Company: Cherkizovo Group – Financial results
Cherkizovo Group, Russia’s leading integrated and diversified meat producer, announced financial results for the period ended 30 September 2013.
Highlights:
• Revenue increased by 5% to $1 195.0 million for 9M 13 from $1 137.3 million in 9M12. Revenue increased by 6% to $415.4 million in 3Q 13 (3Q 12: $390.9 million).
• Gross profit decreased by 28% to $240.2 million for 9M 13 from $333.6 million in 9M 12. Gross profit decreased by 26% to $89.6 million in the 3Q 13 from $120.6 million for 3Q 12.
• Group’s gross margin decreased to 20% from 29% in 9M 12. In the third quarter of 2013 gross margin decreased to 22% from 31% in 3Q 12.
• Adjusted EBITDA* decreased by 51% to $116.1 million for 9M 13 from $239.1 million in 9M 12. Adjusted EBITDA* decreased by 48% to $46.8 million in 3Q 13 from $90.2 million for 3Q 12.
• Adjusted EBITDA* margin decreased to 10% from 21% in 9M 12. In the third quarter of 2013 adjusted EBITDA* margin decreased to 11% from 23% in 3Q 12.
• Net profit decreased by 86% to $23.1 million for 9M 13 compared to $158.7 million in 9M 12. Net profit decreased by 77% to $14.1 million in the 3Q 13 from $62.8 million for 3Q 12.
• Net Debt**** was $813,3 million as of September 30, 2013
• The effective cost of debt was 2.7% (9M 12: 2.1%)
• EPS was at $0.53
• CCR (Cash Conversion Ratio) was 369%
Business developments:
• Three new pork complexes in the Lipetsk, Tambov and Voronezh regions, launched in 2012, are fully operational and working at full capacity, resulting in a significant increase in pork production volumes and higher production efficiency
• Cherkizovo Group has completed the capacity increase project worth RUR 4.5 billion at the Penza cluster. As a result of the Project realization, Penza cluster capacity has doubled from 60 000 tonnes p.a. to 125 000 tonnes p.a. (live weight)
• Construction started of “The Tambov Turkey” farm. “The Tambov Turkey” is the joint venture of Cherkizovo Group and Grupo Fuertes (Spain). The farm will be launched in 2014 and will become fully operational in 2015
• Petelinka chicken meat brand was recognized as “The Product of the Year” in a chilled poultry category, based on AC Nielsen and Comcon data
• Cherkizovo Group reported its second harvest as a grain producer. In 2013, the grain harvest increased by half while wheat yield doubled
• Cherkizovo Group acquired Dankov meat processing plant in the Lipetsk region
Commenting on the results, Sergei Mikhailov, Cherkizovo CEO, stated:
In the third quarter we saw the market environment improving after very challenging first and second quarters. While poultry prices remain flat, pork prices rebounded by 40% between May and October, and the new harvest grain is trading at half the level of February. Market environment improvements are positively affecting the Company’s performance in the third quarter and going forward. Cherkizovo Group remains on a growth path, delivering increased volumes in all segments. Our revenue crossed the billion-dollar milestone in the nine months of 2013, positioning the Company among Russia’s leading food producers, and the Company achieved a 10% EBITDA margin despite a very challenging market environment.
In the poultry segment, we have completed the Penza Cluster capacity increase project announced in 2010, and will soon announce the completion of the Bryansk Cluster capacity increase project. We see our competitive advantage in poultry not only in higher production volumes, but also in the development of our well-known brands, such as Petelinka and Mosselprom. In the fourth quarter, we’re launching new marketing initiatives aimed at helping our brands to win on store shelves.
In the
segment, as a result of our previous investments we are increasing our production every quarter. Our new facilities are operating at full capacity. As the pork market in Russia restructures and recovers, we believe that Cherkizovo Group will keep its leading positions and that the pork segment will be a strong profitability contributor in 2014.
Our meat processing segment delivered a very strong financial and operating performance in the 9 month period, benefiting from the lower input costs in the first half of the year and the better sales mix. The success of the meat processing division illustrates the importance of diversification, which brings more sustainability to Cherkizovo’s business.
Last but not least, I am very proud of the very strong performance of our Grain division. This year we managed to increase our grain harvest by half as a result of wise crop rotation and an increase in the land planted. We have doubled our wheat harvest and tripled our corn harvest, while our yields are significantly better than average for Russia.
Going forward, we anticipate performance to further improve in the fourth quarter, and the Group will deliver the best possible financial result for this very challenging year”.
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