OREANDA-NEWS. May 25, 2012. Cherkizovo Group (LSE: CHE), Russia’s leading integrated and diversified meat producer, today announces unaudited quarterly results for the period ended 31 March 2012.

Highlights

Revenues increased 20% on a rouble currency basis, and increased 16% to USD 357.8 million from USD 308.2 million in the first quarter of 2011

Adjusted EBITDA* increased 80% on a rouble currency basis, and 74% to USD 60.8 million from USD 34.9 million in the first quarter of 2011

Adjusted EBITDA* margin increased to 17% from 11% in the first quarter of 2011

Gross profit increased 50% on a rouble currency basis, and increased 45% to USD 93.7 million from USD 64.6 million in the first quarter of 2011

Group’s gross margin increased to 26% from 21% in the first quarter of 2011

Net income increased 121% on a rouble currency basis, and increased 114% to USD 39.3 million from USD 18.4 million in the first quarter of 2011

For the first quarter 2012 Net debt was at USD 775 million.

The effective cost of debt was 1.7% (1Q2011: 2%)

Net income per share increased 112% to USD 0.91 from USD 0.43 in the first quarter of 2011

Cash conversion rate (CCR)*** was 145% (1Q2011: 176%)

Business Developments

Cherkizovo Group continued construction of its greenfield pork farms in Tambov, Voronezh and Lipetsk by launching rearing facilities at all three complexes.

Cherkizovo Group has opened the first line of the poultry breeding facility, “Pervomayskaya”, at its Bryansk cluster. The facility, which was built as part of Cherkizovo’s ongoing poultry capacity increase project, consists of 28 bird houses, with a combined capacity of almost 1 million broilers.

Cherkizovo Group has built 21 additional bird houses at the poultry breeding facility “Vostochnaya” at its Penza cluster. Previously, this facility consisted of 4 bird houses with a capacity of 246 000 broilers, but with the new bird houses, this has increased to 1 million heads.

Cherkizovo Group’s shares and bonds have been transferred from quotation list ‘A 2’ to quotation list ‘A 1’ on MICEX

Cherkizovo Group’s bonds were included into the Lombard List of the Central Bank of Russia.

Sergey Mikhailov, Chief  Executive Officer of Cherkizovo Group, said:

“In the first quarter of 2012 we delivered an excellent performance, in line with our targets.  Net income showed a record 114% growth, driven by strong performance in the poultry segment, high pork prices, the efficient restructuring of the meat processing division and the decrease in grain prices.  The Group achieved a 16% increase in revenue and growth in Adjusted EBITDA* of 74%, resulting in a healthy 17% Adjusted EBITDA* margin.

In the Poultry segment, we delivered 36% sales growth, driven both by the strength of our existing brands and incremental volumes from Mosselprom, acquired in 2011. From an operational point of view, we have made solid progress in our large-scale projects to increase poultry capacity.

The Pork segment benefited from high pork prices throughout the whole quarter. We continued to expand our capacity, launching rearing facilities at our modern complexes in Lipetsk, Tambov and Voronezh. These complexes will reach full capacity in 2013, further strengthening Cherkizovo’s strong position in the Russian pork market.

The Meat Processing segment delivered positive pricing and profitability trends while volumes were slightly lower. Our recently acquired Kaliningrad meat processing plant is now operating at full capacity and adding to the margins of the segment.

As for the pricing environment, we see that poultry prices are growing very slowly and do not expect significant price growth in 2012; we remain confident about the future of the poultry market and continue to invest in poultry production. In the Pork segment, prices were at historically high levels, supporting healthy margins for the Group. In the Meat Processing segment, prices continued to grow above inflation, representing strengthening consumer confidence and a positive shift in Cherkizovo’s product portfolio towards a larger share of value-added products”.