OREANDA-NEWS. December 08, 2011. Cherkizovo Group (LSE: CHE), one of Russia’s leading integrated and diversified meat producers, announces third quarter and nine months unaudited financial results for the period ended 30 September 2011, reported the press-centre of Cherkizovo Group.

Highlights
Strong organic volume growth and solid financial performance

Revenues increased 24% to USD 1078.6 million from USD 867.5 million for the nine months of 2010, and increased 18% on a rouble currency basis. Revenues increased 32% to USD 389.2 million in the third quarter of 2011 from USD 294.7 million for the third quarter of 2010, and increased 25% on a rouble currency basis for the same period

Adjusted EBITDA increased 6% to USD 177.9 million from USD 167.7 million for the nine months of 2010, and increased 1% on a rouble currency basis. Adjusted EBITDA increased 32% to USD 72.2 million from USD 54.7 million in the third quarter of 2010, and increased 25% on a rouble currency basis

Adjusted EBITDA margin was 17%, down from 19% for the nine months of 2010. Adjusted EBITDA margin in the third quarter was unchanged from the same period of 2010 at 19%, reflecting a healthy profitability level.

Gross profit increased 11% to USD 270.1 million from USD 243.5 million for the nine months of 2010, and increased 6% on a rouble currency basis. Gross profit in the third quarter increased 25% to USD 100.4 million from USD 79.9 million, and increased 19% on a rouble currency basis.

Group gross margin was a robust 25% for the nine months and 26% for the third quarter.

Net income decreased 1% to USD 108.4 million from USD 110.0 million for the nine months of 2010, and decreased by 6% on a rouble currency basis. Net income in the third quarter increased 18% to USD 42.6 million from USD 35.9 million, and increased 12% on a rouble currency basis.

As of 30 September 2011 Net debt was USD 709.4 million.

The effective cost of debt decreased to 2.3% from 2.5% for the nine months of 2010.

Net income per share decreased 2% to USD 2.52.

Business Developments
Cherkizovo has opened a poultry breeding facility, “Komarovka”, at its Penza cluster. The facility consists of 34 bird houses, with a combined capacity of almost 1.1 million broilers.

Cherkizovo 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.

Cherkizovo has launched the largest hatchery in Russia at its Penza cluster. A modern high technology complex, built as part of Cherkizovo’s capacity increase project at the Penza poultry cluster, enables 105 million eggs to be incubated per year.

Cherkizovo has launched a large hatchery in Bryansk, which enables 43 million eggs to be incubated per year. After the launch of a second new line, total annual capacity of the hatchery will be 66 million eggs.

Cherkizovo has started production at its greenfield pork farms in Tambov, Voronezh and Lipetsk by launching three breeding facilities.

Cherkizovo has completed an acquisition of 100% of Mosselprom - a diversified vertically-integrated agro-industrial group. Mosselprom’s production activities include the following: poultry, pork, feed production and grain businesses.

Cherkizovo has started construction of the Elets agroindustrial complex in the Lipetsk region, which is a unique integrated poultry production facility where production is set to start in 2013.

Sergey Mikhailov, Chief Executive Officer of Cherkizovo Group, said:
“Despite the challenging operating environment at the beginning of this year, we have delivered a solid performance across all segments in the first nine months of 2011, in line with our targets. The Group achieved a 24% increase in revenue and growth in Adjusted EBITDA of 6%, resulting in a healthy 17% Adjusted EBITDA margin.

Moreover, we have confirmed our status as the most active operator in the Russian meat sector through the acquisition of Mosselprom, one of Russia’s best known poultry producers, at the start of 2011. We have also started construction of the country’s largest poultry production complex in the Lipetsk region.

We have completed the integration of Mosselprom within the Group’s production structure. As a result of the synergy benefits we have received, operational efficiency is increasing in our poultry segment, where we continue to deliver against our large scale capacity increase projects. In addition to opening two large poultry production facilities in our Bryansk and Penza clusters, we have also launched two incubation facilities, which are amongst the largest not just in Russia, but across Europe.

Our results in the pork segment demonstrate that we have successfully overcome the consequences of last year’s extreme weather conditions, and are now witnessing production growth. In the course of the first nine months of the year, we have launched three breeding facilities at our greenfield pork farms in Tambov, Voronezh and Lipetsk. We have also integrated our new asset “Orelselprom”, which was acquired through the Mosselprom transaction.

In the meat processing segment we see a steady increase in demand for our meat products, while this year we are concentrating on improving the product mix in favour of value added products.

In terms of the pricing environment, we see that in poultry the prices so far this year have been relatively flat, while in pork they have demonstrated some growth.

Overall, management is optimistic that the Group will produce a strong financial performance for the full year in line with our expectations and will further continue to deliver against its strategy.”