TU sees record sales as costs dent profit
SET-listed Thai Union Group Plc (TU), the world's biggest producer of canned tuna, posted record sales in the third quarter, but net profit dropped as rising raw material prices led to weaker profit margins.
President and chief executive Thiraphong Chansiri said TU had consolidated third-quarter sales of 35.1 billion baht, up 7.7% year-on-year, marking a second straight quarter of record sales.
"This quarter clearly showed that demand for our products remained strong despite a challenging market for raw materials and continued difficult economic conditions in various markets around the world," Mr Thiraphong said.
Gross profit fell by 12.4%, while gross profit margin was 14.1%, down from 17.3% a year earlier.
Continued high salmon raw material prices and higher than expected tuna prices contributed to the weaker margin, while a moderate foreign exchange loss of 30 million baht was recorded.
This was partly offset by stringent cost controls in the third quarter, with selling, general and administration costs as a share of sales coming in at 8.7% -- the lowest level in four years -- as well as some positive one-time effects.
As a result, net income remained stable with a 1.9% year-on-year decline to 1.59 billion baht.
During the first nine months of 2016, sales in the US continued to play an important role in the company's revenue, accounting for 39% of total sales year-to-date.
The domestic market accounted for 8% of total sales, while Europe contributed 33%, widening from 29.4% in full-year 2015. Japan contributed 6% of total sales.
In the first nine months, the sales contribution from TU's brands remained stable at 43% year-to-date, with the balance coming from the company's private label.
Third-quarter sales for the frozen and chilled seafood business reached 15.1 billion, up 14.7% year-on-year. The rise was due to the Chez Nous acquisition during the third quarter, improved shrimp exports and the consolidation of Ruegen Fisch in Germany. Pet care and value-added sales surged to 5.26 billion baht, up 28.3% year-on-year.
In October, TU made a US$575-million strategic investment in Red Lobster, the world's largest seafood restaurant chain, for a 25% equity stake and 10-year convertible preferred units of another 24%.
Additionally, TU acquired a minority interest of 18% from its subsidiary Chicken of the Sea Frozen Foods.
TU shares closed yesterday on the Stock Exchange of Thailand at 22.20 baht, up 10 satang, in trade worth 354 million baht.