Cherkizovo Group Pre-close Trading UpdateCherkizovo Group, one of Russia's leading integrated and diversified meat producers, today issues a pre-close trade update in advance of its annual results for the year ended 31 December 2006, which will be announced towards the end of April 2007.
Poultry
As expected, in the second half of the year Cherkizovo experienced an excellent recovery in its poultry prices. Compared to the first half we saw our average price increase by over 7% in the last six months, bringing price levels back to levels experienced in 2005 pre the Avian Flu breakout.
Compared against the unusually strong price levels achieved in 2005, we saw only a 1% decrease in average price in 2006 compared to the previous year from $2.16 to $2.15 per kg (excluding VAT). In rubles the price decreased by 5% (from 61.22 rubles per kg to 58.30 rubles per kg) (excluding VAT).
As a result of earlier investments, poultry volumes increased by 50% in the second half of the year compared to the same period in 2005. Total 2006 volume growth was also up 36% compared to 2005.
In January 2007, we launched a TV advertising campaign to support our leading Poultry brand, Petelinka.
Pork
Throughout 2006 the environment for pork sales was favorable and the impact on pork prices exceeded the management's expectations. Prices increased by 19% in 2006 when compared to 2005 from $1.79 per kg of live weight to $2.14 (excluding VAT). In rubles, prices increased by 15% from 50.78 rubles per kg to 58.16 rubles per kg (excluding VAT).
Volumes in the pork division from our existing facilities increased by 7%, in line with our forecasts.
Lipetsk recorded its first production output in December. Since then the facility has already brought over 900 tonnes of live weight pork to market.
Meat processing
Our product portfolio mix has moved with the demands of the marketplace towards more high margin, value-added products. As a result we have increased volumes of premium high margin products such as semi-smoked, cooked smoked sausages, deli and meat retail format and decreased low value, low segment products which are low margin volume drivers.
As a result average prices increased by 15% from $2.59 per kg to $2.97 per kg (excluding VAT). In rubles the price increased by 10% (from 73.37 rubles to 80.80 rubles) (excluding VAT).
Volumes slightly decreased year-on-year by 4% due to a decrease in the low margin volume drivers
In line with its strategy aimed at expanding the network of regional trading houses in Russia's largest cities, the Company has reconstructed and opened 7 Trade Houses (storage facilities) in 2006 in Ufa, St Petersburg, Saratov, Samara, Ekaterinburg, Perm and Kazan. These facilities will enable the Company to further develop its retail partnerships, increasing the share of premium, high margin products in our portfolio.
Management remains confident regarding a satisfactory performance for 2006.
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