May 15, 2012

Cherkizovo joint ventures with Grupo Fuertes on turkey meat production

A joint venture has been announced between Cherkizovo OJSC and Spain's Grupo Fuertes to launch a turkey meat production in Tambov region of Russia which will be operational in 2014 with more than EUR100 million (US$128 million) invested in the development.

The Board of Directors of Cherkizovo approved the joint venture between Cherkizovo Group and Grupo Fuertes on May 10, 2012.

Cherkizovo and Grupo Fuertes will develop a large scale turkey meat complex on a 5,000-hectare site in the Tambov region of Russia. The new complex will be launched in 2014, with full capacity being reached in 2015.

The annual capacity is expected to be 25,000-30,000 tonnes of turkey meat, and this may increase to 50,000 tonnes in the medium term. Once achieved, this would make Cherkizovo the market leader in the fast growing and profitable Russian turkey meat market.

The total planned investment is RUB4.5 billion (US$148 million) (including VAT), which is equivalent to over EUR100 million (US$128 million) at current exchange rates. The project will be financed from Cherkizovo and Grupo Fuertes's existing funds, and through bank loans. The Tambov regional administration has agreed to provide the necessary infrastructure for the construction of the complex.

Turkey consumption in Russia exceeds 100,000 tonnes a year and has grown dynamically over recent years. In 2010 consumption grew by 20% compared to 2009. Industrial production over the same period grew by 46%. The share of imported turkey meat into Russia has been decreasing constantly and today imports account for approximately 30% of the market.

Per capita consumption of turkey in Russia is only 0.68 kilogramme per annum, much lower than in developed countries. For example annual per capita consumption is approximately seven kilogrammes and four kilogrammes in the USA and EU, respectively.

According to nutritionists, turkey meat is high in B group vitamins, including B3 (PP). Turkey meat also provides healthy microelements including zinc, magnesium, phosphorus, potassium and iron. 100 grams of turkey provides half of the daily human dietary requirements for protein.

Commenting on the joint venture, Sergey Mikhailov, Cherkizovo's CEO, said: "Cherkizovo is already the largest agro industrial group in Russia, and by launching this new project with Grupo Fuertes, we will further strengthen our leading positions and provide customers with a new high quality and healthy meat product. Consumption of turkey has shown significant growth in Russia and we expect to soon be among the largest turkey suppliers in the country. Grupo Fuertes has many years of experience that will ensure the highest product standards and quality control - we look forward to working with them on this joint venture. In addition, the proximity of the turkey production complex to our existing meat processing facilities will provide substantial synergy benefits, and our large-scale distribution network will enable rapid and efficient delivery of new products to the markets of Central Russia".