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Mixed Trading Picture for Cherkizovo in 2009

by 5m Editor
3 February 2010, at 9:27am

RUSSIA - Cherkizovo OJSC has issued a trading update ahead of its results for the year ended 31 December 2009, which will be reported in April 2010. Output of pork was up by more than one-third as the result of the establishment of new farms. Poultry meat output was down slightly, and while meat processing volume was down 10 per cent, the division experienced a price increase.

Poultry division

During 2009, Cherkizovo focused on improving the efficiency of its poultry operations by decreasing the density of breeding. While this has improved production indicators, total sales volumes in the poultry division in 2009 remained largely flat, slightly decreasing by two per cent to approximately 184,300 tonnes of slaughter weight compared to 187,000 tonnes in 2008.

The pricing environment for poultry products in Russia remained stable throughout the year, mostly due to a 30 per cent decrease in poultry import quotas. Prices for Cherkizovo poultry sales increased by 16 per cent from 63.87 roubles (RUB) per kilo in 2008 to RUB74.33 per kg in 2009 (excluding VAT). As a result of the 28 per cent depreciation of the rouble over the period, prices in dollar terms decreased by nine per cent from $2.57 per kg in 2008 to $2.34 in 2009 (excluding VAT).

Pork division

During the year, Cherkizovo's new pork farms in Lipetsk and Tambov operated at close to full capacity, and sales volumes in the pork division in 2009 increased by 38 per cent to approximately 53,800 tonnes of live weight, compared to approximately 39,000 tonnes in 2008.

The pricing environment for pork products in Russia was broadly favourable, although towards the end of the year increases in live imports exercised some downward pressure on selling prices. Prices for Cherkizovo pork sales in rouble terms increased by six per cent from RUB68.36 per kg in 2008 to RUB72.12 in 2009 (excluding VAT). In dollar terms, prices decreased by 17 per cent from $2.75 per kg of live weight in 2008 to $2.27 in 2009 (excluding VAT).

Meat processing division

In 2009, due to decreasing volumes of lower-priced products and lower consumption in the regions of Russia sales volumes in the meat processing segment decreased by 10 per cent to approximately 130,000 tonnes.

Average prices increased by 10 per cent from RUB103.86 in 2008 to RUB113.80 in 2009 (excluding VAT), mostly due to an increase in imported raw meat prices. Division prices in dollar terms decreased by 14 per cent from $4.18 per kg in 2008 to $3.59 in 2009 (excluding VAT).

Commenting on the performance Sergei Mikhailov, CEO of Cherkizovo Group said: "Despite the tough economic environment in 2009 Cherkizovo has continued investing in production growth. These investments have concentrated on large-scale projects to increase poultry capacity, which will provide significantly higher output from 2011. The pork division has continued to deliver its volume growth in line with management's expectations. Accordingly, the management of the Group is satisfied with the Company's overall performance and anticipates that the Group will report strong 2009 results, reflecting the impact of favourable rouble pricing, and continued sales momentum for our products.

"In 2010, we anticipate growth across our pork and poultry divisions, as our new pork operations reach full capacity and we start increasing poultry volumes at our Bryansk poultry cluster towards the end of the year. The Group expects the pricing environment for our products to remain positive driven by a decrease in imports and growing domestic demand. The management is confident that the Group will continue to focus on providing efficiency increases and delivering against our strategy."