May 30, 2007

Thai Union Frozen Products confident on growth target amid strong baht

Despite strong appreciation of baht, Thai Union Frozen Products Plc (TUF) is optimistic in reaching its growth objective based on the company's good performance in the first quarter.

TUF-Thailand's largest processor and exporter of canned and frozen seafood-has set a growth target of 15 percent in terms of profit and 8 percent in terms of revenue this year after a 6 percent profit decline last year to 1.96 billion baht, down from 2.08 billion a year earlier. In 2006, sales revenue increased by 3 percent to 55.03 billion baht or 10 percent to US$1.45 billion in dollar terms.

According to Thiraphong Chansiri, the company's performance is seen to do better this year than in 2006 to which he referred to as "one of its most troubled years" as the baht rose by 13 percent against the US dollar. Last year also saw fuel prices shoot up, interest rates rose steadily and tuna prices surged to US$910 per tonne from US$850 a year earlier, while wages doubled.

Thiraphong says they are closely monitoring the performance of the baht as its further strength may cause serious problems for the entire food export industry.

He added the industry's profit would drop by 8 percent for every one-baht appreciation against the greenback.

For the first quarter, TUF's sales in baht terms fell 7 percent, or 12.80 billion baht, from 13.72 billion in the first quarter of 2006, while in dollar terms they grew by 3 percent to US$361.6 million. Total earnings fell by 6 percent to 13.02 billion baht from 13.87 billion while net earnings rose 27 percent to 527.7 million baht during the period.

During the first quarter, profits increased by 27 percent from last year, thanks to tight cost controls and improved operational efficiency which drove down costs. Thiraphong says hands-on financial control helped reduce the firm's interest burden. Furthermore, the operating performances of our US subsidiaries were quite positive during the period as the TUF's sales in US dollar terms managed to grow further.

TUF's main destination is the US which accounts 55 percent of its products, followed by the European Union, Japan, Asia, Africa, Australia, the Middle East and South America. Thiraphong said Japan could be their second biggest buyer after Thailand signed the Japan-Thailand Economic Partnership Agreement (JTEPA), which fully supports canned tuna and pet food exports and will be shipped duty-free thereafter.

Thiraphong also said High Health (Thailand) Co, a joint-venture firm between TUF's subsidiary, Thai Union Feedmill (TFM), and US-based shrimp breed developer High Health Aquaculture, would also help further develop the group's strength in processing and exporting shrimp with its more integrated process, starting from breed selection, hatchery and processing to distribution to retail outlets.