November 3, 2010

Cherkizovo's poultry sales volume climbs 6% on-year

For the first nine months of 2010, total sales volumes in Cherkizovo's poultry division rose to 146,830 tonnes of slaughter weight compared with about 138,920 tonnes on-year, stated the company.

Prices for Cherkizovo poultry sales increased by 3% in dollar terms from US$2.27 per kg for the first nine months of 2009, to US$2.33 per kg for the first nine months of 2010 (excluding VAT). The beginning of the fourth quarter saw an upward trend in prices for poultry sales, although increasing incoming poultry imports may affect domestic prices towards the end of this year and start of 2011.

Sales volumes in the pork division increased by an impressive 51% to approximately 53,900 tonnes of live weight over the period, compared with approximately 35,570 tonnes for the first nine months of 2009. This growth reflected increased production as Cherkizovo's new farms start to achieve their forecasted target levels of output.

Prices increased by 4% in dollar terms from US$2.32 per kg of live weight for the first nine months of 2009 to US$2.41 per kg of live weight for the first nine months of 2010 (excluding VAT). During the remainder of the year we expect prices to remain mostly flat.

In 2010, the Company has witnessed a recovery in demand for the division's products, as sales volumes in the meat processing segment increased by 8% in the period to approximately 102,870 tonnes from approximately 95,370 tonnes for the first nine months of 2009.

Prices in dollar terms increased by 10% from US$3.47 for the first nine months of 2009 per kg to US$3.82 per kg for the first nine months of 2010 (excluding VAT).

Sergey Mikhailov, CEO of Cherkizovo Group said, "For the first nine months of 2010 Cherkizovo performed strongly across all segments, reflecting the increased demand for our products, primarily driven by lower imports and a consequent requirement for high quality domestically sourced meat. Accordingly, we expect to achieve targeted levels of production for 2010. So far this year, inflation for meat products in Russia has been relatively low compared with other products in the consumer food basket. At present the operating environment remains challenging, as a result of the worse than expected grain harvest and subsequent grain shortage. We are now witnessing a short-term effect of oversupply of meat in the market as less efficient producers and individual households are cutting down livestock, creating a temporary downward pressure on selling prices. However, in the medium term these actions will potentially lead to a shortage of supply and to more aggressive meat price inflation in 2011."