Cherkizovo Group Announces First Half 2018 Financial Results

August 23, 2018

Moscow, Russia – August 23, 2018 – PJSC Cherkizovo Group (MOEX: GCHE), the largest vertically integrated meat producer in Russia, today announces its unaudited consolidated IFRS results for the period ending June 30, 2018.

Second quarter financial highlights

  • Revenue increased by 5.5% year-on-year (y-o-y) to RUB 23.6 billion.
  • Gross profit improved by 43.5% y-o-y to RUB 10.4 billion.
  • Adjusted EBITDA* decreased by 3.1% year-on-year to RUB 4.3 billion. Adjusted EBITDA margin amounted to 18.1%.
  • Net profit was up by 81.4% and totalled RUB 5.8 billion.
  • Net operating cash flow decreased by 13.4% to RUB 3.8 billion.

First half financial highlights

  • Revenue increased by 5.1% y-o-y to RUB 45.5 billion from RUB 43.3 billion in 1H 2018.
  • Net change in fair value of biological assets and agricultural produce amounted to RUB 7.0 billion in 1H18, compared to RUB 1.2 bln in 1H17.
  • Gross profit was up by 39.1% y-o-y to 17.9 billion from RUB 12.9 billion a year ago.
  • Adjusted EBITDA declined by 14.0% and amounted to RUB 7.0 billion. Adjusted EBITDA margin was 15.3%.
  • Net profit reached RUB 8.7 billion, up 70.5% from 1H17.
  • Net operating cash flow decreased by 25.9% to RUB 4.8 billion.
  • Net debt** amounted to RUB 50.7 billion as of June 30, 2018

Second quarter key corporate highlights

  • During the quarter the Company launched two wean-to-finish facilities in Lipetsk and Voronezh region which will add 10 thousand tonnes of annual live-weight pork production capacity.
  • On May 24th the Group signed an investment agreement with representatives of the Moscow Regional Government to build the second phase of Kashira meat processing complex. Total investment is estimated to be approximatelly RUB 6 billion and would add 60 tonnes/day of meat products and up to 100 tonnes/day of meat cut products to the Company’s installed capacity. The project is expected to be launched in 2022.
  • On June 22nd the Company announced that one of its facilities was affected by the avian flu. The case was isolated at a single production facility and didn’t affect our wider production system. Estimated damages are expected to be limited to RUB 100 million as the facility was insured.

Key corporate highlights after reporting period

  • On July 4th our Petelinka brand received a national Loyalty award as “the best FMCG brand”, and for “the effective use of mobile technologies in loyalty programs”.
  • On July 16th Cherkizovo signed a letter of intent to acquire Altaisky Broiler, a poultry producer located in the Zonalny District of the Altai Territory. Core assets include a hatchery, a feed mill, four fattening sites, a slaughterhouse, and a meat packing plant in Biysk. Altaisky Broiler has capacity to produce up to 67 thousand tons (live weight) of poultry products and has a strong foot print in the Siberian Federal District.
  • On July 17th the first phase of our state of the art, Kashira meat processing plant was launched in the Moscow Region, with capacity to produce c. 30 thousand tonnes of finished meat products per annum. The facility further strengthened the Group’s presence in the meat processing business, and fully embraces the industry 4.0 philosophy, with a fine-tuned production system of AI and robotic interactions ensuring control over the entire production cycle.
  • On August 21st the Board of Directors recommended to shareholders to pay a dividend for the 1H18 in the amount of RUB 20.48 per ordinary share.

Sergei Mikhailov, CEO of Cherkizovo, commented:

“We had a number of positive developments in the first half of 2018, which set the stage for further growth in the upcoming quarters.

Underlying consumer demand remained robust, supported by stable real disposable income and a temporary consumption boost fueled by the FIFA World Cup. After a few quarters of relatively weak poultry and pork prices, the market situation started to improve in late spring on the back of higher feed ingredient costs (i.e. grains and soybean meal), delayed impact of the latest restrictions on meat imports, supply dislocation (the worsening epizootic conditions had their toll, with several cases of avian flu and African Swine fever detected across the country) and a reduction in output from other producers caused by company-specific reasons.

We rapidly expanded our market share in St Petersburg and the North-Western Federal District, Russia’s second biggest regional market which we entered about a year ago. In that region, Petelinka joined the ranks of top-selling products in the poultry category. Overall, sales of our key poultry brands, Petelinka and Chicken Kingdom, saw a double-digit growth in the first half of the year, and were primarily driven by strong expansion in the modern retail channel.

We launched several wean-to-finish pork facilities, which we expect will add to our production volumes starting this year. Moreover, we commissioned our state-of-the-art Kashira meat processing facility and maintained JV Tambov Turkey production at maximum capacity in response to a sharp rise in Pava-Pava sales.

In parallel with increased focus on product marketing, we continue to emphasize production efficiency, biosecurity and food safety, in order to better manage costs, drive share and grow profitability. The previous years’ investments in production expansion, cost optimization and customer acquisition are being rewarded by the favourable market conditions and inspire confidence as we move into the second half of the year and beyond.”

Financial summary

RUB mln 2Q 2018 2Q 2017 Y-o- y, % 1H 2018 1H 2017 Y-o- y, %
Revenue 23 604 22 378 5.5% 45 539 43 349 5.1%
Net change in fair value of
biological assets and
agricultural produce 1
4 073 1 060 284.2% 7 010 1 158 505.4%
Gross profit 10 391 7 240 43.5% 17 922 12 881 39.1%
Gross margin 44.0% 32.4% 39.4% 29.7%
Operating expenses and share of JV results (3 511) (3 071) 14.3% (7 447) (6 257) 19.0%
Operating profit 6 880 4 169 65.0% 10 475 6 624 58.1%
Operating margin 29.1% 18.6% 23.0% 15.3%
Adjusted EBITDA 1 4 275 4 411 -3.1% 6 955 8 086 -14.0%
EBITDA margin, adjusted 18.1% 19.7% 15.3% 18.7%
Profit before tax 5 770 3 142 83.6% 8 708 5 020 73.5%
Net profit 5 755 3 172 81.4% 8 709 5 106 70.5%
Net operating cash flow 3 771 4 353 -13.4% 4 793 6 467 -25.9%
Net debt 50 721 43 192 17.4%

1In line with the Group’s management accounting practices and described herein (*) in more detail, Adjusted EBITDA does not include the net change in fair value of biological assets and agricultural produce.


Revenue increased to RUB 45.5 billion up 5.1% y-o-y (1H17: RUB 43.3 billion), with pork and meat processing segment revenues the major drivers of the increase (up 11.6% and 12.7% y-o-y respectively). Poultry segment revenue were up by 1% compared to 1H17 and amounted to RUB 24.0 billion. Turkey revenue increased by 71.2% y-o-y and totalled RUB 2.6 billion. Revenue increase in the first half was driven by volume growth across all segments, as average selling prices in 1H18 remained below levels of the prior year.

Gross profit

Gross profit increased by 39.1% y-o-y to RUB 17.9 billion, (1H17: RUB 12.9 billion). Gross profit was positively affected by operational efficiency gains in poultry and pork segments, lower feed costs and by the net change in fair value of biological assets and agricultural produce, and was offset by lower selling prices. Gross profit margin went up to 39.4% (1H17: 29.7%). Net of RUB 7.0 billion change in fair value of biological assets and agricultural produce, gross profit declined by 6.9% y-o-y to RUB 10.9 billion.

Operating expenses

Operating expenses increased by 19.0% y-o-y to RUB 7.4 billion, (1H17: RUB 6.3 billion), due to higher selling expenses, which in turn is mostly driven by broadening of our distribution network. Operating expenses as a percentage of sales increased to 16.4% in 1H18 (1H17: 14.4%).

Adjusted EBITDA

Adjusted EBITDA totalled RUB 7.0 billion, a 14.0% decline y-o-y. Adjusted EBITDA margin amounted to 15.3% (1H17: 18.7%) due to lower profitability in poultry and meat processing segments, counterbalanced by better results in the pork segment.

Interest expense

Net interest expense in 1H18 increased by 8.1% y-o-y to RUB 1.5 billion.

Net profit

Net profit for the Group totalled RUB 8.7 billion in 1H18, up 70.5% compared to RUB 5.1 billion in 1H17. Net profit margin improved to 19.1% from 11.8% in 1H17.

Cash flow

Operating cash flow was RUB 4.8 billion (1H17: RUB 6.5 billion), a decline of 25.9% primarily due to the increase in operating expenses.

Capital expenditure and debt

The Group’s capital expenditure on property, plant, equipment and maintenance amounted to RUB 4.4 billion in the first half of 2018, an increase of 11.1% y-o-y. Kashira facility finalization and construction of new wean-to-finish pork facilities were major targets of the capex spend in the reported period.

As of June 30, 2018, net debt** was RUB 50.7 billion, compared to RUB 43.2 billion at the end of 1H17. Total debt increased to RUB 52.7 billion as of June 30, 2018 compared to 45.4 billion a year ago. At the end of 2Q18 long-term debt accounted for 66% of the debt portfolio and amounted to RUB 34.9 billion, while short-term debt totalled RUB 17.8 billion. The effective cost of debt was 7.1% in 1H18 (1H17: 8.6%). Subsidised loans and credit facilities made up 34% of the debt portfolio in 1H18 (1H17: 33%). Cash and cash equivalents totalled RUB 1.4 billion as of June 30, 2018.


The Group accrued direct subsidies of RUB 166.3 million in 1H18 (1H17: RUB 110.8 million). The Group accrued subsidies for interest reimbursement of RUB 410.7 million in 1H18. 

Net change in fair value of biological assets and agricultural produce

A higher net change in fair value of biological assets and agricultural produce is explained by a higher valuation of sows, market hogs, and accounting for the upcoming harvest, and by higher prices of the products that the Group produces.

Business segments

Divisions Sales volume Change
Revenue2 Change
k tonnes
k tonnes
RUB# mln
RUB# mln
Chicken 268.53 254.91 5.3% 23 958 23 721 1.0%
Turkey3 20.29 9.44 114.9% 2 549 1 488 71.2%
Pork 109.83 93.33 17.7% 10 034 8 992 11.6%
Meat processing 110.53 92.38 19.6% 17 607 15 617 12.7%

2 Revenue includes inter-segment sales
3 Volume and revenue reported in turkey section represent turkey sales by Trading Company “Cherkizovo”

Poultry Division

Sales volumes in 1H18 increased by 5.3% and amounted to 268.53 thousand tonnes (1H17: 254.91 thousand tonnes). The average selling price declined by 4% y-o-y to 87.6 RUB/kg mostly due to the weak price environment at the beginning of the 2018 which improved significantly in the late spring/early summer.

The segment’s revenue remained unchanged vs. 1H17 and amounted to RUB 24.0 billion (1H17: RUB 23.7 billion): higher sales volumes were offset by a decline in average selling price, despite an increased share of value-added branded products in the sales mix, specifically Petelinka and Chicken Kingdom.

Gross profit declined by 4.7% y-o-y to RUB 5.5 billion, (1H17: RUB 5.7 billion) due to higher production volumes and associated higher cost, offset by lower prices. Gross margin was 22.9%, vs. 24.2% in 1H17.

Operating expenses as a percentage of sales amounted to 12.0%, an increase from 10.4% in 1H17. Operating income decreased 20.7% y-o-y to RUB 2.6 billion (1H17: RUB 3.3 billion). Operating margin fell to 10.9% in 1H18 from 13.9% in 1H17.

The segment’s profit before income tax amounted to RUB 2.3 billion (1H17: RUB 2.7billion).

Adjusted EBITDA declined 26.2% y-o-y to RUB 3.0 billion (1H17: RUB 4.1 billion), while Adjusted EBITDA margin decreased to 12.6% from 17.2% a year ago.

Pork Division

Sales volumes in the first half of 2018 increased by 17.7% y-o-y, to 109.83 thousand tonnes (1H17: 93.33 thousand tonnes). The average selling price was down by 5.3% y-o-y to 90.1 RUB/kg compared to 95.10 RUB/kg a year ago.

The segment’s total sales increased by 11.6% y-o-y to RUB 10.0 billion (1H17: RUB 9.0 billion). The sales growth is attributed to a higher volume of production, though offset by the weak average selling price in the reporting period.

Gross profit doubled y-o-y, to RUB 7.9 billion (1H17: RUB 4.0 billion) due to higher sales volumes, further improvement in operational KPI’s and a non-cash change in the fair value of biological assets of RUB 3.9 billion (net of the revaluation, gross profit increased by 35.2% to RUB 4.0 billion). The segment’s gross margin stands at 78.5%, up from 44.2% in 1H17.

Operating expenses as a percentage of sales amounted to 3.8%, compared to 1.3% in 1H17.

Operating income was up 94.5% y-o-y, to RUB 7.5 billion from RUB 3.9 billion in 1H17. The segment’s operating margin increased to 74.7% from 42.9% in the first half of 2017.

The segment’s profit before income tax amounted to RUB 7.2 billion compared to the 1H17 result of RUB 3.7 billion.

Adjusted EBITDA increased by 24.8% y-o-y to RUB 4.2 billion (1H17: RUB 3.4 billion). Adjusted EBITDA margin improved to 42.0% vs. 37.6% in 1H17.

Meat Processing Division

Sales volumes in 1H18 were up 19.6% y-o-y to 110.53 thousand tonnes (1H17 92.38 thousand tonnes). The average selling price declined to 160.6 RUB/kg, from 173.4 Rub/kg in 1H17.

The segment’s revenue increased by 12.7% and reached RUB 17.6 billion (1H17: RUB 15.6 billion). Revenue growth was driven by an increased share of carcass in the sales mix, on the back of higher volumes of market hogs production in the pork segment.

Gross profit declined by 15.6% y-o-y to RUB 2.3 billion, (1H17: RUB 2.7 billion). The gross margin fell to 13.1% from 17.5% a year ago.

Operating expenses as a percentage of sales amounted to 11.7%, vs. 12.0% in 1H17.

Operating income decreased by 71.3% y-o-y to RUB 249 million from RUB 870 million in 1H17. Operating margin decreased to 1.4% from 5.6% in 1H17.

The segment’s profit before income tax was RUB 51 million, a decrease of 92.8% y-o-y.

Adjusted EBITDA declined by 48.8% to RUB 614 million from RUB 1.2 billion in 1H17.

Grain Division

Due to the seasonality of the business, results of this segment are reported annually to better reflect the business performance and provide an appropriate basis for comparison.


Market conditions remain favourable, and we believe the improvements in market prices for poultry and pork products which started in the second quarter were driven by a combination of robust consumer demand and supply dislocations, rather than purely by seasonal patterns, and will continue for at least the next few quarters. The macro-economic environment was adversely affected by announced VAT hike and associated inflation uptick. The weaker RUB/USD FX rate and an expected decline in grain harvest in Russia are two factors that might weigh on costs.

We increased focus on our new product development process to diversify sales mix and grow profitability by adding more high-margin, branded value-added products. Furthermore, we will direct our marketing efforts at boosting sales of the Petelinka and Cherkizovo brands, while also phasing out some smaller regional brands.

In line with our strategic priorities to develop and operate a modern, efficient production and supply chain, our investments in Kashira-1 and new pork facilities were recently commissioned, and we believe they will be instrumental in supporting our new product efforts and will favourably impact our operating and financial performance in meat processing going forward. 

Finally, ongoing strategic growth initiatives include expansion alongside leading modern retail chains, selected entry into new regional markets (for example, the ongoing acquisition of Altaisky Broiler, a strong player in the Siberian Federal District, which fits well with our strategic vision) and enhancing our presence in the HoReCa segment.

For more information please visit or contact

Investor Relations
Andrei Novikov

Phone: +7 495 6602440 ext 15430

PR and Media
Olga Gromova

Phone: +7 916 5612551

About Cherkizovo Group

Cherkizovo Group is the largest meat and feed producer in Russia. The Group is a top-3 producer in each of the Russian poultry, pork and processed meat markets.

Cherkizovo Group encompasses eight full cycle poultry production facilities, sixteen modern pork production facilities, six meat processing plants, eight feed mills and 287,000 hectares of agricultural land. The Group also includes Tambov Turkey facility, a joint Russian-Spanish venture. In 2017, Cherkizovo Group produced c. 1 mn tonnes of meat and meat products.

Thanks to its vertically integrated structure, which includes grain growing and storage, feed production, livestock breeding, fattening and slaughtering, and meat processing, alongside a distribution system, the Group has delivered long-term sales growth and profitability. The Group’s consolidated revenue was RUB 90.5 billion in 2017. Cherkizovo Group shares are traded on the Moscow Exchange (MOEX).

Some figures in this press-release are rounded for the reader’s convenience.

Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of Cherkizovo Group. You can identify forward looking statements by terms such as “expect,” “believe,” “anticipate,” “estimate,” “intend,” “will,” “could,” “may” or “might” the negative of such terms or other similar expressions. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, general economic conditions, our competitive environment, risks associated with operating in Russia, rapid technological and market change in our industry, as well as many other risks specifically related to Cherkizovo Group and its operations.

Non-IFRS financial measures. This press release includes financial information prepared in accordance with international financial reporting standards, or IFRS, as well as other financial measures referred to as non-IFRS. The non-IFRS financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with IFRS.

* Adjusted Earnings before Interest, Income Tax, Depreciation and Amortization (“Adjusted EBITDA”). Adjusted EBITDA is defined as profit for the period before income tax expense/benefit, interest income and interest expense, net, foreign exchange loss/gain, depreciation and amortisation expense, net change in fair value of biological assets and agricultural produce, and share of loss of a joint venture plus share of adjusted EBITDA of a joint venture and effect of the unsold current year harvest less the effect of prior year harvest sold during the current period as shown in the reconciliation in Appendix 1. Adjusted EBITDA margin is defined as Adjusted EBITDA as a percentage of our net revenues. Our adjusted EBITDA may not be similar to adjusted EBITDA measures of other companies; is not a measurement under IFRS accounting principles and should be considered in addition to, but not as a substitute for, the information contained in our consolidated statement of operations. We believe that adjusted EBITDA provides useful information to investors because it is an indicator of the strength and performance of our ongoing business operations, including our ability to fund discretionary spending such as capital expenditures, acquisitions and other investments and our ability to incur and service debt. While depreciation and amortization are considered operating costs under generally accepted accounting principles, these expenses primarily represent the non-cash current period allocation of costs associated with long-lived assets acquired or constructed in prior periods. Our adjusted EBITDA calculation is commonly used as one of the bases for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within our industry. Adjusted EBITDA is reconciled to our consolidated statements of operations in Appendix 1.

** Net debt is calculated as total debt minus cash and cash equivalents, short-term bank deposits and long-term bank deposits.

First Half 2018 Financial Results - report & appendix