May 4, 2007

Strong baht stifles profits of Thai Union Frozen Products

Earnings of Thai Union Frozen Products (TUF) are expected to remain at THB 424 million (US$ 12.9 million) during the first quarter due to the strong baht.

The baht, which has risen by about 10 percent on-year, is precipitating a sales drop of 9 percent on-year to THB 12.5 billion (US$381.7 million) the first quarter.

Currency concerns remain a worry as 90 percent of the company's export-oriented sales are in US dollars.

Gross margins should narrow from 15.4 percent to 14.8 percent.

The company is expected to turn in a better performance for the second quarter based on seasonal factors and recent declines in domestic interest rates, analysts said. The company's competitive tuna prices should also help it stay ahead.

With the strong baht, sales for 2007 are estimated to grow 2 percent on-year with a gross margin of 15.4 percent. The forecast excludes the impact of the Japan-Thailand FTA. The agreement is expected to boost shrimp and tuna exports in the medium to long term since taxes are lowered, analysts said.

Canned seafood, shrimp feed and pet food are expected to lead growth.

Profit is expected to rise 7 percent on-year to THB 2 billion (US$61 million) this year.

Half of TUF's sales is derived from frozen seafood exported to the US while the other half is generated domestically.