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TUF Sees Opportunities For Tuna In Global Downturn

Thai Union Frozen Products PCL (TUF), Asia's biggest canned tuna exporter, believes it can ride out the global downturn by expanding in new markets and selling more in its core U.S. market, its president said.

TUF, which owns the "Chicken of the Sea" brand and counts WalMart and Cosco among its big buyers, aimed for a 10-12 percent rise in net profit for 2009, Thiraphong Chansiri told Reuters in an interview.

The company also has a target of annual revenue growth of 10-12 percent over the next four years, forecasting $3.0 billion in revenue by 2012, helped by acquisitions.

"We are sticking to the 10-12 percent annual revenue growth target for this year. Despite the poor global economy, the impact on tuna demand should be small," Thiraphong said.

"Tuna consumption in the United States remains sound and it is likely that exports to Japan will become more resilient," he said. "Sales to U.S. supermarkets should increase because people have cut back on dining out and cook for themselves more."

TUF reported dollar-based revenue of $2.07 billion in 2008, with U.S. sales making up half, including revenue from three wholly owned U.S. firms and exports from Thai plants. It also exports to Japan, the Middle East, Africa, Russia and Europe.

Tariffs on food imports to Japan have declined after the signing of a Thai-Japanese free trade deal in 2007.

It posted a net profit of 2.2 billion baht in 2008. Eleven analysts polled by Reuters Estimates are more optimistic than the company, forecasting a 2009 net profit of 2.58 billion baht, up 17.3 percent, helped by a drop in oil prices that has cut costs.

"We feel that sentiment is worse than reality these days. It doesn't mean we're not cautious on the global situation. We're working harder and monitoring export markets and our trade partners closely," Thiraphong said.

HIGHER MARGINS

TUF aimed for an average gross margin of more than 14 percent this year, compared to 12.7 percent last year, when costs were pushed up by extensive maintenance work on four fishing vessels.

Thiraphong said maintenance on the fleet would be minor this year, costing about $1.0 million, compared with $2.0-$3.0 million last year. It also planned to spend 1.0-1.2 billion baht on maintenance of its plants this year, he said.

It continued to look for acquisitions, but cautiously, Thiraphong said.

A fall in the baht of about 3.8 percent against the dollar this year would help exports, and tuna was cheaper.

Tuna prices were volatile last year, ranging from $850-$1,950 per tonne because climate change affected catches in fishing grounds in the western Pacific and Indian Oceans, pushing up the price of skipjack tuna, its main raw fish.

He expected prices to average $1,000-$1,500 per tonne this year as fishing conditions had improved.

Tuna accounts for about half of the company's sales, with the remainder coming mostly from frozen shrimp and canned seafood. About 90 percent of its sales are in overseas markets.

Chicken of the Sea has about 19 percent of the U.S. market, the third biggest brand after StarKist, owned by South Korea's Dongwon Group, and Bumble Bee Seafoods.

Last year, the company cut its tuna can size in the United States to 5 ounces from 6 ounces to contain prices.

At the midday break, TUF shares were up 1.03 percent at 19.70 baht while the main Thai stock index was up 0.27 percent.