March 2, 2011

 

Thai Union Frozen's net profit 2010 lowers 14%

 

 

Thai Union Frozen Products PCL posted a 14% decline in 2010 net profit, hit by a triple blow of higher raw material costs, a stronger baht and a heavy debt burden following MW Brands' takeover.

 

Thailand's largest canned and frozen seafood exporter and manufacturer by revenue posted a net profit of THB2.87 billion (US$93.9 million) last year, according to its filing to the Stock Exchange of Thailand Tuesday (Mar 2).

 

Despite a 13% rise to US$2.27 billion in sales in US dollar terms, the baht's 10.6% appreciation in 2010 took its toll on sales in baht, which grew just 4% to THB71.51 billion (US$2.33 billion), the firm said.

 

The EUR680 million acquisition of MW Brands from New York-based Trilantic Partners, formerly the private-equity arm of the now-defunct Lehman Brothers late last year, has lifted Thai Union Frozen's position to the world's biggest canned tuna producer by sales. The transaction has come at a price, however, causing a huge debt burden to the company.

 

The firm's debt-to-equity ratio shot up to 1.6 times after the transaction in October from 0.72 times at the end of the third quarter.

 

Consequently, the company has squeezed its dividend payment to not exceeding THB1.2 billion (US$39.16 million) a year from at least 50% of net profit.

 

In 2010, Thai Union Frozen paid a THB1.26 (US$0.04) per share dividend for its January to September operations and will pay another THB0.34 (US$0.01) per share dividend for the fourth quarter. Its dividend payment will total THB1.44 billion (US$46.99 million), or 50.04% of net profit, in 2010. In 2009, it paid a THB1.92 (US$0.06) per share dividend, or a total of THB1.70 billion (US$55.47 million), on a record net profit of THB3.34 billion (US$108.99 million).

 

"TUF only started to consolidate MW Brands books into the group in November 2010. Given just November and December of 2010 performances are included, we can already witness its significant contribution to the tuna product line," President Thiraphong Chansiri said. "Nevertheless, TUF is confident that sales improvement could become even more obvious into 2011 when MW Brands are fully consolidated into the group."

 

Thiraphong has previously said the firm targets sales to reach US$4 billion in 2015.

 

Also weighing on earnings was the highly volatile raw material prices of tuna and shrimp. Shrimp prices, in particular, rose to their highest level in recent years and remained elevated for a considerable amount of time during the year, the firm said, adding that the strong baht exacerbated the cost of production.

 

"Into 2011, there are nevertheless evident signs of a recovery. These provide the management confidence that greater opportunities are ahead and a more promising business outlook is taking shape. Benefits of synergies between TUF and MW Brands will be a factor to watch in 2011," Thiraphong said.

 

MW Brands owns John West tuna, Petit Navire, Hyacinthe Parmentier and Mareblue, and has a strong presence in France, the UK, Ireland, the Netherlands and Italy.

 

Of Thai Union Frozen's total sales, 46% was from the US - where its canned tuna Chicken of the Sea brand is predominantly sold - followed by 16% in Europe and 12% in Japan.