Charoen Pokphand Foods

Charoen Pokphand Foods Plc (CPF)

What’s new? We called CPF yesterday with regard to the 2Q12 earnings outlook. Company guidance was negative, so we have downgraded our 2Q12 net profit estimate.
Weak 2Q12 earnings: We now expect 2Q12 net earnings of Bt3.5bn-4bn, down by 20-25% YoY and 65-70% QoQ. Stripping out extra gains, we estimate a Bt3-3.5bn core profit, down 30-40% YoY but up 15-30% QoQ. The YoY core earnings tumble is due to weaker domestic and overseas operations (especially India, Malaysia and Turkey). The QoQ core profit rise is due to an improved domestic operation. The Turkish unit will post a net loss again in 2Q12 (against a 1Q12 net profit), while the Indian and Malaysian units will improve slightly QoQ. CPP’s 2Q12 profit will be flat QoQ. 
Weaker than our previous 2Q12 estimate: Our old 2Q12 net profit forecast was Bt4.2bn-4.4bn. The operations of overseas units, especially Turkish, Indian and Malaysian units, failed to achieve expectations. We estimate a Bt150-200m Turkish net loss for 2Q12, against a Bt300m net loss in 2Q11 and a Bt50m net profit in 1Q12. Turkish meat prices, surprisingly, appear to have softened again. We previously assumed that the profits of both the Malaysian and Indian units would bounce strongly QoQ.
Very slim profit for 2Q12 domestic operations: The mean domestic chicken price was Bt37/kg in 2Q12, down 28% YoY but up 8% QoQ. The mean pork price