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Cherkizovo Group (CHE)
Cherkizovo Group Announces Financial Results for the Third Quarter and Nine
Months of 2017
15-Nov-2017 / 11:30 CET/CEST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
Cherkizovo Group Announces Financial Results
for the Third Quarter and Nine Months of 2017
Moscow, Russia - 15 November 2017 - PJSC Cherkizovo Group (LSE: CHE; MOEX:
GCHE), the largest vertically integrated meat and feed producer in Russia,
today announces its unaudited consolidated IFRS results for the period
ending 30 September 2017.
Third quarter financial highlights
- Revenue was RUB 22.8 billion
- Gross profit fell 32% to RUB 4.9 billion
- Gross profit margin of 21.6%
- Adjusted EBITDA* fell 15% to RUB 3.7 billion
- Adjusted EBITDA* margin of 16.0%
9M financial highlights
- Revenue increased by 12% year-on-year (y-o-y) to RUB 66.1 billion from
RUB 59.2 billion in 9M 2016
- Gross profit jumped 37% y-o-y to RUB 17.8 billion from RUB 13.0 billion
in 9M 2016
- Gross profit margin surged to 26.9%, compared to 22.0% in 9M 2016
- Operating expenses were flat and stood at RUB 9.5 billion y-o-y
- Adjusted EBITDA* more than doubled y-o-y to RUB 11.7 billion, compared
to
RUB 5.3 billion in 9M 2016
- Adjusted EBITDA* margin jumped to 17.7% compared to 9.0% in 9M 2016
- Net profit for the period grew 158% y-o-y to RUB 5.6 billion, versus
RUB 2.2 billion in 9M 2016
- Net operating cash flow was RUB 9.8 billion for 9M 2017
- Net debt** was RUB 47.2 billion as at September 30, 2017
- Earnings per share (EPS) reached RUB 130.4 (9M 2016: EPS was RUB 50.0)
Key corporate highlights for 3Q
- In July 2017, Cherkizovo Group announced plans to construct
turkey-fattening sites in Lipetsk region. Current plans envisage the
construction of three turkey-fattening sites, utilising 1,000 hectares of
land. Planned investment in the project amounts to RUB 1.7 billion.
- Also in July, the Group announced plans to extend production in Voronezh
at LISKO Broiler, the region's largest producer of poultry meat.
- In August, the Vasilyevskaya poultry production facility received
permission to export poultry products to Iraq. Obtaining the right to
export is a significant step in the development of the Group's export
potential.
- Also in August, the controlling shareholder of Cherkizovo Group,
together with affiliates of the Company, completed the acquisition of
21.05% of the Group's ordinary shares and global depositary receipts
(GDRs) from funds and portfolios under the management of Prosperity
Capital Management at a price of RUB 1,300 per ordinary share (or the
dollar equivalent for GDRs), for a total consideration of RUB 12.0
billion.
- In September, the Group announced the completion of a record winter
wheat harvest campaign. This year, Cherkizovo Group harvested almost
270,000 tonnes of winter wheat, nearly doubling the amount of last year's
harvest of 140,000 tonnes. This growth was achieved through the expansion
of winter wheat acreage.
Key corporate highlights after reporting period
- In October 2017, Cherkizovo Group announced the completion of the Share
Buyback Offer. An aggregate of 73,407 shares and 503,293 GDRs,
corresponding to 0.93% of the Group's share capital, were purchased for
the total amount of around RUB 532 million. Following the offer, the
controlling shareholder of Cherkizovo Group, together with its affiliates,
controlled 89.62% of the Group's equity.
Sergei Mikhailov, CEO of Cherkizovo, commented:
"The Group's performance this year to date has demonstrated the strength of
the recovery of our business and our domestic and export markets beginning
in late 2016. We saw stable financial and operational results in the third
quarter, and year-to-date, the Group delivered solid top-line and robust
bottom-line growth, despite increased competition from higher levels of
domestic production. For the first nine months of the year, net profit
jumped 158% reflecting continued internal operating improvements, the
ongoing recovery of the Russian consumer sector and currency gains.
We are very encouraged to have generated strong growth and profitability
across all business segments. The pork and poultry segments made sizable
contributions to EBITDA growth in the first nine months of the year.
Meanwhile, the Winter Harvest was a record one for the Group, following the
acquisition of NAPKO, which, as planned, has boosted our self-sufficiency in
grain.
During the last quarter, we advanced investment plans to increase the output
of pork products in Voronezh and Lipetsk regions. In addition, our Tambov
Turkey joint venture has now reached its target production capacity.
To sustain and augment our market leadership in a competitive environment,
we continue to increase our focus on higher value-added products, including
ready-to-eat and processed meat products. To enhance our strong market
share, we are currently building a state-of-the-art processed meat sausage
factory in Kashira, Moscow region, which will be the largest of its kind in
Europe.
In the third quarter, we started to observe some downward trends in the pork
and poultry markets. We expect weakening of prices will affect our
profitability in the short run; however, this trend is due primarily to
seasonal factors. Nevertheless, our overall outlook remains positive."
Financial summary
RUB mln 9M 2017 9M 2016 y-o-y, % 3Q 2017 2Q 2017 q-o-q, %
Revenue 66 129 59 226 12% 22 780 22 378 2%
Gross profit 17 807 13 034 37% 4 927 7 240 -32%
Operating (9 527) (9 455) 1% (3 428) (3 071) 12%
expenses
EBITDA, 11 698 5 346 119% 3 654 4 313 -15%
adjusted
EBITDA 17.7% 9.0% 16.0% 19.3%
margin,
adjusted
Operating 8 122 3 579 127% 1 499 4 169 -64%
profit
Income 5 711 2 273 151% 690 3 142 -78%
before tax
Profit 5 650 2 192 158% 543 3 172 -83%
Net 9 839 5 062 94% 3 372 4 353 -23%
operating
cash flow
Net debt 47 214 36 949* 28% 47 214 43 192 9%
* as of December 31, 2016
Revenue
Net sales increased by 12% y-o-y to RUB 66.1 billion, compared to RUB 59.2
billion in 9M 2016. Our pork, poultry and meat processing segments all
delivered significant growth, with respective y-o-y rises in revenue in the
first nine months of 21%, 3% and 7%. On a quarterly basis, sales growth was
-10%, -1% and 8%. Average prices grew modestly y-o-y and were flat to
negative q-o-q.
Gross profit
Gross profit increased by 37% y-o-y to RUB 17.8 billion from RUB 13.0
billion in 9M 2016. The strong year-on-year performance came on the back of
a recovery in the consumer sector and a stronger rouble, translating into
higher sales and lower feed costs, the latter being largely denominated in
foreign currency. For 9M 2017, the rouble maintained multi-year highs last
seen in 2015. The combination of lower costs and higher sales lifted gross
margin to 26.9% in 9M 2017. At the same time gross profit decreased on a
quarterly basis by 32%.
Operating expenses
Operating expenses were flat y-o-y and stood at RUB 9.5 billion but
increased in the third quarter by 12% q-o-q. Operating expenses as a
percentage of sales decreased to 14.4% in 9M 2017.
Adjusted EBITDA
In 9M 2017, adjusted EBITDA reached RUB 11.7 billion, which is almost double
the figure reported for 9M 2016. The adjusted EBITDA margin jumped to 17.7%
(9M 2016: 9.0%). The adjusted EBITDA margin for the third quarter of 2017
was 16.0%, versus 12.8% for the corresponding period of 2016.
Interest expense
Net interest expense for 9M 2017 was RUB 2.4 billion, up 23% from the 9M
2016 level of RUB 1.9 billion due to cuts in state subsidies and increase of
total debt.
Net profit
Net profit for the Group grew 158% y-o-y to RUB 5.6 billion in 9M 2017,
compared to RUB 2.2 billion in 9M 2016. The net profit margin in 9M 2017
strengthened to 8.5%, compared to 3.7% for the corresponding period of 2016.
Cash flow
Operating cash flow for 9M 2017 was RUB 9.8 billion compared to RUB 5.1
billion in 9M 2016. This was primarily the result of an increase in
operating income.
Business segments
Divisio Sales volume Change Revenue Change Share
ns y-o-y, of
% Group
reven
y-o-y, ue, %
%
9M 2017, 9M 2016, 9M 9M 2016,
k tonnes k tonnes 2017, RUB mln*
RUB
mln*
Poultry 385.4 372.1 4% 35 472 34 453 3% 49%
Pork 148.7 131.6 13% 13 532 11 171 21% 18%
Meat 167.3 158.6 5% 24 438 22 818 7% 33%
process
ing
* revenue for both years includes intersegment sales
Poultry Division
Sales volumes for 9M 2017 increased by 4% y-o-y to 385,373 tonnes of
sellable weight (9M 2016: 372,070 tonnes). The stable growth was mostly
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