Charoen Pokphand Indonesia
    Category: Best of the Best By : Sonya Angraini Read : 5373 Date : Monday, July 08, 2013 - 01:15:43

    Courtesy of CP Group

    Who doesn't like chicken? “Chicken is the most popular and the cheapest animal protein,” says Rusmin Ryadi, president director at PT Charoen Pokphand Indonesia, a subsidiary of Thai-based Charoen Pokphand group owned by Jiaravanon family. Thus as Indonesians grow richer, they can afford to eat more protein, especially chicken.

    This trend explains why Rusmin is so upbeat about the outlook for his business, which produces poultry feed, processed food and day-old chicks (sold to poultry farms and egg producers). The company is the largest feed producer in the country by market share, with 40%, and the largest producer of day-old chicks by volume. Its stock has performed well, rising 75% last year. The company's market capitalization is now Rp 77 trillion, with a 33% return on equity. The company booked higher sales in the first quarter of this year at Rp 5.6 trillion, compared to Rp 4.9 trillion in the same period a year ago. Despite this, the profits actually dropped 9% to Rp 718 billion due to a higher raw material costs to make poultry feed—mostly corn and soybean meal—in 2012. Rusmin expects sales to grow at least 15% this year. (His comments were all made by an email interview.)

    The rise in raw material prices peaked in the third quarter of 2012, and prices for corn and soybean meal have fallen 11% and 8% respectively, which reduces the margin pressure on Charoen Pokphand, notes Kim Eng analyst Adi Wicaksono in a recent report. The main ingredients of corn and soybean meal are mostly imported due to insufficient supplies from local suppliers.

    To lessen the impact of higher raw material costs, the company is passing on their higher costs by raising prices for its products. “We are able to adjust the selling price in accordance with the increase in raw material prices,” says Rusmin. The company will work with local corn farmers to boost productivity to reduce its dependency on imports, adds Rusmin, who was appointed in May to his post.

    Poultry feed is the biggest revenue generator, contributing 75% of last year's Rp 21.3 trillion sales. The company has seven production facilities for poultry feed located in cities such as Makassar, Medan and Semarang. The feed is available in forms such as concentrate, mash, pellet and crumble. It is constructing a new factory in Cirebon, which should be completed by the end of this year.