WTO decision leaves Thai shrimp exporters cock-a-hoop

The US will have to stop imposing the "continuous bond requirement", or C-bond, on Thai imports. Another Thai exporter, Seafresh Industry (CFRESH), will also benefit.

The US is supposed to return about Bt12 billion in C-bond guarantees to Thai exporters.

The US market outlook for Thai shrimp will likely become brighter next year, which could lead to higher profit projections for listed exporters.

An analyst at Kim Eng Securities (Thailand) said the ruling was positive for frozen-shrimp companies in the long run.

It will increase the competitiveness of Thai shrimps in the US and boost export volume.

The brokerage said it could possibly revise up the three companies' net profit forecasts.

All three stocks enjoyed higher prices yesterday. CPF's stock rose 3.57 per cent to Bt3.36, TUF was up 1.27 per cent to Bt15.90, and CFRESH jumped 9.59 per cent to Bt1.60.

Nattapon Kumnounphon, an analyst at United Securities, said the WTO's decision largely helped CPF and TUF because import duties would be cut from the current range of 5.29-6.82 per cent.

Shrimp exports to the US account for 20 per cent of CPF's sales. Without having to post the C bond, sales and profits could rise by Bt400 million per quarter. TUF could also increase its sales from Bt3.5 billion to Bt4 billion.

The US will likely have to return Bt12 billion placed in C bonds over the past five years to the Thai frozen-shrimp exporters, which would then improve their cash flow.

"This will reduce their interest expense, as they will have enough working capital. Some companies won't need to tap loans from financial institutions," Nattapon said.

United Securities may upgrade its profit projections for CPF and TUF after discussions with the companies' management teams. A Sicco Securities analyst noted that aside from CPF, Seafresh Industry would be buoyed by the ruling because the US was its main market. The company sends 20 per cent of its sales to the US.

"The gain could be limited as Seafresh has engaged in farm contracts, which leads to low flexibility in adjusting shrimp prices and low profit margin," the Sicco analyst said.

Sicco may revise upwards the three companies' 2009 net-profit forecasts.

Sicco recommends that shrimp-exporters focus more on the high-end segment, as their products are less competitive at the low end in the US market than those from Ecuador and Indonesia, which are not subject to any duty upon entering the US.