SET-listed Thai Union Group Plc (TU), the world's biggest maker of canned tuna, expects gross profit margin to improve this quarter on lower costs for raw materials after record third-quarter sales.
The raw material price of tuna has fallen to US$2,000 (66,339 baht) a tonne from $2,300 in the third quarter, said TU chief executive Thiraphong Chansiri.
"Continuous improvements, a review of costs and streamlining our operations have helped us during this time of margin pressure," Mr Thiraphong said.
A reduction in operating costs will help the company's gross profit margin to increase next year, he said, adding that the company plans to integrate its US units into a single office in Los Angeles.
The firm's investment in China has stirred robust growth, with year-to-date revenue of 70 million yuan (350 million baht), and the aim is for the Chinese unit to generate revenue of 700 million yuan within five years, Mr Thiraphong said.
"Our geographic strategy and product diversity are helping us weather today's market and industry volatility," he said. "We will continue to focus on diversification for our long-term growth."
TU yesterday also announced the acquisition of the remaining 4.96% share of Vietnam's Yueh Chyang Canned Food Co Ltd by TU subsidiary Songkla Canning Plc, bringing the holding to 100%.
Despite a lack of merger and acquisition plans for the two remaining months of the year, TU is looking at M&A opportunities next year, Mr Thiraphong said.
Meanwhile, the company reported net profit in the third quarter of 1.74 billion baht, up 8.9% year-on-year, due to improved contributions from strategic investment in US-based Red Lobster Seafood Co and India's Avanti Feeds Ltd, along with prudent foreign currency and tax management.
"However, the improvement was partly capped by lower operating profits and rising interest expenses," TU said in a release.
Net profit in the first nine months was 4.62 billion baht, up 6.1% year-on-year.
Sales in the third quarter grew by 0.4% year-on-year to 35.19 billion baht, a record high for quarterly sales. Continued sales growth was driven by product price adjustments and high volume.
Sales in the first nine months came to 101.4 billion baht, up 0.8% year-on-year.
Ambient seafood sales were recorded at 15.846 billion baht between July and September, up 2.4% year-on-year.
"While the average selling price increased by 2.7% to reflect rising tuna cost, sales volume was under pressure due to the incorporated price hike," TU said.
Sales of frozen and chilled seafood registered 14.8 billion baht, down 2.4% year-on-year. The decline was due to lower domestic shrimp prices and cheaper raw materials for salmon.
Pet care and value-added sales reached 4.6 billion baht, up 2.9% year-on-year, thanks to continued growth in the pet care segment.
The US sales contribution stood at 38% and European markets supplied 32%, with Thailand at 10% and Japan at 6%. Other markets contributed 14%. The percentages were unchanged from a year earlier.
The ratio of net debt to equity was 1.37 in the third quarter, up sharply from 0.92 a year earlier, driven by debt related to the Red Lobster acquisition and other investment activity.
"However, the ratio remained well below the debt covenant ratio of 2," TU said.
TU shares jumped after the strong third-quarter net profit of 1.74 billion baht, beating analysts' forecast of 1.5 billion.
Wijit Arayapisit, vice-president of the research department at Maybank Kim Eng Securities Thailand (MBKEST), said TU's strong net profit resulted from special profits made from the tax credit of its Red Lobster investment and foreign exchange gains.
"The operating net profit [logged at 1.32 billion baht] is not as good as the net profit, and concerns still remain about production cost," Mr Wijit said. "Hence, net profit in the fourth quarter may not be impressive."
He said production costs would likely dent quarter-on-quarter net profit, but year-on-year net profit is expected to continue growing.
Although the company is facing cost pressure, TU's current share price is attractive for investors planning to invest in the medium or long term, as the market price is lower than the 24.40 baht assessed by MBKEST.
TU shares closed yesterday on the SET at 18.90 baht, up one baht, in trade worth 976.5 million baht.
