March 28, 2006

 

Thailand's CPF aims to divest business

 

 

The company plans to sell off a 40 percent stake or 30 million shares in Lotus Supercentre in Guangzhou to Union Growth Investment, wholly owned by Chia Tai Enterprise International Ltd. Hong Kong-based Chia Tai is in turn controlled by CPF's parent, the CP Group.

 

The sale would bring CPF around THB1.2 billion (US$30.9 million).

 

Adirek Sripratak, CPF's president, said the divestment was part of a plan to exit non-core businesses that produced more burdens than profits.

 

CPF last year gained THB 899 million (US$23.13 million) from selling 17.5 million shares in the Makro cash-and-carry chain to its operator, Siam Makro Holding (Thailand) Plc.

 

The group made a total of THB6.74 billion (US$173.4 million) net profit for 2005, up more than five-fold from 2004's net profit of THB 1.23 billion (US$31.64 million).

 

CPF, the food flagship of CP Group, reported sales of THB113.37 billion (US$2.9 billion) in 2005, up 24 percent from the year before.

 

However, the new wave of bird flu and factors such as floods and declines in the shrimping business are likely to affect sales in the first quarter this year.

 

Mr Adirek said bird flu resurgence last year cut chicken consumption by 20 percent in the first quarter when both prices of live chicken and eggs fell.

 

He said the recent outbreak was small and would only affect CPF's first-quarter sales, noting that prices are slowly returning to normal.

 

Phatra Securities recently reduced its projection for CPF's earnings to reflect factors such as flood damage to shrimp farms and the bird flu outbreak.

 

Mr Adirek admitted that gross margins from this year's sales might not be as high as the 16.7 percent CPF gained in 2005, given low chicken prices on average in the first quarter of 2006.

 

However, he hoped to see an improvement in profits from its higher-value cooked products.

 

CPF still considers bird flu one of the risks to future operations together with other factors, including trade barriers imposed by foreign countries.

 

At the same time, that would increase its market capitalisation. In the past two years, foreign holdings in CPF went up from 13 percent to 35 percent at present.

 

Also, it aimed to raise value of product lines and create more marketing awareness among consumers in both domestic and overseas markets this year, spending THB 200 million (US$5 million) in brand building efforts.