November 28, 2008


CP Indonesia to cut investments on bleak 2009 outlook

PT Charoen Pokphand Indonesia, an animal feed and processed chicken manufacturer, has decided to reduce its investments for next year due to the global economy slowdown.


The company expects sales to decline by as much as 10 percent due to weak demand and currency volatility.


Charoen president director Thomas Effendy said the company had to shelve a plan to build a new poultry feed plant with a capacity of 30,000 tonnes.


The company will also reduce allocations for capital expenditure next year to around IDR 100 billion from the IDR 274 billion allocated for this year, said Thomas.


"The crisis has forced us to cancel our IDR 127 billion plant in Lampung next year. We are putting our expansion on hold because of possible low demand and fluctuations in the local currency," Thomas said.


The lower investment next year was due to the credit crunch, said Thomas.


The company is a local unit of Thai conglomeration Charoen Pokphand Foods (CPF), with estimated sales of IDR 12 trillion and net profit of IDR 450 billion this year.


During the first three quarters of 2008, the company earned IDR 9.98 trillion in sales, up 61 percent on-year, while net profit jumped 129 percent to IDR 401 billion.


Charoen produces 4 million tonnes of poultry feed and 24,000 tonnes of processed chicken annually for the domestic market. However, the company said it would look out for cheaper local products for its feedstock due to the uncertainty in the financial sector.


Currently, Charoen requires more than 1 million tonnes of corn and 400,000 tonnes of soy each year to make its poultry feed products, which contribute 78 percent to the company's total sales. More than 90 percent of the corn is grown locally, but all of the soy is imported from Brazil and Argentina.


Charoen operational director Jemmy Wijaya said the company hopes to have its entire corn supply coming from local farmers.

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