Charoen Pokphand Indonesia profit doubles

The Jakarta Post ,  Jakarta   |  Thu, 07/24/2008 10:41 AM  |  Business

Publicly listed animal feed and processed chicken manufacturer PT Charoen Pokphand Indonesia Tbk more than doubled its first semester net profit from last year's, despite higher production costs and selling prices.

The company, subsidiary of Thailand-based Charoen Pokphand Foods, accumulated Rp 209.6 billion (US$22.8 million) net profit in the first semester of 2008, 120 percent higher than the Rp 95 billion profit in the same period last year and surpassing the entire year's profit of Rp 185.5 billion in 2007.

"We have a growing market and increasing prices. The whole industry is growing despite the fuel increase," the vice president of the company, Thomas Effendy, said.

The profit comes mainly from three types of product, all of which saw rising sales in terms of volume and price. Animal feed contributed 78 percent of sales, day-old chickens 13 percent and processed chicken meat 7.8 percent.

Sales volume of animal feed increased by 30 percent to 1.2 million tons since last year and the price rose by almost two-fifths to Rp 4.015 per kilogram.

Processed chicken meat became more popular, with sales volume tripling despite being three times more expensive than during the first half of last year. The demand for day-old chicken increased by 13 percent to 258 million chicks, with the price rising by 30 percent.

Thomas was confident the company would reach the Rp 12 trillion sales target and associated Rp 300 billion net profit target by the year end.

"The price of commodities, which are our raw materials, increased by around 40 percent. It cut the profit margin from 13.6 percent last year to 12.8 percent this year, but because the base price of sales is higher, we made higher net profits," he said.

The demand, he explained, was driven by the relatively cheaper price of chicken compared to other meats and stronger purchasing power of consumers outside Java, especially in regions with agriculture and mining.

"Java is still the biggest market, but the Java share has declined from 65 percent of total sales last year, to 60 percent this year," he said.

The company managed to keep the rise in operating costs under 20 percent, despite rising fuel prices, because its seven feed mills in Java, Sumatra and Sulawesi do not rely on diesel fuel to generate electric power. Four of them are powered by coal, two by gas and only one is connected to the power grid.

Pokphand plans to develop more production outside of Java. A plant in Makassar, South Sulawesi is under construction, while another one in Lampung is being planned, with an initial budgeted investment cost of Rp 54 billion, plus an additional Rp 30 billion subsequently. Three-fifths of the funds would come from the company's own cash flow and the rest from Citibank loans, Thomas was quoted as saying, in a report from the Investment Coordinating Board.

It also received Rp 429 billion in loans from banks last month to cover its capital expenditure and to pay current obligations. (mri)

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