Charoen Pokphand eyes acquisitions

Andi Haswidi, The Jakarta Post, Jakarta

The country's largest poultry feed and breeding stock producer, PT Charoen Pokphand Indonesia (CPI), is set to expand its business by making six corporate acquisitions this year, the company says.

"We have scheduled a shareholders meeting for June 27 at which we will request approval for a rights issue to raise funds to finance the acquisitions," CPI finance president Thomas Effendy said Tuesday in Jakarta.

Thomas said it was expected that the rights issue would raise approximately Rp 175.9 billion (about US$19.6 million), with Rp 165.2 billion of the total proceeds being used to finance the acquisitions.

He said the company would offer its shares at Rp 750, with 234.61 million shares being offered.

Following the rights issue, the company's total share capital will increase from Rp 140.8 billion previously to Rp 164.2 billion.

The six companies to be acquired include four poultry breeding operations, a feed mill company and a food distributor, all of which had signed acquisition agreements that are expected to be fully realized in July.

Under the acquisition plan, CPI will purchase 99.9 percent of PT Satwa Utama Raya for Rp 51.5 billion, 99.9 percent of PT Istana Satwa Borneo for Rp 26 billion, 99.9 percent of PT Vista Agung Kencana for Rp 24 billion, and 50 percent of PT Cipta Khatulistiwa Mandiri for Rp 9.3 billion.

CPI will also acquire 99.9 percent of two other companies, feed mill company PT Vista Grain and a distributor of Fiesta processed foods, PT Prima Food, for Rp 14.2 billion and Rp 23.4 billion, respectively.

Thomas said that the acquisitions were part of the company's efforts to achieve its target of Rp 7.7 trillion in this year's net sales, with the acquisitions themselves expecting to contribute Rp 350 billion.

"We are already targeting around Rp 7.35 trillion in net sales from our existing operations," he said.

Last year, the company booked total net sales of Rp 6.38 trillion and net operating profit of Rp 338.8 billion, up from Rp 5.54 trillion and Rp 284.7 billion, respectively, in 2005.

The company made a net profit of Rp 157.06 billion last year, almost four times the Rp 41.156 billion recorded in 2005.

"By the end of last year, our sales had increased 15.26 percent compared to 2005. The increase was due an 11.32 percent increase in sales of poultry feed, and a 17.59 percent increase in sales of day-old chicks. Increases of an average of 2.34 percent in poultry feed prices and 5.27 percent in the price of day-old chicks also contributed to the increase of sales revenue," Thomas said.

He explained that the company's total assets and equity as of the end of March had increased to Rp 3.16 trillion and Rp 805.08 trillion respectively from Rp 2.9 trillion and Rp 778.13 trillion at the end of December 2006.

To strengthen its financial position, Thomas said that CPI was planning to take out a syndicated loan of $100 million, which would be partly used for working capital, loan refinancing and expansion purposes.

As of the beginning of this month, the company's total outstanding loans stood at Rp 1.4 trillion.

CPI, which has been operating in Indonesia since 1972, is the local subsidiary of Charoen Pokphand, the largest business group in Thailand, with investments mainly in the agribusiness, aquaculture and agriculture fields. It has just recently entered the mobile telecoms industry with an investment in Hutchison's Tri.