August 9, 2004

 

 

CP Food Sees Positive Outlook Following Shrimp Boost
 

Charoen Pokphand Food Plc, Asia"s biggest agri-business conglomerate, said its operating results this year are expected to see a positive trend, owing to an increase in shrimp exports to the US after Thailand"s favorable antidumping rates against those of its competitors.

 

"We believe our operating results in the second half of this year will be better off," said CPF president and chief executive officer Adirek Sripatak, pictured right. He said the company expects its sales this year to increase about 8.4 percent to about 90 billion baht from 83 billion baht a year ago.

 

CPF is expected to report its second-quarter earnings later this week, with analysts expecting a minor decrease during the quarter by about 9 percent year-on-year to 817 million baht due mainly to a slight drop in overall sales revenue, while the gross margin should be almost unchanged from that of last year. This would be a marked turnaround from the net loss of 598 million baht which was booked in the first quarter this year.

 

The outlook for the remaining part of the year looks bright as Thailand"s shrimp exporters are set to enjoy the benefit of having the lowest anti-dumping duty on their exports to the United States after the global economic giant announced its new anti-dumping duties last month.

 

The United States announced an anti-dumping rate of 6.39 percent on Thailand"s exports, which companies such as CPF see as an opportunity to increase sales.

 

The lower tariffs have pushed some producers to seek expansion of their plants in order to meet the growing demand for their products.

 

As part of its efforts to take advantage of the rising prices and the higher export volumes expected from the low tariffs, CPF said that it was planning on investing 1 billion baht to expand its current capacity to nearly 50,000 tons per annum.

 

Adirek said that by 2005, he expects shrimps to account for nearly 12 billion baht of its total revenue base from 6 billion expected this year and just 4 billion baht seen last year.

 

CPF, he said, would have an annual production capacity of 50,000 tons by the end of next year from 32,000 by January and about 25,000 currently.

 

"Shrimp exports will rise to about 32,000 tons, which will boost the export-shrimp-proportion to 12-14 percent of its revenue," he said, adding that Thailand"s total shrimp exports this year will rise to 230,000 tons and next year they are expected to be around 350,000 tons.

 

Most analysts had expected shrimp prices to rise after the lower tariff rates as producers opted to export their products than sell in the domestic markets. Adirek said shrimp prices on average increased by 15-20 baht per kilogramme, or about 5-10 percent, since Thailand"s shrimp exports to the US are set to rise.

 

He said the case of alleged dumping is expected to be cleared by the US authorities within this month. If the allegations prove baseless, it will help boost confidence among Thai shrimp farmers.

 

If Thailand gets exempted from the anti-dumping measures, Thai shrimp culture will recover and take the path of sustainable growth. Thailand"s shrimp culture technology is considered to be the best in the world, while its production costs are the world"s lowest.

 

However, he said, the case of anti-dumping of shrimp into the US filed in a US court by American prawn farmers has minimal impact on CPF"s business since the major markets for CPF"s prawn products are Japan, South Korea, Australia and Great Britain.

 

Meanwhile, the chairman of the Thai Shrimp Association, Somsak Paneetatayasai, said the average anti-dumping-duty rate of 6.39 percent is forecast to help boost Thai shrimp exports to the US for the rest of the year.

 

As per the new tariff rules, China will have to pay as much as 49.09 percent as the average tariff for shrimps exported to the US, Vietnam will pay 16.01 percent, Brazil 36.91 percent, India 14.20 percent and Ecuador will pay 7.30 percent.

 

"More than 75 percent of the US"s shrimp imports come from the six [mentioned] countries and Thailand has a market share of 27 percent," said Somsak. The low tariff gives Thailand an edge over other shrimp exporters. However, the announcement on the anti-dumping tariff rates will be revised on December 17, 2004.

 

Thailand"s shrimp exports this year are expected to reach 240,000 tons, about the same quantity as last year. The country has already exported 85,000 tons of shrimps, higher than that in the same period last year. Nonetheless, the export value this year is forecast to be about 22.5 billion baht, lower than last year"s by 26 billion baht, due to the decline in global shrimp prices.

 

Meanwhile, Thai Union Frozen Products Plc (TUF), Thailand"s biggest shrimp exporter by market value, said its shrimp exports may rise this year after the US imposed the new tariff rate, which also made its share price rise. Exports have slowed down since early in the second quarter when the US government accused the six shrimp exporters, including Thailand, of shrimp price dumping in the US.

 

An analyst at BT Securities said the new tariff rate will help increase the market share of Thai shrimps in the second half of the year. BT said TUF may post a higher-than-expected profit for 2004 because the price of tuna, a product it sells in the US under the label of Chicken of the Sea, may reach the highest in its four-year record and thus help boost sales value gradually.