April 27, 2007

 

Thailand's CP Foods, TUF to set its sights on overseas operations on strong baht

 

 

Thailand's food conglomerates Charoen Pokphand Foods PCL (CP) and Thai Union Frozen Products PCL (TUF) said on Thursday (April 26) they will focus on their overseas operations in response to the baht's strong performance.

 

The appreciation of the baht against the US dollar has impacted the first-quarter revenues of TUF, a leading processor and exporter of canned and frozen seafood; and CP Foods, the food manufacturing and farm operating flagship of CP Group.

 

The two companies are expected to report their first-quarter earnings in mid-May.

 

CP Foods Chief Executive Adirek Sripratak said CPF will centre its operations in India, Malaysia and Vietnam to divert difficult domestic market conditions.

 

Adirek said the company has committed this year to investing THB4 billion (US$122 million) in new projects, including a new feed mill and poultry plant in Russia, aquaculture and animal feed projects in the Philippines, and feed and animal farming in Laos to size up half of its new investments.

 

CP's overseas operations, including exports, contributed about 35 percent of the company's revenue in 2006 amounting to THB125 billion (US$3.85 billion). CP expects a THB140 billion (US$4.32 billion) in revenues for 2007.

 

Due to bird flu and lower domestic prices, CP Foods saw a 63 percent decline in net profit in 2006 to THB2.5 billion, from THB6.8 billion in 2005.

 

Adirek said exports are to make a turnaround once Thailand's new free trade agreement with Japan takes effect.

 

Tariffs on frozen shrimp are to be cut to zero from 1 percent, 180 days after the pact was signed on April 3, while cooked chicken tariffs will fall to 3 percent from 6 percent.

 

These products account 15 to 20 percent of CP's total exports to Japan.

 

CP Foods exports to eight markets, including France, Hong Kong, Singapore, South Korea, Taiwan, and the US, and has accumulated 120 feed mills in 11 countries with a combined annual production capacity of 24 million metric tonnes.

 

TUF said its sales revenue growth was in single digits for the first time in several years, mainly as a result of the baht's strength.

 

TUF President Thiraphong Chansiri said the company's revenue has grown 10 percent for the past several years.

 

The company has projected revenue growth for 2007 of 8 to 10 percent in dollar terms, as a result of higher expenses and interest rates.

 

The company, however, did not provide a 2007 revenue projection in baht terms, on expectations the baht could remain strong against the dollar throughout the year.

 

TUF reported a 10 percent growth in dollar sales last year to US$1.46 billion. In baht terms it recorded growth of just 3 percent to THB55 billion.

 

Thiraphong said sales expectations might be met by year-end if baht stays above THB35 against the dollar.

 

TUF's overseas operations - mainly involving its Chicken of the Sea canned tuna brand through New York-based seafood distributor Empress International, and Chicken of the Sea Frozen Foods, a new company set up last year to distribute frozen seafood - accounted for 49 percent of sales, with the remaining 51 percent deriving from domestic operations.