Thai Union shares fall to 1-year low as analysts foresee weak 2Q earnings 

Seafood titan Thai Union Group Plc (TU) saw its shares drop to a one-year low on Monday as analysts forecast weak second-quarter performance due to extra losses. 

TU traded at 15.80 baht as of midday, down 4.8 per cent from its prior closing. The stock hit its 52-week low at 15.50 baht, the lowest since May 2021. 

One of the world’s top suppliers of canned tuna and frozen shrimp is now under pressure after analysts anticipated the company to report a year-on-year drop in earnings of 50 per cent. 

Although the baht has weakened and is likely to benefit the company’s foreign exchange gains, TU’s net profit in the second quarter is expected to soften by losses from extra items.

Those include about 600 million baht loss from revaluation of Red Lobster preferred shares and some 300 million baht cost of closing Rugen Fisch plant in Germany, according to Dome Khunprayoonsawad, an analyst at Pi Securities. 

“We expect TU to book 1 billion baht net profit in the second quarter, down 57 per cent year-on-year,” said Dome. “While the core profit would be 1.6 billion baht.”

In the first quarter of 2022, TU recorded a net profit of 1.7 billion baht, down 3.2 per cent year-on-year.

Looking forward, Adisak Prombun at Krungsri Securities said that TU’s core earnings in the third quarter are likely to improve thanks to seasonal factors and lower tuna costs. But, there are risks lying ahead in the wake of higher interest rates. 

“Red Lobster preferred shares might be revalued again after a series of interest-rate hikes,” Adisak noted, saying TU might face more losses in the second half.

Krungsri Securities cut their 2022 full-year earnings projection for TU by 18 per cent to 6.7 billion baht, down by 16 per cent from 2021. The target price was also reduced from 22.20 to 19 baht. 

However, Dome at Pi Securities said TU is one of the beneficiaries from the weakening of the baht amid the global food crisis induced by the war in Ukraine. He set the target price at 20.40 baht.

“The shares may have already been priced in by negative factors,” he added.