In the first half, we're going to present the results for Thai Union, and then after that, we will have a 10-minute break, and then we'll have the quarterly results for Thai Union Feedmill. I would like to introduce the executives who are joining us today, who will be presenting. The first is Mr. Thiraphong Chansiri, CEO . Second is Mr. Ludovic Garnier, Group CFO . Third is Ms. Ratinan Wongwatcharano n, Head of Investor Relations. Without further ado, I would like to invite our executives to present. Hello to our analysts. Thank you for the interest you're showing today. Today, we're going to share the results of Q1 for 2023. As we had forecasted since last year, for the first quarter, it should be a soft quarter. The main reasons are due to logistics, the shipping containers. This has normalized.
From last year, where we faced many problems and our customers, many of them, therefore Have purchased in large amounts to offset the shipping delays. At the moment, things have normalized. Our customers, in the first quarter, they are restocking so that their inventory is normalizing as well. This has caused our sales for this first quarter to soften. You can see that the freight cost at the moment, the trend Equal to or less than what we experienced pre-COVID. With lower freight costs, this demonstrates that We have a higher volume. In addition to this, our sales for the first quarter, another reason that has caused impact are the raw material costs for tuna. In the first quarter, this is something normal. The first quarter, the price is quite low. About THB 23,000.
It has reduced significantly. It's at about $2,000-1,900. The tuna costs continue to be high. In the third quarter, towards the end of the ninth month of the year, the costs should drop. We've had the issue of El Niño. With higher temperatures in the oceans, the fish may not be swimming in schools and in big schools. In the third quarter, we expect the ninth month, that the temperatures should improve. There will be El Niño, and the fishing situation will normalize. These are the main reasons. In terms of logistics as well, logistics has affected our Ambient Seafood, our chilled, frozen.
We're looking at a drop of 10% on sales. The gross profit margin is at 15.1%. Our operating profit is THB 796 million. Our SG&A has dropped thanks to the drop in shipping costs. It's about 12.1% compared to what we were experiencing last year. Our net profit is at THB 1.022 billion. It's dropped by 41% year-on-year. In the first quarter, our results may seem a bit soft, and what most people are interested in is Red Lobster. This is a key highlight for the first quarter. Our share of profit from Red Lobster. We can see a change in the trend for Red Lobster. It's in a trend that what we're expecting.
Something else is that Red Lobster's referred shares, we have not recognized them. The interest rate is still high. This year, we don't expect. We have minority interest in i-Tail as well. We have a 22.18% Revenue the net profit for i-Tail. i-Tail Solution for this year was THB 1.3 billion. Our net profit has gone down about 21%. This is overall. On the next page. Let's look at the share buyback. Before the silent period, we bought 44.8 million shares back before the silent period. We have been allowed to buy up to 200 million shares, so we still have room to continue buying back. We have new and innovative product launches as well. We have launched plant-based tuna under the brand John West in the Netherlands.
The second is our select tuna. We have functional ingredients included, and we have launched products with collagen, a high level of collagen.
Red Lobster.
Red Lobster was launched. In over 5,000 stores for Red Lobster, we've launched our frozen seafood under the brand Red Lobster. This is being managed. We have Chicken of the Sea as well. In terms of Deep Blue Tech. We launched our latest batch in March. If you remember, we had $30 million in budget. We've used up about $10 million so far. We do have room to grow in this space. On the next page. There isn't much. This is about sustainability. Let's just continue forward. In terms of SeaChange, we will announce our commitment for 2030 SeaChange regarding labor and the environment and climate change.
We have announced our commitment for net zero by 2050, and this is the direction that we are headed in. On the next page. This is good news that we'd like to share with you that we have received awards from Global Banking & Finance Awards. We received altogether 5 awards. We're still surprised and happy to continue to be recognized like this. Up to 5 awards we received. I'd like to pass the mic on to Ludovic now to share the financial results.
Thank you so much, Khun Thiraphong. Welcome, everyone. Very happy to be with you today. We wanted to start the presentation with a few takeaways for you. You can see the first one is obvious, Red Lobster. Finally, we generated profit in terms of share of operation this quarter, and I think we are very happy about this one. It's not a complete surprise. This is normal year, where in Q1, you know, this is the highest seasonality for Red Lobster. I will elaborate a bit more, but this is one of the key achievements for this quarter and a very good news that we are moving in the right direction. The second one is I want to highlight the SG&A topic.
We told you over the past few quarters, we have been extremely impacted by the extension of the lead time between Asia and the US, and also by the increase of the freight cost. Here we clearly see in Q1 some normalization. The normalization happening is much quicker compared to what we're expecting, okay? I will show you after some graph where you see the lead time, we are back to where we were before the crisis. Also in terms of freight cost, we are back to where we were before the crisis. Of course, it has a negative impact for us in terms of sales because we have been recharging that to our customers the past year. Of course, we are losing this revenue freight, okay?
It has a negative impact for us, but we do believe for the long term, it's very positive for the business to get back to a more normalized situation. Also in Q1, we have some FX gain. You can see here THB 215 in Q1. You know that over the past few quarters and in Q4 and in Q3 last year, we've been facing some volatility. Here we are back to a situation where we have some FX gain, and I think this is good for the business. The balance sheet is extremely strong. Since we did the i-Tail IPO, we told you the net debt to equity is far below our guidance. Now it's at the end of Q1. It has been increasing a bit, but still very low at 0.57.
Khun Thiraphong mentioned that in our Q4 communication. M&A, it was not one of our priority over the past few years, is now back on top of our priorities, okay? It will take a bit of time. We don't want to buy everything. We want to be extremely selective on this one, but this is back on top of our priorities. The last one, we want to continue and to maintain the same strategy. The strategy for Thai Union over the past few years is to focus on bottom line, okay? Top line for us is less important, but improving the growth profit margin and improving the bottom line is really something which is very important for us. Innovation is one of the key step for the improvement of this of this bottom line.
I think we are in a good range for that. If I want to elaborate a bit on the logistic cost, you have here the usual graph we have shown you since last year. You can see the freight cost really declining if you compare to Q1, Q2, 2022. Now we are paying sometimes even below compared to what we are paying before the crisis. The lead time also at 33 days on average. We are back to a very normal situation for us, okay? Very positive. We told you last year that every quarter we are suffering from negative pricing from the freight cost. You have seen last year our SG&A growing quarter after quarters. Now you see the opposite situation, SG&A dropping.
Of course, one of the parallel impact is to see an impact, a decrease of our net sales from this one because we have to give back to our customers part of the freight cost. Overall, we do believe it's a good thing. On the inflation also, you can see here some usual graph on some of the utilities. We are using some oil, some coal, the gasoline. We have some good news here also. Depending on the region, you can see some normalization, okay? We have less pressure from this one. Yet, we are still facing some inflation. In the next chart, I will talk about the fish price inflation that Khun Thiraphong already mentioned. The strategy for us is always the same, okay? We have to increase our prices to maintain our margin.
Also, we have to be very efficient in our operations, okay? We continue to review the recipes of our product and to remove the expensive items, okay? There is no change, that will be the case for the whole 2023 years. Just talking about the fish price, if you compare to the guidance we gave you at the end of Q4, the fish price in Q1 is higher compared to expectation, okay? You can see here the average for the Q1 is around $1,800, okay? Which is much higher compared to our expectation. In April, the fish price has been continued to grow, okay? We do expect the fish price to be around $2,000 in Q2, after we do expect some kind of reduction in Q3 and also in Q4.
We have to admit that in Q1, the fish price, the tuna price has been much higher compared to our own expectation, okay? We were not expecting this. This is also one of the explanation for the soft performance in Q1. Keep in mind that when there is such a change versus the forecast, very often the customers, they will just wait and see, okay? They will stop ordering. They will say, "Okay, we want to see a bit where the fish price will go." We have seen that already in the past, okay? When the fish price is going to the opposite direction we were all expecting, because everyone was expecting a decrease of the fish price in Q1, it didn't happen. They wait and see.
I think this is also one of the key driver for the softer demand we have been facing also in Q1. The salmon price also are also very high in Q1. You can see here on average, exceeding the THB 100. This is all-time high for this one. Since last year, we have been facing very difficult situation with the salmon, okay? We know how to price. We have to do some price increase on this one, yet, on this one, the salmon price is high and is adding some pressure on the market. To the opposite, the shrimp price is kind of normalizing in Q1, okay?
This is good news, I think for us, 168 increasing a bit versus the two previous quarters, but compared to the Q1 2022, it's really dropping, and I think this is a good news for us. Overall, inflation coming from the fish price is really here, and we have to face with this situation. On the next chart, we just provided you with an overview since 2016, okay? Just to remind you how volatile the fish price rise was. Also we put you the Our Ambient gross profit margin since then. You can see that here there are some ups and down, of course, in the fish price, okay? We have already been facing this situation where the fish price is exceeding the 2,000. We have already been facing this situation.
You can see back in 2017 and even earlier. If you get back 10 years ago, we have been facing with this situation. Of course, temporarily, our gross profit margin can be impacted, okay? You can see here in Q1, the ambient gross profit margin is decreasing a bit on this one. You can see after very quickly after we are able to recover, okay? This is something really one of the message I want you to keep in mind. We will recover overall in our gross profit margin, and we are confident about this one. We also wanted to provide you with a quick update on the fish inventories. From time to time, we do provide you with some update.
You can see here the breakdown of the catches by species for 2023. Overall, since the beginning of the year 2000, the level of catches has been kind of constant year-over-year. There is no big change. You can see here on the bottom, I think the graph is the most important. You can see the green part are all the stocks where we don't have any issues, which is the vast majority of the tuna species. We have some red, where here we need to have some improvement, okay? Here we are following very carefully the guidance coming from all the scientific community. We know, especially on the yellowfin in the Indian Ocean, we have to be careful on this one.
Overall, we are quite, kind of, confident the vast majority of the fish we are using is skipjack, and there is no issue at all in terms of resource for the skipjack, and I think this is a good thing. We are also extremely careful on all other species, albacore, bigeye, and there are no big concern on the level of catches for this one. Just a quick update also on the currency. You have seen since in Q1 we have been facing with the Thai baht appreciating versus all the major currencies, versus the dollar, versus the euro and also the GBP. If you remember in Q4, it was dropping quite a lot. Here, good to see this kind of a development happening in Q1. Now moving to Red Lobster.
This is our usual focus on Red Lobster. This is a good news really of this quarter. We are able to generate a profit from the shelf operation amounting to 121 million THB, okay? 121 million THB, of course, compared to last year where we did deliver 243 million THB. This is a huge improvement, okay? I think it's a good sign for us that we're on the right direction. You know, we have been doing many changes since last year at Red Lobster, changing the management, reworking the menu, working also on the menu prices. We had to increase our prices a lot in the U.S. We have in Q1 2 very big event in the U.S. We have the Valentine's Day and we have also the Lobsterfest, okay?
These two very big events we are managed in the right way at Red Lobster in Q1, these are the two key drivers for the strong performance in Q1. If you compare to a few years ago, we are not yet back to where we were before COVID, but we are very close, okay? Where we were before COVID was THB 140 million, so here, THB 121, we are just behind, okay? I want to manage your expectations. We still have a lot of work to be done. You know, the situation at Red Lobster is highly volatile, so we need confirmation over the next quarters. You will see in the next slides, even if here in Q1 they are slightly exceeding our expectations, we don't change our full year guidance.
Meaning for the next quarters, we expect a loss. Of course, we'd be more than happy to beat our forecast for the year 2023. If you look over the past two years, we have to be a bit careful with the guidance at Red Lobster. Overall, Q1, we are on track and that's good news for us and a good confirmation that when we are really putting some pressure and making the right changes, we can deliver some right results. On the share float coming from the lease, there is no surprise the amount will be decreasing year on year gradually until 2030, I guess. Preferred interest, Thiraphong r mentioned this one. You have seen some interest rate increase. Further interest rate increase fully aligned with our expectation. We don't have any surprise.
The guidance for the full year is we will not record any preferred interest in 2023. Exactly the same guidance that what we had at the end of 2024. The interest expenses are rising a bit. Of course, you see the interest rate increasing a bit. The income tax is a bit higher compared to expectation. Always very difficult to forecast the income tax coming from Red Lobster. You know it's a combination of many different things, but we were able to recognize some tax credit in Q1. Overall, positive net income contribution from Red Lobster and also the share profit from operation is the first time since two years. Very happy about this one, and this is a good achievement.
Now if you move to the full year guidance, I, and I did share already with you that we are maintaining our full year guidance at THB 600 million loss for the full year for the share of operation. We don't change also our lease accounting adjustment. That should be kind of stable. Only the effects may impact a bit positively or negatively this impact, but we know already the amount. You can see here also in the pictures, the different value propositions we are doing, okay? Something which is very important in the U.S. The U.S. consumers are very sensitive to price. Of course, you know, all the restaurants have been increasing a lot their prices over the past few years, the past few quarters. Everyone now is pushing for some promotion.
We need to make sure we have always a very good value proposition, okay. We can feel that the brand equity of Red Lobster is very strong for the very large promotion like Lobsterfest or like the Shrimp Feast also. We have to do what are we doing in between, 'cause of course, we cannot do this kind of promotion all the time. Here we need to reinvent, and we need to be a bit more creative. What are we doing between these two big events that we have? This is why the team right now is working on how to propose new menu, new meal, very attractive from a value proposition, okay. Why? Here, all the other restaurants, chain of restaurant, they are reacting very strongly.
They are very aggressive on the promotion. They are always trying to attract, giving some very large portions at a cheap price, okay. We're in the seafood. Our positioning at Red Lobster is we're a bit premium segment compared to the others. We cannot compete directly with all the others. We need to have some value proposition in our meal. The U.S. rate, I already mentioned about this one. Overall, good achievement in Q1 at Red Lobster. We are happy with the results. Just a quick overview regarding the net working capital. You can see here the net working capital is kind of stable compared to Q4 2022 at THB 53 billion. If you compare to Q1 2022, we have an increase. It was THB 48 billion-49 billion in terms of inventory.
You can see just below the net working capital at THB 55 billion, increasing a bit versus Q4. This is normal. You know that usually in Q1, especially Europe and the U.S., the ambient business are always building their inventories in Q1. This is happening. We have some good news also on the frozen side. We told you last year we were facing some challenges with too high inventories in our frozen business in the U.S. This is decreasing, okay? It's going in the right direction. We are not yet completely done with this one, overall, we are happy with the development. Here, the inventory is kind of a mix between some businesses redeclining their volume of inventories and some other businesses building up their stocks for the high season, which is Q2 and Q3 for us.
Net debt to EBITDA, we increase a bit. You can see we are moving from 3.67 to 4.07, we are still in the very low range of our target. Quite happy about this one. The net debt to equity, we are far away from also our target, which is between 1 to 1.01. Quite happy also about this one. Next slide here we have our net debt bridge, okay? You can see here the net debt has been increasing a bit in Q1 from 47 billion THB at the end of Q4 to 50 billion THB at the end of Q1. You can see, as it was mentioned above, the free cash flow is almost at breakeven in Q1.
You know, usually in Q1, we are always have some negative free cash flow because we always increase our inventories a lot in Q1. If you get back to last year, I think our free cash flow was negative by THB 3 billion. Here, still negative in Q1, but I think it's quite a good performance, only negative by THB 200 million. You can see here the EBITDA at THB 2.5 billion, the increase in net working capital by THB 2 billion, and the CapEx are under control at THB 1 billion. I think we are a bit underspending compared to our full year guidance in terms of CapEx. Then you can see on the right we have been investing. First of all, we told you that we have the treasury, the share purchase program that we have.
This is an impact of THB 700 in Q1, and also i-Tail has been investing some of the cash they did raise during the IPO for a bit more than THB 1 billion. These are the two key drivers for the net debt increase in Q1. Overall, we do believe it's under control. I remind you the guidance we have for the whole year. We want to see a decrease of the net debt over the whole year. Okay? Very clearly on this one. The key driver for this one will be the EBITDA and also the net working capital that we want to reduce over the whole year, and the CapEx being under control. The last slide I want to comment is on the interest rate, you know about this slide.
You know the vast majority of our interest rate is fixed by 72%. We are a bit exposed on floating rate for 28%, but I think overall this is under control and there is no big change apart from this one in the breakdown by currency or in the breakdown by maturity. Now I will leave it to Khun Gigi to comment the business performance. Thank you.
Let's take a look at the businesses. First of all, we have the overall outlook. We have four main businesses, and in the first quarter, there has been a bit of change. Our Ambient Seafood has an increased contribution up to 46% this year. Under Frozen and Chilled and PetCare, their contribution has dropped compared to last year. Value added is at about 7%, about the same amount. On this page, the most important thing is that our sales in each category have softened. As mentioned earlier in the fourth quarter, in our earlier meeting in the fourth quarter, we have softer demand for each segment. Last year was high-based as well. As you can see, our Ambient Seafood, even though this year it's gone down a bit. If we compare it, the numbers are acceptable.
There's a 14% increase. This year they come down about 15%. PetCare has also gone down by about 22%. Value added is at an acceptable range, and it's 27.3% for our gross profit margin. The entire group in the first quarter, even though our sales are down by about 10%. If you look at the base. Let's look at each business. Ambient Seafood first. The overall sales has dropped a bit. This is because of the increasing sales price. Our OEM and branded products have increased sales prices, and this has affected our volume. The volume has dropped. For instance, for our OEM products, the volume in the first quarter was at minus 16%.
If you look at the proportion between brand and OEM, you'll see that our brand products have a greater contribution, and OEM contribution has dropped. The main reason for our decrease in sales, another reason, is the price of fish, which is high in the first quarter, especially in March, at $1,980, as Ludo informed you. We're looking at higher fish prices, so orders have been postponed or delayed. It's more like a wait and see strategy. Our customers' orders are beginning to return, and we're looking at a positive outlook for quarter two. In the second half of this year, we expect everything to normalize. As for our brand, branded products, they are growing at 4% and OEM is down by 8.6%. Some brands in some countries are still strong.
What we are trying to grow in our brands. Products that meet the needs, the health trends. We're looking at higher gross profit margin products and look at our best, for instance, this is a snack bites, and it's a herring. It's been launched in Germany. It's popular in Germany, and we have line extensions for herring to attract younger generations. In Italy, Mareblu, they also have new products there. We've lowered the amount of oil for health and well-being purposes. For our Frozen and Chilled, for the first quarter, the business is still seeing recession concerns, especially in the U.S. The market price for seafood in the U.S. has dropped since 2021. At the moment, the price for seafood is beginning to normalize.
The sales have been impacted, especially for chilled and for shrimp and lobster especially. We're still seeing growth year-on-year, and the gross profit margin is about 7.9%. It's dropped a bit compared to the fourth quarter of last year. Compared to 2022 in the same quarter, it's The raw material prices of shrimp, for instance, and salmon have grown in the first quarter. Salmon. The price for salmon has grown 33% year-on-year, and shrimp is 9% year-on-year. If you look at the price of shrimp in April, you'll see that the price in April dropped. It's a significant factor. It has come down to THB 134 per kilogram, and this is a good sign. In the second quarter, we expect a better margin.
For frozen seafood, our strategy, one of our strengths is that we can pass on the cost to our customers. Our main only most of it is OEM. This is more flexible than branded products. We continue to focus on value-added products and innovation and line extension. Building brand awareness. Qfresh. We have collaboration with various brands, with our customers. For instance, you can see the pictures down below. We have operations. We have automation, using more automation to reduce the cost. You'll see the value-added product highlights that were introduced in the first quarter. We continue to develop our products so that we can serve the customers in our various markets. For instance, we have Red Lobster. We have one SKU from the new four SKUs. We have ebi shrimp.
We have chilled salmon, sea bass. What we're trying to build growth in is the shrimp. It's not just breaded shrimp. We have breaded shrimp with filling to make it more interesting. We have an advantage in terms of taste. We have co-creation products with Qfresh. Qfresh itself has also increased its awareness as it has more accessibility in Big C. We have adjusted our menus as well, buy-in menus and takeaway menus as well. This is in collaboration with Top Chef Thailand. This is an example of our collaboration. The third business, the PetCare segment. For the first quarter, we saw a drop of about 22%, mostly due to the volume dropping by about 21%. The margin has gone down to 18%.
Similar to our other businesses, the demand has softened, and customer inventory has gone up. There's also the high price of fish. The price of fish is higher than our expectations, so it's led to a wait-and-see strategy for many. The sales volume dropping leads to higher production costs per ton. That's why we're seeing the overall drop in our performance. We do see encouraging signals for our PetCare segment. We expect that in the second quarter we will see a recovery, quarter-on-quarter recovery. In the second half, we'll also see normalization. The growth in the PetCare segment, we are focusing on the two main markets, which are existing markets like the U.S., which is a high potential market. We have China, we have Europe. In China, we had a 10-year exclusive partnership with Diapi.
They were selling online and offline. They will be offering our retail products in China. In Europe, we have been talking with many customers in many countries. We have drinks for pets in Europe, and this will begin exporting in the second quarter. We also have a deal with a supermarket in the UK. We're working with one of the big four supermarkets in the UK, and we expect to start exporting in the second quarter as well. In terms of our collaboration with new customers, we, this is growing, and we are seeing definite signs of improvement and growth in this area. Got me so in detail. We announced to our pet movie theater three branches in Thailand, Mega Cineplex, Eastville and one other area.
This is to improve brand awareness and awareness of our products. We have a CBC, whether it's Orgafeed or Flying Spark. Flying Spark, we will launch the production facility in May. This is the fruit fly larvae products facility, the first of its kind in Thailand. Last, our value-added products. The sales have gone down by about 9.5%, mostly due to a mix between our prices and our drop in volumes by about 2%. The value-added and others include many businesses, whether it's our own value-added products or our packaging and our alternative protein ingredient, alternative protein ingredients or supplements. Our new businesses continued to grow well in the first quarter, especially in terms of ingredients.
You can see that our gross profit margin has gone down, but in the 1st quarter it's at 27.3%, which is still high. This is a sector that has a good margin, a strong margin, as expected. We also expect that we will continue to focus on higher profit margin products. If we categorize these, we can see 57% comes from the value-added products. We're going to have a new factory in the 3rd quarter. It's at Greenery. It's almost completed, and we expect to be able to start producing in the 3rd quarter. We have packaging is contributing 17%. We have our own products and those for customers. We're seeing a drop in the 1st quarter year-over-year.
Our customers in Europe and in Poland are still showing strong demand, and we still see room for growth. For packaging, we are continuing to increase high margin products. Whether it's for sustainability packaging. At the moment we have customers who are using printed cans from cans with labels. This is a high margin product. For our value enhancing business, it's at about 10% contribution. We still continue to see good growth from last year. As for our ingredients, we have protein hydrolysate and collagen peptide plant, which we expect to start production. It's 99.5% progress. Hydrolyzed and collagen peptide plant production begins. We will see the contribution, a higher contribution by up to 30%. We also have feedback from 7-Eleven.
We have positive feedback from our products on the shelves across 11,800 stores. We just won an award, the best selling award from Watsons. Customers are showing great interest in our alternative protein. You probably had the chance to taste it outside the hall here. This is under the brand John West. It's being sold in the Netherlands. We have 2 SKUs, 1,400 stores, and it's also available online. For the outlook for 2023, I would like to invite Khun Chang to present.
Go. Oh. button.
I still am very confident in our outlook for our businesses. Even though in the first quarter things have softened a bit. We believe that this is a short term headwind, and we believe that in the next quarters we will see recovery and we will see ultimately normalization. We're confident in our fundamentals, at this moment we are stronger than ever, whether it's in terms of our cost savings, our productivity improvement. Today we are doing it. We're growing in these areas even more. For Red Lobster, we're seeing good signs. At the moment we've decided to send six of our managers to help the team there.
Go. We're going to have workshop.
We're doing workshops to prepare the budget for 2024, and they will begin in June until the next year. At the moment we believe we are headed in the right direction. We're doing things properly. The key highlight for Red Lobster is the cost control, whether it's the food cost, labor cost. They are all in line with our targets. What's important from this moment on is our top line, our guest count. We have to entice more customers to come to our branches. For our guidance, we have adjusted our top line from 5-6%. We've adjusted to 3-4%.
The drop of 1% is from forex because the budget that we had set, we used it at 35 THB, but we expect the Thai baht to appreciate. The adjustment is not anything significant. Our gross profit margin, we still want to achieve 17.5-18%. SG&A, we want to decrease it to 11-12%. Our effective interest rate will increase 0.5-1%, and CapEx will be at a normal level at 6 billion-6.5 billion THB. Normally, we never reach this amount. As for our dividends, we will continue to pay our dividends twice a year at least 50% dividend payout ratio. We want our analysts, all of the analysts here today and who's joining us online to rest assured.
If you look at the consensus from our analysts, I'm confident that we will beat the consensus, and we should not have any issues in this regard. I'd like to end the presentation on that note. If you have any questions, please, we welcome them. If you have any questions, you can raise your hand, and our staff will take the microphone to you.
We have
I'd like to ask about El Niño. You talked about this earlier, that it should improve in the second half of the year.
They'll make-
They happen in May to July, right? I'm not sure.
Yeah. With the temperatures drop in the second and third quarter, will this cause a rise in the cost of tuna? What is your expectation?
There is no limit. It's not necessarily May or June. The temperatures are higher than before, since the beginning of the year, this has caused fish a drop in the ability to catch fish. The price has gone up higher than $2,000, and the volume is dropping as well due to the higher prices. The prices are on a downward trend, though. A downward trend to about $1,980. We forecast for the third quarter that the prices of fish will drop by more than the current range. A price of more than $2,000. It just goes to show that the price can go up.
If we took a look at the year when we had El Niño, I think it was 2016, our margin was quite high. Is it possible that this year we might see a trend, a similar trend? If you look at slide 18, you'll see that the prices went up and went down to 1,000, 1,500 as well. You won't see prices stay or stabilize at a high level for long. I think we're quite happy with the downward trend. We're not majorly concerned about this. In the second quarter, we're starting to see the numbers. We're seeing improvement quarter-on-quarter. It's on a better trend. Red Lobster. Let me ask about Red Lobster. The share trend.
Can you talk about EBITDA? What do you expect for EBITDA?
We don't communicate specifically on Red Lobster EBITDA. I think this is the learning from the last quarter. I think overall what we can say, you can see from the net profit, you can assume the EBITDA has been strongly improving compared to last year, okay? If you compare to the net income compared to last year, the contribution, you can see very clearly the EBITDA improvement. It has been improving a lot. We told you in Q4 that there were two covenant to be met by Red Lobster, one on their Q3 and one on their H2. The one in Q3 was delivered, so we don't have any issue with this one. Now they have to deliver the EBITDA for their year-end. The year-end is at the end of May, okay? So far, they're on track.
We do believe they will be able to deliver with this one. Again, we have some very large promotion which are supposed to happen in May, during the last months of their year run, okay? So far, again, we are on good track on this one. We are positive on this one, we do remain careful on this one. We know the situation is highly volatile, okay? This is why we have decided to do all these changes in Red Lobster. The performance since Q1 is showing it, we are in the right direction, okay? Again, we told you that the full year guidance remained the same at THB -600 for the whole year, don't expect to have some benefit from Red Lobster every quarter, unfortunately, okay?
We want to see that quarter after quarter. We confirm this good news and that we are on the good direction. We also keep in mind that the situation in the U.S. is difficult. You have recession, you have a lot of competition among the restaurants. We need to make sure that we always have some very good value proposition for everyone. Overall, we told you we have since few years a challenge of guest count at Red Lobster. This is not yet fixed, okay? We need to fix this one, and we need to transform our operations. We have been doing since last year a lot of training in operations. Please keep in mind also that in 2021, during the COVID-19, we had to lay off a lot of people, so we had to hire again in 2022.
We have a lot of new people in our restaurants, so we need to train them and to make sure the execution is always the same and always good quality. We want the consumers to come to our restaurants, and very important, we want them to come back again. We don't want them to be disappointed with the speed of the service or with the quality of the food, okay? We are making some progress. We still have a lot of progress to be performed.
The increase in our prices, I think, it's gone up to a level where we can control the cost, and our cost control is good. This is good news. In the first quarter or their third quarter, we're seeing positive signs, as we mentioned. In their fourth quarter, which will end in May, we believe that we will be able to deliver. Today, we have spent much time with the budget. I would like you to remain patient, but we are confident that our budget will go down by half. There shouldn't be any problem. I'd like to ask in Thai. The first question is, you said Red Lobster would cover. In the second quarter of 2023, will the profit be better than 2022?
Yes, definitely.
Definitely.
We want to improve every quarter.
Yeah.
Here, the guidance for the full year 2023, we want to decrease the loss by half. Okay?
Okay.
It was -1.2 last year. For this year, for 2023, it will be 600. Yes, we want every quarter to improve.
We have half the loss. If it's half of loss. The second question is, I'm not really sure. Your guest count, what does guest count mean? Has it improved? The guest count has not improved, what has helped for increasing our sales is the increased prices. Don't forget that inflation is higher than 10%, our prices have also been increased by about that amount. We have to increase our guest count, whether it's by promotions or through a good value for our guests, for higher quality of the food, better service. Over the past 12 months, we're seeing the results of our efforts over the past 12 months. That means that the promotion that you talked about, you said Valentine's, for instance, that it has increased the guest count.
No, we're not happy with the results yet. Today, this is on occasion. We have promotions based on occasions, and we want our customer base to improve. It'll take some time. This month, we have Mother's Day. This is another highlight, just like Valentine's. We're hoping that there won't be any floods and that we will see an improvement in our guest count. One other thing is your cost, whether it's salmon or tuna or whatever, for Red Lobster in terms of sales, and this is for TU and for Red Lobster, the prices that you're selling at right now, can they cover the cost, the increasing costs? Will there be a possibility of adjusting the prices? First of all, Red Lobster, like I said, we have adjusted the prices to cover. We've already been successful.
The good news is that our raw ingredients, our material prices have dropped. The prices have dropped. There's been a crash in the raw materials, whether it's lobster or the shrimp. The costs for Red Lobster are quite good for us. As for Thai Union, in terms of OEM, we are not facing any problems. We buy and we sell at the regular transactions. What's challenging for us is the branded products. For this year-
Especially in Europe, we have to increase the selling prices, and this is a challenge for them. When we increase the prices, that will, of course, affect their volume. The good point is that the private labels are cheaper than the branded products. This helps in Thailand, helps us to cover these effects. For Avanti, it's better as well, right?
Yes. going forward.
We do believe Avanti will improve. In general, you know, last year they were impacted by a recall in the U.S., now it's over. We do believe the performance of Avanti will be improving moving forward. You can already see in Q1, part of our share profit improvement is due also to Avanti. The key impact with Lobster, but Avanti also is the contribution is also improving a bit.
Just to make sure, the contribution from Avanti in our first quarter is their fourth quarter, right?
No, we do an estimate of their Q1.
Oh.
Okay. We have.
It's just estimate one.
We do an estimate one, of course. It's a listed company, so we have exactly the same level of information, so we take an estimate. Sometimes we are a bit above, sometimes a bit below. Sometimes you have to catch up the quarter after. We do estimate their quarterly results. Yes.
Do you correct it when they announce the actual result?
Of course. Of course.
Oh.
We have to and we catch up every quarter. Nothing new on this one, we have been doing this since many years.
Okay.
The balance, your guidance for the full year and for the quarter, there's a big gap. Mr. Terburg, what do you think about this?
For the third quarter, we will catch up. In the second quarter, the outlook, It's better than quarter one. Quarter one is a bit weak. For the numbers of Q on Q for quarter two will be better than quarter one?
We do believe, yes. Quarter-on-quarter, Q2 will be improving versus Q1.
Low quarters of this year will be better than last year.
What about Q2 last year?
Mm-hmm.
I think overall in terms of top line, we should be kind of stable. We'll see some normalization. We don't expect to have such a big drop in terms of sales that we have seen in Q1.
Oh.
Q2, we will see some improvement.
It's like it's slowly improving.
Yes. Yes, slowly improving. The growth will happen mostly in Q3 and Q4 in terms of top line. This is our plan right now for the year.
gross margin in the full year is quite challenging.
That's correct. I think when you look at Q1, it's a bit challenging. We do believe you will see some improvement already in Q2, further in Q3, and further also in Q4. At the end of the year, we expect to be back to a normal level, which will be higher than this. On average over the whole year, we do expect to be within this range. Yes.
On the other hand, Red Lobster seems that our budget is quite underestimate, right?
We will see at the end of the year. It's too early.
Okay.
Right now, you're right. In Q1, the Q1 performance is a bit above our expectation. Okay. If you see our guidance over the past few years, we have to be conservative. Okay. It can be highly volatile. Keep this in mind that the situation of Red Lobster is highly volatile from one quarter to another quarter.
Question. The tuna, the increasing tuna price, do we have a stock? We have a higher stock? Is our stock higher than usual?
No. When the prices of fish are higher, that means there's less fish available. Of course, we can't buy as much as before. We are managing this situation, so you don't need to worry.
You think the $2,000 U.S. price?
Yes. We are seeing this in the third quarter. We believe in the fourth quarter that the prices will go down. That's our belief.
Thank you.
I'll call Pat.
I'd like to ask two questions. First... Not Pat. In this year, for your shrimp supply, do you have any concerns? Is this going to affect your production?
First of all, the trend should be good for shrimp. The prices for shrimp have gone down. This is a good timing for us.
The second question is about your value-added business.
I'm not sure if I heard you right.
You talked about value-enhanced. You said it's about 10% of the group. After your new products, It'll go up to 30%?
No, only in our ingredients. It's not going to go up that much. Maybe a bit because it's a small contribution.
Your new product, whether it's the supplements, the margins, are they similar to what you had before or higher or lower?
If it's the ready-made meals, then we're looking at 20+% in terms of gross profit margin. Supplements are very high, higher than that because of our marketing.
The supplements will be more than 30%?
Yes, they will be more than 30.
Thank you.
Which is the other?
Supplements are 60 plus, not 30.
In my team's point of view.
It's still in a small amount for the brands that we have on sale, ZEAVITA.
The next thing-
The interest rate has gone up. The question is, if the interest rate goes down, will there be a reversion or will it always be zero? Right now.
What they'll hear about too.
We're not trying to book these in a bigger amount. We don't want to book when Red Lobster we're not confident yet. We're trying to be conservative. This year we're not going to book preferred interest yet. We'll look at the results from Red Lobster. If things improve, if next year they're doing very well and the interest rate goes down to lower levels compared to what we're experiencing now, then we can start to book. At the moment, if it goes down lower, we could book it, but there's no need for us to book this. The second question is the income tax. I'm not sure how long you can use these numbers. Are you still going to experience loss?
I think in the U.S., the vast majority of these funders don't have any useful lives, meaning we can use them forever. There is a portion which has a definite useful life, it's a minority portion. Keep in mind a few things about the U.S. The structure acquisition of Red Lobster was very specific. I explained to you. We have a tax goodwill, okay? That we can depreciate over 15 years. Every year we take some tax rate from this, okay? Even if Red Lobster is performing huge profits, we'll have some tax rate coming from this tax structure from the beginning. It will not last forever, okay? I think it will end in a few years from now. Right now from this, we are enjoying some tax rate every year.
On top of this, there is also some mechanism coming from the preferred interest. Do we recover that some preferred interest? This will trigger some tax expense or not. Keep in mind also that we are combining the tax from Red Lobster together with the taxes from our ambient and frozen business in the U.S. We are doing what we call a tax consolidation. The idea is right now we have a lot of tax rate. We are benefiting from this situation. It will not be forever. I do believe in Q1, the amount that you see especially for Red Lobster, it's a bit high. It was higher compared to our expectation. It was a positive news for us. I don't expect to have this amount every quarter. I do not expect that every quarter.
Overall, you're right. Right now we have a lot of tax rate coming from the U.S. This is partially offset with some tax expenses we pay in Thailand and also we pay in Europe.
Could you please explain more the impact of slowdown economics to Red Lobster in Q2 and Q3, and what strategy to implement during the lower season of Red Lobster?
Here, I'm not sure. Can you repeat again the start of the question? Q2.
The question? Could you please explain more the impact of slowdown economic to Red Lobster?
Okay. Here the key impact for us is we had to increase a lot of prices last year into differently to all the restaurant chain of restaurants have to increase a lot their prices last year. All the food restaurants, they have seen a decrease in their guest count in the US except for the fast food. The one which are really growing right now. This is McDonald's. This is all this kind of chain. We are not there yet, of course. Here what is important for us is always to make sure that we have some value proposition. Right now, the consumer, they're always looking for good prices. When they go out, they will have the choice between I go to a fast food and the experience is not great, but it's very cheap.
I will go to a fine dining where it's very expensive and the experience is hopefully good. I can go to a casual dining, okay? This is kind of variety that they have. We have to make sure that we always have a good value proposition. We have seen over the past few weeks that if we don't have a good value proposition to attract the consumers, the consumers will go to some other competitors. Why? Because all the others, they are doing some good deal, okay? Some pasta for $10 or some very attractive meals, the people will come in.
The intention, of course, is when you get some people in your restaurant, they will take on top of this some alcohol, some beverages, and then at the end of the day, it's still positive for you, okay? For us, it's a balance. We told you we have been increasing a lot of prices in 22. The good news is on the key materials, raw material that Red Lobster is using, which are the crab and also the shrimps and the lobster, and the prices are going down, okay? We see some deflation in the US on these specific raw materials. They are a bit exposed to salmon and tuna, but very little, okay? What we are talking on the inflation on tuna and salmon is correct, but they're not really impacting Red Lobster.
Just a bit, the key exposure for them are really the shrimp price, which is a different fish, shrimp price in the US compared to Thailand, the lobster and the crab. These are the three key material they are using. This very clearly the prices are going down, okay? It's helpful for us. We see less impact coming from inflation. Okay. The idea is here to have the right balance between the promotion also and having some good value proposition for the consumers. The experience is something which is very important also. We need to reinforce the training. We need to make sure the execution is consistent among all the restaurants. Right now, even if we have seen some improvement, it's not the case yet. Okay? The last piece is we have been restarting the marketing activities.
We did tell you that we have been stopping the marketing activities during COVID or we have been reducing a lot. We are restarting again. The amount of marketing expenses is growing, but we do believe we need that to reattract the people, okay? If you compare to a few years before COVID, our marketing expenses are still far below this level, okay? We are not at all where we were a few years ago on this one. We try also to be more creative, okay? We changed our marketing agency. If you look also at the advertising from Red Lobster, you will see much more consumers and very young people also if you compare to a few years ago. It was very focusing on the food.
We always insist on the food because we want to have some good quality, but also the experience is something very important. There is a last piece also that we have to work around, which is our restaurants. If you go to Red Lobster in the U.S., some of the restaurants are a bit old, okay? Very likely we'll have to engage some CapEx to improve, to modernize, to make them a bit lighter. I've been to the U.S. two months ago, I will get back again next week. Some of the restaurants are a bit old-fashioned. Okay? We have to recognize that, we are competing with some new, fancy, very attractive, with a lot of light restaurants. Okay? We need to modernize and to revisit them.
We are positive on this one. We do believe we're on the right direction.
We have seen the declining of frozen business for consecutive quarters. What's the revenue and gross profit margin guidance?
I think on the frozen there are different interaction. There is a first one, which is I told you that, you know, frozen business in the U.S., we have some deflation, okay? We have some of our key products, like the shrimps, like the lobster, like the crab also, where we see some huge price decrease. If you compare the sales drop compared to the volume drop, you will see a difference between the two. The volume drop is much less compared to the sales drop. Also we told you that in the frozen business we have been facing some challenges last year. Right now we are considering, do we want to continue to operate in all the segments we are operating right now?
We do believe in our frozen business in the U.S. some make a lot of sense because we are producing, like the shrimps. Some other segments, like the lobster, we're not producing by ourself, okay? These are categories where you just buy and sell, and you make a small profit. The issue is for this, you need to have a very large net working capital. Maybe something which makes sense a few years ago, now with the increase of the interest rates doesn't make any sense anymore. Right now we are revisiting. Thiraphong Chansiri mentioned in Q4 we want to downsize a bit our U.S. frozen operation in the U.S. I think you can see a bit the impact of this one in Q1, and you will see the same in the next quarters.
The idea is to drop a bit in terms of top line, we don't mind about this, but to recover in terms of gross profit margin. We were not happy last year with the gross profit margin coming from frozen. We want to improve. Right now in Q1 you don't see the improvement, but we are very confident that in Q3 and Q4 the gross profit margin will get back to 9%, 10%, 11% where it was before the crisis we had to face in 2022.
One more question. When do you think your wait and see mode will be easing?
The wait and see attitude for the customers. Difficult to predict on this one. Usually it doesn't last very long. If you look at our volume at the end of Q3 and Q4, they were very high last year. Our sales were very high in Q3 and Q4. We knew the inventories were very high in our customers. We have already seen this kind of situation where the fish price is going in the opposite direction compared to the consensus. We could have a bit of wait and see attitude. This is what we see very clearly in Q1. We can see already in April the orders are restarting again. We see more and more orders coming in.
We need to see what is happening in May and June. It will be connected to the fish price. We don't expect it will last very long, okay? We see it was one quarter hit. From this one we believe the situation will improve and normalize in Q2 and get back to growth really in Q3 and in Q4.
One more question. Could you please share maybe a call, maybe for April, what are Red Lobster's results and the economy in the U.S., for the target for the entire year, what will it be? The economy is not good. We have to look at the information, the data. For us, we're not worried about anything. April is in our... the fourth quarter for them. We're looking at better trends. We believe that this year, if we meet our targets, every quarter will be better than last year's compared to last year. The base, Right now it doesn't have to do much with the economy. What's important is the competition that Ludo mentioned. Many chains are offering promotions that are attractive. Yes. They are attracting guests. This is something that we need to do as well. With happy and worry. It's not...
We're not going to compete on pricing. We're going to position ourselves properly. In the eyes of our customers. We'd just like you to wait and see what we're doing with this, and we believe that we're headed in the right direction. There's a question from online, the frozen business. Last year, you talked about Chicken of the Sea. The operations weren't very good. What's the situation now? Is it breakeven yet? We're going to look to see this in the second, third, fourth and quarter. We're looking at lower inventory and we'll see it. We'll see better signs. We'll see improvement in the second quarter onwards. The sales and the gross margin, will they improve in the second, third and fourth quarter? Yes, they will. The tax for quarter one, is that the U.S. tax?
Yeah.
Yeah.
It's from US operations?
Yes, it's from the U.S. operations.
It's been that Chicken of the Sea Frozen is turned around already?
Not yet. I think we are very close to breakeven. We are really improving compared to last year, okay? When we see the performance quarter to quarter, it's really improving. When you see the level of inventories, it's much lower compared to last year. Overall, we do believe we are in a much better situation. Also, we are benefiting from the deflation. We told you there were some deflation in some of the segment that Chicken of the Sea Frozen is operating on this one. Not yet positive in Q1, still loss-making, but really improving. The target for the whole year is to be positive at Chicken of the Sea Frozen in the U.S.
One more question. The total quarter two is better than quarter one. Could you highlight for us in terms of our products, what products will be performing compared to others?
Yeah. I think the overall.
Ambient.
is always very strong in Q2. Q2 and Q3, these are the strong quarters for the ambient. I think what you can see in Q1 in the ambient, it's mostly the OEM volume which have been dropping. We do expect this one also to recover. The frozen also should be improving in terms of gross profit margin. We do expect also the PetCare to improve. We do expect every businesses to improve compared to Q1. Really, we believe Q1 is only a temporary issue, both in terms of top line and gross profit margin. We should see some improvement in all the categories in Q2.
Thank you. one last question, please. What could be your most concern in 2023?
That's a very good question.
Our concerns are the same. Red Lobster is the first priority. Other businesses for us are soft. There's restocking.
There won't be a significant change.
There won't be a significant change in the overall business. For Red Lobster right now, we want to push for it to continue to grow, to improve. We want to see Red Lobster become one of our key businesses. Their cash at the end of quarter one was about $100 million. This is a business that can generate much cash. We are excited and concerned at the same time with the progress that we're seeing from our team. It's probably this that is our main concern. As in terms of our financial status, our financial position, we're at a very good level. We have reactivated our M&A, and we're excited about this. We're excited about the opportunities to invest once again. We haven't done this for quite some time now.
This is going to be a year that we're going to see a boom in every category, every market. It's very interesting for us. Especially in this current situation, or to see such investment from us. We're developing our 2030 strategy vision. At the end of this year, we expect to be able to share this with you, with all of the analysts, so that you can see our growth path from this point on. Thai Union would like to thank everyone, and we look forward to seeing you in the next quarter.