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TUF: EU Crisis Provides M&A Tuna Opportunities

The SET-listed Thai Union Frozen Products Plc (TUF) is considering mergers and acquisitions in Europe and a major production expansion in Thailand to meet its revenue target.

The world’s largest canned tuna producer has planned to increase its revenue by 18-20% each year to USD 5 billion by 2015.

President Thiraphong Chansiri said the European debt crisis has brought about good M&A opportunities in the continent and TUF has considered potential deals worth about USD 100 million.

Despite the shrinking economy, TUF was able to increase its sales in Europe by 190% last year in dollar terms, with the region contributing 32% to the company’s total turnover now from 16% the year before, he explained.

“M&A is our growth strategy, especially when our debt-to-equity ratio is declining steadily, strengthening confidence among bankers and investors,” said Mr. Thiraphong. “Once the right opportunity arises, we will grab it.”

As well, TUF is considering the expansion of its production in Thailand next year under a 3-billion-baht annual capital expenditure. It has bought a land plot of 200 rai in Samut Sakhon, where its existing factory is located, to serve the expansion.

Sales in Thailand account for 10% of TUF’s total sales of USD 3.23 billion last year, with the US ranking first with a 36% share, followed by Europe. The company aims for the growth of 20% for both revenue and earnings this year.

Mr. Thiraphong yesterday said with annual growth of 18-20%, TUF revenue will hit USD 4 billion in 2013 and USD 5 billion in 2015. Its mission is to achieve the turnover of USD 8 billion by 2020.

Meanwhile, the increase of minimum wages to 300 baht daily this year will affect its costs only slightly as it has focused on increasing production efficiency. Most of the company’s annual capital expenditure of 3 billion baht was spent on automating the production lines, he noted.

Of the total employment of 32,000 globally, 25,000 people are in Thailand. Wages account for 10% of total costs, he added.

Last year, TUF reported a record-high net profit of 5.07 billion baht, up by 77% from 2010.

Earnings soared 332% year-on-year in the fourth quarter to 1.52 billion baht, beating estimates, while sales surged by 26% to 26 billion baht.