Major factors in the year 2007 which impacted the agri and food industry of Thailand include the rising cost of raw materials used in the production of animal feeds, which is indirectly resulted from the higher global demand of alternative energy. That rising demand has enhanced the usage of agri products such as corn, soybean meal (which are the major raw materials for animal feed production), in alternative energy production, in stead.  
 
In addition, the ever growing non-tariff trade barriers of importing countries, and the strengthening of the Thai baht currency partly from the unpleasant economic situation of the United States are all impact the Thailand operations of Charoen Pokphand Foods Public Co., Ltd and its subsidiaries. The revenues from this operation in 2007 totaled THB 112,905 million, equivalent to 3% growth over 2006 but lower than target set. Moreover, with the average domestic meat price that was lower than the level of 2006 has made the Thailand operation reported operating profit of Baht 1,239 million, 71% decline from the previous year.

However, our overseas operations in Turkey, India, Malaysia and China has shown a growth performance. Business strategy set to specifically fit each country’s potentials and capabilities coupled with the recovery of poultry business from the Avian flu epidemic in Turkey contributed to CPF Group’s overseas sales revenue to reach THB 21,904 million, a 42% growth over 2006. Resulted from that sales growth with higher gross profit, this operations has reported THB 1,640 million in its operating profit, or 1,722% increase over the prior year.

With the performance of both operations above, the Group consolidated sales is reported at THB 134,809 million, 8% increase from 2006. The consolidated operating profit and the net profit are at THB 2,879 million and THB 1,275 million, 34% and 49% lower from 2006 consecutively. 



In October 2007 CPF issued THB 6,000 million Thai baht bond to repay loan and to keep the balance for working capital. This bond was divided into two tranches - the first tranch at THB 3,500 million with 3-year maturity and fixed interest rate of 4.25 per annum and the second tranch at THB 2,500 million with 5-year maturity and fixed interest rate of 4.90 per annum.

In 2007 CPF set up subsidiaries in China and the Philippines. In addition, the Company subsidiaries
in other countries acquired trading companies in the United Kingdom on an expansion plan
of distributing processed meat and food into the European Union. 


There has been the price control policy implemented by the Ministry of Commerce in early year of 2008. Some of the Company’s products are under the control lists, while the production cost has been in the upward trend from the higher raw materials price. The Company and other players in the industry, who have been impacted by this policy, have requested to adjust the products’ price. But there is no expectation of when the approval shall be made. In order to minimize the risk of the government’s price control policy, the Company has posted the cautious investment policy on the Thailand Operations. However, the Company will continue to place emphasis on expanding overseas operations and new countries in areas with high potential such as Ukrane. 

On the meat export front, the Company anticipates higher growth with rising demand from importing countries for quality products with food safety integrity of the Group. 

However, in 2008 it is expected that non-tariff trade barrier will remain an important issue. In addition the continued rising production cost in farming and processing and higher fuel cost than 2007 with the expected stronger Thai baht will all remain factors that will impact performance of the agri and food industry. All players need to adjust themselves along with those mentioned factors. The Company has continuously implemented plans to increase production efficiency and invested in research and development in all areas to add value to production and reduce cost. Producing biogas from manure and fuel energy from frying oil used in production are just some examples of our valuation to production.

Human resources development and the increase efficiency of all supporting units will remain our emphasis, just as important as corporate social responsibility. This is important in ensuring our sustainable growth and to become a major player in the international agri and food arena.

Last but not least, the Company is committed to continuous and lasting growth which would yield appropriate return to shareholders. We realize the importance of good corporate governance. Our management and staff are dedicated to create highest value to the Company. We will work wholeheartedly to make the company strong and to become the “Kitchen of the World.”

The Company wishes to thank all its shareholders and bondholders for the trust, support, and suggestions given. We thank you our trading partners and financial institutions and look forward to receiving continued cooperation and support in the future.