Catfish king ready to hook exports on free trade deals

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Workers process fillet from catfish in Faquimex company in BenTre province, situated in the delta of the Mekong River in Vietnam. Workers process fillet from catfish in Faquimex company in BenTre province, situated in the delta of the Mekong River in Vietnam.

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Hung Vuong Corp., which supplies frozen catfish to Wal-Mart Stores Inc. and Spain’s Mercadona SA, will sell a company stake and spend at least $100 million this year to expand production as Vietnam prepares to sign trade deals.
Vietnam’s largest catfish exporter will build a $30 million Alaskan pollock processing plant in Russia in April and seek an Indonesian partner to expand catfish-feed production overseas, Chairman Duong Ngoc Minh said. He also plans to sell as much as a fifth of the company to a foreign strategic partner.
The company forecasts it will double revenue to 30 trillion dong ($1.4 billion) by 2017 and boost exports to at least 80 countries as Vietnam works to sign the Trans-Pacific Partnership accord and a free-trade deal with the European Union.
“We have been restructuring our production to get ready for Vietnam’s greater integration into the global economy,” Minh, who’s known in local media as the “Catfish King,” said in an interview in his Ho Chi Minh City office Feb. 10. “With all these trade agreements coming in, Vietnamese companies have to spend money to survive. Or they’ll get left behind and die.”
The company is the latest to expand regionally as the Hanoi government prepares to sign at least half a dozen free-trade agreements this year. Vietnam and the EU have said they aim to complete negotiations this year. Meanwhile, the U.S., Vietnam and 10 other nations involved in the TPP negotiations may reach a deal in March, Australian Trade Minister Andrew Robb said Feb. 6.
Trade agreements
Seafood “is a sector that could easily explode” after trade agreements are signed, said Deborah Elms, executive director at Singapore-based Asian Trade Center.
“TPP member countries have 800 million consumers. Many enjoy seafood,” she said. “Seafood products in places like the U.S. and Canada are relatively expensive. Vietnamese producers should pick up market share rapidly.”
Hung Vuong, which has facilities in the Mekong Delta, expects seafood exports to jump 43 percent to $660 million this year, with catfish shipments contributing half. It forecasts 2015 pretax profit will double to at least 1 trillion dong on revenue of 20 trillion dong.
The company rose 3.3 percent at the mid-day break Feb. 12 in Ho Chi Minh City trading. The stock advanced 20 percent last year, compared with the VN Index’s gain of 8.1 percent. The seafood producer plans to double its registered capital to 3.7 trillion dong in 2017 after it issues stock dividends to shareholders.
Food safety
The company will open three catfish production facilities and expand shrimp production in the country this year, with investment totaling 1.2 trillion dong, Minh said. Its investments to upgrade facilities will trim operation costs 20 percent and allow the company to export catfish at cheaper prices while improving quality, he said.
“It’s an opportunity to upgrade our production at low costs as Vietnam’s interest rates have been cut while the yen and euro have dropped,” said Minh, who founded the company in 2003.
Vietnam’s catfish exports are projected to rise 15 percent to 20 percent annually through 2020 with sales of as much as $3 billion a year, said Minh, who is also vice chairman of the Vietnamese Association of Seafood Exporters and Producers. The Southeast Asian nation tops the world in catfish production with 1.2 million tons per year, representing almost one-fifth of global production, according to Minh.
The greatest challenge for Vietnamese seafood exporters after trade agreements are signed will be to comply with food safety and sanitation standards, said Alan Pham, Ho Chi Minh City-based chief economist at VinaCapital Group, the nation’s biggest fund manager.
“They have to invest more in advanced freezing equipment to keep food fresh on arrival at export markets,” he said. “Additionally they need clear accounting records reflecting their production costs to overcome anti-dumping challenges from businesses in the importing countries.”
Anti-dumping duties
The company has refocused its export strategy after it was among 24 Vietnamese catfish enterprises hit with U.S anti- dumping tariffs. Hung Vuong did not export to the U.S. last year, even as tariffs dropped to $0.97 per kilogram from $1.20 per kilo, according to the website of Vietnam’s seafood association. “The United States isn’t a potential market for Vietnamese catfish exports,” said Minh, whose company’s exports to the U.S. accounted for almost 14 percent of revenue in 2013.
He likens the U.S. anti-dumping sanctions to a “trade war” and says the company would consider exporting to the U.S. again after TPP, if the “U.S. conducts catfish trading in a fair way that would benefit its customers.”
The company is in talks with possible Indonesian partners to invest $15 million in a new catfish feed plant with annual capacity of 200,000 tons in that country or take a majority stake in an existing plant, he said. The upcoming trade accords are a boon for his company and the industry, he said.
“This diamond opportunity might be the last one in my life to thrive in the industry,” said Minh, who is 59. “That’s why I decided to aggressively invest and expand to jump on this last opportunity.”

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