CPF to Continue Benefiting from Chinese Pork Demand, Analyst Expects 2-Y Huge Advantage!

Charoen Pokphand Foods Public Company Limited (CPF) could have 1-2 year of benefits from the rising demand of pork in China due to the African Swine Fever (ASF) outbreak.

 

Pork exporters to China are expecting a huge advantage in continuing to export pork as the analyst said the gap in pork production from the ASF outbreak in China will continue for a year or two.

The demand in China continued at a high level to the point that Richard Herzfelder, senior advisor at GIRA Consultancy & Research told CNBC said that if you have meat anywhere in the world, the Chinese want to buy it.

According to the data from the U.S. Department of Agriculture, 20 countries, including U.S., Canada, Brazil and EU were approved for exports of pork to China. Beijing also lowered pork tariffs by 4 percentage points effective on January 1, 2020, to facilitate increased imports. The lower tariff is expected to cut pork import cost by about 3.6% from the current level.

However, pork prices in China are still twice what they were two years ago, said Richard Herzfelder.

 

CPF could benefit from its subsidiary, CPF Canada Holdings, as the company acquired Hylife Investment Ltd., leading integrated pork producers in Canada, last year. Meanwhile, China is Canada’s second-most pork importer.

CPF stated in its 1Q20 Management Discussion and Analysis that its gross profit margin in the first quarter of 2020 was at 18%, increased from 14% in the same quarter last year. This was mainly due to an increase in gross profit of swine business as a result of the spreading of ASF, especially in Vietnam resulted in a significant decline in the number of swine in Vietnam which had an effect on the increase of the average selling price in Vietnam compared to the same quarter last year.

Meanwhile, international sales accounted for 68% of CPF’s total revenues from sales in the first quarter of 2020. The company booked 93.7 million baht from international sales from a total of 138 million baht in sales revenue.