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Cherkizovo Group Boasts Positive Financial Results
November 25, 2014 22:13

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Cherkizovo Group (LSE: CHE, MOEX: GCHE), Russia’s leading integrated and diversified meat producer, has announced its financial results for the period ending 30 September 2014.
Cherkizovo Group (LSE:CHE; MOEX:GCHE) is the largest meat and feed producer in Russia and one of the top three companies serving Russia’s poultry, pork and sausages markets. The Company’s brands include Cherkizovsky, Petelinka, Kurinoe Tsarstvo and Mosselprom. Chairman Igor Babaev and his family control 65% of Cherkizovo Group, and free float on LSE and MICEX amounts to 35%.
·         Revenue increased by 15% to $1 373.5 million for 9M14 from $1 195.0 million in 9M13. Revenue increased by 21% to $501.2 million in 3Q14 (3Q13: $415.4 million).
·         Gross profit increased by 83% to $440.0 million for 9M14 from $240.2 million in 9M13. Gross profit increased by 106% to $184.8 million in the 3Q14 from $89.6 million for 3Q13.
·         Group’s gross margin increased to 32% from 20% in 9M13. In the third quarter of 2014 gross margin increased to 37% from 22% in 3Q13.
·         Adjusted EBITDA* increased by 178% to $322.9 million for 9M14 from $116.1 million in 9M13. Adjusted EBITDA* increased by 214% to $146.6 million in 3Q14 from $46.8 million for 3Q13.
·         Adjusted EBITDA* margin increased to 24% from 10% in 9M13. In the third quarter of 2014 adjusted EBITDA* margin increased to 29% from 11% in 3Q13.
·         After a very challenging 9M 13, net profit for 9M 14 amounted to $228.1 million. Net profit was $112.8 million in the 3Q14 (3Q13: $14.1 million).
·         Net Debt**was $615.1 million as of September 30, 2014
·         The effective cost of debt was 3.8% (9M13: 2.7%)
·         CAPEX amounted to $121.0 million (not including acquisition of Lisko Broiler)             
Business Developments
·         Cherkizovo Group acquired Lisko Broiler, one of the country’s largest poultry producers, in Voronezh region. The deal is based on the enterprise value of approximately RUB 5 billion. As a result of the acquisition, Cherkizovo increased its market share by 2 p.p. to 13%, making an important step to the poultry market leadership;     
·         Operational land bank of the Grain Division was increased to 58 000 hectares as compared with 40 000 hectares in 2013. The Group invested in modern high-tech agricultural equipment in order to promote the efficiency of the grain segment;
·         Cherkizovo Group launched case-ready production line at Cherkizovsky Meat Processing Plant in Moscow. The line allows for 100 tonnes of ready-to-cook meat products to be produced per day; 
·         The Company continued to invest its profits into long-term investment projects, such as Eletsprom (Lipetsk region) and Mosselprom (Moscow region);
·         Tambov Turkey project is well under way. Cherkizovo Group and its partner, Grupo Fuertes, continued the construction of production facilities in Pervomaisky District of the Tambov region;  Sberbank of Russia provided Cherkizovo Group the first tranche as part of the line of credit for the construction of a turkey meat production plant;
·         Cherkizovo Group’s flagship brand in the meat processing received an updated name and logo “Cherkizovo”;
·         Cherkizovo Group's Global Depositary Receipts have been admitted to trading on Moscow Exchange (MOEX) under the ticker "CHEG";
“Despite the increasing volatility on both meat/grain and currency markets, Cherkizovo Group demonstrated strong 9 months and 3Q results. The Company continues to develop through the combination of organic growth, investing into new projects and improving the efficiency of existing ones, and strategic acquisitions, such as acquisition of Lisko-Broiler in 1Q. Meat prices in the period were quite strong, which made it possible to achieve high profitability in the poultry and pork segments, but at the same time meat processing division was under pressure and its profitability decreased significantly. Now pork prices returned to the level seen at the beginning of the year after reaching historical highs,” said Cherkizovo CEO Sergei Mikhailov.

Looking forward, macro situation looks difficult in general. Sharp devaluation of the local currency that influences direct and indirect costs, predicted consumption slowdown and growth of interest rates for loans will be limitation factors for the future growth. However, we are confident that a well-balanced, vertically integrated business model of our Company will allow us to cope with negative trends and achieve maximum benefits out of positive trends,” he added. 

Author: Mikhail Vesely


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