"TUF" Clarifies its First Quarter's Maintaining Growth in US Dollars Sales Despite Facing Persistently Challenging Factors

TUF announced its 2013 operating result for the first quarter still maintains sales in US dollar while sales in Thai baht declined 3% and net profit decreased 54% because the Company has still faced challenging factors regarding the raw material prices of tuna and shrimp setting new historical highs and instance strong Thai baht. However, the Company believes the trends in second half of year would be back to normal and overall picture of industry including the Company would show some improvement.

Mr. Thiraphong Chansiri, President of Thai Union Frozen Products PCL. (TUF), the world’s leader and expert on innovative and quality seafood products with global brand portfolios, elaborated on operating result in the first quarter of 2013 that “The Company earned income from US dollars sales amounting to USD 824 million, we can maintain the turnover compared to the same period of last year where the revenue was equivalent to USD 822 million. Moreover, the Company posted income from Thai baht sales equivalent to Baht 24,441 million, a decrease of 3% compared to Baht 25,304 million in the first quarter of 2012, owing to 3.5% quarterly rise of strong Thai baht compared to the same period in last year. The first’s quarter net profit was Baht 674 million, dropped from 1,467 million baht or down 54% from the same quarter in 2012.

Sales breakdown by 6 main strategic product groups during the first half of 2012 were tuna business (50%), shrimp and relating business (21%), sardine and mackerel business (6%), salmon business (5%), pet food business (8%), value-added product business and other products (10%). In the meantime, the Company’s revenues by markets include the US (39%), European Union (29%), domestic market accounts (8%), Japan (10%), and other countries (14%).

According to overall performance in the first quarter, Mr. Thiraphong explained that “Although the Company has to face challenging factors in the first quarter continuously from Q4/2012, after consideration, it is found that net profit exhibits 10% growth, compared to Baht 612 million in the fourth quarter of last year, representing an improvement from the last quarter. The shrimp raw material price remains high and inadequate due to EMS (Early Mortality Syndrome). Meanwhile, pricing volatility of tuna raw material persists, from staying at 2,350 USD in September last year and sharply declining to 1,900 USD per ton at the year end. Then, the price rose again in the early year and pick new high at 2,325 USD in March. Such volatility of tuna price affects the OEM and export businesses in a way that it lowers the customer confidence. This causes a slowdown in purchase order as the customers cannot accept roaring price, putting an impact on gross profit margin in the first quarter. Nonetheless, overseas brands business, our business of manufacturing for sale, continued to perform well, especially for “Chicken of the Sea” in USA regained profits subsequent to low operating result in last year because of intense price competition. Pet food business in USA also demonstrated good results compared with those in the last quarter. MW Brands, in Europe, could keep maintaining its profitability. In overall picture, overseas business has changed towards a good direction. Nevertheless, the Company still believes that the volatility of raw material prices would decrease in the second half of year.

In relation to a factor driven by strong Thai baht, the Company has worked on risk management with care. The short-term measure are implemented by using financial instruments namely hedging and fix forward etc. which can cover some losses. However, the long-term measure requires strict control on costs and operational improvements to achieve higher efficiency. Presently, Thai baht soars rapidly. By comparing Thai baht with currencies of competitors in neighboring countries, it is found that Thai baht is the strongest in this region. Therefore, the Company has to keep an eye on this situation closely together with assessing business at all times. The Company believes that the Government has monitored this issue closely and if Thai baht continues to surge, the Government would launch a measure to handle this matter more clearly.

The Company’s performance in the past reflected its strong capacity in operating business as a complete seafood producer, from up stream to down stream. The production and marketing bases covering all regions enable the Company to diversify business risks efficiently. Consequently, the Company strongly believes that we can generate good growth consistently. The situations occurred relating raw materials and Thai baht would show better trend and back to normal in the second half of year.” said Mr. Thiraphong.

The Company recently received Global Challenger 2013 Award from the Boston Consulting Group consecutively since 2006 considering from business operational capacity, high-level competitiveness with consistent business growth, and overseas investment strategy to expand business into global stage. This Award clearly represents confidence from foreign institutions for the Company.