Analysts see limited impact from trans fat prohibition

The recent regulation prohibiting the production, import and distribution of trans fat-filled food could have a minor effect on profits for SET-listed companies operating bakery and food businesses as they could switch to substitute ingredients, say analysts.

Each company has its own method to revise ingredients, in compliance with the latest regulation, said Asia Plus Securities (ASP) in a research note.

The securities firm has asked Minor International Plc (MINT), Central Plaza Hotel Plc (CENTEL) and After You Plc (AU) about this issue.

“If costs increase, [businesses] can push this burden onto consumers by raising prices or reducing product size and quantity,” said ASP.

Revenue generated from bakery sales accounts for 90% of the total for President Bakery Plc (PB) and 42% for S&P Syndicate Plc (SNP), said ASP.

The Public Health Ministry’s new regulation to ban the production, import and distribution of food containing trans fats will become effective 180 days after its publication in the Royal Gazette on July 13.

The ministry cited scientific evidence that trans fatty acids from partially hydrogenated oils increase the risk of heart disease and stroke. It is also associated with a higher risk of developing type 2 diabetes.

Common foods that contain trans fats include cakes, pies and cookies, margarine, crackers, microwave popcorn, cream-filled candies, doughnuts, breakfast sandwiches, fried fast foods, and frozen pizza.

Thailand’s bakery industry is valued at around 20 billion baht, said Prachachart Turakij newspaper.

After the regulation was announced, MINT and CENTEL share prices fell 3% on Monday. Central Plaza Hotel operates fast food outlets, contributing 49% of total revenue, such as KFC, Mister Donut and Auntie Anne’s. Minor International operates The Pizza Company, Burger King and BreadTalk, making up 38% of total revenue, said SCB Securities (SCBS).

Information on the cost contribution from ingredients with trans fats is too limited to derive an estimate of the impact on earnings, said SCBS analyst Raweenuch Piyakriengkai, but she believes the impact is limited as viable substitutes are available and inexpensive.