Strong Performance by Cherkizovo in 2010
Cherkizovo has issued a trading update for the first nine months of 2010, which the company's CEO described as showing strong performance across all segments.
Poultry Division
Total sales volumes in the poultry division for the first nine months of 2010 increased by six per cent to 146,830 tonnes of slaughter weight compared to approximately 138,920 tonnes for the first nine months of 2009.
Prices for Cherkizovo poultry sales increased by three per cent in US dollar terms from $2.27 per kilo for the first nine months of 2009, to $2.33 for the first nine months of 2010 (all price exclude VAT). Prices in rouble terms decreased by four per cent from 73.88 roubles (RUB) per kilo for the first nine months of 2009 to RUB70.56 for the first nine months of 2010. The beginning of the fourth quarter saw an upward trend in prices for poultry sales, although increasing incoming poultry imports may affect domestic prices towards the end of this year and start of 2011.
Pork Division
Sales volumes in the pork division increased by an impressive 51 per cent to approximately 53,900 tonnes of live weight over the period, compared to approximately 35,570 tonnes for the first nine months of 2009. This growth reflected increased production as Cherkizovo's new farms start to achieve their forecasted target levels of output.
Prices increased by four pe cent in dollar terms from $2.32 per kilo live weight for the first nine months of 2009 to $2.41 for the first nine months of 2010. In rouble terms, prices decreased by three per cent from an unusually high level of RUB75.38 per kilo for the first nine months of 2009 to RUB72.82 for the first nine months of 2010. During the remainder of the year, the Company expects prices to remain mostly flat.
Meat Processing Division
In 2010, the Company has witnessed a recovery in demand for the Division's products, as sales volumes in the meat processing segment increased by eight per cent in the period to approximately 102,870 tonnes from approximately 95,370 tonnes for the first nine months of 2009.
Prices in dollar terms increased by 10 per cent from $3.47 per kilo for the first nine months of 2009 to $3.82 for the first nine months of 2010. Average prices in roubles increased by two per cent from RUB112.74 for the first nine months of 2009 to RUB115.52 for the first nine months of 2010.
CEO's comments
Commenting on the performance, Sergey Mikhailov, CEO of Cherkizovo Group said: "For the first nine months of 2010, Cherkizovo performed strongly across all segments, reflecting the increased demand for our products, primarily driven by lower imports and a consequent requirement for high quality domestically sourced meat. Accordingly, we expect to achieve targeted levels of production for 2010.
"So far this year, inflation for meat products in Russia has been relatively low compared to other products in the consumer food basket. At present, the operating environment remains challenging, as a result of the worse than expected grain harvest and subsequent grain shortage. We are now witnessing a short-term effect of oversupply of meat in the market as less efficient producers and individual households are cutting down livestock, creating a temporary downward pressure on selling prices. However, in the medium term, these actions will potentially lead to a shortage of supply and to more aggressive meat price inflation in 2011."
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