Charoen Pokphand Foods Public Company Limited Annual Report 2013 Annual Report Charoen Pokphand Foods Public Company Limited Public Company Pokphand Foods Charoen KITCHEN OF Annual Report 2013 THE WORLD INTEGRATED OPERATING PLATFORM CENTERED AROUND QUALITY AND SAFETY A vertically integrated food production traceable throughout the value chain for our consumers around the globe to trust in safety of CPF food products. INTEGRATED OPERATING PLATFORM CENTERED AROUND QUALITY AND SAFETY A vertically integrated food production traceable throughout the value chain for our consumers around the globe to trust in safety of CPF food products. QUALITY CONTROL AND ASSURANCE IN EVERY PROCESS World class standard employed for quality control and assurance throughout entire manufacturing process for food safety and hygiene in every bite for you and your loved ones. QUALITY CONTROL AND ASSURANCE IN EVERY PROCESS World class standard employed for quality control and assurance throughout entire manufacturing process for food safety and hygiene in every bite for you and your loved ones. VARIETY CREATION OF FOOD PRODUCTS TO MEET EVERY DEMAND Understanding the local taste, culture and tradition through product research and development to meet diverse consumer satisfaction around the world. VARIETY CREATION OF FOOD PRODUCTS TO MEET EVERY DEMAND Understanding the local taste, culture and tradition through product research and development to meet diverse consumer satisfaction around the world. KITCHEN OF THE WORLD Egg Satisfied every taste of both local and international customers with quaility and variety products. Fresh Food Products Chicken & Marinated Fresh Chicken Cooked Food Products Ready Meal & Light Meal Pork & Marinated Fresh Pork Fish Side Dish Duck KITCHEN OF THE WORLD Egg Satisfied every taste of both local and international customers with quaility and variety products. Fresh Food Products Chicken & Marinated Fresh Chicken Cooked Food Products Ready Meal & Light Meal Pork & Marinated Fresh Pork Fish Side Dish Duck Cooked Food Products & Processed Food Products Oversea Markets Chicken Appetizer Gyoza & Wonton Appetizer Bakery Processed Egg Sausage, Ham & Bacon Cooked Food Products & Processed Food Products Oversea Markets Chicken Appetizer Gyoza & Wonton Appetizer Bakery Processed Egg Sausage, Ham & Bacon NURTURING PERSONNEL ABILITIES BASED ON EQUALITY “Human Resource” is the key thrust for sustainable growth; therefore, recruiting for talent and strong moral individuals to join us under the cultivation “CPF Way” together with experienced operational skills honing. NURTURING PERSONNEL ABILITIES BASED ON EQUALITY “Human Resource” is the key thrust for sustainable growth; therefore, recruiting for talent and strong moral individuals to join us under the cultivation “CPF Way” together with experienced operational skills honing. ENVIRONMENTAL FRIENDLY PRODUCT DESIGN FOR ALL OF THE SOCIETY AND COMMUNITY Integrated value chain is developed under “Green Business” in addition to the international safety and quality product development standards. ENVIRONMENTAL FRIENDLY PRODUCT DESIGN FOR ALL OF THE SOCIETY AND COMMUNITY Integrated value chain is developed under “Green Business” in addition to the international safety and quality product development standards. DETERMINATION IN CREATING FOOD SECURITY FOR ENTIRE WORLD With understanding in different accessibility for food, CPF brings out expertise in agro-industrial and food businesses to expand its operations to create food accessibility and affordability for all. RUSSIA SWEDEN DENMARK UNITED KINGDOM CANADA IRELAND NETHERLANDS BELGIUM GERMANY FRANCE ITALY SPAIN TURKEY GREECE UNITED STATES SOUTH KOREA CYPRUS OF AMERICA JAPAN CHINA NEPAL BAHRAIN QATAR TAIWAN MEXICO UNITED ARAB EMIRATES HONG KONG OMAN INDIA LAOS VIETNAM CAMBODIA PHILIPPINES NIGERIA SRI LANKA MARIANAS MALAYSIA ISLANDS MALDIVES SINGAPORE ANGOLA REUNION AUSTRALIA SOUTH AFRICA CPF Operations (Including subsidiaries and associates) Sales Representative Office NEW ZEALAND Thailand's Export Destination DETERMINATION IN CREATING FOOD SECURITY FOR ENTIRE WORLD With understanding in different accessibility for food, CPF brings out expertise in agro-industrial and food businesses to expand its operations to create food accessibility and affordability for all. RUSSIA SWEDEN DENMARK UNITED KINGDOM CANADA IRELAND NETHERLANDS BELGIUM GERMANY FRANCE ITALY SPAIN TURKEY GREECE UNITED STATES SOUTH KOREA CYPRUS OF AMERICA JAPAN CHINA NEPAL BAHRAIN QATAR TAIWAN MEXICO UNITED ARAB EMIRATES HONG KONG OMAN INDIA LAOS VIETNAM CAMBODIA PHILIPPINES NIGERIA SRI LANKA MARIANAS MALAYSIA ISLANDS MALDIVES SINGAPORE ANGOLA REUNION AUSTRALIA SOUTH AFRICA CPF Operations (Including subsidiaries and associates) Sales Representative Office NEW ZEALAND Thailand's Export Destination CONTENTS MANAGEMENT ABOUT OPERATIONS SHAREHOLDERS AND CPF AND ITS CONTACT TOWARDS CPF GROUP AND PERFORMANCE DIVIDEND POLICY SUBSIDIARIES INFORMATION SUSTAINABILITY 18 30 66 118 121 150 Message to Shareholders Operations in Brief Management Shareholders Company Facts References 20 44 89 120 122 152 The Company at a Glance Management’s Discussion Human Resources Dividend Policy General Information Contact Us and Analysis Management of the Company’s 24 Investments Milestones 53 93 Report of the Board Corporate Governance 26 of Directors’ Responsibility Awards for Financial Statements 114 and Recognitions Corporate Social 54 Responsibility for Industry Overview Sustainability 58 Risk Factors Note: “The Company” or “CPF Group” 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. Investors may explore more information of the Company in Registration Statement (Form 56-1) posted on www.sec.or.th or www.cpfworldwide.com CONTENTS MANAGEMENT ABOUT OPERATIONS SHAREHOLDERS AND CPF AND ITS CONTACT TOWARDS CPF GROUP AND PERFORMANCE DIVIDEND POLICY SUBSIDIARIES INFORMATION SUSTAINABILITY 18 30 66 118 121 150 Message to Shareholders Operations in Brief Management Shareholders Company Facts References 20 44 89 120 122 152 The Company at a Glance Management’s Discussion Human Resources Dividend Policy General Information Contact Us and Analysis Management of the Company’s 24 Investments Milestones 53 93 Report of the Board Corporate Governance 26 of Directors’ Responsibility Awards for Financial Statements 114 and Recognitions Corporate Social 54 Responsibility for Industry Overview Sustainability 58 Risk Factors Note: “The Company” or “CPF Group” 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. Investors may explore more information of the Company in Registration Statement (Form 56-1) posted on www.sec.or.th or www.cpfworldwide.com MESSAGE TO SHAREHOLDERS In 2013, Charoen Pokphand Foods PCL. and its Moreover, in spite of numerous challenges, CPF Group subsidiaries (“CPF Group”) continued to grow its is emphasizing in strategy development to overcome business with total consolidated revenue reaching many hurdles while continuing to seek business THB 389,251 million, an increase of 9% from a year opportunities to strengthen and sustain growth for the ago. Of which, CPF’s international operations and Group both in domestic and international markets, export revenue constituted 66%, while domestic sales while mergers and acquisitions will continue to be an from Thailand operations accounted for 34% of total instrumental part of the Company’s growth strategy. consolidated sales revenue. The Company growth was In 2013, the CPF Group acquired shares in CP-Meiji achieved despite facing 3 major challenges in 2013 - Co., Ltd. to further expand its dairy business domestically. higher production and raw material costs, oversupply In overseas markets, the CPF Group invested in a Russian in the meat industry and the Early Mortality Syndrome swine farming company. In early 2014, the CPF Group (“EMS”) epidemic which adversely impacted the Thai completed another acquisition of a food processing shrimp industry. The compounding effect has caused company in Belgium equipped with an advanced the Company’s net profit to decline by 30% (excluding technology of microwave sterilization and invested in the fair value adjustment of investment in its affiliated a trading company in Sweden. company totaling THB 8,673 million in 2012) in 2013 18 to THB 7,065 million. With the Company’s vision to being the “Kitchen of - the World,” the CPF Group places importance on Therefore, after thorough consideration of the 3 strategic initiatives - ensure sustainable growth, Company’s financial performance and financial ensure leadership in products and services to meet position for the year ended 2013, the Company’s Board global consumer needs, as well as ensure financial and of Directors had a resolution to propose to the human resources strength to enhance its global Annual Report Shareholders’ meeting to approve the 2013 annual competitiveness. The goal of the above initiatives is to dividend of THB 0.50 per share, which the Company provide the Company’s shareholders and stakeholders already distributed the first dividend payment to a good level of return. shareholders as an interim dividend at THB 0.25 per share and the remaining of THB 0.25 per share will be On behalf of the Company’s Board of Directors and distributed