Thai fish processor Thai Union Frozen Products Plc, is investing US$4 million (155 million baht) for a 50% stake of China’s Century Union (Shanghai) Foods Co, according to the Bangkok Post newspaper.
“China has now developed into one of the global economic powers. This investment allows Thai Union to promote its brands and establish a distribution network throughout the China market,” a spokeswoman said.
Century Union (Shanghai) Foods, which markets FMCG products, currently has registered capital of $8 million with $2.5 million paid up.
TUF has tried to gain greater access to the Chinese market over the last two years.
In 2003 it set up a market research firm in Shanghai and acquired 50% of the shares in Cindena Resources Limited, the distributor of Century canned fish in the local market. The two investments cost $450,000 in total.
But the spokeswoman said that despite the presence of two affiliates, TUF still struggled to export its tuna products to Chinese consumers, thus forcing it to invest in the local tuna firm.
She said TUF expected its new joint venture would generate sales revenues of 50 million baht this year and 250 million baht next year.
China currently accounts for a very slim portion of TUF’s annual turnover, partly because of China’s tuna import tariffs.
Currently, TUF has tuna production capacity of 700 to 800 tonnes per day. It exported tuna products totalling 93,400 tonnes last year.
The United States is currently the largest market for TUF, accounting for 60% of the company’s annual sales, followed by Japan (13%) and Europe (7%). Asia, excluding Japan, makes up only 3% while the domestic market accounts for 8%.
Canned and frozen tuna products account for 64% of TUF’s sales volume.
Suttatip Peerasub, an analyst at Kim Eng Securities, said the outlook was positive for TUF this year given the better performance of tuna business and substantial growth of its shrimp operations.
Kim Eng forecast TUF’s 2005 net profit would increase by 11% to 2.16 billion baht, based on a foreign-exchange rate of 38 baht to the US dollar, on total sales worth 50.875 billion baht, a rise from 40.33 billion in 2004.
The relatively weaker US dollar against baht will affect TUF’s performance as 92% of its total revenues are in dollar terms in 2004, compared with 77% of its total costs and expenses. However, the company should remain competitive as all regional currencies have also appreciated against the US dollar, she said.