Equity Analysis /

Thailand: Agro & Food - Higher raw material costs to squeeze margin temporarily

  • Tuna price above $1,800/tonne challenges branded tuna margin

  • Drop in Thai shrimp price on expanded Thai shrimp culture

  • Record salmon price in Apr to pressure branded salmon margin

Bualuang Securities
9 May 2022

The heart of the matter is cost inflation and how to pass on higher raw material costs to clients to alleviate their impact on GM. Given the high tuna price of US$1,800-1,900/tonne in Mar-Apr and the record-high salmon price of NOK125/kg in late-Apr, TU’s branded tuna and salmon margins will be squeezed in 2Q22. It may be a temporary blip in anticipation of lower raw material costs assuming weaker oil prices and the end of war in 2H22. Expanded industrywide shrimp output will boost CPF and TU’s Thai shrimp sales in 2022. We reiterate our TRADING BUYs for CPF and TU.

Tuna price above $1,800/tonne challenges branded tuna margin

The mean West Pacific Ocean (WPO) skipjack tuna price dropped slightly 5% MoM to US$1,800/tonne in Apr (against $1,900/tonne in Mar which set the new high since Oct 2017). The small price retreat in Apr is regarded as a slight positive because it didn’t rise further. However, we regard the level at or above $1,800/tonne as still high (against the comfort zone of $1,300-1,800/tonne range). Its price jump in Sep-Dec 2021 had to do with poor weather leading to reduced catch. However, the recent price surge during Mar-Apr 2022 was due to the jump in oil price (which has been exacerbated by the Russia-Ukraine war).