May 25, 2011

Cherkizovo's first quarter net income decreases on input cost hikes

Russian meat processor Cherkizovo saw its net income decline during the first quarter of 2011 as it was hit by low selling prices and a sharp increase in input costs.

As of May 24, the group posted a 44% decline in net income to RUB537.2 million (US$18.9 million), despite sales increasing 14% to RUB9.02 billion (US$0.32 billion).

CEO Sergey Mikhailov insisted the first quarter was "a very challenging period for all domestic producers" in Russia.

"This was due to a combination of especially low prices for our products caused by an increased level of imports late last year, and sharply rising input costs, as the full effect of increased grain costs impacted our poultry segment."

However, he added that towards the end of the first quarter and going into the second quarter, "poultry prices recovered and this trend is continuing".

Mikhailov said the group is making "solid progress" in its projects to increse poultry capacity. "This is already reflected in our sales volumes for the poultry division, and we are on track to provide significantly higher output from 2011, which is also supported by our recent launch of the poultry sites in Bryansk and Penza."

He said Cherkizovo's pork operations were delivering volume growth including operations at acquired farms, "while demand for our meat processing products has also remained strong".