TUF maintains sober Q2 outlook

TUF maintains sober Q2 outlook

Seafood firm affected by costs, strong baht

Thai Union Frozen Products Plc (TUF), the world's largest tuna company, sees little chance its bottom line will recover in the second quarter, citing high raw material costs and the strong baht.

Deputy general manager Wai Yat Paco Lee said TUF expects several challenges in the market this quarter with risks hampering higher sales and production.

However, he is more optimistic about the third and fourth quarters concerning financial results and export targets.

"Higher raw material costs and the continuing shrimp epidemic were a big part of the drop in sales and production, leading the company to increase product prices in the first quarter," he told a briefing at the Stock Exchange of Thailand yesterday.

TUF has processing plants in Thailand, Indonesia, Vietnam and the United States. Its brands include Chicken of the Sea and John West Foods.

Genetic problems in baby shrimp, widespread disease outbreak, and poor farm management have caused early mortality syndrome (EMS) in shrimp, Mr Lee said.

To cope with the lower supply, TUF plans to import 20-30% of its shrimp from India and Ecuador.

Baht appreciation also lowered sales by 3.4% year-on-year in the first quarter to 24.4 billion baht, as tuna and shrimp sales fell but pet food and value-added products compensated.

Net profit fell 54% year-on-year to 674 million baht for the quarter. Mr Lee said TUF implemented a hedging strategy to mitigate baht appreciation.

Its revenue target is US$4 billion (120 billion baht) this year.

Mr Lee said sales of frozen food have improved as the US economy picks up, but exports to Europe are stagnant due to material price volatility, the ongoing sovereign debt crisis, and high import taxes.

Although the company plans to introduce products in China, Chinese consumers are still lukewarm on canned tuna, making market penetration rather small with room for growth, he said.

To serve the upcoming Asean Economic Community, TUF is preparing to enter Indonesia, Cambodia, Laos, Myanmar and Vietnam, where it sells canned sardines.

And despite attractive investment opportunities in Myanmar, TUF remains sceptical about electricity, water supply and logistics development there.

The firm might begin investing in Myanmar in three to five years, said Mr Lee.

Shares of TUF closed yesterday on the SET at 59.50 baht, up two baht, in trade worth 316 million baht.

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