Cherkizovo Group posts 1Q 2010 net profit of $31 million

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Meat producer, Cherkizovo Group, has posted a 1Q 2010 net profit of $31 million under US GAAP.

The bottom line is up 33% year-on-year compared with a net profit of $23.4 million for 1Q 2009, with adjusted EBITDA rising 28% to $48.1 million, and revenues up 29% to $268 million for the quarter.

Sergey Mikhailov, CEO of Cherkizovo group, noting the company has switched to quarterly reporting to increase transparency, said prices, particularly poultry, began to increase near the end of the first quarter and expects continued improvement as the year goes on.

“Poultry prices reduced in the first quarter of the year due to higher inventory stocking by producers in the fourth quarter of 2009, which was driven by an increased share of imports in the second half of the year. However, towards the end of the quarter poultry and pork prices recovered strongly, and this trend has continued in the second quarter.”

Mikhailov added that Cherkizovo was starting to see returns from large scale production projects started during 2009, and that the pork division had achieved strong growth, with demand recovering for meat products.

“In the Poultry division we saw profitability returning to historical levels, as 2009 was characterized by unusually high pricing trends. Accordingly, we have achieved a 29% Gross Margin, and a 20% Adjusted EBITDA margin. We accelerated the pace of investment in the division; progressing on two projects at our Bryansk and Penza clusters, which are expected to increase the Group’s poultry capacity by 40% once the sites are fully operational in 2012.”

Mikhailov noted that the demand outlook was looking positive and that Cherkizovo would remain interested in M&A opportunities.

"For the current year we remain broadly positive on Russian consumption, and we expect the pricing environment to improve towards the second half of the year, remaining broadly favorable thereafter. The Company will continue to leverage the benefits from investment in efficiency and capacity, particularly in our higher margin Pork and Poultry businesses. We continue to look for value enhancing opportunities in the market and M&A opportunities, and we remain confident that we will continue to deliver against our strategy in the course of the financial year.”