Earnings Call: Q1 2021

May 10, 2021

Welcome to Thai Union Conference Call for First Quarter Earnings. We have top executives here joining us today. Let me introduce Mr. Ludo Wiggaier, Group CFO. Hi, guys. Good afternoon for the people working in Thailand and good morning for both in the U. S. And Ms. Nalisa Boulat, Group Accounting and Contouring. Good evening, everybody. Glad to have you all here with us. And myself, Gary Tong Song, Head of Investor Relations. So now please allow me to pass on the stage to Mr. Rudovic to begin the session. Hi, everyone. So we have, I think, some very good news to announce to you today. Maybe you have seen already on the SAT website our numbers, but we have many good news to share with you. And I hope you will be very pleased with our results, which are very strong. So just moving to Slide number 5, so here, just a good highlight for the quarter. Top line, we had €31,000,000,000 plus very steady, very stable compared to last year and I will get back to this point. Gross profit is high at 17.7%. Hopefully, operating profit is at €1,900,000,000 This is very high for Q1. And net profit is very unusual for us for Q1 and stand at 1.8. And in fact, we are growing the net profit by 77% compared to last year. If I just get back to each of these components, top line, which you remember last year, we generated quite a heavy growth in q1, thanks to the panic buying and the country loading happening in Europe and in the US. Of course, in 2021, we don't have any more of this impact. But you will see that we have an organization in the ambient sales, but at the same time, we have a very strong push in our product category and also in our pet care and value added category. And this is why overall, we managed to deliver the same performance compared to last year. We had a small growth including the FX and a very small decline excluding the FX. But overall, I think we are very proud of this Q1 performance. Just want to remind you also that in Q1 2021, we had to face the COVID-nineteen peak in Thailand, in San Sakhon at the beginning of Q1. Plus, and we will get back to this also, we had to face with many logistic issues happening in due to the container shortage. Despite all of this, delivering the same sales, I think, Q1 2020 is a great platform. And I really want to thank all the Tynion teams everywhere because it's a huge piece of work. Gross profit margin, I mentioned this one already, absolute amount at 5,500,000,000, but in relative amount it's 17,700,000,000, percent, very consistent with what we have been delivering since Q2 already last year. We told you that the target for this year was 17% on average over the whole year. So we are exceeding this one. And we will get back into the details, but you will see all the 3 categories are really growing compared to last year in terms of gross profit margin. SG and A, I mentioned the logistic issues we are facing. We estimate the extra costs coming from all the container availability issue and the shortage and blah, blah, blah to be between 200,000,000 to 250,000,000. This is why we have an increase in terms of percentage of the SG and A from 11.3% to 11.7% in 2021. If you exclude this impact, then the SG and A only amount to 11.1%. It's a bit slow compared to usual and it's mostly explained by some marketing campaign activities, which will be postponed to Q2 and Q3. Okay. We had a different marketing campaign phasing compared to last year. But overall, OP for Q1 is stand at 1,900,000,000 baht, very close again to the performance we have been delivering in Q2 and Q3 and this is excellent. I think the key change compared to the previous quarters is below OP, we also have some good news. We have some FX gain, if you remember. In Q1 2020, we generated some FX loss by almost 260,000,000 baht. In Q1 2021, we managed to deliver an FX gain by 240. So overall, here you have a 500000000 net income growth coming from this change. We also managed to decrease our finance costs. If you remember, lastly in Q4, we told you that we have been decreasing our net debt, because decreasing also our interest rates. And I will get back also on Red Lobster. Red Lobster, we have also some positive news on the operation of Red Lobster, which are really recovering and we have also some one off impact on the lease accounting. I will get back to this. Next, you will see here in short graph all the good news. We are growing everywhere. I did not mention the EBITDA, but the EBITDA is also growing by 30%, but overall very good news. Gross profit increasing by 9%, OP by 22% and net profit by 77%. So very strong again, very strong performance. In Q1, we are very happy. The next slide, you will see our usual long term view since Q1 2017. And here you can really see the improvements of the operations since now 4 years. We have been delivering 5 quarters in a row of top line growth, okay? It's not a lot, I agree, but still it's growing. We're expecting some normalization. And if you get back to last year Q1 2020, we were generating 5.9% growth. We have been managing to deliver the same performance and I think it's quite a strong achievement. Another good news is regarding the gross profit margin. If you look at our track record that was really one of our key concern back in 2018 2017. We managed to increase around 16% in 2019. And now since 4 quarters in a row, we are around 18%. Again, our full year target for the gross profit margin is at 17%. So in Q1, we over deliver compared to this target, which is pretty unusual because you know that the mix category in Q1 is usually more push coming from the frozen business, which is less profitable for us in general. Net profit margin at 5.8% is very high for Q1. So just if you go through the key developments, we just wanted to give to share with you also a quick update on the COVID-nineteen impact for us. We have been managing to keep all our operations uninterrupted since the beginning. We had only one exception in Ghana. If you remember in 2020, our factory in Ghana was closed for a few weeks. But apart from that, everything is working almost normally. I mentioned to you the peak of COVID-nineteen, which happened in Samutakon, where we have our operation in Thailand. So we had a bit of delay. We had some specific measures in Thailand, but now all the employees get back to work and everything is working normally. The vaccination campaign is also going on. Of course, we fully comply with the local regulation. And of course, it depends on the vaccine's availability. But right now, we have made some great progress in the Seychelles, in the U. K, in the U. S. And also in Thailand. We have been continuing to support the local communities. And you can see here, we made some donation, some food service in Saint Louisa Khan. We provided also some funds and some power strips to some hospital. So we are really willing to help. We know that Tyeunion has been quite lucky during this COVID-nineteen pandemic and we are really willing to help all our consumers and the ecosystem around us. Next, just a quick feedback also and we communicated on that in Q4 earnings release. We told you some news regarding our 2025 corporate strategy. And here you have a small graph where we are summarizing the key elements. You can see here on the top all the progress we make in our core business. So first of all, we told you that we have a program of branded business, which is already ongoing in Europe since 2 years and in the U. S. Since last year. This is ongoing and this will continue. We have also great efforts regarding our manufacturing. We want to improve. We want to move to much more automation. So our R and D team are working regarding the factory of the future. And then we have 3 different steps. You will see here, we have the culinary project. We mentioned in Q4 2020. The factory is starting to be built. We'll get back on this one and should be up and running in 2022. Healthy Living, we have some examples of this one, so I don't comment that much. Then we have some sustainable packaging commitments planned for 2025. If you look at the bottom parts, these are all the key developments regarding the new value and enhancing businesses. I go quickly on this one. We have one specific slide just after. So I don't need to repeat everything. You can see here on the right and we just remind you our target for 2025. We want to achieve 10% of our top line coming from innovation with gross profit margin higher than 20%. We want to beat also the inflation and we want to achieve 3% annual conversion cost improvement until 2025. In terms of EBITDA, we have a target in USD, which is between $450,000,000 to $550,000,000 in 2025. Next, just a quick update also here. Here you will see 3 areas where we wanted to do some specific communication. First of all, on ingredients, we told you that the new factory in Germany is operating since April 2021. The audit are currently going on. Of course, we have a bit of delay because of the COVID-nineteen restriction in Germany. We have launched also some products, the crude oil, the unique DHA and the unique bond to Nakhalshan Powder. We are also building a new factory in Thailand, a protein factory. On the supplements, so we have been setting up a new company called Titanium Life Science. And this company will be distributing some products in Q3, 2021. The 2 other joint ventures, we mentioned this one, Zevita by Inder Pharma and Musota Ibev. We mentioned this one in Q4 last year, and they will start commercializing their product in Q2, 2021 and in Q4, 2021. The last one, alternative protein, we told you that we launched the OMG meat plant based protein, which are available since March 2021 in Thailand. Plus we are planning also to launch some new alternative protein products launch, more the shrimp product in Q3 2021. Just the next one, we do a quick focus on some products which were launched at Petitinabir in France. If you remember, so now we insist a lot on the healthy living and healthy products and healthy oceans. And here Petitinabir launched some new products in Q1. These products are MSC labeled and they are rich in essential nutrients such as vitamin C, omega-three and antioxidant. Here, the idea is really to push further the petitinib market presence in healthy and nutritional seafood brand. They are available both online and also on the leading supermarkets. We are very happy about these developments. We have been working very hard on this one. There will be some more coming in the U. K. Soon and also in the other countries, but this is the right direction, I think. Last, supply chain. This is now one of our strengths for TIE Union. We have been partnering with TNC, which is Nature Conservancy, and we have a commitment to move to 100 percent electronic monitoring of Tuna supply chain by 2025. You can see just below, we have also some other initiatives on sustainability, but overall we are making some good progress. And you can see the last midpoint, our sustainability efforts really continue to be recognized. And you can see here some different examples where we have been recognized on this one. So here, just as an overview, very strong Q1 performance. We are very happy on this one. We will dig a bit more into the details. Thanks to Kun, Amy. Amy? Thank you, Ludo, and hello again, everybody. Ludo have already mentioned a lot of I mean, he already covered some of the key takeaways here. So and one thing that is worth reminding is that we have our 1st quarter record high net profit, 77% improved year over year to RMB 1,800,000,000. And if you look at the absolute value, we gained RMB 787,000,000 versus last year. Part of it is from our strong operating profit. We gained DKK 343,000,000 and the other part is from other non operating expenses. We gained DKK444,000,000. Next, please. Tuna prices were down 4% versus prior year I'm sorry, versus prior quarter and down 11% versus prior year. Prices at Q1 'twenty one was USD 12.83 per tonne, and outlook in April has already increased to USD 13.40 per tonne. Prices are within our expectations. Next, please. We have already mentioned the revenue, USD 31 point 1,000,000,000. So allow me to move to the next slide for more detail. Next, please. So here, mix picture between our main three segments. And if you compare Q1 'twenty one to pre COVID-nineteen, sales increased 6%, and we are very happy with Q1 'twenty one performance when we compare to the normal situation. Move over to Q1 'twenty one versus Q1 'twenty two, sales were stable. And if you break that down, we had increases in frozen, pet care and value added, offset by decline in ambient. Ambient dropped 13% due to: 1st, exceptional increased demands at the beginning of the pandemic last year 2nd, container shortages this year causing delayed shipments frozen turnaround and grew 10%. Restaurant and food services rebounded from vaccine rollout, which proving effective and bending the curve of infected cases, particularly in the U. S. As well as stimulus checks and other relief supports from the government. This drove increased demand for our shrimp, lobster, crab meat in foodservice and other channel. Pet care improved 27%. The demand was stimulated from repeated lockdowns and isolations. More pets were acquired and people spend for better ingredients in pet food and treats, resulting in encouraging product development and innovative. Our product portfolio expanded in both existing and new products. Next no, sorry, let's go back. Next is value added. Let's go back. Value added grew 10% year over year, led by packaging business, who supports can and pet care products of our own and external market. FX impact was positive €78,000,000 from gain in euro, offset by loss in USD. Next, please. Let me add maybe just one thing on this one. I think this is a very important chart. If you remember last year in Q1 2020, when we were generating quite a high growth compared to last year from the ambient business, there were many questions regarding how sustainable the growth is. And I think with this chart, you can see very well the interest for Taino having a very diversified portfolio. Here you can see in Q1 2021, we indeed have some normalization of our ambient products. You can see this on the left. But then you can see that the frozen product and then on the right, the pet care and value added products are really compensating the decline coming from the ambient. I think this is a very important chart. We strongly believe that with our unique positioning, which is combining ambient, frozen, pet care and other, we are very well positioned. And you can see here in Q1 that we managed really to deliver the same very strong performance as in Q1, 2020 to Q1. So I think it's a very good point to keep in mind. Back to you, Amy. Thank you, Ludo, for adding all good information. So next, please Look at revenue structure is well diversifying. And in terms of regional mix, there were changes coming from U. S. A. Sales shift to 43% of sales of total sales portfolio, driven by 6% sales increase, thanks to frozen recovery. Domestic also shipped to 12%, driven by 5% sales increase, mostly from pet care. Europe reduced to 27% due to 11% sales decline resulting from panic buying in March last year. Next please. Gross profit, like Ludo mentioned, improved 9% year over year to JPY 5,500,000,000, thanks to growth in pet care, value added and frozen, offset by soften in ambient. And in terms of gross profit margin, all segments improved, and margins have been consistent in the last 5 consecutive quarters. Next. Here, operating profit was DKK1.9 billion, increased 22% year over year. Moving to cost, higher SG and A, 4%, primarily due to higher logistic costs, offset by lower marketing and advertising and other selling expenses. We control unnecessary spending in the level where operating profit is leveraged. Next. I just could you just add on this one because I think it's a very important point. The OP we're saying Q1 2021 is 1,900,000,000 baht, okay? If you compare last year, it was 1,500,000,000 benefiting from some push on the onion sales. But if you compare to before COVID-nineteen, in Q1 2019, the OP during this quarter was only 1,000,000,000 baht. So here in 2 years, we have been managing to increase from 1,000,000,000 baht to 1,900,000,000 baht. Very important, this is one of the key driver for strong performance in Q1. You can see that the mix of our category has really changed in Q1, but very strong OP. And even in the OP, we mentioned that in the SG and A, we have some extra costs coming from the logistic issues and the container shortage. Of course, we have been in discussion with our customers, with our supply chain partners on sharing this cost. So it doesn't mean that the 200 and and €250,000,000 is an impact bottom line. It's a clear impact in our SG and A. We have been managing to pass through some of these costs to our customers and also to our supply chain partners. But overall, we are really delighted with this Q1 OP. Back to you. Thank you. EBITDA was RMB 3,400,000,000 increased 30% year over year, driven by favorable non operating expenses, mostly from FX gain as a result of Thai Baht depreciated against the USD. Other changes were from lower finance costs from lower debt principal and lower interest rates, offset by higher other income due to fair value adjustment in Russia and higher tax for more profitability. Regarding share profit movement, this will be illustrated later by Ludo. Next, please. Net profit for the quarter, RMB 1,800,000,000. Next. So here, there were 2 one offs for the quarter. 1 was Red Lobster lease adjustment for the amount of RMB 154,000,000 after tax to JPY 73,000,000 fair value adjustment in Russia due to the business was underperforming. Net profit, excluding one offs, was JPY 2,000,000,000 or 100% improve year over year. Next. Earnings per share was 0.37 baht in Q1 'twenty one versus 0.20 baht in Q1 last year. Next. And here, Red Lobster, I'm going to pass this over to Rudolf, please. Thanks. Thanks, Amy. Red Lobster, so we have 2 key topics to mention to you and this is our usual slide where you can see all the details of Red Lobster contribution in our numbers. The first news is on the share profit coming from the operations. Red Lobster is generating some profits in Q1 2021. You can see 81,000,000 baht to be compared to a loss by 111,000,000 last year. If you remember, March 2020 peak of the COVID-nineteen in the U. S, we had many restaurants in the U. S. Being closed, which explained the loss which happened last year. We're expecting the situation to improve, and we are expecting RELOSAR to be around breakeven in Q1. They have been over delivering compared to our own expectation and the operation have been very successful. There are few explanations from that. Some of them are maybe one time, I would say, because we were benefiting in Q1 from some stimulus check, some free money provided by the U. S. Administration to many people. And some of these people have been spending this money in our restaurants. So we've been benefiting from this one and the same for the whole restaurant industry. Apart from that, you know that Q1 is always a very good quarter for Red Lobster. This is lent period for the Christians and many people go to the restaurants at that time. And in Q1, we could see that. But we have also some feedback from the RELISTO management saying we start to see some customers we have not seen since 1 year. We can say the vaccination campaign in the U. S. Is very successful. You can see that with the numbers And now people feel more and more trustful and they can go back to the restaurants. The whole industry has been benefiting in Q1 from this increase and roller star particularly. Of course, we will need to follow-up on the over the next quarters, but this is a very good news and we are very happy about this one. We are still a bit careful on Red Lobster. If you remember, last year, they have been generating 1,200,000,000. For sure, there will be some losses generated in the next quarters and we still maintain our target of generating half of the losses in 2021 compared to 2020. However, the picture is good and is really improving. Keep in mind one thing also is that the average capacity for restaurants is still around 50%. So here, it means that they have been able to manage to deliver a profit in Q1 2021 with almost all the restaurants open, but only with 50% capacity. So this is really a great performance coming from them. Now we are facing some new challenges. Indeed, we need to hire more staff and more managers in our restaurants. And there is a high competition on these people, plus the fact that the administration is providing some free money to many people is not a good incentive for many people to get back to work on this one. So you can see now and you could see there were a lot of articles in the newspaper recently on this one of people trying to hire more workers and more staff. So the first good news is really relapsedory is back to profit in Q1 and this is a very good news for all of us. There is a second news, which is a second line that you can see here. Share profit coming from the lease accounting adjustment, which is a loss by 3 or 7,000,000 baht. So where does it come from? And on this one, usually the U. S. GAAP and the Thai GAAP are almost fully aligned on the lease accounting standard. Here we are just talking about a specific accounting standard, which is called lease. And here normally you don't have a big difference between U. S. GAAP and Thai GAAP except on one thing. The reason of depreciation of the right of use is different between U. S. GAAP and between Thai GAAP. And in fact, in Thai GAAP, it is what we call front loaded, meaning at the beginning of the lease, you will record more depreciation expenses in Thai GAAP compared to U. S. GAAP, okay? And this is why at the beginning of the lease, you generate more expenses in tight gap. Normally, you don't have any significant impact. And I have never seen in any other companies some significant adjustment coming from this difference. However, within Red Lobster, there is one specific and unique situation. Few years ago, they have been doing a transaction to sell a lease back for the vast majority of their restaurants. And this is why now when you look at the portfolio of Red Lobster, something around 800 lease, the vast majority is just at the beginning of the lease payer, okay? And this is where we have a significant negative adjustment between U. S. GAAP and IFRS. Plus the lease payout is always a bit long in Red Lobster, on average between 20 to 40 years. Okay. And as I mentioned, so we have something like 800 lease to be analyzed. So here, it took us a long time really for us to assess these differences. Initially, we thought beginning of 2020 that there was no impact coming from these differences because we could not see anywhere any difference coming from that. However, we have been investigating and it took us a lot of time. Remember in 2020, Rellofstar was facing with a lot of challenges in these operations. They have been working also on the refinancing. So we only get the conclusion early 2021 and this is why we recall in Q1 2021 these negative one offs. So if I go into the details over this 300,000,000 adjustment, it is made up with 2 parts. There is one part which is related to prior year, which is for 200,207,000,000 baht. There is another part, which is specific to Q1 2021, which is bp100,000,000. So the total impact on the share profit is minus bp307,000,000. Of course, we record some additional expense. So we have a small portion, which is offset by some tax credit for 25 percent and we have something like BRL 78,000,000 tax credit happening in Q1. Now moving forward, we will have this impact every quarter. So we can already mention that in Q2, in Q3 and Q4, we should have roughly an impact of minus BRL100 1,000,000 in the share of profit and an impact of plus BRL25 1,000,000 in the tax. So we do expect to have a net impact around €75,000,000 back coming in Q2, in Q3 and Q4. This is not a good news. However, we have to recall this one. It's a pure accounting difference, a pure timing difference between U. S. GAAP and between TFRS. There is no cash impact at all. Apart from this one, we have the usual topics in the other income, in the interest expense and income tax. You can see the net income impact coming from the lobster was positive in Q1 at 64%. If you compare to the contribution in Q2 2020 and Q4 2020, we are very happy about these developments. Just next slide, we just wanted to share with you some of the improvements performed by Relobstar during this quarter. You can see on the top right that we start with this one. This is a percentage of outlets which are opened. And you can see in March April 2021, we are quite high, around 96% 98%, which is quite strong. And if you compare to last year, they were almost all closed in March 2020. So there were different initiatives, which were launched in Q1 2021. Of course, we have the Lobster Fest, which is one of the key events for the Lobster. We have Valentine's Day. We have also the Land Payload. I mentioned this one. The off premise business remains also very strong and the curbside pickup also has been growing very quickly. If you remember, we discussed in Q4 regarding all the digital investments that Red Lobster have been doing. The menu has been changing. If you remember last year, we moved to something which was very simplified. We moved to a 40 pages menu to something which was only 2 pages. Now we are increasing again. We have more customers and they want to have more choice. So we are reacting very proactively on this change. And right now, as I mentioned, the key focus is really for us to attract some new staff and new managers. Of course, one of the key actions facing all these issues with the operations in 2020 was to cut into the resources of the restaurants. So now we have the new challenge beyond us, which is recovering and increasing again all these people. So we are positively we are positive regarding the outcome in of run offside in 2021. The vaccination campaign is very successful in the U. S. As we mentioned. There are also some few stimulus checks coming on this one. We are also conservative. We maintain for the timing our assumptions of loss decreasing by 50% in 2021 compared to 2020, but we may have some good news in the future regarding relapsed. Back to you, Amy, for the networking capital discussion. Thank you, Ludo. Here, we had negative $125,000,000 free cash flow for the quarter. We generated a strong profit, and this required cash for our net working capital. At the same time, we had high level of inventory in transit due to delayed shipment. So this inventory hasn't been created cash to us yet. So we saw this as a temporary timing issue and will be recovered in the next quarter. Next, please. Here, net debt increased by TWD 1,000,000,000 driven by reduced in net working capital, as I just mentioned on the previous slide, offset by gain in EBITDA, JPY 3,400,000,000. Capital spend, investing and financing activities and everything else were in the normal level. And net debt per equity ratio was 0.93 versus 0.94 at the beginning of the year because equity increased more than debt increase. Next, please. Here, our interest bearing debt funding. The debt was diversified to different currencies through the new sustainability linked loan program. In Q1 'twenty one, Thai baht funding was reduced and increased to USD, euro and JPY in order to reduce the currency volatility. And on the right hand side, by maturity, changes were from long term debts that are mature in 2022, where we classify to short term, as shown on the right bar. Chip was from 14% to 37% in Q1 'twenty one. Next, please. Financial ratios, they're all healthy. Return on equity and return on capital employed will improve to 15.5% and 10.4%, respectively. Net working capital was high from temporary increase of inventory, and net debt per equity was healthy at 0.93%. Next, I'll pass the presentation to Koon Gao. Thank you, Kunami. So for this slide, we show you the average raw material prices. Starting from average tuna price was USD 12.83 per tonne or a drop 11% year on year in Q1. The shrimp price was stable year on year at RMB 149 per kg in Q1. However, the average salmon price was declared 23% drop year on year. In April, we see the key raw material prices movement remain still remain in our expectation. Next is on the currencies. In Q1 this year, tied back weakened against euro and pound currencies, while strengthened against the U. S. Dollar. So this partly supports our sales growth in Q1 this year. And also for the 3 core businesses, this quarter, we saw higher sales portion from pet care and value added business unit. The ambient sales portion still at 43%, frozen and chilled seafood at 39% and pet care and value added sales at 18%, which is higher from the past quarter at about 15% to 16%, so thanks to the strong demand of the pet care business and value added. So we go to details of its business unit. First is on the ambient seafood. The sale declined 13% year on year. We already mentioned on the lower tuna sales in U. S. And in Europe. That's because of the partly of the global container shortage and the exceptional sales push in Q1 last year during the 1st wave of COVID. Despite the lower sales, we look at the gross profit margin. It remained high at 20% Q1 this year versus 19% Q1 last year. So this, thanks to the lower raw material price, improving business in sardine mackerels and salmon. The ambient business, we want to highlight on the boat sales in Martin that we still grew from pre COVID-nineteen level, Q1 2019. So on the frozen and shale seafood business, we recovered well at 10% year on year. We saw food services, particularly in the U. S, improved substantially, thanks to the WEXC administration. So the gross profit also recovered to 10 0.5% in Q1 this year. So for both, sales and margin expands strongly for this business unit compared to pre COVID-nineteen. So thanks to the business recovery in shrimp, lobster and we have seen an increase in export. We explain more about the frozen and chilled seafood. This on the left hand, you see that the chart that the gross profit for this business unit are back to growth already. 1st quarter this year gross profit record, RMB 1.2 1,000,000,000, so up 44% year on year, and that also beat Q1 2019 pre COVID. This pushed by the strong sales in the U. S. And Thailand. So our strategy, of course, we focus on the modern trade, supermarket and online channels. We introduced our new value added products to 3 customers. For the cost side, we have focused on the cost saving and productivity enhancement. Move to the pet care and value added. That increased 21% year on year. We see the volume, the selling volume increase as well. That's because people spend more for their pets since the pandemic. We focus on the higher margin products and new product launch, driven by the innovation. So gross profit margin remains strong at a high level, 27.4% in Q1. So we see the strong demand in both domestic and export products. And of course, on the top line and margin, it expand largely compared to the pre COVID-nineteen level in Q1 2019. Let me just jump in on this one, Kyoungel, if I may, on this one. Really, this channel and this category is one of the key drivers. You can see here the numbers. I think what I can find very impressive here is the top line graph we have on the top left. You can see since Q1 'nineteen, we moved from 4.4 €1,000,000,000 and then to €5,500,000,000 So this is really one of the key drivers and one of the key explanation of Tail Union's strong performance in Q1, but also the previous quarters. You can see the gross profit margin are very healthy. For TEU, we have an average for the whole group, which is around 17%, 18% over the last quarters and we are very happy about this one. But you can see here for this category, which is smaller in terms of size compared to the others, we are delivering around 27% gross profit margin. So keep in mind, this category made up with pet care, value added and others also is highly profitable for us and we are really willing to push more in this direction. Back to you, Gunghir. So I think this picture, this chart explain what Kun Ludwig said about the our past 5 year history on the pet care sales and gross profit margin. We can see that the pet care and value added sales grew from BRL 15,000,000,000 in the past 5 years to BRL 20,000,000,000 last year with an upward margin trend. So the key driver, of course, is the higher demand from the global cat and dog population increase and thus, of course, the pet food. We also have our own internal factor like automation of our factories, a launch of new and innovative products. So our global pet care innovation centers, we continue to explore pet food solution, push new category to the key existing customer. And of course, in Thailand, our key cat food brand is the LOTA. So we are doing quite well, and we donate over 40,000 cat food can during the pandemic. North America, thanks to the recovery of frozen and chilled seafood business. So we go detail in the North America, that sales increased by 6% year on year in Taibat term. The U. S. Frozen seafood business of lobster and shrimp sales increased substantially like 50% year on year. And also, we see the Red Lobster operation also marked the profit in Q1. So this was thanks to the vaccine administration that have promote a favorable environment to the food services in the U. S. And of course, compared to Q1 2019 pre COVID, the performance in North America remains strong. In Europe, we experienced the sales decline 11% because of lower branded demand across all market. Last year, we had the exceptional push from sales stable products during the 1st wave of COVID. However, if you see compared to the Q1 2019, Europe's European sales remained strong compared to that number, 8.2%. So thanks to our strong branded position in Europe market. And then move to Thailand. Thailand sales grew by 5% year on year and very strong from pre COVID level, driven by the pet care and value added business. Lastly, on the geography is emerging market and the rest of the world. We explained the sales increase 3%. So mostly, we see strong sales in tuna segment in Middle East market. But however, performance in Asia markets remained challenged compared year on year and the pre COVID level. So overall, this quarter, we delivered consistent high gross margin, derived from 3 core businesses, particular, frozen and CLC Food and Pet Care and value added businesses. Lastly, of course, we maintain our financial guidance for this year. We can highlight a key monitor that would be the global container short cash, the pandemic situation and also the FX, the currencies. That will be a key monitor for investor to look at that. But of course, 2021 guidance is maintained. And lastly, the last slide, we emphasize our Thai Union. We have commitment to the healthy living healthy ocean and the 2025 corporate strategy. So this is wrap up our presentation. Now is Q and A session. Please feel free to submit your questions in the chat box and our IR team will ask those questions for you. So here maybe we start with the questions on Red Lobster. Okay, no surprise. I think there are many questions on Red Lobster and maybe I can take some of them if I may. The first question is, what do we have in the other income of Red Lobster? Kugel, can we get back to the details of Red Lobster, please? In the other income, we have 2 significant components. We have the 8% preferred interest that we record on the preferred shares and there is no real change this 1 quarter after quarter. There is only some changes coming from the FX. So this is one impact. And the second one is we are benefiting from some management fees provided by Red Lobster. You can see here in this chart, this is the line other income. So the amount is very stable around €240,000,000 to €50,000,000 every quarter. This is coming from the 8% preferred shares. There is one extra amount in Q1 2021, which is the management fees. In 2020, we did not record any management fees from Red Lobster because we were negotiating with the banks and you know that Red Lobster was doing its refinancing at that time and it was not sure that we could get some management fees coming from Red Lobster. In Q1 2021, we finalized the refinancing and we did record a catch up over 2020 management fees. We did not record our management fees coming from a lobster in 2020. And this is why you can see a small increase in the line other income in Q1 2021. Maybe there are some questions also on the lease accounting adjustment and maybe here, Kugel, we can go to Slide 51. I just want to get back to this one and we try to put it's not very easy, because it's a very technical question. I'm sorry for that. But I just want to share again, the lease, what is the lease adjustment? The lease adjustment is basically you are removing the lease operating expenses from your P and L. This is what you can see here with the blue, the dark blue on the top. So it's a positive impact in your P and L. And then in U. S. GAAP and also in Thai GAAP, you are basically just replacing these operating expenses by some depreciation and also some finance costs. If you remember, the key topic for the lease standard is to say, we take all the lease and we capitalize this lease in your assets and with a related financial debt, okay? And of course, the asset is called a right of use and then is depreciated and the financial debt is also generating some financial expenses. And you can see here the net impact between the removal coming from the operating lease expenses in the P and L and the new expenses coming from the depreciation and the finance costs. And you can see here the yellow line. The yellow line is the impact on the net profit on Reynosa coming from the lease this lease accounting adjustment. So it's a negative impact and it will remain negative until 2,030, okay? The impact is pretty large and we mentioned this one, the impact for 2020, 2021 will be roughly CHF100 1,000,000 per quarter. So for the full year 2021, we do expect a $400,000,000 baht expense coming from this one, plus we have in Q1, 2020 to Q1, the catch up also of 2020 and prior year for $200,000,000 So the total impact for the whole year is expected to be around €600,000,000 in the share of loss. This is very significant. Please keep in mind that we have also some tax credit for 25% of this amount, which will partially offset this amount. Again, I insist it has nothing to do with the real performance coming from the lobster. This is again a pure accounting difference. Don't ask me why there is such a difference, but it is a fact and there is a small difference in the rhythm of depreciation, which is front loaded in Thai GAAP and which is not front loaded in U. S. GAAP. So we'll continue, can you get back to the Red Lobster slide please with details. Moving forward, we will share with you this table where you will see in the first line the share profit coming from the operation. And then in the second line, you will see the share profit coming from the lease accounting adjustment. Okay. So the first time you can see here is fully comparable with the past. There is absolutely no change. And they have been generating a benefit in Q1 2021 by €81,000,000 VAT. Just below, we have the impact and the sharp profit coming from the lease accounting adjustments. We have 100 coming from Q1 2021, 200,000,000 baht to 207,000,000 baht coming from prior year. Moving forward, you will see a minus 100,000,000 roughly as per our estimate in Q2, Q3 and Q4. I've got another question still on Red Lobster. I tried to cover all of them. Does the target to lower loss from Red Lobster by half include the impact from increase in the lead expenses? No, it does not. If you remember, last year, we did in Q4 2020, we did communicate to you this target of Red Lobster decreasing their loss by 50% and it was before this information we're getting the lease accounting adjustment. So clearly, it does not. Right now, our assumption is on the first line share profit from operations to have Red Lobster decreasing their losses at least by 50%. Last year in 2020, the full year impact coming from Red Lobster was minus 1,200,000,000. So we want them to achieve and have a loss of 4,600,000,000, excluding the lease adjustment. The lease adjustment will come on top. And I mentioned for 2021, the total impact on the share of loss is roughly around 600,000,000, CHF200,000,000 coming from the prior year and then CHF100,000,000 for each of the quarter. But I think overall, we are a bit conservative in our assumptions. I think that the share of loss coming from the operations could be much better compared to only half of the losses coming from last year. The Q1 has been really strong. There is one impact, which is a bit difficult for us to appreciate, which is how much of this improvement is coming from the stimulus check and the free money coming from the administration. But overall, we can see really some really good underlying trend. We can see the guest count is increasing and we can see more and more getting back to the restaurants. This is applicable to us and also to the whole restaurant industry in the U. S. But we want to be a bit conservative on Red Lobster. Considering the past we had last year, we say we want to be a bit careful in our approach to them, but the news in Q1 are quite good on this one. Next one, maybe Amy. Next question. Sure. I can just pick one, right? Sure. Regarding we saw some question on the fair value adjustment regarding our business in Russia. And the question was, please explain the additional fair value adjustment related to Russia that we recorded in Q1 2021. So we told you at the end of last year that we were facing some challenges with our business in Russia, and this is why we recorded this change in fair value in Q4 2020. And Q1 2021, the business is still performing below our expectations. So we recorded another €2,000,000 or €73,000,000,000 change in the fair value. We can now see some kind of stabilization for this business in April to be confirmed in the following months. Maybe I'll take next one. Next one, we had a question regarding a fire situation happening in Germany in April 2031. And indeed here, if you go through our financial statements, you can see in the subsequent events, we have one specific paragraph regarding the new fire, unfortunately happening in Germany. So this happened in April 2021, so after the closing. We have something like 4, 5 factories in Germany and there was one fire happening in one of these factories in Germany. If you remember in 2019 and in 2020, we had 2 very large fire incidents happening in Germany also, but in a different factory in our new brand new facility called TUMN. And then last year, we have also a fire destroying 1 factory in Canada. Now we have in Q1 a very different situation. The fire incident is much less serious compared to these 2 large incidents, yet our production in this facility is stopped. We have been engaging the discussions with our insurance company on this one. We are sure that the damages will be covered. At this stage today, we don't have any view on the potential damages. We expect it may end up with few 100 or 1,000,000 of euros, but it should be fully covered by the insurance. Again, the building are not damaged at all, the equipments are not damaged, but the selling is destroyed and you have also a lot of dust everywhere. So we have a lot of decontamination to be performed in the factory. We are not really concerned. We won't have any significant impact coming from this one. We have 2 months of finished goods inventory before this fire in Germany. We can use also the other factories in Germany. We can use also other factories in Europe. And if need be, we can use also our own factory in Thailand to help them facing with this issue. It's a challenge. It's not a good news for us. It's a third fire, which happened in a few years. We know we are in a risky business and we need to cope with this situation, okay? So I think in Q2, we will be able to provide you with some more details regarding the damages. But from a pure operation and finance point of view, we don't expect any significant impact coming from that. I'll take the next one. What is ambient business outlook? And can we maintain Q1 2021 momentum into the next quarter? So normalization was expected in Q1 'twenty one, and we all know that peak sales from the 1st wave of COVID-nineteen last year do not repeat this year. And if you compare Q1 'twenty one versus pre COVID-nineteen, Ambient grew quite a bit. And we're very happy when you can when we compare when the situation was normal, especially when the gross profit margin was at 20%, it is a very good success to us. So we remain positive and believe that we have strong plans for the rest of the year. So next question, we have a question regarding the cash flow. And indeed, we have in Q1, we have and maybe we get back can I get back to the specific slide please, Kum Gao? We have in Q1 a very strong profit. We mentioned a very strong OP. Maybe we just get back to net debt bridge, if I may, okay? So you will see in Q1 a very strong EBITDA generated. You can see here on this graph, we have 3,400,000,000 bath EBITDA. However, we have a highly negative impact coming from the net working capital by 2,700,000,000 baht. The key drivers for such negative net working capital is an increase of our finished goods and our goods in transit also. As we mentioned, we are facing in Q1 with some supply chain issues and logistics and there is clearly a delay in our sales in the U. S, in Europe and also in Asia. And we have many products just being on the sea or waiting in the port for some containers. So you have an increase of the inventories. At the same time, we have been managing to decrease our inventories of raw materials and we have also a decrease of our account payables. So overall, we have a strong increase of our network capital by CHF2.7 billion and this is almost offsetting the EBITDA the strong EBITDA coming in Q1. You can see also the impact coming from the CapEx. We have 843,000,000 bad spend in CapEx in Q1. If you remember, we have a target for the whole year of 6,000,000 to 6,500,000. We are on track. I think we are slightly late on this one. When we set up this target of 6% to 6.5%. We did not have in mind the COVID impact in Thailand. And of course, the peak which happened in Q1 has been delaying some of these amounts. So I would expect that over the we need to see what's happening in Q2 and in Q3. But over the full year, we may not be able to spend exactly the SEK6 billion that we are planning. Apart from this one, you can see the other amounts are much smaller. So the key drivers really for the negative cash flow are the net working capital and also the CapEx and the interest paid in Q1, 2021. I think we are not concerned. We still believe we will generate some cash in 2021 and this is clearly our target. But clearly, it's a good heads up for us. So we'll follow carefully the situation in order to make sure that from a cash situation, we get back to where we want to be in 2021. Okay. I'll take the next one. Our gross profit margin seems to be gradually eroding since Q2 of last year from 18.2% to 17.7%. If you look if you compare from our track record, 17% 18% is very strong, and 18% last year was all time high record for us with some exceptional push in ambient from COVID-nineteen. And we are now at 17.7% versus 16.2% last year. We are very happy with this performance. So maybe I'll take the next one. And here we have some question regarding the Q2, 2021 in terms of revenue, in terms of segments. I think what we can say, you could see the picture in Q1 2021, basically the ambiance category is declining, but this decline in terms of top line is fully offset by the pet care value added and also the frozen categories. We do expect this positive momentum to continue in Q2 2021. I think we are a bit surprised and the decline in the onion category is a bit stronger compared to what we're expecting. And then on the flip side, the growth on the frozen and the pet care and others is also a bit stronger compared to what we were expecting. So all in all, we are almost in track compared to what we wanted to be, but with however a different portfolio what we have. In Q2 and maybe you get back to the 5 years graph, if you can see this one. We told you that we have a growth target for the full year 2021, which was between 3% to 5%. We maintain this target for the whole year. If you get back to Q2 and to Q4 last year, the growth top line growth was not that high. You can see here 2.6% in Q2 and then we are just below 2% in Q4. So we believe that the growth will mostly happen during this quarter. So in Q2, 2021, we do expect to have a strong top line growth. So this is for the top line story and we maintain again our target of 3% to 5% top line growth. There will be one key driver, which would be of course the USD impact. USD is very important for our business that we have something like 40% of our sales in the U. S. So depending where the FX rate tieback versus USD go, we may have some challenge in this top line. But we had some issues in Jan and Feb, because the actual FX rate was a bit far away from our budget assumptions. However, now it's improving and right now the actual FX rate is very close to our budget operations. So we need to see how does it flow. But right now, I think we're in good track and we strongly believe that this very positive momentum that we have since 4 quarters now will continue over Q2, Q3 and Q4. We are very optimistic for the whole year. Just maybe one word on the gross profit margin. We told you that the gross profit margin was very high over the last 4 quarters. It will continue in this direction. We don't see any reason to change right now. The raw material price are still where we want them to be. Of course, we have some challenges here and there, but overall they are under control. There will be one topic to keep in mind, which will be the development regarding the logistic cost. We told you since Q4 and that it was impacted negatively our business. In Q4, we told you that we were expecting the situation to improve and to get back to normal at the end of Q2, 2021. I think we are now revising these assumptions. We believe this difficult situation from a supply chain point of view will remain until the end of Q4. However, we believe the situation will improve, but it improved gradually and it's much smaller, much slower compared to what we were expecting. So this is maybe the only topic that we need to keep in mind. But overall, the guidance is to say the momentum right now is positive for TEU since 4 quarters and we believe it will continue in the next quarters. Of course, we are not sure we'll be able to deliver such a high performance. In Q1, this is particularly high. You need to keep in mind that part of this one is explained by some FX gain. We have 260,000,000 baht in Q1. This may not repeat again every quarter. If you remember last year, we had some FX loss in Q1 and then after we had some FX gain in the next quarter. So this one we don't fully control. But overall, the positive and the outlook is highly positive for our business. Next question, we have one question regarding the situation of Avanti, our associate in India. And of course, the COVID-nineteen situation in India is very challenging. So far, so we don't have yet the numbers for Q1. They know they will release the numbers a bit later compared to us, plus we don't have exactly the same year end. However, it seems to be under control. They are facing with some challenging, we're getting their frozen product, but regarding their feed business, it was okay. I think they had some impact regarding the availability of their workers in Q1 and that's when they have been facing with some challenges in their frozen business. But from the last news we heard, the situation of the feed business was good on this one, but it will have to be confirmed with the numbers. If you remember in 2020, we were very impressed by Aventi's performance, which was very strong and in fact much better compared to our own performance in the frozen industry. So we'll see how it closed in 2021 in the specific context of COVID-nineteen peak happening in India. We just have one more question also on the relative to management fees. In Q1. So here normally this one is supposed to be recurring. But as I mentioned to you in 2020, we did not record it. And if you get back to 2019 or 2018, normally we were recording this one every quarter. It was a bit different in 2020 because we were renegotiating and we were refinancing the company. And at that time, we are not expecting the management fees to be paid. Finally, it was concluded in Q1 2021 and we could be managed to be paid for a portion of this one. So the 2020 for sure there is a one off impact happening in Q1 2021 on the payment of these 2020 management fees. But going forward, we will still continue to benefit from these management fees as we have been enjoying since the acquisition of Red Lobster. There is maybe some few more questions. Questions regarding Canada. And with the factory, we resumed the operation after the fire happening last year. We are right now investigating different possibilities on this one and one of the possibilities for us to sell our business in Canada. So we have different options on the table. I think there will be more developments and more things to say in Q2, 2021 for us. Right now, the direction is not for us to resume the operations there. Just for you to remember, the factory in Canada was mostly sourcing for our lobster business in for Chicken of the Sea Frozen in the U. S. And you can see in our segment category that the lobster business has been increasing in Q1 2021. What does it mean? It means that Chicken of the Sea Frozen, our frozen operation in the U. S. Has been able to replace basically these Canadian sourcing in Q1 2021. So we don't have any concern regarding the long term operations and it does not hurt our operation in the frozen channel. Few more questions. Seychelles, Seychelles, we can read some news that Seychelles is looking down again with this affecting EU's operations. I think you are correct. We could read also in the past days, some increase in the COVID-nineteen cases in the Seychelles. It's a bit weird because I think the vaccination campaign has been very successful in the Seychelles. So we need to see the development over the next days weeks. With the COVID-nineteen situation is highly volatile. So we need to manage on a daily and a weekly basis, okay? And we need to know that this is our new way of working, okay? You will have some peak of the COVID-nineteen happening in different location. And this is our role and this is our task to try to manage it the best way we can. Until now, I think we can we have demonstrated that we are very successful in managing our supply chain. And again, apart from the example of Ghana, which happened for a few weeks last year, we did keep all our factories up and running during the COVID-nineteen and I think it's a great success. So we'll follow carefully the situation in the Seychelles. The vast majority of our workers in Seychelles is vaccinated already with 2 doses. Now we need to see which variant are we talking about. At this stage, we don't have any impact at all in our production, but we need to manage carefully and to follow-up over the next days weeks. Sorry, here we are running a bit out of time. I'll just take maybe some few more questions and then we stop. So we have one regarding the pet food. What will be the growth momentum for pet food for the rest of the year compared to Q1 'twenty one? I must say, I'm very pleased and very impressed by our category the performance of our category pet care and value added in Q1 'twenty one. And you can see it's a consistent growth since I think 4, 5 quarters. And this is one of the key driver for TEU's strong performance in Q1 2021. I'm not sure this momentum will remain and they will grow in the same path for the year to go. However, we have some strong efficiencies. We have some good plan. We have a very strong portfolio in terms of NPD in the pet food and maybe one next quarter, we can share with you some more example. There are some very funny and good products that we want to launch in this category. So the momentum will remain very strong for the rest of the year. We'll grow exactly the same path. I'm not sure. I think it's a bit too early to mention this one. We have been really successful in Q1, 2021. We want to continue and to push further, but maybe it will be not exactly growing exactly at the same rate. Can you go up in that please? And maybe maybe I'll just take your last one, which is on the incremental growth on the reported net profit. What is coming from the FX? What is coming from the fair value and what is coming from the operations? I think if you get back to our P and L, you will see the increase coming from the OP is something around 300,000,000 baht. So OP is very strong in Q1, 2021. This is one of the key drivers. There is a second big explanation for the improvement compared to last year, which is the FX. We have in Q1 2021 FX gained around €250,000,000 plus, but last year it was a loss by €260,000,000 So clearly the switch in terms of FX is really also one of the key driver for the performance in Q1, 2021. So the other two key elements, operating profit is very strong. FX gain also switched from an FX loss situation to an FX gain situation. If you go line by line, you will see that we have also some good news in the finance interest in many different lines, but these are really the key items. I want to insist again also on the share profit. If you compare to Q1, 2021, you don't see a lot of changes. But this one, keep in mind, include also the €300,000,000 but lease accounting adjustment we have been recording on Red Lobster. If you exclude this one, you will see the share profit is strongly improving, in fact, compared to last year. Anything remaining on this one? Okay. Just get back on the revenue growth target for 2021. I think we mentioned this one. We said at the end of Q4 that we had a revenue target between 3% to 5% for the whole year. For the time being, we've maintained this target. And I think Amy mentioned this one. In Q1, we are flat compared to last year. However, we have some strong expectation and strong plans to generate some growth, especially in Q2 and Q4 2021, where if you look at 2020 performance, we are not growing that much during this quarter. So this is really where we do expect to have some growth. So for the Tanning, we maintain our target sales between 3% to 5% compared to last year. Conger, I think we should conclude the call. Sure. Thank you, Mr. Lubitsch, for your presentation. So thank you for your interest to join our conference call today. So if you have further questions, please feel free to contact IR team. So thank you for joining us today. Have a good one. Thanks a lot, guys. Thanks also for all your questions. We can see and we are not surprised. A lot of interest coming from our numbers. Again, we are very pleased with this one. If there are any remaining questions, you can still ask tomorrow. Tomorrow, we have the physical the online, sorry, analyst meeting. Please join this event. We can elaborate more. Consir Appon will be with us. He will share his own insight. But very pleased with Q1 numbers. And I think this is very encouraging for the rest of the year. Thank you and see you again tomorrow. I won't be in the call, but Thanks a lot everyone. Any questions, just let us know. Thank you. Have a good one. Thanks a lot. Thank you. Goodbye. Bye. Cheers.