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Seafood exporters cool to US downgrade

Thai industry unlikely to be hit hard by trafficking report

The United States' decision to downgrade Thailand to the lowest level on the State Department's "Trafficking in Persons" (TIP) 2014 report is expected to have a limited impact on Thai frozen-seafood companies because of their relatively small export volume to the US.

Those companies include industry giants Thai Union Frozen Products (TUF) and Charoen Pokphand Foods (CPF).

Asia Plus Securities said it would keep monitoring the impact of the TIP downgrade but according to its preliminary estimate, it believed the impact on frozen-seafood operators would be limited.

It noted that TUF exports to the US made up 13.4 per cent of its revenue, while CPF's was just 1 per cent of its total.

Furthermore, both companies had good relationships with clients overseas and their product quality was trusted globally. Even with the downgrade, orders from overseas markets were unchanged.

However, Asia Plus said the downgrade might make it difficult for TUF and CPF to capture new clients in the future, which could affect their future growth.

Labour costs in the sector are also rising, accounting for 8 per cent of TUF's expenses and 12 per cent of CPF's.

As a result of the negative factors, the two companies' stock prices might experience short-term pressure.

Thanachart Securities yesterday released its research on the situation, saying it did not expect TUF and CPF to face foreign bans as both companies were leading seafood exporters and had good communications with their clients in terms of their compliance with human-rights standards.

TUF and CPF have not seen any negative response from their clients, according to Thanachart Securities.

It noted that CPF's shrimp exports to the US and the European Union were less than 2 per cent of its total revenue in 2013. As a result, the securities firm expects the downgrade to have a short-term impact on CPF.

It said TUF had diversified by importing skipjack and yellow-fin tuna from overseas that met EU standards, while the company's frozen-shrimp exports to the US and the EU made up only 7 per cent of it total revenue.

State agencies and Thai food exporters were preparing to allow US importers to examine Thai companies, which would allay any fears and boost the sector. Thanachart Securities, therefore, does not believe the downgrade will have a signifi-

cant impact on the operations and fundamentals of TUF and CPF.


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