Thai food giants expected to gain from US tax cuts

Corporate April 28, 2017 01:00

By The Nation

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Thailand's agricultural and food sectors are expected to gain from US tax reductions, according to a brokerage house. Companies operating in the United States could gain from a massive tax cut for businesses and individuals in the country, said Asia Plus Securities, which has raised its 2017 net-profit forecasts by 3.0 per cent for Thai Union Group (TU) and by 0.4 per cent Chareon Pokphand Foods

The US administration under President Donald Trump on Wednesday unveiled plans to cut taxes for businesses and individuals, slashing the corporate rate to 15 per cent. Tax brackets for individuals would be compressed from seven to just three – 10 per cent, 25 per cent and 35 per cent, lower than the current top rate of 39.6 per cent, according to Agence France-Presse.

Consumers will have more money to spend in the US, Asia Plus Securities said.

The tax cuts could have direct positive impacts on TU, which has subsidiaries distributing canned tuna under the brand Chicken of the Sea as well as shrimp and feed-meal businesses in the US.

Asia Plus Securities revised up its forecasts for TU's net profit by 3.0 per cent for 2017 and by 2.8 per cent for 2018. These estimates are based on the US corporate tax of 15 per cent from this year onwards.

TU's businesses in the US are expected to record net profit of Bt1 billion this year and their profit contribution to the company is expected to rise by Bt200 million or 3 per cent of the total. 

In addition, the reduction in personal-income-tax rates could have indirect positive impacts on TU's US restaurant business Red Lobster, assuming that they would permit more consumer spending. TU holds a 25-per-cent stake in Red Lobster.

CPF also gains from the planned US tax cuts but at a limited level, Asia Plus Securities said. The Thai company sells frozen ready-to-eat food in the US under the Bellisio brand.

The brokerage house increased its estimates for CPF's net profit by 0.3 per cent this year and 0.3 per cent next year. The US contribution is expected to rise by Bt55 million or 0.3 per cent of CPF's net profit this year.