The Nation



TUF sees some business units turn the corner



Thai Union Frozen Products (TUF), the world's largest canned-tuna company, expects its profits to grow by more than 30 per cent next year, thanks to a partial turnaround of its businesses, says its president Thiraphong Chansiri.

Such spectacular growth, however, will come on top of an expected 50-per-cent plunge in profit this year.

The Thai seafood company, through several acquisitions over the years, owns many of the world's top canned- and frozen-seafood brands. These include John West in Britain, Chicken of the Sea in the United States, Petit Navire in France, Mareblu in Italy, and Century in China.

TUF expects to post sales revenue of US$3.6 billion to $3.7 billion (Bt116 billion to Bt119 billion) this year, about 8-10 per cent lower than its $4-billion target.

Thiraphong said 2013 was one of the hardest years for TUF but it had a quite positive view for next year, when it forecasts profits to grow by at least 30 per cent and sales to rise by 10 per cent. Gross margin is expected to recover from 12 per cent booked in the first half of 2013 to at least 14 per cent next year, though still lagging the 16-17 per cent recorded in 2010-2011.

"The lowest point has passed. The gross margin was 12 per cent in the first half and 13.9 per cent in the third quarter, starting to change course," he said.

Thiraphong cited four major factors contributing to its 2013 hardship. First was early mortality syndrome (EMS) in shrimps, which contribute 20 per cent of its sales revenue. Then there was fluctuation in the price of tuna, which accounts for nearly half of its sales. The political crises in the Middle East affected its sales in that region in the second quarter, while losses at its overseas subsidiary US Pet Nutrition continued.

"Although EMS is still around, the major problem is not the disease [itself], but the orders that were placed earlier [at prices based on the old costs] that caused us to incur losses in the first half. But since August, we have begun to adjust the prices," he said.

Furthermore, the price of tuna has shrunk to $1,500 a tonne at present, the lowest in three years, and the Middle East business has returned to normal since the third quarter. US Pet Nutrition, meanwhile, is expected to stop posting losses next year.

Cutting its capital expenditure from the Bt6 billion earmarked earlier to Bt4.5 billion this year and Bt3.5 billion in 2014, TUF is now emphasising improved efficiencies and profitability. It aims to reduce its debt-to-equity ratio from 1:1 this year to 0.8-0.85 by the end of next year.

Nevertheless, TUF remains committed to its goal to increase sales to $5 billion by 2015 and to $8 billion by 2020. Mergers and acquisitions will necessary for the company would to achieve these aggressive targets. "But we have nothing in the pipeline at the moment," he said.

M&A and organic growth will also help TUF achieve its target of creating a No 3 business - after tuna and shrimp, which are currently the largest and second-largest business units - that contributes at least 10 per cent of the group's revenues in the next two or three years. The candidates for this third-largest business unit are pet food, salmon, and sardine and mackerel, which currently contribute only 7, 5 and 4 per cent respectively.

The objective is to achieve a more balanced business portfolio, Thiraphong said.

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