CPF in hunt for more global deals
Agribusiness giant sets sights on M&As
Charoen Pokphand Foods Plc (CPF), the SET-listed subsidiary of agribusiness giant Charoen Pokphand Group, remains active in scouting for more merger and acquisition opportunities this year, focusing notably on markets with relatively large populations and hefty barriers, in order to stimulate its business growth.
According to Adirek Sripratak, the newlyappointed executive committee chairman, given the company’s vast overseas operations and integrated agri-industrial and food business, CPF could manage organic growth averaging 8-10% a year.
“But to fuel the company’s revenue growth to exceed that rate, we need more M&A deals,” said Mr Adirek, now 71.
“I’ve just arrived from Japan and is scheduled to fly again to Sri Lanka, Bangalore and Hyderabad to scout for new investment and M&A opportunities.”
Acting as CPF’s president and chief executive from 2003 to March this year, Mr Adirek was instrumental in expanding the global footprint of the company, which aspires to be a kitchen to the world. CPF has branched out to 16 countries, including Vietnam, the Philippines, Malaysia, China, India, Russia and Turkey.
Last year overseas operations and exports contributed 68% of the company’s sales revenue worth 464 billion baht, with the remaining 32% coming from CPF operations in Thailand.
CPF’s international operations surged 12% last year to 286 billion baht, outstripping the growth rate of the domestic market, which rose only 7% to 179 billion.
With his new position as chairman, Mr Adirek said he feels much freer and has more time to explore for new investment opportunities and M&A deals for the group.
In early March, CPF reorganised into two operating segments focused on food and agricultural products, and appointed two co-chief executives t o oversee these operations.
Sooksant Jiamjaiswanglerk, vice-chairman of CP Vietnam, a CPF subsidiary, became president and chief executive of the agricultural business unit, while Sukhawat Dansermsuk, chief financial officer of CPF’s ready-to-eat foods business, was named the president and chief executive of the food business unit.
The two new chief executives are supervised by Mr Adirek.
Last year CPF clinched 11 overseas investment deals worth nearly 50 billion baht i ncluding one with Bellisio Foods, one of America’s largest and fastest-growing frozen food firms, in December for a total consideration of US$1.08 billion (37 billion baht).
Founded in 1990, Bellisio Group is the third-largest maker and distributor of single-serve frozen entrees in the US, with household brands such as Michelina’s, Boston Market, Chili’s and Atkins.
The group has more than 50,000 distribution points in the US, and through its central production facility in Jackson, Ohio, is able to distribute its products to more than half of the US within 24 hours and nationwide within 48 hours.
The acquisition marks CPF’s entry into the world’s largest food market, enabling the introduction of the company’s Asian offerings to the North American market. Bellisio’s products should see greater penetration in the Asian market, tapping into the extensive distribution networks of CPF.
This year, the company remains active in M&A efforts, starting with acquiring a 33% stake in Polish food firm SuperDrob Capital Group for €49.5 million (1.9 billion baht) in January.
SuperDrob is a family-run company that sells fresh and processed poultry products as well as sausages and ham. Established 23 years ago, it exports half of its products to countries including England, France, Germany and China.
The deal marks CPF’s first step in the poultry business in a European country.
Poland is a top exporter of poultry to the European market. The move will help the company respond faster to the regional consumer base as well as provide an opportunity for expansion into other businesses in Poland in which CPF has expertise.
In April, CPF, through its wholly owned subsidiary CPF Investment Ltd, signed a share purchase agreement with Westbridge Food Group Ltd (WFGL) for a combined value of £60 million (2.6 billion baht) to expand CPF’s market in Europe.
The investment in WFGL will allow CPF to expand its distribution network for retail, and food service and production in Britain and the EU. WFGL is a British company with expertise in meat and ready-made products. The company also engages in the development, sourcing and supply of products across many food groups worldwide.
Mr Adirek announced recently CPF would invest 25 billion baht this year — excluding any possible M&As — mainly to accommodate its overseas investment expansion. The company aims to raise revenue from overseas operations over the next few years to 70% of the total from 68% now.
To this end, CPF’s board early last month approved an increase in registered capital of 1.54 billion baht to 9.29 billion by issuing 1.54 billion new ordinary shares with a par value of one baht per share.
The new ordinary shares are to be sold to existing shareholders at a ratio of five existing ordinary shares to one newly issued ordinary share at 25 baht each. The subscription dates are scheduled for July 24-31, 2017.
CPF plans to use the proceeds to repay loans and/or debentures of 27 billion baht by 2018 and finance future investment of 11.7 billion.
Mr Adirek expects its revenue to grow by at least 10% this year to about 500 billion baht.
For the first quarter this year, CPF reported strong revenue growth of 13% year-on-year to 120 billion baht, with net profit up 5% to 3.95 billion. Last year, CPF reported 33% profit growth of 14.7 billion baht, an increase from 11.1 billion in 2015.
As of Dec 31, 2016, the company had a debt-to-equity ratio of 2.01 times, up from 1.85 in 2015 and 1.54 times in 2014.
According to CPF’s executives, with earnings before interest, taxes, depreciation and amortisation worth 40 billion baht earned last year, and new capital, the company is quite financially ready for new investments.
However, Mr Adirek said the company would insist that before any deal is made, it needs to be thoroughly scrutinised by the board to be sure it supports CPF’s core businesses.
“All factors need to be taken into account from the target’s operating results, financial statements dating back five to 10 years, and whether business synergy will be generated before asking to personally meet management, visit a factory, conduct due diligence, determine a price valuation, and bargain over valuation under which some deals may take about a year,” he said.
CPF shares closed on Friday on the Stock Exchange of Thailand at 24.60 baht, down 30 satang, in trade worth 723 million baht.
Like a lot of conservatives who write about public policy, my views on climate change place me in the ranks of what the British writer Matt Ridley once dubbed the “lukewarmers”. Lukewarmers accept that the earth is warming and that our civilisation’s ample CO2 emissions are a major cause. They doubt, however, that climate change represents a crisis unique among the varied challenges we face, or that the global regulatory schemes advanced to deal with it will work as advertised. And they raise an eyebrow at the contrast between the apocalyptic, absolutist rhetoric with which these schemes are regularly defended and their actual details, which seem mostly designed to enable the globe’s statesmen to greenwash the pursuit of economic and political self-interest.
More specifically, lukewarmers look at the Intergovernmental Panel on Climate Change’s official projections and see a strong likelihood that rising temperatures will drag on GDP without leading to catastrophe. They look at the record of climatological predictions and see a pattern in which observed warming hugs the lower, non-disastrous end of the spectrum of projections. And they look at the substance of the Paris accord, which papered over a failed attempt to set binding emission rules with a set of fine-sounding promises, and see little to justify all the anguish and despair over Donald Trump’s decision to abandon it.
The despairing are unlikely to be convinced by this quick description, so for a better sense of the lukewarmist case, I recommend two recent essays by Oren Cass of the Manhattan Institute: First, “The Problem With Climate Catastrophizing,” from Foreign Affairs, and second, “How to Worry About Climate Change,” from National Affairs.
But while inviting readers to ease their pain over Paris with the balm of lukewarmism, I also want to concede two problems with this approach. The first is that no less than alarmism, lukewarmism can be vulnerable to cherry-picking and selection bias, reaching for any piece of evidence — and when you’re dealing with long-term trends, there’s a lot of evidence to choose from — that supports its non-catastrophic assumptions, even if the bulk of the data starts to point the other way.
This means that every lukewarmer, including especially those in positions of political authority, should be pressed to identify trends that would push them toward greater alarmism and a sharper focus on the issue. I’ll answer that challenge myself: My own alarm over climate change has gone up modestly since the Obama-era cap-andtrade debates, as the decade or more in which observed warming was slow or even flat — the much-contested warming “pause” — has given way to a clearer rise in global temperatures.
If you chart this spike against the range of climate change projections, it brings the trend up into the middle of climatologists’ scenarios for the first time in some years. Maybe that will be temporary and it will fall back. But the closer the real trend gets to the worst-case projections, the more my lukewarmism will look Pollyannish and require substantial reassessment.
But this is where the second objection to lukewarmism comes in, which is that such reassessment might happen on op-ed pages but not in actual right-wing politics, because in actual right-wing politics no serious assessment of the science and the risks is taking place to begin with. Instead there’s just a mix of business-class and blue-collar self-interest and a trollish, “If liberals are for it, we’re against it” anti-intellectualism. So while lukewarmers may fancy ourselves serious interlocutors for liberals, we’re actually just running interference on behalf of know-nothing and do-nothingism, attacking flawed policies on behalf of a Republican Party that will never, ever advance any policies of its own.
This critique is ... not necessarily wrong. A Republican Party that was really shaped by lukewarmism would probably still oppose the Paris deal and shrink from sweeping carbon taxes. But it would be actively debating and budgeting for the two arenas — innovation and mitigation — where the smartest sceptics of regulatory solutions tend to place their faith.
This is not what the GOP seems inclined to do. Instead it lets lukewarmers poke holes in liberal proposals for climate insurance policies, and then sits back satisfied that no insurance policy, no extra effort, is necessary at all. Earlier I recommended reading Oren Cass’ essays; now I’ll quote his tweet when Trump pulled out of the Paris accord. “Hopefully someday,” he wrote, “we’ll get a reality-based climate agreement that helps prepare for and adapt to whatever climate change brings.”
The problem is that while Paris was not sufficiently rooted in reality, the anti-Paris sentiments that moved Trump weren’t entirely reality-based either. And a clear Republican plan for how to “prepare for and adapt to whatever climate change brings” does not actually exist.
In its absence, lukewarmism is a critique without an affirmative agenda, a theory of the case without a party that’s prepared to ever act on it. So its claim to offer a fully-credible policy alternative to climate alarmism awaits a different president, and a very different GOP.