August 29, 2013

Thai Union Frozen halts completion of new shrimp plant

Thai Union Frozen Products Plc (TUF) has decided to delay plans for the completion of a new shrimp processing plant, which was originally intended to be finished by mid-2014.

The decision comes after the disappointing results from the firm's second financial quarter, which led TUF to diminish its revenue projection from US$4 billion to US$3.8 billion. The firm attributed this situation to a very volatile currency and to an important early mortality syndrome (EMS) outbreak.

According to newspaper report, Wai Yat Paco Lee, TUF's deputy general manager expressed at the Stock Exchange of Thailand session that the plans for the new shrimp factory to replace the old one had been shelved mainly due to an EMS outbreak, which decimated shrimp populations in Asia hitting Thailand, China, Vietnam and Malaysia and caused havoc and heavy losses to the industry. The EMS epidemic put shrimp prices to the roof.

"Since the third quarter of 2012, the shrimp business has been tough due to an inadequate supply of raw materials. This year, the situation has remained challenging because the disease has yet to be tackled and we expect EMS will remain with us until next year," the executive remarked.

The company has now decided to derive part of its shrimp production to the Samut Sakhon plant of Pakfood Plc, 75% of which belongs to TUF. The firm estimates the supply for this year is projected to drop from 500,000 tonnes to 250,000 tonnes.

For the first half of 2013, TUF reported that its sales increased by 5% on-year, to THB1,760 million (US$50 million), which were relatively the same in Thailand Baht terms, at THB52.560 million (US$1,630 million). Meanwhile, its net profit declined from THB2,470 million (US$70 million) to THB1,030 million (US$30 million). About 19% of the firm's profits during the first six months of 2013 came from frozen shrimp, with an additional 3% coming from shrimp feed.

Tuna prices have been stable and have dominated the 50% of the company's business. TUF expects tuna prices to improve for the remainder of 2013, which would help rebound its profits.

Thai Union Food's president, Thirapong Chansiri, had stated earlier this year that poor financial results during the first financial quarter would badly affect the outcome of the second financial quarter.