TRIS Rating Assigns “A+/Stable” Rating to Proposed Issue of “CPF” after Size Increased Up to Bt8,400 Million

TRIS Rating Co., Ltd. has assigned the rating of “A+” to the proposed issue of up to Bt8,400 million in senior debentures of Charoen Pokphand Foods PLC (CPF). The new issue rating replaces the “A+” rating previously assigned by TRIS Rating on 30 October 2009 for the debentures of up to Bt8,000 million due within 2015, as CPF decides to increase the issue size by Bt400 million. At the same time, TRIS Rating has affirmed the company and current issue ratings of CPF at “A+”. The outlook remains “stable”. The ratings reflect CPF’s leading position in the Thai 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, and exposure to disease outbreaks.

The “stable” outlook reflects the expectation that CPF will be able to maintain its leading position in the dynamic global food industry. 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.

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 the company’s shares. The company’s business is divided into two major categories, livestock and aquaculture, each of which comprises feed, farm, and food. Fully-integrated operations help the products meet safety and traceability standards, which qualify the products for export to major importing countries, including the United States, Japan, and the European Union.

Currently, CPF’s revenue from the farm business contributed 47% of total sales, followed by animal feed (34%), and food products (19%). To reduce the commoditized nature of the products and stabilize cash flow, CPF focuses on building the CP brand and developing value-added products for both the domestic and export markets. CPF aims to increase the contribution from cooked and ready meal products to one-third of total sales within the next five years, while reducing the proportion of sales from the farm business. In addition to product diversification, the company has increasingly diversified its operations into many countries. The contribution from overseas operations has continuously increased from 6% of total sales in 2003 to 17.5% for the first nine months of 2009. Contributions from operations in Taiwan will be realized from October 2009 onwards.

TRIS Rating said, CPF’s financial profile remains healthy. Sales increased to Bt119,415 million for the first nine months of 2009, up by 2.8% from the same period of 2008, while net profit increased sharply by 186% to Bt8,080 million. Rise in profit came mainly from the recovery in its aquaculture business both domestic and overseas markets. Low grain and energy costs, better control of expenses, and the focus on value-added products also supported the strong rebound in profitability. The proceeds from the new debentures will be used to repay CPF’s matured debentures and for business expansion. -- End

Company Rating: Affirmed at A+ Issue Ratings: 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+ Up to Bt8,400 million senior debentures due within 2015 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.