Charoen expects better sales in year of the chicken

Leony Aurora, The Jakarta Post/Jakarta

The year 2005 is the year of the chicken, according to Chinese calendar. So poultry feed and day-old chick (DOC) producers are expecting better sales after the avian influenza epidemic that sent their financial reports to glaring red in 2004.

Finance president of PT Charoen Pokphand Indonesia Thomas Effendy told reporters on Friday that the company's losses were expected to be much higher than 2003, but refused to give an estimate.

"Our performance in 2004 was very poor. Prices of imported raw material (for poultry feed) have increased by 100 percent since March 2004," he said in a public forum.

The company reported a loss of Rp 162 billion (US$17.61 million) in the first three quarters of 2004 -- almost eight times the Rp 21.18 billion it lost throughout 2003.

As prices of local and imported materials started to decline in November, Thomas is optimistic that 2005 will be a better year.

"I think we will profit this year," he said.

The year 2004 was very tough on the chicken industry, especially after the government officially admitted the presence of avian influenza in the country last March. Scared of eating infected chicken, people literally stopped consuming poultry and sent prices plummeting.

Charoen, with 40 percent of the market share in the DOC business, had to sell the chicks at an average price of Rp 1,781 each, lower than what it spent to rear them at Rp 1,815. Even with the low prices, the company, a subsidiary of Thai poultry giant Charoen Pokphand, is estimated to have sold only 259 million chicks last year, about 16 percent less than its production in 2003 of 311 million.

Its poultry feed, despite seeing an increase in its average price by almost 20 percent from the previous year of Rp 2,449 per kilogram in 2004, suffered from an even higher jump of 24 percent in prices of raw materials. Production is estimated to be slightly down in 2004 to 1.5 million tons from 1.58 million tons in 2003.

However, with the availability of vaccines and avian influenza being slowly eradicated, Charoen expected to see an increase in production this year.

"Feed will increase by 10 percent in quantity and DOC 15 percent," said Thomas.

Poultry feed contributes between 75 percent and 80 percent of company revenue, DOC between 10 percent and 15 percent while Charoen's other products -- shrimp feed, fish feed and chicken- based processed products -- make up the rest.

Thomas said that based on his experience, the chicken industry had a routine cycle. "The prices of DOC are usually good for two or three years, go bad for a year or so, then rise again."

Considering that the DOC's prices have been low for over a year, he remained positive that they would increase this year.

"I've talked with other producers and they said the same thing. Besides, this is the year of the chicken," he quipped.