OREANDA-NEWS. August 19, 2008. Cherkizovo, one of Russia's leading integrated and diversified meat producers, announced its pre-close trading update for the first six months of 2008, the press-centre of Cherkizovo Group reported.

Poultry Division

Total sales volumes across the Company's poultry division increased in the first six months of 2008 by 11% to approximately 88,350 tonnes. This compares to approximately 79,800 tonnes in the same period in 2007.

Prices for poultry increased by a lower than expected 11% in the first six months of 2008 to US2.61 per kg (excluding VAT), compared to US 2.36 per kg (excluding VAT) in the first six months of 2007. 

In rubles, prices increased by 1% to 62.46 rubles per kg (excluding VAT), compared to 61.59 rubles per kg (excluding VAT) in the first six months of 2007. These figures include volumes and prices from OJSC Kurinoe Tsarstvo (Chicken Kingdom), which the Company acquired at the end of August 2007. The first six months figures in relation to OJSC Kurinoe Tsarstvo (Chicken Kingdom) are included on a pro forma basis. 

Poultry prices increased, but in the second quarter were below management's expectations. This was primarily through increased imports, in particular from the US and Brazil, undercutting local producers. The Federal Customs Service of Russia reported that between December 2007 and June 2008 poultry imports grew by 9.4%.

However, the Company saw price growth in July and remains confident that poultry prices will grow in the second half. This confidence is driven by a number of factors. First, the Federal Customs Service significantly increased the minimum dutiable value for imported poultry meat and this has influenced the prices of imported poultry.

Alongside this, it would appear that poultry prices in Brazil and the US have increased significantly in recent months and management would expect Russia to follow this global trend. A further positive influence is the 2008 harvest in Russia, which is expected to be very rich and result in low grain prices.

Governmental support towards agricultural producers improved, with the latest amendments to the 2008 budget approving RUR 5 billion of subsidies to be provided for domestic poultry producers. Cherkizovo believes that if the Government will distribute these subsidies to local producers in 2008, the Company would benefit from it.

Pork Division

With an increased capacity from the first two modules at the Lipetsk pig breeding and raising facility coming on stream, volumes in the Company's pork division increased by 92% in the first six months of 2008 to approximately 20,000 tonnes.  This compares to approximately 10,400 tonnes in the equivalent period in 2007.

Throughout the first six months of 2008 pork prices in Russia followed a positive global pricing trend and increased by 22% to US 2.52 per kg of live weight (excluding VAT) in the first six months of 2008, compared to US 2.07 per kg (excluding VAT) in the first six months of 2007.  In rubles, pork prices increased by 11% to 60.23 rubles per kg of live weight (excluding VAT) compared to 54.12 rubles per kg (excluding VAT) in the first six months of 2007.

Meat processing Division

Sales volumes in the first six months of 2008 within the meat-processing segment increased by 2% to approximately 71,800 tonnes, compared to approximately 70,500 tonnes in the first six months of 2007.

As a result of raw meat price growth, average prices within the meat-processing segment increased by 23% in the first six months of 2008 to US 3.97 per kg (excluding VAT), compared to US 3.22 per kg (excluding VAT) in the first six months of 2007. In rubles the prices increased by 13% to 95.07 rubles per kg (excluding VAT), compared to 83.98 rubles per kg (excluding VAT) in 2007.