November 26, 2018

CP Foods' overseas operations to expand further

Charoen Pokphand Foods (CP Foods) is shifting its direction to overseas investment in order to tackle global economic uncertainties.

The company said it is projected that two-thirds of its revenue will come from operations out of its Thailand base.

According to CP Foods' recent report to the Stock Exchange of Thailand, the company earned THB400 billion (US$12.1 billion) in the first nine months, up by 7%. Of the total, its revenue from overseas operation accounted for 67%, an increase by 12%.

In addition, it is forecast that the company's total revenue will hit THB600 billion (US$18.8 million) - with overseas sales' share at 75% - in the next five years. This growth marks a significant change in strategic direction for Cp Foods, taking into account that the revenue from foreign operation was only 30% back around 20 years ago.

The uncertainty in global economy is cited as the main reason for the change of strategic direction.  Sooksunt Jiumjaiswanglerg, CEO of agro-industrial business and co-president at CP Foods, said the geographic diversification could mitigate those risks.

"We are investing in 17 countries including Thailand. International diversification helps us to mitigate the risks from economic uncertainties, breaking trade barriers and greatly reduce cost of operation in many ways," he said.

CP Foods' major overseas operation are in China and Vietnam. Investment in other countries include Taiwan, India, US, Turkey, Russia, Cambodia, UK, the Philippines, Malaysia, Belgium, Sri Lanka, Brazil, Laos and Poland, involving animal feed and farm, food processing, food service, aquaculture farm and products.

Taking Poland's operation as an example, CP Foods already exported chickens to EU market. However, the number of exported chicken is limited by EU's tariff rate quotas. Having operations in Poland helps CP Foods to break the barrier. In addition, it would save transportation cost and speed up its response to European customers, making CP Foods more competitive in European poultry market, the company said.
 

"Having production base in targeted markets will strengthen the company's competitiveness and facilitate businesses," noted Jiumjaiswanglerg.

The CEO cited CP Foods Vietnam as the current best performer due to the recovering pig price in Vietnam. The price is projected to remain high in 2019. As an effect of this positive outlook, CP Foods plans to raise pig production from five million per year to seven million per year.

The company also sees progress in the Philippines. Jiumjaiswanglerg added that the company will push for more investment in the country, especially in pork business, which has an export potential.

CP Foods' operations in the rest of Southeast Asia perform well in this year, largely due to the recovery of livestock price. The company's operations in Turkey has generated the same level of profit as 2017 even though the Turkish currency's value was halved this year.

However, CP Foods stated that the major threat for international operations is the outbreak of African swine fever (ASF).

Still, the company said it has been well prepared and such a development is unlikely to have significant impact on the company's performance.

As a result from recovering livestock prices worldwide, the company expects  its positive momentum to continue in Q4. It is optimistic of its business's performance in 2019, largely due to overseas performances and better pig and chicken prices in Thailand.

- CP Foods