August 3, 2010

 

Thai Union's outlook remain bright after Q2 profit falls

Thai Union Frozen Products PCL said Monday (August 2) that its H2 earnings should recover after an 8.5% fall in Q2 net profit due to higher raw material costs, foreign exchange conversions and asset write-downs.

 

The sales of Thailand's top canned and frozen seafood product manufacturer and exporter was hurt by the higher baht, which was 7% higher against the dollar in the quarter on-year. However, analysts said the fall in profit was not so significant because the market is focused on the company's expansion following last week's announcement it plans to buy French canned seafood business MW Brands for EUR680 million (US$884.5 million).

 

In the April-June period, Thai Union Frozen Products posted net profit of THB873.1 million (US$27.1 million) compared with THB954.5 million (US$29.66 million) in the second quarter last year.

 

"Investors are not so worried about the second quarter results. The MW Brands acquisition seems to be positive to the company over the long term," said Ayudhya Securities analyst Sittidath Prasertrungruang.

 

"Even though the company's sales in dollar denominated terms rose 6% to US$529 million from a year ago, the rise in the value of the baht against the dollar resulted in flat sales growth in baht terms," the firm said.

 

Second quarter sales, of which 49% were from the US, eased slightly to THB17.09 billion (US$530 million) from THB17.2 billion (US$534 million) a year earlier.

 

"This year saw much greater fluctuations of shrimp and tuna prices than in the previous year. The unusually warm temperature resulted in a delayed shrimp harvest while tuna prices shot up to US$1,700 per tonne. The MW Brands deal is also expected to help the company reach its sales target of US$3 billion before its 2012 deadline. The company is confident that it can attain further growth in the second half of the year, as this is the company's typical high season," President Thiraphong Chansiri said.

 

Thiraphong said the situation is expected to return to normal in the last two quarters of the year. In the first half, Thai Union Frozen Products posted a 6% rise in net profit to THB1.7 billion although sales dropped 4% to THB33.42 billion.

 

According to the company, Q2 net profit would have exceeded THB900 million (US$27.96 million) without provisions associated with the sale of the American Samoa plant to the Samoan government.