CPF sees profits from stellar meat prices in January

Charoen Pokphand Foods announced stellar meat prices in January, suggesting profitable farming business.

Broiler prices hit an all-time high at THB45 (US$1.35) per kg, pushing the gross margin of broiler to 50%. Egg prices were slightly softer month-on-month (MoM), but improved year-on-year (YoY). However, the egg segment faced small losses in January, but this is expected to have an insignificant impact since it only contributes 3.0% of total sales.

Swine prices increased from THB57 (US$1.71) per kg in December 2009 to THB59 (US$1.71) per kg, implying a fatter margin of 18.0%.

Shrimp prices were weaker YoY, but flat MoM. Although shrimp prices declined YoY, a minimal impact is expected as shrimp makes up a small proportion of total sales at 10.0% and the profit from other products are more than enough to cover the drop in shrimp margins.

Net-net, overall margins will improve YoY and MoM as broiler and swine make up the highest proportions of farm business (31% to total sales and 70.4% of farm income).

Given the good prices in January and constructive costs, CPF expects to post robust earnings in 1Q10 thanks to jumps in broiler and swine prices.