CP Group fosuses on investments to stem impact of baht rise
Charoen Pokphand Group is investing more in its domestic and overseas operations as a strategy to deal with the baht's appreciation, executives of Thailand's largest conglomerate Charoen Pokphand Group said.
At a seminar hosted by CP yesterday on “Baht’s strengthening: impact and solution”, Sumeth Laomoraphorn, CEO of CP Group’s International Trading Business in rice and food products, said the company would invest about Bt1 billion to set up a rice-processing plant in Ayutthaya this year.
“The investment plan is part of the company’s strategy to deal with the baht’s appreciation that would lead to lower returns in the rice export business,” he said.
Sumeth, who is also president of CP Intertrade, said that as the baht’s appreciation and the rice-pledging scheme had pushed up the price of rice, leading to lower export volume and revenue, the firm will concentrate more on investment in order to create value-additions to rice.
The new plant will be located in Amphor Nakhon Luang, in Ayutthaya, on 500 rai of land. The plant will be the first factory of CP Intertrade to produce vermicelli and noodles from rice. The production capacity is about 40,000 tonnes of rice a year.
Sumeth said the plant is expected to open by the middle of next year. Products from rice will be for both domestic supply and exports.
The rice export volume of CP Intertrade dropped by 10 per cent last year to about 500,000 tonnes. The firm is projected to drive up rice export volumes by 10 per cent this year to 600,000 tonnes.
Sumeth said that with the government’s plan to release more rice from its stockpiles, the Kingdom’s total rice export volume should reach 7 million to 7.5 million tonnes this year, higher than last year’s 6.5 million tonnes.
However, if the baht strengthens to Bt27-Bt28 against the greenback, export volumes could be revised down, he added.
To ensure less impact from the baht’s fluctuation, Sumeth suggested that exporters, especially small and medium enterprises quote their price and get a response from importers within a day because waiting overnight for acceptance of the price could cause loss to exporters.
To manage losses from the baht’s strengthening, CP Group has its own central unit to manage currency inflow and outflow. Fortunately, due to the balance of its imports and exports, CP Group has not incurred any loss from the appreciation due to its focus on overseas investment.
Sithong Vatcharangkulpipat, vice president of CP Merchandising, said the company has focused on value-addition to its brand product and expanded investment overseas to ensure sustainable income amid the rising baht.
Approximately, for every tonne of food export, about Bt10,000 would be lost from the baht’s appreciation.
He said the firm has set up many plants, mainly re-packing and assembly plants in target markets. For instance, the company plans to outsource its food production plant in Belgium for trading in the European Union market. The firm has also developed assembly plants for processed food in Australia.
To offset losses from the baht’s appreciation against the greenback, the firm has traded more in various currencies.
So far, about 50 per cent are traded in US dollars, 30 per cent in pound-sterling, and the remaining about 15 per cent of the total trading value are in Singapore dollars, Hong Kong dollars, yen, and a small amount in Thai baht.
In the past, only 10 per cent of its trading value was in other currencies, Sithong noted.
