Cherkizovo heralds benefits from Russia meat curbs

02 february 2010
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Cherkizovo forecast a fillip from Russia's curbs on meat imports as the chicken-to-sausages group heralded "strong" 2009 results, led by a 38% jump in pork production. 

Cherkizovo said that Russia's drive to turn from the world's biggest global meat importer to self-sufficiency would stimulate a "positive pricing environment" for meat products. 

A cut to Russia's poultry import quotas had already helped the Moscow-based group enjoy a 16% rise, to 74.33 roubles per kilogramme, in the average price of its poultry products last year. 

 Self-sufficiency drive  

Yelena Skrynnik, Russia's farm minister, last week placed a deadline of three years on the country becoming self sufficient in poultry, and placed exports on the agenda within four or five years. 

The drive, which is being accompanied by a succession of import quota cuts from 952,000 tonnes in 2009 to 550,000 tonnes in 2012, has alarmed many foreign producers, including the US, which has effectively been barred from the market. 

Russia two weeks ago introduced a ban on meat processed with chlorine treatments, America's default method of cleaning poultry carcasses. 

Russia has historically been America's main poultry export market, with trade estimated at $800m in 2008. 

 Capacity investment  

Cherkizovo is undertaking considerable investment in raising production of pork and, in particular, poultry, with upgrades to egg production, raising and slaughter facilities. 

Poultry output will be "significantly higher" from 2011, chief executive Sergei Mikhailov said. 

However, production eased by 2,700 tonnes to 187,000 tonnes last year, because of a decision to lower the intensity of breeding operations as part of an efficiency drive. 

A jump to 53,800 tonnes, live weight, in pork production reflected the ramp up of operations to full capacity at newly-built pork farms in Lipetsk and Tambov. 

 Market reaction  

The statement was welcomed by Citigroup analyst Marat Ibragimov as signalling "strong top-line growth". 

"The company beat our forecasts on pork and meat processing output volumes and slightly missed our poultry volumes estimates," said Mr Ibragimov, who has a target of $16.00 on Cherkizovo stock, and a "buy" rating. 

"The aggregate top line looks to be in line with our forecasts and about 5% above consensus estimates." 

The shares stood 3.8% higher at $13.75 in midday trade in London. 

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