April 22, 2004

CP Foods Consider Expansion In Eastern Europe, Africa

Charoen Pokphand Foods Plc says it plans to broaden investments in the poultry and aquaculture business to Eastern Europe and Africa to offset risks from rising import barriers from its trade partners.
 
Russia, Ukraine and Romania were potential sites for chicken businesses, according to CPF president and CEO Adirek Sripratak.
 
"We have also eyed Madagascar for a site to raise shrimp for export to European countries,'' he said.
 
Mr Adirek said that exports of Thai shrimp to the EU were subject to a 20% tax on processed products and 15% for fresh shrimp. However, shrimp from Madagascar, a former colony of France off the east coast of Africa, enjoyed zero import tariffs in the EU.
 
Thai shrimp exports to the United States are also facing challenges now that Washington has decided to investigate whether shrimp from Thailand and other countries were sold below cost. The US Department of Commerce is scheduled to impose preliminary anti-dumping duties on shrimp from six countries on July 28, postponed from the previously scheduled date of June 8, Mr Adirek said.
 
He said survey teams had been sent to the countries in which CPF was interested in. The company has also employed 10 Russian executives to study the chicken operations of the company, which he said were more advanced than those in Russia. Import demand for chicken in Russia was high at more than one million tons a year, he said.
 
Last year, CPF entered the chicken business in Eastern Europe by acquiring C.P. Standart Gida Sanayi ve Ticaret A.S. in Turkey from its Hong Kong-listed affiliate C.P. Pokphand Co.
 
The investment plans will be carried out within three years and the company plans to use part of its 5.4-billion-baht investment capital set aside for this year to fund the new projects.
 
CPF already operates both livestock and aquaculture businesses in China, Malaysia, Vietnam and India as part of a strategy to reduce risks.
 
Dhanin Chearavanont, the chairman of the parent Charoen Pokphand Group, said that while many countries agreed with trade liberalisation rules under the World Trade Organisation, some nations, especially developed countries, still imposed import barriers.
 
Mr Dhanin, who chaired the CPF shareholders' meeting yesterday, said the bird flu outbreak that hit the local poultry industry could lead to sweeping changes in the chicken industry, resulting in exports of brand-name cooked chicken in quality packaging replacing raw meat.
 
However, he expressed confidence that the performance of CPF this year would not be worse than last year. He was referring to the situation when Sars had more impact on the overall economy than bird flu has had this year.
 
The bird flu outbreak since January had resulted in the mass cull of 35 million birds nationwide and is expected to reduce shipments of Thai chicken this year to about 42,000 tons, from 54,000 last year. Export revenue is projected to fall by 10 billion baht to 39 billion baht.
 
CPF expects consolidated sales revenue for 2004 to grow by 5%, from 83.1 billion baht last year. It reported net profits of 2.24 billion baht on revenues of 85.2 billion for 2003, compared with profits of 2.6 billion on revenues of 76.6 billion the previous year.
 
CPF shares closed yesterday on the Stock Exchange of Thailand at 3.94 baht, up eight satang, on trade worth 33 million baht.
 
Mr Adirek said the company also needed to establish more subsidiaries abroad to act as distributors. Currently it has distribution centres in 12 countries.