May 21, 2005

Charoen Pokphand Foods rated "A" by TRIS rating

TRIS Rating Co., Ltd. has affirmed the ratings of Charoen Pokphand Foods PLC (CPF) and its debentures at "A". At the same time, TRIS Rating has assigned the ratings of CPF's two proposed senior debentures totalling up to THB4 billion at "A". The rating outlook has been changed to "positive" from "stable".

The ratings reflect the company's leading position in Thailand's agribusiness industry, its product and market diversification, its full vertical integration, and management's ability to respond to the ever-changing business environment. These strengths are partly offset by the inherent volatility of commodity prices, exposure to disease outbreaks, and stricter regulations imposed by importing countries.

The "positive" outlook reflects the bright prospects of the shrimp business due to the low anti-dumping rate for Thai shrimp exported to the US compared with other countries. The company's competitive advantage is expected to be further strengthened after the completion of its new processed chicken plant and the achievement of full vertical integration for its shrimp business.

TRIS Rating reported that CPF is the largest agribusiness company and regarded as the flagship agribusiness of the CP Group in Thailand. The company's business is divided into two categories, livestock and aquaculture, which accounted for 75 percent and 25 percent of total sales in 2004. Its fully integrated chicken operation helps its products meet international standards, qualifying it to export to Europe and Japan.

CPF's 2004 performance was adversely impacted by the bird flu outbreak in Thailand and other Asean countries. The occurrences of bird flu are expected to remain, but at a lesser degree, while the chicken industry has changed to export only cooked products. During the first three months of 2005, CPF's performance improved significantly because of a strong rebound in the domestic price of livestock products. Though the sustainability of the current high prices remains a concern, the company's strategy to focus more on food products should partially insulate the company from the cyclicality of commodity prices, TRIS Rating said.