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Strong Performance in All Segments for Cherkizovo

by 5m Editor
12 August 2010, at 9:01am

RUSSIA - In its trading update for the fist half of 2010, integrated meat company, Cherkizovo reports strong performance across all sectors, with reduced imports boosting demand for Russian products. The CEO also welcomed the government's ban on grain exports to mitigate the effects of the severe drought in the country.

Cherkizovo OJSC, one of Russia's leading integrated and diversified meat producers, has issued a trading update for the first half of 2010. All prices quoted are exclusive of VAT.

Poultry Division

Total sales volumes in the poultry division in the first half of 2010 increased by eight per cent to approximately 99,860 tonnes of slaughter weight compared to approximately 92,840 tonnes in the first half of 2009.

Prices for Cherkizovo poultry sales increased by five per cent in US dollar terms from $2.19 per kilo in the first half of 2009 to $2.30 in the first half of 2010. Prices in rouble (RUB) terms decreased by four per cent from RUB72.32 per kilo in the first half of 2009 to RUB69.11 in the first half of 2010. This reflected normalisation of prices from the unusually high levels in 2009.

The start of the third quarter saw an upward trend in prices for poultry sales, as the summer holiday season progresses. Going forward, the Company expects poultry prices to remain relatively strong for the remainder of the financial year.

Pork Division

First half sales volumes in the pork division increased by an impressive 75 per cent to approximately 37,160 tonnes of live weight, this compared favourably to approximately 21,250 tonnes in the first half of 2009. This growth reflected increased production as Cherkizovo's new farms start to reach their forecasted target levels.

Prices increased by five per cent in dollar terms from $2.28 per kilo live weight in the first half of 2009 to $2.40 in the first half of 2010. In rouble terms, prices decreased by four per cent from an exceptionally high level of RUB75.41 per kilo in the first half of 2009 to RUB72.07 in the first half of 2010.

The third quarter has so far seen stable prices in the division and Cherkizovo expects them to remain largely flat going forward.

Meat Processing Division

In the first half of 2010, the Company witnessed a recovery in demand for the division's products, as sales volumes in the meat processing segment increased by eight per cent to approximately 66,200 tonnes from approximately 61,550 tonnes in the first half of 2009.

Division prices in dollar terms increased by 13 per cent from $3.37 per kilo in the first half of 2009 to $3.81 in the same period of 2010. Average prices in roubles increased by three per cent from RUB111.42 in the first half of 2009 to RUB114.66 in the first half of 2010.

Commenting on the performance, Sergey Mikhailov, CEO of Cherkizovo Group said: "In the first half of 2010, Cherkizovo performed strongly across all segments, reflecting the increased demand for our products, primarily driven by the decrease in imports and subsequent demand for high quality domestic meat. To date, the adverse weather conditions and fires in Central Russia, have not affected any of Cherkizovo's poultry or pork farms. Accordingly, we expect to achieve targeted levels of production for 2010.

"In the poultry division, we are seeing the benefits from last year's large-scale projects to increase capacity, and we also expect to start launching new production sites in the second half of the year. The Pork division has enjoyed significant growth and we are pleased with progress to date. We are now concentrating on a rapid volume growth phase as we leverage our state of the art production advantages. Meat processing continues to see demand returning to pre-crises levels as consumer confidence continues to improve.

"Poultry and pork pricing in the first half of the year increased to healthy levels towards the end of the second quarter, and we expect the pricing environment for our products to remain positive throughout the current financial year as the demand for quality domestic meat further grows.

"While the unusual weather conditions in Central Russia have produced a worse-than-expected grain harvest, we welcome the measures taken by the Government to mitigate the impact. In particular, the ban on grain exports and expected sale of grain from the intervention fund should lead to a stabilisation of prices in the domestic market, where prices are at the time mostly speculative. However, possible aggressive grain price increases, which from an operations perspective will predominantly affect the fourth quarter of this year, may also lead to domestic meat price inflation. In the event of sustained extraordinary grain price increases, we reasonably anticipate that the Government will intervene with additional subsidy measures for grain and livestock producers," concluded Mr Mikhailov.