January 27, 2012

 

Charoen Pokphand Foods aspiring for US$20-billion revenue

 

 

Five years from now, Charoen Pokphand Foods Plc (CPF) is anticipating for an annual revenue of THB650 billion (US$20.8 million), boosted by a planned expansion at home and abroad.

 

The focus will at first be on feed production before improving CPF's integrated food production facilities.

 

Chief executive Adirek Sripratak said 2012 revenue will come in at THB320-330 billion (US$10.2-10.5 billion), up from THB210 billion (US$6.7 billion) expected for last year. Assuming 15% revenue growth per year, CPF will achieve THB650 billion (US$20.8 billion) in 2017.

 

Adirek said CPF will acquire companies producing animal feed, farm products and food in Thailand and elsewhere. Negotiations with an animal feed producer in Pakistan should be concluded "very soon", said Adirek.

 

The foreign expansion will start with construction of an animal feed factory, moving later to farming and food processing factories to serve local markets and act as an export base.

 

CPF's revenue structure will change in line with the reduced contribution from farming, with the food and feed business eventually generating two-thirds of revenue.

 

Earlier acquisitions in China and Vietnam have raised the revenue contribution of animal feed to 54% now from 39%, while farm revenue dropped to 33% from 43% and food to 13% from 18%.

 

CPF last November agreed to buy 74.2% of Hong Kong-listed C.P. Pokphand Co Ltd for US$2.1 billion. The move is part of a bid to strengthen its status as an international agribusiness leader.

 

He said this means CPF must speed up its technology development and upgrade the entire production process.

 

The goal is to have all of its 47 feed and food factories in Thailand and abroad ISO 270001:2005 certified for administration of information technology (IT) security.

 

"Improved IT security will ensure we can keep our formulas secret and be ready for production at any time," said Adirek. He said technology development will prepare CPF for an upward trend in food and animal feed prices over the next 5-10 years in line with rising oil prices.

 

Oil is expected to exceed US$100 a barrel again, resulting in greater demand for energy crops. That means less cultivation area for feed crops, pushing up the cost of animal feed production.

 

"Considering energy price trends and climate fluctuations, the long-term outlook is for higher food prices. Importing nations may be planning to enlarge their stocks from the current three to five months to ensure food security. This is an opportunity, but we must keep up our quality amid tough competition," said Adirek.

 

In the short term, chicken prices will enjoy an upward trend if the EU and Japan allow imports of fresh poultry. The Thai Commercial Office in Brussels reported the EU is "not likely" to extend an import ban on fresh poultry from Thailand when it expires in June. Thailand had a quota of 90,000 tonnes of fresh poultry shipments to the EU, but the 2006 bird flu outbreak resulted in the ban. Thailand has been certified free from the disease since February 2009.

 

CPF shares closed unchanged yesterday on the SET at THB35 (US$1.12) in trade worth THB419 million (US$13.4 million).