| Cherkizovo Group / 1st Quarter Results Cherkizovo Group Announces Financial Results for the First Quarter of 2017 17-May-2017 / 10:00 CET/CEST Dissemination of a Regulatory Announcement, transmitted by EquityStory.RS, LLC - a company of EQS Group AG. The issuer is solely responsible for the content of this announcement. Cherkizovo Group Announces Financial Results for the First Quarter of 2017 Moscow, Russia - 17 May 2017 - Cherkizovo Group (LSE: CHE; MOEX: GCHE) (hereinafter 'Cherkizovo' and 'the Group'), the largest vertically integrated meat and feed producer in Russia, today announces its unaudited consolidated IFRS results for the first quarter ending 31 March 2017. First Quarter 2017 financial highlights - Net revenue rose 13% year-on-year to RUB 21.0 billion - Gross profit increased by 83% year-on-year to RUB 5.6 billion, from RUB 3.1 billion in 1Q 2016 - Gross margin of 26.9% versus 16.6% in 1Q 2016 - Operating expenses slightly increased to RUB 3.2 billion from RUB 3.1 billion in 1Q 2016 - Adjusted EBITDA* was more than five times higher year-on-year and reached RUB 3.7 billion, compared to RUB 0.7 billion in 1Q 2016 - Adjusted EBITDA* margin of 17.8% compared to 3.9% in 1Q 2016 - Net profit for the period was RUB 1.9 billion, compared to a loss of RUB (0.4) billion in 1Q 2016 - Net operating cash flow for the period was RUB 2.1 billion, compared to RUB (1.3) billion in 1Q 2016 - Net debt** was RUB 38.6 billion as at 31 March 2017, compared to RUB 36.9 billion as at 31 December 2016 - The effective cost of debt was 9.5% (2016: 9.7%) - Earnings per share of RUB 44.1 (1Q 2016: RUB (10.1))
Key corporate highlights for the reporting period - Cherkizovo Group launched a new grain dryer facility in Znamensk district, Orel region, with a capacity of 200 tonnes of wheat per hour. A grain storage facility with a total capacity of 60,000 tonnes is being built at the site and is near completion. - The Group launched its first replacement chick site at the new poultry production facility in Lipetsk region. After implementing its import substitution strategy, the Group will ultimately achieve 90% self-sufficiency in hatching eggs. - The Group launched a new sow farm in Lipetsk region. Once fully operational, the facility will boost production in the Group's pork segment by 350,000 heads per annum. - Cherkizovo launched its new turkey brand, Pava-Pava, which was created to promote products manufactured at the Tambov Turkey facility, a joint venture between Cherkizovo Group and Grupo Fuertes, Spain's leading agricultural producer. Key corporate events after reporting period - On 26 April 2017 Cherkizovo completed the acquisition of NAPKO, one of Russia's leading grain producers. The transaction increases Cherkizovo Group's total operating land bank to 287,000 hectares. The Group's self-sufficiency in grain is expected to reach 60% over the next few years from approximately 30% at the end of last year.
Sergei Mikhailov, the CEO of Cherkizovo Group, commented: 'Cherkizovo Group enjoyed an excellent first quarter on the back of an increase in production, recovery in market prices, stabilisation in consumer demand and the local currency and ongoing improvement in operational efficiency and costs. The Group's revenues experienced a double digit increase, while EBITDA growth was five times that of the same period last year and ahead of budget. Our strategy to increase our share of branded, value-added products and to derive cost efficiencies throughout our vertically integrated supply chain allowed us to deliver a solid top-line performance across all segments, while our operating expenses remained on the level of the corresponding period last year. Pork was our top-performing segment, with year-on-year revenue growth of 22%. In addition, Poultry is winning the premium market segment, as the share of Petelinka brand has continued to grow year-on-year. We are also expanding our presence across Russia. Cherkizovo's poultry products are now available in St Petersburg, while our processed meat products have entered the Urals and North-West federal regions.' Financial summary
1 as of December 31, 2016 Revenue Net sales increased by 13% year-on-year to RUB 21.0 billion, compared to RUB 18.5 billion in the first quarter of 2016. The poultry and pork segments were the most significant growth drivers, with average price increases of 5% and 10%, respectively. The pork segment's performance was also boosted by a 12% year-on-year rise in production volumes in the first quarter. Gross Profit Gross profit increased by 83% year-on-year to RUB 5.6 billion from RUB 3.1 billion in the first quarter of 2016. The strong performance came on the back of higher sales and lower feed components costs, which are largely denominated in foreign currency, and the first quarter of 2017 saw the rouble appreciate to the level last seen in July 2015. The combination of lower costs and higher sales lifted the gross margin to 26.9% in the first quarter of 2017 from 16.6% in the corresponding period in 2016. Operating Expenses Operating expenses slightly increased to RUB 3.2 billion from RUB 3.1 billion in 1Q 2016. Operating expenses as percentage of sales fell to 15.2% in 1Q 2017, compared to 16.7% in 1Q 2016.
Adjusted EBITDA In the first quarter of 2017, adjusted EBITDA reached RUB 3.7 billion, which is more than five times the figure reported in 1Q 2016. The adjusted EBITDA margin for the first quarter of 2017 came in at 17.8%, compared to 3.9% in the corresponding period of 2016. Interest Expense Interest expense was down 31% year-on-year to RUB 0.9 billion in the first quarter of 2017, compared to RUB 1.3 billion in the first quarter of 2016. Net Profit Net profit for the Group amounted to RUB 1.9 billion in the first quarter of 2017, compared to a net loss of RUB (0.4) billion in the first quarter of 2016. Net profit margin in the first quarter of 2017 reached 9.2% compared to a negative margin (2.4%) in the corresponding period of 2016. Cash Flow Net operating cash flow for the first quarter of 2017 reached RUB 2.1 billion compared to RUB (1.3) billion in 1Q 2016. This was a result of increasing operating income. Business segments
# Includes intersegment sales Poultry Division First quarter sales volumes decreased 2% year-on-year to 125,548 tonnes of sellable weight (1Q 2016: 128,227 tonnes). In the same period in 2016, management decided to sell excess inventory due to market volatility, which boosted sales volumes. The average price during the first quarter of 2017 increased by 7% year-on-year to 92.40 RUB/kg[1] as branded products, HoReCa and value-added ready-to-cook products represented a larger share of sales. Total sales for the division increased 4% year-on-year to RUB 11.8 billion (1Q 2016: RUB 11.4 billion). This growth was a result of the rise in the average price as brand name and value added products took a higher share of sales. Gross profit grew by 174% year-on-year to RUB 2.6 billion from RUB 1.0 billion in the first quarter of 2016. This was as a result of lower feed costs due to the appreciation of the rouble. The corresponding period of 2016 saw the rouble weaken to a record low relative to the US dollar and Euro and led to a significant increase in our feed costs, which are largely denominated in foreign currencies. The gross margin for the first quarter of 2017 consequently increased to 22.2% from 8.4% in the corresponding period of 2016. Operating expenses as a percentage of sales in the first quarter dropped to 10.0% from 11.2% in the first quarter of 2016, due to lower repairs & maintenance, payroll and advertising & marketing expenses. Operating income for the first quarter of the year came in at RUB 1.4 billion, compared to a loss of RUB (0.3) billion in the first quarter of 2016, while the operating margin increased to 12.1% in 1Q 2017 from (2.8%) in the corresponding period of last year. Net profit for the division came in at RUB 1.2 billion, compared to a loss of RUB (0.8) billion in the first quarter of 2016. Adjusted EBITDA reached RUB 2.0 billion in the first quarter of 2017 compared with RUB 0.1 billion in the first quarter of 2016, while the adjusted EBITDA margin increased to 17.1% from 0.9% in the first quarter of 2016. Pork Division Production volumes in the first quarter of the year increased 12% year-on-year to 44,978 tonnes (1Q 2016: 40,138 tonnes). This was due to higher production levels following the launch of two new wean-to-finish sites in Voronezh in September and October 2016, as well as the ongoing genetics improvement strategy. The average price rose by 10% year-on-year to 90.23 RUB/kg (1Q 2016: 81.73 RUB/kg). This increase was driven by growing consumption in Russia, which has been fuelled by the promotional activity of retail chains, along with the stabilisation of consumer purchasing power. Total sales in the pork division increased 22% year-on-year to RUB 3.9 billion (1Q 2016: RUB 3.2 billion). This sales growth was expected as both volume and average price increased year-on-year. Gross profit in the first quarter of 2017 doubled to RUB 1.2 billion (1Q 2016: RUB 0.7 billion). The segment's gross margin rose to 31.5% in the first quarter of the year from 23.0% in the same period of 2016. Operating expenses as a percentage of sales in the first quarter of 2017 were lower compared to the first quarter of 2016 and stood at 1.8% (1Q 2016: 5.6%). Payroll, taxes and rent were the main drivers behind the decrease. Operating income increased twice year-on-year to RUB 1.2 billion from RUB 0.6 billion in the first quarter of 2016. The operating margin increased to 29.7% from 17.4% in the previous year. Net profit increased by 161% year-on-year to RUB 1.1 billion (1Q 2016: RUB 0.4 billion). Adjusted EBITDA increased 133% year-on-year to RUB 1.4 billion. The adjusted EBITDA margin increased to 35.3% in the first quarter of 2017 from 18.4% in 1Q 2016. Meat Processing Division Sales volume increased by 4% year-on-year to 50,479 tonnes from 48,615 tonnes in the first quarter of 2016. This was due to product portfolio growth in the modern trade channel and geographical expansion into the Urals and North West federal regions. During the reporting period, the average price increased by 6% year-on-year to 151.46 RUB/kg. Total sales were 7% higher in the first quarter of 2017 and reached RUB 7.4 billion (1Q 2016: RUB 6.9 billion). The increase was a result of sales volume growth. Gross profit increased by 20% year-on-year to RUB 1.4 billion in the first quarter of the year, compared to RUB 1.2 billion in the first quarter of 2016. The gross margin rose to 18.8% in the first quarter of 2017 from 16.8% in the first quarter of 2016. In the first quarter of 2017, operating expenses as a percentage of sales decreased to 12.1%, compared to 12.3% in the corresponding period of last year. This was a result of lower marketing and selling expenses. Operating income increased by 58% year-on-year to RUB 0.5 billion from RUB 0.3 billion in the first quarter of 2016. The operating margin rose to 6.7% from 4.5% in the first quarter of 2016. In the reporting period, the meat processing segment generated net profit of RUB 0.5 billion, an increase of 70% year-on-year (1Q 2016: RUB 0.3 billion). In the first quarter of 2017, adjusted EBITDA grew by 48% year-on-year to RUB 0.6 billion (1Q 2016: RUB 0.4 billion). The adjusted EBITDA margin reached 8.7% in the first quarter of the year, compared to 6.3% in the first quarter of 2016. 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. Financial Position The Group's capital expenditure on property, plants, equipment and maintenance amounted to RUB 1.8 billion in the first quarter of 2017, a year-on-year decrease of 13%. Of that, RUB 0.3 billion was invested in the poultry division, primarily the construction of the hatchery and grain storage facility in Lipetsk region (the Eletsprom Project). In the pork division, RUB 0.8 billion was invested into the new finisher complexes in Voronezh region, as well as constructing new finisher complexes in Lipetsk region. The meat processing division received RUB 0.4 billion of investments for the construction of the Kashira meat processing plant in the Moscow Region. In addition, Cherkizovo also invested RUB 0.2 billion in Tambov Turkey and IT projects in the first quarter of 2017. As of 31 March 2017, net debt amounted to RUB 38.6 billion, compared to RUB 36.9 billion at the end of 2016. Total debt stood at RUB 40.4 billion as of 31 March 2017, an increase of 5% from the end of 2016. As of 31 March 2017, long-term debt represented 64% of the debt portfolio and amounted to RUB 26.0 billion. Short-term debt stood at RUB 14.4 billion, or 36% of the portfolio. The effective cost of debt was 9.5% in 1Q 2017 (2016: 9.7%). Subsidised loans and credit lines made up 34% of the debt portfolio in 1Q 2017 (1Q 2016: 77%). Cash and cash equivalents totalled RUB 1.1 billion as at 31 March 2017. Subsidies In the first quarter of 2017, the Group accrued subsidies for interest reimbursement of RUB 0.1 billion, which offset interest expense (1Q 2016: RUB 0.6 billion). The Group received RUB 0.05 billion (RUB 47,135 thousand) of subsidies in the first quarter of 2017, compared to RUB 0.1 billion in the corresponding period of 2016. Outlook for 2017 The macroeconomic stability seen at the beginning of the year has carried over into the second quarter. The rouble has continued to appreciate slightly relative to the US dollar and Euro, which directly benefits Cherkizovo's feed costs. While many of these factors look positive for Cherkizovo going forward, it is still too early to tell whether these trends will persist throughout the remainder of 2017. Cherkizovo Group expects to harvest over 562,000 tonnes in 2017, a 20% increase on the 2016 level. The quality of crops is also anticipated to be significantly better than last year. By the end of the year, the Group's self-sufficiency in grain is forecast to reach 35%, which will further strengthen the Group's vertically integrated business model. Russia is expected to reach self-sufficiency in pork production over the next few years and Cherkizovo is capitalising on this opportunity. In 2017, the Group plans to complete the construction of pork clusters in Voronezh and Lipetsk regions, which will boost annual output by an additional 70,000 tonnes to reach 280,000 tonnes. The Group has laid a solid foundation for future growth with the launch of a number of strategic initiatives this year, including the Tambov Turkey project, which is expected to reach full operational capacity this year. The Elets egg hatchery project has also been completed and will make the Group self-sufficient in hatching eggs by the end of the year. In addition, the Kashira meat processing plant, the largest of its kind in Europe and the largest investment in the food sector to date in the Moscow region, is due for completion by the end of the year. All of these projects will significantly boost production capacity and should generate solid returns over the years to come. For more information please visit www.cherkizovo.com or contact Cherkizovo Group Irina Kravets, PR Manager, +7 (495) 660 2440 ext. 15171,i.kravets@cherkizovo.com About Cherkizovo Group Cherkizovo Group isthe largest meat and feed producer in Russia. The Group is a top-3 producer in the poultry, pork and processed meat markets and is the largest feed manufacturer in the country. Cherkizovo Group encompasses eight full cycle poultry production facilities, 15 modern pork production facilities, six meat processing plants, eight feed mills and more than 287,000 hectares of agricultural land. In 2016, Cherkizovo Group produced 903,000 tonnes of 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 consistently delivered stable, long-term sales growth and profitability. The Group's consolidated revenue reached RUB 82.4 billion in 2016. Cherkizovo Group shares are traded on the London Stock Exchange (LSE) and 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, write-off of receivables from insurance company, share of loss of a joint venture and loss on disposal of subsidiaries 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.
APPENDIX I: KEY DATA AND FIGURES
UNAUDITED 3 Months 2017 Consolidated Selected Financial Data UNAUDITED 3 Months 2017 Consolidated Selected Financial Data Continued
#This amount represents unrealised margin on inter-division sales and relates mainly to the sale of grain from Grain to Feed division UNAUDITED CONSOLIDATED INCOME STATEMENT DATA
POULTRY DIVISION UNAUDITED INCOME STATEMENT DATA
PORK DIVISION UNAUDITED INCOME STATEMENT DATA
MEAT PROCESSING DIVISION UNAUDITED INCOME STATEMENT DATA
FEED DIVISION UNAUDITED INCOME STATEMENT DATA
APPENDIX II: UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME FOR THREE MONTHS ENDED 31 MARCH 2017
APPENDIX III: UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION AS OF 31 MARCH 2017
*** Starting from 2017 the Group uses special bank accounts as a guarantee for fulfillment of the Group's obligations under the purchase contracts with foreign suppliers of machinery and equipment. UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSISION AS OF 31 MARCH 2017 Continued
APPENDIX IV: UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOW FOR THE THREE MONTHS ENDED 31 MARCH 2017
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOW FOR THE THREE MONTHS ENDED 31 MARCH 2017 Continued
The EquityStory.RS, LLC Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Archive at www.dgap.de/ukreg | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Language: | English |
| Company: | Cherkizovo Group |
| Lesnaya str. 5B, White Square Office Center, 12th | |
| 125047 Moscow | |
| Russia | |
| Phone: | +7 495 660-24-40 |
| Fax: | +7 495 788-32-32 |
| E-mail: | info@cherkizovo.com |
| Internet: | www.cherkizovo.com |
| ISIN: | US1641452032 |
| Listed: | Foreign Exchange(s) London, Moscow |
| Category Code: | QRF |
| TIDM: | CHE |
| Sequence No.: | 4202 |
| End of Announcement | EquityStory.RS, LLC News Service |
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574697 17-May-2017
