"Shrinking world consumption and the world economic crisis", says Charoen Pokphand Foods Plc (CPF) president and CEO Adirek Sirpratak, are the main reasons to cut the investment budget by over 50% over the next two years.
The approach would have to be very cautious and selective and the "focus" would have to be market development, sales distribution, channel expansion and high-potential projects in countries such as Russia, India and Malaysia.
The group's annual investment expenditure will be reduced by half to Bt2-Bt2.5 billion (€41m-€51m) next year from the previous Bt5 billion (€102.5m), but it will continue to boost product quality and manufacturing efficiency.
The global recession and downward trend of raw material prices have also prompted CPF to adjust its sales and marketing policy. Now, it will try to lengthen contracts signed with business partners and clients, while reducing raw material inventory to lower production costs. At present, its order backlog extends to the second quarter of next year.This will help avoid risks from the global economic downturn, particularly the impacts on CPF's major export markets, the US, European Union and Japan.
The company will also focus next year on such marketing activities as brand building and overseas market expansion into Russia, for example. More hi-tech, automated equipment would be installed in plants to reduce energy consumption and boost productivity, Adirek Sirpratak said.
The company expects its sales to grow by 5% next year, up from this year's Bt150 billion (€3.08b). Domestic sales now account for 60-65% of the total sales, while the overseas investments generate 16-18% with the rest generated by export sales. The animal feed business currently contributes 35% of total sales, with 55% from livestock and aquaculture and 10% from processed foods. In the long- term 10 year plan, processed foods should contribute 50% of revenues with the balance coming from animal feed, livestock and aquaculture.