February 6, 2008

Strong earnings recovery in 2008 expected for CPF
 

Charoen Pokphand Foods (CPF) estimates its normalised fourth quarter earnings in 2007 to be THB 662 million (US$21.2 million), compared to 2006's fourth quarter earnings of THB 111 million (US$3.56 million), said Kelive Thai, a live market analysis website.

However, there is a drop of 42 percent quarter on quarter. This decrease should come from seasonal impact, low shrimp prices, and poor feed sales caused by sharp increases in raw material costs (soy, corn and fishmeal). 

In particular, soy prices have increased sharply by 51 percent year on year to around THB 16 (US$0.51) per kilogram.

Egg sales have also incurred losses due to falling egg prices to THB 1.90 per egg, which is below the average cost of THB 2.00 per egg. However, chicken sales have remained profitable even with higher feed costs, resulting in average costs rising from THB 30 per kilogram to THB 32 per kilogram. Average chicken price has remained at THB 35 per kilogram.

The normalised profit for 2007 is expected to be THB 1.2 billion (US$38.5 million). That is a drop of 39 percent from 2006, and it results from poor performance caused by poor domestic meat prices and rising feed costs in the first half of 2007.

However, earnings recovery of 171 percent to THB 3.3 billion (US$106 million) is expected in 2008 due to improving chicken and pork prices since the second half of 2007.

The feed business, representing 30 percent of CPF's sales, should remain healthy as the company is allowed to adjust feed process after sharp rises in raw materials in the fourth quarter of 2007.

Chicken and shrimp exports are projected to increase by 10-15 percent this year. Overseas aquaculture in India, Malaysia and Vietnam should also deliver a growth of at least 20 percent.

Chicken prices are expected to remain favourable without significant impact from bird flu. Pork prices have increased from 2007's average of THB 41 per kilogram to THB 55-56 per kilogram, with its average costs at THB 42 per kilogram. Pork prices are expected to remain favourable.

THB 1 = US$0.03 (February 6, 2008)