Leading producers cope with costs

Thai Union Frozen Products (TUF), the Kingdom’s largest seafood exporter, will increase its export prices of shrimp and tuna products by 2-4 per cent soon to offset the increase in the daily minimum wage and raw-materials costs.
TUF president Thiraphong Chansiri said that even though the company had reduced some operating costs and increased productivity since last year to deal with the Bt300 daily minimum wage imposed last month in key provinces, this year it had no choice but to increase prices.
Isara Vongkusolkit, chairman of Mitr Phol Sugar Group, said his company was adjusting to higher wage-driven costs by focusing more on technology and cutting temporary staff.
“I don’t know the exact amount to be invested, but it will definitely be geared towards new technology,” he said. The group late last year raised workers’ pay to meet the Bt300 minimum in the seven provinces in which the government programme was to kick off, he said.
Though wages accounted for less than 10 per cent of total costs, Isara said, the company needed to cut costs, as the domestic sugar price is subject to government controls. At present, Mitr Phol Group sells 30 per cent of its product domestically.
At TUF, wages account for 10 per cent of total operating costs. The company has witnessed a 4-per-cent increase in raw-materials costs and wages, so it has had to raise export prices by 2-4 per cent, president Thiraphong said.
He said the company had no plan to raise domestic prices. Even though it is facing higher costs, the weak baht and the stable price of tuna can help the company turn a profit, he added. TUF is confident its revenue and profit this year will grow no less than 15 per cent.
He said the company had purchased a 40-per-cent stake in Pakfood (PPC), the country’s leading shrimp processor, adding that PPC’s figures would be consolidated into TUF’s in the current second quarter.
The banking industry, meanwhile, has seen inflation have an impact on savings, said Kosit Panpiemras, chairman of the executive directors of Bangkok Bank.
Savings via deposits are essential for the economic system, but the inflation rate has surpassed interest rates, resulting in a negative real interest rate and reducing the attractiveness of deposit products.
He expressed worrying about the negative interest rate, at 0.3 percentage point now, which would discourage saving.Banks are not strongly promoting deposit products as before, because of the increase in deposit premiums paid to the central bank.
Competition remains strong, but banks are promoting deposit products among existing customers rather than chasing new depositors in a bid to keep their customer base, he said.
Kosit said enterprises must find ways to sustain businesses in the face of high operating costs. The bank foresees an acceleration in inflation in the next month or two, but remains optimistic that all parties should be able to cope with high prices.
“Though goods prices are on the rise, I’m convinced it can be accommodated by all parties – the general public and business operators. As all share the same experience, no one is advantaged or disadvantaged. All will adjust to the situation,” the banker said.
Kosit said businesses knew well that increased operating costs were driven by the rising price of crude |oil, which affected logistics and |transport.
The inflation rate in the first four months was 4 per cent, which is an acceptable figure, but the trend of high inflation will influence the entire economy, he said, adding that the impact of the wage hike was expected to become clear in the next one or two months.
The Bank of Thailand is expected to maintain its policy rate at 3 per cent throughout this year.