Cherkizovo Group OJSC saw strong sales across its poultry and pork divisions, despite increased costs and extremely bad weather, which affected the grain market and resulted in direct government subsidies in the second quarter of 2011.
The company has strengthened its poultry business over the year, acquiring agro-industry group Mosselprom in May and increasing production capacity at a number of its sites. Earlier this year, it announced construction of poultry complexes at Elets and opened two new hatcheries and breeding facilities at Bryansk and Penza, as well as opening a state-of-the-art slaughtering facility at Pensa, installing a new sausage smoking production line and starting construction on three pork farms.
Volume sales of poultry increased by 34% to 260,200t, or 38% by value (USD), helped by the sales of the newly-acquired poultry producer Mosselprom, as well as increased volumes from Bryansk and Penza. Sales in poultry prices increased by 5%, year-on-year, despite a 7% decrease during the fourth quarter. Increased raw material, utility and labour costs saw gross margins decrease to 23%, although gross profit rose by 10%.
Pork volume sales increased 4% to 91,400t liveweight, with total sales by value increasing by 22% to US$270.5m and profits up 20%, The price for pork sales also inceased by 15%. Processed meat sales increased 3% by volume but rose 20% to US$635.4m, with prices up 17%.
Chief executive Sergey Mikailov said “These results have been achieved despite a very challenging operating environment at the start of the year, when extreme weather conditions resulted in lost harvests and a steep increase in grain prices.
“In terms of outlook, there are many uncertainties in the current operating environment. However, despite the challenges noted, management is confident that the group is taking the appropriate measures in terms of investing for growth and efficiency to deliver performance in line with its strategic expectation in 2012.”
However, the company admitted to future uncertainties, with fluctuating grain prices and Russia’s entry into the WTO leading to the possibility of decreasing pork duties putting downward pressure on domestic prices and leading to increased imports. However, it said it remained focused on improving profitability through organic growth, investing in capacity and delivering efficiency gains.