Thai Union buys into Russia, reports Q1 decline in sales
Thai Union is taking a stake in TUMD Luxembourg S.a.r.l., a holding company controlling Russia’s top canned tuna producer and the seafood brands Maguro, Captain of Tastes, and Rybar.
Thai Union announced it was acquiring 45 percent of TUMD – and that it plans to become the majority shareholder in the company – in its first quarter results for 2018. The company will purchase a combination of new and vendor shares valued at around USD 16 million (EUR 13.5 million) to acquire the initial stake, and through a series of options, Thai Union expects to increase its shareholding first to 51 percent, and then gradually to 80 percent over the next three years, it said. The transaction is subject to approval by the Russian Federal Anti-Monopoly Service.
TUMD wholly owns three Russian companies: Dalpromryba Limited Liability Company; Torgovo-Promyshlenny Kompleks “Dalpromryba” Limited Liability Company; and Maguro Limited Liability Company. The companies are collectively known as the DPR Group (DPR). DPR is a retail-focused fish and seafood business with annual sales of approximately USD 45 million (EUR 37.9 million). It operates in both frozen and ambient segments, owns the Maguro, Captain of Tastes, and Rybar brands, and is Russia’s number-one 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,” Thai Union said in its release. “Russia has a large and growing economy with a relatively low consumption of tuna, which is steadily increasing. It is expected that sales of tuna, and other seafood, will continue to increase given improving living standards and general health awareness.”
Thai Union said it hopes to further strengthen DPR’s position in the Russian market, and has a plan to double the firm’s sales to USD 100 million [EUR 84.3 million] within the next five years.
“With this acquisition, Thai Union will have critical coverage of almost all key European seafood markets, driving exposure to fast growing emerging markets,” Thai Union said.
Elsewhere in its first quarter 2018 announcement, Thai Union reported a drop in first quarter sales and net profit. Its Q1 sales total of THB 29.7 billion (USD 930.8 million, EUR 784.6 million) was down 5.5 percent from a year earlier, and its quarterly net profit of THB 869 million (USD 27.2 million, EUR 23 million) represented a 39.3 percent year-on-year drop. The company said the appreciation of the Thai baht, declining tuna sales, and higher raw material costs contributed to its weaker profit margin.
The company experienced growth in its Thai, Chinese and the Middle Eastern markets, with sales improving due to the launch of new products and increased marketing activities, but saw a drop-off in sales in North America, its top market.
“Tougher market competition in North America, together with U.S. dollar depreciation, saw the sales of ambient, frozen and chilled seafood, particularly shrimp and lobster, decline in both value and volume in this key region,” Thai Union said.
In the first quarter of 2018, North America contributed 40 percent of total sales, followed by Europe at 32 percent, the Thai domestic market at 12 percent, and other markets at 16 percent.
Thai Union’s gross profit declined 26.2 percent from a year earlier to THB 3.36 billion (USD 105.2 billion, EUR 88.7 billion), while its gross profit margin was 11.3 percent compared to 14.5 percent in last year’s first quarter. Thai Union’s ambient sales in the first quarter were THB 14.1 billion (USD 441.6 million, EUR 372.5 million), down 1.6 percent year-on-year, and sales contribution from the frozen and chilled seafood business fell 8.9 percent year-on-year to THB 11.52 billion (USD 360.8 million, EUR 304.3 million). Pet care and value-added product sales fell 8.2 percent to THB 4.08 billion (USD 127.8 million, EUR 107.8 million) over the same period last year, the company reported.
Despite weaker profitability, the company’s strong cash flow prompted debt repayment and improved its net debt-to-equity ratio to 1.35 times in the first quarter of 2018, compared to 1.38 times at the end of 2017, according to Thai Union.
“Despite pressures from high raw material inventory costs and challenging market environments, our net profit was supported by other incomes and prudent foreign exchange management,” Thai Union CEO Thiraphong Chansiri said in the release. “Thai Union will continue to work harder to weather the industry’s volatility. Currently, the pressure from rising raw material prices is beginning to relax as tuna product prices show signs of a more moderate increase.”