Cherkizovo Group: 2013 Financial Results
March 6, 2014 - Moscow, Russia
6 March 2014
Cherkizovo Group OJSC ("Cherkizovo" or "the Group" or "the Company")
Financial results for the Year Ending December 31, 2013
Moscow, March 6, 2014 - Cherkizovo Group (LSE: CHE), Russia's largest
integrated and diversified meat producer, today announces full-year
audited financial results for the period ending 31 December 2013.
* Revenues increased by 8% in roubles, and increased by 5% on a US
Dollar basis to $1,654.9 million in 2013 from $1,570.3 million in 2012.
Revenues increased by 6% to $460.0 million in the fourth quarter of
2013 from $433.0 million for the fourth quarter of 2012, and increased
by 11% on a rouble currency basis.
* EBITDA* decreased by 41% in roubles, and declined by 43% on a US
Dollar basis to $180.6 million in 2013 from $314.6 million in 2012.
EBITDA* in the fourth quarter of 2013 decreased by 14% to $65.1 million
from $75.4 million in the fourth quarter of 2012, and decreased by 10%
on a rouble currency basis.
* EBITDA* margin was at 11% in 2013, down from 20% in 2012. EBITDA*
margin in the fourth quarter of 2013 decreased to 14% from 17% in 2012.
* Gross profit decreased by 19% in roubles, and decreased by 21% on
a US Dollar basis to $358.4 million in 2013 from $452.8 million for
2012. Gross profit in the fourth quarter of 2013 decreased by 1% to
$118.2 million from $119.3 million in the fourth quarter of 2012, and
increased by 4% on a rouble currency basis.
* Group gross margin was at 22% in 2013 and 26% for the fourth
* Net income decreased by 70% in roubles and declined by 71% on a US
Dollar basis to $64.5 million from $225.2 million in 2012. Net income
in the fourth quarter of 2013 decreased by 38% to $41.4 million from $
66.5 million in fourth quarter of 2012, and declined by 35% on a rouble
* As of 31 December 2013 Net debt** was RUR 24,746.5 million ($756.1
* The effective cost of debt increased to 3% from 2% for 2012
* Net income per share decreased by 72% to $1.47
* Cash conversion rate (CCR)*** was 277%(103% for 2012)
* Large scale projects aimed to double capacity at the Bryansk and
Penza clusters were completed. As a result of these 7.5 billion RUR
investments, Bryansk cluster capacity increased from 35 000 to 85 000
tonnes p.a., Penza cluster capacity increased from 60 000 to 125 000
tonnes p.a. (liveweight)
* Construction is underway of new broiler farms in the Moscow and
Lipetsk regions. These farms will become operational in 2014
* Construction is underway of feed plant in the Bryansk region,
hatchery for 240 million eggs p.a. and grain storage facility of 215
000 tonnes in the Lipetsk region
* Petelinka brand recognized as "The Product of the Year"; new
marketing campaigns and branding initiatives helped to increase the
share of branded poultry products in sales
* All new pork complexes are fully stocked with sows and fully
operational. The company had increased number of piglets born by 500
000 with the same number of sows as in 2012
* Cherkizovo became Russia's second largest pork producer,
increasing its sales of live hogs by 50%
* The company installed a new semi-cooked products line"Cherkizovo Express"
worth $20 million on its Moscow CHMPZ plant
* The company reconstructed the slaughtering facility at Penza
plant, increasing its meat storage capacity threefold and its livestock
storing capacity twofold.
* Cherkizovo acquired Dankov meat processing plant and slaughter
house in the Lipetsk region
* 2013 grain harvest increased by 50% as compared to 2012; the
Company demonstrated very strong yields.
Commenting on the financial performance, Cherkizovo Group CEO Sergei
The year 2013 was challenging for the entire Russian meat industry,
including Cherkizovo Group. In the first half of the year, the pricing
environment for the pork and grain markets was unfavourable. Live pigs
prices reached record lows, while in contrast, prices on grain reached
a historic high for the last decade. Under these conditions, even the
most efficient manufacturers, such as our company, experienced constant
losses. However, starting from the second quarter, the situation began
to improve. The first and most important event was the grain price drop
to the level of longstanding trends. Due to the decrease of imports and
to production at private farms, the pork supply declined, and by the
middle of the third quarter, pig prices returned to acceptable figures.
In addition, the government allocated one-time compensatory subsidies
to producers, and this partly mitigated the consequences of the price
During this difficult period, Cherkizovo Group once again demonstrated
that its business model, which combines vertical integration and
diversification, enables the company to operate confidently, even in
the most unfavourable conditions. Cherkizovo Group's revenues rose,
surpassing 50 billion roubles for the first time in the company's
history, and we increased production and sales in all divisions. In
2013, the company produced approximately 640,000 tonnes of meat
products and around 1.5 million tonnes of feed, confirming its status
as the country's largest meat and fodder manufacturer. Despite the fact
that profitability indexes dropped substantially due to the
unfavourable market environment, we are satisfied with the results of
the work done in 2013.
In the poultry division, we completed projects to double production
capacity in Penza and Bryansk poultry clusters, achieving the specified
capacity of 450,000 tonnes live weight per year. The company focused on
marketing and sales in order to achieve sufficient profitability on the
stagnating market. We increased the share of our branded products by 7
percentage points, to almost 60 per cent, and Petelinka, our top brand,
was recognized as The Product of the Year.
The previously implemented investment program in pig production enabled
Cherkizovo Group to sharply expand production and performance and to
become, based on the year's results, Russia's second largest pork
producer. We increased sales by more than 50 per cent. Obviously, the
low pork prices in the first half of the year did not make it possible
to obtain in 2013 a full financial yield from growth in pig production,
but after prices recover, we expect that this division will again
become one of the most profitable business sectors.
Meat processing emerged as a stabilising factor for the business. The
price decline on meat, which hurt pig production, helped the meat
processing division to increase its profitability to double digits. The
higher profitability was also supported by improvement in sales
structure and an increase in the share of high-margin products. During
the year we reconstructed the Moscow and Penza facilities, raising
their operating efficiency and preparing for the release of new lines
of ready-to-cook products.
The grain division returned outstanding results. Compared to 2012,
yield was up by 50 per cent from practically the same cultivated area.
Moreover, the grain yield at Cherkizovo Group facilities substantially
exceeds the countrywide average. In order to make the grain division
even more efficient, we are continuing to invest in modern agricultural
machinery and grain storage.
Cherkizovo Group has entered 2014 with facilities that are operating at
full capacity, and this will make it possible to produce and sell
considerable volumes of meat products this year, while the favourable
pricing environment that we are currently observing on the markets will
help to regain our business profitability longstanding trend.
About Cherkizovo Group
Cherkizovo Group (LSE: CHE) is the largest meat manufacturer in Russia
and one of the top three companies serving Russia's poultry, pork and
meat processing markets. The company is also Russia's largest producer
The Group includes 7 full cycle poultry production facilities, with a
total capacity of 450,000 tonnes live weight p.a.; 14 modern pork
production facilities with a total capacity of 180,000 tonnes live
weight p.a.; 6 meat processing plants with a total capacity of 158,000
tonnes p.a.; 6 fodder plants with a total capacity of 1.4 million
tonnes p.a.; grain storage facilities with a total storage capacity
exceeding 500,000 tonnes; and a land bank exceeding 100,000 hectares.
In 2013, Cherkizovo produced more than half a million tonnes of meat
and processed meat products.
Due to its vertically integrated structure, which includes agricultural
land, grain storage facilities, feed production, livestock breeding,
growing and slaughtering as well as meat processing and integrated
distribution, Cherkizovo has consistently delivered sustainable revenue
and profit growth. In 2013, Cherkizovo's US GAAP consolidated revenue
exceeded $1,6 billion.
Cherkizovo's strategy includes both organic growth and investment in
new projects, driving the consolidation of the Russian meat market.
Within the last five years alone, Cherkizovo has invested more than $1
billion into the development of Russia's agriculture sector. Cherkizovo
shares are quoted on LSE and MICEX.
- Ends -
For further information:
Alexander Kostikov Tel. +7 495 788 3232 ext. 15019
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Tatyana Elizarova Tel. +7 495 788 3232 ext. 15236
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Some of the information in this press release may contain projections
or other forward-looking statements regarding future events or the
future financial performance of the Group. You can identify forwar
looking statements by terms such as
"might" the negative of
such terms or other similar expressions. We wish to caution you that
these statements are only predictions and that actual events or results
may differ materially. We do not intend to update these statements to
reflect events and circumstances occurring after the date hereof or to
reflect the occurrence of unanticipated events. Many factors could
cause the actual results to differ materially from those contained in
our projections or forward-looking statements, including, among others,
general economic conditions, our competitive environment, risks
associated with operating in Russia, rapid market change in our
industry, as well as many other risks specifically related to the Group
and its operations
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