TU eyes higher sales via added value

TU eyes higher sales via added value

Strong baht hurt Q1 result, target revised

Thai Union workers process shrimp at a plant in Songkhla province. (Photo by Wichan Charoenkiatpakul)
Thai Union workers process shrimp at a plant in Songkhla province. (Photo by Wichan Charoenkiatpakul)

SET-listed Thai Union Plc (TU), a global seafood conglomerate, targets 3-5% sales growth this year thanks to greater emphasis on creating value-added products for sustainability.

The company adjusted its previous sales growth target of 5% to a range of 3-5% because of exchange rate volatility, said investor relations manager Bunlung Waiyanont.

TU reported first-quarter sales of 29.7 billion baht, down 0.1% year-on-year, partially attributed to the depreciation of the euro and pound against the baht. Excluding the foreign exchange impact, sales would have increased by 2.3% year-on-year, driven mainly by sales growth of frozen and chilled seafood as well as pet care.

The company's sales revenue also depends on other factors such as a decline in the prices of tuna and shrimp, said Mr Bunlung.

"Tuna sales could be stable as the price is likely to have stabilised, with the margin expected to improve. Sales of shrimp and salmon are likely to continue growing, supported by growing demand," he said.

TU is moving more towards value-added products, recently beginning commercial operations in Germany for tuna fish oil, which offers a high profit margin in Europe, said Mr Bunlung.

Investment in this product, which was developed through innovation and R&D, is around 1 billion baht. The product is expected to break-even by December, he said.

TU is also planning to submit an IPO filing for subsidiary Thai Union Feedmill, a manufacturer and distributor of animal feeds, to be listed on the Stock Exchange of Thailand. The IPO listing is expected to be completed in the final quarter.

The escalating Sino-US trade row produces an "opportunity" for the company because there are more customer orders for TU products from US-based customers to avoid higher import tariffs in China, said Rittirong Boonmechote, president of global frozen and related business.

"Since last year we have seen an increase in orders. As a producer and exporter of seafood, higher Chinese tariffs are a positive result for us because customers have turned to us for new orders," said Mr Rittirong.

Chinese businesses have also been contemplating a move to relocate their production bases to Southeast Asian countries, especially Thailand and Vietnam, to offset the impact, he said.

The year-long trade frictions between the world's two biggest economies worsened recently when the Trump administration announced an extra 25% tariff on thousands of Chinese products worth about US$200 billion. On the other hand, China announced a tit-for-tat tariff hike on $60 billion worth of US goods, coming into effect from June 1.

Brexit had an adverse effect on TU because customers have to pay more for seafood products as the pound depreciates, said Mr Rittirong.

The company is trying to focus its operations more towards Thailand and Asia on the back of lower demand in Japan, the EU and the US, he said, adding that TU is still committed to operations in Japan, the EU and the US.

"We are not looking into any mergers and acquisitions at the moment because we want to focus on our core businesses and reduce the debt-to-equity [D/E] ratio. But we are open for new investment opportunities in startups," said Mr Rittirong.

The company's D/E ratio stood at 1.36 times in the first quarter, below the two times ceiling but higher than the 1.1 times target.

TU shares closed on Tuesday on the SET at 18.50 baht, unchanged from the previous day, in trade worth 457.2 million baht.

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