Drop in Value of Ruble Hits Cherkizovo’s Revenue04 June 2014
RUSSIA - Cherkizovo Group, Russia’s largest meat and feed producer, saw revenue fall by two per cent to US$376.6 million from $383.0 million in the first quarter of the year due mainly to the weakening of the Russian ruble against the US dollar.
Gross profit increased by 48 per cent to $95.1 million from $64.4 million in the quarter and gross margin increased to 25 per cent from 17 per cent.
Adjusted EBITDA doubled to $56.2 million frm $28.4 million.
Net Profit in the quarter was $25.0 million compared to a net loss of $600,000 in the same period in 2013.
During the quarter the Cherkizovo Group acquired LISKO Broiler in the Voronezh region, one of the country’s largest poultry producers.
The deal is based on the enterprise value of approximately RUB 5 billion. As a result of the acquisition, Cherkizovo increased its market share by 2 p.p. to 13 per cent, making an important step to the poultry market leadership.
The operational land bank of the Grain Division was increased to 58,000 hectares as compared with 40 000 hectares in 2013.
The Group invested in modern high-tech agricultural equipment in order to promote the efficiency of the grain segment and expects a harvest of approximately 250 thousand tonnes of grain in 2014.
The Cherkizovo Group launched case-ready production line at Cherkizovsky Meat Processing Plant in Moscow in the period.
The line allows for 100 tonnes of ready-to-cook meat products to be produced per day.
Sergei Mikhailov, Cherkizovo CEO, said: “Cherkizovo demonstrated very strong results in the first quarter. The Company’s revenue increased by 13 per cent in RUB, and Adjusted EBITDA more than doubled. We can definitely say that after a very challenging 2013, the Group returned to a strong profitability.
“The market environment was quite favourable throughout the quarter. Grain prices were relatively stable, while poultry meat and pork prices started to increase. Due to a shortage on the pork market and stoppage of imports, growth of live hog prices was very rapid starting in March. As a result, Cherkizovo Group, which completed its long-term investment programme in the pork division last year, could gain a strong financial return from these investments.
“Once again, we benefited from the Company’s diversified structure. The rapid growth of profit in the pork division compensated many times over for the inevitable pressure on margins in the meat processing division. While many meat processors are facing difficulties as a result of the shortage on the pork market, Cherkizovo Group is able to supply its meat processing division with high quality raw meat thanks to its high degree of the vertical integration.
“The acquisition of Lisko Broiler that we announced in the first quarter was a milestone for our business. Cherkizovo Group continued to consolidate the Russian meat market and made a major step towards market leadership. The transaction was made at a very attractive multiple which is beneficial for our shareholders, and we expect to have a noticeable synergy effect starting this year.”
ThePigSite News Desk