Cherkizovo OJSC, one of Russia's leading integrated and diversified meat producers, has issued a trading update for the first quarter of 2011.

Poultry division

Sales volumes in the Poultry division in the first quarter of 2011 increased by a robust 15 per cent to approximately 53,570 tonnes of saleable weight compared to approximately 46,570 tonnes for the first quarter of 2010, reflecting the contribution from the newly launched sites at Bryansk.

Prices for poultry sales in US dollar terms increased by five per cent from $2.32 per kg in the first quarter of 2010 to $2.43 in the first quarter of 2011 (all values reported exclude VAT). Compared to the price in the fourth quarter of 2010 of $2.45, prices in the first quarter of 2011 were almost flat.

Prices in rouble terms increased by three per cent from 69.20 roubles (RUB) per kilo in the first quarter of 2010 to RUB71.07 in the first quarter of 2011. However, compared to the price in the fourth quarter of 2010 of RUB75.15 per kg, the price in the first quarter of 2011 decreased by five per cent, reflecting pressure from higher inventories caused by a larger share of imports entering Russia in the fourth quarter. However, prices in April 2011 have been on an upward trend, and the Company anticipates this to continue through the second quarter of the year, given the considerable reduction in poultry import quotas, as well as meat price inflation resulting from rising input costs.

Pork division

Sales volumes in the Pork division in the first quarter of 2011 increased by five per cent to approximately 20,220 tonnes of live weight, compared to approximately 19,190 tonnes in the first quarter of 2010.

In US dollar terms, prices for pork sales increased by 12 per cent from $2.29 per kg of live weight in the first quarter of 2010 to $2.57 in the first quarter of 2011. Compared to the price in the fourth quarter of 2010 of $2.33 per kg, the price in the first quarter of 2011 increased by 10 per cent.

Prices in rouble terms increased by 10 per cent from RUB68.59 per kg in the first quarter of 2010 to RUB75.27 in the first quarter of 2011. Compared to the price in the fourth quarter of 2010 of RUB71.61 per kg, the price in the first quarter of 2011 increased by five per cent. The pricing environment for pork products in Russia at the end of 2010 and beginning of 2011 was negatively affected by a larger than usual reduction of livestock by smaller and less efficient producers and households, and the Company expects it to recover in the second quarter as the summer season progresses.

Meat Processing division

Sales volumes increased by eight per cent to approximately 33,200 tonnes from 30,790 tonnes for the first quarter of 2010.

Prices in US dollar terms increased by 13 per cent from $3.80 per kg in the first quarter of 2010 to $4.30 in the first quarter of 2011. Compared to the price in the fourth quarter of 2010 of $4.08, the price in the first quarter of 2011 increased by five per cent.

Prices in rouble terms increased by 11 per cent from RUB113.71 per kg in the first quarter of 2010 to RUB125.75 in the first quarter of 2011. Compared to the price in the fourth quarter of 2010 of RUB125.37 per kg, the price in the first quarter of 2011 remained flat.

CEO's comment

Commenting on the performance, Sergei Mikhailov, CEO of Cherkizovo Group, said: "We are making solid progress in our large-scale projects to increase poultry capacity, and this is already reflected in our sales volumes for the poultry division, and we are on track to provide significantly higher output from 2011, which is also supported by our recent launch of the second site in Bryansk. The Pork division is delivering its volume growth in line with expectations, including operations at the acquired farms, while demand for our meat processing products has also remained strong.

"In the first quarter of 2011, we witnessed weaker pricing trends in poultry sales resulting from higher imports in the previous period which led to stocking inventories by the producers and lower than expected price inflation despite sharply rising costs. Looking ahead, we anticipate the pricing environment for our products to recover towards the second half of the year supported by expected growth in meat consumption, reduced imports and rising costs resulting from grain price increases, as well as by a shortage of supply driven by the reduction of stock. Management is confident that the Group will continue to focus on providing efficiency increases and delivering against its strategy," concluded Mr Mikhailov.