management team of Red Lobster. We have been defining what are the initiatives, okay? For all of these initiatives, we have some specific target. The idea, of course, is to improve the operational performance and also the financial performance of Red Lobster moving, moving forward. Here, very close work together. I think they did appreciate really our support. This is the first time that we go really there with the team, and we spend so much time with them. We went there already 2 times. We will go again at Red Lobster, and the idea is really to support them. We have few enablers.
You can see here they are clearly identified, around the people, around digitalization. I think Red Lobster, we are a bit late, especially in the experience in the restaurants. We can really improve on this one. We have also a specific work stream regarding the cost reset. We are reviewing the SG&A to try to see how can we simplify, how can we redeploy the cost at Red Lobster. The impact on this one is overall, we are improving our full year guidance. You remember we told you in Q4 and in Q1 that the full year loss from operation was THB 600 million. We improved a bit, THB 500 million, it's just to show you the direction, okay? Keep in mind that for H1, we are slightly positive, okay?
The share profit from Red Lobster in H1, Q1 plus Q2, from the operation is slightly positive. This is good. We plan to have a loss in H2 as we always have, okay? We do remain cautious, about Red Lobster, you know, the situation is always volatile. The guest count situation also has to be improved. We see some improvement, but we want to make sure this is sustainable, okay? We follow quarter after quarter, but Q2, we are quite happy with the, with the performance there. Quick update on our net working capital. You can see I can move quickly, but overall, our net working capital has been improving a bit in Q2. We told you in Q1 we wanted to see this net working capital decreasing.
This is starting to happen in Q2, we want to decrease further in Q3 and in Q4. Moving to our net debt, you can see here our net debt has been increasing from 47 billion Thai baht at the end of last year to 53 billion Thai baht. There are two components on this one. I think the free cash flow is in line with our forecast. We have 3 billion Thai baht. In Q2, free cash flow has been extremely good. We have EBITDA, and then we have positive impact from our change in net working capital. CapEx, we are a bit behind our plan, and we will share with you the updated guidance on this one. We will decrease a bit the full year guidance for the CapEx.
We have been also doing a lot of investment in H1. Khun Thiraphong mentioned about the Thai Union treasury shares. We mentioned also about the additional shares we took in i-Tail. i-Tail has been also investing in some corporate bonds, okay? All of these are the key drivers for the net debt growth in H1, but overall, we do believe the net debt will be decreasing in H2, and we are, we are on a good track. Finally, you have our usual breakdown. There is no big change on this one. We're getting the interest rate, we're getting the fixed portion on this one. We do remain confident. We have the good one. We don't have a lot of refinancing to happen by 2023.
It's a small amount of money that we have to refinance. Next year, in 2024, there will be a larger amount of refinancing. Now we let Khun Gigi going through the other business performance.
I'd like to start with the overall look. You can see that in for the second quarter and the first half, the ambient seafood has grown from 43% last year to 48% this year, whereas pet care has gone down to 10%. Frozen has gone down as well because of our right sizing and downsizing in our frozen business, so the contribution has gone down from 37% to 35%. Our value added, the contribution is the same at about 7%. In the first half of the year, even though the sales had gone down, but if you take a look at it more closely, last year, we had a new high, a high base, and Ludo also mentioned already our FAD-free revenue that went down.
In the first half, it went down by THB 1.1 billion, a part of our revenue from last year. This is an impact from the drop in sales for FAD. Our ambient food, if we look at the sales for the first half, it's more stable than last year. In the second quarter, we saw good growth. Our gross profit margin was at 19%. For frozen and chilled, we have a gross profit margin at a very good level. Thanks to our product mix and our downsizing, our right sizing, this has improved our margin. Our pet care, we have a high base from last year, which is the high, a record high for us, and we're seeing a slowdown in demand and a lower volume as well.
Value add has gone down as well due to soft demand for every category. Let's begin with the ambient seafood. We are seeing, we're seeing record high for the past nine years, we have increased our selling prices. We have promotional activities, especially in Europe, as for our OEM, we're seeing a drop of 3.6% because our customers are in a wait and see mode, because the tuna prices are still at $2,000. Our gross profit margin has improved by 19.9% quarter on quarter, thanks to our product mix and our rising prices, we had a one-off from our Lübeck factory in the second quarter of last year.
As for our strategy, we will continue to increase our selling prices, and we will launch new products for our product mix that have a higher profit margin. We're going to increase our selling channels from, towards more e-commerce. In the US, we have rebranded, and we have new packaging, and that's also on the shelves right now. As for our frozen business, even though the sales are down by 17.3%, it's our strategy where we have reduced in our frozen business, and we have volatile prices as well. We have done rightsizing in our frozen business. For the second quarter, we have the impact for the adjustment in volume that's gone down by about 10% and the prices that have gone down by about 8% due to the deflation, as Mr. Ludo mentioned earlier.
Our gross profit margin has increased to 9.6%, a significant increase compared to the last year or the last quarter, because of our costs, our prices for tuna have gone down to the lowest level in 11 years, and we have a stronger inventory management process. In the first half of this year, everything is in line with our second quarter. We are seeing signs of recovery in restaurants, and we have the growth in the US. We're seeing positive growth there, even though it's not significant positive. On the retail side, we're seeing slower recovery, and our strategy is to continue to improve our frozen portion to be at an appropriate size. We're going to get rid of those businesses that are not generating a profit. For instance, our closing of our shrimp farm.
We're going to look at our product mix as well, and our feed has improved, too, and you'll hear about this in the next session. In Qfresh, we have a new series, new products, and these are and on October 28th, at Central World, we will be launching these new products, and we invite you to join the product launch. As for our pet care business, we're seeing a drop of about 42% because of the higher prices, and we also have the destocking issue from the 1st quarter carrying on from the 1st quarter, even though we're seeing recovery in the US market, which is not that fast, and we are seeing recovery in Europe as well, but not to the level that we're... That is satisfactory for us. We're seeing impact from the shipping costs because of exports as well.
Our gross profit margin in the second quarter has improved a bit from the past quarter. It's gone up by about 20.2%, and we're seeing a drop compared to the year before because of the volume that has gone down significantly and our product mix, and we have inventory provision as well in the second quarter. As for the first half, we're seeing soft results compared, and the demand is destocking, and we're seeing signs of recovery, though, in June. In the third quarter, we have secured orders by about 80%, thanks to a revised budget in the third quarter, and we have plans to increase our prices by 3%-5% in the second half, and this will help with our sales and our margin.
As for our value-added and other businesses, the overall picture is that we're seeing a, a softer demand in every business, whether it's value-added or packaging or value-enhancing businesses. Our gross profit margin, even though it has gone down, but it is still high compared to other, other businesses, is more than 25%. In the first half, we're looking at a drop of 13%, but this is our high baseline from last year, and we have a gross profit margin of about 26.5%. This is thanks to lower raw material prices like shrimp and steel and aluminum.
In the packaging business, the demand for the first half is still soft, for us, we see that at this moment, the price of steel and aluminum has gone down, our costs on average are dropping, and we will see a better margin in the second half of this year. As for our new factory, we will commercialize in the third quarter, and this will be non-halal products. For the halal line, it will be next year. As for our outlook in 2023, I'd like to invite Khun Thiraphong to present. Thank you very much. Before we talk about the outlook, I'd like to add to what was just mentioned from Khun Loo about Red Lobster, that Thai Union, at the moment, right now, we are fully committed to turning Red Lobster around.
As we have mentioned before, or as I mentioned earlier, we just visited them, and we feel that things are positive. We have more confidence in transforming Red Lobster. Our Bangkok team is helping them, has helped them in the past year with their budget for this year in strategizing as well. In addition to having Paul Kenny as our CEO, we also have Trin, who is a COO, one of our own. We also have one of our own as an assistant to the COO as well. We're going to send six more people from here to help them in their finance, in their strategy as well, and in their operations, two more people in for operations. Procurement, we're sending one person.
We want you to see that we are taking a more active role in Red Lobster, and we believe that with closer management, we will be able to adjust and improve their culture, their mindset, and their method of operation. This is something that we wanted to share with you today. For 2023, the outlook, we would like to adjust the numbers so that they reflect what has happened in the first two quarters. Our full year guidance for sales from 3%-4%, we're going to adjust it to - 5% to - 6% year-on-year. Our gross profit margin from 17.5%-18%, we would like to adjust it to 16.5%-17.5%. Our SG&A, we will maintain it at the same level of 11%-12%.
Our effective interest rate, we're going to increase this from 0.5%-1%. Our CapEx, we would like to reduce this number from $6 billion-$6.5 billion to $5.5 billion-$6 billion instead. Our dividend policy will remain the same. This is for transparency and also to reassure you and to help you do your jobs better. Thank you.
We just wanted also to elaborate a bit to explain to you the, the bridge between our initial guidance on the top line that we gave at the end of Q4 last year and the updated guidance. If you remember, at the end of Q4 2022, our guidance for the year 2022 was a growth by 5%-6%. That was our original guidance at the end of Q4 2022 for the year 2023. Here, we try to do a simplified bridge to explain to you what are the big drivers on how to move from this +5%-6% to this -5%-6%. The first key driver is i-Tail.
Of course, you know, you're aware, I'm sure you did follow the analyst conference also for i-Tail. Initially, they were planning for the whole year to have the growth by 15%, okay? 15% growth for i-Tail. They have been revising down to minus 26% now for the whole year, okay? What does it mean for TU? It means a drop by 5%-6%, just coming from i-Tail, okay? In this impact, you have an impact in terms of revenue, recharge also in this one. The second big driver is the US frozen. I mentioned to you that here we have decided to rightsize our business, so this is one component of this one.
On the same side, you can see the shrimp price, the crab, and also the lobster prices are all going down. All of these together, this is another 3%-4% decline compared to our initial expectation. You have the freight price also. We were expecting for the year 2023, the freight price to decrease, and this has happened, but it was much quicker and much stronger compared to our expectation, so this is another 1% variance compared to our initial expectation. The last one in on the FX. We told you that our forecast for the whole year was around 35 Thai baht for $1. Now, we are between 34-34.5 Thai baht. Here, this is another %.
Here, again, this is simplified, but we just wanted to walk you through and to explain to you how did we move from the initial +5.6% to the -5.6%. We don't comment on everything. Of course, you have some other impact coming from the ambient, from the frozen business, but they offset each other, so this is just to give you the big picture. We wanted also to elaborate a bit on the extraordinary measures we took in terms of costs. Controller Pongpong, do you want to elaborate, please?
From our operational results, where we expected a weaker results compared to the last year, we are not being complacent. We have implemented a profit protection plan. As for our corporate function, we have a goal to reduce our cost by 10%, and this will help us to have savings of around THB 160 million-240 million. We're going to slow down our hiring, and we will only hire when necessary, for only for selective places. In terms of our travel and entertainment expenses, we're going to be very strict. Whatever is unnecessary, we will not allow that travel from this point on. Our projects, those that can be delayed or canceled, they will be delayed or canceled, and that's for our corporate functions.
In terms of our operations, we're going to optimize our workforce, and we're going to emphasize cost efficiency in our factories, every factory of ours. We're going to focus on improved yields and operation efficiency, and we're going to transfer some work, some operations, especially the back office operations, like in the US and Europe, to be outsourced in Thailand so that our team here at our headquarters can handle this to reduce the costs that are higher in the US and in Europe. These are the actions that we will be taking continuously. As for rightsizing or stopping of loss-making operations. Because the interest rates are higher today, bigger is not better. Therefore, we need to review and reconsider our operations, our business, and you'll see that we've been doing right-sizing our frozen business in the United States. We have closed one factory in Lübeck in Germany.
We have closed a shrimp farm, some of the from Feed mill, from Thai feed mill, and we have downsized our domestic businesses as well. As for the commercial aspect, we are reducing our marketing expenses. We're stricter when it comes to recruitment, and we're also being stricter when it comes to travel and entertainment expenses. These are the measures that we have been taking, and we will continue on with these measures, and we will review continuously. At this point, I'd like to end our presentation, and if you have any questions, please do ask them. Thank you. Before we begin our Q&A session, I would like to ask our analysts and our bankers and fund managers here today, please do the survey for us, so that we can improve our presentations and our meetings for you. Thank you.
If anyone has any questions, you can raise your hand. I'd like to ask Ludo, that I, I like you very much, you know that. Red Lobster, for the 2nd quarter, the earnings are better, better than last year. Is this because of your top line or because of cost? What is more impactful for you?
Sorry. I think the key impact, you have to remember that we did increase a lot of prices compared to last year, the overall profitability has been improving. Overall, the sales have been improving overall. Yeah, you have a very big pricing effect, but the guest count has been dropping a bit compared to last year, okay? It's mostly a pricing effect. It's not only specific to Red Lobster, you can see that in the whole restaurant industry. We told you last year that our priority was really to recover the profitability of Red Lobster. This is why we had to increase our prices. This is down, now the profitability is much better at Red Lobster. Now, the next challenge, we of course, we want to recover because of guest count.
That means that the industry in the US, where you said, is the same growth, the restaurants, ours is not improving, right? Looking forward for the third quarter, are we seeing an increase?
I think the, the performance over the past few months, we have been exceeding the restaurant industry. We have been launching also, I'm sure you have seen also the, the Endless Shrimp. Now it's supposed to be a permanent item in the menu. We told you that we wanted to avoid being too expensive, so we are doing a lot of promotion push also on this one. I think with the Endless Shrimp, here we have a very valuable proposition for the consumers in the US. It's $20, so it's really affordable. We will be doing also some other promotions, okay? I would expect overall in, in H2, we want to attract more guest count.
The profitability will be decreasing a bit because we are decreasing the overall check because of all this one, but we do expect, overall, the situation to improve overall. In H2, you can see the full year guidance is THB 500 million. After six months, we are positive, so we do expect to generate some losses in H2, but we are looking at the overall picture, at Red Lobster.
Let me share. If you remember before this, before inflation, the average check for Red Lobster was at about $25. Today, the average check is $33. The second half of the year, we had a major loss because of the slow adjustment of prices. This year, right now, we are in a P&L shape that is good. The sales price is appropriate, and the food costs are under control. We want to have food costs at 32% or less. We have prime costs. Our labor costs, our target is 61%, and right now it is higher by that, by about 2% because of the labor costs that we have to manage better.
Overall, the promotions, the most recent promotions, in the economic situation, we might be seeing something weaker, but every brand is launching promotions to attract guests for a better guest count, we have been able to do this well. We have the Endless Shrimp promotion, which is something that customers really enjoy. You can see that the positive sign is that the guest count has improved, it's not just that it's grown because of the selling prices. The guest count has improved, too, but it has not reached the level that we're satisfied with, so we will continue to push for a higher guest count. Overall, we are very happy so far with our P&L shape. It's on a positive trend, the restaurants, they have improved, they developed. There's a improvement in the food, the service.
My latest trip has shown that we have a improvement in the service model. We've adjusted our employees. The servers, they're doing a better job. The old model, one server would take care of three tables. Under the new model, one server takes care of 10 tables, and this model is something that we're trying out in California and in New York as well, and we're going to roll this out from this point forward. This new model will allow our servers to take care of customers without having to run back and forth to the kitchen as well, because we will have back servers who will help them to bring the food out from the kitchen. One back server will take care of three servers, and this will allow our service on the floor of the dining room be better.
The new model has not reduced the number of hours, but it has improved the service. We will continue to adjust this, and we want to share with you that overall, everything is in line with what we're looking for, but we still have to continue to adjust the consistency, the quality of the food. During our latest trip, we saw things have gotten better, but we still see room for more improvement. I'd like to ask another question about you're trying to improve the efficiencies. Have you closed any of your branches this year? We closed 16 last year. This year?
16 last year.
This year, we have-
No, we don't have any, any specific plan for this year.
Do you think this number is optimum already?
I, I think we are constantly reviewing the restaurants. You have also to keep in mind that most of the restaurants are leased, okay? We, we have sometimes a very long period, some very long lease period. If you want to walk away, normally you have to pay a fine equivalent to the rest of the lease. For some, some location, it could be very expensive. I think we did a very good piece of work last year by, by, by closing 16 of these restaurants. We will do one or two, a few more here and there, I think we did quite a lot of really last year. Usually, on average, I think Red Lobster was only closing and opening one or two restaurants per year, we have been much more active last year already.
Then about the forecast, because you still have a lot of this year, do you think which year you will break even?
Good question. I think we said, I think take two to three years to turn, to turn around the picture, and this is what we expect to see. We, we have to see, keep in mind, the, the last few years, we have been facing with COVID-19, we have been facing with Omicron, we have been facing with inflation. Many things have been impacting the whole restaurant industry in the U.S., so it was kind of a mess over the past few years. Now, this year, this year seems to be much better, so we are looking forward to see what is the normal performance of Red Lobster in a normal context, excluding COVID and, and inflation.
Thank you very much.
Thank you.
Are there any other questions? I'd like to ask, when you talk about the frozen, the right sizing for frozen business, the sales, are we talking about $1 billion, $1.2 billion? What will the level be and the gross margin for this right sizing, what, what do you expect?
Sorry. Still a work in progress. You're right, overall, this business is something like $900 million revenue, usually between $800-$900. Here, the idea would be to move to something which is more $600-$700. It would be something like $200 million in terms of top line decrease. We do expect to have some better gross profit margin coming from this one. We, we were doing in the past some few businesses, like in the lobster. Thai Union is not producing any lobster, okay. We are doing some kind of speculation, buying and reselling on this one. We said it makes sense a few years ago because we made some profit. On this one, the profit was too slim.
In this context of high interest rates, it doesn't make any sense anymore. This is why we decided we want to move away, we have been reviewing all our customers, punctually, here and there, we are moving from some risky or volatile customers. That would be the impact, overall, it should be beneficial for the growth profit margin of the frozen business, okay? You have seen last year we have been deeply impacted by some losses coming from our US frozen business, we want to avoid having this situation again.
Do you think that, back to, like, 10% gross margin is possible after the right sizing, business?
We, we do believe, of course, the US frozen is not the only component. This is the biggest one in terms of top line. The Thai frozen business is very important. They have been very successful over the past two years. Feed mill is also as a component of our frozen business, okay? If now they are recovering, you will hear a bit more in the next hour. They are recovering. We need them to be performing well, and our chill business also have been improving. Yes, I do believe that this is a, the growth profit margin we want to achieve. Correct.
Yes. Thank you. Next one is on the gross margin that we target in the second half. Of course, it has to be over 17%. What could be the driver? Is that because of the change of the business mix, or which, which one could be the outperform segment?
You're right, right now, after six months, we are 16% growth profit margin, you can see the full year guidance is between 16.5%-17%. We have to do in H2 a better growth profit margin compared to H1. A few things for this one. We do expect the fish price to decrease a bit, okay? Q3 will be decreasing, but just a bit compared to where we are right now, we expect some further drop to happen in Q4 and to end the year around $1,700. That would be one of the first driver. Keep in mind that right now, we still have many customers just waiting. They use a wait and see attitude, okay? They want to see where the fish price goes, they stop ordering.
This is not only for us, but for the whole industry, we see the situation. As soon as we see the fish price kind of weakening a bit or normalizing, we will see our performance improving. This is mostly for the ambient business. You heard also the i-Tail forecast. The H2 is supposed to be much better compared to H1. Of course, that would be, for us, one of the key driver that we expect to see. The frozen business also is supposed to be strong in H2. If you remember last year, our frozen business has been suffering in Q3 and Q4, especially in the US. We could see some clear signs of recovery on this one.
Finally, the value added is kind of connected also with the, the ambient business that we have over on this one. In terms of top line, we see Q3 will still be declining versus last year, but kind of normalizing. We do expect to be closer to last year compared to Q1 and Q2, and in Q4, we are targeting to be back to growth in terms of top line, okay. Bottom line, I think the Q3 last year was extremely high, We expect to be still dropping in Q3, In Q4, we do expect to be back to growth in terms of bottom line compared to last year.
Sorry. For the ambient business, after we raised the selling price in Europe, do you think that already covered enough for the high cost price, I mean, tuna cost price in third quarter?
I think overall, we are quite happy with the output of the price negotiation. Again, the situation is different from one country to another country. We have different countries, and the inflation is sometimes a bit higher in some of the countries. The UK situation, for instance, is very specific. Overall, the message, we are quite happy with the output of the price negotiation. You can see there is an impact on the volume, okay? There is some price elasticity. We know we have been increasing a lot of prices over the past two years. The volume are dropping a bit. If you look into the details, in Q2, it's mostly the volumes coming from OEM, which are decreasing the most compared to last year. Again, this is coming from the wait and see attitude from the customers, okay?
The fish price are very high. They just stop ordering, okay? We have also some specific topics in some certain countries like Middle East, where our customers are facing issue finding some dollars, having access to dollars, okay? Usually, the Middle East for us, in terms of volume, is quite significant. Here we have some punctual topic, which is lasting already since Q1 on this one. We have different explanation from this one, but overall, the price negotiation, we are happy with in our branded business.
My last question, do, do we need to increase the price in the U.S., follow Europe, in this situation?
In the ambient?
Yeah, in the ambient.
We have been also increasing our prices. We try to be a bit more selective. In the US, you know, the, the tuna product are much more commodity business compared to compared to Europe. Europe, you have much more value-added products, so we have to be a bit more selective, but we have been increasing already our prices in the US also.
The sales prices have gone up to their highest level already. Right now, we're waiting for them to go... When will they go down? That's what we're looking forward to. The raw material prices, as they weaken, this will help to increase the volume for us, and this is the trend that we're looking at. Thank you.
Hi. I would like to ask about the new guidance for the year, with revenue now declining 5%-6%. Have that already taken into account the right sizing of your frozen and chilled business in the US, and also the trend that we're seeing in the pet food business?
Yes. All of this is included. That's correct, and you can see here the different impacts, based on the different line. Yes.
That implies we're gonna see year-on-year revenue starting to stabilize in the second half of the year. If you look at what was, second quarter numbers, this can be a very big jump from second to third quarter, and that's something that you have already seen in the past month and a half, of the third quarter. Is that something that you can confirm?
Yeah, I think you're absolutely correct. What I mentioned in the top line in Q3, we'll still be dropping versus last year, but it should be... The, the drop should be much lower compared to Q1 and in, in Q2. In Q4, we are targeting for growth, very clearly on, on this one, for the different reasons I, I mentioned before. Yes.
I'd like to ask one thing about Red Lobster. Could you confirm? We saw that there's improvement at Red Lobster. It's from the increasing prices and better traffic that has started to grow, not just because of the prices, right? Is that the right understanding? Yes, that's correct. We also hope that it's going to continue to increase, and we're going to use promotions to push this, and advertising as well. We need a higher guest count. Without a higher guest count, then it will be difficult for us to manage things. I'd like to ask about your recruitment of executives. Paul is the interim CEO, and are you still looking for someone to be a full-time CEO for you? What about your team? Do you think they... How long do you think they will get...
Will they stay there for the turnaround? We're going to start recruiting a new CEO. Paul will help us for one more year, the next year. We will start looking for someone new. We're going to look for the right person to put in this job, because we have past experiences that have taught us a lot. We're going to spend the next few months or so looking. We're gonna take time to look. Are there any other questions?
I have question to Khun to Mr. Adam. Since the company already shared the carbon dioxide target emission by 42% by 2030, and also the net zero emission by 2050, right? I want to see, like, can the company share the key activities to achieve the targets?
Sure. Thank you. I think one of the first things that we're going to work on, certainly within our shrimp supply chain, is gonna be on traceability. Right, one of the first steps is we need to understand where the product is coming from, right down to the farm level. Then, as I mentioned in my presentation, we need to start understanding our feed supply chain. One of our biggest carbon hotspots is within our shrimp supply chain. Predominantly, that is driven by feed related to deforestation. You'll see in our commitments that we will have 100% responsible feed, which means that feed needs to be certified as being deforestation-free. That's going to be one of our key actions as we move forwards.
We're also going to be looking at on-farm energy usage in the shrimp supply chain, particularly in Thailand but also elsewhere, so that we can help drive the adoption of renewable energy. Beyond that, we're going to be looking at packaging, how we can continuously save, particularly on some of our ambient cans, how we can help streamline the packaging more efficiently, increase the recycled rates. Then in our tuna supply chain, we're also going to be looking at how we can increase catch efficiency. In the long term, we need to start looking at transitioning fuels. In the short term, we're going to be looking at how can we reduce fuel usage through increased catch efficiency.
Yeah, just, briefly add within our-
Yeah, just, just briefly add within our own operations, some of our factories are still using coal, so we will also be transitioning all of these coal boilers towards biomass, which is obviously a renewable, carbon neutral fuel source as well.
Thank you. Hello. I'd like to ask, why you are confident? Why, why do we think that the tuna price will come down to the $1,700 per ton level? Well, we are like you, analysts, we always wrong, right? What we see right now. Right now, the prices are starting to weaken, but it's 1,970, 1,950, but 2,000. It's not going to go over 2,000. We're seeing signs of a downward trend, and it's not going to go down by much, because remember, it's during the FAD-free phase. We're not allowed to use the equipment, so we're not going to see a bigger, much supply in terms of fish. 1,700 is an expectation, it's a forecast. We're not sure if it's right or not.
We're analyzing as well. We'll see at the end of the year what the real level is. When there's a lot, then we'll see a drop, a big drop. It could be 1,700, it could be 1,500. What we see right now is that it will gradually drop. The next question I have for you is M&A. Is there anything in the pipeline or do you have any updates for us? Not at the moment for the pipeline. We are working on our strategy for 2030. This 2030 strategy will help us have a broader view. We are hiring a consultant to implement this exercise, where it's inside out and outside in. This exercise will help us have more clarity in terms of direction, future direction.
In addition, aside from M&A, another growth engine right at this moment that we have in our hands right now is our pet care. i-Tail, TFM, Thai Union Feedmill, and Red Lobster. I want to see Red Lobster become successful. As we have shared, we are giving this our all, especially in terms of, we're putting our human resources there. You can see that I'm speaking the restaurant language better, right? I want all of you to rest assured and just wait for our results. We will share our performance in the future, and I, I'm certain it will be positive developments. The economic situation might not be-- might be a bit weak, but the restaurants in the US are selling well, every restaurant. It depends on the quality of the food and the value proposition for every shop, every restaurant. I was there.
I visited 21 branches. This is only for Red Lobster. At the other restaurants that I went to have a meal at, I saw customers come in. The US market is accustomed to dining out. For the restaurant business, don't worry, people are going out and having meals out, outside of the home. Thank you. We have run out of time. We'd like to ask for the final question.
Hi, yeah. My first question is on Red Lobster. It's been about a year since you've stopped receiving preferred share payments. Red Lobster has been improving quite well. Generally, what are the criteria that you have to, like, hit in order for this to, like, resume, start with that? Yeah.
You're right. I think we have not recorded any preferred interest since 2022. Nothing to do with the performance of Red Lobster, only related to the market conditions and the market rate. Okay. You know, it's a fair value calculation that we do every quarter, and when the interest rates are going up, then overall the fair value is stable or going down. That was the reason why in 2022 and also in 2023, we don't plan to record anything. Just to make it clear, and we mentioned that a few times already, we were accruing, but Red Lobster was not paying for this one. Remember, the initial agreement was for them to pay only 50% of the preferred shares and 50% the maturity, but over the past few years, it was not possible.
We are just accruing for this one, but we are not receiving in cash.
Okay. I guess because of this, you're also being able to book a lot of tax credit? Is there any kind of guidance that you have for the rest of the year? What type of tax credit you are likely to?
I think the tax credits are kind of consistent from one year to another year. You are right. By definition, the structure of Red Lobster is generating tax credits. Okay? You remember we discussed that a few quarters ago. We have a tax goodwill that we can depreciate every quarter. Even if Red Lobster were generating some profit, we will receive some tax credit coming from the amortization of its tax goodwill. I would expect the there is a portion of the tax credits which are very consistent from one year to another year. There is another portion which is related to the losses performed by Red Lobster. Of course, if Red Lobster is performing better, then the tax credit are decreasing. Okay?
It's a combination of 2 or 3 different big topics that, that you have. Overall, I would expect to have less tax credit at consolidated level, because Red Lobster is doing better compared to last year.
Right. For the second half, Red Lobster should be doing worse than the first half, right? It's likely to be having higher tax credit.
That's correct. That's correct. We, we re-compare year-on-year very often, so we compare Red Lobster performance in H2 compared to Red Lobster performance in H2 last year, because their seasonality is very high. You know, by definition, the Q1 is always good for Red Lobster because of Lent, because of different promotion that they have. Always compare year-on-year, it's easier for you.
The final question is a little bit on pet food. The revision for revenue was quite significant. Obviously, they expected a 15% growth, now it is down to minus 20%+. What exactly happened? Was it you didn't expect this to be the true demand? Was it just an exceptional two quarters? Why was it that you expected 15% growth, but in the end, you ended up finding out that it was a stocking issue?
I think, I think a few explanation for this one. First of all, you have to keep in mind that the year 2022 was very specific. We have been growing by 30%-40% top line. Every quarter was just crazy. It's very difficult when you move away from this momentum to imagine what would be the next year, okay? We have to acknowledge, I think, that part of the growth last year was due to people stocking because of the logistic issues. We have been facing a lot of logistic issues. The price of the container went crazy. You have a lot of customers in the US and also in Europe, willing to increase their inventories, okay? That was part of the growth last year.
Of course, it was very difficult for us to say how much was it, because we are not open book with our customers. At the end of last year, when we did provide the +15% guidance, we were just expecting the market to continue to grow. If you look at the big players, it continues to grow, okay? The top line is still growing, okay? We do believe right now it's only an issue of destocking. We were not expecting the logistic flows to normalize so quickly, so they normalized very quickly, much quicker compared to our expectation. We were not expecting also the interest rate to increase so much. Now you can see all the customers, they are paying a lot of attention to the net working capital. Okay? The question is, how long will it last?
We are a bit longer compared to our initial expectation. I think we, we do acknowledge this one, but we do see some sign of recovery in the pet care business starting in July. We need to make sure this is sustainable, okay? Inflation is also playing a role. Right now, you know, we are in the wet cat and in the premium product, okay? Of course, when the inflation is very high, then some people, they will move a bit from the inflation, they will move more to the mass market. Of course, we are a bit suffering from this one, but we do remain very confident with i-Tail. It's a very nice business. They will be back to growth very quickly. We did confirm also the long-term guidance that we have for i-Tail.
We do believe this year it's only a hiccup.
For today, Thai Union Group Public Company Limited would like to thank everyone for your attendance. We would like to end the analyst meeting for the second quarter and first half. If you have any further questions, please contact our investor relations. We'd like to invite you all to join us for the break for about 10 minutes, and after the 10-minute break, we will have the Thai Union Feedmill presentation. Thank you.