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Strong European Seafood Performance Drives Thai Union Profits

29 February 2016

THAILAND - Thai Union Group Company Limited has announced record net profit (before one-time expenses) of THB 6.1 billion, up 19.1 per cent from THB 5.1 billion in 2014 out of another consecutive record annual sales of THB 125.2 billion that were 3.1 per cent higher than a year ago.

After the non-operational one-time expenses, reported net profit was THB 5.3 billion, still a new record. Earnings between Interest, Taxes, Depreciation and Amortization (EBITDA) also hit a record high at THB 11.5 billion, up 4.8 per cent from a year ago.

The encouraging result was attributable to strong performance of its leading seafood brands in Europe, successful integration of recent acquisitions, namely MerAlliance (leading chilled smoked salmon producer in Europe), King Oscar (world premium sardine brand) and Orion (the largest lobster supplier in North America), strong recovery of its Thailand-based shrimp processing operations and successful restructuring of USPN (US-based pet food producer).

The USD apppreciation against Thai baht in the latter part of the year also created positive impact.

Nevertheless, this did not happen without challenges, namely the highly volatile EUR, sharply lower tuna and shrimp raw material prices, major importing countries’ concern on Thailand’s sustainability issues and eventual cancellation of the Bumble Bee transaction.

Mr Thiraphong Chansiri, President/CEO of Thai Union Group PCL. (TU) commented: “This is another great year with record sales and net profit. The 2015 result demonstrates our resilience and ability to grow in spite of a host of challenges faced by Thailand and the global seafood industry. Volatile foreign exchange rates, global correction of tuna and shrimp prices, uncertain global economic conditions and sustainability issues faced by Thailand did not discourage us from outperforming the industry. Our top line might be a bit short of the original target, our bottom line has nevertheless more than made up for the shortfall, allowing us to set another record level. This is mainly thanks to our teams’ efforts in achieving efficiency and cost savings to boost our margins, together with the full consolidation of King Oscar and MerAlliance into the Thai Union family. If without certain one-time expenses due to acquisitions and restructuring our fishing fleet in the last quarter, our bottom line would have set an even higher record.”

“Our financial position also improved a lot thanks to strong EBITDA and free cash flows as we benefited from lower raw material prices and better inventory management. This allowed us to bring our net debt-to-equity ratio down to 0.75x from 0.85x in 2014. Our net debts dropped to THB 36 billion from THB 40 billion a year ago,” he added.

Based on the company’s sales in 2015, tuna category still commanded the largest share of business, accounting for 37 per cent of its business, followed by shrimp and related business 29 per cent, salmon business 9 per cent, pet food business 7 per cent, sardine and mackerel business 6 per cent and value-added and other products 12 per cent.

Going into 2016, the disclosure of sales information will be changed to 3 categories instead, namely ambient (shelf-stable) seafood 47 per cent, frozen, chilled and related seafood 40 per cent and pet care, value-added and other products 13 per cent. The new classification will explain better the growth dynamics and margin trends of our business given the different key channels these categories are serving at the moment.

Currently, sales contribution from our own brands was stable at 41 per cent in 2015 with the balance being our private label sales. On the other hand, the US remained our largest market at 42 per cent in 2015, followed by Europe at 29 per cent, Thai domestic market at 8 per cent, Japan at 6 per cent and other markets at 14 per cent.

While there were challenges on the top line growth of the tuna category because of low raw material prices and increased competition, it managed to further improve its profitability from a year ago. A similar development also applied to the shrimp category. Chicken of the Sea’s new lobster business through Orion also established the group’s leading presence in this space in North America. The star categories with both top line and bottom line growth were sardine and mackerel and salmon business, mainly thanks to the acquisitions of King Oscar and MerAlliance since late 2014. The pet care business also recovered well in profitability after the restructuring of the US-based US Pet Nutrition unit in 2014.

Following a strong performance in 2015, the company hold an optimistic view on 2016 in spite of uncertain world economic conditions and its potential impact on consumption and commodity prices.

Mr Chansiri added: “We are well positioned for another solid year in 2016. The year is a period which we would reset our base for further growth. A lot of new initiatives are being launched this year, namely our continual drive for innovations in products and production processes, a new focus on serving food service customers and emerging markets, namely the Middle East, Southeast Asia and China. Therefore, growth will be primarily driven by these new endeavors and the full consolidation of Rugen Fisch, which is our latest 51 per cent acquisition of the leading seafood producer with own brands in Germany, into the group.”

He added: ”In order to deliver our expected results, we cannot achieve it without sustainability in mind and in action. Despite the challenges Thailand is facing, we are committed to ensuring our supply chain free of these labor and environmental issues, setting a benchmark for the industry on this front. We take sustainable development seriously as a strategic opportunity for growth rather than a threat or burden. We will continue to drive on this and make sure our suppliers and the broader industry partners to be on board as well.”

Despite the cancellation of the Bumble Bee transaction in late 2015, the firm is committed to holding on to its 2020 sales target of USD 8 billion. The company has laid out an articulate plan to realize this target.

Mr Chansiri elaborated: “New initiatives just mentioned plus continual expansion of our existing business lines will not be enough to make our 2020 target. We would therefore continue to pursue synergistic acquisition opportunities to strengthen our group as well as meeting our top line target. We are looking at opportunities that can eventually add sales worth USD 1-1.5 billion in total in next 5 years. With all the new and existing talents we have on board, I believe that the 2020 target is within reach.”

TheFishSite News Desk

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