March 2, 2004

Thai Union Posts Huge Profits

Thai Union Frozen Products posted a 47% rise in net profit last year despite a 60% drop in fourth quarter earnings. Net profit reached 2.27 billion baht on total revenue of 40.83 billion baht.

"The fourth-quarter drop was anticipated, mainly because of the looming US anti-dumping duties on Thai shrimp, a stronger baht, and lower tuna prices," said Prasit Sujiravorakul, analyst at Capital Nomura Securities Plc.

"The pressure from US anti-dumping duties was expected to last until June 8, when the US government makes a preliminary finding that could result in the imposition of punitive import tariffs."

However, Mr Prasit said Thai companies, particularly TUF, the country's largest processor and exporter of canned and frozen seafood, would stand to gain if the US government imposed a relatively low penalty on Thai exports compared to other countries.

The US International Trade Commission (ITC) ruled last month that there was "reasonable indication" that certain low-priced shrimp and prawns from six countries - Thailand, Brazil, China, Ecuador, India and Vietnam - were hurting US shrimpers.

According to Thiraphong Chansiri, TUF's president, the company generated revenue of US$974.5 million in 2003, up 22% from 2002. In baht terms, revenue was 40.34 billion baht, up 18% from the previous year. Earnings per share for the year stood at 2.65 baht.

Mr Thiraphong attributed the jump in profit to increased sales in all product lines, including those of its Chicken of the Sea brand sold in the US.

However, the company saw a significant drop of 60% in net profit in the fourth quarter of last year to 206.2 million, compared with 511.1 million baht in the same period of the previous year.

"The decline in net profit in the fourth quarter was due to a stronger baht and lower tuna costs of competing packers located in the Eastern Pacific Ocean. The situation negatively impacted our pricing for tuna products and consequently brought down our margins, despite a 4% year-on-year increase in revenue from tuna products," said Mr Thiraphong.

According to Mr Thiraphong, the company increased its promotional and advertising expenses for its products both domestically and overseas during the period.

Despite the net profit drop in the fourth quarter of 2003, revenue rose 16% year-on-year to 10.07 billion baht.

According to analysts, TUF was expected to see a further drop in net profit this year to 1.92 billion baht,