OJSC CHERKIZOVO GROUP. TRADING UPDATE FOR FULL YEAR 2009

February 2, 2010

Cherkizovo OJSC (LSE: CHE), one of Russia's leading integrated and diversified meat producers, today issues a trading update ahead of its results for the year ended 31 December 2009, which will be reported in April 2010. 

Poultry Division 


During 2009 Cherkizovo focused on improving the efficiency of its poultry operations  by decreasing the density of breeding. While this has improved production indicators, total sales volumes in the poultry division in 2009 remained largely flat, slightly decreasing by 2% to approximately 184,300 tonnes of slaughter weight compared to 187,000 tonnes in 2008.
The pricing environment for poultry products in Russia remained stable throughout the year, mostly due to a 30% decrease in poultry import quotas. Prices for Cherkizovo poultry sales increased by 16% from 63.87 roubles per kg in 2008 to 74.33 roubles per kg in 2009 (excluding VAT). As a result of the 28% depreciation of the rouble over the period, prices in dollar terms decreased by 9% from $2.57 per kg in 2008 to $2.34 per kg in 2009 (excluding VAT)?. 

Pork Division 

During the year Cherkizovo’s new pork farms in Lipetsk and Tambov operated at close to full capacity, and sales volumes in the pork division in 2009 increased by 38% to approximately 53,800 tonnes of live weight, compared to approximately 39,000 tonnes in 2008.
The pricing environment for pork products in Russia was broadly favourable, although towards the end of the year increases in live imports exercised some downward pressure on selling prices. Prices for Cherkizovo pork sales in rouble terms increased by 6% from 68.36 roubles per kg in 2008 to 72.12 roubles per kg in 2009 (excluding VAT). In dollar terms, prices decreased by 17% from $2.75 per kg of live weight in 2008 to $2.27 per kg of live weight in 2009 (excluding VAT)*. 

Meat Processing Division 


In 2009 due to decreasing volumes of lower-priced products and lower consumption in the regions of Russia sales volumes in the meat processing segment decreased by 10% to approximately 130,000 tonnes.
Average prices increased by 10% from 103.86 roubles in 2008 to 113.80 roubles in 2009 (excluding VAT), mostly due to an increase in imported raw meat prices. Division prices in dollar terms decreased by 14% from $4.18 per kg in 2008 to $3.59 per kg in 2009 (excluding VAT)*.  


Commenting on the performance Sergei Mikhailov, CEO of Cherkizovo Group said: "Despite the tough economic environment in 2009 Cherkizovo has continued investing in production growth. These investments have concentrated on large-scale projects to increase poultry capacity which will provide significantly higher output from 2011. The pork division has continued to deliver its volume growth in line with management’s expectations. Accordingly, the management of the Group is satisfied with the Company's overall performance and anticipates that the Group will report strong 2009 results, reflecting the impact of favourable rouble pricing, and continued sales momentum for our products.   

In 2010 we anticipate growth across our pork and poultry divisions, as our new pork operations reach full capacity and we start increasing poultry volumes at our Bryansk poultry cluster towards the end of the year. The Group expects the pricing environment for our products to remain positive driven by a decrease in imports and growing domestic demand. The management is confident that the Group will continue to focus on providing efficiency increases and delivering against our strategy."