''We have just completed an 8.5-billion-baht integrated poultry complex in Nakhon Ratchasima. Further investment in Thailand will not be for production, but packaging, branding and DC logistics,'' said Adirek Sripratak, the company's president and CEO.The complex, the single largest investment for the company in Thailand, will double the production of cooked chicken to 120,000 tonnes per year, in line with a plan to sell less fresh chicken. Bird flu has hit domestic sales of chicken, for which prices have fallen by 31% to around 24 baht per kg. Exports of fresh meat have also been affected tremendously in the past few years, especially due to European Union and Japanese bans.
''The current strong baht, of course, has affected our exports, but we can acquire cheaper raw materials from abroad, enabling us to balance the losses,'' said Mr Adirek. CPF estimates revenue from exports this year to account for 22% of its projected 130 billion baht sales revenue, while 14% is expected to come from offshore operations. According to Mr Adirek, these two sources would contribute up to 40% in sales revenue next year and make up 50% of CPF sales in the next few years, decreasing its dependence on Thai operations. Offshore investment has been active in the past few years, beginning with US$22 million to acquire a poultry-processing plant in Turkey in 2003 and $3 million to set up an aquaculture project in China the following year.
Two years ago, CPF also injected one billion baht in livestock and 300 million baht in aquaculture projects in Malaysia and India, as well as 320 million baht to buy a cold-storage facility in the UK. This year, it decided to spend 500 million baht for a feed- and pork-processing plant in Russia and 110 million baht for feed and animal farming in Laos. The company is also involved in operations, under the CP Group umbrella, in Indonesia, Cambodia and Burma. ''Next year, we will look into establishing an aquaculture business in the Philippines,'' he said. According to Mr Adirek, CPF investment abroad would now deal with livestock and farm-related business, including breeding and food processing.
The investment will provide CPF with more sources of raw materials amid a competitive environment between the farming and industrial sectors. Maize prices in the US market have surged to eight baht per kilogramme, from five to six baht, as the ethanol industry has pushed up demand, while in Thailand, the price of maize, a main ingredient for animal feed, has risen 15% this year to five baht/kg. In Thailand, CPF plans to shift focus to the logistics business to support the delivery of its food to more than 10,000 stores each day.
Some experts have already been hired to move forward with the new venture. Mr Adirek said that a joint venture with IDS Logistics of Hong Kong-based Li & Fung Ltd was possible. ''Diversification into more than one area of business would help reduce business risk. Those who engage only in producing chicken will have problems.'' He explained that Thailand's chicken exports had also been affected by non-tariff barriers from foreign markets such as the EU, which had just introduced a quota system on the import of Thai chicken limited at 150,000 tonnes per year. ''These factors will drive down chicken sales and companies had better move to more valued items, a strategy we have already applied,'' he added.
CPF next year will use 400 million baht to build up its CP brand of semi-cooked and cooked products in both local and foreign markets. Shares of CPF closed yesterday on the Stock Exchange of Thailand at 4.96 baht, up four satang, in trade worth 39.98 million baht.
Nakhon Ratchasima _ Charoen Pokphand Foods Plc (CPF), the food flagship of the CP Group, plans to lower domestic investment over the next three years to shift its focus to offshore expansion. The move aims to counteract local currency volatility and growing trade barriers against the Thai meat trade.
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