April 5, 2007

Thailand's CPF posts significant loss in Q1 2007
 

Thailand's Charoen Pokphand Foods is estimated to post a significant loss of between THB900 million (US$27.736 million) and THB1 billion (US$30.818 million) in Q1 2007 due to weak prices of poultry and swine products.

Poultry and swine products account for a significant portion of CPF's total revenue at 19 percent and 10 percent respectively.

The company last made a loss of THB598 million in Q1 2004 when bird flu first hit the country.

While industry participants expect CPF to break-even or narrow its loss for this year's first half, its second half earnings should turn positive as prices are seen to register further gains especially for swine products.

CPF's earnings for 2007 are expected to fall 17 percent from last year, but if poultry and swine product prices return to normal levels, a rebound is likely in 2008, analysts said.

Chicken prices have rebounded at end-March, fully covering production costs. The earnings outlook might yet look bright for 2007 if chicken prices stay at current levels.

On the other hand, hog farming has become popular in Thailand following high profit margins in previous years, leading to an oversupply of pork. This has kept pork prices weak since last December. But CPF is optimistic about swine prices for the second half of this year, as the weak prices should discourage new hog farming.

Meanwhile, prices of corn, the key raw material in CPF's production, jumped in Q1 2007, fuelled by the rise in global corn demand for ethanol production. This has pushed up the break-even cost of chicken production from THB25/kg to THB29/kg.

On a positive note, the recent free trade agreement between Thailand and Japan is a boon to CPF, as Japan will gradually cut tariffs on Thai chicken products and immediately abolish duties on shrimp imports. At present, 40 percent of both the company's shrimp and chicken products are shipped to Japan.