Earnings Call: Q2 2021

Aug 9, 2021

Good morning management, analysts, bankers, investors and our guests. On behalf of Tyeunion Group, I would like to extend a warm welcome to you for quarter 2, 2021 results presentation. Once again, we meet virtually, so I hope you all are well and ready to join us for the result announcement. The executive joining us today are, of course, our President and CEO, Kuntirapong Jamsari and our Group CFO, Mr. Ludovic Gagne and our Investor Relations Manager, Kuntirapong Jamsi. So as usual, Quinteropon will present to you the key highlights and recent developments and followed by the financial result with Comodo and financial result by business outlook with Quangail and Quinteropon will end the presentation by presenting to you the business outlook. Any questions you may have during the presentation and Q and A, please feel free to type it down in the chat box. And without further ado, I would like to invite Quinterrappon to begin the announcement. Thank you. Good morning, the analysts and bankers. Thank you very much for joining our analyst meeting for our Q2 this year. Let me go through the first section, executive summary and then I will have Ludo and the team to walk you through the details. Slide 5. 1st, we're very pleased to announce the result of this quarter. Even though our top line growth is at 8.6% year on year but this is our best record high net profit in 1 quarter. The reason for our exceptional growth of our top line are from frozen sales which was up by 29% year on year and thanks to the strong turnaround in our food service businesses and export. Also our pet care and value added sales was up by 13%, thanks to growth in new and existing products. And ambient sales although it dropped by 6.8 percent, but for us it's kind of normalized due to the fact that last year's Q2 it was a kind of penalty loading when we first had the 1st wave of COVID-nineteen. Gross profit margin is also one of our all time high at 19%, up 82 basis points year on year. Our continued high gross margin is from frozen margin recovery. Pet care and value added, very strong demand and also from the new and innovative product. And even though we have a slight drop in our ambient sales, but we still were able to sustain the good ambient margin. Operating profit also a record high at BRL2.5 billion supported by strong gross margin. SG and A although it's slightly high at 11.9% and is due to the higher sales and also due to the marketing costs, Thanks to our effective cost management. Net profit all time high at BRL2.3 billion up 36.5 percent. I think this is all the key highlight from our Q2. Thanks also to the turnaround in Red Lobster very strong in our Q2. Next please. This page for the first half of this year our net profit was up by 51.7% year on year with BRL4.1 billion. Our share price so far this year from Jan to August up by 64.2 percent even though it looks very strong but the fact is that our PE multiple still remain below 15x multiple. Net debt to equity slightly higher in this quarter ended at 0.98x. It's also due to the fact that we have made some investment 1 in Rouge and Fish and 1 in one of the listed company in Australia and I will share with you later in details. Look at the financial summary, you can see again net profit up by 51.7 percent EBITDA up by 26.4 percent top line growth by 4.4%. Next please. With this strong net profit, we have announced our first half interim dividend of KRW0.45 per share or dividend payout growth by 40% compared to the year ago. The ex dividend debt would be August 23rd record, that 24th impairment debt will be on September 7th and this is the payout ratio of 52% comply to our dividend policy. And again key development during the Q2, you can see that we had Yecheng, our Vietnamese factory was closed on July 12 for 5 weeks with plans to reopen on August 16. We have a vaccine implemented in CECL, U. K. And U. S. They are in advanced progress under core program with the local authorities. Soga Canyon, we have closed the factory for 2 weeks during the 4th week the 4th wave of COVID-nineteen and have reopened on July 5th and so far right now they are operating as usual. In Samut Sakhon, we are still operating as usual so far. We never closed any of our factories in Samut Sakhon. We continue to work closely with the local authority. We're doing active case fighting through antigen test kit, extending our factory accommodation isolation. I think we have basically a good experience during our 3rd wave in Samuelsa Con from December last year. So I think overall we have all the key measures in place. We are confident that we can manage through this COVID-nineteen. This is the investment that we have made in the Q2. We acquired the remaining 49% share in RUKENFISH. So basically right now we own 100% in our German business. As you recall in 2016 we acquired 51% at RMB43.5 1,000,000 and we acquired the remaining at €44,800,000 in May this year. So, Rugen Fish with the revenue over €140,000,000 per year and it's the number one brand in German. Next, new product initiative towards our 2025 strategy. We have expanded healthy living portfolio. We have implemented and introduced value added tuna product with more functionality in the market. For example, John West, Australia have launched tuna with protein and calcium and it's in the market since July this year. We also have enriched with calcium from natural ingredient our Tuna borne calcium, its patent technologies. Besides Joint West Australia, we also have introduced similar products right now in our France through Pitinavia and also John West in U. K. We also launched our new product line under Bellota and Marvel in Thailand. We launched a new dry pet food product in July this year. And again, we have released our 8th Annual Sustainability Report published in May 2021. We also get recognition from UN Global Compact SDG Pioneer Award. Doctor. Darren McBain was recognized as an SDG Pioneer, one of the 10 business leaders for her work towards a sustainable ocean economy. We also continue to support local community impact by COVID-nineteen. These are the key steps to our 2025 corporate strategy. Besides strengthening our core business, we also have implemented our new business unit that is Tuna borne calcium powder at Soka Canyon in 2021. We have launched plant based seafood and meat in the first half of this year produced from Thailand. Our refinery in German has already started back to operation again this year. We have established and launched Thai Union Life Science this year and the first batch of products right now in the market from August this year. We are introducing calcium, oil and collagen into Thai market. Functional beverage and medical product joint venture will also be launched through JV with Thai Bev this year end of this year. Our culinary project, the new factory will also be ready by end of next year. The new factory of protein hydrolysate and collagen peptide will be started now is started construction and we hope that it will be also completed by end of next year 2022. Based on our corporate strategy, by 2025, we expect the revenue from innovation will be at least 10% with gross margin over 20%. We expect 3% annual conversion cost improvement from our core businesses and we expect to achieve EBITDA between $450,000,000 to $550,000,000 by 2025. Next, Culinary project, you can see that from the picture on the right boxes, we have completed the pilot right now and we do hope to complete the construction in 2022. Total production area would be almost 10,000 square meters with new automatic cold storage. Capacity will be increased by 38%. Total CapEx is RMB1.1 billion and plan to launch commercially in the Q3 next year. Next please. Expanding into new attractive value enhancing area, Thai unique ingredient focus on viralizing part of our fish into value added marine ingredient under the brand Unique DHA, Unique Bone. But this is going to be B2B for sales channel. Protein hydrolysate and collagen peptide factory will be completed in 2022. Thai Union Life Science B2C business product is now launched in the market in August this year that will be under the brand of Civita supplement. There will also be a Civita joint venture with InterPharma for hospital channel. There will also be Thai Best joint venture for functional beverage. Alternative protein, we have launched OMT in Thailand. We have also collaboration with international FMCGs to launch plant based meat in Asia. So you will see more significant revenue from next year Although we just started end of this year, the number is still relatively quite small. We aim to achieve $30,000,000 revenue for our alternative protein by 2025. Next, this is the latest investment that I want to share with you. We have invested up to 10% in the company called Clover Corporation, a listed company in ASX market as of July 2021 at the total purchase price of A29 million dollars Clover Corporation owns NUMAIC Ingredients producing encapsulated DHA oil including tuna oil and algae oil in the market serving infant formula market encapsulate its kind of in the dry form for tuna oil. If you are aware, Thai Union produces tuna oil in liquid. Clover is one of our strategic partners who buy our oil and then make it in the dry form. Headquarter is in Australia with majority sales in Asia followed by Europe. We turn from business partner to strategic partners from our investment so that we can broaden our product portfolio, our customer reach and geographic coverage. We are launching supplement under C. VITA brand in Thailand. It's going to be first time ever the most enriched and natural supplement from 100% deep sea tuna pods patented in Japan for better functionality. The market opportunity in Thailand, the size is 30,000,000,000 baht. We have launched it we have introduced product in August, but will be officially launched in September. Focus now on key product, collagen, calcium and fish oil. Right now, we have exclusive partnership with Watson and the top 100 independent pharmacies. We will drive sales from both off line and especially online channels. Next. Key success, we have built a multiple product portfolio across categories. We launched O and MG meat in Thailand from March this year. We have a contract OEM partnership with leading FMCG players, well positioned plant based startup and strategy customer. For example, major U. K. Retailers. We unfortunately cannot disclose the FMCG clients due to confidentiality agreement with them. In Thailand, we also collaborate with Vifood from June 2021 and partner start up Moreme to co develop new product. We have ambition to reach RMB1 1,000,000,000 revenue by 2025. We continue to invest in our food tech startup via our CVC fund, US30 $1,000,000 The latest investment that we made in June July, one is VA aqua, a biotech startup focused on disease prevention for aquaculture based in Israel. We have invested in the company called Alep Farm, a leading sales cultivated meat company based in Israel. We will continue to maintain a very active pipeline for further expanding our CVC portfolio in these strategic areas. Next section, I will pass to our CFO, Ludo. Thank you. Thanks a lot, Kunti Rapong, and very happy and pleased to be with you this morning. As you could hear from Kunti Rapong, we have many good news to share with you this morning. Our financial performance in Q2 is exceptional. You have here all the key takeaway. Top line, I will not comment further. Kuntura Pang already mentioned this one, that the growth, we are very happy with the growth. We have, just for you to remember, a positive FX coming from the Euro and the GBP, but even if you exclude the FX, the growth is still very strong at plus 7%. I think for me the key takeaway for this quarter is really the record high gross profit margin at 19%. If you remember in Q2 2020, it was already our record high, our previous record high at 18 point 2%. So here in 2021, we are really overachieving this performance. And I think this is really coming from a unique combination where we have all 3 categories performing very well at the same time in terms of gross profit margin. I think this is one of the key success, and we will get back to these and explain and elaborate further in Coon Gare section. As a result, the OP is at 2,500,000,000 baht, record high for us improving versus last year. And even below the OP, we have some very strong improvement. If you do remember, Q2 2020, Red Lobster, most of their restaurants were closed at that time. Now the situation in Q2 2021 is completely different and we will elaborate further, but they are mostly operating almost all their restaurants. And as a consequence, the loss from Red Lobster has been reduced dramatically and this is also one of the key driver for our strong performance. So bottom line net profit, we are generating 2,300,000,000 baht bottom line, we are very pleased with that. This is a new record high for us for the quarter. Again, the key drivers are our operations. We are doing very well in terms of sales and OP and also below OP, we have a lot of good news also to share. Next. Another thing which is very important, and you know the sustainability is really one of our key assets since many years now within Titanium, and since last year, we have been really trying to develop everything around the Blue Finance. And if you do remember, in Q1, we told you that we have been launching a new Sustainability Linked Term Loan, SLL, that was in February 2021 for €12,000,000,000 bat amount. What we can announce to you is now in July 2021, we just launched successfully a 5,000,000,000 baht sustainability linked bond. It's a bond this time, it's not a loan anymore. It was the first time that we did that, that something like this was performing in Thailand. The regulation is very completely new. I think it was a load only since May. And again, we had a lot of success coming from this one. You can see here the amount of oversubscription, more than 2 times, so this is very happy. We can see a lot of appetite coming from the balance and coming from the funds on this kind of tool. The KPI, so again, we have some sustainability KPI to be respected and they are almost the same than the one we had for the loan before. So, we have 3 of them, DGSI is one of them, carbon intensity is another one, and the last one is related to electronic monitoring. And you can see here it will be a 7 year maturity, senior and secured, and then you can see here the interest rate, which is, I think, very, very attractive. Great success from our Treasury team, from Jung Yud and all his team, and I think we are very pleased to be the first one to launch this kind of tool in Thailand. I think at the end of 2021, we will have something like 40% of our long term debt, which will be based also on sustainability linked KPI. This is a lot we want to push further for next year also, but we are really pleased to drive the whole industry in this direction. And I think it really shows the commitment of Titanium toward more sustainability. Next one. So even if we have some great numbers in terms of financial performance, we are facing some challenges like any other companies. I will not comment further COVID-nineteen challenges because Kuntura Pang already mentioned this one, but the situation is clearly in our radar. But I will get back to the container shortage issue. And if you do remember, we talked about these topics in Q4 2020 already. We told you in Q1 that the impact was an increase of our selling cost by almost 200,000,000 baht. We have roughly the same situation and the same exposure happening in Q2. Again, we are facing some container shortage. We have some delay in the shipments. Of course, we try to pass through the cost to our suppliers, to our customers, so it's a commercial discussion. We are trying to mitigate all of these, but eventually at the end of the day, the impact in terms of selling cost was €200,000,000 again for Q2. So this is total for the H1, something around €400,000,000,000 And I told you already in Q1 that we are expecting the situation to improve. It is improving. However, it is much slower compared to our expectations. So now we expect the situation to continue until the end of the year. We expect to have roughly the same impact in H2 compared to H1, and we expect the situation to kind of normalize in Q1, 2022. It's a huge impact. Of course, it's impacting everyone. Just to give you an idea, the cost of a container moving from Thailand to the U. S. Or to Europe has been multiplied by 4. Pre COVID, it was something around $2,000 for 1 container, and now we are moving in a range between $8,000 to $10,000 And of course, this creates a lot of challenges in terms of supply chain, because it delays all the deliveries. Again, nothing to be concerned about. We are managing the situation already since 6 months, so we know how to deal with this one, but this is clearly one of the challenge that we have to face with. On the top right, you can see another challenge that we have, which is related to inflation in our business, mostly coming from packaging and also coming from oils. And I'm sure you have read a lot of articles coming from all the industries and especially the food company mentioning this kind of inflation already impacting us a bit in 2021. So we are having some discussion with our suppliers and we're trying to find some way to mitigate this inflation. However, we have to face with this one. So for us, it's a watch out for H2 2021, but also for 2022. We have already most of our purchases, which are hedged or performed or sourced already for 2021. So the majority of the impact should come, if it is confirmed, should come in 2022 and this is something to watch out for us to keep in mind. Again, some challenges, we need to keep them in mind, nothing to be concerned. I think this is part of our usual day to day operation. Next slide, quick focus on the tuna prices. You know that tuna prices is one of the key driver for our performance. In Q2 2021, the average Skipjack price is around $13.23 we have an increase by 4.5% compared to last year, so a bit of inflation here. But we told you, as long as we remain in this gray area between $1300 $1700 we believe this is comfortable and this is sustainable. So on this one, we believe it is okay. Just to give you some outlook on H2, we are still planning to have a bit of inflation there. However, it should be again under control. We are not anticipating some huge increase or significant decrease of the fish price in Q3 and in Q4. Next slide. So, next slide is the overview over the last 3 years of our performance and I think we are very happy about this one. You can see the top line has been positive. We have been generating some growth over the last 6 quarters in a row and the last one in Q2 2021 at almost 9% is very interesting for us. The gross profit margin is also very nice. We have been able to generate some top line growth together with some profit increase also. Gross profit margin at 19% is record high. Again, the previous record was at 18.2%. And if you look at the net profit, net profit margin at 6.5% is also record high. So very pleased with these numbers. Again, we will get back to this in the category analysis to explain to you further where does it come from. Next. So just we are just starting the deep dive on the financials. And here, you can see the performance in terms of sales. We already commented the performance in terms of Q2. Just to show you the numbers for H1, so €67,000,000,000 in terms of sales, we are growing by 4.4% compared to 2020. And if we compare to 2019 pre COVID situation, we are growing by almost 9%. So this is very interesting and very attractive for us. The story that we had in Q2 is almost the same that we had in Q1. If you remember, in Q1, we had the frozen really growing, we had also the petchem value added growing and we had the ambient category kind of normalizing. So we had the same situation happening in Q2, except that in Q2 our frozen business also in Asia is back to growth. And we told you in Q1, it was mostly our U. S. Business, which was growing, but the frozen business in Thailand was still a bit soft. The situation is moving in Q2 and in Q2, we can see that now our frozen business both in U. S. And also in Thailand are back to growth. And this is why the frozen is growing so much, also true that the comparison, the baseline in Q2 2020 was really soft because of the pandemic. We have an opposite situation in the Ambient, and maybe you can get to next slide. You will see here the view that we had. You can see on the left the chart the bridge between Q2 2019 to Q2 'twenty one, Q2 'twenty 20 to Q2 'twenty one. You can see all the ambiance are declining. Tuna, saline mackerels, salmon are all declining. And then you can see all the next boxes, which are all green and growing again. And I think this is very interesting to compare to the same bridge we presented to you last year. Last year, we had exactly the opposite situation. On the right, you can see that the ambient was really growing. This was coming from the COVID-nineteen, the punch reloading and the panic buying. And you could see that the frozen was also decreasing. Okay. So we have exactly the opposite situation. Now the ambient is kind of normalizing. The frozen is recovering and the pet care and value added and other products is still growing. Okay. So very interesting chart. And I think it shows how resilient and how strong our portfolio or product is, because last year we had a lot of discussion regarding how sustainable is the performance for Thai Union. And you can see in 2021, we are able to grow even compared to last year where we were benefiting from COVID-nineteen situation. Next slide is our usual focus by regions. I think we can see here some growth in Q2. This is mostly the US and also Europe. If you do remember, Europe in Q2 2020 was a bit soft. We were facing with some out of stocks situation in these markets, so we had to cut all the promotion activity at that time. Situation is different now. In Q2 2021, we have been able to restart again all the promotion activity in the EU and this is why you will see that the U. S. Is very strong and also Europe is also very strong. In terms of mix between branded and private label, we don't have a lot of change. I think this is situation as usual. Next slide. So we just show you just a quick focus on gross profit margin and I really did comment the performance for Q2. So I will not get back to this one. Again, I think 19% is coming from very strong combination with the 3 categories performing really well. Okay, frozen and chilted, seafood, we told you, we are back to a very strong top line. Pet Care also have very strong top line and these two businesses have been generating some very high gross profit margin, especially you will see the Pet Care and Value ID business has been generating more, a record high gross profit margin, higher than 30%, which is great. The ambient, even if we are kind of normalizing, our top line has been also generating a very high gross profit margin at 22%, you will see this one. So over H1, now we have been delivering on average 18.4% gross profit margin. This is much higher compared to our initial expectation for the year at 17%. This is also above last year where we were at 17.3% and above 2 years ago when we were at 15.8%. And you can see in terms of numbers, absolute amount, we stand at 12,300,000,000 at the end of June 2021. Next one, just quick focus on the OP. You may have some questions regarding the level of SG and A, and this is correct. Our SG and A have been growing a bit, and now they represent 16.6%. They are increasing by 16.6%, and they are representing 11.9% of our sales, which is in the high range of our usual guideline, between 11% to 12%. A few things that we have to highlight. First of all, we have of course the impact in this quarter of the logistic costs, and I did mention to you that our estimation was something around 200,000,000 baht, plus we have also some increase in our marketing activities by almost 200,000,000 baht. I told you that Q2 2020 we cut a lot of marketing activities because basically we are facing out of stocks. Now we get back to normal marketing activities and this creates an increase in our SG and A. Last one, I will get back to this one. We have one one off item to mention to you this quarter, which is a goodwill impairment. We're getting our business in TIMAC. TIMAC, if you know, this is our shrimp hatchery business and we get back to this a bit after. But despite this SG and A increase, thanks to a very strong gross profit increase, we are delivering a record high OP at €4,400,000,000 but over 6 months. Okay. In terms of margin, this is 6.6%, again very high and very pleased about these numbers. Next slide. So as a consequence from a very strong OP, you will see the EBITDA is also very strong. Over 6 months, we stand at 7,600,000,000 baht, 7,600,000,000 baht, last year we had almost 6,000,000,000 baht, kind of flat versus 2019. But growth of the EBITDA by 26%. Of course, we are benefiting from the strong OP increase from relapsedar recovery and also from the FX gain that we are having. Just one thing maybe to mention on Aventi. You know Aventi is our Indian partner. They are doing the feed and the frozen business, and they have been suffering a bit in 2021 on their frozen activity. The COVID-nineteen situation in India is not great, and they have been facing with some shortage in terms of labor force. So in terms of share of profit, this is a bit declining, still very strong, but a bit declining versus last year. We do expect the situation to kind of normalize in Q3 and Q4. Their feed business is still doing well. And of course, this is a listed company, so this is public information. But the rest and especially Red Lobster is strongly recovering and fully offsetting this impact. Next one, just a quick focus on net profit. We mentioned this one. I don't get back to Q2, but you can see 2.3. The previous recall high was 2.1 in Q3 2020. So 2.3 we are super high. Over 6 months at 4.1, we are very pleased we are growing by 52% compared to previous year. Next slide. We have only one one off to report to you this quarter. I mentioned to you the impairment of TMAC, just maybe some few words about this one. So, TMAC is one of the very specific business, one unique business we have within TEU, where they are doing the hatchery business and they are also playing the role of R and D center for our frozen business in Tainan and also in the U. S. So this business has been loss making since few years. We have a very strong action plan in order to turn around the picture here. And over the last few years, we have been improving year on year and we have been reducing the losses. However, in 2021, for different reasons, we are not improving anymore. So we are not getting back to breakeven. And this is a trigger even for this goodwill impairment for 105, so this is a one off that which is reported to you for this quarter. If you exclude should you exclude this one off, then the net profit would be even higher at 2,400,000,000 baht. Next slide, just a quick focus on the earnings per share. So for Q2, we stand at 0.49, and for 6 months, we stand at 0.86. Again, this is a consequence of the very strong net profit. Again, we are delighted about these numbers. Next slide. Just a quick focus on Red Lobster. If you remember, Red Lobster was really painful last year, because they have been generating a lot of losses coming from the closure of most of their restaurants. The situation is very different. In 2021, if you do remember, if you look at the first line here, you can see the share of profit coming from Red Lobster. Q1, 2021, they have been able to generate some benefit, some profit. If you do remember, Q1 is always supposed to be the best quarter for them. They have a lot of events, they have their land, and they have a lot of commercial activities also during this quarter. Q2, they are generating a loss by 49,000,000 baht. However, we have much more in a much better situation compared to Q2, 2020. Q2, 2020, if you do remember, they have been generating a share of loss by 700,000,000 baht. If you do remember, they have most the vast majority of their restaurants, which was closed during this quarter, and that's why we have such a huge improvement. Now almost all the restaurants are open. We have been doing many changes, and I will get back to this in next slide, within Red Lobster, and we are very happy with the performance. Just a quick focus on the second line here, you can see share profit from the lease accounting adjustment. If you do remember, we introduced this topic in Q1. Already we told you we have some accounting differences between US GAAP that Red Lobster are applying and Thai GAAP that we are applying here in Thailand. The impact is we are recording, it's a pure phasing difference. So we are recording some expenses ahead of them, so we have some negative impact. It's a pure accounting adjustment, there is no cash impact at all. The impact is quite large. There was a one off impact of 300 in Q1 2021, and going forward, we expect to have an impact around minus 100,000,000 baht per quarter. So total for the whole year, we expect to have some lease impact around minus 600,000,000 baht for 2021. It will continue into next years to come, but it will reduce further. And at one stage, it will remove and then it will become a positive adjustment in few years. Apart from that, the other line, other income, interest expense don't change a lot. We have a lower income tax. Why? Because we have lower share of loss coming from a lobster, so we are enjoying less tax credit on this part. Next time, we just want to show you a quick focus on all the changes we have been doing at Red Lobster. One of the most important is, of course, you have heard about this one. Kim, the CEO of Red Lobster has been retiring and we have a new CEO who has been joining since last week, Kelly. She has a very strong background. She was leading the Black Box Intelligence and she has been also leading the Chili's Green and Bar, where they are operating more than 1600 restaurants. We are very happy and pleased to have Kelly on board. We had her on the call this morning. Of course, this is her 1st week, but we know she is clearly an expert of this category and we are very confident that she will be able to improve the situation at Red Lobster. Guest count, we mentioned this one, this is a challenge for Red Lobster since few years and this is really the key challenge we gave to the management team. We told them we want to see the guest count improving. Of course, it is improving compared to last year when we are facing the COVID-nineteen, but overall compared to the competition, we want to regain some market share. And this is a key challenge that we gave to Kelly and the whole management team. Just in terms of people, we told you that in 2020, we cut a lot of employees. And now that we are re operating all the restaurants, we have been hiring 20,000 people since January 2021, 26,000 people. This is huge. And of course, you can imagine how challenging it is to train all these people and to integrate them into Red Lobster. However, we are fully confident that relapsedar will be able to integrate all these people. We are very happy to get back to a more normalized situation in the U. S. Of course, we continue to follow-up very carefully the situation of the COVID-nineteen in the US. You know that we have an increase of the number of cases in the US. So far, we are very far away from the situation that we have in Europe or even in Asia, but still this is a watch out for us. The vaccination campaign has been very successful. So we believe that we are in a much better situation this year compared to previous year. In terms of financial performance, if you do remember last year, they have been generating a loss by 1,200,000,000 baht. At the beginning of the year. We told you that we are planning Rell Lobster to generate to improve by 0.5%, so we are planning to have a loss by almost 600,000,000. Considering the very strong H1, which is above our expectation, we revised this target to be a loss by €200,000,000 to €300,000,000 for the whole year 2021. Okay. So you can see over H1, we have a small profit, before H2, we expect to have a loss, and especially in Q4, where usually they are generating some losses because of seasonality. Next slide. Free cash flow. So, I think this is maybe the only KPI. We are, to the timing, a bit below our target and our plan. I think we have some good reason for that. In Q1, we have been generating a negative cash flow. We are catching up in Q2. So we are generating 1,600,000,000,000, the total of H1, we have been generating 1.5 1,000,000,000 baht. We are revising down a bit our CapEx, because we didn't spend as much as we planned in H1. And maybe we can move to next slide. So this is our net debt bridge, and here you will see. So we are generating in H1 a very strong EBITDA by 7,600,000,000 baht. However, we have a very strong increase of our net working capital by 4,000,000,000 baht. Why? Because we took the decision to invest in our net working capital. You can see that right now you have a lot of demand for our products everywhere in the world, and we want to be able to face with this very strong demand. So this is we have decided to increase our volumes of inventories. If you do remember, in 2020, we have been facing some out of stock situation in some regions in the world. We want to avoid having such a situation. So we have been increasing our level of inventories. Keep in mind also that for some specific activities like our frozen business in the US, we have a pretty large pricing effect. And I'm sure you have seen in the news some price increase on the lobster, on the crab categories. So even if you keep the same volume, you have a very strong pricing effect. CapEx, over 6 months, we have been spending CHF 2,000,000,000. This is a bit below our forecast. We told you at the beginning of the year, the full year plan was to be between CHF 6,500,000,000. 1,000,000,000. You will see in our guidance, we are revising down this guidance to BRL5 1,000,000,000 for the whole year. We had a bit of delay in some projects, because we were anticipating the COVID-nineteen situation to really normalize in 2021. We all know this is not the case, so we are realizing down a bit our CapEx project. However, no concern for the plan. I think everything is under control and we will be able to catch up in 2022, so it does not change our commercial plan, which is a good thing. All the rest is almost normal, except for the investing part, and Cote Ripon mentioned this one, we have been investing into Rug and Fish for the buyout of the minority shareholders and also in Clover Corporation and few other investments. Consequence, our net debt has been increasing from BRL52,000,000,000 to BRL 57,000,000,000 and net debt to equity has been increasing from BRL0.94 to BRL0.98, but we believe the situation will improve in Q2, and we'll get back to a better situation. Next slide, just a quick focus on our usual funding. We have been refinancing in Q2 2021, a very large portion of our debt, and this is why you can see some changes in terms of currency and also in terms of maturity. We are very happy again about the successes and the achievement we had in Q1 and in Q2. We are getting the sustainability linked bond and loan, I'm very pleased about this one. Last slide, just a quick focus on the profitability ratio, and you can see, I don't need to go through all of them. Situation is improving everywhere. Of course, the profitability is very strong. We have been very fortunate. The inventory days, you can see here, are increasing from 120 to 126 days. And in terms of absolute amounts, you can see the increase of our inventories. At the end of Q4 2020, we were close to €39,000,000,000 and now we are at €43,000,000,000 and we are much above compared to Q2 2020. Clearly, we were not happy with Q2 2020 performance because it was too low, it was not sustainable and we are facing some out of stocks and that's why we are much more happy with the situation at the end of Q2 2021. Net debt to EBITDA, I think we are below 4% net debt to equity also, we are exactly where we want to be. And now I will hand over to Kyung Yerong to go through the performance by business unit. Thank you. Thank you, Knudel. For raw material price, tuna price in 2nd quarter remained relatively stable at US11323 dollars per tonne, so positive 4.5% year on year. We expect some reasonable inflation for tuna prices during the fat ban or the space aggregation devices during July to September. So in July, Tuna price was US1500 dollars per tonne, but this is of course within our manageable range. 7 months for this year or year to date tuna price remained at a low level still at US1300 dollars per tonne so unchanged compared to the same period of last year. Shin price in Q2 was stable, also in July we see the price drop as well, so 7 months this year, Shin price remained in our budget. Same as salmon price was NOK 63 per kg. So in July, salmon price was stable and of course 7 months was still in our budget. On the currency, in Q2, Taiwan's weakening against euro and pound currency was strengthened against the US dollar. So average FX year to date still support our sales growth. As we have 3 core businesses compared to Q2 last year, we saw a higher sales portion from frozen and chilled seafood, pet care and value added business unit while the ambient sales portion normalized from last year exceptional sales from the pantry loading. So we go more detail on this, Caio Union delivered solid performance, you can see from the right chart of the first half earnings, it grew 4.4% from last year and 8.8% from pre COVID and you can see our gross margin has been an upward trend. So we go more detail in each business. In Q2, ambient sales declined 7% due to the mix performance in key regions. We go for the U. S. And Asia. We've seen tuna sales drop, reflecting the exceptional sales push in Q2 last year and also some effect from the global container shortage. However, it was partially offset by the higher demand in Europe because last year, there was a stock out situation during the pantry loading in Europe. So overall, we see high gross margin continue at 22% because of the raw material price and also the improving salmon business. If you compare to the pre COVID-nineteen level, ambient business still expand on sales and its sustained margin. Certain business in Q2, sales recovered very strong 29% year on year and that also supported by sales volume growth. We see the business recovery in shrimp, lobster from food service and retail business in the U. S. So that helped a lot for the gross profit margin recovered strongly to 11.5% this quarter was 7% in Q2 last year. So of course we compare to pre COVID-nineteen both sales and margin expand firmly, particular for shrimp and lobster business. So we go more what we our strategy that we're growing the profit. First half of this year profit, we record BRL3 billion, up 72% year on year and that's beating first half pre COVID and even first half last year. So we have 2 strategies, both from the sales top line and also the cost reduction. We mentioned already about the recovery of the culinary channels in the U. S. We do more on secure more contracts for the OEM, for the new customers. We introduced more value added products to customers as well and of course for the COTS side we install more automation machines and streamline the production base so we continue to do this in the next quarters. And the highlight on pet care and value business is increased 13% year on year, We launched the products and also we expanded customer base. We have the greater performance in packaging business as well. So gross margin continued at a high level of 30% and of course we continue to deliver this high profitability and innovation product launch to help on this business. So with this one we see the upward trend of the sales and margin of course the global pet care innovation center is working closely with the new and key existing customers we co developed the innovative pet food and you can see from the picture that this is the example that we launched, Shenther, our brand that brings delicious and the kidney friendly cat treats so that comes in different formulas to help in the digestion skin, joy and bone diet for example. So into the graphic diversity in first half of this year we see the slightly increase for the North America so thanks for the recovery of the frozen and chilled seafood business. We're going to North America so increased 12% on sales year on year that driven by the frozen seafood sales and of course partially offset by the ambient business but overall it still grew a lot at 12%. We see the LLOGSTER improving performance in second quarter so the performance solid compared to pre COVID. In Europe, sales also increased 15%, we have higher demand in blended business and also we're doing well in the shield salmon and other seafood business in Europe as well. We benefit from the higher FX currency and also we have a strong performance on pre COVID. Thailand recovered up 14% year on year. We have business on the frozen JLC food together with the pet care business even we have some lower sales from the ambient so sales remain going at 2% from pre COVID-nineteen. Lastly on the emerging market and the rest of the world, we see sales decline 10% year on year and that's from the ambient business particularly in the Middle East market in Japan but we see some market growing like China. So overall performance remains challenged if you compare to pre COVID, but we see increasing trend. So overall summarize, we delivered 19% gross margin and CNY6.8 million gross profit for this quarter. For the full year financial guidance, we adjust in 2 items on the gross profit margin and the topics. We maintain our sales 3% to 5%, gross profit revised up to 17% to 18% and of course CapEx revised down to RMB5 1,000,000,000 that's because we postponed some CapEx into next year. So this wrap up the presentation. So Kun Chirapol maybe you can give more on the outlook or guidance for this year that would be very grateful. Well, looking ahead to the end of the year, we still find the demand in the market, it's still quite strong. We expect also Red Lobster to perform as per our plan. The ForEx tibach to dollar is also very favorable given the current level right now. So it would be very supportive to our business. And you see from the guidance, I think we are although the top line growth 3% to 5%, I think we are very much determined to deliver at 5% or more if we can. Gross margin 17% to 18%. I would expect to see it on the upper side. So that would be my expectation. I think everything is still going as planned. Fundamentally, our business is still very strong. We don't have any issues baggage with us. We are still managing our non performing businesses. So things still going as planned. I think let's open for Q and A, please. Okay. Thank you very much, executive, for presenting. Moving on to Q and A session, please feel free to type your question in the team chat. Keep it coming. I think that I see the list of the question here. Number 1 is regarding the functional DRAM. I would say that we cannot disclose in details because this is a joint venture between us and Taibeth where we are both listed company. But I would hope that you could appreciate our joint venture partner which is Tibet that they don't expect to do anything small. So, I do hope that with our joint venture with them would lead to a sizable business. Another question regarding the supplement market, KRW30 1,000,000,000,000. This is a very fragmented market right now. Nobody really owns or dominates this segment. You may know the famous name like Blackmoor, Mega, etcetera. But the market is still relatively very fragmented. So we do believe that there would be space for us to be in this market. And as we mentioned, we our product are very much different from what's available in the market because it's all natural from marine base. So and with the management team that we recruited the Managing Director for this unit, it came from what's the name, Ludo, the principal she was in charge before? Libya. Libya. From India. Okay. So hopefully with her knowledge would help us to penetrate into this segment. Regarding TAIBAT assumption assume around what? Right now, go ahead, go ahead, Cuchipo. Yes, go ahead, Ludo. I think our budget was what, EUR30 1,000,000? EUR31 1,000,000,000. But then now it has been increasing. And in our forecast, we are assuming EUR32.5 billion for the rest of the year. And we had some discussion yesterday with some analysts, because right now, indeed, the FX is around 33 to 34. We have been discussing with some banks in Thailand and the expectation is the tieback will be increasing in Q4. So we don't expect to remain at least 33, 34 level and that's why our own assumption for the rest of the year is 32.5 just for you to keep in mind. And Ludo, why don't you also share with the analysts about our expectation from Red Lobster in Q3? Sure. Sure, sure, sure. So we mentioned, you can see already over H1, we have a small profit. If you combine Q1, which was positive 80% and then Q2, which is slightly negative, We mentioned to you that we expect to have for the full year the share flows by 200,000,000 to 300,000,000. We expect Q3 to be slightly negative, and we expect Q4 to be more negative. You remember, in terms of seasonality, Q4 is always the loss making quarter. It was quite large last year. Last year, they did quite well in Q3, but we expect them to generate a small loss in Q3. But for the full year, what you need to remember, we do expect to have a loss between €200,000,000 to €300,000,000 but This is just coming from the operation. It does not include any lease accounting impact, okay. Lease accounting impact is something which is different, but overall very happy with the performance of Red Lobster. Okay, let me ask next question for you. So question from analysts, this year we have extra expense from the container shortage around 800,000,000 So if the situation unsolved sorry, solve early next year that would be a 100,000,000 add back to the profit. Is that the right to say? No, no, no. I think we just show you the incremental cost affected us. But having said that, we have been able to pass on most of such cost to our customers. So when the situation improves, get back to normal, then it will help us to be even more competitive to offer our customer even better price. Absolutely correct, Absolutely correct, Guntherapong. Just to add on what you're saying, you're absolutely correct. The BRL400,000,000 we have been sharing, it's just an impact in our selling costs. It's not an impact in our bottom line, right? It has to be very clear, we were able to pass through some of these costs. And again, just be a bit careful when we say we do expect to have the same profit, the same exposure for H2. This is just an estimate at this stage. So we don't know if at the end of the year it would be €800,000,000 or not. I think the key message that you need to keep in mind is until now we have been able to face with this situation and we have been able to generate some very high profit despite this challenge. So just be confident that we can continue to cope with this challenge. I think this is a key message that you have to keep in mind. I just want everyone to understand that the business has been always challenging with all the issues that we encounter, but we have proved our ability to mitigate the risk. And with our scale, with our relationship with all the vendors, we should be able to manage the situation better than our peers, I would say, in Thailand. Okay. Next is on can you please share with us how long, Thai Union has the raw material price including the oil and the packaging? Maybe, Couture, let me take this one and you can add if you need anything else on this. I think we have different practices around the regions. We can talk about Thailand. Thailand is mostly an OEM business. So we don't have very long term hedging in terms of packaging and oil. We mostly have some quarterly cost in. We have in some regions some different practices, especially in Europe, where from time to time we are doing some long term hedging, especially for the oil and for the packaging. Sometimes we have something like 6 months agreements on the prices with the packages. Keep in mind also that we have some inventories also to offset this kind of inflation. I can see the next question regarding the percentage of growth. Just to share with you, we have some requests, which are quite high for the timing, around 8% inflation right now, the packaging and apparently more to come also in 2022. This is a pure commercial discussion right now. It doesn't mean we will accept that. We are trying to find everything, of course, to mitigate with these costs. It's not only applicable to us. I think you will see a lot of communication from all the industries saying we are facing this inflation. We report to you because this is a watch out. However, you can be confident that we will be able to cope with this situation. We are used to that. This year it seems to be a bit higher because of course you have a lot of industries getting back to normalized situation after COVID. So there is a lot of demand for all the steel and all the materials. However, we will be able to fight with this situation. It may imply passing some tariff increase at the end of the day to the consumers and you could hear already some very large consumer product company announcing some inflation for the next year. We try to do whatever we can do to protect the consumers and to limit the price increase as much as we can, but we follow very carefully the situation here. Next is on the currency, how and what percentage do we hedge foreign currency revenue and the cost? Again, maybe Couture Apung can take this one. We are very conservative on the hedging. We don't try to play. We have different practices in the OEM business. We usually try to hedge as soon as we have some sales and also part of our inventories. So we don't try to play at all with the currency. It means, of course, that sometimes we lose some opportunity, that's correct, but we don't want to play. We have some different practices in our Branded business where sometimes we take some hedging for more long term view. Like in Europe, sometimes we hedge for 6 to 9 months in advance and we try to do it gradually and to increase all over the quarters. Okay. So we are very flexible on this and we have some very specific rules which are there and we are applying. Again, we don't want to speculate at all. Right now, we can see the FX is going in the right direction for us because we are an export business and of course, if the Thai baht is depreciating versus the other currency, this is good for our business, but it can go also the other way around. Okay. So we have very clear guidance to say, okay, we need to hedge X percent of our full year commitment and also our sales and inventories. Yes. To add on top of Ludo, we have a very clear policy for hedging for the entire group and they must follow a policy in managing the currency. And I think so far this has been part of our doing business and we have proved our ability to manage the ForEx quite well in the last 40 years. So I think you can be assured that we can we don't try to speculate, okay? Our policy is to be very conservative. We try to just minimize loss. So overall, we always gain, but we don't speculate on the currency. Thank you. Next one, should we expect the same operating profit margin for Q3 as it was in Q2? Maybe I take this one. We tell you that right now in Q2, we are achieving a 19% gross profit margin. This is record high, okay. We don't expect these to remain at 19% in Q3 and Q4 just to manage the expectation. We share with you that we have been revising up our full year guidance at the beginning of the year. We are planning to end up the year at 17%. Now we are growing our guidance from 17% to 17% to '18 range. And I think we will end up the year in the high part of this range. Very happy about the gross profit margin development that we have until now. We do expect in Q3 and Q4 to have a bit lower gross profit margin to end up the year around between 2017 2018 and maybe closer from 2018. Again, the key explanation for a very strong gross profit margin in Q2, we have a unique situation in our frozen business in the U. S. Okay. We mentioned that already in Q1, but we have really here in this market an unbalanced situation between demand and supply. We're expecting the situation to kind of normalize quickly. It is normalizing, but the situation is lasting a bit longer. We have also a very strong performance from our Pet Care business, from our Packaging business, basically everywhere. So we do expect a bit of normalization to happen in Q3 and Q4. But overall, we are very confident in our performance in terms of gross profit margin. And we will end up the year in a range between 'seventeen to 'eighteen. But I don't think we'll be able to replicate the same Q2, the same performance than in Q2 for the different reasons I just mentioned. Okay. And I think the next question, whether what is the tieback assumption that we assume for 18% gross margin in second half? So 32.5 percent assumption of the tieback versus dollar for us for the year to go for H2 is around 32.5 dollars tieback for 1 dollars If we assume 34 baht per U. S. In second half, would it be reasonable to assume gross profit margin reach to 19% in second half? We don't know. We don't have any crystal ball, of course. We have been discussing with the banks. These guys are the experts. For the time being, this is not the plan. And maybe they are wrong, we will see in H2. But right now, their own forecast is a churn situation in Q3 and then in Q4 to see the tieback increasing versus dollar. So right now, the direction is not to stay or to go in the direction of 34. However, of course, we watch out. We never know. We are always wrong in this kind of forecast. But I think we have very good practice and we know exactly how to react. If it go to 34, it will be positive for our business. So there is no concern for you to have in mind. Yes, I think that's the key point. If it's 34, everybody should feel very comfortable and relaxed, okay, because it's supportive to our business. Next is, are we experiencing any labor shortage of relapsed in the U. S? Maybe I take this one, Cunterabong. We don't have any shortage and you see in one of our slides we have been writing that we have been hiring 26,000 people since beginning of Jan, 26,000 people. This is huge. But yes, of course, there is right now very high competition in the U. S. You can see the whole restaurant industry is hiring more managers, more staff in the restaurants. So yes, very heavy competition. I think the situation is very different from one state to another state. We told you that in Q1, there were still some free money provided by the U. S. Administration to a lot of people. And of course, that was not a very good incentive for these people to get back to work. I think the situation is changing right now. So we have more people and we have been able to hire 26,000 people. Again, if you do remember, we shared with you that usually before COVID-nineteen, we were operating in the restaurants with 4 manager by restaurant on average. We kept to 2 managers last year and now we are increasing back to 3 managers, okay, and again for the number of staff. I think this is very important for us. We want to make sure that the experience of the people getting back to the restaurants and we see more and more people getting back to the restaurants is a good experience, okay. So we want to invest some money and maybe it will penalize us in the very short term because it will mean more training costs and more people costs. But we believe in order to improve the guest count, we need to invest in these people. So at this stage, there is no warning. I think everything is under control regarding the labor resource in the U. S. Few more questions on the gross profit margin. Can we expect Q3 margin to be the same level as in Q1? And next is on the gross margin of pet care business. Can you elaborate more? Maybe I take it on Coteur Appon. Q3, we already discussed about this one. We don't expect to stay at 19%. We still expect to deliver a very nice gross profit margin in Q3 and Q4. Initially, if you do remember at the beginning of the year, we mentioned that anything above 17% we will be happy. Okay. Now we are much above the 17%. We are at 18.4% to 6%. So we want to deliver more for sure. And now we have been increasing our guidance for the full year and we plan to end up the year between 2017 to 2018, but we don't think we will end up the year, the full year above the 18% or 19%. Pet Care margin, just for you to remember, when we talk about the Pet Care, this is always Pet Care combined with the value added and some other products. So it's a combination of very different topics. The good thing is in 2021, all these categories and segments were all very successful. Pet Care is doing well. Packaging, and we discussed about this one yesterday, Packaging is becoming really interesting in terms of gross profit margin and also our value added business is doing well. However, the Pet Care business has been generating really a lot since already since last year, 2.5 years. We do have some very strong expectation for them. I think the momentum right now is very good for the pet care industry in general and I think we are doing really good. I think really our customers, especially in the U. S, really see us as a very reliable partner because we are delivering very high quality products and on time. Right now, due to the pressure on the supply chain in the U. S, I think the level of quality coming from the U. S. Manufacturer is not great. And I think we are taking some advantage for this one. So the momentum is still good. Right now, you could see that the gross profit margin in Q2 was record high for this one. We do expect a bit of normalization as for the other categories to happen in Q3 and Q4. But overall, for the full year, we are again very confident for this category. Any more questions? Please feel free to type it down. Yes. One more coming. So what will happen with the pet food orders given the hiccup at the Songkranmin? Well, again, Songkranmin was closed for only 2 weeks. We still have large capacity at TUM in sumutsa.com. So I think the impact would be very minimum. And we were having also some inventories, okay. So we believe we can manage that. There would be an impact, a small impact, but not that large. We are able to manage that. And for everybody information, we have been vaccinating our workers at both Sumu Sakon and Songkran, especially in Songkran, I think during those periods, I think we have now vaccinated our workers in Songhai in a very high level would say like 70% over plus. Okay. And in some factory like packed food, it's over 70% in some factory maybe smaller, but we will continue to vaccinate our workers up to 100%. And keep in mind, if I may, that the Sunkra factory was closed only for 2 weeks. Now we restarted the operation. It was really partially closed in June. So you have already now June numbers, so a small impact and you don't see it really. We will see in Q2, but we believe we will be able to catch up. Of course, we have a ramp up production plan, but right now, our operation in Semu Sacom can also replace and we can manage this situation. One last question on the what is the strong demand trend going forward for pet food and what is the key developing for strong demand? Well, as we mentioned earlier, especially during COVID, people spend more time at home, people adopted more pets at home and therefore the trend is going quite strong. And I think it's going to continue in every market, including U. S, Europe and in Asia. And again, we still plan to again spin off feed mill to be listing by end of this year. Head care unit will also be carved out and be listing by end of next year. We are working on it and these are my top, top priorities including Red Lobster where I think we are on the right track especially with the new CEO coming in. I think we're going to see even more closer collaboration between Thai Union and the Red Lobster team. Okay. Well, that will be the end of the presentation today. Thank you for joining us. And if you have any further questions, please feel free to contact our IR department anytime. Please take good care of yourself and your loved ones and keep your guard up high. And really, hopefully, we can meet by the Q3. Thank you, Sohne. Thanks a lot, and stay safe, everyone.