Asian Seafoods returns to M&A
Asian Seafoods Coldstorage, one of Thailand’s top five shrimp and pet food exporters, is set to resume its mergers and acquisitions (M&A) strategy to boost its revenue to 15 billion baht by 2020 from 9.2 billion last year.
Rik Van Westendorp, chief financial officer, said the company is also searching for opportunities to expand distribution units in key markets such as the US, the UK, China and Japan.
“M&A is not our first priority during this turnaround period. But because the company is now financially balanced, with a lower debt-to-equity level of 1.8 times, we are back to rethinking about possible M&As,” Mr Westendorp said.
The company recently recovered from the adverse impacts of early mortality syndrome, a shellfish disease that spread in Thai shrimp farms in 2012. The epidemic had a great impact on the Thai market, drastically cutting exports from 600,000 tonnes in 2012 to only 200,000 tonnes the following year. Asian Seafoods struggled during this period because it earns revenue from frozen shrimp and shrimp feed.
Thailand’s shrimp exports eventually recovered in 2014. Since then, the company has focused more on canned tuna and pet food, the latter previously considered a byproduct.
Mr Westendorp said although frozen food will continue to make up a large share of revenue, the pet food business will be the main player in the company’s 15-billion-baht profit goal. Pet food sales are much more stable than frozen food, he said.
“Pet food is a high-growth, high-margin business, with pet owners preferring natural and organic options that are higher in nutrition. The worldwide market size of pet food is around US$100 billion, with the super-premium segment making up 3-5% of the total market,” said Mr Westendorp.
The company is now a major player in the global market for super-premium pet food, providing original equipment manufacturer products that include cans for pet food, pouches and plastic cups for many clients under multiple brands in the US, UK, China, and Japan markets.
Next year the company plans to expand its capacity for cat food production by insourcing funds and conducting feasibility studies to determine whether it can invest in an automated pet food warehouse. If the warehouse project goes through in 2018, the company plans to invest 200 million baht towards its completion to prepare for growing consumption for global aqua food.
“Global food consumption demand will grow exponentially the next 30 years, with the aquatic food category leading the way,” he said.
Mr Westendorp said the company plans on increasing investment in aqua feed, tech farming and farming-related businesses to achieve a higher market value and bring in more revenue from frozen food products.
The frozen food business currently contributes 43% of Asian Seafoods’ total revenue, followed by pet food 24%, tuna 13%, aquaculture feed 12%, and distribution of frozen food products 8%.
By 2020, the frozen food business is expected to make up 41% of total revenue, with the pet food business accounting for 28%, notably higher than its 4% share back in 2014. The aquaculture feed business is projected to increase to 14% of the total, tuna to 10%, and the distribution business to 7%.