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Strong Performance from Cherkizovo

by 5m Editor
21 October 2009, at 9:32am

RUSSIA - Cherkizovo Group, one of Russia’s leading integrated and diversified meat producers, saw a strong performance and improvement in margins despite the challenging economic conditions and lower consumer spending in the first six months of the year.

Net income nearly doubled on a ruble currency basis, and increased by 39 per cent to $50.3 million from $36.3 million for the same six months in 2008.

Adjusted EBITDA increased 52 per cent on a rouble currency basis, and 10 per cent to US $80.5 million from $73.1 million for the same six months of 2008.

Adjusted EBITDA margin improved significantly to 18 per cent compared to 13 per cent in the six months of 2008.

Gross profit increased by 26 per cent on a ruble currency basis, and decreased 9% to $128.4 million from $140.5 million driven by ruble devaluation.

Significant improvement in Group gross margin to 28 per cent from 25 per cent in 2008.

Revenues increased 15 per cent on a rouble currency basis year-on-year, and decreased 17 per cent to $459.3 million from $554.0 million for the six months of 2008.

Net debt decreased 10% on a rouble currency basis, and decreased 33 per cent to $436.2 million.

Sergey Mikhailov, Chief Executive Officer of Cherkizovo Group, said: “The Company continues to make solid progress against its stated strategy, despite the particularly challenging domestic and international operating environment. Cherkizovo achieved significant margin improvement, driven by the Group’s focus on improving operating efficiencies.

"While in constant currency terms, the performance has been exceptionally strong, with a material growth in Gross profit of 26 per cent, Adjusted EBITDA of 52 per cent, and Net Income of 92 per cent, the dramatic depreciation of the ruble against the US dollar in the first six months of the year has had a significant translation impact on our reported numbers.

"The Company’s poultry division enjoyed a favourable pricing environment, supported by a lower grain price, and continued to gain integration benefits from OJSC Kurinoe Tsarstvo. These factors combined to produce a record Gross margin of 35 per cent and Adjusted EBITDA margin of 27 per cent. The exceptional performance contributed significantly to the overall improvement in the Company’s Adjusted EBITDA margin.

"Production volumes in the Company’s pork division continued to increase in the first six months of 2009, as the new capacity gathers pace. This together with a favourable pricing environment in the first half enabled us to sustain strong divisional margins for the first half of the year. We anticipate further volume gains in the second half of the year.

"In the meat processing division the Company continued to see decreased sales volumes of lower-priced, lower-margin products, and this together with lower consumption in the regions of Russia due to the challenging economic environment affected the performance of the division.

"Overall, the Company’s vertically-integrated business model proved its strength and enabled us to improve performance in a tough economic environment. Looking forward the Group will continue to leverage improving efficiencies and capacity levels to drive results. While we anticipate the pricing environment to remain largely favourable for Cherkizovo’s products in the second half of the year, we will continue to see some pressure on consumer consumption. However, we remain confident that the Group will continue to make good progress and deliver against its stated strategy in the course of the financial year."