FBA Issue 23: November / December 2008
CP to set its sights on foreign operations, may invest in South African shrimp farming
Thailand's Charoen Pokphand (CP) Group has expressed interest in pursuing shrimp-farming investment in South Africa following the rise of Thai restaurants in the country.
CP has already set up a marketing unit to export shrimps from India to South Africa. For the next five years, the conglomerate's annual investment budget for food activities, which is about 4 billion baht ($117 million) to 5 billion baht ($146.6 million) would be shifted to foreign operations, according to CP president and chief executive Adirek Sripratak.
CP has concentrated most of its investments in Cambodia, Laos, Myanmar, Vietnam, and China. However, India, Russia and South Africa have been getting an increasing proportion of both the company's attention and investment dollars.
ABB to raise storage, handling fees
Australia's ABB Grain Ltd will increase its storage and handling charges for its storage facilities and coastal export terminal network by 6 to 10 percent.
A company official revealed that the increase will take place after an annual review of its fee structure. It will apply for a harvest of winter grains which starts in October and to be completed by year's end.
He added that ABB needs to make a suitable financial return on its investment in its sizable network, which includes 111 country sites in southern Australia, two in Victoria state and seven shipping lines. To continue its investment returns for shareholders.
The increase exceeds the general rate of inflation because AA grain costs have risen faster than the overall price level. By increasing fees, ABB is also seeking to mitigate the impact of skyrocketing transport costs.
AgFeed acquires 2 hog farms; raises 2008 earnings guidance
AgFeed Industries, Inc., the largest commercial hog producer and premix feed company in China, acquired two large commercial hog farms located in South China.
The buyout, funded with the company's available cash on hand, was completed in October. The company already has a total of 30 commercial hog farms, including the recent two acquisitions.
AgFeed also raised its 2008 earning guidance of adjusted earnings per share (EPS) to $1.10/share due to the projected financial performance of the 3rd and 4th quarter of 2008, including the above mentioned two additional acquisitions.
Despite the west's ongoing credit crisis, AgFeed remains well capitalized and intends to leverage its balance sheet into more farm takeovers, which begin to augment its earnings within one growing season.
Pilgrim's Pride prepares to sell off assets
Pilgrim's Pride, scrambling to shore up its troubled balanced sheet, may look to sell assets and tap private-equity market for cash.
America's largest chicken processor is facing a possible default on bank loans stemming from continued losses and ill-timed bets on the corn and soy markets.
Farha Aslam, analyst from Stephens Inc., said Pilgrim's Pride may sell its Mexican operations, its egg business and two plants. Combined, such sales could fetch up to US$225 million, she said.
She added that the company has a good chance of selling its assets to avoid bankruptcy.
The Texas-based plant revealed that it has obtained a month-long waiver from its lenders as it tries to fix its business and negotiate a new agreement with its banks.
Earlier this year, banks relaxed certain loan covenants to give Pilgrim's Pride more breathing space.
Aslam said any money the company borrows will come at a higher cost. This is because Moody Investor's Service has cut the Pilgrim's Pride corporate credit rating further into junk bond territory, from B1 to B2.
The company already took several measures earlier this year to counter a sharp run-up in feed grain prices, weak prices for boneless chicken meat and an oversupply of poultry.
It also cut 2,300 jobs, shaved chicken processing output by 6.25 percent, closed one processing plant and shuttered seven distribution centres.
However, all this hasn't been enough to stave off mounting losses. For the nine-month period ended June 28, the company racked up a loss of US$197 million, against its earnings of US$13.8 million a year ago.
Yurun aims to triple pork output by 2012
China's Yurun Foods is aiming to triple its hog slaughter capacity by 2012 in order to benefit from China's rising domestic pork demand.
The company wants to raise its annual slaughtering capacity to 50 million heads with acquisitions and internal expansion, according to chairman Zhu Yicai. Yurun's current capacity is 18 million heads per year.
Increased capacity would allow Yurun and other large-scale slaughterhouses to rapidly strengthen market penetration, Zhu said. He added that smaller players with low hygiene standards might be phased out by China's tightening food safety laws.
Yurun recorded 71 percent growth in net profit in the first half of 2008. As China's leading meat processor, it spearheads the sector's consolidation, which is still in its early stages.
EU approves Schering Plough and Pfizer deals
The European Commission has approved Pfizer's proposed acquisition of certain animal health divisions of Schering-Plough.
The EU's executive body sanctioned the proposal after thoroughly examining the acquisition process. The Commission concluded that the proposed transaction would not significantly reduce industry competition in the European Economic Area (EEA).
Schering-Plough is pursuing the sale of these assets following commitments it made in the acquisition of Organon BS.
Although the decision impacts competition in the EU's animal health industry, the venture will nevertheless cater to a wide range of alternative suppliers for veterinarians and various animal segments across the Europe
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