Thai Union : Management Discussion and Analysis Quarter 1 Ending 31 Mar 2021

1Q21: Solid bottom line at 77.4% YoY growth

Net profit was at THB 1,803mn, driven by strong operating profit from all three core businesses and FX gains.

Revenue

1Q21 sales were stable YoY to THB 31,125mn. This was mainly driven by improved frozen and chilled seafood sales (+10.3% YoY) and strong PetCare and value- added business sales (+20.8% YoY). The Ambient business experienced a 13.1% YoY drop in sales in 1Q21. Compared to 1Q19 pre-COVID level, all three core businesses still grew well in 1Q21 at 6.0% growth.

Gross profit

Thanks to the recovery of frozen and chilled seafood and an increased demand in the PetCare and value-added business, we delivered a consistent, high gross margin at 17.7%, up 150bps YoY. Gross profit was at THB 5,507mn in 1Q21, up 9.3% from 1Q20 and 25.7% from 1Q19 pre- COVID level.

Operating profit

1Q21 operating profit was at THB 1,871mn, up 22.4% YoY, mostly thanks to strong gross profit. 1Q21 SG&A- to-sales ratio was at 11.7% vs 11.3% in 1Q20. Such increase mostly resulted from higher logistic costs. Despite that, SG&A expenses increased only 3.6% YoY, thanks to effective cost management.

Net profit

TU reported robust 1Q21 net profit growth of 77.4% YoY, at THB 1,803mn. This was thanks to strong core businesses in Frozen and chilled seafood as well as PetCare and value-added, margin expansion, FX gains, and lower finance costs.

Adjusted net profit marked at THB 2,030mn, up 99.8% YoY. The one-off items were Red Lobster's lease accounting adjustment and a change in fair value adjustment from the Russian (TUMD) business (detailed in page 3).

Cash flow and ND/E

1Q21 free cash flow (FCF) had a temporary impact from high inventory of finished goods and goods in transit on delayed shipments and container shortages. However, with a strong operating profit, TU's end-1Q21 net D/E ratio was at 0.93x.

Stock Information

(Bloomberg/ Reuters)

(TU TB/ TU.BK)

Share price (07/05/2021)	THB 15.20
Historical closing price:
52-week high	THB 16.00
52-week low	THB 11.90
No. of shares:	4,771.8m
Par value:	THB 0.25
Market Cap.	THB 72.5bn
Avg. value trade/day (YTD)	THB 342.7mn
Major shareholders
(9/3/2021)
Chansiri Family	19.26%
Thai NVDR Co., LTD.	15.06%
Mitsubishi Corporation	7.29%
Niruttinanon Family	6.92%
Social Security Office	4.55%

Business Overview

Thai Union Group PCL (TU) is one of the world's largest seafood player. TU owns leading brands portfolio in key markets and global sourcing, production and distributing networks. TU's key products are canned tuna and frozen shrimp. TU also produces for external customers through its private label business. On the sustainability front, TU has shown strong commitments and is confident in its positive long term contribution to socio-economic development, conservation of natural resources and practice of ethical business conduct.

Key financial figures

Unit: THB mn	1Q21	1Q20	4Q20
Sales	31,125	31,103	33,464
Gross profit	5,507	5,040	6,023
EBITDA	3,426	2,634	3,092
Net profit	1,803	1,016	1,457
EPS (THB)	0.37	0.20	0.29
GPM (%)	17.7%	16.2%	18.0%
NPM (%)	5.8%	3.3%	4.4%
ND/E (x)	0.93	1.05	0.94
ROCE (%)	10.4%	6.4%	9.2%
ND/EBITDA (x)	3.87	5.51	4.02

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Financial Statements Analysis:

Unit: THB mn	1Q21	1Q20	YoY	4Q20	QoQ
Sales	31,125	31,103	0.1%	33,464	-7.0%
COGS	(25,617)	(26,063)	-1.7%	(27,441)	-6.6%
GP	5,507	5,040	9.3%	6,023	-8.6%
SG&A	(3,637)	(3,511)	3.6%	(4,085)	-11.0%
FX gain (loss)	244	(262)	na.	38	543.0%
Other income	351	418	-16.1%	291	20.6%
Share of profits from	(32)	(18)	77.2%	(189)	-83.3%
investments in assoc. & JVs
EBIT	2,434	1,668	46.0%	2,079	17.1%
Finance cost	(397)	(434)	-8.7%	(415)	-4.3%
EBT	2,037	1,233	65.2%	1,664	22.4%
Tax	(199)	(149)	33.6%	(127)	56.6%
Net income	1,803	1,016	77.4%	1,457	23.7%
EPS	0.37	0.20	88.2%	0.29	26.6%
FX: USD/THB	30.26	31.29	-3.3%	30.61	-1.2%
GPM	17.7%	16.2%		18.0%
%SG&A/Sales	11.7%	11.3%		12.2%
NPM	5.8%	3.3%		4.4%

Sales

1Q21 sales were at THB 31,125mn, up 0.1% YoY. The sales performance was driven by the frozen and chilled seafood business (+10.3% YoY) as well as the PetCare and value-added business (+20.8% YoY). The frozen and chilled seafood business recovered from food services and export. The PetCare and value-added business delivered strong sales growth from new and existing products. The ambient business normalized after record high sales in 1Q20, with sales drop of 13.1% YoY, but still grew from 1Q19 pre-COVID level.

During 1Q21, the Thai Baht moved against key trading currencies as follows; USD (-3.3% YoY), EUR (+5.8% YoY) and GBP (+4.1% YoY), which partly supported sales growth.

Excluding FX impact, TU sales would have declined by 0.2% YoY in 1Q21.

1Q21 sales volumes declined slightly at 0.6% YoY, due to lower selling volumes in the ambient business.

Gross profit

During 1Q21, TU continued to deliver a consistent high gross profit margin of 17.7%, up from 16.2% in 1Q20. The margin expansion was derived from the core business. The frozen and chilled business' gross profit increased 44.3% YoY, from a recovery of food service operations. The PetCare and value-added business' gross profit improved 33.5% YoY, from a strong demand and new products launched. The ambient business' gross profit declined 9.8% YoY, due to a normalization effect after an exceptionally high push in 1Q20 from COVID-19 pantry- loading. 1Q21 gross profit remained at a healthy level of THB 5,507mn, up 9.3% YoY.

Selling and administrative expenses

1Q21 SG&A to sales ratio was at 11.7%, up from 11.3% in 1Q20. The increase resulted from higher logistic costs estimated at approx. THB 200-250mn during the quarter.

Despite higher logistic costs, SG&A expense increased only 3.6% YoY, thanks to TU's effective cost management by lower marketing and advertising, and other selling expenses.

FX Gain/Loss

Thanks to prudent FX exposure management, TU reported 1Q21 FX gains of THB 244mn, compared to THB 262mn FX loss in 1Q20.

Share of income from investment in associates

1Q21 share of loss was at THB 32mn (vs THB 18mn share of loss during 1Q20). The quarter's loss contribution mainly resulted from Red Lobster's lease accounting adjustment amounted THB 307mn (THB 207mn for 2020 and THB 100mn for 1Q21 operations: detailed in page 3). Excluding that, the Red Lobster operations during the quarter turned a share profit of THB 81mn (vs THB 111mn loss contribution in 1Q20), resulted from an improvement of Red Lobster operations and also external factors such as successful vaccination programs in the US and the issuance of stimulus checks.

The Avanti business performed strongly at a higher share of profit YoY.

Other income

1Q21 other income was at THB 351mn, declining from THB 418mn in 1Q20. The decrease was from an expense of THB 73mn as a one-off item from a change in fair value adjustment in the Russian (TUMD) business (detailed in page 3). Moreover, TU continued to record a consistent interest income from its investment in Red Lobster's preferred units.

Finance cost

1Q21 finance cost decreased 8.7% YoY to THB 397mn, from THB 434mn in 1Q20. The decline was mostly explained by debt repayment and lower cost of debt.

Income tax expense

1Q21 income tax expense was THB 199mn, compared to a tax expense of THB 149mn in 1Q20. The increased tax expense was in line with the improving operating profit of the company.

2

There was a tax credit of THB 53mn related to one-off items booked in 1Q21 (detail in page 3).

Net profit

1Q21 net profit on reported basis was at THB 1,803mn, up 77.4% YoY. The increase was thanks to strong core businesses, particularly frozen and chilled seafood and PetCare and valued-added, as well as margin expansion, and FX gain. 1Q21 net profit margin was 5.8%, up significantly from 3.3% in 1Q20.

Adjusted net profit

Excluding one-off items, adjusted net profit was THB 2,030mn in 1Q21, up 99.8% YoY. 1Q21 one-off items are as follows;

	Amount			One-off items
	(THB mn)
-207			Lease accounting adjustment from Red
				Lobster during 2020 (booked as an expense at
				share of loss)
53			Tax credit related to Red Loster's lease
				accounting adjustment during 2020 (booked as
				a tax credit in TU's tax income)
-73			Change in fair value adjustment from the
				Russian business (booked as an expense in
				other income)

Financial position analysis:

As of March 31, 2021, Thai Union's total assets were at THB 143,862mn, slightly decreased by 0.5% from THB 144,575mn at end-2020, mainly due to lower cash at banks and cash equivalents.

Total liabilities decreased to THB 86,734mn (2.4% down from THB 88,838mn at end-2020), mainly thanks to continued debt repayment from healthy EBITDA and CAPEX kept under control.

During the quarter, current liabilities increased by 14.2% from end-2020, due to a larger amount of loans reaching to maturity. The non-current liabilities declined 18.6% from end-2020, given more long-term loans reached their maturity and moved to current liabilities. During 1Q21, the company repaid short-term loans of THB 5.9bn.

Total equity (including THB 6bn of perpetual debentures) increased by 2.5% (+THB 1,391mn) from end-2020 to THB 57,128mn, thanks to strong net profit during the quarter.

Cash Flow analysis:

During 1Q21, net cash receipts from operating activities were at THB 633mn. Positive cash flow was mostly driven by profitable operations (EBITDA: THB 3,426mn in 1Q21).

Net cash payments for investing activities were at THB 846mn, which was well on track with the Company's plan to focus on CAPEX for efficiency enhancement and growth projects.

Thai Union recorded net cash payment for financing activities of THB 2,057mn during 1Q21, which was largely attributed to regular debt repayment and interest paid on perpetual debentures.

Net decrease in cash and cash equivalents, including exchange losses, was at THB 2,209mn resulting to outstanding cash and cash equivalents of THB 4,077mn as of the end of this quarter (including the impact from the use of Bank Overdraft).

Financial ratio highlights:

	1Q21	1Q20	4Q20
A/R Days	34	35	32
Inventory Days	124	122	125
Current ratio (x)	1.18	1.58	1.37
ROCE (%)	10.4%	6.4%	9.2%
ROE (%)	15.5%	8.2%	14.1%
ROA (%)	6.9%	4.4%	6.3%
ND/E (x)	0.93	1.05	0.94
ND/EBITDA (x)	3.87	5.51	4.02
Interest Coverage (x)	8.63	6.06	7.46
BV (Baht/share)	9.97	9.04	9.69

Remark:

Current ratio = Total current assets / total current liability ROCE = 12-month rolling EBIT / Average capital employed

Capital Employed = total assets - total current liabilities (incl. current portion of long-term debt)

ROE = 12-month rolling net profit / average total shareholders' equity

ROA = 12-month rolling EBIT / average total assets ND/E = Interest-bearing debt - cash & cash equivalents/

total shareholders' equity Debt/EBITDA = Interest-bearing debt / EBITDA Interest coverage = EBIT / interest expense

BV = Total shareholders' equity / outstanding shares

1Q21 profitablity ratios significantly increased compared to a year ago with ROCE at 10.4% (vs 6.4% in 1Q20); ROE at 15.5% (vs 8.2% in 1Q20); and ROA at 6.9% (vs 4.4% in 1Q20). This resulted from the Company's robust profit (EBIT +46% YoY, net profit +77% YoY) in 1Q21.

3

Receivable days as of 1Q21 were at 34 days, which decreased from the previous year at 35 days, thanks to the Company remaining focused on cash conversion and collection.

Inventory days during 1Q21 was up to 124 days, from 122 days a year ago, due to higher inventory value (+9.7%) and higher goods in transit during the quarter.

The Current ratio at end-1Q21 was at 1.18 times, declined from 1.37 times at end-2020, mainly from a larger amount of debt reaching maturity.

Interest-bearing debt decreased by THB 1,157mn from end-2020 (down 2.0%), due to a regular debt repayment. As a result, net debt-to-equity was at 0.93 times, down from the end-2020 level of 0.94 times.

The net-debt to EBITDA ratio continued reducing to 3.87 times as end-1Q21, from 4.02 times end-2020, thanks to the strong EBITDA (+10.8%) and lower interest-bearing debt.

The interest coverage ratio during 1Q21 was at 8.63 times, up from 6.06 times in 1Q20, mostly thanks to strong EBITDA and lower finance cost (down 8.7% YoY).

Interest-bearing debt profile by currency:

EUR	EUR	JPY
1%	2%	2%
		USD
		16%
THB		THB
99%		80%

December 2020

March 2021

As of end-1Q21,interest-bearing debt was at THB 57,258mn, mainly denominated in the local currency. THB debt accounted for 80%, following by USD accounted for 16%, while EUR and JPY debts were at 2% each of the total interest-bearing debt.

Business overview by business unit:

Total sales value

Unit: THB mn			+0.1% YoY
				33,464	-7.0% QoQ
31,103	31,125
15%	16%	18%
35%	41%	39%
50%	43%	43%
			1Q20		4Q20	1Q21
		Ambient seafood		Frozen, chilled seafood & related

PetCare, value added & others

Ambient seafood1:

Normalized top line with continued healthy margin

	1Q20	2Q20	3Q20	4Q20	1Q21
Value	15,631	16,394	16,259	14,440	13,580
Brand	60.2%	57.4%	57.8%	53.1%	59.3%
PL	39.8%	42.6%	42.2%	46.9%	40.7%
Volume	99,599	101,136	98,176	93,652	86,197

Value (unit: THB mn), Volume (unit: ton)

Remark: PL stands for Private Label business

1Q21 ambient sales decreased 13.1% YoY, largely due to a decline in sales volume by 13.5% YoY, particularly in the US and Europe, as a result of last year's pantry- loading during the lockdown in March 2020 and a global container shortage.

Despite lower sales, the gross profit margin remained high at 20.2% in 1Q21 vs. 19.4% in 1Q20, thanks to a lower raw material price and improving businesses in sardine & mackerel and salmon.

The ambient business expanded on both sales and margin, compared to 1Q19 pre-COVID level.

Frozen, chilled seafood and related2:

Recovering topline and GPM

	1Q20	2Q20	3Q20	4Q20	1Q21
Value	10,944	11,554	13,370	13,738	12,076
Brand	37.7%	34.4%	37.2%	38.1%	38.4%
PL	62.3%	65.6%	62.8%	61.9%	61.6%
Volume	61,179	61,284	71,224	69,236	63,081

Value (unit: THB mn), Volume (unit: ton)

1Q21 frozen and chilled seafood business sales recovered well at 10.3% YoY growth, supported by the sales volume growth of 3.1% YoY.

Thanks to a substantial recovery in food service businesses, particularly in the US, as well as export products, the frozen business experienced a margin recovery.

The gross profit margin improved for all segments, including shrimp and lobster, to 10.5% in 1Q21 vs. 8.1% in 1Q20.

PetCare, value-added and others3:

Solid growth and uptrend margin

	1Q20	2Q20	3Q20	4Q20	1Q21
Value	4,528	5,103	5,155	5,287	5,469
Brand	7.8%	5.5%	6.4%	5.1%	4.8%
PL	92.2%	94.5%	93.6%	94.9%	95.2%
Volume	62,852	73,322	75,019	75,409	72,957

Value (unit: THB mn), Volume (unit: ton)

1Q21 PetCare and value-added sales increased noticeably by 20.8% YoY, on the back of increasing volume (+16.1% YoY), which is attributable to a focus on higher margin products, new products launched, and people spending more for their pets since the pandemic.

4

Gross margin strongly improved to 27.4% in 1Q21 vs 24.7% in 1Q20, driven by increased demand in both domestic and export products.

PetCare and valued-added sales and margin expanded largely compared to 1Q19 pre-COVID level, thanks to our focus on profitability and new products launched, driven by innovation.

Remark:

1. Ambient seafood business includes entire tuna, entire sardine & mackerel and ambient & pouch salmon businesses
2. Frozen, chilled seafood and related business includes shrimp & related (shrimp, lobster, shrimp feed & value-added shrimp), frozen, chilled & smoked salmon and other seafood (frozen cephalopod, crab, scallop, shellfish and other fish) businesses
3. PetCare, value added & others business includes PetCare, value-added businesses (Ready-to-Eat products, packaging, maguro & cephalopod sashimi, local products, bakery products and snack)

Sales breakdown by brand vs. private label:

Unit: THB mn

134,937 133,285 126,275 132,402

42%	41%	41%	42%	31,125			Brand
58%	59%	59%	58%			Private
42%			label
				58%
2017	2018	2019	2020	1Q21

1Q21 branded sales portion vs private label sales portion was unchanged at 42% and 58%, respectively. 1Q21 branded sales decreased by 6.7% YoY, due to the normalization in the ambient business. 1Q21 private label sales increased 5.5% YoY, thanks to the frozen and chilled seafood business recovery.

Business overview by region:

THB mn	2017	2018	2019	2020	1Q21
Total sales	134,937	133,285	126,275	132,402	31,125
USA	38.8%	37.7%	39.6%	41.9%	42.7%
Europe	30.8%	30.4%	27.9%	29.0%	26.9%
Japan	6.3%	5.7%	5.8%	5.3%	5.4%
Domestic	9.2%	10.5%	11.5%	10.0%	11.7%
Others	14.9%	15.7%	15.2%	13.8%	13.3%

Remark: *Others represent Asia, Australia, Middle East, Canada, Africa, South America and others

1Q21 sales contribution in the US and Thailand increased, while sales contribution in Europe decreased. Sales in North America rose 5.6% YoY, from private label products. Sales in Thailand domestic market increased 4.8% YoY, from the PetCare business. European sales declined 10.9% YoY, from branded products.

Key operating factors:

Raw material prices

Skipjack tuna (USD/ton)

In April 2021, tuna price closed at USD 1,340/ton. In 1Q21, average price was at USD 1,283/ton (-11.0% YoY, -3.8% QoQ).

White shrimp

(THB/kg. of 60 pieces/kg)

In April 2021, shrimp price closed at THB 146/kg. In 1Q21, average price was at THB 149/kg (-0.2% YoY, - 0.9% QoQ).

Salmon (NOK/kg)

In April 2021, salmon price closed at NOK 62/kg. In 1Q21, average price was at NOK 54/kg (-22.7% YoY, +13.3% QoQ).

5