Cherkizovo Group Announces third quarter and nine months 2020 Financial Results

November 19, 2020

Moscow, Russia – November 19, 2020– PJSC Cherkizovo Group (MOEX: GCHE), the largest vertically integrated meat producer in Russia, today announces its unaudited consolidated IFRS results for the third quarter and nine months of 2020.

Third quarter financial highlights

·        Revenue increased by 5.9% year-on-year (y-o-y) to RUB 31.7 billion.

·        Gross profit of RUB 9.8 billion, was 53.3% higher than a year ago result.

·       Adjusted EBITDA* of RUB 10.5 billion was 38.2% higher than in 3Q19. Adjusted EBITDA margin improved to 33.0%, from 25.3% in 3Q19.

·       The Group’s net profit RUB of 4.5 billion, almost tripled compared to 3Q19. Adjusted net profit** totaled RUB 6.7 billion, up 66.8% from 3Q19.

Nine months financial highlights

·        Revenue increased by 7.8% year-on-year (y-o-y) to RUB 92.3 billion.

·        Gross profit of RUB 29.1 billion, was 38.8% higher than a year ago result.

·       Adjusted EBITDA* increased by 32.8% y-o-y to RUB 20.8 billion. Adjusted EBITDA margin improved to 22.5%, from 18.3% in 9M19.

·       The Group’s net profit RUB of 12.8 billion, increased by 93.3% compared to 9M19. Adjusted net profit** totaled RUB 10.3 billion, up 40.3% from 9M19.

Three months corporate highlights

·                 Sales in the retail channel increased by 7% y-o-y boosted by chicken and meat products sales of our branded products, predominantly under Petelinka and Cherkizovo brands. Export sales remained a significant growth driver for the Company adding 61% y-o-y, while foodservice sales partially recouped after a slump in the 2Q20.

·                 On August 16th ACRA assigned A+ (Russian scale) rating to the Group with a stable outlook, citing strong business profile.

·                 On September 18th Cherkizovo issued 3.5-year rouble denominated bonds of RUB 6.3 billion with a coupon of 6.2%.

·                 On September 25th, Extraordinary General Meeting resolved to reduce the Company’s authorized capital by RUB 29,167.59 by redeeming 2,916,759 treasury shares (6.6344% of the authorized capital).

Key corporate highlights after the reporting period

·        On October 1st the Group completed the acquisition of the chicken processing facility aimed at foodservice clients, located in Efremov, the Tula region from Cargill.

·       On November 18th Roger Michael Jones stepped down from the management board.

Sergei Mikhailov, CEO of Cherkizovo, commented:

“I am pleased and proud to report that Cherkizovo continued to perform well in the face of the extraordinary challenges emanating from the ongoing COVID-19 public health and economic challenges associated with it.

Cherkizovo’s priorities remain the safety of our employees and the uninterrupted supply of quality products to our clients and ultimate consumers. Our management and employees demonstrated tremendous commitment and courage to enable us to maintain production and supply to customers and markets. While our company and employees were not immune to COVID-19 health issues, we strive to provide a safe work environment and personal protection equipment, especially for production and supply chain workers, and to the best of our ability to support our employees and their families through this difficult time.

In 9M 2020 Cherkizovo achieved growth in revenues and profits of 8% and 40% respectively, despite economic recession, Ruble volatility, rising costs, periodic staff shortages, pressures on consumer disposable income, and shifting consumer preferences. We leveraged advantages and opportunities from our scale, modern operations, vertical integration, segment diversity, cost controls, and emerging foodservice and export channels.

A large share of our profit growth came from our Grain segment, where volume growth was driven by yield improvements, the result of investment in modern agronomy practices. Grain profit performance also benefited from an extremely favorable pricing environment for major crops; however, higher grain prices compounded with huge inflation in other main feed components and impact of ruble weakening will ultimately lead to much higher feed costs for our animal breeding operations, which will put significant pressure on margins as early as the fourth quarter, with continued impact into 2021. Growth of exports, which now account for 8% of our consolidated sales, partly serves as a natural hedge from FX volatility, and it is our intention to grow export sales further.

Cherkizovo strategy includes selectively pursuing compelling consolidation opportunities in our domestic market and in October we concluded an acquisition of a small chicken processing plant that enhances our value-added product portfolio for quick-service restaurants. While current demand for QSR and foodservice generally is depressed due to COVID-19, our medium- and long-term view on foodservice is very favorable and we managed to make the acquisition that we believe is the right strategic fit for us going forward.

We are putting significant effort and investment into product development and marketing, to strengthen our major brands, namely Petelinka, Chicken Kingdom, Cherkizovo, and Pava-Pava, and to evolve our product portfolio to satisfy shifting customer demands.”


Financial summary

RUB mln

3Q 2020

3Q 2019

y-o-y, %

9M 2020

9M 2019

y-o-y, %


31 727

29 958


92 304

85 619


Net change in fair value of biological assets

(2 386)

(2 813)


2 201



Net revaluation of harvested crops in stock

4 012

1 324


3 389



Gross profit

9 770

6 374


29 129

20 991


Gross margin



9.5 p.p.



7.1 p.p.

Operating expenses, net

(4 251)

(3 933)


(12 844)

(11 880)


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







Adjusted operating profit 1

7 869

5 163


14 155

9 631


Adjusted operating margin



7.6 p.p.



4.1 p.p.

Adjusted EBITDA 1

10 464

7 572


20 793

15 662


Adjusted EBITDA margin



7.7 p.p.



4.2 p.p.

Profit before income tax

4 647

1 441


13 001

6 639


Net profit

4 530

1 227


12 815

6 628


Adjusted Net profit 1

6 727

4 033


10 339

7 368


Net operating cash flow

5 285

5 327


11 152

8 949


Net debt




62 246

62 390


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.


During 9M20, revenue increased by 7.8% y-o-y to RUB 92.3 billion (9M19: RUB 85.6 billion). Revenue growth is attributed to higher volumes across all business segments, mix improvements in the meat processing segment, better prices for major crops harvested, and offset by lower prices in pork and meat processing segments compared to a year ago.

Gross profit

Gross profit up by 38.8% y-o-y to RUB 29.1 billion, (9M19: RUB 21.0 billion). Higher gross profit was driven by an increase of revenue and realized cost efficiencies, predominantly in pork production, net change in fair value of biological assets, and net revaluation of harvested crops in stock – the latter reflecting better harvest at the prices above the levels of the last year. Gross profit margin improved to 31.6% (9M19: 24.5%).

Operating expenses

Operating expenses increased by 8.1% y-o-y, to RUB 12.8 billion from RUB 11.9 billion a year ago fuelled by higher production volumes. Operating expenses, 13.9% as a percentage of sales remained unchanged from a year ago result.

Adjusted operating profit

Adjusted operating profit of RUB 14.2 billion, increased by 47.0% y-o-y from RUB 9.6 billion a year ago. Adjusted operating profit excludes net change in fair value of biological assets of the Group’s segments of RUB 2.2 billion and JV in the amount of RUB 275 million.

Adjusted EBITDA

Adjusted EBITDA of RUB 20.8 billion, up by 32.8% compared with a year ago result (9M19: RUB 15.7 billion). Adjusted EBITDA margin increased to 22.5% (9M19: 18.3%) as all segments boosted profitability, with the grain segment adding the most to consolidated EBITDA.

Interest expense                                                                                                 

Net interest expense of RUB 3.2 billion increased by 2.3% compared to a year ago results.

Net profit

Net profit for the Group totaled RUB 12.8 billion in 9M20, up 93.3% compared to RUB 6.6 billion in 9M19. Net profit margin increased to 13.9% from 7.7% a year ago.

Adjusted net profit was up by 40.3% y-o-y to RUB 10.3 billion, from RUB 7.4 billion a year ago. Adjusted net profit margin increased to 11.2% from 8.6% a year ago.

Cash flow

Operating cash flow expanded by 24.6% to RUB 11.2 billion (9M19: RUB 8.9 billion), driven by higher operating profit.

Capital expenditure and debt

The Group’s capital expenditure on property, plant, equipment and maintenance amounted to RUB 6.9 billion during 9M20, an increase of 11.7% y-o-y.

As of September 30, 2020, net debt**** was RUB 62.2 billion, almost unchanged from a year ago. Gross debt increased to RUB 77.5 billion as of September 30, 2020, compared to RUB 65.5 billion a year ago. At the end of 9M20 long-term debt accounted for 54% of the debt portfolio and amounted to RUB 41.6 billion. The effective cost of debt***** was 5.9% as of September 30, 2020. Subsidized loans and credit facilities made up 40% of the debt portfolio in 9M20, in line with a year ago results.


Total government grants received for compensation of interest expense amounted to RUB 0.3 billion RUB.

Net change in fair value of biological assets

Net change in fair value of biological assets is explained by a higher valuation of grains and market hogs.

Business segments



Sales volume

Change y-o-y, %

Revenue 2

Change y-o-y, %

9M20, k ton

9M19, k ton

9M20, RUB mln

9M19, RUB mln





54 926

51 192


Turkey 3




5 228

4 722






19 340

18 118


Meat processing




30 804

29 315


Samson 4




1 644



2 Revenue includes inter-segment sales

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

4 Volumes denote to sales volumes of associate company Samson – Food Products.

Poultry Division   

Sales volumes in 9M20 increased by 6.4% to 518.9 thousand tonnes (9M19:487.6 thousand tonnes) driven by higher production volumes. The average selling price increased by 0.9% y-o-y to 105.8 RUB/kg. Sales to export markets, mostly China, increased by 217% y-o-y was a major growth driver, followed by domestic retail where sales grew by 3%. Foodservice sales, while recovered compared to the second quarter of 2020, remained below levels of 3Q19. Our major brands performed well. In 9M20 sales of Petelinka and Chicken kingdom branded produce was up 3% a 4% respectively, compared to a year ago result. The segment’s revenue increased by 7.3% and amounted to RUB 54.9 billion (9M19: RUB 51.2 billion).

Net change in fair value of biological assets amounted to RUB 0.4 billion, compared to a negative result of RUB 0.5 billion in 9M19.

Gross profit increased by 14.0% y-o-y and totaled RUB 13.3 billion, (9M19: RUB 11.7 billion) driven by sales growth and negatively affected by an increase in the cost of feed components. Gross margin improved to 24.2%, from 22.8% in 9M19.

Operating expenses as a percentage of sales increased to 10.4% compared to 10.3% a year ago. Operating income increased to RUB 7.8 billion (9M19: RUB 6.4 billion). Operating margin increased to 14.1% from 12.5% in 9M19.

The segment’s profit before income tax amounted to RUB 7.8 billion (9M19: RUB 5.6 billion).

Adjusted EBITDA of RUB 9.4 billion, increased by 6.4% y-o-y, while Adjusted EBITDA margin of 17.1% remained in line with 9M19.

Pork Division

Sales volumes in 9M20 increased by 11.2% y-o-y, to 217.0 thousand tonnes (9M19: 195.2 thousand tonnes), as we further streamlined our production. The average selling price of 89.1 RUB/kg, declined by 4.0% y-o-y compared to 92.8 RUB/kg a year ago. While market participants continued to add production, the soft price environment of the first half of the year improved in the 3Q20. The segment’s revenue increased by 6.7% y-o-y to RUB 19.3 billion (9M19: RUB 18.1 billion).

Net change in fair value of biological assets was RUB 0.7 billion, compared to negative RUB 0.5 billion a year ago.

Gross profit of RUB 6.9 billion increased by 30.9% compared to RUB 5.2 billion in 9M19, due to lower pork prices offset by lower cost of production due to operational excellence and fixed costs absorption as we ramped up our production system to target levels. The segment’s gross margin improved to 35.4%, from 28.9% a year ago.

Operating income amounted to RUB 6.4 billion (9M19: RUB 4.9 billion). The segment’s operating margin increased to 33.0% from 26.9% a year ago.

The segment’s profit before income tax increased by 43.1% y-o-y to RUB 6.0 billion (9M19: RUB 4.2 billion).

Adjusted EBITDA increased by 6.2% to RUB 7.0 billion (9M19: RUB 6.6 billion). Adjusted EBITDA margin changed from 36.3% in 9M2019 to 36.1%.

Meat Processing Division

Sales volumes in 9M20 increased by 6.3% y-o-y to 190.0 thousand tonnes (9M19: 178.7 thousand tonnes), as higher volumes of pork production led to higher pork carcass coupled with the growth of sausages sales. The average selling price declined by 1.0% y-o-y to 162.2 RUB/kg (9M19: 163.8 RUB/kg), as prices for pork carcass declined following the negative dynamics of live pork price, while sausage prices increased by 1%. As a result, the segment’s revenue increased by 5.1% and reached RUB 30.8 billion (9M19: RUB 29.3 billion).

Gross profit increased by 69.6% and amounted to RUB 3.1 billion, (9M19: RUB 1.8 billion) due to higher sales and the lower cost of ingredients for the meat products. The gross margin amounted to 10.0%, compared to 6.2% a year ago.

Operating expenses increased by 15.1% y-o-y, and amounted to 11.7% as a percentage of sales (9M19: 10.7%).

Operating loss narrowed to RUB 0.5 billion compared to a loss of RUB 1.4 billion in 9M19.

The segment’s loss before income tax widened to RUB 1.5 billion, compared to a loss of RUB 1.1 billion a year ago, driven by FX loss of RUB 0.9 billion.

Adjusted EBITDA turned to positive RUB 0.6 billion from RUB 0.3 billion loss in 9M19. EBITDA margin was 2.0% in 9M20.

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, 75% share in Samson – Food products, a meat processor in St-Petersburg, and 50% share in Cobb-Russia.

Total result in consolidated EBITDA of the Group from all JVs and associates amounted to RUB 672 million, up 42.7% a year ago (9M19: RUB 471 million), mostly due to results improvements of JV Tambov Turkey, and Samson – Food products.


Our ambitious and exciting medium-term goals and strategy must overcome a challenging near term macro-economic environment, as the second wave of COVID-19 currently unfolds, including weak GDP growth, ongoing Ruble weakness, and soft consumer demand due to stagnating real disposable incomes.

We are proud of the important role that Cherkizovo and other food production companies are playing to support the country at this difficult time, and we also would like to take the opportunity to express our deep gratitude to the many health care and other critical workers for their bravery and service to others during this unprecedented pandemic.