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All news / Largest meat producer in Russia announces its IFRS results for the first half 2019

  • 23 Aug 2019, 08:42

PJSC Cherkizovo Group (MOEX: GCHE), the largest vertically integrated meat producer in Russia, today announces its unaudited consolidated IFRS results for the first half 2019.

Second quarter financial highlights

· Revenue increased by 25.5% year-on-year (y-o-y) to RUB 29.0 billion.

· Gross profit of RUB 7.4 billion declined by 23.8% compared to 2Q18.

· Adjusted EBITDA* decreased by 7.3% y-o-y to RUB 4.1 billion. Adjusted EBITDA margin contracted to 14.0% from 19.0% in 2Q18.

· Net profit declined to RUB 2.2 billion from RUB 5.8 billion in 2Q18. Adjusted net profit** amounted to RUB 1.3billion, compared to RUB 2.2 billion a year ago.

Firsthalf financial highlights

· Revenue increased by 25.1% y-o-y to RUB 55.7 billion.

· Net change in fair value of biological assets amounted to RUB 2.2 billion, compared to RUB 6.1 billion in 1H18. Net revaluation of harvested crops in stock changed to negative RUB 0.7 billion from RUB 0.9 billion in 1H18.

· Gross profit of RUB 14.6 billion declined by 11.8% compared to a year ago.

· Adjusted EBITDA* up by 14.2% y-o-y to RUB 8.1 billion. Adjusted EBITDA margin contracted to 14.5% from 15.9% in 1H18.

· Net profit dipped to RUB 5.4 billion from RUB 8.7 billion in 1H18. Adjusted net profit** totaled RUB 3.2billion, up 19.3% y-o-y from RUB 2.6 billion a year ago.

· Net debt amounted to RUB 64.6 billion as of June 30, 2019.

Second quarter corporate highlights

· In May, the Group became one of the winners of Russia's Best Social Projects 2019 Award, an annual event supporting public initiatives and facilitating sustainable development.

· In June, the Company announced that Tambov Turkey, its 50-50 Joint Venture with Grupo Fuertes, was considering construction of the second stage of the its modern turkey production and processing facility, aimed to increase production at the JV by 29 thousand tons (live weight) per annum. We anticipate it would take two years to implement the expansion project.

· In June, following bilateral agreements between Russia and China to open markets for chicken products, the Group signed pilot agreements to export chicken produce to China directly.

Key corporate highlights after reporting period

· On August 21, the Board of Directors recommended to the Extraordinary General Shareholders Meeting to distribute the Company’s net profit following the results of the first half of 2019 in the form of dividends in the amount of RUB 48.79 per ordinary share.

Sergei Mikhailov, CEO of Cherkizovo, commented:

“First half of the year the Company delivered improvements over the previous year in overall sales and EBITDA, but failed to meet ambitious internal goals due to a combination of market pricing and internal factors.

Our chicken business was fueled by strong growth of the key brands in the retail channel, coupled with significant acceleration of sales to HoReCa clients. Pork segment, where we almost completed the current investment cycle, continued to deliver operational excellence, which transformed into cost savings and mitigated negative effects of rising input prices, and sales price pressures. Meanwhile, we put much effort to bring profitability of the meat processing segment back to the historical averages.

Overall the first half year provided solid foundation for continued profitable growth of the Group in the coming quarters.”


Financial summary

RUB mln

2Q 2019

2Q 2018

y-o-y, %

1H 2019

1H 2018

y-o-y, %


28 980

23 086


55 661

44 507


Net change in fair value of biological assets


3 596


2 248

6 065


Net revaluation of harvested crops in stock







Gross profit

7 438

9 756


14 617

16 581


Gross margin



-16.6 p.p.



-11.0 p.p.

Operating expenses , net

(4 266)

(3 018)


(7 947)

(5 876)


Share of profit/loss of joint ventures and associates







Operating profit

3 087

6 881


6 534

10 475


Operating margin



-19.1 p.p.



-11.8 p.p.

Adjusted EBITDA 1

4 058

4 376


8 090

7 084


Adjusted EBITDA margin



-5.0 p.p.



-1.4 p.p.

Profit before income tax

2 299

5 770


5 198

8 708


Net profit

2 200

5 754


5 401

8 708


Adjusted Net profit 1

1 313

2 158


3 153

2 643


Net operating cash flow

3 683

3 769


3 622

4 793


Net debt


64 558

50 721


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



In the first half of 2019, revenue increased by 25.1% y-o-y to RUB 55.7 billion (1H18: RUB 44.5 billion). Revenue growth is attributed to higher volumes and prices across segments, most notably in the chicken segment on the back of consolidation of the assets acquired at the end of 2018 in Siberia and Central part of Russia.

Gross profit

Gross profit declined by 11.8% y-o-y to RUB 14.6 billion, (1H18: RUB 16.6 billion). Revenue growth in the first half of the year was offset by the lower net change in fair value of biological assets, negative effect from net revaluation of harvested crops in stock, and higher input cost in chicken and pork segments. Gross profit margin declined to 26.3% (1H18: 37.3%).

Operating expenses

Operating expenses increased by 35.2% y-o-y to RUB 7.9 billion, from RUB 5.9 billion a year ago. Operating expenses as a percentage of sales increased to 14.3% (1H18: 13.2%). Selling, general, and administrative expenses of RUB 7.8 billion increased in line with revenue growth and as a percentage of sales amounted to 14.0% compared to 13.7% a year ago.

Adjusted EBITDA

Adjusted EBITDA of RUB 8.1 billion, increased by 14.2% y-o-y. Adjusted EBITDA margin declined to 14.5% (1H18: 15.9%) driven by higher revenues across segments and higher profitability of the chicken segment, and positive impact from Tambov Turkey JV results offset by lower results in the meat processing segment.

Interest expense                                                                                                                           

Net interest expense in 1H19 increased by 26.0% y-o-y to RUB 2.1 billion.

Net profit

Net profit for the Group totaled RUB 5.4 billion in 1H19, down 38.0% compared to RUB 8.7billion in 1H18. Net profit margin declined to 9.7% from 19.6% a year ago.

Adjusted net profit increased by 19.3% y-o-y to RUB 3.2 billion, from RUB 2.6 billion a year ago. Adjusted net profit margin declined to 5.7% from 5.9% a year ago.

Cash flow

Operating cash flow declined by 24.4% to RUB 3.6 billion (1H18: RUB 4.8 billion), affected by working capital increase, on the back of higher grain and livestock inventory.

Capital expenditure and debt

The Group’s capital expenditure on property, plant, equipment and maintenance amounted to RUB 4.0 billion during 1H19, a decline of 12.2% y-o-y. Investments in the grain segment and new wean-to-finish pork facilities were significantprojects of capital expenditures in the reported period.

As of June 30, 2019, net debt*** was RUB 64.6 billion, compared to RUB 50.7 billion at the end of 1H18. Gross debt increased to RUB 66.7 billion as of June 30, 2019, compared to RUB 52.7 billion a year ago. At the end of 1H19 long-term debt accounted for 46% of the debt portfolio and amounted to RUB 30.7 billion. The effective cost of debt**** was 5.5% as of June 30, 2019. Subsidized loans and credit facilities made up 39% of the debt portfolio in 1H19 (1H18: 34%).


Total government grants for compensation of interest expense recognized in profit and loss amounted to RUB 0.9 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 market hogs, accounting for the upcoming harvest, and lower market prices for the poultry products.


Business segments


Sales volume

Change y-o-y, %

Revenue 2

Change y-o-y, %

1H19, k ton

1H18, k ton

1H19, RUB mln

1H18, RUB mln





32 953

23 486


Turkey 3




2 935

2 549






12 089

9 889


Meat processing




18 968

17 694


Samson 4







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 1H19increased by 20.3% to 323.1 thousand tonnes (1H18:268.5 thousand tonnes). The average selling price increased by 16.6% y-o-y to 101.85 RUB/kg as we further increased sales of Petelinka and Chicken Kingdom branded products, and sales in the HoReCa channel more than doubled in 1H19 compared to a year ago. As a result, the segment’s revenue increased by 40.3% and amounted to RUB 33.0 billion (1H18: RUB 23.5 billion).

Gross profit was up by 33.4% y-o-y and totaled RUB 6.9 billion, (1H18: RUB 5.1 billion) on better sales mix, and operational efficiencies that mitigated the negative effect from higher input cost. Gross margin declined to 20.8%, from 21.9% in 1H18.

Operating expenses as a percentage of sales improved to 10.5% from 10.8% a year ago. Operating income increased by 34.7% y-o-y toRUB 3.5 billion (1H18: RUB 2.6 billion). Operating margin declined to 10.7% from 11.1% in 1H18.

The segment’s profit before income tax amounted to RUB 3.0 billion (1H18: RUB 2.3 billion).

Adjusted EBITDA of RUB 5.0 billion, an increase of 67.7% y-o-y, while Adjusted EBITDA margin increased to 15.3% from 12.8% a year ago.


Pork Division

Sales volumes in 1H19 increased by 19.0% y-o-y, to 130.7 thousand tonnes (1H18: 109.8 thousand tonnes). The average selling price of 92.49 RUB/kg, up by 2.7% y-o-y compared to 90.04 RUB/kg a year ago. The segment’s revenue increased by 22.2% y-o-y to RUB 12.1 billion (1H18: RUB 9.9 billion), due to the ramp of newly built facilities.

Gross profit of RUB 5.5 billion declined by 27.6% compared to 1H18, due to decline of the net change in the fair value of biological assets by RUB 2.1 billion, and 13.4% cost inflation in per kg pork production. The segment’s gross margin declined to 45.6%, from 76.9% a year ago.

Operating income amounted to RUB 5.3 billion (1H18: RUB 7.5 billion). The segment’s operating margin declined to 43.8% from 75.8% a year ago.

The segment’s profit before income tax declined by 33.4% y-o-y to RUB 4.8 billion (1H18: RUB 7.2 billion).

Adjusted EBITDA increased by 3.3% y-o-y to RUB 4.4billion (1H18: RUB 4.2 billion). Adjusted EBITDA margin declined to 36.0% from 42.6% in 1H18.


Meat Processing Division

Sales volumes in 1H19 increased by 4.1% y-o-y to 115.0 thousand tonnes (1H18: 110.5 thousand tonnes). The average selling price increased by 2.7% y-o-y to 164.91 RUB/kg (1H18: 160.1RUB/kg). The segment’s revenue increased by 7.2% and reached RUB 19.0 billion (1H18: RUB 17.7 billion). Revenue growth was driven by higher volumes of the carcass in the sales mix, on the back of higher volumes of market hogs production in the pork segment, coupled with higher pricing for sausages, cuts, and carcasses.

Gross profit declined by 41.6% y-o-y to RUB 1.1 billion, (1H18: RUB 1.9 billion). The gross margin fell to 5.9% from 10.8% a year ago.

Operating expenses as a percentage of sales amounted to 10.6%, vs. 9.4% in 1H18.

Operating income turned to negative RUB 1.0 billion from RUB 0.2 billion in 1H18.

The segment’s loss before income tax was RUB 0.7 billion, compared to a profit RUB 0.1 billion a year ago, on lower results from operations partially offset by RUB 0.3 billion FX gain, related to EUR denominated loan.

Adjusted EBITDA turned to negative RUB 0.3 billion from RUB 0.6 billion in 1H18.


Russia’s domestic macroeconomic conditions remain relatively stable with inflation pressures subsiding, rouble staying in the narrow range, and firm consumption that we anticipate through year-end.

We believe that cost pressures witnessed in the first half year will ease by year-end, as prices for grains are expected to decline with the arrival of new harvest in Russia.

While our overriding strategic priority and focus remains on domestic market and growth of value-added branded products, we are pleased that our efforts to develop selective export opportunities are showing encouraging results, eg, China, which recently opened its market for Russian chicken produce.