CPF Aims to Control China & Viet Nam Businesses

CHINA & VIET NAM - Charoen Pokphand Foods Plc (CPF), the SET-listed food flagship of the CP Group, announced a 66.3-billion-baht fund to gain control of agricultural subsidiaries in China and Viet Nam.
calendar icon 30 November 2011
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Bangkok Post reports that the company's board on Friday, 26 November, approved the purchase of 74.18 per cent of Hong Kong-listed CP Pokphand Co (CPP), which has two main businesses - animal feed in China, and integrated-farm operations in Viet Nam via CP Viet Nam Corporation (CPV).

Adirek Sripratak, CPF's president and chief executive, said the deal will see sales expand by 50 per cent to 315 billion baht next year, from an estimated 210 billion this year, and make the company the leading agro-industrial concern in the region.

CPF will buy 18.79 billion CPP shares at HK$0.90 apiece from Orient Success International Ltd, Worth Access Trading Ltd and CPI Holding Co, a value of US$2.17 billion.

The company will help to fund the purchase by issuing 694 million shares priced at 30 baht each. The remaining US$1.49 billion (46.8 billion baht) will be paid in cash.

The share issue will increase the number of CPF shares to 8.214 billion, up from 7.52 billion.

However, the board passed a resolution to reduce its capital through 471 million shares the company had bought back. As a result, its paid-up capital after all plans are completed will consist of 7.77 billion shares, an increase of only 3.32 per cent.

Mr Adirek said the transaction, which is expected to receive shareholder approval at the Dec 18 meeting, will give CPF a presence in 12 countries and make big changes to its revenue structure, which now covers a wide range of businesses from farming to food.

Next year, the proportion of sales revenue from foreign operations will almost double to 51 per cent.

Domestic sales and exports will represent 40 per cent and 9 per cent of the total, respectively, down from 61 per cent and 13 per cent.

Animal feed production capacity will increase to more than 20 million tonnes of poultry and aqua feedmeal annually.

Mr Adirek said the feed segment represents up to 95 per cent of CPP, whose sales are spread over 28 Chinese provinces.

Its Chia Tai brand has been popular on the mainland for more than 30 years.

CPV in Viet Nam is the leader in the integrated farm sector.

"This country of 90 million has great business potential. What we might do next is modernise the farming system there, promote more value-added food and branded products," Mr Adirek told a press briefing yesterday.

CPP achieved first-half sales of US$1.19 billion for a net profit of US$64 million, while CPV finished the first half with US$648 million in sales for a net profit of US$97 million.

CPF expects the deal will boost its net profit substantially next year.

Its combined sales amounted to 153 billion baht in the first nine months of this year, up by 8 per cent year-on-year, for a net profit of 13.4 billion baht, up by 17 per cent.

CPF's third-quarter net profit increased by 19 per cent year-on-year to 5.09 billion baht.

However, the flood crisis has slowed domestic sales in the fourth quarter.

Mr Adirek said next year is expected to be better thanks to massive private and public spending to repair the damage. "Next year's economic growth will rise - gradually, but we are certain that GDP growth will be 4.5 per cent to 5 per cent," he said.

Shares of CPF was suspended from trade yesterday pending the board meeting. They closed at 30.75 baht on Thursday, up 50 satang, in trade worth 721 million baht.

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