ANNUAL REPORT 2012 Annual Report 2012 Charoen Pokphand Foods Public Company Limited Charoen Pokphand Foods Public Company Limited 313 C.P. Tower Building, Silom Road, Bangrak, Bangkok 10500, Thailand Head Offifififfiice Tel: 66 2625 8000 Fax: 66 2638 2139 www.cpfworldwide.com Charoen Pokphand Foods Public Co., Ltd. NORWAY SWEDEN ESTONIA DENMARK IRELAND UNITED KINGDOM POLAND CANADA NETHERLANDS RUSSIA BELGIUM GERMANY FRANCE ITALY SPAIN TURKEY GREECE SOUTH KOREA UNITED STATES CYPRUS OF AMERICA MOROCCO JAPAN LEBANON CPF has production NEPAL CHINA and processing bases in BAHRAIN QATAR TAIWAN SAUDI ARABIA UNITED ARAB MEXICO EMIRATES “12 Countries” INDIA HONG KONG across the globe. From these internationally OMAN LAOS VIETNAM recognized and certiffiified facilities, PHILIPPINES GUAM our products are distributed CAMBODIA to more than 40 countries NIGERIA SRI LANKA in 5 continents - serving and satisfying MALAYSIA MARIANAS ISLANDS over 3 billion citizens of the world. MALDIVES SINGAPORE INDONESIA ANGOLA AUSTRALIA CPF Operations (Including subsidiaries and associates) SOUTH AFRICA Sales Representatives Thailand's Export Destinations NEW ZEALAND NORWAY SWEDEN ESTONIA DENMARK IRELAND UNITED KINGDOM POLAND CANADA NETHERLANDS RUSSIA BELGIUM GERMANY FRANCE ITALY SPAIN TURKEY GREECE SOUTH KOREA UNITED STATES CYPRUS OF AMERICA MOROCCO JAPAN LEBANON CPF has production NEPAL CHINA and processing bases in BAHRAIN QATAR TAIWAN SAUDI ARABIA UNITED ARAB MEXICO EMIRATES “12 Countries” INDIA HONG KONG across the globe. From these internationally OMAN LAOS VIETNAM recognized and certiffiified facilities, PHILIPPINES GUAM our products are distributed CAMBODIA to more than 40 countries NIGERIA SRI LANKA in 5 continents - serving and satisfying MALAYSIA MARIANAS ISLANDS over 3 billion citizens of the world. MALDIVES SINGAPORE INDONESIA ANGOLA AUSTRALIA CPF Operations (Including subsidiaries and associates) SOUTH AFRICA Sales Representatives Thailand's Export Destinations NEW ZEALAND Quality and food safety are CPF’s primary concerns. Our facilities are designed and built to meet most stringent international standard; our production processes and operating procedures are detailed to ensure integrity of the products; our total vertically integrated operations provide full control and traceability throughout the supply chain. Dedicated and committed to creating sustainable total vertically food integratedoperations Quality and food safety are CPF’s primary concerns. Our facilities are designed and built to meet most stringent international standard; our production processes and operating procedures are detailed to ensure integrity of the products; our total vertically integrated operations provide full control and traceability throughout the supply chain. Dedicated and committed to creating sustainable total vertically food integratedoperations Sourcing of ingredients is an important factor in production of hygienic and quality food products. This is the reason why CPF is so particular about raw material procurement. eticulous andM considerationcare in providing safe food products to all walks and Circle of Life Sourcing of ingredients is an important factor in production of hygienic and quality food products. This is the reason why CPF is so particular about raw material procurement. eticulous andM considerationcare in providing safe food products to all walks and Circle of Life Multitude of food product varieties to satisfy globalpalates Consideration is given to differences in culture, customs and epicurean preferences when developing and creating food dishes. Multitude of food product varieties to satisfy globalpalates Consideration is given to differences in culture, customs and epicurean preferences when developing and creating food dishes. aring Cand isCPF’ sharingsroad map to sustainability. Charity begins at home. CPF’s concern for the society at large evolves from improvement within and grows toward local communities and environment. Working and walking hand-in-hand will make this world a better place. aring Cand isCPF’ sharingsroad map to sustainability. Charity begins at home. CPF’s concern for the society at large evolves from improvement within and grows toward local communities and environment. Working and walking hand-in-hand will make this world a better place. CONTENTS Message to Shareholders 12 The Company at a Glance 14 CPF Milestones 18 CPF Awards and Recognitions 20 Operations in Brief 24 Management’s Discussion and Analysis 34 Report of the Board of Directors’ Responsibility 43 for Financial Statements Industry Overview 45 Risk Factors 54 Management 62 Corporate Governance 90 Corporate Social Responsibility for Sustainability 106 Capital in Brief 110 Shareholders 112 Quick Facts 114 General Information of the Company’s Investments 115 References 139 Contact Us 141 Note: ‘The Company’ or ‘CPF’ in this annual report refer to Charoen Pokphand Foods Public Company Limited (‘CPF’) and its subsidiaries which CPF directly or indirectly holds more than 50% of their paid-up capital and companies that CPF has control. Mr. Dhanin Chearavanont Chairman of Mr. Adirek Sripratak the Board of Directors President and Chief Executive Officer 12 Annual Report Message to Shareholders In 2012 the Company was faced with many challenges and traceability. The Company is dedicated to social including fluctuating price of raw material and higher responsibility, environment conservation and sustainable production cost. Severe drought in America and South business growth. America caused prices of corn and soybean meal, sources of protein to animal diets, to increase steeply. At present, the Company has investments and As a result, production cost of raising animal protein operations in 12 countries with over 3 billion population. increased accordingly. To make matter worse, over We export to some 40 countries including the United supply of swine, broiler and layer made market price States, European Union and Japan. Our strategy to for these animals to be lowered than production cost. becoming top food company of the World is through However, CPF’s growth and profitability in other innovation, personnel development and research and businesses remained favorable, particularly our ready development. The Company also dedicates to providing meal business. Acquisition of CP Pokphand Co., Ltd., products and services that are of high quality, creating with operations in China and Vietnam, was also food security, as well as operating the business with positive to CPF overall growth. strict adherence to corporate social responsibility, environment conservation and sound corporate Consolidated sales in 2012 is THB 357,175 million with governance. net profit of THB 18,790 million, equivalent to 73% and 17% growth over 2011 respectively. Sales in 2013 In addition to the above-mentioned, CPF operates will continue to grow from our international operations. on three guiding principles - benefits to the country, The Company’s emphasis on investing in ready meal benefits to the society, and benefits to the Company. business will continue, especially in China, Vietnam We are concerned for all stakeholders’ interest and and Thailand. to growing sustainably to becoming “Kitchen of the World.” With our vision to be “Kitchen of the World”, the Company is committed to our vertical integration business in On behalf of the board of directors, management agro-industry and food. We will continue to provide and staff, we thank you our shareholders for the trust quality product in terms of nutrition, taste, food safety and support. Mr. Dhanin Chearavanont Mr. Adirek Sripratak Chairman of President and the Board of Directors Chief Executive Officer Kitchen of the World 13 The Company at a Glance Leading Agro-Industrial and Food Conglomerate Charoen Pokphand Foods Public Company Limited is the leading agro-industrial and food conglomerate in the Asia Pacific region. The Company operates in both the livestock (swine, broilers, layers, and ducks) and aquaculture (shrimp and fish) businesses. The vertically integrated businesses incorporate the manufacturing of animal feed, animal breeding and animal farming; meat processing, the manufacturing of semi-cooked meat and fully-cooked meat; food products and ready meal products, as well as the meat and food retailer and restaurant businesses. CPF’s CPF’s Values VISION Mission CPF engages in vertically 1. Three Benefits to integrated agro-industrial and Sustainability - for the food businesses and commits to Country, the People and providing products and services the Company that are of high quality, nutritious, 2. Speed and Quality tasty, safe and traceable, and is 3. Simplification dedicated to operating 4. Adaptation to Change our business with strict adherence 5. Innovativeness to corporate social responsibility 6. Integrity, Honesty and environment conservation & Reciprocity as a means of achieving sustainable growth. The Company has production bases in 12 countries The Company’s operations can be divided into two across the globe, serving more than 3,000 million main areas as follows: people, and exports fresh meat and processed meat 1) Thailand Operations - which comprises operations under the customers’ brands, as well as ready-to-eat in Thailand that lead to domestic sales and export; products under the brand, to more than 40 countries 2) International Operations - which incorporates the worldwide, spanning five continents. investment in agro-industrial and food businesses in eleven countries including subsidiaries in China, Vietnam and Turkey;