Exit from Red Lobster Restaurant brings record loss to Thai seafood giant

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(Feb 19): Thai Union Group PCL, one of the world’s biggest seafood processors, posted a record quarterly loss after writing off investment in its Red Lobster restaurant unit.

The company, which also controls the Chicken of the Sea brand, reported a net loss of 17.2 billion baht (RM2.28 billion) in the fourth quarter, compared with a net profit of 1.24 billion in October-December a year earlier. Shares fell as much as 1.3% on Monday on the Stock Exchange of Thailand.

Thai Union took a one-time non-cash charge of 18.4 billion baht on Red Lobster after deciding to “exit” the US seafood restaurant chain, according to its exchange filing on Monday. Chief executive officer Thiraphong Chansiri last month announced a planned departure from Red Lobster, reiterating in the latest filing that the restaurant unit’s “ongoing financial requirements no longer align with Thai Union’s capital allocation priorities.”

The quarterly loss was the company’s largest, according to data compiled by Bloomberg dating back to 1996. Excluding the one-time charge, Thai Union’s normalised net income was 1.24 billion baht in October-December period, little changed from a year earlier. Sales in the quarter dropped 10% from a year earlier to 35.5 billion baht.

The Thai seafood giant paid US$575 million (RM2.75 billion) in 2016 for a 25% stake in Red Lobster — plus preferred stock that can convert into a further 24% shareholding — and bought another 13.7% of common equity interest in 2020.

Challenges that hit Red Lobster in recent years included the Covid pandemic, sustained industry headwinds and higher interest rates and labor costs, according to Thiraphong. That resulted in a “prolonged negative financial contribution” to Thai Union, which won bondholders’ approval last week for changes to an interest-coverage ratio and dividend-cap restriction on several tranches of notes.

Earnings growth “could recover in 2024,” as the company sees better performances from core units that provide canned, frozen and chilled seafood, Bloomberg Intelligence (BI) analysts Lisa Lee and Lea El-Hage said in a note on Feb 16. In addition to Chicken of the Sea tuna, Thai Union also owns the John West brand and controls the exchange-listed pet food business i-Tail Corp.

“Capacity expansion will help, as gross profit margin stabilises to 17-18% from cost-cutting efforts, lower raw-material costs, new product launches and price increases,” the BI analysts wrote.

The US and Canada comprise Thai Union’s largest market, contributing 41% of total sales in 2023, followed by Europe at 30% and Thailand at 11.5%, according to the company’s filing.…Read more by

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