December 18, 2009

Profitable times expected for CPF

Charoen Pokphand Foods (CPF) Plc remains bullish on its bottom-line 2010 prospects after a surge in net profits expected to top THB10 billion (US$301.1 million) this year.

CPF president and chief executive officer Adirek Sripatak said the company next year would focus mainly on profit rather than driving sales volume.

Sales in 2010 are expected to increase by just 5-7% from this year's expected revenue of THB170 billion (US$5.11 billion), with profit projected to outstrip sales growth.

"Next year's strategy will concentrate on expanding ready-to-eat food products both in domestic and international markets, building up distribution channels to cover more retail outlets and continuing efficiency development to cut production and operating costs," Adirek said.

The shrimp business is expected to become a key revenue driver next year, given the increasing popularity of the company's prawn products and the competitive shrimp industry. The outlook has improved for the Thai shrimp industry following an agreement to settle US anti-dumping orders against Thai shrimp imports.

In 2009, the anti-dumping duty on imported Thai shrimp to the US was 4.7% compared to 1% for rival countries. The termination of the anti-dumping duties on Thai shrimp should be positive for exports as the US is a major market. Pork and broiler production are also expected to expand gradually over the next two years as farmers remain cautious about the economic outlook and banks stay conservative on lending.

Given the projected limited supply in 2010, the International Monetary Fund forecasts pork prices to increase by 4.5% and shrimp by 6.7%, while chicken prices will remain flat.

Even though raw material prices are expected to be higher in 2010, CPF says it foresees limited impact as it has already locked in its raw materials at low costs. The company estimates that these low-priced materials will support its production until at least the first quarter of next year.

Raw material prices are expected to ease by the end of the second quarter due to an increased supply from the harvest season. CPF reported a nine-month net profit of THB8.079 billion (US$ 242.9 million), up from THB2.823 billion (US$84.9 million) in the same period last year.

Stronger-than-expected earnings in the third quarter of this year and no news of bird flu outbreaks in the fourth quarter prompted KGI Securities to revise its forecast for CPF's full-year earnings to THB10.44 billion (US$313.9 million) from below THB10 billion (US$300.1 million). Profits are forecast to reach THB11.05 billion (US$332.3 million) in 2010, the brokerage said.