October 10, 2008

Russian meat processor Cherkizovo's net profit in the first half of 2008 increased 66 percent to US$36.3 million, as pork and poultry production doubled to offset higher grain prices.

The company's first half turnover rose 63 percent on-year to US$559.2 million, while EBITDA grew 64 percent to US$72.3 million. However, the gross margin fell 3 percent on-year to 25 percent.

Despite government support and operational efficiencies, rising grain prices in the first half of 2008 have pressurised margins, according to Cherkizovo chief executive Sergei Mikhailov.

Pork sales rose soared 133 percent to US$54 million in the first half of 2008. Cherkizovo said output increased over 90 percent as it opened a new pig-breeding facility in the Lipetsk region. The pork division also benefited from Russian pork prices, which rose 23 percent on-year.

Poultry sales doubled in the first half, largely due to Cherkizovo's purchase of poultry firm Chicken Kingdom. Poultry revenues surged 137 percent to US$247.3 million. However, poultry prices remained stagnant during the period due to competition from cheaper imports from the US and Brazil, Cherkizovo said.

Mikhailov said the first half of the year accounts for 40-45 percent of annual results and that he was confident of strong full-year performance.

"Some key commodity price pressures appear to be abating," he said.