May 26, 2014
CP Foods revises FY 2014-2015 earnings forecast downwards
Charoen Pokphand Food''s (CP Foods) core business rebounded as expected, with 1Q14 net profit reported at US$60 million, growing 16.8% quarter-on-quarter (qoq) and 99.7% year-on-year, the Nation reports.Domestic livestock business improved because pork and chicken prices rose 12% qoq while feed mill raw material cost was low owing to inexpensive feed stock from late 2013, boosting profit margins.
However, the shrimp business still faced losses. Though shrimp farmers could deal with Early Mortality Syndrome, only a small amount of shrimp was grown and sold in the market due to unfavourable weather.
Overseas business improved qoq, particularly the livestock business in Vietnam, as the problem of oversupply had reduced.
Share of profit from associated companies has grown by 30% qoq, mainly from CP ALL''s increasing profit. Overall, CP Food''s 1Q14 net profit accounted for 19% of FY2014 earnings forecast.
The company has revised its FY 2014-2015 earnings forecast downwards by 14.7% for 2014 and 12.5% for 2015.
The downward forecast is due to feed mill raw material cost rising higher than expected. Smaller amounts of corn and soymeal products have been sold in the market as a result of unfavourable weather worldwide for feed production.
Corn price has risen 24% from end 2013, and soymeal price has risen 4% qoq. Thus, CP Foods faces a high risk as corn and soymeal costs make up 40 and 24% of its raw material cost, respectively.
Due to the inexpensive feed stock from late 2013, 1Q14 earnings result was not affected by the rise in feed costs. However, it is expected to threaten the company''s net profit in the next two or three quarters.