For the first six months of the 2021 fiscal year, Russia-based Cherkizovo Group is reporting double-digit increases in overall sales and revenue, as well as for the majority of its meat business segments. Looking ahead, the firm intends to invest heavily in output expansion, and to pursue export opportunities.
Commenting on the recently released unaudited financial results for the second quarter, CEO of Cherkizovo Group, Sergei Mikhailov, highlighted the company’s “impressive growth” during the first half of the 2021 fiscal year.
Among the key achievements for the period was a near 31% increase in sales revenue from the same quarter of last year to 39.8 billion rubles (RUB; US$53.9 million). This translated into improvements of more than 25% for gross profit, and 31% for net profit. At RUB6.5 billion, adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) was 21% higher year-on-year. However, EBITDA margin contracted from 17.5% one year ago to 16.3% for the second quarter of 2021.
These overall developments were generally similar for the half-year. At RUB73.1 billion, overall revenue was up by almost 21% year-on-year, while gross profit and net profit were 27% and 62% higher, respectively. Meanwhile, at RUB11.0 billion, adjusted EBITDA was around 7% above the previous year’s level, and adjusted EBITDA margin fell from 17.1% for the first 6 months of 2020 to 15.1% for the most recent half-year.
According to the group’s report, increased production volumes accounted for the 9.2% increase in operating expenses for the half-year in 2021 compared to the same period one year ago. The figure were more than RUB8.6 billion, compared with just over RUB7.9 billion for the first six months of 2020. Expressed as a percentage of sales, however, operating expenses were lower for the first-half of 2021.
Sales volume, revenue improved for four business segments
One month ago, Cherkizovo reported the sales volumes and revenues associated with each of its business segments for the second quarter of the year. In volumes terms, higher sales were registered for the chicken, turkey, ready-to-eat (RTE) processed meats divisions, as well as for Samson Food Products.
These trends continued for the half-year in figures just published.
Most important for the group in terms of sales volume and revenue is the chicken division. At around RUB45.7 billion, this business achieved an almost 30% year-on-year increase in half-year revenue compared to the same period of 2020. This was achieved following a 5% expansion in output to just under 360,000 metric tons (mt).
At 23,500mt for the half-year just ended, the turkey division achieved a year-on-year increase of more than 20% in sales volume through the Cherkizovo trading company. Revenue through this business was around 26% higher at almost RUB4.28 billion.
Achieving a similar percentage increase in sales revenue was the RTE meats business, with a figure of more than RUB12.44 billion for the latest half-year. This was achieved on a 15.7% higher sales volume of 60,400mt.
Also turning in greatly improved performance was the Samson Food Products division. Delivering a six-month increase of more than 53% sales revenue at RUB1.53 billion, its sales volume was 19% higher year-on-year.
Cherkizovo’s pork division appear to have had a disappointing half-year. Sales for the period were down 35% at 64,300mt, while revenue was 10% lower at just over RUB10.64 billion. However, the company reports that it has diverted live pigs and carcass sales to third parties in favor of its own RTE meat division.
Recent business developments
For the first quarter of this year, Cherkizovo reported a year-on-year increase in revenue of just over 10%.
Within the last few days, the group announced it will reopen the Altaisky Broiler processing plant in October of this year. This follows a fire at the facility in Siberia in early July, which caused extensive damage to warehousing. However, administrative buildings, processing facilities and farms were unaffected, and no injuries were reported.
In April, Cherkizovo Group closed its acquisition of St.Petersburg/Leningrad-based Pit Product from Finland-based Atria Group. The deal included two processing plants with a total capacity of 39,000mt of sausages, hot dogs and deli meats.
Two months later, the group completed an upgrade to its Otechestvenny plant. Now with an estimated annual capacity of 13,000mt, the facility produces beef patties for the Russian fast-food market.
Earlier this month, the group’s Board of Directors discontinued the management board's responsibilities of two managers, who have left the company.
Furthermore, it has also made changes to the Board of Directors. With the aims of improving corporate governance and streamlining business processes, two additional members have been appointed to the Board.
Key strategies: investment in exports, food-service sector
CEO Mikhailov confirmed that Cherkizovo is to continue its strategy of growth through exports despite the ongoing challenges presented by the coronavirus (COVID-19) pandemic. Building on established sales in Asia, the firm has increased its poultry trade to Saudi Arabia and to some African markets. It has also expanded exports of sausage and consumer-packaged chicken products to the Commonwealth of Independent States (CIS).
As a result of post-pandemic social support initiatives from the Russian government, Cherkizovo expects consumer spending to remain stable. The Group is set to pursue its strategy to grow its food-service business. Previously announced are investments of more than RUB80 billion (US$1.08 billion) over the next 3 years to expand poultry and pork capacities at several of its sites in the regions of Altai, Tula, and Lipetsk.
More on Cherkizovo Group
With annual slaughterings approaching 320 million birds, Cherkizovo Group in among the leading European producers in WATTPoultry.com’s Top Poultry Companies database.
By 2019, Moscow-based Cherkizovo Group had become the largest broiler producer in Russia — at least in part due to the opening up of the Chinese markets to Russian poultry meat imports.
