March 23, 2004

Analysts See CPF Turnaround As Bird Flu Clears

Analysts believe that Charoen Pokphand Foods (CPF), one of Thailand's leading food-processing enterprises, will post a turnaround in performance in the second half of this year following the end of bird flu in the country.

CPF posted a net profit for 2003 of 2.24 billion baht, a decline of 14% from 2002 and lower than consensus estimates of 2.6 billion baht. Analysts believe that this was a result of an increase in the company's cost of goods sold as it took steps to ensure the prevention of bird flu from its farms.

The bird flu resulted in a sharp drop in domestic demand for chicken products as well as prices; CPF's sales of chicken in February were estimated at only 30-40% of normal levels. Export revenues were severely hurt in the first two months of this year, as well, as Japan temporarily cut imports of Thai chicken. The company's exports of chicken to Japan account for a large 50% of its total export volume and 7-8% of its total sales.

As a result, CPF is expected to post a net loss for the first quarter of 2004 of 400-800 million baht.

However, with the Japan trade of processed chicken reopened this month, CPF's exports this year should double the 47,000 tons it shipped in 2003, which were worth 1.7 billion baht.

Chicken prices, meanwhile, have rebounded to 24-30 baht a kilogram from 17 baht in February, with prices set to rise further as a result of increasing domestic demand and supply shortages.