1. Export Limitation

To export chicken meat will face several limitations. It depends on the government policy of each country including tariff or non-tariff barriers i.e. hygienic standards. In this future, the hygienic standard will be widely used as a measure of trading barriers including ISO 9000, GMP, HACCP, Environment and Human Right, and Animal Welfare. The tariff barrier will less important because most countries are entering into the WTO system or the Free Trade Agreement in which the government will decrease import tariff and subsidy.

2. Quota System

2.1 In 2010, the Thai government set import quota on maize at 54,700 tons and the State-Run Public Warehouse Organization was the sole authorized importer. The import period was limited to during 1 March -2010 - 30 June 2010.

2.2 EU has implemented to use the new import quota system for cooked and raw frozen chicken products starting from 1 July 2550 onwards. Thailand has quotas on the cooked chicken in the amount of 160,033 tons.

3. Pricing

Feed mill business is involved with pricing policy for both the purchasing price of raw materials and the selling price of feed mill. For instance, the company must purchase soybean meal from the domestic market at the price not lower than the set price. The company also needs to enter the agreement with the Ministry of Commerce. For the selling price of feed mill, the company cannot adjust the selling price unless the Internal Trade Department, Ministry of Commerce Thailand provides the permission.

4. Foreign Exchange Rate

Thai Baht currency was dramatically appreciated of the year 2010, so it was directly impact on income and profit of our company.

2) Foreign Exchange Rate

Thai Baht currency was dramatically appreciated of the year 2009, so it was directly impact on income and profit of our company.

Feed Mill Business

Revenue from Sale

In 2010, the revenue was increased by 9.87 percent from previous year due to the increasing from animal feed sales volume. Land animal feed was increased 12,500 tons and aquatic animal feed was increased 2,200 tons.

Other Income

In 2010, the other income was reduced by 25.71 percent from previous year because the transportation fees which collected from related customers has been declined due to the new feed mill plant which located at Chonburi province is in the same area of related company’s chicken farm so the transportation distance shall be reduced.

Cost and Selling & Administrative Expense

The cost of goods sold in 2010 was increased by 5.11 percent because the total production of animal feed has been increased. The selling and administrative expenses were increased by 18.00 percent due to the increasing from sales volume, other expenses related to the selling such as transportation expense, promotion, and commission which computed by the sales volume of the customers, etc.

Profitability

The gross profit margin was increased from 10.25 percent to 14.13 percent in this year due to the increasing from animal feed sales volume. In 2010, the company had net profit in the amount of 867.89 million Baht or earning per share was 21.70 Baht whereas in 2009 the company had net profit in the amount of 538.96 million Baht or earning per share was 13.47 Baht.

Return on Equity

In 2010, the company had net profit in the amount of 867.89 million Baht or earning per share was 21.70 Baht. The Board of Directors was approved to pay 1.00 baht per share. However, rights to dividends are also be uncertain because it must wait for approval from shareholders’ meeting.

Grandparent Chicken Farm

Revenue from Sale

In 2010, the company had revenue from selling parent chicks increased by 18% from 2009 due to the increasing from the total production and sales and the selling price per unit in 2010 is higher than 2009.

Other Income

The other income in 2010 increased by 4.93 percent. It was inclined from the normal operation.

Cost and Selling & Administrative Expense

The cost of goods sold was increased by 4.20 percent that had the same direction with the increasing of income and the total production of parent chicks also was increased. For the selling and administrative expenses were increased by 13.90 percent from the normal operation.

Profitability

The gross profit margin of selling parent chicks was increased from 27.64 percent in 2009 to 41.63 percent in 2010 due to the increasing from selling parent chicks. The net profit in this year is 44.17 million Baht or earning per share was 2.21 Baht whereas in 2009 the company had profit in the amount of 28.36 million Baht or earning per share was 1.42 Baht.

Return on Equity

In 2010, The Company had net profit in the amount of 44.17 million Baht or earning per share was 2.21 Baht. The Board of Directors decided to omit dividend payment in this year. The dividend payment policy depends on the company’s performance.

Hatchery Farm Business

Revenue from Sale

In 2010, the revenue from sale increased by 25.71 percent because the sales volume was increased by 9.31 percent due to the expansion of the broiler farm of MKS which is the major customer that increased the sales volume of the day old chicks.

Other Income

In 2010, the other income was equal to year 2009. It was the normal transaction from the general operation.

Cost and Selling & Administrative Expense

The cost of goods sold in 2010 was increased by 24.90 percent which is higher in the same direction with the increasing of revenue from sales due to the total production of chicks has been increased. The selling and administrative expenses were increased in the amount of 16.74 million Baht or increased by 50.07 percent since in 2010, there was the loss from selling parent chicken retirement higher than in 2009 and it was the normal transaction from the general operation.

Profitability

The gross profit margin was higher from 5.08 percent in 2009 to 5.69 percent in 2010 because of the increasing in the sales volume. Therefore, the company had net profit in the amount of 10.85 million Baht or earning per share was 0.31 Baht whereas in 2009 the company had net profit in the amount of 9.38 million Baht or earning per share was 0.27 Baht.

Return on Equity

In 2010, the company had net profit in the amount of 10.85 million Baht or earning per share was 0.31 Baht. The Board of Directors decided to omit dividend payment in this year. The dividend payment policy depends on the company’s performance.

Broiler Farm Business

Revenue from Sale

In 2010, the revenue from sale increased by 9.82 percent because the selling quantity increased by 6.14 percent. The parent company had higher export volume resulting increased of selling quantity in year 2010. The company started to sell broiler to GFN (Thailand), the associated company of the parent company, in the fourth quarter. Moreover, the company also sold the excess amount of the DOC broilers to the outside market when the production capacity could not accommodate.

Other Income

In 2010, the other income increased in the amount of 12.25 million Baht due to the income from selling the water to GFN (Thailand). This transaction came from the normal operation.

Cost and Selling & Administrative Expense

In 2010, the cost of goods sold increased by 11.95 percent which is higher in the same direction with the increasing of revenue due to the increasing of the chicken meat production. The selling and administrative expenses were increased in the amount of 23.96 million Baht because in 2010, the company had higher sales volume that caused higher transportation cost. This transaction came from the normal operation.

Profitability

The gross profit margin was decreased from 3.69 percent in 2009 to 1.83 percent in 2010 because of the increasing in the cost was higher than the increasing of the income from selling. So, the company had net profit in the amount of 26.90 million Baht or earning per share was 0.49 Baht whereas in 2009, the company had net profit in the amount of 103.98 million Baht or earning per share was 1.89 Baht.

Return on Equity

In 2010, the company had net profit in the amount of 26.90 million Baht or earning per share was 0.49 Baht. The Board of Directors decided to omit dividend payment in this year because the company paid the interim dividend in the second quarter of year 2010 in amount of 1.95 Baht per share in accordance with the Board of Directors Meeting on July 9th, 2010. The total amount is 107.25 million Baht.

Evisceration Business and Chicken Processed Food

Revenue from Sale

The revenue from sale of the company in 2010 was increased by 4.14 percent due to the increasing of the sales was increased by 6.60 percent. The export quantity of Japan which is the major customer of the company was increased by 1.56 percent.

Other Income

In 2010, the other income increased in amount of 49.45 million Baht due to the profit from exchange rate in 2010 was higher than the previous year and it was the normal transaction from the general operation.

Cost and Selling & Administrative Expense

In 2010, the cost of goods sold increased by 6.96 percent because the utilities expense increased. The selling and administrative expenses were increased 30.82 million Baht or increased by 11.64 percent which came from increasing of export volume, the increasing of freight cost, and the increasing of the depreciation expense of the fixed assets

Profitability

In 2010, the gross profit margin decreased from 9.23 percent to 6.76 percent because of the increasing in the cost was higher than the increasing of the income from selling. The company had net profit in the amount of 410.14 million Baht or earning per share was 0.33 baht.

Return on Equity

In 2010, the company had net profit in the amount of 410.14 million Baht or earning per share was 0.33 Baht so, the Board of Directors was approved to pay 0.30 Baht per share however, rights to dividends are also be uncertain because it must wait for approval from shareholders’ meeting and the dividend payment policy is not more than 50% of net profit of Company’s separate financial statement after all deductions as required by law or by the Company, subject to GFPT and subsidiary companies’ cash flow, liquidity and future investment plans.

Processed Food Business

Revenue from Sale

The revenue from sale in 2010 was increased in amount of 15.84 million Baht or increased by 6.64 percent because sales volume especially sausages was increased in amount of 741 tons from 2009.

Other Income

In 2010, the company had more other income 0.04 million baht or 7.72% that came from general operation.

Cost and Selling & Administrative Expense

The cost of goods sold in 2010 increased by 4.20 percent same as the increasing from revenue from sales and the selling and administrative expenses were increased due to the higher expenses of the new stores.

Profitability

The gross profit margin increase from 7.17 percent in 2009 to 9.30 percent in 2010 due to the selling quantity increased. The company had net profit in the amount of 3.64 million Baht or earning per share was 9.11 Baht.

Return on Equity

In 2010, the company had net profit in the amount of 3.64 million Baht or earning per share was 9.11 Baht. The Board of Directors decided to omit dividend payment in this year. The dividend payment policy depends on the company’s performance.

Financial Position

1) Assets

As December 31st, 2010, the total assets of the Company equal to 9,215 million Baht. The current assets equal to 3,284 million Baht. Land, buildings, and equipment equal to 4,162 million Baht. The investment in associated company equal to 746 million Baht. Other investment and other non-current assets equal to 1,023 million Baht.

As December 31st, 2010, the assets increased from December 31st, 2009 by 13.23 percent which came from the increasing from the investment in the fixed assets.

2) Liquidity

2.1 Cash Flow

The cash flow provided from operation in 2010 was 1,506 million Baht. It derived from net profit in the amount of 1,163.45 million Baht. The cash used from investing activities was 1,254 million Baht decreased from the previous year in the amount of 82 million Baht due to the company had been invested in the GFPT Nichirei (Thailand) Company Limited as being joint-venture company in amount of 191 million Baht and purchased in fixed assets in the amount of 880 million Baht. For cash used from financing activities, the company had 272 million Baht and it used for pay dividend to shareholders. The cash and cash equivalent as December 31st, 2010 equal to 181.59 million Baht.

2.2 Liquidity Ratio

The liquidity ratio as of the consolidated financial statement as December 31st, 2010, was 2.62 time, Increased from December 31st, 2009 which was 1.31 time. The company expected it would not have any liquidity problems.

2.3 Payment Schedule of Short Term Loan Effects on Liquidity

In 2010, short-term loan was decreased 867 million Baht. Most of loans were in the form of short-term loan and loan from directors, the company is confident that the company can pay all debts on schedule.

3) Investment

3.1 Expenses from Investment

In 2010, the company had less investment than the previous year in the amount of 82 million Baht due to the investment in the fixed assets and the company has been invested in the new joint-venture company.

3.2 Future Investment

In 2010, the company still expands the production capacity from the last year on chicken farm and joint-venture company by using working capital, short-term and long-term loan from financial institutions and loan from directors and related persons.

4) Sources of Funds

4.1 Funds Structure

As December 31st 2010 The consolidated financial statement indicated that a debt to equity ratio was 0.71 : 1 which was the objective of the Company to retain the appropriate shareholding structure.

4.2 Equity

As December 31st, 2010, the equity of the Company was 5,331 million Baht, increased from the previous year by 19 percent which came from the increasing of the net income of this year.

4.3 Liabilities

As December 31st, 2010, the liabilities equal to 3,833 million Baht which consist of the liability without interest and the liability with interest equal to 824 million Baht and 3,009 million Baht, respectively. For the liability with interest, consist of short-term loans equal to 596 million Baht and long-term loans equal to 2,413 million Baht.

Long-term loans and short-term loans were in the form of baht currency only. The company had not any debts from foreign currency. The details of interest rate, payment schedule and collateral, please see in the notes to financial statements clause 22, 23, and 24.