Bangkok--26 Nov--CPF
Charoen Pokphand Foods (CP Foods), Thailand's leading food producer, is shifting its direction to overseas investment to tackle global economic uncertainties. It is projected that two-thirds of CP Foods' 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 400 billion baht in the first nine months, up by 7%. Of the total, its revenue from overseas operation accounted for 67%, an increase by 12%. It is forecast that the company's total revenue to hit 600 billion baht with overseas sales will share by 75% in the next five years.
This is a significant change in strategic direction for the company, noting 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. Mr. Sooksunt Jiumjaiswanglerg, Chief Executive Officer (CEO) for 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. Being 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 China and Vietnam. Investment in other countries include Taiwan, India, USA, Turkey, Russia, Cambodia, United Kingdom, the Philippines, Malaysia, Belgium, Sri Lanka, Brazil, Laos and Poland, involving animal feed and farm, food processing, food service, aquaculture farm and products etc.
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 operation 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.
"Having production base in targeted markets will strengthen the company's competitiveness and facilitate businesses," noted Sooksunt.
Mr. Sooksunt 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 5 million per year to 7 million per year.
The company sees rising progress in the Philippines. He 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 also perform well in this year, largely due to the recovery of livestock price. While Turkey's operations has generated the same level of profit as 2017 even though the Turkish currency's value was halved in this year.
The major threat for the international operation is outbreak of African swine fever (ASF). However, the company stated that it has been well prepared and therefore, it is unlikely to make significant impact on the company performance.
As a result from recovering livestock price worldwide, the company expects positive momentum to continue in Q4. It is optimistic that 2019's business will remain optimistic, largely contributed by overseas performance and better pig and chicken prices in Thailand.