November 13, 2013

Charoen Pokphand Foods' nine-month financial results drop on EMS




Driven by a disease that could cut its shrimp supply by half this year, Charoen Pokphand Foods' (CPF) nine-month financial performance is off target.


"The effect of early mortality syndrome (EMS) on Thailand's shrimp industry and CPF's shrimp business was more severe than expected. Moreover, the recovery of the shrimp industry has been hampered by higher shrimp prices due to less supply in the market, which affected the cost of shrimp processing. It is estimated that shrimp supply will decline about 50% this year," CPF chief executive officer Adirek Sripatak said in a statement.


In the third quarter, the company showed a 10% increase in net profit on-year to THB2.65 billion (US$84 million), lifting nine-month earnings to THB5.3 billion (US$168 million).


Sales in the quarter rose 8% to THB105.3 billion (US$3.3 billion), raising nine-month sales revenue to THB285.89 billion (US$9.1 billion).


Last year, CPF's sales revenue stood at THB378.99 billion (US$12 billion) while net profit was THB18.8 billion (US$600 million).


CPF said its research and development team had been dedicated to study farming techniques to help bring the shrimp survival rate back to normal, and it had disseminated such knowledge to farmers. It now is seeing farmers return to operations.


The company expects better operating results in the second half of 2013 and a gradual improvement in 2014. The third-quarter results improved over the previous quarter, mainly as a result of a recovery of broiler and swine prices in the domestic market from last year, when prices plunged below production costs because of oversupply.


The quarterly profit of THB2.65 billion (US$84 million) is better than Bualuang Securities expected, as it had forecast THB2.47 billion (US$78 million) based on an estimated loss of THB1 billion (US$31.7 million) to THB1.5 billion (US$47.5 million) from the shrimp operation. In a research note, it said the quarterly profit would be low because of weaker shrimp and overseas operations (specifically Turkey, Russia, Malaysia, the Philippines and Vietnam) and a lower equity contribution from CP All.


In a research note last month, Asia Plus Securities said it might lower its forecast of CPF's 2013-14 net profit, as the shrimp business had recovered more slowly than expected. However, it noted that profit from livestock business would still be high, despite a decrease in the prices of pork and chicken since September, because there was more product in the market as producers increased capacity to compensate for Saha Farm's troubles. In any case, this would not put much pressure on CPF, as the cost of feed-mill raw materials has also decreased. Asia Plus expects CPF's profit to remain healthy.