October 23, 2007

 

Thailand's CPF to see its highest earnings in two years

 

 

Charoen Pokphand Foods' (CPF) 3Q07normalised earnings is forecasted to jump 135 percent on-year to Bt1.289 billion (US$40.1 million) , the highest earnings over the last eight quarters.

 

Rising domestic meat prices, higher exports season and healthy overseas business growth all contributed to the strong showing.

 

Despite higher raw material prices, the feed business, which accounts for 30 percent  of total sales, should remain profitable as the company passes on higher costs.

 

Overall gross margin is expected to improve from 13.8 percent in 3Q06 to 14.5 percent .

 

Chicken prices reached a two-year high of Bt36.50/kg in 3Q07 on tight chicken supply.

 

Average prices surged 45 percent on-year to Bt35/kg, well above costs of Bt30/kg.

 

The egg business should break even for the first time in two years as average prices rose 24 percent on-year to Bt2.10/egg, higher than costs averaging Bt2/egg.

 

CPF's pork business, which accounts for 8 percent of total sales, is also expected to turn a profit based on average prices of Bt45/kg, against costs of Bt42/kg.

 

Meat prices are expected to remain favourable through next year, analysts said.

 

Supply is likely to remain tight given as raw material prices remain high.

 

A stronger economy next and the return of consumer confidence next year should help spur demand, analysts said.

CPF has announced it is moving away from production of raw poultry and is concentrating on developing more value-added products which offers  higher margins.

 

Despite a stronger Thai currency, the company's exports are expected to benefit from lower tariffs due to agreements such as the JTEPA (with Japan), GSP privileges and higher EU quotas

 

CPF's overseas business accounts for 16 percent of total sales.