December 21, 2010

 

Thai Union Frozen's 2010 net profit near 2009 level

 

 

Thai Union Frozen Products PCL sees its 2010 net profit to remain almost unchanged from last year due to a strong baht.

 

The firm expects the net profit to swell by 30% next year after its EUR680-million (US$894.38-million) takeover of French canned seafood business MW Brands, President Thiraphong Chansiri said Monday (Dec 20).

 

He said that its 2010 net profit will be similar to the record THB3.34 billion (US$110.6 million) posted last year, which came on the back of THB68.99 billion (US$2.29 billion) in sales. Sales in dollar terms this year should grow less than 10%, but the takeover of MW Brands is expected to lift total sales by 30% to US$2.8 billion in 2011.

 

Thai Union Frozen completed the takeover of MW Brands from New York-based Trilantic Partners, formerly the private-equity arm of the now-defunct Lehman Brothers, in October. 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.

 

In 2010, sales of MW Brands are expected at US$650 million while Thai Union Frozen's are projected at US$2 billion.

 

Thiraphong said Thailand's largest canned and frozen seafood product manufacturer and exporter by sales is targeting sales to reach US$4 billion in 2015.

 

The bulk of Thai Union's sales are in US dollars but its earnings are translated into Thai baht. The Thai baht has gained around 11% against the dollar this year.

 

The shrimp business, which accounts for 20% of total revenue, is the only sector that has been significantly hit by the baht's appreciation as 10% of its shrimp exports are based on raw materials in Thailand.

 

Thiraphong expects that the baht will continue to rise against the dollar but at a slower pace.

 

"It's a problem that every player in the same industry is facing. We have an advantage as we are bigger. To remain competitive, we'll continue to cut costs, adjust the product price and try possible financial tools to leverage with the baht appreciation," he said.

 

Thiraphong said the MW Brands deal should expand the company's gross margin, which currently averages 14%-16%, by two percentage points.

 

He said the 24% import tax charged by the EU on products produced outside Europe won't hurt the company as MW Brands has two plants, one each in Portugal and France. He added that to maximise production capacity of the European plants, MW Brands' production of products for markets outside Europe will be shifted to Thailand.

 

Thai Union, in which Mitsubishi Corp. holds an 8.2% stake, has been aggressively expanding into new markets to build its business, with a push into new markets in Russia along with an increasing focus on Eastern Europe, the Middle East and Africa.

 

After the consolidation, sales in the US will account for 38% of the total sales while those in Europe will jump to 33% from 11%.

 

But Tiraphong said the company won't be making any more major acquisitions over the next few years as it works to reduce its debt burden.