OREANDA-NEWS. May 06, 2011. Cherkizovo OJSC (LSE: CHE), one of Russia's leading integrated and diversified meat producers, issues a trading update for the first quarter of 2011, reported the press-centre of Cherkizovo.

Poultry Division
Sales volumes in the Poultry division in the first quarter of 2011 increased by a robust 15% to approximately 53,570 tonnes of sellable weight compared to approximately 46,570 tonnes for the first quarter of 2010, reflecting the contribution from the newly launched sites at Bryansk. 

Prices for poultry sales in dollar terms increased by 5% from USD 2.32 per kg in the first quarter of 2010 to USD 2.43 per kg in the first quarter of 2011 (excluding VAT)*. Compared to the price in the fourth quarter of 2010 of USD 2.45, prices in the first quarter of 2011 were almost flat. 

Prices in rouble terms increased by 3% from 69.20 roubles per kg in the first quarter of 2010 to 71.07 roubles per kg in the first quarter of 2011 (excluding VAT). However, compared to the price in the fourth quarter of 2010 of 75.15 roubles per kg, the price in the first quarter of 2011 decreased by 5%, reflecting pressure from higher inventories caused by a larger share of imports entering Russia in the fourth quarter. However  prices in April 2011 have been on an upward trend, and we anticipate this to continue through the second quarter of the year,  given the considerable reduction in poultry import quotas, as well as meat price inflation resulting from rising input costs.

Pork Division
Sales volumes in the Pork division in the first quarter of 2011 increased by 5% to approximately 20,220 tonnes of live weight, compared to approximately 19,190 tonnes in the first quarter of 2010. 

In dollar terms, prices for pork sales increased by 12% from USD 2.29 per kg of live weight in the first quarter of 2010 to USD 2.57 per kg of live weight in the first quarter of 2011 (excluding VAT)*. Compared to the price in the fourth quarter of 2010 of USD 2.33 per kg, the price in the first quarter of 2011 increased by 10%. 

Prices in rouble terms increased by 10% from 68.59 roubles per kg in the first quarter of 2010 to 75.27 roubles per kg in the first quarter of 2011 (excluding VAT). Compared to the price in the fourth quarter of 2010 of 71.61 roubles per kg, the price in the first quarter of 2011 increased by 5%. The pricing environment for pork products in Russia at the end of 2010 and beginning of 2011 was negatively affected by a larger than usual reduction of livestock by smaller and less efficient producers and households, and we expect it to recover in the second quarter as the summer season progresses. 

 Meat Processing Division
Sales volumes increased by 8% to approximately 33,200 tonnes from 30,790 tonnes for the first quarter of 2010.

Prices in dollar terms increased by 13% from \\$3.80 per kg in the first quarter of 2010 to USD 4.30 per kg in the first quarter of 2011 (excluding VAT)*. Compared to the price in the fourth quarter of 2010 of USD 4.08, the price in the first quarter of 2011 increased by 5%.

Prices in rouble terms increased by 11% from 113.71 roubles in the first quarter of 2010 to 125.75 roubles per kg in the first quarter of 2011 (excluding VAT). Compared to the price in the fourth quarter of 2010 of 125.37 roubles per kg, the price in the first quarter of 2011 remained flat.

Commenting on the performance, Sergei Mikhailov, CEO of Cherkizovo Group said: "We are making solid progress in our large-scale projects to increase poultry capacity, and this is already reflected in our sales volumes for the poultry division, and we are on track to provide significantly higher output from 2011, which is also supported by our recent launch of the second site in Bryansk. The Pork division is delivering its volume growth in line with expectations, including operations at the acquired farms, while demand for our meat processing products has also remained strong.

In the first quarter of 2011 we witnessed weaker pricing trends in poultry sales resulting from higher imports in the previous period which led to stocking inventories by the producers and lower than expected price inflation despite sharply rising costs. Looking ahead, we anticipate the pricing environment for our products to recover towards the second half of the year supported by expected growth in meat consumption, reduced imports and rising costs resulting from grain price increases, as well as by a shortage of supply driven by the reduction of stock. Management is confident that the Group will continue to focus on providing efficiency increases and delivering against its strategy."

* For price calculation in dollar terms the Company used the average exchange rate for 1Q2011 of 29.27 roubles per 1 US Dollar, for 1Q2010 the average rate was 29.89 roubles per 1 US dollar.