TRIS Rating Co., Ltd. has assigned the company rating of “A+”with “stable” outlook to Thai Union Frozen Products PLC (TUF). The rating reflects TUF’s strong market position as one of the world’s leading tuna processors, solid valuable “Chicken of the Sea” canned tuna brand, and the management team’s proven track record in the seafood export business. The rating also takes into consideration TUF’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,
threats from manufacturers in low-cost countries, and the implementation of import trade barriers by
major trading countries.
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 improve its financial profile in the intermediate term.
TRIS Rating reported that TUF’s major product portfolio includes canned tuna, frozen shrimp, and
other seafood products, as well as pet food and shrimp feed. Over the last 10 years, TUF has steadily built
up its market position in the global tuna industry. The company’s business profile has been enhanced
after becoming the sole owner of the “Chicken of the Sea” brand in 2001. As a result, revenue in 2001 increased sharply to Bt35,324 million from Bt19,120 million in 2000. In 2005, TUF’s canned tuna
production capacity was 280,000 tonnes per annum, making it one of the top tuna processors in the world.
This enables the company to benefit from economies of scale in raw material procurement and production.
In addition, the company’s competitive position has been strengthened by its efforts to vertically integrate through the acquisitions of packaging and distribution networks. The company recently entered the
shrimp breeding and hatchery businesses, which will also enhance its ability to control and improve
shrimp quality. Given the strength of the “Chicken of the Sea” canned tuna brand in the US, TUF plans
to use the brand as a platform to introduce new premium tuna and other value-added seafood
products. 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 government, stand as threats to its operating performance.
TRIS Rating said that, for the first half of 2006, TUF’s total sales were Bt26,906 million, up by 7.2%
from the same period last year, driven by strong export growth. However, net profit dropped by 20.1% to
Bt776 million, tempered by an increase in fuel costs, the appreciation of Thai baht, and higher interest
expenses. Cash flow protection, as measured by the ratio of funds from operations (FFO) as a
percentage of total debt, was 35.2% in 2005, up from 31.9% in 2004. The ratio is considered
adequate, although it has been relatively volatile over the past few years as outstanding debt increased
sharply after major acquisitions and declined afterward when the company utilized internal cash to
repay the debt. The ratio of operating income before depreciation and amortization to sales had
remained in the range of 6%-9% during 2000-2005, but slightly dropped to 5.4% in the first six months
of 2006. The company’s total debt to capitalization ratio as of 30 June 2006 was 42.4%, down slightly
from 42.7% as of year-end 2005. The ratio is expected to stabilize at the current level, supported by
FFO, a reduced dividend payout, and conservative business expansion strategies. -- End
Thai Union Frozen Products PLC (TUF)
Company Rating: A+
Rating Outlook: Stable
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Copyright 2006, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information.
offset by the maturity of the canned tuna industry in the US, high exposure to tuna price fluctuations,
threats from manufacturers in low-cost countries, and the implementation of import trade barriers by
major trading countries.
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 improve its financial profile in the intermediate term.
TRIS Rating reported that TUF’s major product portfolio includes canned tuna, frozen shrimp, and
other seafood products, as well as pet food and shrimp feed. Over the last 10 years, TUF has steadily built
up its market position in the global tuna industry. The company’s business profile has been enhanced
after becoming the sole owner of the “Chicken of the Sea” brand in 2001. As a result, revenue in 2001 increased sharply to Bt35,324 million from Bt19,120 million in 2000. In 2005, TUF’s canned tuna
production capacity was 280,000 tonnes per annum, making it one of the top tuna processors in the world.
This enables the company to benefit from economies of scale in raw material procurement and production.
In addition, the company’s competitive position has been strengthened by its efforts to vertically integrate through the acquisitions of packaging and distribution networks. The company recently entered the
shrimp breeding and hatchery businesses, which will also enhance its ability to control and improve
shrimp quality. Given the strength of the “Chicken of the Sea” canned tuna brand in the US, TUF plans
to use the brand as a platform to introduce new premium tuna and other value-added seafood
products. 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 government, stand as threats to its operating performance.
TRIS Rating said that, for the first half of 2006, TUF’s total sales were Bt26,906 million, up by 7.2%
from the same period last year, driven by strong export growth. However, net profit dropped by 20.1% to
Bt776 million, tempered by an increase in fuel costs, the appreciation of Thai baht, and higher interest
expenses. Cash flow protection, as measured by the ratio of funds from operations (FFO) as a
percentage of total debt, was 35.2% in 2005, up from 31.9% in 2004. The ratio is considered
adequate, although it has been relatively volatile over the past few years as outstanding debt increased
sharply after major acquisitions and declined afterward when the company utilized internal cash to
repay the debt. The ratio of operating income before depreciation and amortization to sales had
remained in the range of 6%-9% during 2000-2005, but slightly dropped to 5.4% in the first six months
of 2006. The company’s total debt to capitalization ratio as of 30 June 2006 was 42.4%, down slightly
from 42.7% as of year-end 2005. The ratio is expected to stabilize at the current level, supported by
FFO, a reduced dividend payout, and conservative business expansion strategies. -- End
Thai Union Frozen Products PLC (TUF)
Company Rating: A+
Rating Outlook: Stable
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Copyright 2006, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information.