June 12, 2008

CPF 2008 earnings forecast lowered 29 percent
  
  

CPF's 2008 earnings forecast has been lowered by 29 percent to reflect rising costs of raw materials for animal feed.

Gross margin forecast for the feed business has dropped from 12-13 percent to 7-8 percent, as feed prices remained unadjusted. The overseas feed business is expected to show improving margins in the second quarter of 2008 as sales prices have been raised. Price increases in Thailand have to be approved by the government and it is currently under consideration, whereas price increases overseas do not require government approval.

Domestic meat business will play a key role for CPF growth this year amid meat price increases. Swine prices are at THB 55 per kg, up 34 percent on-year. Broiler prices are at THB 38 per kg, up 15 percent on-year while egg prices have risen 20 percent on-year to THB 2.4 per egg.

After incurring losses from low prices last year, the swine and egg businesses have now turned profitable.

CPF will benefit from baht depreciation, earning 18 percent of its revenue from chicken and shrimp exports with the US, the EU and Japan as major markets. Meanwhile, overseas business is expected to grow by at least 20 percent.

CPF has focused on adding more branded food products that now accounts for 6 percent of sales, which would boost gross margin and limit risk of fluctuating commodity prices.

Normalised profit is expected to rise 135 percent on-year to THB 2,372 million this year. High inflation could affect feed price adjustment and consumption and the negative issues are fully reflected in the share price, which has dropped 13 percent in the past month.

THB 1 = US$0.03 (June 12, 2008)