THURSDAY, March 28, 2024
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Thai Union held back by strong baht, falling tuna sales in second-quarter slump

Thai Union held back by strong baht, falling tuna sales in second-quarter slump

THAI Union Group yesterday reported a 2 per cent year-on-year decline in sales for the second quarter of this year to Bt34.1 billion, mainly due to the impact of a strong baht and declining tuna sales.

The company’s net profit margin improved to 4 per cent from 2.9 per cent in the first quarter. Excluding foreign exchange impact, sales would have held stable at with a 0.1 per cent decline.
Gross profit improved significantly from the prior quarter to Bt4.709 billion, while the gross profit margin was 13.8 per cent compared with 11.3 per cent in the first quarter of this year. Inventories of higher-priced raw materials, particularly in the shrimp business, along with the baht appreciation, contributed to gross market volatility.
Thai Union’s ambient seafood sales in the second quarter were Bt16.363 billion, down 1.6 per cent year on year, and the sales contribution from the frozen and chilled seafood business fell 2.6 per cent to Bt13.324 billion. PetCare and value-added product sales fell 1.2 per cent to Bt4.450 billion over the same period last year, while the baht appreciated 7 per cent year on year. In the first half of 2018, North America contributed 38 per cent of total sales, followed by Europe at 32 per cent, the Thai domestic market at 10 percent, and other markets at 20 per cent.
Tougher market competition in North America, together with US dollar depreciation, saw the sales of ambient, frozen and chilled seafood, particularly shrimp and lobster, decline in value while the volume of the frozen and chilled business grew 3 per cent in this key region. However, Thailand, China and the Middle East continued to grow, with sales contributions improving due to the launch of new products and strong marketing and sales efforts.
Selling, general and administration (SG&A) to sales ratio increased to 10.4 per cent in second quarter of this year, compared to 9.5 per cent in the same period last year. This change is mainly due to negative one-off costs that occurred in the second quarter, and legal costs related to North America settlements.
Strong working capital management and the improved operational earnings before interest, tax, depreciation and amortisation (EBITDA) in the second quarter contributed to a good operational cash flow performance of Bt7.5 billion for the first half of 2018. Together with dividend payments in April of Bt2.4 billion, investments in Russia and Thailand, continued productivity focused capital expenditure (capex). Thai Union kept net debt to equity ratio stable at 1.41 times in second quarter compared to 1.38 times at the end of 2017.
“Despite continued pressures from volatile raw material costs and challenging market environments, we increased our gross margin and net profit showed improvement,” said Thiraphong Chansiri, CEO of Thai Union. “Thai Union will continue to work harder to weather the industry’s volatility as we focus on continued business and product innovation, while growing our geographic diversity,” he added.
In the second quarter of this year, Thai Union’ss subsidiary Chicken of the Sea reached a settlement with Walmart in an antitrust litigation in the US, and the company is in advanced negotiations in various other litigation discussions. As a result, Chicken of the Sea recorded a US$44 million one-time accrual to reflect potential risks.
Thai Union completed its 45 per cent acquisition of TUMD Luxembourg. TUMD wholly owns three Russian companies: Dalpromryba Limited Liability Company; Torgovo-Promyshlenny Kompleks Dalpromryba Limited Liability Company; and Maguro Limited Liability Company. These companies are collectively known as the DPR Group (DPR).
DPR is a retail-focused fish and seafood business, and it is Russia’s No 1 canned tuna producer. Thai Union opted to make the investment in DPR because its manufacturing and distribution platform offers significant opportunities for further growth and development. DPR, which has sales of around US$45m, operates in both frozen and ambient segments, and owns brands such as Maguro, Captain of Tastes and Rybar. Thai Union expects to gradually increase shareholding to 80 per cent over the next three years.
Thai Union reached an agreement in June to acquire a 25.1 per cent stake in Thammachart Seafood Retail Co Ltd (TSR) for about Bt37 million. TSR, which generates sales in excess of Bt660 million, provides professional management services to Thai retailers for their seafood counters, handling fresh and frozen product at 158 locations in Thailand. This includes two food and beverage concepts at eight locations, The Dock Seafood Bar and The Lobster Lab, as well as management of the Ocean Bar.
 

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