OREANDA-NEWS. October 06, 2009. Cherkizovo Group (LSE: CHE), one of Russia’s leading integrated and diversified meat producers, announced half year results for the six months ended 30 June 2009, reported the press-centre of Cherkizovo Group.

Highlights
Strong performance and improvement in margins despite the challenging economic conditions and lower consumer spending

Net income nearly doubled on a rouble currency basis, and increased 39% to US 50.3 million from US 36.3 million for the six months of 2008

Adjusted EBITDA* increased 52% on a rouble currency basis, and 10% to US 80.5 million from US 73.1 million for the six months of 2008

Adjusted EBITDA* margin improved significantly to 18% from 13% for the six months of 2008

Gross profit increased 26% on a rouble currency basis, and decreased 9% to US 128.4 million from US 140.5 million driven by ruble devaluation

Significant improvement in Group gross margin to 28% from 25% in 2008

Revenues increased 15% on a rouble currency basis year-on-year, and decreased 17% to US 459.3 million from US 554.0 million for the six months of 2008

Net debt decreased 10% on a rouble currency basis, and decreased 33% to US436.2 million

Sergey Mikhailov, Chief Executive Officer of Cherkizovo Group, said:
“The Company continues to make solid progress against its stated strategy, despite the particularly challenging domestic and international operating environment. Cherkizovo achieved significant margin improvement, driven by the Group’s focus on improving operating efficiencies.  While in constant currency terms, the performance has been exceptionally strong, with a material growth in Gross profit of 26%, Adjusted EBITDA of 52%, and Net Income  of 92%, the dramatic depreciation of the ruble against the US dollar in the first six months of the year has had a significant translation impact on our reported numbers.

The Company’s poultry division enjoyed a favorable pricing environment, supported by a lower grain price, and continued to gain integration benefits from OJSC Kurinoe Tsarstvo.  These factors combined to produce a record Gross margin of 35% and Adjusted EBITDA margin of 27%. The exceptional performance contributed significantly to the overall improvement in the Company’s Adjusted EBITDA margin.

Production volumes in the Company’s pork division continued to increase in the first six months of 2009, as the new capacity gathers pace. This together with a favorable pricing environment in the first half enabled us to sustain strong divisional margins for the first half of the year. We anticipate further volume gains in the second half of the year. 

In the meat processing division the Company continued to see decreased sales volumes of lower-priced, lower-margin products, and this together with lower consumption in the regions of Russia due to the challenging economic environment affected the performance of the division.

Overall, the Company’s vertically-integrated business model proved its strength and enabled us to improve performance in a tough economic environment. Looking forward the Group will continue to leverage improving efficiencies and capacity levels to drive results.  While we anticipate the pricing environment to remain largely favorable for Cherkizovo’s products in the second half of the year, we will continue to see some pressure on consumer consumption. However, we remain confident that the Group will continue to make good progress and deliver against its stated strategy in the course of the financial year.”