TRIS Rating Affirms Company and Issue Ratings of “CPF” at “A+/Stable”

TRIS Rating Co., Ltd. has affirmed the company and issue ratings of Charoen Pokphand Foods PLC (CPF) and its existing debentures at “A+” with “stable” outlook. The ratings reflect CPF’s leading position in Thailand’s agribusiness industry, product and market diversification, expanding overseas operations, and improving position in the packaged food industry. The ratings also take into consideration the company’s low operating profit margins, volatile commodity prices, exposure to disease outbreaks, and the global economic slowdown.

The “stable” outlook reflects the expectation that CPF will be able to maintain its leading position in the dynamic global food market. The decision to brand most products with the CP name is strategically important and should partially insulate the company from the cyclicality of prices for its basic products. CPF’s diversified product and market along with the economies of scale are expected to help improve its credit protection and generate more stable profits in the medium term.

TRIS Rating reported that CPF is the largest agribusiness company in Thailand and is the flagship agribusiness company of the CP Group in Thailand. As of April 2009, Charoen Pokphand Group Co., Ltd. (CPG) and related companies held 41% of CPF’s shares. The company’s business is divided into two major categories, livestock and aquaculture, which account for approximately 73% and 27% of total sales, respectively. For each category, products include feed, breeding stock, live animals, meat, and branded food products. Fully-integrated operations help its products meet safety and traceability standards, which qualify the products for export to major importing countries, including the United States (US), Japan, and the countries of the European Union (EU).

To reduce the commoditized nature of products and stabilize cash flow, CPF continues to focus on building the CP brand and developing value-added products for both the domestic and export markets. In 2008, revenue from breeding stock, live animals, and raw meat contributed 43% of total sales, followed by animal feed (37%), and cooked meat and ready-to-eat products (20%). CPF aims to increase the 20% contribution from cooked and ready meal products to one-third of total sales within the next five years. In addition to diversifying the range of products, the company has operations in many countries. The most recent overseas operation, in Russia, is expected to start up in the second quarter of 2009. The contribution from overseas operations has increased from 8% of total sales in 2003 to 16% in 2008.

TRIS Rating said, CPF’s financial profile remains healthy. The total debt to capitalization ratio increased slightly from 50.04% in 2007 to 51.04% in 2008, but decreased to 49.48% in March 2009. Sales increased by 15.9%, from Bt134,809 million in 2007 to Bt156,238 million in 2008. CPF’s Thailand operation benefited from a strong rebound in the price of domestic livestock in 2008, especially broilers and swine. Though facing high grain and energy costs, CPF reported a net profit of Bt3,128 million in 2008, more than double the profit of Bt1,275 million in 2007. The company’s operating results grew continuously in the first three months of 2009. Sales grew 3% to Bt34,779 million from the same period of 2008, while net profit increased sharply by 71% to Bt771 million. The sharp decline in grain and energy costs in early 2009, better control of expenses, and the focus on value-added products should partially alleviate the pressure from a softer domestic broiler price and slowing global demand. -- End

Company Rating: Affirmed at A+ Issue Ratings: CPF097A: Bt1,200 million senior debentures due 2009 Affirmed at A+ CPF09NA: Bt3,500 million senior debentures due 2009 Affirmed at A+ CPF106A: Bt2,000 million senior debentures due 2010 Affirmed at A+ CPF10OA: Bt3,500 million senior debentures due 2010 Affirmed at A+ CPF117A: Bt3,800 million senior debentures due 2011 Affirmed at A+ CPF118A: Bt3,000 million senior debentures due 2011 Affirmed at A+ CPF12OA: Bt2,500 million senior debentures due 2012 Affirmed at A+ CPF138A: Bt3,000 million senior debentures due 2013 Affirmed at A+ Rating Outlook: Stable Copyright 2009, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information.

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