January 25, 2007

CPF earnings for 2006 to drop 19 percent due to weak consumption

2006 and 2007 earnings forecast for Charoen Pokphand Foods (CPF) has been revised down by 19 percent and 15 percent, respectively, to reflect weakening domestic demand, according to stock analysts.

CPF is projected to deliver 2006 profit of THB 2,230 million (US$62.1 million), down 61 percent on-year. However, its earnings are expected to be up 41 percent this year to THB 3,135 (US$87 million).

Its fourth quarter 2006 CPF earnings are expected to drop 41 percent on-year to THB 324 million (US$9 million) due to poor performance of its domestic meat business, which accounts for a quarter of sales.

Although average chicken prices has made a slight recovery, profits have been dragged down by poor pork prices, resulting in a net loss for that division, analysts said.

Meanwhile, CPF's chicken business in Turkey is expected to continue making losses.  As it is off-season, the aquaculture and export arm of its businesses in Thailand should also show lackluster results.  

Declining consumer confidence and the bomb incidents this year would weaken consumption and meat prices. Bird flu cases in ducks recently would also dampen demand, thus pushing prices down

The upside is that CPF's recent investments in the aquaculture businesses in China and Malaysia are likely to show significant growth this year. CPF also invested US$49 million in a shrimp farm in the Philippines in 2005. A rebound is expected in pork prices as oversupply eased and pork exports should continue to do well, analysts said.