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Cherkizovo Reports Excellent Performance in Q1

24 May 2012

RUSSIA - Cherkizovo Group reports a 26 per cent increase in gross margins in the first quarter of 2012 compared to 21 per cent in the first quarter of 2011.

Sergey Mikhailov, Chief Executive Officer of Cherkizovo Group, said: “In the first quarter of 2012 we delivered an excellent performance, in line with our targets. Net income showed a record 114 per cent growth, driven by strong performance in the poultry segment, high pork prices, the efficient restructuring of the meat processing division and the decrease in grain prices. The Group achieved a 16 per cent increase in revenue and growth in Adjusted EBITDA of 74 per cent, resulting in a healthy 17 per cent Adjusted EBITDA margin.

In the Poultry segment, we delivered 36 per cent sales growth, driven both by the strength of our existing brands and incremental volumes from Mosselprom, acquired in 2011. From an operational point of view, we have made solid progress in our large-scale projects to increase poultry capacity.

The Pork segment benefited from high pork prices throughout the whole quarter. We continued to expand our capacity, launching rearing facilities at our modern complexes in Lipetsk, Tambov and Voronezh. These complexes will reach full capacity in 2013, further strengthening Cherkizovo’s strong position in the Russian pork market.

The Meat Processing segment delivered positive pricing and profitability trends while volumes were slightly lower. Our recently acquired Kaliningrad meat processing plant is now operating at full capacity and adding to the margins of the segment.

As for the pricing environment, we see that poultry prices are growing very slowly and do not expect significant price growth in 2012; we remain confident about the future of the poultry market and continue to invest in poultry production. In the Pork segment, prices were at historically high levels, supporting healthy margins for the Group. In the Meat Processing segment, prices continued to grow above inflation, representing strengthening consumer confidence and a positive shift in Cherkizovo’s product portfolio towards a larger share of value-added products."

Pork Division

Sales volumes in the Pork division in the first quarter of 2012 increased by 12 per cent to approximately 22 660 tonnes of live weight, compared to approximately 20 220 tonnes in the first quarter of 2011.

In dollar terms, prices for pork sales increased by 4 per cent from $2.57 per kg of live weight in the first quarter of 2011 to $2.66 per kg of live weight in the first quarter of 2012 (excluding VAT). Compared to the price in the fourth quarter of 2011 of $2.66 per kg, the price in the first quarter of 2012 was flat.Prices in rouble terms increased by 7 per cent from 75.27 roubles per kg in the first quarter of 2011 to 80.53 roubles per kg in the first quarter of 2012 (excluding VAT). Compared to the price in the fourth quarter of 2011 of 82.97 roubles per kg, the price in the first quarter of 2012 decreased by 3 per cent.

Total sales in the Pork division increased 7 per cent to US$62.1 million (1Q2011: US$58.0 million). Gross Profit increased 32 per cent to US$24.6 million (1Q2011: US$18.6 million) while Gross Margin increased to 40 per cent (1Q2011: 32 per cent).

Operating expenses as a percentage of sales increased to 10 per cent from 7 per cent in the first quarter of 2011. Operating Income of the division increased 28 per cent to US$18.6 million (1Q2011: US$14.6 million), while Operating Margin was 30 per cent (1Q2011: 25 per cent). Profits in the Pork division increased 28 per cent to US$18.1 million (1Q2011: US$14.1 million).

Poultry Division

Sales volumes in the Poultry division for the first quarter of 2012 increased by 42 per cent to approximately 75 860 tonnes of sellable weight compared to approximately 53 570 tonnes for the first quarter of 2011, reflecting the contribution from the newly launched sites at Bryansk and sales by Mosselprom, acquired in May 2011.

Prices for poultry in dollar terms decreased by 1 per cent from $2.43 per kg in the first quarter of 2011 to $2.40 per kg in the first quarter of 2012 (excluding VAT). Compared to the price in the fourth quarter of 2011 of $2.36, prices in the first quarter of 2012 were nearly flat.

Prices in rouble terms increased by 2 per cent from 71.07 roubles per kg in the first quarter of 2011 to 72.50 roubles per kg in the first quarter of 2012 (excluding VAT). Compared to the price in the fourth quarter of 2011 of 73.74 roubles per kg, the price in the first quarter of 2012 decreased by 2 per cent.

Total sales in the Poultry division increased 36 per cent to US$189.3 million (1Q2011: US$139.4 million). Gross Profit increased 82 per cent to US$47.8 million (1Q2011: US$26.2 million), and divisional Gross Margin increased to 25 per cent (1Q2011: 19 per cent).

Operating expenses as a percentage of sales remained flat at 13 per cent. Operating income of the division increased by 209 per cent to US$23.6 million (1Q2011: US$7.6 million), and operating margin increased to 12 per cent (1Q2011: 5 per cent). Profit in the Poultry division increased by 219 per cent to US$20.1 million (1Q2011: US$6.3 million).

Meat Processing Division

Sales volumes decreased by 12 per cent to approximately 29 115 tonnes from 33 200 tonnes for the first quarter of 2011. The decrease was predominantly due to the closure of a high-cost slaughtering facility in southern Russia (Labinsk).

Prices in dollar terms increased by 11 per cent from $4.30 per kg in the first quarter of 2011 to $4.75 per kg in the first quarter of 2012 (excluding VAT). Compared to the price in the fourth quarter of 2011 of $4.57, the price in the first quarter of 2012 increased by 4 per cent.

Prices in rouble terms increased by 14 per cent from 125.75 roubles per kg in the first quarter of 2011 to 143.82 roubles per kg in the first quarter of 2012 (excluding VAT). Compared to the price in the fourth quarter of 2011 of 142.74 roubles per kg, the price in the first quarter of 2012 stayed almost flat.

Sales in the Meat Processing division decreased 5 per cent to US$130.9 million (1Q2011: US$138.4 million). Divisional Gross Profit increased 10 per cent to US$21.9 million (1Q2011: US$19.9 million), while Gross Margin increased from 14 per cent to 17 per cent. Operating expenses as a percentage of sales increased to 14 per cent from 12 per cent in the first quarter of 2011. Divisional profit increased 221 per cent to US$1.3 million (1Q2011: US$0.4 million).

ThePigSite News Desk



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