March 16, 2004

CP Foods Sells Alabama Poultry Plant

Leading Thai poultry firm Charoen Pokphand Foods Plc has sold its chicken operation in the United States for 1.6 billion baht or US$41.18 million following four consecutive years of losses.

The integrated chicken business and substantial assets of its Charoen Pokphand (USA) in Alabama were sold to Equity Group Eufaula Division, LLC, which offered the best conditions among several bidders, according to Adirek Sripratak, CPF's president and chief executive officer.

CP-USA, 99.95% owned by CPF, was set up six years ago to operate an integrated broiler business in Alabama to slaughter around one million chickens a week for the domestic market with a sales target of around $100 million per year.

But the dormant US consumer market resulted in a 10% decline in sales of CP-USA in 2002, leading to a loss of about 800 million baht for the year.

Conditions improved last year but the operation still finished in the red.

CPF said that CP-USA planned to use the proceeds from the sale of the assets to pay its debts.

Mr Adirek said in a previous interview that the establishment of CP-USA was aimed at penetrating the large chicken market in the United States with potential to export the meat to Asia.

As well, the unit was equipped with state-of-the-art technology that would benefit operations in Thailand.

Mr Adirek said yesterday that the transaction would not have an impact on CPF's financial performance for 2004, given that the actual sales proceeds were on par with estimates made in the fourth quarter of 2003.

CPF last year announced plans to raise $21 million in capital for CP-USA to help settle liabilities and invest in a new wastewater plant, but later announced plans to sell off its fixed assets to clear the debt instead.

In its 2003 financial statements, CPF reported that the net realisable value of the fixed assets sold by CP-USA was lower than net book value by $23 million. CPF reduced the carrying value of the fixed assets to the realisable value and recorded the assets as held for sale in its balance sheet ending Dec 31, 2003.

At the end of 2003, CP-USA reported assets of 2.14 billion baht, with shareholders' equity of -358 million baht.

The company had a net loss of 1.15 billion baht, including a 938-million-baht charge for impairment of asset values, on sales worth about 4.5 billion baht.

CPF shares closed yesterday on the Stock Exchange of Thailand at 3.82 baht, down 10 satang, in trade worth 16.94 million baht.