Cherkizovo Group Announces first half 2020 Financial Results

August 20, 2020

Moscow, Russia – August 20, 2020– PJSC Cherkizovo Group (MOEX: GCHE), the largest vertically integrated meat producer in Russia, today announces its unaudited consolidated IFRS results for the first half of 2020.


Second quarter financial highlights

·        Revenue increased by 4.9% year-on-year (y-o-y) to RUB 30.4 billion.

·        Gross profit of RUB 10.6 billion, was 42.1% higher than a year ago result.

·       Adjusted EBITDA* of RUB 5.3 billion was 31.5% higher than in 2Q19. Adjusted EBITDA margin improved to 17.5%, from 14.0% in 2Q19.

·       The Group’s net profit RUB of 5.3 billion, increased by 140.0% compared to 2Q19. Adjusted net profit** totalled RUB 2.3 billion, up 75.0% from 2Q19.

First half financial highlights

·        Revenue increased by 8.8% year-on-year (y-o-y) to RUB 60.6 billion.

·        Gross profit of RUB 19.4 billion, was 32.4% higher than a year ago result.

·       Adjusted EBITDA* increased by 27.7% y-o-y to RUB 10.3 billion. Adjusted EBITDA margin improved to 17.1%, from 14.5% in 1H19.

·       The Group’s net profit RUB of 8.3 billion, increased by 53.4% compared to 1H19. Adjusted net profit** amounted to RUB 3.6 billion, up 8.3% from 1H19.

First half corporate highlights

·                 Our sales in the retail channel increased by 7% y-o-y boosted by chicken, turkey, and meat products sales of our branded products, predominantly under Chicken Kingdom, Pava-Pava and Cherkizovo brands.

·                 During the first half, our export sales doubled compared to 1H19 results and reached RUB 4.9 billion. China remains the main destination for the Company’s export, consuming mostly chicken products.

·                 Sales to HoReCa clients were significantly hit by COVID-19 related restaurants closure in the second quarter with sales for 1H20 down 31% y-o-y compared to 1H19.

·                 In May we broke ground in Elets, the Lipetsk region, to start construction of the oil extraction plant due in 2022 that will further enhance our vertically integrated business model and reduce our foreign currency exposure.

·                 The Group’s facilities remained operational during the pandemic, while management of the Group introduced a number of measures to safeguard continuity and security of operations and employee safety. These actions included elevated hygiene and disinfection protocols, restricted access to production sites, re-allocation of some production among plants and hiring of additional personnel to minimize risks of possible disruption. All these safeguards as well as other steps taken by management allowed the Group to minimize significant business disruptions.

·                 We launched several “food drive” initiatives during COVID-19 quarantine to support medical workers and communities where Cherkizovo operates.


Key corporate highlights after the reporting period

·       On July 15th the Company and Spanish Grupo Fuertes opened a new facility of Tambov Turkey, a second stage of the facility operating under JV that will increase volumes of production by 50% to 85 thousand tonnes in live weight.

·       On July 16th the Group announced the signing of a preliminary agreement with Cargill to acquire its chicken processing facility, located in Efremov, in the Tula region. The deal is subject to regulatory approval from respective Russian authorities and, if approved, is expected to close in a few months. The facility is aimed at quick-service restaurant clientele, which remains one of the key pillars of the company’s growth strategy.

·       On August 18th, the Board of Directors recommended to the Extraordinary General Shareholders Meeting (EGM) to distribute the Company’s net profit following the results of the first half of 2020 in the form of dividends of RUB 48.79 per ordinary share. EGM will take place on September 24th, with the dividend record date of October 5th.

Sergei Mikhailov, CEO of Cherkizovo, commented:

“In the first half of the year, the Company’s outstanding results were achieved against a breakdown of COVID-19 that significantly altered the macro environment, but ultimately presented an opportunity for us. We delivered growth in revenues and profits in all our segments. 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. 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. Our competitive advantage in our pork segment stems from our low-cost position, as we believe that we are running one of the most efficient large-scale pork operations. Turn-around of our meat-processing unit is ongoing, as the segment benefited from lower input prices and tweaks to our product portfolio.

While foodservice was hard hit during the pandemic, our exposure to it was limited – only 5% of total sales in 2019. Moreover, the foodservice channel remains a key strategic priority for Cherkizovo, and we intend to accelerate the recovery of this channel via our acquisition of a modern chicken processing facility from Cargill, which we announced in July.

Lastly, early indications of the harvest campaign are very promising – we’ve added more corn and soy to our crop rotation this year and anticipate an uplift of profitability in this segment on the back of better improving yields.”


Financial summary

RUB mln

2Q 2020

2Q 2019

y-o-y, %

1H 2020

1H 2019

y-o-y, %


30 413

28 980


60 577

55 661


Net change in fair value of biological assets

3 146



4 587

2 248


Net revaluation of harvested crops in stock







Gross profit

10 568

7 438


19 359

14 617


Gross margin



9.0 p.p.



5.7 p.p.

Operating expenses, net

(4 219)

(4 266)


(8 593)

(7 947)


Share of profit/(loss) of joint ventures and associates







Adjusted operating profit 1

3 377

2 229


6 286

4 468


Adjusted operating margin



3.4 p.p.



2.4 p.p.

Adjusted EBITDA 1

5 335

4 058


10 329

8 090


Adjusted EBITDA margin



3.5 p.p.



2.6 p.p.

Profit before income tax

5 236

2 299


8 354

5 198


Net profit

5 280

2 200


8 285

5 401


Adjusted Net profit 1

2 347

1 341


3 612

3 335


Net operating cash flow

4 504

3 683


5 867

3 622


Net debt




62 450

64 558


1 In line with the Group’s management accounting practices and described herein (*,**,***) in more detail, Adjusted operating profit, EBITDA and Adjusted Net profit don’t include the net change in fair value of biological assets and certain other items.


In 1H20, revenue increased by 8.8% y-o-y to RUB 60.6 billion (1H19: RUB 55.7 billion). Revenue growth is attributed to higher volumes across all business segments, and mix improvements in chicken and turkey business units that led to better pricing achieved, offset by lower prices in pork and meat processing segments compared to 1H19.

Gross profit

Gross profit increased by 32.4% y-o-y to RUB 19.4 billion, (1H19: RUB 14.6 billion). Higher gross profit was driven by an increase of revenue and realized cost efficiencies in meat products production and a number of improvements in operations. Gross profit margin improved to 32.0% (1H19: 26.3%).

Operating expenses

Operating expenses increased by 8.1% y-o-y, to RUB 8.6 billion from RUB 7.9 billion a year ago fuelled by higher production volumes. Operating expenses as a percentage of sales remained unchanged from a year ago at 14.2%.

Adjusted operating profit

Adjusted operating profit of RUB 6.3 billion, increased by 40.7% y-o-y from RUB 4.5 billion a year ago. Our adjusted operating profit excludes net change in fair value of biological assets of the Group’s segments in the amount of RUB 4.6 billion and JV in the amount of RUB 86 million.

Adjusted EBITDA

Adjusted EBITDA of RUB 10.3 billion, up by 27.7% compared with a year ago result (1H19: RUB 8.1 billion). Adjusted EBITDA margin increased to 17.1% (1H19: 14.5%) driven by better profitability in the chicken and meat processing segments, offset by a marginal decline in profitability in pork segment.

Interest expense                                                                                                 

Net interest expense in 1H20 remained almost unchanged from a year ago and amounted to RUB 2.2 billion.

Net profit

Net profit for the Group totalled RUB 8.3 billion in 1H20, up 53.4% compared to RUB 5.4 billion in 1H19. Net profit margin increased to 13.7% from 9.7% a year ago.

Adjusted net profit, which excludes changes to the fair value of biological assets, was up by 8.3% y-o-y to RUB 3.6 billion, from RUB 3.3 billion a year ago. Adjusted net profit margin was unchanged from a year ago result of 6.0%.

Cash flow

Operating cash flow expanded by 62.0% to RUB 5.9 billion (1H19: RUB 3.6 billion), driven by higher operating profit.

Capital expenditure and debt

The Group’s capital expenditure on property, plant, equipment and maintenance amounted to RUB 4.3 billion during 1H20, a increase of 9.6% y-o-y.

As of June 30, 2020, net debt**** was RUB 62.5 billion, compared to RUB 64.6 billion at the end of 1H19. Gross debt increased to RUB 68.9 billion as of June 30, 2020, compared to RUB 66.7 billion a year ago. At the end of 1H20 long-term debt accounted for 57% of the debt portfolio and amounted to RUB 39.6 billion. The effective cost of debt***** was 6.6% as of June 30, 2020. Subsidized loans and credit facilities made up 34% of the debt portfolio in 1H20 (1H19: 39%).


Total government grants received for compensation of interest expense amounted to RUB 0.2 billion RUB.

Net change in fair value of biological assets

Net change in fair value of biological assets of RUB 4.6 billion is driven by a higher valuation of grains and market hogs.

Business segments



Sales volume

Change y-o-y, %

Revenue 2

Change y-o-y, %

1H20, k ton

1H19, k ton

1H20, RUB mln

1H19, RUB mln





35 906

32 953


Turkey 3




3 462

2 935






12 312

12 089


Meat processing




19 411

18 968


Samson 4







2 Revenue includes inter-segment sales

3 Volume and revenue reported in turkey section represent turkey sales by Trading Company “Cherkizovo”

4 Results of associate company Samson – Food Products.

Poultry Division   

Sales volumes in 1H20 increased by 6.2% to 343.0 thousand tonnes (1H19:323.1 thousand tonnes) as we benefited from a production boost provided by assets acquired at the end of 2018. The average selling price increased by 2.8% y-o-y to 104.71RUB/kg. Sales growth to federal retail chains and export clients was the key driver adding 3% and 4x respectively during first half of the year, while foodservice sales were negatively impacted by COVID-19 restaurants’ closures. Despite consumer trade down sales of our Petelinka branded products were up 2% compared to 1H19, and we also boosted sales of products under Chicken Kingdom brand by 8%. The segment’s revenue increased by 9.0% and amounted to RUB 35.9 billion (1H19: RUB 33.0 billion).

Net change in fair value of biological assets amounted to negative RUB 0.2 billion, compared to a negative result of RUB 0.3 billion in 1H19.

Gross profit increased by 25.0% y-o-y and totalled RUB 8.6 billion, (1H19: RUB 6.9 billion) driven by volumes growth and operational improvements. Gross margin improved to 23.9%, from 20.8% in 1H19.

Operating expenses as a percentage of sales increased to 10.7% compared to 10.5% a year ago. Operating income increased to RUB 4.7 billion (1H19: RUB 3.5 billion). Operating margin increased to 13.2% from 10.7% in 1H19.

The segment’s profit before income tax amounted to RUB 4.3 billion (1H19: RUB 3.0 billion).

Adjusted EBITDA of RUB 6.4 billion, increased by 26.0% y-o-y, while Adjusted EBITDA margin increased to 17.7% from 15.3% a year ago.

Pork Division

Sales volumes in 1H20 increased by 13.7% y-o-y, to 148.6 thousand tonnes (1H19: 130.7 thousand tonnes), as more market hogs where bred at newly constructed farms. The average selling price of 82.9 RUB/kg, declined by 10.4% y-o-y compared to 92.5 RUB/kg a year ago, as the pork market remains oversupplied domestically. The segment’s revenue increased by 1.8% y-o-y to RUB 12.3 billion (1H19: RUB 12.1 billion).

Net change in fair value of biological assets was RUB 1.4 billion, compared to RUB 1.7 billion a year ago.

Gross profit of RUB 4.9 billion declined by 11.3% compared to RUB 5.5 billion in 1H19, on lower pork prices offset by lower cost of production due to operational excellence. The segment’s gross margin declined to 39.7%, from 45.6% a year ago.

Operating income amounted to RUB 4.5 billion (1H19: RUB 5.3 billion). The segment’s operating margin declined to 36.9% from 43.8% a year ago.

The segment’s profit before income tax declined by 12.1% y-o-y to RUB 4.2 billion (1H19: RUB 4.8 billion).

Adjusted EBITDA compressed by 8.2% y-o-y to RUB 4.0 billion (1H19: RUB 4.4 billion). Adjusted EBITDA margin declined to 32.5% from 36.0% in 1H19.

Meat Processing Division

Sales volumes in 1H20 increased by 7.6% y-o-y to 123.7 thousand tonnes (1H19: 115.0 thousand tonnes), as higher volumes of pork production led to higher pork carcass coupled with the growth of sausages sales, the latter was particularly strong as we managed to grow sales across all our major product categories. The average selling price declined by 4.9% y-o-y to 156.9 RUB/kg (1H19: 164.9 RUB/kg), due to the negative trend in pork carcass price, as sausage and B2B/B2C prices remained stable. As a result, the segment’s revenue increased by 2.3% and reached RUB 19.4 billion (1H19: RUB 19.0 billion).

Gross profit doubled from a year ago result and amounted to RUB 2.2 billion, (1H19: RUB 1.1 billion) due to the lower cost of ingredients for the meat products. The gross margin amounted to 11.3%, compared to 5.9% a year ago.

Operating expenses increased by 17.9% y-o-y, and amounted to 12.2% as a percentage of sales (1H19: 10.6%).

Operating loss amounted to RUB 0.1 billion compared to a loss of RUB 1.0 billion in 1H19.

The segment’s loss before income tax compressed to RUB 0.5 billion, compared to a loss of RUB 0.7 billion a year ago, driven by FX loss of RUB 0.3 billion.

Adjusted EBITDA turned to positive RUB 0.6 billion from RUB 0.3 billion loss in 1H19. EBITDA margin was 3.0% in 1H20.

Results of joint ventures and associates

The Group’s significant joint ventures and associates include 50% share in Tambov Turkey, a turkey producer established by the Company and its partner and shareholder Grupo Corporativo Fuertes, our 75% share in Samson – Food products, a meat processor in St-Petersburg, and our 50% share in Cobb-Russia.

Total result in consolidated EBITDA of the Group from all JVs and associates amounted to RUB 474 million, up 81.6% from a year ago (1H19: RUB 261 million), mostly due to results improvements at both Tambov Turkey, and Samson – Food products.


We are pleased to report that our business is performing well, despite COVID-19 related disruptions, due to investments made and investments we continue to make in strategic projects and related initiatives, in products and marketing and in expansion across sales channels. We attribute our continued success to our leading market share, our strategic focus on the domestic market, our growing branded, value-added products, our diversification of revenue and profit streams through export and foodservice sales, and our strong senior management team which is supported by dedicated employees that remain at the forefront of our operations and drive continuity and efficiency of day to day operations.

Our major expansion and modernization projects include the oil extraction plant, that will add to our vertical integration and further reduce FX related risks, and expansion of the JV Tambov Turkey facility aimed to tap consumer’s demand for modern, healthy branded products

We see exciting opportunities to pursue consolidation on the domestic market, and carefully evaluate all options against our strategic goals, priorities and return objectives.