SOURCE: OJSC Cherkizovo Group

November 28, 2013 10:34 ET

OJSC Cherkizovo Group: 3rd Quarter Results

MOSCOW, RUSSIA--(Marketwired - Nov 28, 2013) -

Cherkizovo Group OJSC ("Cherkizovo" or "the Group" or "the Company")

Financial results for the Nine Months Ended September 30, 2013

Cherkizovo Group (LSE: CHE), Russia's leading integrated and diversified
meat producer, today announces financial results for the period ended 30
September 2013.


    * Revenue increased by 5% to USD 1 195.0 million for 9M 13 from
      USD 1137.3 million in 9M12. Revenue increased by 6% to USD 415.4
      million in 3Q 13 (3Q12: USD 390.9 million).

    * Gross profit decreased by 28% to USD 240.2 million for 9M 13 from
      USD333.6 million in 9M 12. Gross profit decreased by 26% to
      USD89.6 million in the 3Q 13 from USD 120.6 million for 3Q 12.

    * Group's gross margin decreased to 20% from 29% in 9M 12. In the
      third quarter of 2013 gross margin decreased to 22% from 31% in
      3Q 12.

    * Adjusted EBITDA* decreased by 51% to USD 116.1 million for 9M 13
      from USD 239.1 million in 9M 12. Adjusted EBITDA* decreased by
      48% to USD 46.8 million in 3Q 13 from USD 90.2 million for 3Q 12.

    * Adjusted EBITDA* margin decreased to 10% from 21% in 9M 12. In
      the third quarter of 2013 adjusted EBITDA* margin decreased to
      11% from 23% in 3Q 12.

    * Net profit decreased by 86% to USD 23.1 million for 9M 13
      compared to USD 158.7 million in 9M 12. Net profit decreased by
      77% to USD 14.1 million in the 3Q 13 from USD 62.8 million for 3Q

    * Net Debt**** was USD 813,3 million as of September 30, 2013

    * The effective cost of debt was 2.7% (9M 12: 2.1%)

    * EPS was at USD 0.53

    * CCR (Cash Conversion Ratio) was 369%

Business Developments

   * Three new pork complexes in the Lipetsk, Tambov and Voronezh
     regions, launched in 2012, are fully operational and working at
     full capacity, resulting in a significant increase in pork
     production volumes and higher production efficiency

   * Cherkizovo Group has completed the capacity increase project
     worth RUR 4.5 billion at the Penza cluster. As a result of the
     Project realization, Penza cluster capacity has doubled from 60000
     tonnes 125000 tonnes p.a. (live weight)

   * Construction started of "The Tambov Turkey" farm. "The Tambov
     Turkey" is the joint venture of Cherkizovo Group and Grupo Fuertes
     (Spain). The farm will be launched in 2014 and will become fully
     operational in 2015

   * Petelinka chicken meat brand was recognized as "The Product of
     the Year" in a chilled poultry category, based on AC Nielsen and
     Comcon data

   * Cherkizovo Group reported its second harvest as a grain producer.
     In 2013, the grain harvest increased by half while wheat yield

   * Cherkizovo Group acquired Dankov meat processing plant in the
     Lipetsk region

Commenting on the results, Sergei Mikhailov, Cherkizovo CEO, stated:

In the third quarter we saw the market environment improving after very
challenging first and second quarters. While poultry prices remain flat,
pork prices rebounded by 40% between May and October, and the new harvest
grain is trading at half the level of February. Market environment
improvements are positively affecting the Company's performance in the
third quarter and going forward. Cherkizovo Group remains on a growth path,
delivering increased volumes in all segments. Our revenue crossed the
billion-dollar milestone in the nine months of 2013, positioning the
Company among Russia's leading food producers, and the Company achieved a
10% EBITDA margin despite a very challenging market environment.

In the poultry segment, we have completed the Penza Cluster capacity
increase project announced in 2010, and will soon announce the completion
of the Bryansk Cluster capacity increase project. We see our competitive
advantage in poultry not only in higher production volumes, but also in the
development of our well-known brands, such as Petelinka and Mosselprom. In
the fourth quarter, we're launching new marketing initiatives aimed at
helping our brands to win on store shelves.

In the pork segment, as a result of our previous investments we are
increasing our production every quarter. Our new facilities are operating
at full capacity. As the pork market in Russia restructures and recovers,
we believe that Cherkizovo Group will keep its leading positions and that
the pork segment will be a strong profitability contributor in 2014.

Our meat processing segment delivered a very strong financial and operating
performance in the 9 month period, benefiting from the lower input costs in
the first half of the year and the better sales mix. The success of the
meat processing division illustrates the importance of diversification,
which brings more sustainability to Cherkizovo's business.

Last but not least, I am very proud of the very strong performance of our
Grain division. This year we managed to increase our grain harvest by half
as a result of wise crop rotation and an increase in the land planted. We
have doubled our wheat harvest and tripled our corn harvest, while our
yields are significantly better than average for Russia.

Going forward, we anticipate performance to further improve in the fourth
quarter, and the Group will deliver the best possible financial result for
this very challenging year".

About Cherkizovo Group

Cherkizovo Group (LSE: CHE) is the largest meat manufacturer in Russia and
one of the top three companies serving Russia's poultry, pork and meat
processing markets. The company is also Russia's largest producer of

The Group includes 7 full cycle poultry production facilities, with a total
capacity of 425,000 tonnes live weight p.a.; 14 modern pork production
facilities with a total capacity of 180,000 tonnes live weight p.a.; 6 meat
processing plants with a total capacity of about 160,000 tonnes p.a.; 6 
fodder plants with a total capacity of 1.4 million tons p.a.; grain storage
facilities with a total storage capacity exceeding 500,000 tonnes; and a
land bank exceeding 100,000 hectares. In 2012, Cherkizovo produced more
than half a million tons of meat and processed meat products.

Due to its vertically integrated structure, which includes agricultural
land, grain storage facilities, feed production, livestock breeding,
growing and slaughtering as well as meat processing and integrated
distribution, Cherkizovo has consistently delivered sustainable revenue and
profit growth. In 2012, Cherkizovo's US GAAP consolidated revenue exceeded
USD1,5 billion, and net profit amounted to USD 225 million.

Within the last five years alone, Cherkizovo has invested more than USD 1
billion into the development of Russia's agriculture sector. In addition to
existing production facilities, the Group is also investing in a 20 billion
ruble high technology agro-industrial production complex in Elets, Lipetsk

Cherkizovo's strategy includes both organic growth and investment in
new projects, driving the consolidation of the Russian meat market.
Cherkizovo shares are quoted on LSE and RTS/MICEX.

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