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Charoen Pokphand Food to Stumble in Next Two Quarters

26 May 2014

THAILAND - Charoen Pokphand Food's (CPF) core business rebounded as expected. Q1 2014 net profit was reported at B2bn, growing 16.8 per cent quarter on quarter (qoq) and 99.7 per cent year on year (yoy).

Domestic livestock business improved because pork and chicken prices rose by 12 per cent qoq while feed mill raw material cost was low owing to inexpensive feed stock from late-2013, boosting profit margin, reports the Nation

However, the shrimp business still faced losses. Though shrimp farmers could deal with Early Mortality Syndrome, only a small amount of shrimp business was grown and sold in the market due to unfavorable weather.

Overseas business improved qoq, especially the livestock business in Viet Nam, as the oversupply problem had receded.

Share of profit from associated companies has grown by 30 per cent qoq, mainly from increasing profit. Overall, CPF’s Q1 2014 net profit made up 19 per cent of FY2014 earnings forecast.

The company has revised down its FY 2014-2015 earnings forecast by 14.7 per cent in 2014 and 12.5 per cent in 2015.

Feed mill raw material cost has been rising higher than expected. Smaller amount of corn and soybean meal products has been sold in the market as a result of worldwide unfavorable weather for feed production.

Corn price has leapt by 24 per cent from end- 2013, and soybean meal price has risen by four per cent qoq. Thus, CPF would suffer high risk as corn and soybean meal cost makes up 40 and 24 per cent of its raw material cost, respectively.

Thanks to its inexpensive feed stock from late-2013, Q1 2014 earnings result was not affected by this negative factor. However, it would threaten CPF’s net profit in the next two or three quarters, and Q2 2014 - Q4 2014 gross margin would drop from 1Q14.

TheMeatSite News Desk

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