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DGAP-UK-Regulatory News vom 23.08.2017

Cherkizovo Group: Announces Financial Results for the First Half of 2017

Cherkizovo Group / Half-yearly Results

23-Aug-2017 / 13:01 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 Half of 2017

 

Moscow, Russia - 23 August 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 June 2017.

 

Second quarter financial highlights

- Revenue increased by 7% quarter-on-quarter (q-o-q) to RUB 22.4 billion from RUB 21.0 billion in 1Q 2017
Gross profit grew by 28% q-o-q to RUB 7.2 billion from RUB 5.6 billion in 1Q 2017
Gross profit margin stood at 32.4% compared to 26.9% in 1Q 2017
Adjusted EBITDA* rose by 16% to RUB 4.3 billion, compared to RUB 3.7 billion in 1Q 2017
Adjusted EBITDA* margin of 19.3% compared to 17.8% in 1Q 2017

 

First half financial highlights

Revenue increased by 12% year-on-year (y-o-y) to RUB 43.3 billion from
RUB 38.8 billion in 1H 2016
Gross profit jumped 58% y-o-y to RUB 12.9 billion from RUB 8.1 billion in 1H 2016
Gross profit margin surged to 29.7%, compared to 21.0% in 1H 2016
Operating expenses decreased 2% y-o-y to RUB 6.3 billion, compared to RUB 6.4 billion in 1H 2016
Adjusted EBITDA* tripled y-o-y and reached RUB 8.0 billion, compared to
RUB 2.7 billion in 1H 2016
Adjusted EBITDA* margin reached 18.6% compared to 7.0% in 1H 2016
Net profit for the period grew five-fold y-o-y, reaching
RUB 5.1 billion, versus RUB 0.9 billion in 1H 2016
Net operating cash flow was RUB 6.5 billion for 1H 2017
Net debt** was RUB 43.2 billion as at June 30, 2017
Effective cost of debt stood at 8.6% (2016: 9.7%)
Earnings per share (EPS) reached RUB 116.4 (1H 2016: EPS was RUB 21.6).

 

Key corporate highlights for the reporting period

Cherkizovo Group acquired NAPKO from a related party. NAPKO is one of Russia's leading grain producers with 147,000 hectares of land located in Lipetsk, Tambov and Penza regions, which are strategically important areas for Cherkizovo Group. In 2016, NAPKO produced 250,000 tonnes of grain. Following the acquisition, Cherkizovo Group's total operating land bank reached 287,000 hectares. As part of the transaction, the Group also acquired the supporting production infrastructure to cultivate the land and store the grain.
The Tambov Turkey project, a joint venture between Cherkizovo Group and Grupo Fuertes, Spain's leading agricultural producer, is well on the way towards reaching its total installed capacity of 50,000 tonnes of live weight per annum. Favourable market conditions have placed us in the top three turkey producers in Russia, with the new Pava-Pava brand already on the shelves of the large retail chains. Certification with international food safety management standards will allow Tambov Turkey to export top-quality meat to European markets. European certification will be a further testament to the highest quality of meat being produced at this new, state-of-the-art plant.
The Group launched three new pork fattening sites in Lipetsk and Voronezh regions, with total production capacity of more than 126,000 live market hogs annually.

 

Key corporate highlights after reporting period

On 2 August 2017, the controlling shareholder of Cherkizovo Group, together with its affiliates, completed the acquisition of 21.05% of the Group's ordinary shares and GDRs from funds and portfolios under the management of Prosperity Capital Management, for a total consideration of RUB 12.0 billion.
Cherkizovo Group announced its intention to expand in Voronezh region, with construction begun on two pork-fattening plants and plans under consideration to build a number of poultry houses. Voronezh region is expected to be one of the key geographic regions for Cherkizovo Group over the next decade. The Group also outlined expansion plans for Lipetsk and Penza regions.

 

Sergei Mikhailov, CEO of Cherkizovo, commented:

"We continued to see a stronger financial performance during the second quarter, following an excellent set of results in the previous quarter, buoyed by a stronger ruble. The Group's gross profit experienced a double-digit increase, while EBITDA growth was nearly three times that of the same period last year and exceeding expectations.

 

We were very pleased to see progress broadly across the whole business. The pork segment made a significant contribution to growth, delivering year-on-year EBITDA growth of 148%, driven by an increase in volumes and average price. We also made major progress in the poultry segment during the first half adding capacity and improving margins. In the meat-processing segment, we continued to gain share, despite a shrinking market. In grain, the acquisition of NAPKO will allow us to boost self-sufficiency in grain to over 60% in the coming years, compared to 30% at the end of 2016, which should reduce volatility of grain and feed prices and ensure stable supply.

 

Tambov Turkey plans to add an additional 50,000 tonnes of live weight production, providing major opportunities in the local and export markets. We are in the process of acquiring a license to export to the EU, which we believe will be a step-change for our business.

 

On the corporate governance front, we made important strides during the first half, with a new board and chairman elected. We boosted the power of our independent directors to improve oversight and transparency. In addition, we believe the acquisition of Prosperity Capital's stake provides us valuable flexibility and more options in our capital markets strategy and supports our commitment to deliver value for shareholders."

  

Financial summary

RUB mln

1H 2017

1H 2016

y-o-y, %

2Q 2017

1Q 2017

q-o-q, %

Revenue

43,349

38,835

12%

22,378

20,971

7%

Gross profit

12,881

8,144

58%

7,240

5,640

28%

Operating expenses

(6,257)

(6,371)

(2%)

(3,071)

(3,186)

(4%)

EBITDA, adjusted

8,043

2,728

195%

4,313

3,730

16%

EBITDA margin, adjusted

19%

7%

 

19%

18%

 

Operating profit

6,624

1,773

274%

4,169

2,455

70%

Profit before tax

5,020

946

430%

3,142

1,878

67%

Profit

5,106

949

438%

3,172

1,934

64%

Net operating cash flow

6,467

1,074

502% 

4,353

2,114

106%

Net debt

43,192

36,949*

17%

43,192

40,417

7%

* As of December 31, 2016

 

Revenue

Net sales increased by 12% y-o-y to RUB 43.3 billion, compared to RUB 38.8 billion in 1H 2016. The pork and meat processing segments were the most significant growth drivers, with a y-o-y rise in production volumes in the first half of 13% and 4%, respectively. On a quarterly basis, sales growth was 29% and 10%. The pork segment's performance was also boosted by a 13% y-o-y rise in prices.

 

Gross profit

Gross profit increased by 58% y-o-y to RUB 12.9 billion from RUB 8.1 billion in 1H 2016. The strong performance came on the back of higher sales and lower feed costs, which are largely denominated in foreign currency. During 1H 2017, the ruble reached its highest level compared to global currencies since July 2015. The combination of lower costs and higher sales lifted the gross margin to 29.7% in 1H 2017, from 21.0% in the same period in 2016. At the same time, on a quarterly basis, gross profit demonstrated q-o-q growth of 28%.

 

Operating expenses

Operating expenses decreased by 2% y-o-y to RUB 6.3 billion, compared to RUB 6.4 billion in 1H 2016, as a result of lower payroll and other selling expenses. In the second quarter, operating expenses decreased by 4% q-o-q. Operating expenses as percentage of sales decreased to 14.4% in 1H 2017 from 16.4% in 1H 2016.

 

Adjusted EBITDA

In 1H 2017, adjusted EBITDA reached RUB 8.0 billion, which is nearly three times the figure reported in 1H 2016. The adjusted EBITDA margin jumped to 18.6% (1H 2016: 7.0%). The adjusted EBITDA margin for the second quarter of 2017 came in at 19.3%, compared to 17.8% in 1Q 2017.
 

Interest expense

Interest expense was 25% lower y-o-y, reaching RUB 1.8 billion in 1H of 2017. The main drivers behind this decrease included a change from short term to longer term loans and a decrease in interest rates, although total borrowings increased by 18% y-o-y to RUB 45.4 billion (2016: RUB 38.6 billion). Net interest expense for 1H 2017 was RUB 1.5 billion, up 14% from the 1H2016 level of RUB 1.3 billion. The Group accrued RUB 0.3 billion of subsidies in 1H 2017 which is included in the net interest expense above, a y-o-y decrease of 76%.

 

Net profit

Net profit for the Group grew five-fold to RUB 5.1 billion in 1H 2017, compared to RUB 0.9 billion in 1H 2016. Net profit margin in 1H 2017 strengthened to 11.8%, compared to 2.4% in the corresponding period of 2016, maintaining higher level from the first quarter of 2017.

 

Cash flow

Operating cash flow for 1H 2017 was RUB 6.5 billion compared to RUB 1.1 billion in 1H 2016. This was primarily the result of the increase in operating income.

 

Business segments

 Divisions

Sales volume

Change
y-o-y, %

Revenue

Change y-o-y, %

Share of Group revenue, %

1H 2017, k tonnes

1H 2016, k tonnes

1H 2017, RUB mln*

1H 2016, RUB mln*

Poultry

254.9

252.4

1%

23,721

22,857

4%

49%

Pork

98.4

86.9

13%

 8,992

7,109

26%

19%

Meat processing

107.3

102.9

4%

15,617

14,653

7%

32%

* Revenue for both years includes intersegment sales

 

Poultry Division 

First half sales volumes increased 1% y-o-y to 254,911 tonnes of sellable weight (1H 2016: 252,351 tonnes). This modest uptick was due to growth in production, leading to increased output volumes. In the same period in 2016, management decided to sell excess inventory due to market volatility, which boosted sales volumes.

 

The average price during 1H 2017 increased by 1% y-o-y to 91.15 RUB/kg as branded products and HoReCa sales represented a larger share of sales. On a q-o-q basis, the average price decreased by 3% to 89.93 RUB/kg during 2Q 2017, due to buyers' market during the season.

 

Revenue for the division increased 4% y-o-y to RUB 23.7 billion (1H 2016: RUB 22.9 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. However, the decrease in prices during 2Q 2017 led to a slight decrease in revenue of less than 1% q-o-q.

 

Gross profit grew more than two-fold y-o-y to RUB 5.7 billion, from RUB 2.7 billion in 1H 2016. This was as a result of lower feed costs due to the appreciation of the ruble. The corresponding period of 2016 saw the ruble weaken to a record low relative to the US dollar and Euro, leading to a significant increase in our feed costs. The gross margin for 1H 2017 consequently increased to 24.2%, compared to 11.9% in the same period of 2016. Between the first and second quarters of 2017, the segment's gross profit grew by 19%, with gross profit margin increasing to 26.3% from 22.2% in 1Q 2017.

 

Operating expenses as a percentage of sales decreased to 10.4%, from 11.2% in 1H 2016, due to lower repairs & maintenance, payroll and advertising & marketing expenses.              

 

Operating income for 1H 2017 jumped to RUB 3.3 billion, compared to RUB 0.2 billion in 1H 2016, with a quarterly increase of around 29%. The operating margin for 1H 2017 increased to 13.9% from 0.7% in the corresponding period of last year, supported by a 2Q 2017 margin increase to 15.6% from 12.1% during 1Q 2017 as a result of lower feed costs.

 

Net profit for the division came in at RUB 2.7 billion, compared to a loss of RUB 0.6 billion in 1H 2016. This was mainly a result of the link of the costs of feed components to foreign currencies.

 

Adjusted EBITDA grew more than four-fold, and amounted to RUB 4.1 billion (1H 2016: RUB 0.9 billion), while the adjusted EBITDA margin grew to 17.2% from 4.1% in 1H 2016. Quarterly EBITDA margin increased to 17.3% in 2Q 2016 from 17.1% in the last quarter.

 

Pork Division

Production volumes in the first half of the year increased by 13% y-o-y to 98,369 tonnes (1H 2016: 86,902 tonnes). This was due to higher production levels following the launch of two new wean-to-finish sites in Voronezh in 2016, as well as the on-going genetics improvement programme launched in 2014.

 

The average price rose by 13% y-o-y to 94.02 RUB/kg (1H 2016: 83.20 RUB/kg). This increase was driven by growing consumption in Russia, which has been fuelled by increased promotional activity by Russian retail chains, along with a stabilisation in purchasing power.

 

Total sales in the pork division grew 26% y-o-y to RUB 9.0 billion (1H 2016: RUB 7.1 billion). This sales growth was expected as both volume and average price increased y-o-y. On a quarterly basis, sales increased by 29%.

 

Gross profit for 1H 2017 almost doubled to RUB 4.0 billion, (1H 2016: RUB 2.2 billion), because of higher sales volumes and average live hogs price growth, along with the lower cost of feed components and veterinary supplies due to stronger ruble. The segment's gross margin jumped to 44.2% in the first half of the year from 30.8% in the same period of 2016. The pork segment's gross profit grew 121% between the first and second quarter of the year.

 

Operating expenses as a percentage of sales decreased compared to the same period of 2016 and stood at 1.3% (1H 2016: 5.7%).

 

Operating income doubled y-o-y to RUB 3.9 billion from RUB 1.8 billion in 1H 2016. The operating margin increased to 42.9% from 25.2% in the previous year.

 

Net profit doubled y-o-y to RUB 3.7 billion (1H 2016: RUB 1.5 billion).

 

Adjusted EBITDA doubled as well y-o-y and amounted to RUB 3.4 billion (1H 2016: RUB 1.4 billion). The adjusted EBITDA margin grew to 37.6% in 1H 2017 from 19.1% in 1H 2016. On a q-o-q basis, adjusted EBITDA demonstrated robust growth of 43%.

 

Meat Processing Division

Sales volumes increased by 4% y-o-y to 107,314 tonnes from 102,898 tonnes in 1H 2016. This was due to the growth in the product assortment in modern retail channels and geographical diversification into the Ural and North West regions.

 

During the reporting period, the average price increase by 5% y-o-y to 150.11 RUB/kg. On a q-o-q basis, the average price decreased by 2% to 148.92 RUB/kg (1Q 2017: 151.46 RUB/kg).

 

Total sales were 7% higher in 1H 2017 and reached RUB 15.6 billion (1H 2016: RUB 14.7 billion). This sales growth was expected as both volume and average price increased y-o-y. In the second quarter, sales grew by 10% q-o-q.

 

Gross profit for the first half of the year increased 8% y-o-y to RUB 2.7 billion, compared to RUB 2.5 billion in 1H 2016. The gross margin was up to 17.5% from 17.3% in 1H 2016. Gross profit growth weakened on a q-o-q basis to 4%.

 

In 1H 2017, operating expenses as a percentage of sales were in line with the last year and amounted to 12.0%, as a result of lower marketing and selling expenses.

 

Operating income increased by 12% y-o-y to RUB 0.9 billion from RUB 0.8 billion in 1H 2016. The operating margin increased to 5.6% from 5.3% in 1H 2016, resulting from an increase in the profitability of sausages and lower marketing and selling expenses.

 

During the reporting period, the meat processing segment generated net profit of RUB 0.7 billion, a decrease of 3% y-o-y.

 

In 1H 2017, adjusted EBITDA increased by 11% to RUB 1.2 billion (1H 2016: RUB 1.1 billion). Adjusted EBITDA decreased by 15% on a q-o-q basis. The adjusted EBITDA margin of 7.7% in 1H 2017 exceeded the last year (1H 2016: 7.4%).

 

Grain Division

During the reporting period, Cherkizovo started its 2017 harvesting campaign and expects to harvest a total of around 750,000 tonnes of crops this year. Year to date, wheat yields have exceeded the rates built into our budget. We are still in an early stage of the harvest period, and weather and other factors could intervene to affect total yields for the season.

 

Due to the seasonality of our business, the results of this segment are reported annually to better reflect the business performance and provide the appropriate basis for comparison.

 

Financial Position

The Group's capital expenditure on property, plant, equipment and maintenance amounted to RUB 4.6 billion in 1H 2017, a y-o-y increase of 4%. RUB 2.0 billion was invested in the construction of new pork finisher complexes in Lipetsk region, the development of sites in Voronezh region and the building of two wean-to-finish sites in Penza region. RUB 0.7 billion was invested into the poultry division. The meat processing division received RUB 1.4 billion of investments for the construction of the Kashira meat processing plant in Moscow region. In the grain division, RUB 0.3 billion was invested into the construction of a new grain drying facility.

 

As of 30 June 2017, net debt** amounted to RUB 43.2 billion, compared to RUB 36.9 billion at the end of 2016. Total debt increased to RUB 45.4 billion as of 30 June 2017 compared to the level of total debt of 38.6 billion at the end of 2016. As of 30 June 2017, long-term debt represented 73% of the debt portfolio and was RUB 33.0 billion. Short-term debt stood at RUB 12.4 billion, or 27% of the portfolio. The effective cost of debt was 8.6% in 1H 2017 (2016: 9.7%). Subsidised loans and credit lines made up 33% of the debt portfolio in 1H 2017 (1H 2016: 79%). Cash and cash equivalents totalled RUB 1.6 billion as of 30 June 2017.

 

Subsidies

In 1H 2017, the Group accrued subsidies for interest reimbursement of RUB 0.3 billion, which offset interest expense (1H 2016: RUB 1.1 billion). The Group received RUB 0.1 billion of subsidies in 1H 2017, compared to RUB 1.0 billion in 1H 2016.

 

Outlook

The Group maintains a positive outlook for the remainder of 2017, based on progress across all segments of the business and the strong ruble in the year to date. At the same time, the Group maintains a robust risk forecasting and mitigation function.

The acquisition of NAPKO, a long-standing trusted supplier and related party, has expanded the Group's land bank and self-sufficiency in grain over the long term, strengthening the Group's business as a whole and reducing exposure to grain market volatility and shortages. Russian wheat harvests are forecasted to reach record levels this year, supported by Cherkizovo Group's wheat yields exceeding the budget so far.

Despite significant external risks, the Group remains optimistic about the second half of 2017 and prospects for 2018. The macroeconomic outlook is positive. The stronger ruble compared to major foreign currencies continues to drive lower feed prices, keeping meat prices lower. These factors, coupled with an on-going recovery in Russian consumer spending power should support continued solid Group profitability.

 

 

For more information please visit http://www.cherkizovo.com or contact

Cherkizovo Group

Dmitry Mironov

Head of Investor Relations

+7 (495) 660 24 40 ext. 15962

[email protected]

 

About Cherkizovo Group

Cherkizovo Group is the largest meat and feed producer in Russia. The Group is a top-3 producer in each of the Russian 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. The Group also includes Tambov Turkey facility, a joint Russian-Spanish venture. In 2016, Cherkizovo Group produced 903,000 tonnes of meat and 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 delivered long-term sales growth and profitability. The Group's consolidated revenue was RUB 82.4 billion in 2016.

 

Cherkizovo Group shares and GDRs are traded on the Moscow Exchange (MOEX) and the London Stock Exchange (LSE).

 

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

(in thousands of rubles)

Meat-Processing

Poultry

Pork

Grain

Feed

Corporate assets/expenditures

Turkey

Inter-division

Combined

Total Sales

15 616 747

23 720 958

8 991 733

630 345

13 482 803

823 493

1 488 447

(21 405 630)

43 348 896

including other sales

304 833

438 300

95 680

36 963

-

823 493

-

(905 581)

793 688

including sales volume discount

(380 269)

(230 421)

-

-

-

-

(4 784)

-

(615 474)

Interdivision Sales

(6 586)

(884 399)

(6 670 439)

(136 515)

(13 013 551)

(694 140)

-

21 405 630

-

Sales to external customers

15 610 161

22 836 559

2 321 294

493 830

469 252

129 353

1 488 447

-

43 348 896

% of Total sales

36.0%

52.7%

5.4%

1.1%

1.1%

0.3%

3.4%

0.0%

100.0%

Net change in fair value of biological assets and agricultural produce

-

 167 963

1 017 141

(97 580)

-

-

-

70 468

1 157 992

Cost of Sales

(12 879 207)

(18 139 359)

(6 032 517)

(781 799)

(12 918 113)

(741 664)

(1 446 573)

21 312 896

(31 626 336)

Gross profit / (loss)

2 737 540

5 749 562

3 976 357

(249 034)

564 690

81 829

41 874

(22 266)

12 880 552

Gross margin

17.5%

24.2%

44.2%

-39.5%

4.2%

9.9%

2.8%

0.1%

29.7%

Operating expenses

(1 867 689)

(2 461 562)

(121 175)

(169 821)

(182 483)

(1 337 548)

(51 529)

124 954

(6 066 853)

Share of loss of a joint venture

-

-

-

-

-

-

(189 991)

-

(189 991)

Operating profit/(loss)

869 851

3 288 000

3 855 182

(418 855)

382 207

(1 255 719)

(199 646)

102 688

6 623 708

Operating margin

5.6%

13.9%

42.9%

-66.4%

2.8%

-152.5%

-13.4%

-0.5%

15.3%

Other (expenses)/ income, net

(34 145)

(86 692)

17 583

(4 148)

639

123 356

-

(81 533)

(64 940)

Interest expense, net

(118 920)

(489 071)

(171 818)

(70 286)

(452 451)

(317 534)

-

81 533

(1 538 547)

Division profit / (loss)

716 786

2 712 237

3 700 947

(493 289)

(69 605)

(1 449 897)

(199 646)

102 688

 

5 020 221

 

Division profit margin

4.6%

11.4%

41.2%

-78.3%

-0.5%

-176.1%

-13.4%

-0.5%

11.6%

Supplemental information:

 

 

 

 

 

 

 

 

 

Income Tax expense / (benefit)

2 725

17 920

13 765

1 516

(6 163)

10 677

-

-

40 440

Depreciation expense

329 218

956 711

539 321

106 504

309 890

141 610

-

-

2 383 254

                     

UNAUDITED 6 Months 2017 Consolidated Selected Financial Data

 

 

 

 

 

UNAUDITED 6 Months 2017 Consolidated Selected Financial Data continued

(in thousands of rubles)

Meat-Processing

Poultry

Pork

Grain

Feed

Corporate assets/expenditures

Turkey

Inter-division

Combined

Division profit / (loss)

716 786

2 712 237

3 700 947

(493 289)

(69 605)

(1 449 897)

(199 646)

102 688

 

 5 020 221

 

Add:

 

 

 

 

 

 

 

 

 

Interest expense, net

118 920

489 071

171 818

70 286

452 451

317 534

-

(81 533)

1 538 547

Interest income

(7 825)

(76 801)

(20 443)

(1 143)

(863)

(114 155)

-

81 533

(139 697)

Foreign exchange loss/(gain), net

41 978

166 212

3 420

5 374

947

(8 819)

-

-

209 112

Depreciation and amortization

329 218

956 711

539 321

106 504

309 890

141 610

-

-

2 383 254

Net change in fair value of biological assets and agricultural produce

-

 

(167 963)

 

(1 017 141)

97 580

-

-

-

(70 468)

 

(1 157 992)

 

Share of loss of a joint venture

-

-

-

-

-

-

189 991

-

189 991

Adjusted EBITDA*

1 199 077

4 079 467

3 377 922

(214 688)

692 820

(1 113 727)

(9 655)

32 220

8 043 436

Adjusted EBITDA Margin*

7.7%

17.2%

37.6%

-34.1%

5.1%

-135.2%

-0.6%

-0.2%

18.6%

Reconciliation between net division profit and profit attributable to Cherkizovo Group

 

 

Total division profit

 

5 020 221 

Non-controlling interests

 

126 474

Income taxes

 

(40 440)

Profit attributable to Cherkizovo Group

 

 5 106 255

 

 

 

UNAUDITED CONSOLIDATED INCOME STATEMENT DATA

(in thousands of rubles)

Six months ended 30 June 2017

Six months ended 30 June 2016

 

 

 

Sales

43 348 896

38 834 869

incl. Sales volume discounts

(615 474)

(2 849 125)

incl. Sales returns

(241 366)

(346 301)

Net change in fair value of biological assets and agricultural produce

1 157 992

1 116 380

Cost of sales

(31 626 336)

(31 807 140)

Gross profit

12 880 552

8 144 109

Gross margin

29.7%

21.0%

Operating expenses

(6 066 853)

(6 371 320)

Share of loss of a joint venture

(189 991)

-

Operating profit

6 623 708

1 772 789

Operating margin

15.3%

4.6%

Profit before income tax

5 020 221

946 455

Profit attributable to Cherkizovo Group

5 106 255

948 816

Net profit margin

11.8%

2.4%

 

 

 

Weighted average number of shares outstanding

43 855 590

43 855 590

Earnings per share

 

 

Profit attributable to Cherkizovo Group per share - basic and diluted (rubles)

116.4

21.6

 

 

 

Consolidated Adjusted EBITDA reconciliation*

 

 

Profit before income tax

5 020 221

946 455

Add:

 

 

Interest expense, net of subsidies

1 538 547

1 349 349

Interest income

(139 697)

(215 145)

Foreign exchange loss/(gain), net

209 112

(308 146)

Depreciation and amortisation

2 383 254

2 071 535

Net change in fair value of biological assets and agricultural produce

(1 157 992)

 (1 116 380)

Share of loss of a joint venture

189 991

-

Consolidated Adjusted EBITDA*

8 043 436

2 727 668

Adjusted EBITDA Margin

18.6%

7.0%

 


 

 

 

 

 

 

 

 

 

 

 

 

POULTRY DIVISION UNAUDITED INCOME STATEMENT DATA

(in thousands of rubles)

Six months ended 30 June 2017

Six months ended 30 June 2016

 

 

 

Total Sales

23 720 958

22 856 884

Interdivision sales

(884 399)

(957 742)

Sales to external customers

22 836 559

21 899 142

Net change in fair value of biological assets and agricultural produce

167 963

199 466

Cost of sales

(18 139 359)

(20 333 789)

Gross profit

5 749 562

2 722 561

Gross margin

24.2%

11.9%

Operating expenses

(2 461 562)

(2 556 955)

Operating profit

3 288 000

165 606

Operating margin

13.9%

0.7%

Interest income

76 801

86 069

Interest expense, net

(489 071)

(419 795)

Other expenses, net

(163 493)

(397 430)

Division profit/(loss)

2 712 237

(565 550)

Division profit margin

11.4%

-2.5%

 

 

 

Poultry division Adjusted EBITDA reconciliation*

 

 

Division profit/(loss)

2 712 237

(565 550)

Add:

 

 

Interest expense, net of subsidies

489 071

419 795

Interest income

(76 801)

(86 069)

Foreign exchange loss, net

166 212

402 820

Depreciation and amortisation

 956 711

972 765

Net change in fair value of biological assets and agricultural produce

(167 963)

(199 466)

Poultry division Adjusted EBITDA*

4 079 467

944 295

Adjusted EBITDA Margin

17.2%

4.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PORK DIVISION UNAUDITED INCOME STATEMENT DATA

(in thousands of rubles)

Six months ended 30 June 2017

Six months ended 30 June 2016

 

 

 

Total Sales

8 991 733

7 108 869

Interdivision sales

(6 670 439)

(5 628 254)

Sales to external customers

2 321 294

1 480 615

Net change in fair value of biological assets and agricultural produce

1 017 141

837 161

Cost of sales

(6 032 517)

(5 755 261)

Gross profit

3 976 357

2 190 769

Gross margin

44.2%

30.8%

Operating expenses

(121 175)

(401 945)

Operating profit

3 855 182

1 788 824

Operating margin

42.9%

25.2%

Interest income

20 443

15 284

Interest expense, net

(171 818)

(308 385)

Other (expenses)/income, net

(2 860)

4 785

Division profit

3 700 947

1 500 508

Division profit margin

41.2%

21.1%

 

 

 

Pork division Adjusted EBITDA reconciliation*

 

 

Division profit

3 700 947

1 500 508

Add:

 

 

Interest expense, net of subsidies

171 818

308 385

Interest income

(20 443)

(15 284)

Foreign exchange loss/(gain), net

3 420

(2 401)

Depreciation and amortisation

539 321

407 120

Net change in fair value of biological assets and agricultural produce

(1 017 141)

(837 161)

Pork division Adjusted EBITDA*

3 377 922

1 361 167

Adjusted EBITDA Margin

37.6%

19.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MEAT PROCESSING DIVISION UNAUDITED INCOME STATEMENT DATA

(in thousands of rubles)

Six months ended 30 June 2017

Six months ended 30 June 2016

 

 

 

Total Sales

15 616 747

14 652 813

Interdivision sales

(6 586)

(11 977)

Sales to external customers

15 610 161

14 640 836

Cost of sales

(12 879 207)

(12 122 540)

Gross profit

2 737 540

2 530 273

Gross margin

17.5%

17.3%

Operating expenses

(1 867 689)

(1 753 892)

Operating profit

869 851

776 381

Operating margin

5.6%

5.3%

Interest income

7 825

5 325

Interest expense, net

(118 920)

(121 447)

Other (expenses)/income, net

(41 970)

79 611

Division profit

716 786

739 870

Division profit margin

4.6%

5.0%

 

 

 

Meat processing division Adjusted EBITDA reconciliation* 

 

Division profit

716 786

739 870

Add:

 

 

Interest expense, net of subsidies

118 920

121 447

Interest income

(7 825)

(5 325)

Foreign exchange loss/(gain), net

41 978

(88 015)

Depreciation and amortisation

329 218

314 136

Meat processing division Adjusted EBITDA*

1 199 077

1 082 113

Adjusted EBITDA Margin

7.7%

7.4%

 

FEED DIVISION UNAUDITED INCOME STATEMENT DATA

(in thousands of rubles)

Six months ended 30 June 2017

Six months ended 30 June 2016

 

 

 

Total Sales

13 482 803

15 523 182

Interdivision sales

(13 013 551)

(15 312 530)

Sales to external customers

469 252

210 652

Cost of sales

(12 918 113)

(15 355 668)

Gross profit

564 690

167 514

Gross margin

4.2%

1.1%

Operating expenses

(182 483)

(199 007)

Operating profit /(loss)

382 207

(31 493)

Operating margin

2.8%

-0.2%

Interest income

863

9 338

Interest expense, net

(452 451)

(265 607)

Other (expenses) / income, net

(224)

188 335

Division loss

(69 605)

(99 427)

Division profit margin

-0.5%

-0.6%

 

 

 

Feed division Adjusted EBITDA reconciliation*

 

Division loss

(69 605)

(99 427)

Add:

 

 

Interest expense, net of subsidies

452 451

265 607

Interest income

(863)

(9 338)

Foreign exchange loss/(gain), net

947

(188 228)

Depreciation and amortisation

309 890

272 198

Feed division Adjusted EBITDA*

692 820

240 812

Adjusted EBITDA Margin

5.1%

1.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

APPENDIX II:

 

UNAUDITED conDENSED CONSOLIDATED INTERIM statement of profit or loss and other comprehensive income for the six months ended 30 June 2017

 

(in thousands of rubles)

Six months ended 30 June

2017

 

Six months ended 30 June

2016

 

Year Ended

31 December 2016

 

 

 

 

 

 

Sales

43 348 896

 

38 834 869

 

82 417 193

Net change in fair value of biological assets and agricultural produce

1 157 992

 

1 116 380

 

(340 063)

Cost of sales

(31 626 336)

 

(31 807 140)

 

(64 222 344)

Gross profit

12 880 552

 

8 144 109

 

17 854 786

Selling, general and administrative expense

(6 333 796)

 

(6 517 539)

 

(13 008 713)

Other operating income, net

266 943

 

146 219

 

410 591

Share of loss of a joint venture

(189 991)

 

-

 

(200 191)

Operating profit

6 623 708

 

1 772 789

 

5 056 473

 

 

 

 

 

 

Interest income

139 697

 

215 145

 

343 737

Interest expense, net

(1 538 547)

 

(1 349 349)

 

(3 738 315)

Other (expenses) / income, net

(204 637)

 

307 870

 

298 484

 

 

 

 

 

 

Profit before income tax

5 020 221

 

946 455

 

1 960 379

Income tax expense

(40 440)

 

(131 825)

 

(72 861)

Profit for the period

4 979 781

 

814 630

 

1 887 518

Profit, attributable to Cherkizovo

5 106 255

 

948 816

 

1 919 227

Non-controlling interests

(126 474)

 

(134 186)

 

(31 709)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

APPENDIX III:

 

UNAUDITED Condensed consolidated interim Statement of financial position As of 30 June 2017

 

 (in thousands of rubles)

 

 

30 June

2017

 

31 December 2016

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

Property, plant and equipment

 

 

71  307 104 

 

64 445 256

 

Investment property

 

 

587 023

 

443 676

 

Goodwill

 

 

557 191

 

557 191

 

Intangible assets

 

 

1 899 131

 

1 949 663

 

Non-current biological assets

 

 

2 096 435

 

1 926 714

 

Notes receivable, net

 

 

610 000

 

510 000

 

Investments in joint venture

 

 

2 216 481

 

2 061 472

 

Long-term deposits in banks

 

 

641 365

 

641 365

 

Restricted cash***

 

 

1 854 945

 

-

 

Deferred tax assets

 

 

479 624

 

479 624

 

Other non-current receivables

 

 

531 181

 

508 140

 

Total non-current assets

 

 

82 780 480

 

73 523 101

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Biological assets

 

 

14 316 842

 

10 712 481

 

Inventories

 

 

8 745 094

 

10 602 118

 

Taxes recoverable and prepaid

 

 

1 637 377

 

1 904 786

 

Trade receivables, net

 

 

3 890 597

 

4 942 884

 

Advances paid, net

 

 

1 267 342

 

1 721 691

 

Other receivables, net

 

 

1 642 411

 

1 393 473

 

Cash and cash equivalents

 

 

1 575 265

 

1 002 203

 

Other current assets

 

 

526 784

 

534 838

 

Total current assets

 

 

33 601 712

 

32 814 474

 

TOTAL ASSETS

 

 

116 382 192

 

106 337 575

 

*** 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 30 JUNE 2017 Continued

 

 

30 June

2017

 

31 December 2016

 

EQUITY AND LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

Share capital

 

440

 

440

 

Treasury shares

 

(78 033)

 

(78 033)

 

Additional paid-in capital

 

5 588 320

 

5 588 320

 

Retained earnings

 

52 011 086

 

47 503 411

 

Total shareholder's equity

 

57 521 813

 

53 014 138

 

Non-controlling interest

 

1 095 806

 

1 026 280

 

Total equity

 

58 617 619

 

54 040 418

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

Long-term borrowings

 

32 970 568

 

24 469 704

 

Provisions

 

58 131

 

58 131

 

Deferred tax liability

 

422 114

 

420 299

 

Other liabilities

 

8 832

 

14 379

 

Total non-current liabilities

 

33 459 645

 

24 962 513

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

Short-term borrowings

 

12 438 147

 

14 122 997

 

Trade payables

 

7 458 730

 

8 608 271

 

Advances received

 

460 483

 

562 584

 

Payables for non-current assets

 

1 121 721

 

1 061 629

 

Tax related liabilities

 

827 727

 

849 400

 

Payroll related liabilities

 

1 508 553

 

1 394 940

 

Other payables and accruals

 

489 567

 

734 823

 

Total current liabilities

 

24 304 928

 

27 334 644

 

 

 

 

 

 

 

Total liabilities

 

57 764 573

 

52 297 157

 

TOTAL EQUITY AND LIABILITIES

 

116 382 192 

 

106 337 575

 

 

APPENDIX IV:

 

UNAUDITED Condensed consolidated interim STATEMENT OF cash flows For the six MONTHS ended 30 june 2017

 

 

Six months ended
30 June
2017

Six months ended 30 June
2016

Year ended
31 December 2016

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

Profit before income tax

5 020 221

946 455

1 960 379

Adjustments for:

 

 

 

Depreciation and amortization

2 383 254

2 071 535

4 660 365

Bad debt expense

26 947

91 530

231 981

Foreign exchange loss (gain), net

209 112

(308 146)

(621 087)

Interest income

(139 697)

(215 145)

(343 737)

Interest expense, net

1 538 547

1 349 349

3 738 315

Net change in fair value of biological assets and agricultural produce

(1 157 992)

(1 116 380)

340 063

Loss (gain) on disposal of property, plant and equipment, net

52 844

9 400

(8 054)

Gain on disposal of non-current biological assets, net

(314 637)

(155 602)

(402 456)

Write-off of receivables from insurance company

-

-

347 975

Share of loss of a joint venture

189 991

-

200 191

Other adjustments, net

(3 161)

(2 353)

(28 059)

Operating cash flows before working capital and other changes

7 805 429

2 670 643

10 075 876

Decrease in inventories

2 686 051

2 311 295

770 364

Increase in biological assets

(2 167 397)

(1 935 675)

(202 031)

Decrease (increase) in trade receivables

1 045 212

(269 446)

(477 366)

Decrease in advances paid

56 901

263 937

796 090

Decrease in other receivables and other current assets

189 135

499 592

947 249

Increase in other non-current assets

(30 597)

(30 132)

(70 105)

(Decrease) increase in trade payables

(1 379 117)

(931 797)

675 348

Increase (decrease) in tax related liabilities (other than income tax)

84 324

(22 928)

41 155

(Decrease) increase in other current payables

(385 949)

143 249

142 585

Operating cash flows before interest and income tax

7 903 992

2 698 738

12 699 165

Interest received

77 428

159 010

255 850

Interest paid

(1 456 204)

(2 578 856)

(4 895 763)

Government grants for compensation of interest expense received

58 507

851 030

1 433 471

Income tax paid

(116 936)

(55 663)

(124 186)

Net cash from operating activities

6 466 787

1 074 259

9 368 537

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

Purchases of property, plant and equipment

(3 975 563)

(4 073 105)

(8 569 640)

Purchases of non-current biological assets

(443 895)

(268 255)

(1 110 778)

Purchases of intangible assets

(98 558)

(197 100)

(555 633)

Proceeds from sale of property, plant and equipment

1 694

29 995

34 013

Proceeds from disposal of non-current biological assets

577 978

323 635

755 422

Acquisitions of subsidiaries, net of cash acquired

(4 768 059)

-

-

Investments in joint venture

(345 000)

(150 000)

(960 000)

Issuance of long-term loans and placing of deposits

(1 471)

-

-

Purchase of notes receivable

(100 000)

-

(210 000)

Proceeds from redemption of deposits and short-term loans receivables

50

4 627

6 273

Net cash used in investing activities

(9 152 824)

(4 330 203)

(10 610 343)


UNAUDITED Condensed consolidated interim STATEMENT OF cash flowS For THE SIX MONTHS ENDED 30 JUNE 2017 continued

 

 

 

Six months ended
30 June
2017

Six months ended 30 June
2016

Year ended
31 December 2016

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

Proceeds from long-term loans

9 419 635

1 291 699

11 862 021

Repayment of long-term loans

(1 803 054)

(3 825 614)

(5 363 445)

Proceeds from short-term loans

5 194 473

11 823 904

21 834 999

Repayment of short-term loans

(8 953 480)

(9 308 226)

(30 652 746)

Dividends paid

(598 580)

(998 771)

(998 771)

Disposal of non-controlling interests

105

-

1 127

Net cash from (used in) financing activities

3 259 099

(1 017 008)

(3 316 815)

 

 

 

 

Net increase (decrease) in cash and cash equivalents

573 062

(4 272 952)

(4 558 621)

 

 

 

 

Cash and cash equivalents at the beginning of the period

1 002 203

5 560 824

5 560 824

 

 

 

 

Cash and cash equivalents at the end of the period

1 575 265

1 287 872

1 002 203

 

 

 



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