(Bloomberg) -- Thai Union Group Pcl, one of the world’s biggest makers of canned tuna, is considering an exit from its loss-making Red Lobster unit less than three years after boosting its stake in the US restaurant chain.

The first half of this year will be crucial in demonstrating whether management changes and an operational overhaul can trim losses at the world’s largest seafood restaurant chain, according to Chief Executive Officer Thiraphong Chansiri. Losses at Red Lobster, which hit $9.8 million in the final quarter of last year, have weighed on Thai Union’s results that have otherwise seen growing revenue driven by its pet food and ambient seafood businesses.

While the final decision on whether to exit the Red Lobster investment hasn’t been made, “Thai Union has never prolonged any bad businesses” and has a previously shut several unprofitable factories, Thiraphong said in an interview this week. 

Thai Union shares dropped as much as 6% Friday, heading for their lowest close since April 2021 and extending this year’s slide to 15.4%. That outpaced an almost 4% decline in Thailand’s benchmark stock index and a 2.7% fall in a gauge of food and beverage firms.

Red Lobster was hit hard during the early days of the pandemic as restaurant closures and other virus measures kept customers away, but business has since been stymied by rising costs of raw materials and labor. The $900 billion US foodservice industry is struggling with a severe worker shortage, with some companies not able to recruit enough employees even after boosting pay and benefits.

Read more: Restaurants Roar Back in US With Everything They Need But Staff

Thai Union had last year rolled out a series of measures to try and ease pressure for the restaurant chain, installing new management, raising prices of its dishes and implementing some cost cutting, said Thiraphong. It also said last year it would guarantee a portion of Red Lobster’s credit facility up to $65 million. 

The Thai seafood giant in 2016 paid $575 million 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. The company also owns the Chicken of the Sea and John West brands. 

Other highlights from Thiraphong include:

  • Thai Union’s pet food business will still be the main driver of earnings growth driver as people are more willing to pay for premium foods for their cats and dogs.
  • First-quarter sales growth is expected to slow as some customers may reduce their orders after a high volume of purchases in 2022 led to elevated inventories.
  • Recession concerns in Europe and US will probably have limited impact on the company’s tuna and seafood products, which are considered affordable basic foods.
  • Company plans to focus more on blue loans and bonds as cost of those borrowings are attractive compared with other funding.

(Updates with share price movement in fourth paragraph.)

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