TRIS Rating Co., Ltd. has assigned a rating of “A+” to the proposed issue of up to Bt6,000 million in senior debentures of Charoen Pokphand Foods PLC (CPF). At the same time, TRIS Rating has affirmed the company rating and the ratings of CPF’s existing debentures at “A+” with “stable” outlook. The ratings reflect CPF’s leading position in Thailand’s agribusiness industry, its product and market diversification, increasing overseas operations, and improving position in the packaged food industry. The ratings also take into consideration the company’s low operating profit margins, higher energy and grain costs, and the volatile price of commodities.
The “stable” outlook reflects the expectation that CPF will be able to maintain its leading position in the dynamic global food market. 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. CPF’s product and market diversification and economies of scale are expected to help improve its credit protection and generate more stable profits in the medium term.
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 2008, Charoen Pokphand Group Co., Ltd. (CPG) and related companies held 40% of the company’s shares. The company’s business is divided into two major categories, livestock and aquaculture, which account for approximately 70% and 30% of total sales, respectively. For each category, the company’s products include feed, breeding stock, live animals, meat, and branded food products. The company’s fully-integrated operations help its products meet safety and traceability standards, which qualify them for export to major importing countries including the United States (US), Japan, and the countries of the European Union (EU).
To reduce the commoditized nature of its products and stabilize its cash flow, CPF continues to focus on building the CP brand and developing value-added products for both the domestic and export markets. Branded food products accounted for 6% of total sales in 2007 and in the first quarter of 2008. In addition to diversifying its range of products, the company has started operations in many new countries. Its most recent overseas operation, in Russia, is expected to start up in late 2008. The contribution from overseas operations has increased from 8% of total sales in 2003 to 16% in 2007.
TRIS Rating said, CPF’s Thailand operation in 2007 was negatively affected by a sharp drop in major product prices, increasing grain and energy costs, and the strengthening of the Thai baht. The poor performance of Thailand operation was partially mitigated by the strong performance of its overseas operations, which generated a consolidated net profit of Bt1,275 million for 2007. The company’s operating results improved sharply in the first three months of 2008, due mainly to the strong rebound in the price of domestic livestock, especially broilers and swine. The company reported a net profit of Bt451 million for the first three months of 2008, compared with a net loss of Bt1,135 million for the same period in 2007. The improvement in domestic prices, enhanced efficiency, and better control of expenses should partially alleviate the pressure from rising grain and energy costs on profit margins for the remaining of 2008.
CPF’s financial profile remains healthy. Its total debt to capitalization ratio increased slightly from 48.51% in 2006 to 50.04% in 2007 and to 50.70% in March 2008. To mitigate the impact of the fluctuation of the Thai baht against the US dollar, approximately 30%-40% of the company’s exports are now traded in the British pound and the Euro. Total export sales constituted 18% and 16% of total sales in 2007 and in the first three months of 2008, respectively, mainly to the EU. Rising grain costs, consumers’ growing concerns regarding food safety, increased volatility in commodities markets, and changing trade agreements continue to be major risks for agribusiness companies. — End
Charoen Pokphand Foods PLC (CPF)
Company Rating: Affirmed at A+
Issue Ratings:
CPF097A: Bt1,200 million senior debentures due 2009 Affirmed at A+
CPF09NA: Bt3,500 million senior debentures due 2009 Affirmed at A+
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+
CPF12OA: Bt2,500 million senior debentures due 2012 Affirmed at A+
Up to Bt6,000 million senior debentures due 2011 and 2013 A+
Rating Outlook: Stable
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Copyright 2008, 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.
The “stable” outlook reflects the expectation that CPF will be able to maintain its leading position in the dynamic global food market. 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. CPF’s product and market diversification and economies of scale are expected to help improve its credit protection and generate more stable profits in the medium term.
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 2008, Charoen Pokphand Group Co., Ltd. (CPG) and related companies held 40% of the company’s shares. The company’s business is divided into two major categories, livestock and aquaculture, which account for approximately 70% and 30% of total sales, respectively. For each category, the company’s products include feed, breeding stock, live animals, meat, and branded food products. The company’s fully-integrated operations help its products meet safety and traceability standards, which qualify them for export to major importing countries including the United States (US), Japan, and the countries of the European Union (EU).
To reduce the commoditized nature of its products and stabilize its cash flow, CPF continues to focus on building the CP brand and developing value-added products for both the domestic and export markets. Branded food products accounted for 6% of total sales in 2007 and in the first quarter of 2008. In addition to diversifying its range of products, the company has started operations in many new countries. Its most recent overseas operation, in Russia, is expected to start up in late 2008. The contribution from overseas operations has increased from 8% of total sales in 2003 to 16% in 2007.
TRIS Rating said, CPF’s Thailand operation in 2007 was negatively affected by a sharp drop in major product prices, increasing grain and energy costs, and the strengthening of the Thai baht. The poor performance of Thailand operation was partially mitigated by the strong performance of its overseas operations, which generated a consolidated net profit of Bt1,275 million for 2007. The company’s operating results improved sharply in the first three months of 2008, due mainly to the strong rebound in the price of domestic livestock, especially broilers and swine. The company reported a net profit of Bt451 million for the first three months of 2008, compared with a net loss of Bt1,135 million for the same period in 2007. The improvement in domestic prices, enhanced efficiency, and better control of expenses should partially alleviate the pressure from rising grain and energy costs on profit margins for the remaining of 2008.
CPF’s financial profile remains healthy. Its total debt to capitalization ratio increased slightly from 48.51% in 2006 to 50.04% in 2007 and to 50.70% in March 2008. To mitigate the impact of the fluctuation of the Thai baht against the US dollar, approximately 30%-40% of the company’s exports are now traded in the British pound and the Euro. Total export sales constituted 18% and 16% of total sales in 2007 and in the first three months of 2008, respectively, mainly to the EU. Rising grain costs, consumers’ growing concerns regarding food safety, increased volatility in commodities markets, and changing trade agreements continue to be major risks for agribusiness companies. — End
Charoen Pokphand Foods PLC (CPF)
Company Rating: Affirmed at A+
Issue Ratings:
CPF097A: Bt1,200 million senior debentures due 2009 Affirmed at A+
CPF09NA: Bt3,500 million senior debentures due 2009 Affirmed at A+
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+
CPF12OA: Bt2,500 million senior debentures due 2012 Affirmed at A+
Up to Bt6,000 million senior debentures due 2011 and 2013 A+
Rating Outlook: Stable
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Copyright 2008, 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.