Thai Union Group Investing in a Vietnam Seafood Processor
Songkla Canning PCL. (SCC), Thailand's major processor and exporter of canned seafood and a subsidiary of Thai Union Frozen Products PCL. (TUF), will make an investment worth Bt110 million in Yeuh Chyang Canned Food Co., Ltd. (YCC), a Vietnam-based processor and exporter of canned seafood. The investment is expected to provide Thai Union Group with several business advantages.
According to Mr. Thiraphong Chansiri, president of TUF, "Our board of directors has passed a resolution in favor of such acquisition through Songkla Canning. We believe that TUF and Songkla Canning will benefit from the investment. Through this transaction, Songkla Canning will become the biggest shareholder with a 51% stake of Yueh Chyang. This will add more processing capacity to the group as well as expanding its geographic manufacturing base. The investment will be close to Bt 110 million which is equivalent to fifty-one percent of the current book value of Yueh Chyang. We consider the purchase price appropriate given the market opportunity and the expected return on investment.
"Yeuh Chyang is one of the leading canned seafood processors and exporters in Vietnam. It is located in Long-An province employing over 1,000 workers with a cold storage capacity up to 400 tons. The firm's three main products are pasteurized crabmeat, canned shellfish and tuna with the United States/Canada, the European Union and Asia as its major export markets. Its tuna processing capacity has been small, compared with those of crab and shrimp. However, the firm is ramping up its capacity at the moment. This will further add to the processing capacity of Thai Union Group. Because of this expansion as well as its small base, we expect its tuna sales to jump 47% in 2008 and 49% in 2009 respectively."
"The primary objective of this investment is to further diversify our group's geographic manufacturing base. Other equally important factors include the low labor cost and the stable foreign exchange rate which are critical to our cost competitiveness. The labor cost in Vietnam is generally low. Also, Vietnamese Dong has been holding a very stable relationship with the U.S. dollar as opposed to Thai Baht. Vietnamese Dong moved less than 1% against USD from a year ago. Moreover, the trade relationship between Vietnam and the United States as well as the European Union has been improving. This provides us with even more business opportunities in those markets," explained the president.
"This investment in Vietnam will add to our existing facilities which now include three fish processing plants in Thailand, one plant in Indonesia and one in American Samoa. In addition to diversification of our production base, our presence in Vietnam will provide us with more business opportunities in the future. We are confident that the investment will work to our advantages," added the president.
"In the past few years, Vietnam has achieved remarkable economic growth. After becoming a member of WTO, the country is now subject to much less trade barriers like before. Geographically, Vietnam's location is favorable for the seafood industry, given its coastline which is comparable to that of Thailand. Out of its population of 85 million, 45 million are of working age. Over 90% of the total population is literate. Besides the low labor cost, the strong work ethics of its workforce gives the country a competitive edge. With all these positives, we are convinced that we should be able to generate satisfactory returns from this investment," concluded the president.