Bangkok--31 Oct--TRIS Rating TRIS Rating Co., Ltd. has affirmed the company and issue ratings of Thai Union Frozen Products PLC (TUF) at “A+” with “stable” outlook. The ratings reflect the company’s strong market position as one of the world’s leading tuna processors, its solid valuable “Chicken of the Sea” canned tuna brand, and the management team’s proven track record in the seafood export business. The ratings also take into consideration the company’s conservative business expansion policy, as well as its product and geographic diversity. These factors are partially offset by the maturity of the canned tuna industry in the US, high exposure to tuna price fluctuations, and threats from manufacturers in low-cost countries, as well as the implementation of import trade barriers by major trading countries, and the fluctuation of the Thai baht. The “stable” outlook reflects TRIS Rating’s view that TUF will continue to maintain its competitive strength through economies of scale and production efficiency, expand business operations in a conservative manner, and reduce its financial leverage in the intermediate term. TRIS Rating reported that TUF is Thailand’s leading processor and exporter of canned and frozen seafood products with 2006 total sales of Bt55,039 million. The company’s diversified product portfolio includes canned tuna, frozen shrimp, and other seafood products, as well as pet food and shrimp feed. In 2006, canned tuna remained the largest revenue contributor, about 47% of total sales, followed by frozen shrimp at 20%, canned pet food at 9%, and canned seafood and shrimp feed at 7% each. The company primarily exports to the US (57%), Japan (10%), and the EU (10%). Its management has more than a decade of experience in the seafood processing industry. The company has a solid position in canned tuna, “Chicken of the Sea”, as the third-largest brand of canned tuna in the US. The full acquisition of the brand in 2001 enhanced TUF’s business profile and almost doubled its revenue base. The brand strength also enables the company to capitalize on and introduce premium, value-added seafood products. In 2006, TUF’s canned tuna production capacity was 280,000 tonnes per annum, making it one of the top tuna processors in the world. The company achieves economies of scale in raw material procurement and production. Its supply chain value has been strengthened through the integration of packaging and distribution networks. Although the company’s historical performance has been quite stable, various uncontrollable factors, including foreign exchange rates, climate change, and trade policies implemented by foreign governments, stand as threats to its operating performance. TUF’s financial profile remains conservative and strong. Operating margins and cash flow generation are relatively stable, despite commodity price volatility, thanks to its strong diversity, brand equity, and effective cost saving initiatives. During the last three years, TUF’s ratio of funds from operations to total debt was in the 32%-35% range, while earnings before interest, tax, depreciation, and amortization (EBITDA) to interest was between 6-14 times, and operating margin was about 6%. Leverage is expected to rise due to the recent Bt1.4-billion acquisition of the tuna-fishing fleet. The appreciation of the baht against the US dollar, rising energy costs, as well as record-high tuna prices have pressured the company’s profitability in the first half of 2007. TRIS Rating expects that TUF’s financial performance will continue to be under pressure over the intermediate term, said TRIS Rating.