High demand for pork and better business model for aquaculture key contributors to company’s strong performance
Charoen Pokphand Foods (CPF) reaped TBT7.475 billion (US$247.6 million) in net profits in the third quarter of 2020, a 23% increase from the same period last year. The income boosted nine-month earnings to TBT19.614 billion, which grew 36% on year.
Earnings before interest, tax, depreciation and amortization (EBITDA) jumped 87% on the year to Bt61.658 million, the highest-ever in the company’s history. Major contributors were the African swine fever (ASF), which led to pork shortage and sustained pork prices above last year’s level as well as greater profitability of the aquaculture business in Thailand after adjustments in marketing strategies and business model.
Prasit Boondoungprasert, CEO of CPF, attributed the financial improvement mainly to pork shortages in Asia in the aftermath of the ASF outbreak. Pork supplies dropped particularly in Vietnam and China, significantly pushing pork prices above the levels seen last year. The pig farming industry came under structural changes, as strict farm management in line with biosafety standards is a prerequisite as long as an ASF vaccine is not yet available. Moreover, farms need piglets strong enough to withstand the disease and poorly-managed farms may cause another round of outbreaks. Consequently, it will take some time before pork supplies will return to the normal level, said Boondoungprasert.
CPF’s Thailand aquaculture business enjoyed greater profitability, due to the new business model and strategies that focus more on domestic demand. A bright future is anticipated for the aquaculture business in Thailand and abroad.
Prasit said CPF expected earnings growth to be sustained next year, due to business expansion and capacity expansion in several countries. While pork prices may soften from this year’s level, they will remain high. Meanwhile, CPF will start realizing profits from the swine business in China, which is under the acquisition process since the approval of minor shareholders who convened late August. CPF is consequently convinced that 2021 earnings will remain satisfactory.
The diversified CPF ranks as the world’s largest feed company and the world’s sixth largest poultry producer.