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POKPHAND CO. L
TD. / Interim Report
| 1 |
| CONTENTS |
| Management’s Discussion and Analysis 2 |
| Unaudited Consolidated Results 7 |
| Condensed Consolidated Income Statement 7 |
| Condensed Consolidated Statement of Changes in Equity 8 |
| Condensed Consolidated Balance Sheet 9 |
| Condensed Consolidated Cash Flow Statement 11 |
| Notes to Condensed Consolidated Financial Statements 12 |
| Interim Dividend 18 |
| Financial Review 18 |
| Disclosure Pursuant to Rule 13.18 of the Listing Rules 19 |
| Directors’ and Chief Executives’ Interests and Short Positions |
| in Shares, Underlying Shares or Debentures 19 |
| Substantial Shareholders’ and Other Persons’ Interests and |
| Short Positions in Shares and Underlying Shares 21 |
| Share Option Scheme 22 |
| Code on Corporate Governance Practices 24 |
| Model Code for Securities Transactions by Directors 24 |
| Audit Committee 24 |
| Purchase, Sale or Redemption of Listed Securities 24 |
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2
MANAGEMENT’S DISCUSSION AND ANALYSIS
BUSINESS REVIEW
As of 30th June, 2007, C.P. Pokphand Co. Ltd. (the “Company”) and its subsidiaries (the “Group”)
recorded improved operational performance, with a loss attributable to equity holders narrowed
to US$8.3 million. Compared with the same period last year, the consolidated turnover increased
by 21.4% to US$957.9 million, gross profit soared 49.5% to US$96.0 million, while overall gross
profit margin increased 1.9% to 10.0%.
Agri-business
The Group’s agribusiness is classified into four main business lines – feed, food integration,
breeding and rearing, and biochemical. Compared with the first half year of last year, all of the
four business lines recorded gains in their turnover and overall gross profit this year. Among
them, the breeding and rearing sector and the food integration sector posted more favorable
increments. Below is a comparison of the consolidated gross profit of each business line for the
first half year of 2007 to that of 2006:
With the periodic threat of animal diseases in recent years, China’s husbandry industry has been
under immense pressure and in the first half of 2007 the market experienced an all-time low
livestock stock level. Due to this supply shortage in addition to the restricted time frame of the
livestock growing cycle, overall food prices in China showed significant increases, with pork
prices rising the most followed by poultry. This, in turn, corresponded to increases in the selling
prices of the Group’s products. As a result, profit margin of the Group’s breeding and rearing
business and food integration business skyrocketed in the first half of 2007; overall profitability,
however, was strained by the rising cost of energy and raw materials.
In an effort to combat the rising material and energy costs, the Group has been leveraging a
centralized purchasing unit to minimize the impact of these costs, as well as constantly finding
innovative ways to boost efficiency with technological advancements.
Feed
Feed accounted for 55.0% (2006: 57.0%) of the consolidated turnover of the Group. The
consolidated turnover of the feed business increased 17.2% to US$527.0 million during the first
half year of 2007. Owing to the rising raw material cost, gross profit was offset by 2.8% to
US$55.3 million while gross profit margin was reduced by 2.1% to 10.5%.
Consolidated Gross Profit
-10
0
10
20
30
40
50
60
Feed Breeding and
Rearing
Food
Integration
Biochemical Others
56.9
55.3
-6.7
10.1
1.8
15.4
8.2
8.1
4.0
7.1
US$’ Million
1H 2006
1H 2007
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Feed (continued)
The Group’s major feed products include poultry, swine, aqua and cattle feed. Poultry and swine
feed accounted for the majority, approximately 50.4% and 28.6% of the total, respectively. Aqua
feed sales have also increased to 7.3% of the Group’s total feed sales.
As more and more breeders gradually reentered the rearing business, overall market demand on
feed soared during the first half of 2007. Average market selling price of complete poultry feed
went up 6.5% and sales volume of the Group’s poultry feed rose 19.5% to 1.2 million tons.
Likewise, the average price of corn, the main raw material in our production for feed, also went
up to RMB1.55 per kg, an increase of 18.5% compared with the same period last year.
As for swine feed business, sales recorded a slight drop of 3.5% as compared with the same
period last year despite an increase of 10.3% in the average market selling price of complete
swine feed. The aftermath of swine diseases caused swine breeders to be more cautious and keep
their rearing low despite heftier market price increase in swine finished products compared to
poultry products. Swine rearing is seen as higher risk than poultry rearing factoring in the much
longer swine rearing cycle of five to eight months.
In the first half of year 2007, the Group has already invested approximately RMB27 million in the
development of the aqua feed business in view of the continual expansion in this sector.
Food Integration
The food integration business, the Group’s second largest business, accounted for approximately
26.1% (2006: 27.9%), or approximately US$250.0 million, of the Group’s consolidated turnover
in the first half of 2007. Both gross profit and gross profit margin increased significantly from the
same period last year, with the gross profit rising 8.6 times to US$15.4 million and gross profit
margin edging up to 6.2%. The increase in general food prices in China has escalated into a rapid
price increase in the poultry meat products. According to National Bureau of Statistics of China,
poultry meat prices rocketed 20.7% as compared with the same period last year. As a result,
sales of both the Group’s raw and cooked foods recorded a double-digit growth despite a fall in
the Group’s domestic sales volume from 90,000 tons to 81,000 tons. Export sales, on the other
hand, recorded stable growth with sales volume increased 1.0% to 20,000 tons over the same
period last year.
6.7%
33.4%
4.6%
10.4%
44.9%50.4%
7.3%
28.6%
3.9%
9.8%
Poultry Feed Aqua Feed Swine Feed Cattle Feed Other Feed
1H 2007 Feed Sales Distribution 1H 2006 Feed Sales Distribution
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Food Integration (continued)
In light of the rising demand in China for poultry meat along with a higher consumer awareness
of food safety and a change in their consumption patterns, the Group continues to uphold great
emphasis on food safety and quality control in addition to new product development. Catering to
the different needs of the consumer, the Group has launched approximately 60 new food products
under “Chia Tai Food” during the first half of 2007. Many of these products are sold widely in the
supermarkets and hypercenters in China.
Breeding and Rearing
Breeding and rearing accounted for approximately 6.2% (2006: 3.9%) of the Group’s consolidated
turnover with sales of the Group’s breeding and rearing business doubling to US$59.4 million.
Gross profit turned around from a loss to a profit of US$10.1 million. This turnaround came not
only due to an upward trend in the market or the Group’s continuous support to farmers by
means of giving out technical support, but also the additional effort from the Chinese government
in its policies favorable to farmers during a time more and more farmers regained their confidence
in the breeding and rearing industry for their livelihood.
During the past year, animal diseases such as bird flu and swine high fever illness intermittently
broke out in China; as a result, farmers kept low inventories of broilers, swine, commercial day-
old-chicks and piglets as a way to mitigate their risks. On top of these inventory shortages was
the restricted time frame of the growing cycle. All of these factors fueled the increase in food
prices in China. According to the China Animal Agriculture Association, the selling price of day-
old-chicks for the first six months this year went from RMB2.28 to RMB2.82 per bird, indicating
an average price of RMB2.48 per bird which was an increase of 60.1% from the same period last
year. Meanwhile, average broilers’ selling price also soared 31.1% to RMB12.4 per kg while
average selling price of piglets and live pigs rose 65.7% to RMB13.77 and 47.1% to RMB9.71 per
kg, respectively, from the same period last year. The Group’s breeding and rearing business
benefited from this improving sales environment.
As for the layers breeding and rearing business, it is on track with the Group’s development.
Average market selling price of eggs surged by 30.9% to an average of RMB7.5 per kg. This in
turn doubled the sales of the Group’s layers segment of the breeding and rearing business to
US$4.9 million, among which, sales volume of eggs grew 8.5% to 2,000 tons.
Biochemical
In the first half of year 2007, consolidated turnover of the biochemical business accounted for
4.2% of the Group’s consolidated turnover (2006: 4.9%). Its consolidated turnover reached
US$39.8 million, improved slightly by 2.3% from that of last year. However, the gross profit
margin recorded a small drop of 0.8% to 20.4%.
The Group’s biochemical products mainly include Chlortetracycline (“CTC”) and L-Lysine
monohydrochloride (“L-Lysine”). During the period under review, the increase in the average
market price of CTC was not enough to offset its diminishing sales. Turnover of CTC dropped
slightly to US$31 million. As for L-Lysine, the market was considered stable with a selling price
that increased from between RMB1,500 to RMB4,000 per ton compared with last year.
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Industrial Business
The Group’s industrial business is the sale of motorcycles, automotive accessories and carburetors,
and the distribution of the full range of Caterpillar products. During the first half of year 2007, net
profit contributed to the Group’s industrial business segment rose to US$1.7 million.
Effective from 1st April, 2006, the Chinese government reduced the excise tax for low-exhaust
motorcycles, 250cc or lower, from 10% to 3%, benefiting the Group’s jointly controlled entity
Luoyang Northern Ek Chor Motorcycle Company Limited (“Northern Ek Chor”) as it produces
low-exhaust motorcycles. During the period under review, Northern Ek Chor’s “Dayang” brand
motorcycles were highly promoted, resulting in a 15.1% increase in its turnover to
RMB650 million, and 19.5% in its sales volume to 250,000 vehicles.
The Group’s another jointly controlled entity ECI Metro Investment Co., Ltd. (“ECI Metro”) is the
sole agent of Caterpillar construction machinery products in western China. Stimulated by the
infrastructure development projects there, ECI Metro recorded continuous growth in sales and
profit.
FINANCIAL REVIEW
Liquidity and Financial Resources
As at 30th June, 2007, the Group had total assets of US$994.8 million (31st December, 2006:
US$971.8 million). Total debt and debt to equity ratio (debt to equity ratio is calculated by
dividing the total borrowings by the equity including minority interests) were US$527.4 million
and 598.2% respectively, as compared to US$563.1 million and 554.7% as at 31st December,
2006.
Most of the borrowings by the Group are in U.S. dollars and RMB, and the interest rates ranged
from 4.9% to 13.8% per annum for the period.
The Group had not engaged in any derivative for hedging against both the interest and exchange
rate.
All sales in the People’s Republic of China (“PRC”) are denominated in RMB, and export sales are
denominated in foreign currencies. Foreign currencies are required for purchase of imported raw
materials, parts and components, and the Group keeps necessary foreign currencies to meet its
operational needs. The directors consider the appreciation of RMB in the period has had insignificant
impact on the Group’s business.
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Capital Structure
The Group finances its working capital requirements through a combination of funds generated
from operations and short term and long term bank loans. The Group had cash and cash equivalents
of US$64.9 million as at 30th June, 2007 (31st December, 2006: US$55.1 million), an increase of
US$9.8 million.
Charges on Group Assets
As at 30th June, 2007, out of the total borrowings of US$527.4 million (31st December, 2006:
US$563.1 million) obtained by the Group, only US$193.7 million (31st December, 2006:
US$195.0 million) were secured and accounted for 36.7% (31st December, 2006: 34.6%) of the
total. Certain of the Group’s property, plant and equipment and land lease prepayments located
in PRC and Hong Kong with net book value of US$243.8 million (31st December, 2006:
US$205.6 million) have been pledged as security for various short and long term bank loans.
Contingent Liabilities
As at 30th June, 2007, the guarantees provided by the Group were US$9.2 million (31st December,
2006: US$9.4 million).
Employee and Remuneration Policies
As at 30th June, 2007, the Group employed around 43,000 staff (including 15,000 staff from the
jointly controlled entities and associates) in PRC and Hong Kong. The Group remunerates its
employees based on their performance, experience and prevailing market rate while performance
bonuses are granted on a discretionary basis. Other employee benefits include insurance and
medical coverage, subsidized training programme as well as a share option scheme.
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UNAUDITED CONSOLIDATED RESULTS
The board of directors of the Company (the “Board”) announces the unaudited consolidated
results of the Group for the six months ended 30th June, 2007 together with the comparative
figures for the corresponding period in 2006 and (for the information purpose) the audited
comparative figures for the year ended 31st December, 2006, as follows:
CONDENSED CONSOLIDATED INCOME STATEMENT
Six months Year ended
ended 30th June, 31st December,
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
Notes US$’000 US$’000 US$’000
Revenue 2 957,946 789,299 1,691,457
Cost of sales (861,985) (725,097) (1,522,720)
Gross profit 95,961 64,202 168,737
Selling and distribution costs (36,600) (34,472) (71,603)
General and administrative expenses (55,957) (49,674) (109,532)
Other income 3 7,387 963 3,502
Other losses 4 – (2,938) ( 7,182)
Finance costs (18,396) (17,492) (34,601)
Share of profits and losses of:
Jointly controlled entities (977) (3,175) 1,282
An associate 983 553 1,704
Loss before tax 5 (7,599) (42,033) (47,693)
Tax 6 (2,769) (2,455) (6,638)
Loss for the period (10,368) (44,488) (54,331)
Attributable to:
Equity holders of the Company (8,254) (41,090) (49,728)
Minority interests (2,114) (3,398) (4,603)
(10,368) (44,488) (54,331)
US cent US cents US cents
Loss per share attributable to 7
equity holders of the Company:
Basic (0.286) (1.422) (1.721)
Diluted N/A N/A N/A
Dividend per share – – –
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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months Year ended
ended 30th June, 31st December,
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
Notes US$’000 US$’000 US$’000
Surplus on revaluation – – 2,976
Exchange differences on
translation of foreign currency
financial statements and
exchange realignment 12 2,354 1,616 4,581
Net gains not recognized in
the income statement 2,354 1,616 7,557
Release of reserves upon
deregistration of a subsidiary 12 (30) ––
Acquisition of additional interests
in a subsidiary 12 (234) ––
Dividends paid to minority interests 12 (5,059) (3,501) (2,945)
Net loss for the period/year 12 (10,368) (44,488) (54,331)
Total changes in equity (13,337) (46,373) (49,719)
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CONDENSED CONSOLIDATED BALANCE SHEET
30th June, 31st December,
2007 2006
(Unaudited) (Audited)
Notes US$’000 US$’000
Non-current assets
Property, plant and equipment 8 442,879 447,733
Investment properties 4,245 4,129
Land lease prepayments 49,244 48,731
Non-current livestock 14,367 12,009
Interests in jointly controlled entities 66,459 83,047
Interests in an associate 27,488 26,801
Available-for-sale investments 1,480 1,480
Goodwill 2,928 2,515
Deferred tax assets 2,011 2,011
Total non-current assets 611,101 628,456
Current assets
Current livestock 22,659 17,755
Inventories 192,660 177,033
Accounts receivable,
other receivables and deposits 9 79,850 59,279
Bills receivable 4,212 4,675
Tax recoverable 47 47
Due from minority shareholders 1,525 5,620
Due from related companies 12,595 13,610
Pledged deposits 5,296 10,199
Cash and cash equivalents 64,877 55,107
Total current assets 383,721 343,325
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CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
30th June, 31st December,
2007 2006
(Unaudited) (Audited)
Notes US$’000 US$’000
Current liabilities
Accounts payable, other payables
and accrued expenses 10 264,365 251,596
Bills payable 6,933 10,577
Tax payable 6,165 4,908
Provisions for staff bonuses and welfare benefits 8,290 7,739
Due to related companies 78,021 22,182
Due to minority shareholders 15,445 10,203
Interest-bearing bank and other loans 396,241 435,450
Total current liabilities 775,460 742,655
Net current liabilities (391,739) (399,330)
Total assets less current liabilities 219,362 229,126
Non-current liabilities
Interest-bearing bank and other loans (131,189) (127,616)
Net assets 88,173 101,510
Equity
Equity attributable to equity holders
of the Company
Issued capital 11 28,898 28,898
Share premium account 12 73,897 73,897
Reserves 12 (55,428) (48,843)
47,367 53,952
Minority interests 12 40,806 47,558
Total equity 88,173 101,510
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CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Six months ended Year ended
30th June, 31st December,
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
US$’000 US$’000 US$’000
Cash generated from operations 65,421 27,773 70,144
Interest paid (18,396) (17,492) (37,092)
Tax paid (1,659) (1,339) (5,490)
Net cash inflow from operating activities 45,366 8,942 27,562
Net cash inflow/(outflow) from investing
activities 11,539 (34,601) (67,785)
Net cash inflow/(outflow) before financing
activities 56,905 (25,659) (40,223)
Net cash (outflow)/inflow from financing
activities (49,005) (5,704) 28,263
Increase/(Decrease) in cash and cash equivalents 7,900 (31,363) (11,960)
Effect of exchange rate changes, net 1,870 805 1,113
Cash and cash equivalents at beginning of period 55,107 65,954 65,954
Cash and cash equivalents at end of period 64,877 35,396 55,107
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of preparation and accounting policies
The condensed consolidated interim financial statements are unaudited and have been prepared in
accordance with International Accounting Standards (“IAS”) 34 “Interim Financial Reporting”
promulgated by the International Accounting Standards Board and Appendix 16 of the Rules Governing
the Listing of Securities on
These unaudited condensed consolidated interim financial statements should be read in conjunction
with the annual financial statements for the year ended 31st December, 2006.
The accounting policies adopted are consistent with those followed in the Group’s annual financial
statements for the year ended 31st December, 2006. As described in the annual financial statements
for the year ended 31st December, 2006, the following new standards, amendments to standards
and interpretations are mandatory for financial year beginning on 1st January, 2007:
IAS 1 Amendment Capital Disclosures; effective for annual periods beginning on or after 1st
January, 2007
IFRS 7 Financial Instruments: Disclosures; effective for annual periods beginning
on or after 1st January, 2007
IFRIC-Int 7 Applying the Restatement Approach under IAS 29 Financial Reporting in
Hyperinflationary Economies; effective for annual periods beginning
on or after 1st March, 2006
IFRIC-Int 8 Scope of IFRS 2; effective for annual periods beginning on or after 1st
May, 2006
IFRIC-Int 9 Reassessment of Embedded Derivatives; effective for annual periods
beginning on or after 1st June, 2006
IFRIC-Int 10 Interim Financial Reporting and Impairment; effective for annual periods
beginning on or after 1st November, 2006
Management has assessed the impact of these new standards, amendments to standards and
interpretations where the adoption of these these new standards, amendments to standards and
interpretations did not result in material impact on the financial statements of the Group and no
substantial changes to the Group’s accounting policies.
The following new standards, amendments to standards and interpretations have been issued but are
not effective for 2007 and have not been early adopted:
IAS 23 (Revised) Borrowing Costs; effective for annual periods beginning on or after 1st
January, 2009
IFRS 8 Operating Segments; effective for annual periods beginning on or after
1st January, 2009
IFRIC-Int 11 Group and Treasury Share Transactions; effective for annual periods
beginning on or after 1st March, 2007
IFRIC-Int 12 Service Concession Arrangements; effective for annual periods beginning
on or after 1st January, 2008
The Group is in the process of making an assessment of the impact of the above standards,
interpretations and amendments. So far, it has concluded that the adoption of these new standards,
amendments to standards and interpretations is unlikely to have a significant impact on the Group’s
results of operations and financial position.
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2. Revenue
Revenue, which is also the Group’s turnover, represents rental income and the net invoiced value of
sales after allowances for goods returned and trade discounts and after elimination of intra-group
transactions.
Segmental information
Business segments
Manufacture
Feedmill and sale of
and poultry motorcycles
operations and
and trading of accessories Investment
agricultural for and property
products automotives holding Total
US$’000 US$’000 US$’000 US$’000
For the six months ended
30th June, 2007
(Unaudited)
Segment revenue:
Total sales 1,054,524 – 256 1,054,780
Intrasegment sales (96,583) – (251) (96,834)
Sales to external customers 957,941 – 5 957,946
Segment results 8,283 (1,752) (3,127) 3,404
Other income 5,005 – 3 5,008
Interest income 2,379
Finance costs (18,396)
Share of profits and losses of
jointly controlled entities (4,466) 3,489 – (977)
Share of profit of an associate 983 – – 983
Loss before tax (7,599)
Tax (2,769)
Loss for the period (10,368)
For the six months ended
30th June, 2006
(Unaudited)
Segment revenue:
Total sales 866,205 – 34 866,239
Intrasegment sales (76,908) – (32) (76,940)
Sales to external customers 789,297 – 2 789,299
Segment results (14,267) (1,560) (4,117) (19,944)
Other income 361 – 167 528
Other losses (2,938) – – (2,938)
Interest income 435
Finance costs (17,492)
Share of profits and losses of
jointly controlled entities (5,431) 2,256 – (3,175)
Share of profit of an associate 553 – – 553
Loss before tax (42,033)
Tax (2,455)
Loss for the period (44,488)
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3. Other income
Six months Year ended
ended 30th June, 31st December,
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
US$’000 US$’000 US$’000
Gain on disposal of subsidiaries – – 261
Gain on deregistration of a subsidiary – 167 –
Unrealised gain on revaluation of livestock 3,235 ––
Compensation of office decoration 3
Interest income 2,379 435 897
Tax refund in respect of reinvestment of
distributed earnings from the ventures
established in the PRC 1,770 361 2,344
7,387 963 3,502
4. Other losses
Six months Year ended
ended 30th June, 31st December,
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
US$’000 US$’000 US$’000
Changes in fair values of investment properties – –58
Unrealised loss on revaluation of livestock – 227 1,151
Impairment of items of property,
plant and equipment – 2,711 5,785
Impairment of goodwill – – 188
– 2,938 7,182
5. Loss before tax
Six months Year ended
ended 30th June, 31st December,
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
US$’000 US$’000 US$’000
The Group’s loss before tax is arrived at
after charging/(crediting):
Foreign exchange gains, net (4,019) (1,211) (1,845)
Depreciation 24,228 25,009 50,999
Amortisation of land lease prepayments 663 1,041 1,061
Staff costs 67,293 57,934 115,732
Loss on disposal of property,
plant and equipment, net 112 156 755
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6. Tax
Six months Year ended
ended 30th June, 31st December,
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
US$’000 US$’000 US$’000
The Group:
Provision for taxation in respect of
profit for the period/year:
the PRC:
Mainland China 2,769 2,455 6,245
Deferred tax asset – – 393
Tax charge for the period/year 2,769 2,455 6,638
No provision for Hong Kong profits tax has been made as the Group earned no assessable income in
Hong Kong during the period/year (2006: nil).
7. Loss per share attributable to equity holders of the Company
Loss per share is calculated based on the net loss from ordinary activities attributable to equity
holders of the Company of US$8,254,000 (2006: net loss of US$41,090,000) and the weighted
average of 2,889,730,786 shares (2006: 2,889,730,786 shares) of the Company in issue during the
period.
A diluted loss per share amount for the period has not been disclosed as no diluting events existed
during the period.
8. Property, plant and equipment
Office Industrial Motor
Office premises in buildings in Furniture, vehicles and
premises in Mainland Mainland Plant and fixtures and transport Construction
Hong Kong China China machinery equipment facilities in progress Total
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Cost or valuation:
1st January, 2007 12,297 5,068 298,576 568,119 77,359 26,590 33,819 1,021,828
Additions – – 2,842 1,366 1,297 972 3,905 10,382
Transfer in/(out) – – 7,055 15,253 193 15 (22,516) –
Disposals – – (4,105) (2,896) (499) (1,923) (94) (9,517)
Deregistration of a subsidiary – – (83) (145) (45) (49) – (322)
Exchange realignment – – 10,369 16,585 1,548 730 1,029 30,261
30th June, 2007 12,297 5,068 314,654 598,282 79,853 26,335 16,143 1,052,632
Accumulated depreciation and
impairment losses:
1st January, 2007 – – 128,675 376,518 49,500 19,402 – 574,095
Depreciation provided during
the period – 10 7,193 14,006 1,944 1,075 – 24,228
Disposal – – (1,833) (2,266) (377) (1,624) – (6,100)
Deregistration of a subsidiary – – (16) (40) (19) (30) – (105)
Exchange realignment – – 3,913 12,056 1,104 562 – 17,635
30th June, 2007 – 10 137,932 400,274 52,152 19,385 – 609,753
Net book value:
30th June, 2007 12,297 5,058 176,722 198,008 27,701 6,950 16,143 442,879
31st December, 2006 12,297 5,068 169,901 191,601 27,859 7,188 33,819 447,733
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9. Accounts receivable, other receivables and deposits
The Group normally grants a credit policy of up to 90 days. The Group seeks to maintain strict
control over its outstanding receivables. Overdue balances are reviewed regularly by senior
management. In view of the aforementioned and the fact that the Group’s accounts receivable relate
to a large number of diversified customers, there is no significant concentration of credit risk.
Accounts receivable, other receivables and deposits are non-interest bearing. An aged analysis of the
accounts receivable, based on the invoice date, together with other receivables and deposits is as
follows:
30th June, 31st December,
2007 2006
(Unaudited) (Audited)
US$’000 US$’000
Less than 90 days 27,677 23,333
91 to 180 days 1,654 1,022
181 to 360 days 367 350
Over 360 days 1,644 1,425
31,342 26,130
Other receivables and deposits 51,039 34,365
82,381 60,495
Less: Impairment of accounts and other receivables (2,531) (1,216)
79,850 59,279
10. Accounts payable, other payables and accrued expenses
An aged analysis of the accounts payable, based on the date of receipt of the respective goods,
together with other payables and accrued expenses of the Group is as follows:
30th June, 31st December,
2007 2006
(Unaudited) (Audited)
US$’000 US$’000
Less than 90 days 122,635 98,640
91 to 180 days 9,532 7,845
181 to 360 days 7,213 5,126
Over 360 days 3,432 3,126
142,812 114,737
Other payables and accrued expenses 121,553 136,859
264,365 251,596
Accounts payable are non-interest bearing and are normally settled on 60-day terms. Other payables
and accrued expenses are non-interest bearing and have an average term of one month.
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17
11. Issued capital
Number of shares Issued capital
30th June, 31st December, 30th June, 31st December,
2007 2006 2007 2006
(Unaudited) (Audited) (Unaudited) (Audited)
US$’000 US$’000
Authorised:
15,000,000,000 ordinary shares
of US$0.01 each 150,000 150,000
Issued and fully paid:
At beginning and end of
period/year 2,889,730,786 2,889,730,786 28,898 28,898
12. Reserves
Attributable to equity holders of the Company
Share Share Asset Exchange
premium option revaluation Capital Reserve Expansion equalization Accumulated Minority
account reserve reserve reserve fund fund reserve losses Total interests Total
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
1st January, 2007 73,897 8,470 10,565 28,865 22,420 11,669 (12,182) (118,650) 25,054 47,558 72,612
Transfers from/(to)
accumulated losses – – – – 939 236 – (1,175) – – –
Acquisition of additional
interest in a subsidiary – – – – – – – – – (234) (234)
Exchange realignment – – – – – – 1,669 – 1,669 685 2,354
Dividends paid to
minority interests – – – – – – – – – (5,059) (5,059)
Deregistration of a subsidiary – – – – – – – – – (30) (30)
Loss for the period – – – – – – – (8,254) (8,254) (2,114) (10,368)
30th June, 2007 73,897 8,470 10,565 28,865 23,359 11,905 (10,513) (128,079) 18,469 40,806 59,275
13. Related party transactions
(a) A portion of the Group’s sales and purchases transactions, together with certain less significant
commercial transactions, are with companies in which Messrs. Sumet Jiaravanon, Dhanin
Chearavanont, Thanakorn Seriburi and Damrongdej Chalongphuntarat, directors of the Company,
have beneficial interests. Details of major related party transactions in addition to the
transactions and balances detailed elsewhere in the financial statements are set out as follows:
Six months Year ended
ended 30th June, 31st December,
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
Notes US$’000 US$’000 US$’000
Sales of goods to jointly controlled
entities and an associate (i) 16,394 11,520 22,366
Sales of goods to related companies (i) 14,985 14,605 48,894
Purchases of raw materials from jointly
controlled entities and an associate (ii) 18,138 26,270 47,791
Purchases of raw materials from
related companies (ii) 1,044 1,034 1,071
Notes:
(i) The sales of goods were made by reference to the published prices and conditions
offered to the major customers of the Group, except that a longer credit period was
normally granted.
(ii) The purchases of raw materials were made by reference to the published prices and
conditions offered to the major customers of the suppliers, except that a longer credit
period was normally granted.
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13. Related party transactions (continued)
(b) During the period, the Group paid a technical fee of US$30,769 (six months ended 30th June,
2006: US$30,769) to Dynamic Corporate Services Limited for the provision of technical and
management support services to the Group. The technical fee was determined by reference to
the agreed service fees between the parties.
Mr. Robert Ping-Hsien Ho, director of the Company, has beneficial interest in the share capital
of Dynamic Corporate Services Limited.
(c) During the period, Hainan Chia Tai Animal Husbandry Co. Ltd., a wholly-owned subsidiary of
the Company, received rental income of approximately US$336,000 (six months ended 30th
June, 2006: US$315,000) from a related party, C.P. Aquaculture (Hainan) Co., Ltd.
(d) The amounts due from and to related companies are unsecured, non-interest bearing and
have no fixed terms of repayment and arose, in the opinion of the directors, in the normal
course of the Group’s business activities. The carrying amounts of these amounts due from
and to related companies approximate to their fair values.
(e) Compensation of key management personnel of the Group:
Six months
ended 30th June,
2007 2006
(Unaudited) (Unaudited)
US$’000 US$’000
Short term employee benefits 1,573 1,782
The key management personnel of the Group are 15 directors and 3 senior management
(2006: 15 directors and 4 senior management).
14. Comparative figures
Certain comparative figures have been reclassified to conform with the current period’s presentation.
INTERIM DIVIDEND
The Board does not recommend an interim dividend for the six months ended 30th June, 2007
(2006: nil).
FINANCIAL REVIEW
The following analyses are the Group’s total and attributable turnover under management (including
turnover of the Company’s jointly controlled entities and associates):
Analysis of the Group’s total and attributable turnover under management
Six months ended 30th June, 2007
Group Attributable
Total turnover ownership turnover
US$ million % % US$ million %
PRC agri-business 1,321.3 87.6 29-100 1,023.8 91.7
PRC industrial business 187.0 12.4 28-55 92.8 8.3
1,508.3 100.0 1,116.6 100.0
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19
DISCLOSURE PURSUANT TO RULE 13.18 OF THE LISTING RULES
Save as disclosed below, the directors are not aware of any circumstances which would give rise
to a disclosure obligation pursuant to the requirements under Rule 13.18 of the Listing Rules as
at 30th June, 2007.
The Company entered into an agreement (the “Loan Facility Agreement”) with two banks in
Thailand relating to a loan facility of US$140.0 million (the “Loan Facility”) on 18th April, 2005.
The Loan Facility is to be repaid on 14 semi-annual consecutive instalments and the final maturity
date of the Loan Facility is 28th April, 2012. As at 30th June, 2007, the outstanding amount
owing by the Company under the Loan Facility was US$116.5 million.
Pursuant to the Loan Facility Agreement, it would be an event of default if the Company fails to
procure that (1) C.P. Intertrade Co., Ltd. (“CP Intertrade”) at all times maintains its shareholding
in CPI Holding Co., Ltd. (“CPI”) at not less than 99% (CP Intertrade currently holds 100% of the
issued share capital of CPI) and (2) CPI and its affiliates (being (i) any person or entity which has a
direct or indirect interest in CPI, or (ii) any company in which any such person(s) and/or entity(ies)
together hold not less than a 30% interest) together at all times maintain their aggregate
shareholding in the Company at not less than 46.51%. An affiliate of CPI has also undertaken to
provide to the Company by way of equity injections or subordinated loans the proceeds of sale of
its assets if and when it disposes of its assets. If any of the above-mentioned events of default
occurs, all amounts outstanding under the Loan Facility would become immediately due and
payable by the Company.
DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITIONS IN SHARES,
UNDERLYING SHARES OR DEBENTURES
As at 30th June, 2007, the interests and short positions of the directors and chief executives of
the Company in the shares, underlying shares and debentures of the Company or any of its
associated corporation (within the meaning of Part XV of the Securities and Futures Ordinance
(the “SFO”)) as recorded in the register required to be kept by the Company under section 352 of
the SFO; or as otherwise notified to the Company and Sumet Jiaravanon 1,004,014,695 – – – 1,004,014,695 34.74
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DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITIONS IN SHARES,
UNDERLYING SHARES OR DEBENTURES (CONTINUED)
(ii) Directors’ interests in share options granted by the Company
Pursuant to the old share option scheme (the “Old Scheme”) adopted on 10th April, 1992
which expired on 9th April, 2002 and the existing share option scheme (the “Existing
Scheme”) adopted by the Company on 26th November, 2002, certain directors were granted
share options. As at 30th June, 2007, the interests of the directors of the Company in share
options to subscribe for shares in the capital of the Company under the Old Scheme and
the Existing Scheme were as follows:
Number of shares Price per share
issuable upon exercise Period during to be paid on Approximate
of share options held which share options exercise of percentage
Name of director Date of grant as at 30th June, 2007 are exercisable share options of shareholding
HK$ %
Mr. Sumet Jiaravanon 26th February, 2003 12,800,000 26th February, 2003 to 0.3900 0.4429
25th February, 2013
3rd May, 2004 12,800,000 3rd May, 2004 to 0.3900 0.4429
2nd May, 2014
19th May, 2005 12,000,000 19th May, 2005 to 0.3540 0.4153
18th May, 2015
Mr. Dhanin Chearavanont 26th February, 2003 12,800,000 26th February, 2003 to 0.3900 0.4429
25th February, 2013
3rd May, 2004 12,800,000 3rd May, 2004 to 0.3900 0.4429
2nd May, 2014
19th May, 2005 12,000,000 19th May, 2005 to 0.3540 0.4153
18th May, 2015
Mr. Thanakorn Seriburi 10th August, 1998 17,500,000 10th August, 1998 to 0.3875 0.6056
10th August, 2008
26th February, 2003 21,584,807 26th February, 2003 to 0.3900 0.7469
25th February, 2013
3rd May, 2004 20,000,000 3rd May, 2004 to 0.3900 0.6921
2nd May, 2014
19th May, 2005 21,000,000 19th May, 2005 to 0.3540 0.7267
18th May, 2015
Mr. Meth Jiaravanont 19th May, 2005 21,000,000 19th May, 2005 to 0.3540 0.7267
18th May, 2015
Mr. Robert Ping-Hsien Ho 26th February, 2003 21,584,807 26th February, 2003 to 0.3900 0.7469
25th February, 2013
3rd May, 2004 20,000,000 3rd May, 2004 to 0.3900 0.6921
2nd May, 2014
19th May, 2005 21,000,000 19th May, 2005 to 0.3540 0.7267
18th May, 2015
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DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITIONS IN SHARES,
UNDERLYING SHARES OR DEBENTURES (CONTINUED)
(ii) Directors’ interests in share options granted by the Company (continued)
Saved as disclosed above, at no time during the period was the Company or any of its
subsidiaries, a party to any arrangements to enable the directors to acquire benefits by
means of the acquisition of shares in, or debentures of, the Company or any other body
corporate.
Save as disclosed above, as at 30th June, 2007, none of the directors and chief executives of the
Company had any interest or short position in shares, underlying shares or debentures of the
Company or any of its associated corporation (within the meaning of Part XV of the SFO) as
recorded in the register required to be kept by the Company under section 352 of the SFO; or as
otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.
SUBSTANTIAL SHAREHOLDERS’ AND OTHER PERSONS’ INTERESTS AND SHORT
POSITIONS IN SHARES AND UNDERLYING SHARES
As at 30th June, 2007, the following persons (other than a director or chief executive of the
Company) had the interests or short positions in the shares or underlying shares of the Company
as recorded in the register required to be kept by the Company pursuant to Section 336 of the
SFO:
Approximate
percentage of
Capacity and Number of the Company’s
Name of shareholder Notes nature of interest shares held issued share capital
(Note 1) %
Krung Thai Bank Public (2) Person having a 1,004,014,695 (L) 34.74
Company Limited security interest in shares
CPI Holding Co., Ltd. (3) Beneficial owner 1,004,014,695 (L and S) 34.74
C.P. Intertrade Co., Ltd. (3) Interest of a controlled 1,004,014,695 (L and S) 34.74
corporation
Worth Access Trading Limited (4) Beneficial owner 1,059,190,000 (L) 30.54
Charoen Pokphand Holding (4) Interest of a controlled 1,059,190,000 (L) 30.54
Company Limited corporation
Charoen Pokphand Group (4) Interest of a controlled 1,059,190,000 (L) 30.54
Company Limited corporation
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POKPHAND CO. L
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SUBSTANTIAL SHAREHOLDERS’ AND OTHER PERSONS’ INTERESTS AND SHORT
POSITIONS IN SHARES AND UNDERLYING SHARES (CONTINUED)
Notes:
(1) The letter “L” denotes a long position whilst the letter “S” denotes a short position.
(2) 1,004,014,695 shares were held by Krung Thai Bank Public Company Limited as security.
(3) CPI Holding Co., Ltd. beneficially owned 1,004,014,695 shares. It also has a short position in
1,004,014,695 shares. C.P. Intertrade Co., Ltd. has declared an interest in these shares by virtue of
its shareholding in CPI Holding Co., Ltd.
(4) Worth Access Trading Limited has a long position in 1,059,190,000 shares (including 481,250,000
shares and the subscription rights of 577,940,000 shares attached to the warrants). Charoen Pokphand
Holding Company Limited has declared an interest in these same 1,059,190,000 shares by virtue of
its shareholding in Worth Access Trading Limited whilst Charoen Pokphand Group Company Limited
has also declared an interest in such number of shares by virtue of its shareholding in Charoen
Pokphand Holding Company Limited.
Save as disclosed above, so far as is known to the directors, as at 30th June, 2007, no person
(not being a director or chief executive of the Company) had an interest or a short position in
shares or underlying shares of the Company as recorded in the register required to be kept by
the Company pursuant to Section 336 of the SFO.
SHARE OPTION SCHEME
Details of the directors’ interest in the Old Scheme and the Existing Scheme are set out in the
sub-section headed “Directors’ interests in share options granted by the Company” under section
headed “Directors’ and chief executives’ interests and short positions in shares, underlying shares
or debentures” above.
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POKPHAND CO. L
TD. / Interim Report 2007
23
SHARE OPTION SCHEME (CONTINUED)
Outstanding share options
As at 30th June, 2007, options to subscribe for an aggregate of 697,744,234 shares (which
include the options granted to certain directors as disclosed above) of the Company granted
pursuant to the Old Scheme and the Existing Scheme were outstanding. Details are as follows:
Number of share options
At Granted Exercised Cancelled Lapsed At
1st January, during during during during 30th June, Exercise
Category of participant 2007 the period the period the period the period 2007 Date of grant Exercise period price
HK$
(i) directors in aggregate 17,500,000 – – – – 17,500,000 10th August, 1998 10th August, 1998 to 0.3875
10th August, 2008
68,769,614 – – – – 68,769,614 26th February, 2003 26th February, 2003 to 0.3900
25th February, 2013
65,600,000 – – – – 65,600,000 3rd May, 2004 3rd May, 2004 to 0.3900
2nd May, 2014
87,000,000 – – – – 87,000,000 19th May, 2005 19th May, 2005 to 0.3540
18th May, 2015
(ii) other senior executives 60,739,236 – – – – 60,739,236 26th February, 2003 26th February, 2003 to 0.3900
in aggregate 25th February, 2013
49,248,078 – – – – 49,248,078 3rd May, 2004 3rd May, 2004 to 0.3900
2nd May, 2014
41,848,078 – – – – 41,848,078 19th May, 2005 19th May, 2005 to 0.3540
18th May, 2015
(iii) other employees 7,700,000 – – – – 7,700,000 10th August, 1998 10th August, 1998 to 0.3875
in aggregate 10th August, 2008
(iv) other participants 25,000,000 – – – – 25,000,000 10th August, 1998 10th August, 1998 to 0.3875
in aggregate 10th August, 2008
86,339,228 – – – – 86,339,228 26th February, 2003 26th February, 2003 to 0.3900
25th February, 2013
80,000,000 – – – – 80,000,000 3rd May, 2004 3rd May, 2004 to 0.3900
2nd May, 2014
108,000,000 – – – – 108,000,000 19th May, 2005 19th May, 2005 to 0.3540
18th May, 2015
697,744,234 – – – – 697,744,234
C.P
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POKPHAND CO. L
TD. / Interim Report 2007
24
CODE ON CORPORATE GOVERNANCE PRACTICES
The Company is committed to achieving high standards of corporate governance that properly
protect and promote the interests of all the shareholders and enhance corporate value and
accountability.
The Company has complied with all the code provisions prescribed in the Code on Corporate
Governance Practices as set out in Appendix 14 of the Listing Rules throughout the six months
ended 30th June, 2007, save for a deviation from code provision A.4.2.
This provision stipulates that every director, including one appointed for a specific term, should
be subject to retirement by rotation at least once every three years. The Company was incorporated
in Bermuda under the C.P. Pokphand Company Act, 1988 (the “Private Act”). Pursuant to paragraph
3(e) of the Private Act, the executive chairman of the Company shall not be subject to retirement
by rotation at each annual general meeting. In order to achieve the intended effect of this code
provision, Mr. Dhanin Chearavanont, the Executive Chairman, intends to voluntarily retire by
rotation in such manner and at such frequency as provided for other directors under the Bye-
Laws of the Company.
MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS
The Company has adopted the Model Code as the Company’s code of conduct for dealings in
securities of the Company by the directors. Having made specific enquiry of all directors, the
directors have complied with the required standard as set out in the Model Code throughout the
six months ended 30th June, 2007.
AUDIT COMMITTEE
The Audit Committee comprises the three independent non-executive directors of the Company.
The establishment of the Audit Committee serves to enhance corporate governance practice. The
principal duties of the Audit Committee include the review and supervision of the Group’s
financial reporting process and internal controls. The Audit Committee has reviewed the Group’s
unaudited financial results for the six months ended 30th June, 2007.
PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES
There was no purchase, sale or redemption of the Company’s listed securities by the Company or
any of its subsidiaries during the period under review.
By Order of the Board
Robert Ping-Hsien Ho
Director
Hong Kong, 25th September, 2007
As at the date of this interim report, the Board comprises twelve executive directors, namely Mr.
Sumet Jiaravanon, Mr. Dhanin Chearavanont, Mr. Thanakorn Seriburi, Mr. Meth Jiaravanont, Mr.
Anan Athigapanich, Mr. Damrongdej Chalongphuntarat, Mr. Robert Ping-Hsien Ho, Mr. Bai Shanlin,
Mr. Soopakij Chearavanont, Mr. Nopadol Chiaravanont, Mr. Benjamin Jiaravanon and Mr. Narong
Chearavanont, and three independent non-executive directors, namely Mr. Kowit Wattana, Mr.
Sombat Deo-isres and Mr. Ma Chiu Cheung, Andrew.
