Good morning, management, analysts, bankers, investors. On behalf of Thai Union Group, I would like to give you a warm welcome to our second analyst meeting of 2022 for the first quarter results announcement. Finally, we meet in person, and I hope you guys are all well. We will start our event with the usual performance announcement. The key speakers are our President and CEO, Mr. Thiraphong Chansiri. He will walk you through the key highlights and recent development, then followed by our Group CFO, Mr. Ludovic Garnier. He'll walk you through the consolidated results and then followed by our investor relations team, Ms. Neroli Goldman. She'll walk you through the business performance. This session will take approximately 50 minutes and followed by Q&A for 30 minutes. Today, we have arranged a special session for you.
We would have the knowledge sharing session on the good corporate governance at Thai Union. This session will be led by Mr. Rapipong, who is our Deputy General Manager for Legal and Compliance and Tax. That session will last approximately 30 minutes, including Q&A. After the knowledge sharing session, we will take a short break around 10 minutes, and then we will continue with TFM result announcement, followed by the Q&A. For those who are joining us online, for English interpretation, please mute original audio and for when Ludo speak, please unmute. Without further ado, I would like to welcome Mr. Thiraphong Chansiri to begin the result announcement.
Hello to all the analysts. Today, we are going to report our results for the first quarter of 2022. This new year has come with many challenges, different challenges compared to the last year, and the theme is inflation all around the world, whether it's with the oil prices that have affected our packaging and also the labor that we will be experiencing in the future. As for the results for the first quarter of 2022, the management team is very satisfied with the results, even though we faced so many challenges. In terms of the demand for our products, that demand is still quite good. It's very good, in fact historically, because we haven't seen double digits like this for quite some time. Our sales grew by 16.5%.
If we exclude the Forex impact, you'll see that it's grown not just in terms of the price, but also the volume that has grown. If we look at units, we are quite impressed. The pet care and the value-added products have grown by 27.2%. Our ambient products have grown by 14.3%, and our frozen products have also grown by 14.2%. The gross profit may seem to be diluted a bit from the last year, and right now it is at 17.5%, and mostly from the costs that have increased, as I mentioned earlier. The company is continuing to deal with these prices to be able to handle the investment costs.
I would like you to all to understand that the costs that we have will continue to increase to some degree, but we will do our best to catch up with these. In terms of operating profit, it went down by 10.9%, mostly because of SG&A. This term is mostly from the shipping costs, which continue to increase. Aside from this, we also have inventory that we have to carry an increased amount of this, and the transit time for shipping has increased twofold. Our net profit has gone down only by 3.2%, which is mainly due to the tax credits that have been higher for us. These are our overall results for the first quarter. On the next page, you'll see the different areas. We have our gross profit that has increased.
You'll see that the net debt to equity, even though it has increased a bit from 0.93 x to 1.01x , it's mostly due to our net working capital that is still negative because of the inventory, high level inventory that we have, and also because of the account receivables. There's no need to worry because we have been able to sell quite a lot in the first quarter, and that is the reason for this. On the next page, I'd like to point out that even in the first quarter, despite the Omicron variant, our supply chain, we are continuing to take care of this. Every production facility of ours continues to operate at 100% capacity. We have our prevention measures to prevent infection, of course.
We continue to be strict on that front, whether it's mask-wearing at every factory, whether despite the fact that in many countries they have done away with the mask mandate. This is a measure that we want every single plant to continue to follow. We also have the alcohol gels in place. This is something that we are giving great importance to, and we also have ATKs for our employees to continue to check for infection regularly. We have over 93% of our labor which have two doses already, and about 36% or so have the booster dose. There is a sufficient supply of vaccines, so this is not a concern for us. On the next page, you will see our CSR efforts.
We are very worried about the community, the communities where we operate, and we have donated, food products and materials to those communities. On the next page, I would like to share ZEAVITA, a product that we had launched last year. Today, our trade channels that are not online. We are number two in that regard. That's a fast development for us. The product has been well-received, and there is confidence and also, credibility behind the Thai Union name. Therefore, our products have been well-received by many establishments, and we also have samples for you today for you to take home. On the next page, we continue to invest in food tech startups, especially SPACE-F, which we have a lot. We are collaborating with the National Innovation Agency and Mahidol University. In February, we began our third batch.
For batch three, there are 17 startups that have been chosen from over 200 companies, and eight of those are accelerators, and there are nine incubators. What is interesting is that 50% of these are from overseas, whether it's the U.S., Canada, Finland, France, Hong Kong, or Poland. Food tech in Thailand is very interesting and will attract startups from all over the world. It's a magnet. In terms of our fund, we have invested in eight companies so far. What is interesting is Orgafeed, which is a Thai startup and has begun production. They are raising insects, and we have a factory set up already in the first quarter. The products that they have manufactured are pet treats, and we have been working with our very own i-Tail here in Thailand.
Flying Spark is from Israel, and this is another example which should be able to start producing insect protein within the first half of this year. Their factory is perhaps the most state-of-the-art. This factory is in Phetchaburi Province here in Thailand. Once this factory is up and running, we may put together a trip for our analysts to go and visit. I would now like to ask Khun Ludo to take over, and he will give you the details about the financial results.
Thanks, Thiraphong. Good morning, ladies and gentlemen. I'm very happy to be with you today to see you physically after two years, and very happy also to share some good news on the Q1 numbers. I will be quite quick on this slide. Khun Rapipong already mentioned the key highlights. I think for you, the key takeaway are really the record high top line, okay. For Q1 for us to be so high in Q1 is something which is a bit unusual. 16.5% growth compared to last year. We have, of course, some positive effects. If you exclude the effects, the growth is still double-digit at +12%, and I will elaborate a bit more in the next slides. The GP margin, we are diluting a bit.
Honestly, considering the inflation, and we'll elaborate on the inflation, I think the performance is still very good. We are very close to last year, where we're not facing with the same inflation pressure. The OP is dropping, mostly coming from the freight cost and also some additional marketing costs. So yes, operating performance is declining a bit. That was expected. We told you last year, especially in Q1 and in Q2, the operating performance has been very strong, so it's not a surprise to decline a bit compared to last year. Share of loss. We have more share of loss compared to last year. The key components is of course Red Lobster. Again, I will elaborate a bit more on this one, but you know the company is facing some challenges in Q1 for different reasons.
We have also lower share profit coming from Avanti in Q1. However, bottom line, our net profit is very close to last year. Just decreasing by 3% compared to last year. We have in between some good news, mostly on the tax, and I will elaborate a bit more where does it come from. If you move to the next slide, I think this is something we are very proud, and you can see really all the efforts and all the progress that Thai Union has been doing over the last few years. It has been nine quarters in a row where we are delivering some top line growth. Okay, we have a gross profit margin which is exceeding 17, and in the range of 18% over the last eight quarters in a row also. Very strong performance.
We told you a few years ago, it was our key focus, and I think this is a clear demonstration that we can be good, and the Q1 performance, despite the inflation pressure, is also very, very strong on this one. We just wanted to elaborate a bit on all the topics related to inflation that we have to face in Q1. Of course, we are not the only one to face with this context. I think, overall, the macro environment is very complex for all the industries right now. Since last year, we have been talking a lot about the logistics issues, the container shortage we are facing. Of course, you know that we are an export company, so we are very exposed, to that. The situation is not really improving.
You can see from a cost point of view and also from a transit time, mostly from Thailand to the U.S., we don't see an improvement in Q1. We can see now in April a bit of improvement, okay, in terms of cost. It is very soft. We need to see the next months if it is confirmed. But we have, again, in Q1 compared to last year, an impact, a price impact on the freight cost, almost at THB 700 million, THB 710 million. If you do remember, in Q1 2021, we told you we had already an impact of THB 200 million. Meaning in two years, we have a price impact coming from the freight cost, almost at THB 900 million. Keep in mind, this is really impacting our numbers.
The packaging and ingredients, we discussed about that also in our Q4 presentation. We told you we're expecting some very strong inflation coming from the packaging and ingredients, and this is happening. Again, you can see some kind of softening over the past few months, but still very high compared to the full year 2021. I think what is new in Q1 is really the raw material situation, and I will elaborate in the next slide, and also the utilities. I think we were not expecting the war between Ukraine and Russia to happen, and you can see the pressure on all the utilities everywhere in the world have been going up much higher compared to our initial expectation, okay?
This is mostly from us in Thailand, some impact on the gasoline and also on the coal prices, which went up, as you can see here on this graph. Of course, we have different solutions on how to face with this inflationary context. The first one is we are not fully exposed. On some of these topics, we are partially hedged, okay? We are doing some hedging every year, it's not new, but we try to be very cautious. We know we can be exposed to this. We cannot take some hedging on everything. For instance, on the tuna price, we cannot get hedging. On the salmon price, for instance, we can. We have also some high inventories. We decided since last year to increase our inventories, both in terms of raw materials, in terms of finished goods.
This is also one of the reasons why our net working capital is so high at the end of Q1. The price negotiation is something which is really key. Of course, we try to pass through the inflation increase to our customers. We cannot increase the prices to the same extent that the costs are going up. Very likely we'll have to get back again to retailers all along the year to get some new price increase. We are not the only one to do that. I think I'm sure you have seen all the other food industries communicate it, and you can see the inflation right now is very high everywhere. Here, the price negotiation was very important.
Always, we always have a lot of discussion with our retailers, and I think we have been quite successful compared to expectation in Q1 on this side. The cost management is something which is key. You know, it has been a few years already when we put a lot of focus on this one. We did show you some videos in Q4 regarding all the automations we have been doing in our frozen business. We want to push more. We have to move anyway in that way. We have to be very efficient in the factory. We have some good successes, especially in Thailand. The conversion cost pattern are going down. This is good. We have some challenges on some other factories, so we still have some room for improvement here. Lastly, I think we need to remain very agile.
You can see the situation is highly volatile on the raw material price, on the packaging, on the ingredients. We need to be very agile, and sometimes we need to change the way we are doing the businesses. Difficult macro environment overall, but we do believe we can face with this situation, okay? We are used to face some inflation. It's not a new topic for us. We knew this one. What is a bit unique this year is to see all the raw materials, the packaging, the ingredients, and also freight costs all coming up together. One good thing, we are not the only one being exposed. Of course, all the industries and all the corporate are facing with the same situation. We wanted to share with you a quick update, our usual update on the raw material prices.
You can see the tuna price increasing and exceeding $1,700 in Q1, increasing by 34% in Q1. The salmon price is also increasing a lot compared to last year at 78 NOK in Q1, increasing by 45%. The shrimp price also is going up at 182 THB and increasing by 24% compared to last year. Here we told you in our Q4 guidance that we were expecting some inflation on the raw materials, so we are not surprised to see the prices going up. However, we are not expecting this magnitude to happen. There is one good news, which is in April the tuna prices go down a bit compared to March. We need to see the confirmation over the next months.
Overall, the raw material prices are higher compared to our expectation. Again, it's coming after the freight cost increase, the packaging and ingredient cost. I think the macro environment, there is one good news, which is the FX, okay? The FX in Q1 has been very favorable for us, especially the U.S. dollar has been increasing versus Thai baht. You know, of course, we are an export company, so when the Thai baht is depreciating versus U.S. dollar, versus euro or versus pound, it's very favorable for our business. We have this situation in Q1, mostly coming from the dollar. We see a small positive impact also coming from euro and coming from pound, but it's much, much smaller compared to the USD. Now, a quick focus on Red Lobster.
Red Lobster, we discussed yesterday. We share with you can see the performance. Very clearly, they are facing some heavy challenges in Q1. We told you in Q4 already that they were facing with the Omicron variant in December, in January, in February. The impact from that is drop in the guest count. Much less people going to the restaurants, being afraid of the COVID-19 again. They've been facing also with the inflation. You know some of the key products sold by Red Lobster is, of course, lobster and shrimp and also shellfish. The inflation on this product has been extremely high. If you compare the performance of Red Lobster compared to some other restaurant industry in the U.S., they are more exposed in terms of inflation.
They have been also impacted again by the labor shortage in Q1. We told you since last year already we were looking for more managers, more staff also in our restaurants. The situation is improving, but of course, you have more costs. You have more costs in a time where you have less guest counts, okay. These are the key explanation for the share profit drop in Q1. From the numbers you can see here in Q1, the share of loss from the operation is THB 243. Usually in Q1, they are always positive. They are always profit-making in Q1. Here it's a heavy loss in Q1. There is one good news, which is a share of loss coming from the lease accounting adjustment.
If you do remember, we told you last year in Q1 2021, the amount was -THB 300 million, including 200 coming from the catch-up from 2020. We don't have this impact anymore. Here we have a lower impact coming from the lease accounting adjustment in Q1 2022. We told you the guidance for the whole year for this lease accounting adjustment is something around -THB 400 million. It will be roughly -THB 100 million every quarter before any tax impact. The other income interest expense are not changing a lot. Compared to last year, we have a bit of FX impact, but it is very small. The income tax is growing. Just for you to remember, something you don't have always in mind, Red Lobster, the legal form, it's a partnership.
What does it mean? It means that when we take the share profit, they don't have any tax income or tax expense reported in the share profit. In fact, the tax income or tax expense has to be calculated by all the partners, all the partners being Thai Union, being Seafood Alliance, and being all the other one also, of this one. There are three key area of tax credit coming from Red Lobster. The first one is, of course, they have their share profit or loss coming from the operations. From this one, we have the normal 25% tax rate coming from this one here. We have a share of loss, so we have some tax credit coming from this one. This is the first source. The second one is due to the structuring of the acquisition of Red Lobster.
Since the beginning, since 2016, we have a tax goodwill, okay? Not in accounting, but a tax goodwill that we can depreciate over 16 years, over 15 years, okay? Every quarter and every year, we can amortize just for the tax calculation. We are benefiting from tax relief from this one. It's not new. We have this one since the acquisition, but sometimes we don't have it in mind. The last thing is Red Lobster is a restaurant industry. In the restaurant industry, they are benefiting some tax credit from the tips, that they are getting. All the restaurant industries in the U.S., they are benefiting from tax credit. This is a bit more difficult to predict. This is why from time to time, from one quarter to another quarter, you have some increase or decrease of the tax credit, okay?
The combination of the three is explaining the big amount of tax credit that we have in Q1. Red Lobster by itself is $206 in terms of tax credit compared to last year. We have an increase of tax credit by almost $120 compared to last year. If I move on to the next one. Here, again, we insist on other challenges we are facing. I'm sure you heard also that Kelli, our CEO of Red Lobster, who joined us eight months ago, has decided to resign by mid-April. That was her decision. You can see from the numbers that the challenges in Q1 has been extremely high in Q1 at Red Lobster.
Very clearly, it appeared that we were not fully aligned between the board of Red Lobster and also the top management at Red Lobster on how to react, how quick do we have to react. We believe we should have been much quicker on how to react to this crisis situation. This is why she decided to leave. On this one, the board of Red Lobster, together with the senior leadership team at Red Lobster, they are fully determined to turn around the picture, okay? I think there were some new joiners over the last few months. We have a new CFO, we have a new marketing lady at Red Lobster, which seems to be very strong. Of course, the situation is not easy, but here we are confident that we can turn around the picture.
We just wanted to update also our assumption in terms of share profit for the whole year. Okay, there is no change for the lease accounting adjustment. It was -THB 400 million before, -THB 400 million. It is still -THB 400 million. We did update the share of loss from the operations. If you do remember, in our Q4 communication, we told you we were expecting a range between -THB 400 million to -THB 500 million. The total was -THB 450 million, the midpoint range. Here we did update on this one to -THB 650 million for the whole year, and the range, which should be between -THB 600 million to -THB 700 million on this one. Strategic initiatives. I don't comment further on this one. We want to push further.
We told you that we are revisiting the menu, also the execution is improving in the restaurant. The off-premise has been very successful since the first wave of COVID-19, and we are still pushing on this one. The value proposal is something which is very important. You need to understand in the U.S., especially the price of the fuel is something which is very important, and the price of the fuel has been going up in Q1. Many people are very sensitive to this indicator because usually the fuel is never expensive in the U.S. Now in Q1, because of the overall price increase everywhere, the fuel price has been going up a lot in Q1. Many people they decide to cut their not necessary expenses and not to go to the restaurant anymore, okay?
This is also one of the explanation why the guest count has been dropping in Q1. The marketing, we have changed completely the way we are doing some marketing activities at Red Lobster compared to two years ago, we are doing much more digital activities, much less on the TV, on this one. Heavy challenges, we are not happy with the Q1 performance. However, we do believe we can turn around the picture in the next quarters to come. Next one, sustainable finance. I will be quick on this one. We did a lot last year. If you do remember, we did a lot of refinancing. Almost 100% of our refinancing was performed together with Blue Finance strategy. We did a bit more or so in February 2022.
We did issue some sustainability-linked derivatives in February. Again, we go in the same direction. We want to push further in that direction. Plus, we did communicate also our first KPI. You can go to our website. You will see we were successful in at the end of 2021 on all our goals. Next one is just a quick focus on SeaChange. You know, SeaChange is our sustainability program. Again, on this one, I will be quite quick on that. This is our usual commitment that you have. Few things for you to keep in mind. The first of all is we will announce very soon our target in terms of greenhouse gas emission reduction, okay? You know, there will be a target to be announced to 2030, to 2050.
We are working on that. It will be a Science Based Targets initiative on this one. Apart from this one, we still have our packaging, sustainable packaging initiative, which is going on. We have our tuna commitment. All of these, I guess, you know, so I don't comment further on this one. Maybe the box on the right, the Sustainable Fisheries Partnership is something which is new. We signed this one at beginning of Q1. Here the idea is again, to move to much more sustainable fishing, much more sustainable practices, coming from the fishermen and to improve overall our operations. Now if we did dive a bit in our numbers. Here, this is a quick focus on our sales, and you can see here our track record, Q1 2020.
If you do remember Q1 2020, it was the quarter with the first wave of COVID-19. The sales were up, and they were only at THB 31 billion. Q1 2021, again, our sales were at THB 31 billion. You can see now in Q1 2022, our top line exceeding THB 36 billion. This is really extraordinary performance, okay. Our record high performance for Q1, extremely unusual. What I think is very interesting, of course, we have a bit of effects, but even if you exclude this one, the top line is still very high. Our three categories, and Lina will elaborate on this further. Our three categories are growing in Q1, which is really good because you have seen in 2020 and 2021 our ambient and frozen business, they were kind of offsetting each other. Here the three categories are growing.
Of course, we have a significant price effect in Q1. The volume are positive in the three categories. Don't misunderstand, we have a lot of changes happening in every category. The frozen category, for instance, and Neroli Goldman will elaborate on this one. We have lots of changes with lobster declining and shrimps increasing. Overall, the top line performance is excellent. The double digit growth in Q1 for us is something which is very unusual, and we are very happy with this one. The gross profit is growing consistently by almost 15% compared to last year. Again, it's a record high gross profit in absolute amount compared to last year, THB 6.4.
In the Q1, of course, this is the impact of the price increase to absorb the freight cost, inflation, and also to absorb the raw material, the packaging, and the ingredients in the inflation. In terms of gross profit margin, we are diluting a bit compared to last year, 17.5% compared to 17.7%. Thanks to the top line growth, our GP in absolute amount is growing a lot, and I think this is really good. Again, we have some favorable impact coming from the translation, mostly coming from the USD. Now moving to the OP, you can clearly see here the impact of the freight cost increase. Here overall, we have a decline of our OP by almost 11% compared to Q1 2021.
However, at 1.7, almost THB 1.7 billion, I think this is our third best ever performance in Q1 in terms of OP, okay? We did really good last year. We were almost at 1.9. If you do remember, Q1 and Q2, the operating performance in 2021 was really excellent. There was another strong performance, I think it was 10 years ago. Over the last ten year, this is the second highest performance at almost 1.7. Here again, we are impacted by the freight cost. I told you the price impact related to freight cost is almost THB 700 million. We are facing huge impacts coming from from this cost. We also increase our marketing activities in Q1.
You know, we have now the supplement business in Thailand, which is a new activity for us and where we are spending a bit of money to support the launch of this new brand. We did spend a bit more also in Europe and in the U.S. in terms of marketing activities. These are the key reasons why our SG&A ratio has been increasing from the 11.7% last year to the 12.9%. 12.9% for us is record high also for Q1. Okay? Moving on to the net profit. I told you below the OP, we have many good news. We have some. First of all, some bad news on the FX gain. We have some FX loss in Q1, very small one. Versus a THB 200 FX gain last year, so it's declining.
However, this is almost offset by the other income increase. The other income increase is mostly explained by two topics compared to last year. The first one is we signed a settlement with the MMO. MMO is the name of the U.K. authority. You know, we have been in litigation with them since 2013, so it's a very old litigation. They were suing us, they were saying that we have been using some IUU fish coming from Ghana. Two years ago, back in 2019, we were found not guilty on this one, and then we sue them for damages. Basically, we did record something like THB 70 million settlement coming from this one, which is recording in the other income.
Plus, last year, if you do remember, we did record some impairment on our goodwill, some fair value adjustment on our Russian business for almost THB 70 million. The other income increase is almost offsetting the FX again decrease. Of course, we have a sharp profit drop compared to last year. I told you mostly coming from Red Lobster and a bit also coming from Avanti. We have some good news from RBF because we have a contribution from RBF on this one that is not enough to offset the drop coming from Red Lobster and also coming from Avanti. The good news for us is really coming from the taxes. Okay. The taxes last year in Q1, we had a tax expense by almost THB 200 million.
Now in Q1 2022, we have a tax credit of almost THB 200 million. We have a change by almost THB 400 million. I told you Red Lobster is a really significant component of this one. You can see, if you get back to the chart of Red Lobster, the tax change just for Red Lobster only is something like THB 120 million. Okay. This is one big component. Another big component is our U.S. business, excluding Red Lobster. Here I'm talking about our frozen and also our ambient business in the U.S. We told you last year, our frozen business has been extremely successful in 2021. It was generating a lot of profit. We don't have the same situation in 2022.
We are facing a very strong and very violent normalization of the context in the U.S. Our U.S. business, frozen business, is loss-making in Q1. We do expect it's temporary situation. It will turn around in the rest of the year, but in Q1, we are benefiting from tax trade also coming from this one. Here again, the impact is something like THB 120 million. On the same side, we have also our European business, which is a bit less positive compared to last year. We are positive, we pay, we have some tax expenses in Europe. However, the amount is lower compared to last year. Here it's changed by something like THB 70-THB 80 million compared to last year.
Finally, there is a last component, which is last year, we did reverse some tax credit related to Russia in Q1, because of the impairment of the goodwill and these kind of topics. This is another THB 70 million. It was a one-off impact in Q1 2021. We don't have the same impact in Q1 2022. These are the four key components to explain the changes in the tax. The key components just for you to understand and to remind, mostly coming from the U.S. The tax rate are mostly coming from Red Lobster and also our frozen business in the U.S. That's why overall, we end up with a net profit at THB 1,746 million, very close to last year, just declining by 3%.
Keep in mind the net profit of Q1 2021 at THB 1.8 billion was really very high compared to our track record. In terms of normalization, there is one-off to be reported to you in Q1, which is the one I just mentioned on the MMO settlements. This impacted our subsidiary in John West. The amount is THB 77 million. We have of course a bit of tax. Also on this one, we did not mention it, sorry, on this one, but we have an income tax of roughly 20% on this one. If you remove this impact, then the adjusted net profit amounts to THB 1.668 billion compared to our reported numbers of THB 1.7 billion. Just a quick focus also on our net debt.
You have seen that our net debt has been increasing in Q1. It was THB 61 billion at the end of Q4 last year, and now it is at THB 65 billion. If you look at the bridge, there are three key components. The first one is of course our EBITDA is quite good, quite okay. In Q1 at THB 3 billion. Our CapEx, THB 1 billion, is under control. You know, we have a CapEx target for the whole year of THB 6 billion. At THB 1 billion, we are a bit below our plan. I do expect to catch up over the next quarters. We really have a lot of plans on this one. The bad news is really coming from the change in net working capital.
You can see here, it's an increase of net debt by THB 5.7 billion. There are two key components for this one. The first one is, of course, we have record high sales, so we have record high receivables at the end of Q1. Okay. It's a good thing, of course, because these receivables, they will be transformed into cash into the next months. Okay. So this is a good thing. There is no issue on this one. We follow very carefully if we have any aging receivables, and we don't have any issue on this one. Another portion is coming from a further increase of our inventories, by almost THB 2.3 billion. I told you already, in Q4 2021, our inventories were already at record high, okay. So we are still facing with the same logistics issues.
We have a lot of inventories underwater. Plus, we have decided also to increase our inventories of raw materials over the past few months. This is why overall you can see this one. It's a bit too high. There is one portion which is fully aligned with our expectation. There is another portion which is a bit higher compared to expectation. Here, the clear direction to our businesses is to see this amount decreasing over the next months and quarter. It will take a bit of time to us, but we do believe that, we are still in the position to achieve our 60% target of cash conversion rate. If you do remember, we always want to generate 60% free cash flow from our EBIT, and we work very closely in that direction.
Apart from that, we didn't have any significant investments in Q1. You can see we have a bit of FX impact. You can see the remark just below the bridge. We have a bit of investment in the new joint venture that we did communicate already in Q4, but the amounts are very small. Moving to the next one, the free cash flow situation. The free cash flow is negative in Q1 at THB 3.7 billion. Here again, the key driver is really the net working capital. The THB 5.7 billion coming from this one. We are still committed on our CapEx target, THB 6 billion, but we are a bit late compared to our spending, so we may have a bit of headroom at the end of the year. This one is not our direction.
We want to spend this money, because you know, the last two years we had some very high expectation in terms of CapEx, but because of COVID, we were not able to spend all this amount, okay? Now in 2022, we really want to spend this money. Here you can see our key ratio. Of course, our profitability ratio, the ROE, ROIC are declining a bit, slightly a bit because of the lower profitability. You can see here the inventories days, 132 days. There is nothing to be alarmed about, but the amount of the inventory at THB 49 billion is record high. The amount of working capital at THB 52 billion is also record high, and we want to see this one.
Overall, net debt to EBITDA, I think and net debt to equity, we are within our guidance. There is no concern at all on our side. Now I will leave the floor to .
For the next topic, I will discuss the results of our core businesses. If you take a look at the sales that have continued to grow well in the past quarter, they come from our diversified portfolio. In the first quarter, our ambient seafood had a sales portion of 43%. Our frozen and chilled seafood was 38%. Our pet care value added and others increased from last year and is at 19% compared to 18% in the first quarter of last year. As for our mix between the branded and OEM, we have increased sales from the private labels at 61% compared to 58% from last year. This is a result of increasing demand for pet care products and also the value-added products as well as the frozen seafood products that have continued to grow.
The three businesses on the bottom of the slide, you'll see that we continue to advance in newer businesses of higher profitability, and these are ingredients, supplements and alternative protein. Our target is to achieve sales from innovations at 10% of sales and a gross profit margin of up to 20%. In the last quarter, if we compare to the pre-pandemic situation or even during the COVID situation, we have continued to see growth, especially in the frozen chilled seafood that grew by 26% compared to the first quarter of 2020. This is thanks to the revival of restaurant businesses. During the first wave of COVID-19, there was the lockdown which affected them. In terms of pet care value added and other products, they have continued to have healthy growth, up to 54%.
We see an increasing demand for pet care because people are giving more attention to their pets. In terms of our ambient seafood products, there wasn't much of a change from the same period in 2020, even though this is a high base and people were hoarding products during COVID. If we take a look at the overall sales on the right-hand side, you'll see that our sales have grown significantly, as we mentioned earlier. It is about 17% in growth compared to the first quarter of 2020. It is 17.5% in the first quarter of 2022. This is a very significant rate of growth because we have been actively looking to reduce our cost, increase automation and a focus on higher profitability products.
This is a result of our diversification in our products and the strength of our core businesses. This has all led to higher sales in the past period. In terms of our ambient seafood, the sales have grown significantly by 14% compared to the year before. This is mostly due to the increasing sales in tuna in Europe, in the U.S. and Europe and Asia. The sales have grown by 7% thanks to the demand that has increased in Asia along with movement in the FX movement. As for our OEM sales on the right-hand side, you'll see that between the OEM and the branded products, the OEM sales have increased from 42% to 58% this year. The gross profit margin is at 21.7%, increasing from the year before at 20%.
This is due to the strategy of our company. As Ludovic Garnier mentioned earlier, we adjusted the sales price for both OEM and branded to pass on the costs that were increasing. Also thanks to the increasing sales along with our product management to focus on higher profit margin products. The same goes for our ambient business. We were able to deliver at a high level as well compared to the pre-pandemic level. The ambient business has grown in terms of both sales and profit, and there hasn't been much change from the first quarter of 2020 when we experienced COVID. In terms of our ambient strategy, we have this 3% increase in CAGR despite the normalization from last year.
After our high base when people were hoarding products during COVID and the gross margin was at 21%-22%, which is quite high thanks to our cost management and our focus on higher profit margin products. We have also launched new products that are value added. For example, we have a vitamin C, and we've increased vitamin C and omega-3 in our canned tuna under our Healthy Living portfolio in Europe. We also have new products under our SEALECT brand that is yellowfin tuna in olive oil. This is different from the regular tuna that we see in the market. This is a premium product, and again, we're using yellowfin tuna rather than skipjack tuna, and it is placed in olive oil. We hope that you will all have the chance to try this new product.
Those of you who have tried the product, many people say that it's more delicious, it's softer, and this is a healthy choice for those who want to take care of their health. It is available in the 7-Eleven convenience stores throughout the country and in supermarkets as well. In terms of our inventory management and raw material management, we have adjusted the prices to pass on the cost, and we have adjusted our promotions to reflect the increasing raw material prices. In terms of our frozen and chilled seafood sector, we've seen an increase of 14% in sales, and this is due mostly to the higher selling prices and the recovery of the restaurant business, as well as the depreciation of the Thai baht. As for our gross profit margin, it is at 9%.
This is a slight decrease compared to the first quarter of last year, which was at 10.5%. This is due to effects in the U.S. and Europe, higher logistic costs, and higher raw material costs. Even though we have gross profit margin that has increased by about 1%, this is due to demand in Asia and higher exports as well. If we compare this to pre-pandemic levels, our frozen seafood business has increased in terms of sales and margin. As for our strategy for our frozen and chilled seafood, we're going to continue to focus on profitability. In the past quarter, we had gross profit margin equal to THB 1.3 billion. This is higher than our past periods as well as our pre-COVID levels as well.
In the U.S., Asia, and in Thailand, we have solid sales, and demand continues to grow. We also have higher exports thanks to the recovery of the restaurant business and also higher selling prices. We will continue to launch new products that are value added. For instance, we have pre-fried shrimp. We have mussels with cheese, and you can see pictures on the left-hand side. We're going to launch these products in our market here in Asia and in other regions. We also are focusing on expanding our Qfresh and Thammachart Seafood brands, and we will expand in Southeast Asia. In addition to this, we are preparing to open a culinary plant that will heighten ready-to-eat products and bakery products. We're going to increase the production capacity to cater to a very large brand in the world. That's towards the end of this year.
We're also focused on automation, continuous automation to reduce our cost and to increase our production efficiency. In terms of pet care and value added and others, this is one of our rising stars. In the past quarter, our sales grew by 27.2% compared to the last year. The quantity went up by about 8%. This is due to strong demand for our pet care products after people have started to give more attention to their pets. We've also launched new products, new innovations, and we continue to widen our portfolio. We have sales from packaging as well, and also the FX effect that has helped our sales figure. As for our gross profit margin, it is at a high level at about 24.4%.
That is a slight decrease from the first quarter of last year because of the exceptional performance last year due to the favorable raw material prices and the sales in the pet care trading companies in the U.S. that increased during that time. As for our sales and our margins, they have grown well, grown strongly compared to the first quarter of 2020 and the COVID period. Our pet care and value-added strategy, as you can see on the chart, our business continues to grow with a double-digit growth. We continue to see this growth in the first quarter. We are focusing on R&D. We have our Pet Care Innovation Center. We also have a joint venture with Mahidol. We're going to open at the end of this year. We want to be an OEM producer from producing according...
Changing from just producing according to the strict formula. We want to be an ODM or original design manufacturer, which means that we will innovate the product itself and the packaging to be a leader globally. We are expanding our pet care business into the U.S. and in Europe and China, and we are launching new products continuously. We're also expanding our packaging business as well. This is a reflection of our components for the revenue. You can see that we have growth in every segment, especially in terms of tuna. It grew by 15%. Shrimp and other frozen foods, pet care, value-added products. You can see that all of these have improved. The FX for the U.S. We have the USD effect and the Euro effect that have also helped. On this slide, as Mr.
Thiraphong told you, our sales have reached a record high for the first quarter at THB 36 billion. Our margin is still high for the first quarter at 17.5%. Our gross profit is also quite strong at THB 6.4 billion. Now I would like to turn the stage back to Ludo to explain on our guidance for this year. Thank you.
Thanks a lot, Lina. Yes indeed, considering the Q1 performance, considering the challenges we are facing on inflation, and the opportunities we have also, we have decided to adjust a bit our guidance. You can see on the sales, our initial guidance provided last quarter was for the full year to have a growth between 4%-5%. The new adjusted one is we are targeting a growth between 7%-8%. Okay. Of course, this is far away from the 16% we deliver in Q1, so we don't expect to deliver the same performance, the same growth in Q2, Q3, Q4. Okay. Q1 was record high. Yet for the full year, we do expect 7%-8% growth overall, which is a very good news.
Remember, 2021 for us was a record high year in terms of sales, and we expect to grow further compared to this one. There will be different components in this one. FX is one component of this one. In Q1, the FX impact is very large. We don't expect the same FX impact to happen in Q2, Q3, Q4 if you look at the dollar changes. The volume growth will be there. We told you in Q1, they are positive for the three categories, and this is our expectation. For the whole year, the pricing effect last year will be very important, of course, because we need to kind of pass through the inflation coming from the freight cost, the packaging, the ingredients to our customers. Overall, very happy with this performance.
The gross profit margin, the initial guidance was between 18%-18.5%. We adjust a bit down on this one to 17.5%-18%. We do remain very confident on the gross profit margin. We are very happy overall with the performance. We do believe the Q1 performance, which is almost close to last year, is a good one. Really a good one. We do believe we have also a lot of headroom to improve further on this one. We fully acknowledge that there are some challenges. We don't try to dismiss this one yet, we do believe we have some good opportunities on this one. I think. One of the big difference compared to last year is last year Q1 and Q2 in terms of operating performance were extremely high.
We expect that this year H1 will be lower, and then we expect to recover in Q3 and Q4. The SG&A, we gave you a guidance which was a bit wide at the beginning of the year, between 12%-13%. We just fine-tune this one from 12%-12.5%. Different reason for this one. First of all, the top line growth is of course higher compared to expectation. We have also in this guidance some expectation that the freight cost situation will improve in Q3 and Q4. The expectation for Q2 is the SG&A ratio to remain very high, in the high range of this guidance. Yet we expect some improvement to happen in Q3 and Q4.
For the rest, the interest rate, the CapEx and the dividend policy, there is no significant change. We confirm our guidance. I told you the CapEx, we spent THB 1 billion in Q1, so we are a bit behind. We may have a bit of buffer at the end of the year. Overall, we do remain very confident, and we are pleased with the Q1 numbers. Now we can move to the Q&A session.
Okay, thank you executives for the presentation. Moving on to the Q&A session. We will give the priority to the question from participants from the hotel room, and then followed by those who are joining us online. For those who are joining us online, your microphone will be muted, so for all the question you may have, please type in the chat box. As we have a dedicated session in corporate governance and a Q&A for that as well, so may I request for you to keep all those questions to be discussed during that session. Please raise your hand for any questions you may have. State your name, your company and the question, and our team will hand you the microphone. Questions?
Hello. I'm Adisak from Beyond Securities. I'd like to ask about your guidance. Your gross profit margin to sales, what items have been adjusted significantly? Is it the sales to price volume? The sales that have increased over the first quarter, we've also have been accompanied by increased volume as well. Overall, we expect increased volume. At the same time, we have the FX effect. We've also adjusted the selling prices. You can see that it's not just the price, but also the volume that has grown. At this moment, our OEM business in Thailand. As for our frozen business, we have a strong level of orders until the end of the year, as well as for our canned products. We have orders for two-three months in advance. Overall, this year, we are satisfied and not worried in terms of our.
Because we have good, strong top line growth. Our gross margin has been revised down a bit because we believe that we still believe we can manage the situation, and we're going to be focusing on our costs. At the moment, the situation is quite fluid, and our job is to monitor. The cost for tuna, you said it was manageable at $1,200-$1,700. The oil that you're using, the gasoline prices have increased for fisheries. So will this range change? I believe that the gasoline prices do have an effect because the investment cost for fishing, the main cost is the gasoline. It all depends on the demand in the market. Raw material costs at $1,700. The highest was in the third month at about $1,900.
In the fourth month, we've seen it come down to about THB 1,800, and we see an improvement in the capture. We expect a decrease in this area. Our procurement department is also working on these costs. This trend should weaken. At the same time, in terms of shrimp, even though the cost has increased, we, compared to other seafood businesses, our cost is low. Lobster is very expensive. In the restaurants in the U.S. especially, they have stopped promoting lobster-based products. If you don't consume lobster, of course people will turn to shrimp, and this will be a main choice in terms of seafood, so demand is still high for this.
I'd like to ask, the price for tuna that is high at $1,900 in March, do you believe that we will see a higher level than that this year? I think that at this moment we can see that the price is beginning to weaken and the trend. When it went up to $1,900, we even thought it would go up to $2,000. These things are things that have to be monitored weekly, and it seems to be getting better. More fish is entering the system, so the price is going down. We don't expect it to go higher than $1,900. It already reached that level. What do you expect the lowest level to be this year in U.S. dollars?
We don't expect to see less than $1,500, and we will continue to monitor. I think there will be a weakening of the cost, a lowering of the cost. There will be more room for the market to grow. What about the inventory level that you have right now for tuna? How much do you have in terms of months? Two months worth of tuna is what we have. That's the raw materials, right? Yes, it is. What about canned tuna? We have a small canned tuna inventory because we produce, and we ship it out immediately. If it's for OEM. If it's OEM, we have a high level of raw materials, but for branded products, they are finished. We have more finished products because we don't need to store raw materials so much. How the brand?
We have to have three months worth because the transit time, especially for Europe, it has to be produced in Ghana, Seychelles, and Portugal, so they have a longer lead time than Thailand does. The quarter one inventory level increased. If it's by business, are there any business that have a higher level of inventory?
Yeah. I think in H1, the key explanation is coming from frozen business in the U.S. Well, the inventories have been growing. Again, we're impacted by the logistics costs, and the challenges on the containers happening in this one. Overall, we have some ups and downs. The key explanation from the inventory increase is coming from the frozen business in the U.S. Short explanation for this one. The container shortage, logistics issues are still there. We're expecting to sell a bit more on this one, and you have a very violent market normalization in the U.S. happening right now, but you haven't mentioned this one. You have some restaurants moving out, some lobster, some chef, some blah, blah. It's a bit slower compared to expectation.
The team right now is working very hard on how to release all these inventories.
I believe that in the next few quarters, the inventory level will decrease because right now is when we're focusing on lowering our inventories. You increase the selling prices in the first quarter. Is this enough for the packaging costs and the gasoline prices, or do you think you will have to increase prices further in the next quarter? For our branded products, I think they've had their second round of increases in prices. At this moment, we will continue to monitor the situation. For OEM, we increase or decrease depending on transactions. We produce and we sell. That is the process. That's the cycle. For OEM, there's no need to worry. I'm not sure about has time shortened due to the negative factors. For instance, three months or six months changing prices for OEM. For OEM, we change.
We adjust the prices all the time. We sell in advance by one to two months. For every transaction, every week, we adjust the prices. Every time we have new sales, we adjust the prices. Actually, it's not just the price adjustment. We also manage our product mix. We have our value-added products. This is something that we have done quite well in the past few years. The higher margin for these products. These are not commodity products. Our portfolio, our product portfolio has improved over the past three years in every category. What about the freight cost? Does the company see that it's reached the peak already, or do you expect to face higher costs in the future?
I think the freight cost will continue to increase this year, the entire year, and we will continue to monitor the news on new ships. There will be new, newer ships. Once those newer ships are introduced, we will see lowering freight cost because it has increased by about 10 x, hasn't it? It's not. There's no way that these prices can continue to stay so high. We have been able to manage the situation, and we see a downside. We think that the upside has probably peaked and can't go up any further. I don't really understand. Has it peaked? I think it has peaked. We see the prices. We will see increasing prices for one more year, this whole year. We don't think the freight costs will lower this year. However, we will pass the cost onto.
We will pass the cost on depending on the grain costs. If we look at slide 50 in the appendix. The sales for Europe have dropped quarter by quarter. What is the sales trend in Europe? Will it improve or what is causing this uncertain growth?
I think we are growing last year. If you compare to Q1, you need to remember in Europe, they have a very strong seasonality. It's a bit difficult to compare quarter-over-quarter because you will always have some upside and downside. What makes more sense is really to compare Q1 with the Q1 last year. We are growing in Europe. The growth is lower compared to the one we see in Asia. That's very clear. We have already for some countries like the U.K., we have already increased the prices since January, okay. This has an impact on the volumes. Despite this one, we are able to generate some volume growth overall at European level and also some top line growth, okay. Overall, we are generating some growth here.
It's a bit lower compared to the other regions, correct. Right now, in terms of sales for the Q1, we are quite happy with the performance, okay? Remember, the Q4 performance was very high for Europe in Q4 last year. The Q4 growth for the whole group was super high in terms of sales for Q4.
In terms of sales in Europe, what is the major currency? Is it EUR, euro?
Euro.
Euro?
Euro would be the key one, and then the second one would be GBP. Okay. Our key markets in Europe are France, Germany, Italy, also where we are using euro, and then the U.K., where we are using GBP.
Compare in terms of the depreciation of the currency. It has a growth rate in-
It has a positive effect, yes, but not that big. If you compare the euro and the GBP compared to last year, Thai baht is depreciating a bit, but very small, okay. The impact in terms of FX is much bigger for the USD.
Could we look at page 18, slide 18, please. I see in the last sentence, you see that you say you have a challenge for the-
The labor shortage.
The labor shortage. What is the trend in the U.S. and what plans do you have to deal with this?
In Thailand. In the United States, we don't expect to be using robots to help, but we will continue to manage internally at the restaurants to improve the efficiency using, for instance, IT, but we don't expect to be using robots in the restaurant. The labor shortage has been something we've been facing for over a year, it has been manageable. The pressure is the labor costs have increased. The strategy for Red Lobster today, we see room to reduce our cost significantly in terms of waste in the restaurants. This can be improved in the restaurants. There are some price adjustments, but not that much. We're focusing more on the menu mix.
Looking at those that have higher profit margin and lower profit margin.
If no questions coming from the room, please allow me to raise a question coming from the online channels. The first one is how much of our cost is in Thai baht, compared to other key major currencies like the U.S. and Euro?
I think the key exposure for us is really the Thai baht versus USD. You remember in Thailand, we are buying the fish, which is our first source of expense in dollars. The key exposure for us in Thailand is really the conversion cost. We pay our conversion cost in Thailand, in Thai baht. This is for us, the key exposure in Thai baht. In terms of purchases of raw material, we have kind of natural exposure, natural coverage because we are buying and we are also selling mostly in dollars, okay? The key exposure for us is really coming from the conversion cost. The conversion costs over the last two years have been really under control in Thailand.
Of course, we have some increase coming from the utilities, coming from the inflation of the salaries and this kind of stuff. Overall, the performance in Thailand has been really good, in terms of FX and Thai baht management.
The second question is about the change in prices for branded, the higher prices that have increased by 5%-7%. These will be realized in quarter two. Will this have an effect on the sales volume?
How much will it offset the cost? As for the gross margin, will it be better than quarter one?
Here I think we have different situation by country. I told you in Europe, for instance, I'm talking about branded first. Some of the price increase were already effective since January. I told you the case of the U.K. This is kind of unique in Europe for all the other countries, for France, for U.K. The price increase will be effective indeed in Q2. For the OEM business situation in different country, I mentioned this one, we always adjust the prices. Yes, in Q2, we do expect to have some impact coming from the price increase. There may be some impact on the volume. We have seen in the U.K. some negative volume impact coming from the price increase. However, we do believe we can manage on this one and the outlook are good.
We do expect to improve the performance in Q2 and in Q3, especially in Europe. Overall at group level, in Q2, we'll have also to release some inventories with higher fish price. There may be a bit of pressure overall at gross profit margin level. However, we do remain confident and this is why for the full year guidance, we gave a guidance. We did adjust very closely from our initial guidance, and we just adjusted a bit down.
As for the OEM, do we have any long-term contracts? What is the proportion of sales and in the current situation with the increasing costs, what is the company doing to handle its cost?
Yes, in our OEM business, we have a bit of long-term contracts. It's a minority, something around 20% that we have with some very specific customers, mostly in the U.S. We have some long-term agreement. Of course we cannot adjust the prices on this one, so it's very beneficial when the prices are going down. It's going on the opposite side. We want to maintain this kind of long-term agreement because for us it provided us some visibility. Okay. However, we have some way to work on this one through our efforts on the commercial cost and also on productivity in the within the factories. Again, it's a minority to small portion, 20% of our OEM business.
For our animal feed, we have value-added products that we've been launching and these are products that have a good profit margin.
The next question.
How much tax credit does Red Lobster have left?
I think we have one specific slide on this one. You can see for Q1 we have something like 200. We generate THB 200 million net tax credit. It's a significant amount. Again, we have. I told you how we have specifics on Red Lobster, three sources of tax credit. The first one coming from the operations. In the share of loss that you see there is no tax included in these numbers. Again, Red Lobster is a partnership, so the tax income or expenses are calculated by the partners. This is the first one. The second one is we have some goodwill tax depreciation. You don't see it in the accounting. It's a pure tax calculation. We are benefiting since 2016 from tax credit coming from this one.
Lastly, it's a restaurant business and the restaurant business in the U.S., they are benefiting from specific tax credits. Every quarter there is some organic tax credit coming from the normal business of Red Lobster. These are the three components which are explaining why you have more tax credit, but the key one is of course the higher share of loss from Red Lobster in Q1.
I'd like to ask about how you manage risk, about your risk management. You have increasing interest expenses, especially for the U.S. What is your plan for risk management?
I think the fact that the interest rates overall are increasing is not a surprise for all of us. I think everyone was expecting from this one. I'm sure you have seen the interest rate increase happening in the U.S. very recently. That was expected. Yeah, the prices may go up. We are doing some hedging also overall on our interest rate. We don't expect huge impact. The goal clearly for us on that one is to decrease our net working capital and to improve on the debt situation. This is the expectation that we have for the whole year. There may be in the short term some small increase of our interest rate, but this should be quite marginal. We don't expect to have strong impact coming from this one. At this stage, we've not decided to cut any CapEx plan.
We told you no we want to spend the CapEx amount, this year and we want really to execute our plan. There is no concern on our side. Of course, we need to watch out for the situation. The inflation rate are very high. You can see that everywhere. The U.S., for the time being, they were the first one to move quite significantly on the interest rate. We need to watch out for the other countries. No concern on our side on this one.
Okay. Thank you.
We have one minute left. If anyone else from the room would like to raise a question, please feel free to do so now. We have maybe time for one more question.
I'd like to ask about the pet care that will be OEM in terms of margin. I'm sorry, I can't hear.
OEM, we have contracts to manufacture. This is. It relies on the development of the pet care product formula along with our partners, and these are customized formulas. This is why our customers continue to stay with us, because we have these special products that you can't find anywhere else. In terms of pet care, we want to see growth, and we expect 12%-15% per year. In the first quarter, it has grown by over 20%. The gross profit margin for our pet care sector, we're looking at mid-20s, about 24% or 25%. This is our target moving forward for the next three- five years. This is our strategy for pet care.
Session for the Thai Union performance result announcement. Thank you so much, Lina.