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TUF Sees 2010 Annual Sales Growth in US and Thai Baht term

TUF announced its annual performance figures for the year 2010 with year-on-year sales growth of 13% in U.S. dollar term and 4% in Thai Baht term. Despite a host of coincident challenges during the year, the Company managed to deliver satisfactory trading performance.

Mr. Thiraphong Chansiri, president of Thai Union Frozen Products PCL. (TUF), the leading manufacturer and exporter of frozen and canned seafood, announced that 2010 sales in dollar term were USD2,268 million, up 13% from USD2,014 million in 2009. Sales in Thai term were Bt71,507 million, up 4% from Bt68,995 million in 2009. Total revenues for the year amounted to Bt72,810 million, a 4% growth from Bt69,697 million in 2009. However, total annual net profit declined by 14% year-on-year to hit Bt2,874 million, compared with Bt3,344 million of last year. Earnings per share for 2010 is 3.15 baht.

As for Q4/2010 performance, TUF registered sales growth both in dollar and Thai Baht terms. Sales in dollar term increased by 33%, from USD519 million in 2009 to USD687 million in 2010. In line with the dollar sales growth, Thai Baht sales rose to Bt20,649 million, or up 20% from Bt17,202 million in 2009. Quarterly net profit was Bt352 million, representing a decline of 51% from Bt718 million in 2009.

Thiraphong further stated that TUF saw an outstanding growth in its fourth-quarter sales in U.S. dollar term when compared to those of the other three quarters. This was particularly evident given its significant contribution to the annual figure. Such significant achievement bodes well for the Company’s strong business position and high growth prospect. Excluding MW Brands, TUF would still manage to deliver sales growth of up to 14.4% during the quarter. TUF only started to consolidate MW Brands books into the group in November 2010. Given just Nov and Dec of 2010 performances are included, we can already witness its significant contribution to the tuna product line. Nevertheless, TUF is confident that sales improvement could become even more obvious into 2011 when MW Brands are fully consolidated into the group. With regards to the dramatic decline in the fourth quarter net profit, highly volatile raw material prices of tuna and shrimp were some of the key factors to blame. Shrimp price, in particular, rose to its high in recent years and sustained there for a considerable amount of time during the year. Thai baht (vs. U.S. dollar) appreciated on average by 9% from a year ago, pushing up production costs in the fourth quarter. Furthermore, there were higher interest burden and MW Brands acquisition-related expenses booked during the period. As all negative factors came in play at the same time, making it a challenging quarter to manage. That also led to a lackluster quarterly net profit. Into 2011, there are nevertheless evident signs of a recovery. These provide the management confidence that greater opportunities are ahead and a more promising business outlook is taking shape. Benefits of synergies between TUF and MW Brands will be a factor to watch in 2011.

Tuna products retained the largest share in TUF’s product portfolio in 2010, at 40% of total sales. Frozen shrimp came in second at 22%, followed by canned petfood (9%), canned seafood (8%), shrimp feed (7%), products for the domestic market (7%) , frozen cephalopod (4%), and canned sardine and mackerel (3%). The US remained the number one market with 46% share, followed by the European Union at 16%, Japan (12%), domestic sales (12%), Africa (4%), Oceania (3%), the rest of Asia (3%), the Middle East (2%), Canada (1%) and South America (1%).

Thiraphong also revealed that, in next few years, TUF will put its primary focus on reducing debts and manufacturing costs in order to bring D/E ratio down to a more desired level as a response to a sharp increase of the ratio to 1.6 times (after MW Brands acquisition) from 0.72 times in Q3’10. Given the challenge, TUF will have to develop a more constrained business plan. Starting 2011, the typical dividend policy of at least 50% of net profit to be paid as dividend will be changed to a cap where no more than Bt 1,200 mill of dividend will be paid each year. This policy should last a few years. Once the normal level of D/E ratio is reached, the typical dividend policy will be restored immediately. TUF plans to achieve this target (D/E ratio at 1 time) within next 3 years. He is confident that this short-term move should provide long-term sustainable returns to shareholders and investors. TUF website


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