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Cherkizovo hit by rouble, despite strong sales

By Nicholas Robinson , 29-Nov-2012
Last updated on 29-Nov-2012 at 10:50 GMT

Cherkizovo has reported strong Q3 performance
Cherkizovo has reported strong Q3 performance

Russian meat processor Cherkizovo has recorded a healthy sales increase of 6% for the nine months of 2012, despite an underwhelming price performance in its red meat divisions, caused by the weakening of the rouble.  

Overall sales increased to US$1,145.4m over the last nine months from US$1,079.4m in the previous year. Revenue for the third quarter of this year increased by 3% to US$394.5m compared to US$384.6m for Q3 last year.

Cherkizovo’s gross profit saw an increase of 23% to US$333.4m for the first nine months of this year and, in Q3, gross profits stood at US$121.2m, which was a 22% increase on the previous year.

Chief executive officer for Cherkizovo Sergey Mikhailov said he was pleased with the results of the first nine months of 2012. “It is pleasing to see our nine months revenues pass the US$1bn mark, as active management and a supportive trading environment combined to produce solid growth.”

Poultry

Volume sales in the poultry division for the first nine months of 2012 increased by 27%, which equated to around 236,080 tonnes (t), compared to 185,620t for the same period last year.

The value of Cherkizovo’s poultry, however, decreased by 2% to US$2.46/kg during the period, which has been attributed to the weakening of the Russian rouble. However, value in Q3 of 2012 did increase by 7% to US$2.57/kg.

Mikhailov said: “The strong poultry results reflect the infrastructure investments Cherkizovo has already made, with impressive volume and revenue growth reflecting strong organic growth and good incremental sales from Mosselprom. Meanwhile the segment’s substantial improvement in operational efficiency has produced better profitability.”

Pork

Sales volumes in Cherkizovo’s pork division for the first nine months of this year increased by 7% to 70,131t of live weight, compared to 65,800t for the same period in 2011. According to Cherkizovo, the increase has been helped by the launch of new greenfield sites in the Tambov and Voronezh regions.

However, like the poultry sector, the price of pork also saw an overall decrease of 4% to US$2.63/kg, also attributed to the weakening of the rouble. The decrease in price of liveweight pork continued into Q3 and dropped by 2%.

Of the performance in the pork division, Mikhailov said: “In the pork segment, major operational changes were made in 2012 to ensure it was well-placed for future growth. A strong macro environment in the middle of the year enabled the segment to carry out a sow replacement programme, without reducing volumes or profitability. The pork segment has now reached installed capacity of 180,000t per annum and we are well-placed to deliver strong volume growth in 2013.”

Meat processing

Cherkizovo’s meat processing division saw a big dip of 13% in sales volumes for the first nine months of 2012 from 108,420t to 94,049t. The division also experienced a 4% drop in price to US$4.71/kg. However, the company closed an inefficient facility, which led to a divisional gross profit increase of 9% to US$82.6m and a gross margin increase of 20%.  

Mikhailov said: “The meat processing segment has produced a record profit, as the group’s strategy to focus on high-margin, value-added produce started to positively impact the segment’s financial performance. Recent examples of this strategy include the tripling of productivity at the Kaliningrad plant, which is now well-placed for further growth.”

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