June 12, 2007

 

Thai Vegetable Oil sees marginal 2007 profit increase over rising imported soybean costs

 

 

Thai Vegetable Oil (TVO), Thailand's largest soybean feed producer, said on June 11 it expected 2007 profits to increase by only 6 to 7 percent due to soaring costs of imported soybeans which is seen to continue in the next three to four months, the company's executive said.

 

Executive vice president Sethasan Sethakarun said the fall in global supply would continue at least into the third quarter, putting a cap on the company's profit for the year.

 

The company imports 90 percent of its soybeans with an average import price ranging from US$330-US$360 per tonne this year, up from US$270-US$280 per tonne in 2006, he said.

 

The streamlining of US farm policy had resulted in fewer soybean acres, pushing up global soybean prices, although new supply from Argentina and Brazil late this year should help, he said.

 

TVO had net profit of 471 million baht (US$14.39 million) in 2006 on revenues of 15 billion baht (US$459.58 million).

 

The falling demand for soybean-based animal feed from pig farms which reduced supply in response to falling pork prices has resulted to a flat first quarter revenues of 3.6 billion baht (US$110.27 million), he said.

 

Thai Vegetable has a daily soybean crushing capacity of 4,000 tonnes and supplies local feed industries, among which are Thai conglomerate Charoen Pokphand Foods.

 

TVO accounts for 30 percent of the local market share and competes with imported soymeal mainly from Brazil, Argentina and India. It also supplies soybean oil for to Singapore, Hong Kong and the Philippines and to China.

 

A pending free trade agreement with the United States would eliminate Thai import duties on soymeal, now at 4 percent, adding to pressure on domestic producers.

 

However, the trade deal has been delayed due to Thailand's prolonged domestic political crisis and may not come into effect until after a general election scheduled for late 2007, Sethasan said.

 

Thai Vegetable shares have risen 18.9 percent so far this year, outperforming a 10.3 percent rise of the Thai stock market.