Cherkizovo starts construction of Lipetsk mega poultry plant

New plant will boost capacity.
Russian meat and poultry producer, Cherkizovo Group, has started construction of a $685 million state of the art poultry plant at Elets,in the Lipetsk region.

The plant will become the corner stone of an agro industrial cluster in the region and help promote Russian food self-sufficiency.By developing a modern new integrated plant Cherkizovo is looking to introduce new efficiency standards and lay the basis of a competitive food production platform into the future.

The project will see construction of a 160 million eggs per year hatchery, housing capacity for 10 million broilers, and with a 24000 thousand birds an hour processing facility, and 500 thousand tonnes frozen storage capacity.Additionally the facility will include a capacity to produce 90 tonnes of feed an hour, a 300 thousand tonnes grain storage capacity and oilseed processing capacity.

The plant is expected to become operational in three years, and become fully operational at the end of 2015, providing 4000 jobs.It follows an agreement between the regional government, the Russian Ministry of agriculture, and the Cherkizovo Group, signed in May 2009

Sergey Mikhailov, CEO of Cherkizovo Group said the unrivalled facilities will strengthen the group’s leading industry position and increase consumer confidence in the safety of Russian poultry products

“This project confirms Cherkizovo Group as the leader in Russian agriculture and food production. This large-scale investment project will mark a transformational stage in our development. The new site will increase our production capacity to an entirely different level and allow Cherkizovo to draw competitive advantages from the proximity to our other existing production sites. Moreover, the strategic location of this innovative project will provide direct access for our quality products to the lucrative markets of Moscow and Central Russia. This is a unique project for Russia and we are very pleased to take up another opportunity to contribute meaningfully to the programme of security of food supply and to the overall development of the national economy”

BKS analyst, Vladislav Metnev, says the massive investment project will underpin Cherkizovo’s position on the Russian market for years to come.

“It is a bespoke large scale project for Russia. The ammount of investments almost 3 times high annual company investments. The modernization will drive companys market share from the current 9% to 16-17% over the next 3 years assuming 10% year on year market growth. Undoubtedly, the company will cement its leader position in the Russian poultry industry.”

Metnev added that the scale of the plant, in addition to providing for a significantly enhanced competitive position for Cherkizovo on the domestic market, with greater price competition, will enable exports.

“Russia is importing a part of all poultry products from abroad, however the implementation of this solution will certainly open new export opportunities for Russian poultry products. We expect the Russian poultry export will reach 50-70 thousand tonnes per year.”

Matnev also noted that despite highly attractive gross margins in the poultry sector at about 30%, could prompt more investment, a lack of large scale producers capable of handling the costs involved is likely to limit it.