Thai Union Group reported earnings of 121 million baht in the first quarter of this year, improving from a loss of 243 million baht year-on-year thanks to its turnaround business plan for the Red Lobster seafood restaurant chain.

Its first-quarter net profit was 1 billion baht, down 41.5% from 1.7 billion year-on-year, mainly attributed to two non-comparable items.

In the first quarter of 2022, Thai Union booked preferred interest of 239 million baht (after tax) from Red Lobster, compared with no preferred interest in the first quarter of 2023 because of interest rate hikes and a 200-million-baht net profit dilution effect from Thai Union’s reduced stake in i-Tail, from 99.5% to 77.8% following i-Tail’s listing on the Stock Exchange of Thailand in December 2022.

Excluding those two non-comparable items, Thai Union’s quarterly net profit declined by 21.8%.

The company recorded sales of 32.7 billion baht for the period, a 10% decrease from a high baseline last year.

The decline was anticipated as demand for the group’s products softened across all markets, with customers managing high inventory levels by reducing orders, while high prices of raw materials also prompted a slowdown in purchases.

“We expect the first quarter to be the softest period of this year as a result of a high sales baseline in the first quarter of 2022, together with a high inventory level for our customers and logistics normalisation,” said Thiraphong Chansiri, chief executive of Thai Union Group.

“However, we remain optimistic about 2023 growth as we have already seen signs of improvement in the second quarter and expect normalisation in the latter half of the year as the consumption trend of seafood and healthier proteins continues to rise globally.”

The first-quarter results showed an improvement in selling and administrative expenses, which fell by 12.1% to 4.12 billion baht, following an improvement in freight costs and logistics normalisation.

High levels of inventory across global markets and high fish prices resulted in softer demand, pushing down sales for Thai Union’s ambient business by 1.9% year-on-year to 15.2 billion baht.

PetCare business sales declined by 21.9% to 3.5 billion baht.

Meanwhile, the frozen and chilled seafood business reported a 15.3% decrease in sales to 11.7 million baht, attributed to a high baseline last year and seafood market price normalisation.

For the value-added and others business unit, sales were down 9.5% to 2.2 billion baht, although the gross profit margin stayed at 27.3%.

Sales in North America accounted for 43% of total revenue in the first quarter, followed by 26% from Europe, 19% by others and 12% from Thailand.

“We continue to focus on profitability, operational excellence and financial discipline while navigating our business through the year. Thai Union’s balance sheet remains strong, with net debt-to-equity at 0.57 times, which is below our target of 1.0-1.1 times. Going forward, this will allow us to prioritise mergers and acquisitions, focusing on businesses that are a strategic fit for the group,” said Mr Thiraphong.

Thai Union has ongoing investment projects to expand its capacity across various categories with a budget of 6-6.5 billion baht. The projects include three new factories in Samut Sakhon and one cold storage plant in Ghana: a ready-to-eat dim sum and bakery factory; a factory to produce protein hydrolysate and collagen peptide; a wet pet food and treat factory with an automated packing line; and a cold storage plant for the ambient tuna business.