Tuesday's release of Q1 results from seafood giant Thai Union is providing a bit more clarity into measures US restaurant chain Red Lobster is taking to stay afloat as the impact of the coronavirus continues to unfold.

Thai Union, which owns shelf-stable seafood brand Chicken of the Sea, also owns a 25 percent stake in the casual-dining seafood chain, which operates over 700 outlets in North America, the majority of which are in the United States.

In its Q1 report, Thai Union said Red Lobster continued to be a drag on the company's profits, a familiar refrain sprinkled throughout many of the company's quarterly reports since it acquired a stake in Red Lobster in 2017 for $575 million (€516 million).

"At the moment, the seafood restaurant chain is focused on large-scale cost reduction and cash preservation," Thai Union wrote in the quarterly report. It said Red Lobster currently has over $200 million (€184 million) in cash on hand.

The chain has also paused advertising, reduced capital expenditures to maintenance only, cut executive pay, and is continuing renewal and rent negotiations.

While all of its units are closed to in-restaurant dining, 60 percent are still open for takeout only. This off-premise business has been growing rapidly, said Thai Union, recently reaching an increase of over 300 percent compared to pre-coronavirus levels.

"The new, one-paged menu continues to find a lot of attraction and gives customers 'an everyday reason to come,'" Thai Union said.

One day at a time

While Thai Union's investment has yet to pay off , the company appears to have few alternatives but to wait out the current coronavirus-inspired foodservice collapse.

With a targeted management reshuffle last August, Thai Union was hoping for an EBITDA improvement at the restaurant group, but it is doubtful now when this will happen.

"Red Lobster was already suffering losses because of tough competition in the US market. Now, with Covid-19, I am not sure how they will recover," Bualuang Securities Analyst Prasit Sujiravorakul told IntraFish. "And they seem hesitant as to whether to convert their preferred stock into common shares." adding that any recovery that does happen will certainly not be coming in the second quarter, which he expects to only show further downturn on the first.

The situation puts Thai Union in a challenging spot, but Chatsatien believes the seafood giant sees Red Lobster as a long-term investment.

"In a normal situation, Red Lobster would be contributing to Thai Union's net profit. Thai Union aims to improve Red Lobster's profitability in the long term by synergizing the supply chain with its seafood business in the United States," said Trinity Securities Analyst Tanapat Chatsatien.

What is clear is that for Thai Union, there is now very little choice but to play the long game. "While management might be considering selling, they would not find a buyer in this environment," said Sujiravorakul.

US-based private equity firm Golden Gate Capital is the majority owner of the restaurant chain.

In 2014, Golden Gate Capital acquired Red Lobster from former owners Darden Restaurants for $2.1 billion (€1.9 billion) in cash.

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Red Lobster clings to 'cash preservation' strategy to stay afloat