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Fresh Produce

Russian Meat Producer Cherkizovo Group Sees Boost From Retail Sales In First Half

Russian meat producer Cherkizovo Group has posted a 8.8% increase in revenue in the second quarter of its financial year, to RUB 60.6 billion (€690 million).

The group said that the sales increase was driven by a 7% increase in the retail channel, with chicken, turkey and meat products seeing a sales boost, particularly its Chicken Kingdom, Pava-Pava and Cherkizovo brands.

Adjusted EBITDA rose by 27.7%, to RUB 10.3 billion, while EBITDA margin increased to 17.1%, up from 14.5% a year earlier.

Export Business

Export sales also doubled in the first-half period, to RUB 4.9 billion (€56 million), with China the main destination for the company's export products, mainly chicken.

At the same time, however, the business did take a significant hit to its HoReCa business, which saw sales down 31% year-on-year in the first half, as a result of restaurant closures due to COVID-19.

All of its production facilities remained operational during the pandemic, with the business implementing 'a number of measures' to safeguard operations and employee safety, including 'elevated hygiene and disinfection protocols, restricted access to production sites, re-allocation of some production among plants and hiring of additional personnel to minimise risks of possible disruption'.

"We delivered growth in revenues and profits in all our segments," commented Sergei Mikhailov, CEO of Cherkizovo, who said that while COVID-19 "significantly altered" the macro environment, it also presented an opportunity.

"In our chicken business, we’ve shifted volumes that we had lost from foodservice clients into retail and increased sales of the products under 'Chicken Kingdom' - our mid-market brand, simultaneously boosting exports, the latter contributing meaningfully to our profitability," he said.

"Our pork business remains in good shape, with EBITDA profitability of 32.5%, despite operating in an environment where domestic pork producers keep adding volumes, and export opportunities remain limited, resulting in local pricing pressures. [...] Turn-around of our meat-processing unit is ongoing, as the segment benefited from lower input prices and tweaks to our product portfolio."

Network Investment

During the period, Cherkizovo said that it broke ground on an oil extraction plant in Elets, in the Lipetsk region, which will 'further enhance' its vertically integrated business model.

In addition, in July, the group teamed up with Spain's Grupo Fuertes to open a new facility of Tambov Turkey, as well as signing a preliminary agreement with Cargill to acquire the latter's chicken processing facility in Efremov, in the Tula region.

The Cargill acquisition will "accelerate the recovery" of the HoReCa business for Cherkizovo, Mikhailov said, adding that this remains a "key strategic priority" for the business.

© 2020 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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