Thai union group’s Strategic Divestment

Thai Union Group PCL, a major player in the seafood industry, has announced plans to divest its minority stake in the U.S.-based restaurant chain, Red Lobster. This move follows a comprehensive review conducted in 2023 by Thai Union and Red Lobster, aimed at identifying opportunities for operational and financial enhancements.

Financial Strains Lead to Divestment Decision

Thiraphong Chansiri, the CEO of Thai Union Group, highlighted several factors influencing this decision. “The COVID-19 pandemic, persistent industry challenges, rising interest rates, and increasing costs for materials and labor have adversely affected Red Lobster,” Chansiri explained. The restaurant’s continued financial struggles have led to negative impacts on Thai Union and its stakeholders. “After thorough analysis, we concluded that the ongoing financial demands of Red Lobster are inconsistent with our capital allocation strategies. Consequently, we are moving forward with exiting our minority investment.”

Financial Impact and Impairment

Red Lobster’s performance has been a concern for Thai Union, with a reported loss of THB 0.7 billion (€18 million) in the first nine months of 2023. The company anticipates a one-time, non-cash impairment charge of THB 18.5 billion (€480 million) for its entire investment in Red Lobster, which will be reflected in its fourth-quarter earnings for 2023. Despite this, Thai Union assures that its balance sheet remains robust, with a net debt/equity ratio of 0.84.

Share Repurchase and Financial Management

In light of these developments, the company’s board has approved a share repurchase plan. The plan, aimed at financial management, involves an investment not exceeding THB 3.6 billion (€93 million), or 200 million shares.

Recent Financial Performance

The second quarter of the financial year saw Thai Union reporting a net profit of THB 1.0 billion (€26 million), a 36.7% decrease from the previous year. This decline is attributed to foreign exchange losses and the diluting effect on the net profit of i-Tail. The company’s revenue also experienced a 12.6% year-on-year decrease to THB 34.1 billion (€890 million), influenced by factors such as high baseline figures from the previous year, elevated inventory levels among customers, normalization of logistics, and generally weaker demand.

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