Russian pork and poultry company Cherkizovo Group reported a 60 percent decline in net income for fiscal year 2015. The company’s income for the year was reported at RUB6 billion (US$90 million), compared to a net income of RUB15.1 billion (US$220 million) during Cherkizovo's 2014 fiscal year.

The company saw increases in both sales volumes in its poultry division, while its pork division experienced a decline in sales.

“2015 was a challenging year for the company, nonetheless, we pressed ahead with our ambitious development plans,” said Sergei Mikhailov, Cherkizovo CEO.

“Notwithstanding the challenges, the agricultural sector in Russia has shown continuous growth year after year and has already [proven] to be a significant driver of the Russian economy.  We believe that by building on our key strengths and competencies, continuing to invest in infrastructure and new product development and growing our market share, Cherkizovo Group will emerge from the country-wide economic slowdown stronger than ever.”

Cherkizovo poultry division

Sales volume for the Cherkizovo poultry division increased to 460,000 tons in 2015, a 12.9 percent increase when compared to the previous year, while total sales for the division increased by 19 percent year-on-year to RUB 44.6 billion (US$660 million).

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The average price continuously fell on a quarter-on-quarter basis during the course of 2015 as a result of increasing market supply, which was partly driven by a drop in consumers’ real income. For 2015 as a whole, the average price increased by 4.2 percent year-on-year to RUB94.52/kilogram from RUB90.70 /kilogram in the previous year.

Cherkizovo pork division

In 2015, sales volumes in the pork division fell by 3.8 percent year-on-year to 163,700 tons, compared with 170,200 thousand tons in 2014, as Cherkizovo Group made a strategic move to depopulate the Orel sow farm to improve genetics for future production.

The average price for pork increased by 3.5 percent year-on-year. However, there was a sharp drop of 20.5 percent in the fourth quarter in the third quarter. This decrease was driven largely by seasonality, as well as a reduction in consumers’ real income.

Total sales in the pork division were flat year-on-year as a result of higher intercompany sales to the meat processing segment. Gross profit stood at RUB4.7 billion (US$70 million), a year-on-year drop of 50 percent, as feed components and medication costs are denominated in foreign currencies. The segment’s gross margin fell to 28.1 percent from 56.1percent in 2014.