Cherkizovo Reports 79% Increase in Sales of Pork Products

Poultry Division 

Total sales volumes in the poultry division in the first quarter of 2010 increased by 6% to 46,570 tonnes of slaughter weight compared to 44,100 tonnes in the first quarter of 2009.  

Prices for Cherkizovo poultry sales increased by 9% in dollar terms from $2.12 per kg in the first quarter of 2009 to $2.32 per kg in the first quarter of 2010 (excluding VAT)*. Prices in rouble terms decreased by 4% from 72.05 roubles per kg in the first quarter of 2009 to 69.20 roubles per kg in the first quarter of 2010 (excluding VAT). In the fourth quarter of 2009 producers stocked up higher inventories of poultry due to an increased share of imports in the second half of the year, which affected the prices in the first quarter of 2010. In addition, prices were influenced by a seasonal effect evident in the first quarter of every year, as well as the early lent period ahead of Easter in Russia.  

Pork Division 

Sales volumes in the pork division in the first quarter of 2010 increased by a record 79% to 17,505 tonnes of live weight, compared to approximately 9,780 tonnes in the first quarter of 2009, as production at new farms is now reaching targeted levels.  

Prices increased by 6% in dollar terms from $2.20 per kg of live weight in the first quarter of 2009 to $2.33 per kg of live weight in the first quarter of 2010 (excluding VAT)*. In rouble terms prices decreased by 7% from an exceptionally high level of 74.61 roubles per kg in the first quarter of 2009 to 69.58 roubles per kg in the first quarter of 2010 (excluding VAT). In the first quarter of 2010 the prices were affected by factors of seasonality as well as by the unusually high import of live pigs in Russia in the last quarter of 2009.   

Meat Processing Division 

In the first quarter of 2010, the Company saw a strong recovery and pick-up of demand for the division's products, as sales volumes in the meat processing segment increased by 9% to approximately 30,800 tonnes from 28,400 tonnes in the first quarter of 2009.  

Division prices in dollar terms increased by 16% from $3.29 in the first quarter of 2009 per kg to $3.80 per kg in the first quarter of 2010 (excluding VAT)*. Average prices in roubles increased by 2% from 111.56 roubles in the first quarter of 2009 to 113.71 roubles in the first quarter of 2010 (excluding VAT).  

Commenting on the performance, Sergey Mikhailov, CEO of Cherkizovo Group said:  

"In the first quarter of 2010 we saw strong performance across all our segments, reflecting increased demand for our products. In the poultry division, we have started to see returns from the large-scale capacity increase projects we commenced last year. In line with our expectations, our pork division has achieved impressive growth reflecting the completion of the investment cycle and the division now being in a volume growth phase. In our meat processing division, for the first time in recent years, we saw a significant recovery in volumes as demand for meat products started to improve.  

Poultry pricing reduced in the first quarter of the year due to higher inventory stocking by producers in the fourth quarter of 2009. This was caused by an increased share of imports in the second half of the year. The first quarter of the year is traditionally weak, affected by tighter consumer spending after the lengthy New Year holiday period and an early lent in Russia. However, towards the end of the quarter we saw a recovery in poultry and pork prices, and this trend is continuing in the second quarter. 

Throughout the year, we anticipate further volume growth across our pork and poultry divisions, as our new pork operations accelerate output and we start increasing poultry volumes at our Bryansk poultry cluster towards the end of the year. In meat processing, we expect the positive trend to continue and we anticipate a return to pre-crisis levels. Overall, the Group broadly expects the pricing environment for our products to remain positive driven by a decrease in imports and growing domestic demand. The management is confident that the Group will continue to focus on providing efficiency increases and delivering against our strategy". 

For price calculation in dollar terms the Company used the average exchange rate for the first quarter of 2009 of 33.9307 roubles per 1 US dollar, for the first quarter of 2010 the average rate was 29.8903 roubles per 1 US dollar.