TUF mulls further acquisitions

Corporate April 03, 2014 00:00


3,703 Viewed

THAI UNION Frozen Products president and chief executive Thiraphong Chansiri has hinted at a return to an acquisition spree.

Speaking at a press conference yesterday, Thiraphong said he would spend more time searching for new business opportunities this year, as the world’s leading seafood company has kept its target to grow its sales by as much as 25 per cent by 2015.
Though the TUF boss declined to be specific on his firm’s merger and acquisition targets, the huge revenue-growth goal is unlikely to be met through organic growth alone. The world’s largest canned-tuna producer recorded revenue growth of only 6 per cent last year when it had faced a “perfect storm” in all of its major businesses, and aims to grow by 9 per cent this year.
“I will spend more time to look out for opportunities this year,” he said. “But it is not possible that we will cut any deal in this second or third quarter.” 
Thiraphong said the just came back from a business trip to many South American countries, including Ecuador, which is the second-largest canned-tuna-producing country after Thailand, thanks partly to its tax-free access to the European Union. He said the trip was very much about exploring, and it would need more study to determine investment opportunities for TUF in the region.
TUF will this year focus on streamlining its business and enhancing its free cash flow and will not invest in unnecessary items. Thanks to its reduction of capital expenditure to Bt3.5 billion this year, the company expects to improve its profitability and cut down its debt-to-equity ratio to 0.8:1 by the end of this year. 
Thiraphong said business results in the first quarter, due to be submitted to the Stock Exchange of Thailand soon, were in line with its expectations. Thanks to reduced investments and a low base of last year when it recorded a 39-per-cent fall in net profit, TUF expects an earnings jump this year. The firm expects its gross margin to recover from 12.6 per cent last year to no less than 14 per cent this year and hopes it will return to the normal range of 15-16 per cent in 2015.
Among the positive factors are the average price of tuna, which is expected to fall to the lowest level in four or five years, the depreciation of the baht to the range of 32.2-32.3 per US dollar, and an expectation of breaking even in its US pet-food business. Its shrimp business, nevertheless, will continue to be affected by early mortality syndrome for another year, he said.
Thiraphong said the company would seek its shareholders’ approval today (Thursday) to expand its debenture-issuance ceiling by another Bt10 billion, since it has used up the previously approved amount of Bt25 billion. The approval will give the firm more flexibility to manage its finances, since the global trend of interest rates is upwards. 
He said an ideal portion of long-term versus short-term debts was 50:50, but it would wait for the appropriate time to issue new debentures.
“Even with the additional Bt10 billion in debentures, our long-term loans would still not exceed 30 per cent of our total debts. Normally, short-term loans have the lowest cost,” he said, explaining why TUF was in no rush to achieve the 50:50 ideal.
Thiraphong said TUF would appoint a head of innovations, a newly created position, next month as part of its strategy to put more emphasis on value-added businesses and research and development activities. However, the company will not increase its R&D budget much from the current Bt150 million per year, preferring to focus on expanding its talent pool, especially in the science and technology field.
After successfully becoming a global business, TUF is now focusing on upgrading itself with a globally integrated management and structure, and has been adding a number of internationally experienced expatriates. The company recently appointed a head of strategy and chief financial officer to take care of the group’s global operations, not just the parent company.

Most view