TRIS Rating Assigns “A+/Stable” Rating to “TUF”
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 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