TU - Preview 3Q24F: Moderate growth

Expect 3Q24F net profit of Bt1.29bn, +7% YoY and +6% QoQ. Excluding Bt240mn FX loss, 3Q24F core profit will be Bt1.53bn, up 2% YoY as better sales and gross margin plus higher equity income offset higher SG&A/sales, interest and tax expenses; we expect growth of 6% QoQ on seasonality. The results will be released on Nov 6.

3Q24F highlights. Sales are expected to grow 4% YoY, with better sales in the ambient and pet care units making up for lower sales at the frozen unit (weak food service demand and partly from downsizing in low-margin business in the US). Gross margin will widen to 19% (+60bps YoY and +50bps QoQ) on a wider margin in the pet care unit (up YoY) from better sales and product mix, and the frozen unit (up QoQ) from more high-margin products and the ambient unit (stable QoQ) with lower tuna prices balancing costs. SG&A/sales is anticipated to jump to 13.3% (+140bps YoY and +30bps QoQ) on a rise in marketing and logistics expenses and in advisory expenses

from the business restructure. Equity income will rise to Bt366mn (vs -Bt234mn in 3Q23) from better contribution from Avanti and the absence of Red Lobster after adjusting fair value of its investment in Red Lobster to zero at end-

4Q23 (zero in 3Q24 vs -Bt496mn equity income and -Bt135mn net contribution from Red Lobster in 3Q23).

4Q24TD situation. Tuna price. Spot skipjack tuna price fell 21% MoM to a 3-year low at US$1,250/ton in August from US$1,580/ton in July, as abnormally good catches pulled price below fishery breakeven costs. Price rose 12% MoM to US$1,400/ton in September from lower catches. In 2024, TU revised down its view on 2024F spot skipjack tuna price to US$1,400-1,500/ton from US$1,600/ton estimated in early 2024 (vs US$1,407/ton in 9M24 and US$1,784/ton in 2023). With tuna price low, TU expects to have more room to invest in marketing to raise branded sales volume. It does not expect any impact on OEM orders as tuna price was volatile for a short time only.

Based on recent tuna price, TU is optimistic on 4Q24F sales in terms of price and sales volume YoY. US east coast port strike. Port workers in the US east coast began a strike on October 1, on the issues of a wage increase and job security from the use of more automation. On October 3, port workers and port operators have reached a tentative deal that immediately ended a three-day strike, and they would extend their master contract until January 15, 2025, to return to the bargaining table to negotiate all issues. TU’s sales passing the US east coast accounted for 35% of its sales in the US (or 15% of consolidated sales). TU estimates that no impact can be seen yet.

However, if this issue is resumed or is prolonged in the future, it may affect TU’s sales recognition, with some delays from longer lead time if they switch shipments to the west coast from the east, with limited impact on freight rate (70% of its sales are in priced FOB).

Key risks: Inflationary pressure and THB appreciation. Key ESG risks are GHG emission, waste & water management (E), customer welfare, product quality management, health & safety policies (S).