April 25, 2007

 

Thailand's CPF may cut this year's sales target by 15 percent

 

 

A sluggish Thai economy has prompted the country's food processing giant Charoen Pokphand Foods to reconsider its sales target for this year.

 

Depending on second quarter results which are due in May 4, the company may revise downward its sales target for this year by 7 percent to 15 percent, said Teerasak Urunanon, CPF's executive vice president.

 

A 7-percent cut would mean a reduction of THB 10 billion (US$300 million) off expected annual sales of THB 150 billion. The company posted a loss of THB 1 billion (US$30 million) in the first quarter this year.

 

Diminishing local meat demand, coupled with a strong currency, bird flu risks, rising raw material costs, may prompt a cut in sales, said Teerasak.

 

First-half sales are expected to fall as chicken, pork and egg prices have declined since the end of last year due to oversupply, he said.

 

Although the industry is cutting down on production, the drop in consumer demand is even faster, Teerasak noted.

 

During the first quarter, domestic chicken prices hit their lowest level at THB22/kilogram, but rebounded to about THB31/kg level by end-March.

 

In addition, CPF expects to halve animal feed production at its integrated poultry complex in Nakhon Ratchasima to 600,000 tonnes.

 

As domestic conditions deteriorate, CPF is refocusing its efforts abroad at forging a global brand.

 

In fact, apart from feed mill upgrading in Thailand, there are no current plans to invest further at home as the company increasingly devotes resources abroad.

 

An example of this is the recently announced joint venture with agri-giant Bunge for a soy processing plant in China's Tianjin.

 

CPF now has feed plants in Laos and Russia and is expanding its feed plants in Vietnam and Cambodia. It has also invested in its shrimp business in the Philippines. On the seafood front, the company is also hoping to shift its focus on the US to newer markets in the EU and Japan.

 

CPF runs 120 feed mills in 11 countries with a combined production capacity of 24 million tonnes annually.