September 4, 2013

 

Cherkizovo's H1 2013 profits up 5% to US$780 million

 

 

In the first half of 2013, Cherkizovo has seen its revenue rise by 5% to US$779.6 million from US$746 million in the first half of 2012.

 

However, revenue for the second quarter fell by 3% to US$396.4 million compared to US$410.5 million for the same period in 2012.

 

Gross profit fell by 29% to US$150.6 million for the half year from US$212.6 million in the first half of 2012. In the second quarter of the year gross profit fell by 30% to US$85.8 million in from US$121.7 million for the second quarter of 2012.

 

The group's gross margin decreased to 19.3% from 28.5% in the first half of 2012 and in the second quarter of 2013 gross margin decreased to 21.6% from 29.7% in 2012.

 

Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) fell by 53% to US$69.3 million in the half year from US$148.5 million in the first half of 2012. Adjusted EBITDA also fell by 55% to US$40.7 million in the second quarter of the year from US$90.2 million for the same period of 2012.

 

The company said there was a net profit decrease of 91% to US$9 million in the first half of 2013 compared to US$95.5 million in the first half of 2012. Net profit fell by 84% to US$9.4 million in the second quarter of 2013 from US$58.3 million in 2012.

 

Sergei Mikhailov, Cherkizovo CEO, said, "We faced a very challenging environment in the first half of 2013. Grain prices reached all-time highs in February and pork prices were very low in the first quarter, these factors having an impact on Cherkizovo's profitability in the first and second quarters. However, thanks to its diversified, vertically integrated structure, the company was able to profit off the meat processing division, where margins reached historic highs."

 

Mikhailov also said that the market environment began to improve significantly in the second quarter. While poultry prices remained relatively depressed, pork prices started to rebound at the beginning of the BBQ season in early May. Due to the market deficit caused by import restrictions and the spread of African swine fever in many Russian regions, pork prices continued to increase throughout the summer, reaching more than RUB70/kilogramme (US$2). At the same time, grain prices started to decline due to the new harvest, dropping by more than half. However, it is clear that the much more favourable combination of low grain and relatively healthy pork prices will take some time to show up in their financial statements.

 

The company has seen three new pork complexes in the Lipetsk, Tambov and Voronezh regions, launched in 2012, go fully operational and working at full capacity, resulting in a significant increase in pork production volumes and higher production efficiency.

 

Renovation of a semi-cooked meat products facility began at the Cherkizovsky Meat Processing Plant in Moscow. The new facility will produce semi-cooked meat products under the popular Cherkizovsky brand. The launch is expected this autumn," said Mikhailov.

 

Renovation of a slaughterhouse at the Penza Meat Processing Plant got under way. Renovation started at Ozherelie feed mill in the Moscow region; Renovation at Kamenka feed mill in the Penza region to be completed in autumn 2013.

 

Operational land bank of the Grain Division was increased to 40,000 hectares compared to approximately 35,000 hectares in 2012. By the date, the Group harvested more than 110,000 tonnes of grain, demonstrating strong yields of 5.1 tonnes per hectare for wheat and 3.3 tonnes per hectare for barley.

 

Construction started of the Tambov Turkey farm, a joint-venture between Cherkizovo Group and Grupo Fuertes (Spain). The farm will be operational in 2015. Cherkizovo Group acquired Dankov meat processing plant in the Lipetsk region.