July 31, 2009

Thailand's Charoen Pokphand Foods (CPF) profit is forecast to reach an historic high for second quarter of 2009, with a 210 percent year-on-year growth to THB2,52 million.

The company estimated a gross margin surge from 13.4 percent in Q2 2008 to 17.4 percent, thanks to the growth of all business lines, especially overseas and exports.

Indian, Malaysian, Vietnamese and Chinese operations should enjoy high margins due to declining raw material feed prices. The chicken business in Turkey will also see a turn from losses back to profit after a recovery in chicken prices.

Exports will be fuelled by ongoing growth in the Japanese market and more high-margin food exports such as ready-to-eat products.

The prices of corn and soymeal, the major raw material for feed, went down 22 percent year-on-year and 5 percent year-on-year to THB7.3/kg and THB17.1/kg, respectively.

Meat business including swine, broilers and eggs is seen to benefit from lower material prices. Even with slower demand along with a weakened economy, sales prices for meat remain at favourable levels.

Eggs have returned profitable after suffering three-years of losses. An improving shrimp business is expected on the back of a lower supply and lower production costs.

Based on the harvest season, corn prices have decreased substantially to approximately THB6.5/kg. Rising soymeal should not hurt margins as it has been already stocked for the rest of the year.

Margins for the meat business are expected to remain healthy based on low raw material prices, while sales prices stay at profitable levels.

Swine, broilers and egg prices are now at THB56/kg, THB39/kg and THB2.5/egg, respectively. Overseas operations should continue to enjoy low raw material prices. CPF will also realise equity gains from an affiliate in Taiwan from 3Q09 onward, with its recent expansion worth THB826 million.

US$1 = THB34.022 (Jul 31)