12 November 2004
Thailand
Thai Union Frozen Products Plc (TUF), the maker of ‘Chicken of the Sea’ canned tuna, reported a 7.8 percent fall in third-quarter profits earlier this week due to higher raw tuna costs and foreign exchange losses.
Analysts said the outlook for Asia’s top canned tuna exporter in the current quarter was strong as its sales of shrimp were picking up after the US Commerce Department imposed a relatively low anti-dumping duty rate on shrimp.
A fall in tuna prices since mid-October to about $800 per ton from an average of $1,120 in the third quarter would boost sales and improve margins, they said.
TUF, whose key ‘Chicken of the Sea’ brand accounts for about one-third of earnings, reported a third-quarter net profit of 564.3 million bath (USD 14 million), or 0.65 baht (almost 2 $cent) per share, at the top end of analyst expectations of 500-570 million baht. TUF’s third-quarter sales – 53 percent from tuna and 25 percent from shrimp – rose 19 percent to 13.3 billion baht, according to its statement.
Its selling and administrative expenses in the quarter were likely to have risen 28 percent to 1.4 billion baht, partly due to marketing efforts to increase its tuna brand’s share of the US market to 20 percent from 18 percent, analysts said.
Del Monte Food’s Starkist has a 43 percent share and privately owned San Diego firm Bumble Bee Seafoods has 24 percent.
TUF, which earns about 90 percent of its revenues in dollars, was likely to have made a foreign exchange loss of eight million baht as the baht strengthened during the quarter, analysts said.
The baht averaged 41.15 baht per dollar, compared to 40.07 baht in the previous three months and 41.04 baht in the same quarter last year, according to Reuters data. Third-quarter profits were down 7.8 percent from last year’s 612 million baht (USD 15.1 million) and up 7.1 percent from the second quarter’s 527 million bath (USD 14.1 million). Fourth-quarter profits were expected to jump 136 percent from a year earlier to 487 million baht, rising to 2.34 billion baht in 2005, according to forecasts of 11 analysts compiled by Reuters Estimates.
TUF said it expected 2004 sales to rise an annual 15 percent to $1.2 billion, or almost 49 billion baht, slightly higher than the 46.9 billion baht estimated by analysts. Analysts are bullish on TUF’s 2005 outlook as tuna prices fall and shrimp sales recover following the imposition of preliminary a U.S. anti dumping duty of 6.39 percent in July. The duty will be finalized by December 17.
TUF would benefit from higher fish catches in the Western Pacific Ocean, its main tuna source, because of cooler sea surface temperatures following the onset of the El Nino weather phenomenon, analysts said. The cooler temperatures started in September and are forecast to last until at least early 2005.
TUF is a top analyst picks because of its generous dividend yield of almost 9 percent. Shares in TUF, which has a market capitalization of $530 million, rose 17.3 percent during the third quarter as the Thai stock market index dropped 0.3 percent.
TUF stock is trading at 11.5 times forecast 2004 earnings, higher than most domestic food exporters. Shrimp exporter Seafresh Industry is trading at 6.09 times forecasts and top chicken exporter Charoen Pokphand Foods at 8.52 times.
Earlier this week, TUF shares fell 1.6 percent to 24.6 baht and the overall stock market index dropped 1.13 percent.
