OREANDA-NEWS. May 27, 2011.
Highlights
Revenues increased 14% on a rouble currency basis, and increased 16% to USD 308.2 million from USD 265.0 million for the first quarter of 2010, reported the press-centre of Cherkizovo Group.   

Adjusted EBITDA decreased 31% on a rouble currency basis, and 30% to USD 34.9 million from USD 49.6 million for the first quarter of 2010

Adjusted EBITDA margin decreased to 11%
 
Gross profit decreased 14% on a rouble currency basis, and decreased 12% to USD 64.6 million from USD 73.5 million for the first quarter of 2010

Group gross margin was 21%

Net income decreased 44% on a rouble currency basis, and decreased 42% to USD 18.4 million from USD 31.9 million for the first quarter of 2010

For the first quarter 2011 Net debt increased 3% on a rouble currency basis, and was USD 642.1 million.

The effective cost of debt remained at 2%.

Net income per share decreased 42%.

Business Developments
Cherkizovo Group has opened the poultry breeding facility, “Komarovka”, at its Penza cluster. The facility, which was built as part of Cherkizovo’s ongoing poultry capacity increase project in Penza, consists of 34 bird houses, with a combined capacity of almost 1.1 million broilers. 

Cherkizovo Group has opened a second line at the poultry breeding facility in its Bryansk cluster. It consists of 26 bird houses, with a combined capacity of almost 880,000 broilers. The bird houses will be populated using the Group’s own hatcheries, and equipped with state-of-the-art technologies that reflect the latest innovations and best practices in poultry keeping. 

Cherkizovo has reached an agreement to acquire 100% of Mosselprom - the diversified vertically-integrated agro-industrial group. Mosselprom’s production activities include the following: poultry, pork, feed production and grain businesses. Subsequently, the strategic acquisition was completed on 16th May, 2011.

Sergey Mikhailov, Chief Executive Officer of Cherkizovo Group, said: 
“The first quarter of 2011 was a very challenging period for all domestic producers including ourselves. This was due to a combination of especially low prices for our products caused by an increased level of imports late last year, and sharply rising input costs, as the full effect of increased grain costs impacted our Poultry segment.  However, while the majority of industry producers were operating at breakeven levels, Cherkizovo did manage to report USD 308.2 million in Group revenue and an Adjusted EBITDA of USD 34.9 million, while maintaining an 11% Adjusted EBITDA margin. Towards the end of the first quarter and going into the second quarter, poultry prices recovered, and this trend is continuing.

We are making solid progress in our large-scale projects to increase poultry capacity. 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 poultry sites in Bryansk and Penza. The Pork division is delivering volume growth including operations at acquired farms, while demand for our meat processing products has also remained strong.

Elsewhere, we have recently announced the start of a transformational project – the construction of a unique complex in the Lipetsk region, which will allow us to significantly increase production by 2016 and set industry trends in efficiency and product quality.

We have also completed the strategic acquisition of Mosselprom, a large, diversified vertically-integrated agro-industrial holding company that comprises poultry production and feed production, as well as land cultivation and cropping, and we expect strong production volume growth in poultry and pork, with significant synergies that will further enhance our performance. 
We remain broadly positive on Russian consumption, and, as the pricing environment improves, we expect consumption to remain generally favorable. This trend will be  supported by growing consumer confidence, reduced imports and increased costs from rising grain prices.

We also welcome the Government’s recent decision to offer producers direct subsidies to offset sharp cost increases, and to distribute grain from the intervention fund directly to regions that have suffered most. These measures combined will stabilise the market environment and allow domestic producers to continue developing quality local products, despite the difficult trading conditions. Moreover, the current grain harvest outlook is positive for Russia, which, we expect, will further stabilise input costs.

Overall, we expect that in the second half of the year we will return to normalized profitability levels, as cost pressures decrease; this will offset the negative impact of the performance in the first quarter. Accordingly, management is optimistic that we are on track to meet expectations for the full year.”