May 27, 2010

Cherkizovo posts positive Q1 results

Russian meat processor Cherkizovo Group has announced its first-quarter financial results, recording a 29% year-on-year rise in revenue to US$268.0 million and a 32% increase in net profit to US$31.0 million.

The bottom line is up 33% year-on-year compared with a net profit of US$23.4 million for first quarter 2009, with adjusted EBITDA rising 28% to US$48.1 million.

Cherkizovo CEO Sergey Mikhailov on Wednesday (May 26) said local prices for pork and poultry have been rising strongly over the last couple of months, after falling in the first quarter of the year.

Mikhailov noted that poultry prices reduced in the first quarter of the year due to higher inventory stocking by producers in the fourth quarter of 2009, which was driven by an increased share of imports in the second half of the year. However, towards the end of the quarter poultry and pork prices recovered strongly, and this trend has continued in the second quarter.

Some analysts had expected poultry prices to rise at the start of 2010, when Russia banned poultry rinsed with a chlorine solution that is commonly used in the US. Until then, the US had supplied a large proportion of the chicken legs and thighs consumed in Russia.

Meanwhile, Mikhailov added that Cherkizovo was starting to see returns from large-scale production projects started during 2009, and that the pork division had achieved strong growth, with demand recovering for meat products.

He said that in the Poultry division, profitability returned to historical levels, as 2009 was characterised by unusually high pricing trends. Accordingly, he said the company achieved a 29% Gross Margin, and a 20% Adjusted EBITDA margin.

Additionally, the group accelerated the pace of investment in the division; progressing on two projects at our Bryansk and Penza clusters, which are expected to increase the group's poultry capacity by 40% once the sites are fully operational in 2012.