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Investor Presentation
May 2012
Disclaimer
By attending this presentation, you agree to be bound by the foregoing limitations.
This presentation has been prepared by OJSC Cherkizovo Group (the "Company") solely for use in connection with the presentation to investors of the Company’s annual financial and
production results and is not made in contemplation of any offering of any of the Company’s securities. This presentation is strictly confidential to the recipient and may not be reproduced,
redistributed or passed on, directly or indirectly, to any other person or published, in whole or in part, by any medium or for any purpose. Failure to comply with this restriction may
constitute a violation of applicable securities laws. This presentation does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or
subscribe for, or any offer to underwrite or otherwise acquire any securities in the Company, nor shall it or any part of it nor the fact of its distribution or communication form the basis of, or
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1
Cherkizovo Group – The Integrated Meat Producer
FY2011 Sales: $1,472.9m
FY2011 EBITDA: $245.5m
Poultry
Pork
Meat Processing
FY2011 Total sales: $691.5m
FY2011 EBITDA: $110.9m
FY2011 Total sales: $270.5m
FY2011 EBITDA: $109.5m
FY2011 Total sales: $635.4m
FY2011 EBITDA: $41.7m
Market Position
• #2 in Russia
• #3 in Russia
• #2 in Russia
Key Products
• Chilled/frozen poultry
• Live pigs, pork carcasses,
fresh pork cuts
• Sausages, salamis,
fresh retail-format meat,
ready-to-cook products
• 7 clusters
• Total capacity (t.p.a):
260,200 *
• 10 farms
• Total capacity (t.p.a):
91,400**
• 7 plants
• Total capacity (t.p.a):
145,270***
Key Brands
Production
Facilities
Source: Poultry Union of Russia, Pork Union of Russia, Meat Union of Russia,
Company’s Financials
* Sellable product, as of 2011
** Live weight, as of 2011
*** Prepared products, as of 2011
2
Overview of Results
Key Highlights of 1Q2012
SOLID FINANCIAL RESULTS*

Revenues increased 20% in RUR, and increased 16% to $357.8 mln

Adjusted EBITDA* increased 80% in RUR, and 74% to $60.8 mln

Adjusted EBITDA* margin increased form 11% to 17%



EBITDA and EBITDA Margin Evolution, 2006-2011,
RUR mln
CAGR +30%*
9%
Gross profit increased 50% in RUR and 45% to $93.7 mln
6000,0
13%
Group gross margin increased to 26%
Net income increased 121% in RUR and 114% to $39.3 mln

Net income per share increased 112% to $0.91
2000,0
Cash conversion rate (CCR)*** was 145%
1000,0
Cherkizovo Group continued construction of its greenfield pork farms in Tambov, Voronezh
and Lipetsk by launching three rearing facilities at all three complexes.

Cherkizovo Group has opened the first line of the poultry breeding facility, “Pervomayskaya”,
at its Bryansk cluster. The facility, which was built as part of Cherkizovo’s ongoing poultry
capacity increase project, consists of 28 bird houses, with a combined capacity of almost 1
million broilers.

Cherkizovo Group has built 21 additional bird houses at the poultry breeding facility
“Vostochnaya”. Previously, this facility consisted of 4 bird houses with a capacity of 246 000
broilers, but with the new bird houses, this has increased to 1 million heads.

Cherkizovo Group’s shares and bonds have been transferred from quotation list ‘A 2’ to
quotation list ‘A 1’ at MICEX

Cherkizovo Group’s bonds were included into the Lombard List of the Central Bank of
Russia.

In May, Cherkizovo announced entering the dynamic and profitable turkey meat market
10%
5782,9
27%
8%
3000,0
51%
14%
12%
6641,6
53%
12%
4000,0
The effective cost of debt was 1.7%.

16%
15%
7214,1

OPERATIONAL DEVELOPMENTS
17%
14%
5000,0
Net debt was at $775.0 million.
* All figures compared to 1Q2011
20%
18%
7000,0


18%
18%
8000,0
3786,4
6%
2997,0
4%
1967,1
2%
0,0
0%
2006
2007
2008
2009
EBITDA, RUR mln
2010
2011
EBITDA margin, %
Source: Management estimates, Company reports
 CAGR growth is calculated between 2006 to 2011
4
Group Performance

Total sales increased 16% in USD terms and 20% in RUR
terms
Gross profit increased 45% in USD terms and 50% in RUR
terms; gross margin increased to 26%
Operating expenses as percentage of sales were flat at 14%
EBITDA increased 74% in USD terms and 80% in RUR terms,
EBITDA margin increased to 17%
Net income increased 114% in USD terms and 121% in RUR
terms. Net income margin increased to 11%




Total Group Sales, USD mln
1Q2011
30.26
USD
Total Sales, USD mln
308.2
357.8
16%
20%
Gross Profit, USD mln
64.6
93.7
45%
50%
Gross Margin, %
21%
26%
EBITDA, USD mln
34.9
60.8
74%
80%
EBITDA Margin, %
11%
17%
Net Income, USD mln
18.4
39.3
114%
121%
Net Income margin %
6%
EBITDA and EBITDA margin, USD mln, %
60.8
70
400
350
300
250
200
150
100
50
0
357.8
308.2
17%
16%
42%
50%
37%
50
40
30
34.9
34%
10
0
1Q2011
Meat Processing
1Q2012
Poultry
Source: Management estimates, Company reports
Pork
53%
39.3
35
46%
30
15
10
37%
10%
14%
Meat Processing
45
18.4
20
49%
1Q2011
11%
Net Income, USD mln
25
20
41%
RUR
40
17%
60
1Q2012 % change % change
29.27
US$/RUR rate
1Q2012
Poultry
Pork
5
0
68%
51%
30%
2%
1Q2011
Meat Processing
3%
1Q2012
Poultry
Pork
Poultry Division


Volumes increased by a robust 42% to appr. 75 860 tonnes
Prices decreased by 1% to $2.40 per kg for 1Q2012 (excl.
VAT) and increased by 2% to 72.50 RUR per kg (excl. VAT)
Total sales increased 36% to $189.3 mln
Gross Profit increased 82% to $47.8 mln, Gross Margin
increased to 25% due to lower grain prices and improved KPIs
Operating expenses as a percentage of sales were flat at 13%
EBITDA increased 139% to $33.9 mln, EBITDA margin
increased to 18%
Division profit increased 219% to $20.1 mln, division profit
margin increased to 11%





Volume and Price** Dynamics
80
$2.43
% change % change
USD
RUR
139.4
189.3
36%
40%
Gross Profit, USD mln
26.2
47.8
82%
89%
Gross Margin, %
19%
25%
EBITDA, USD '000
14.2
33.9
139%
147%
EBITDA Margin, %
10%
219%
232%
18%
Division profit USD '000
6.3
20.1
Division profit margin %
4%
11%
Total Sales, USD mln
EBITDA and Division Profit, USD mln
$2.40
60
40
75 860
80
53 570
189.3
0
139.4
Source: Management estimates, Company reports
14.2
EBITDA, US$ '000 (left axis)
1Q2011
1Q2012
33.9
20.1
6.3
1Q2011
0
1Q2012
10%
10
40
10
18%
20
0
20
30%
30
120
50
1Q2011
30.26
Total Sales, USD mln
160
40
29.27
200
(1%)
70
30
1Q2011 1Q2012
US$/RUR rate
EBITDA margin, % (right axis)
20%
10%
0%
1Q2012
Division profit, US$ '000 (left axis)
Investments to Drive Capacity and Efficiency Growth
Volume sales (thous. sellable weight tonnes)
Bryansk Cluster Capacity Increase Overview



The project is expected to double production of the cluster to
75,000 live-weight tonnes by the end of 2012
Sites launched: additional breeding facilities and bird houses,
1st line of the new hatchery with an annual capacity of 43 mln
eggs
Sites to be launched in 2012-2013: 2nd line of the hatchery to
increase capacity to 66 mln eggs, fodder factory.
350
300


Source: Company, Management estimates
+34%
260
110
310 +15%
2
60
20
60
60
295
300
300
2013E
2014E
2015E
55
33
194
150
100
The project is expected to double production of the cluster to
140,000 live-weight tonnes in 2013
Sites already launched: Incubation facility for 105 mln eggs per
year, additional breeding facilities and bird houses and a stateof-the art slaughtering facility of 8,000 units per hour
Sites to be launched in 2012: additional bird houses and a
fodder factory.
+19%
470
380
357 +6%
400
200

+23%
450
250
Penza Cluster Capacity Increase Overview
+142%*
500
194
227
255
50
0
2010
2011
2012E
Organic growth
Mosselprom
Elets project
* Expected increase in 2015 compared to 2010 levels
* For 2011 Mosselprom volumes are consolidated from 13 May 2011
7
Pork Division
1Q2011

Volumes increased 12% to appr. 22 660 tonnes

Prices increased by 4% to $2.66 per kg in 2012* (excl. VAT)
and by 7% to 80.53 RUR per kg (excl. VAT)
Total sales increased 7% to $62.1 mln
Gross Profit increased 32% to $24.6 mln; Gross Margin
increased to 40% due to grain prices
Operating expenses as a percentage of sales increased to
10% due to new facilities launch
EBITDA increased 29% to $23.9 mln; EBITDA Margin was
38%
Division profit increased by 28% to $18.1 mln, division profit
margin was 29%





Volume and Price* Dynamics
25
4%
$2.66
$2.57
20
15
20 220
22 660
62.1
7%
11%
Gross Profit, USD mln
18.6
24.6
32%
37%
Gross Margin, %
32%
40%
EBITDA, USD '000
18.6
23.9
29%
33%
EBITDA Margin, %
32%
38%
Division profit USD '000
14.1
18.1
28%
32%
Division profit margin %
24%
29%
EBITDA and Division Profit, USD mln
25
70
60
20
50
15
1Q2012
45%
39%
38%
32%
32%
40
62.1
58.0
10
5
30%
23.9
18.6
15%
14.1
18.1
1Q2011
1Q2012
0
0
1Q2011
% change %change
USD
RUR
58.0
10
0
30.26
Total Sales, USD mln
20
5
1Q2012
29.37
Total Sales, USD mln
30
10
US$/RUR rate
1Q2011
1Q2012
0%
EBITDA, US$mln (left axis)
EBITDA margin, % (right axis)
Division profit, US$mln (left axis)
Source: Company
* Company’s selling price
8
Cherkizovo Consolidates the Russian Meat Market
Greenfield construction in Tambov, Voronezh and Lipetsk





Cherkizovo is constructing greenfields in Tambov,
Voronezh and Lipetsk regions
Sites will represent best-in-class integrated multi-site
complexes, with breeding, rearing and fattening facilities
Investment consideration of appr. $160mm, of which appr.
20% will be funded by the Group, and the remaining 80% by
bank loans
Breeding and rearing facilities at all three sites are launched
Sites are expected to reach their full capacity by the end of
2013
Volume sales (thous. live-weight tonnes)
+111%*
200
185,0
185,0+
12,5
25,0
12,5
25,0
12,5
25,0
34,5
37,5
37,5
108,0
110,0
110,0
2013E
2014E
2015E
180,0+ +3%
180
+50%
160
140
120.2
+32%
120
100
87,7 +4%
80
91,4
11,2
5,4
14,4
76,5
71,6
2010
2011
9,8
23,3
6,1
60
40
81,0
20
0
Existing farms



2012E
Greenfield farms
Acquired farms
Orelselprom
Cost and scale synergies due to proximity of
new farms to existing Cherkizovo’s facilities
Efficient deployment of CAPEX,
as all
essential construction is completed in Lipetsk and
Penza
Greenfield construction represents significant
efficiency gains
* Increase in 2015 compared to 2010 levels
9
Meat Processing Division


Volumes decreased by 12% to appr. 29 115 tonnes
Prices increased by 11% to $4.75 per kg for 2012* (excl.
VAT) and increased by 14% to 143.82 RUR per kg
Total sales decreased 5% to $130.9 mln
Gross Profit increased 10% to $21.9 mln; Gross Margin
increased to 17%
Operating expenses as a percentage of sales increased to
14%
EBITDA increased 11% to $6.1 million; EBITDA margin
slightly increased to 5%
Division profit was $1.3 mln, division profit margin was 1%





Volume and Price* Dynamics
35
$4.30
11%
$4.75
30
25
15
33 200
29 115
138.4
130.9
(5%)
(2%)
Gross Profit, USD mln
19.9
21.9
10%
14%
Gross Margin, %
14%
17%
EBITDA, USD '000
5.5
6.1
11%
15%
EBITDA Margin, %
4%
5%
Division profit USD '000
0.4
1.3
221%
233%
Division profit margin %
0.3%
1%
8
100
6
5
20
1Q2012
10%
8%
6%
5%
138.4
130.9
4%
4
2
4%
6.1
5.5
0.4
2%
1.3
0
0%
1Q2011
0
1Q2011
EBITDA and Division Profit, US$ mln
120
10
0
Total Sales, USD mln
10
40
% change
RUR
30.26
140
60
% change
USD
29.27
Total Sales, USD mln
80
20
1Q2011 1Q2012
US$/RUR rate
1Q2011
1Q2012
EBITDA, US$mln (left axis)
1Q2012
Division profit, US$mln (left axis)
EBITDA margin, % (right axis)
Source: Company
* The company selling price
10
New opportunities – Cherkizovo enters turkey meat market
Turkey meat production joint venture with Grupo Fuertes (Spain)
Total investments in the project – 4,5 bln RUR (incl. VAT)
Integrated turkey meat production complex
Russian turkey meat market highlights
•Greenfield project in Tambov region on a 5000ha land plot
•Double-digit growth
• Production capacity: 25-30 thousand tonnes in sellable weight
•Growing demand for nutritional turkey meat
(possible increase to 50 thousand tonnes)
•Retail prices 3x higher than for poultry meat
•Full-cycle production from fodder to package
•Complex will go live in 2014 and reach full capacity in 2015
•Import is replaced with domestic production quickly
Combining leading European experience and genetic resources in turkey production
with Cherkizovo’s strong position on the Russian meat market
Top turkey meat producers in Russia, in volume terms, %
11
Capital Expenditures and Debt
Capital Expenditure, RUR mln
Total Debt, RUR mln
All Group Debt is in RUR, Cost of Debt for 1Q2012 was 1.7%
10,000.0
8 698.3
542.2
8,000.0
30000
24,063.5
25000
23,625.7
1 344.9
Short-term
29%
20000
6,000.0
Long-term
30%
15000
4,000.0
1 369.4
2,000.0
-
1 135.2
74.1
732.8
562.5
81,3
471.5
582.4
1Q2011
1Q2012
6 811.2
10000
71%
70%
2011
1Q2012
5000
0
Poultry
Pork
2012Plan
Meat processing
7%
Subsidized
7%
Non-subsidized
Poultry: investments into capacity
Bryansk cluster: “Pervomaiskaya” poultry breeding facility: 1st line
launched in 1Q2012
Penza cluster
“Vostochnaya” poultry breeding facility: 21 additional bird houses
launched in 1Q2012
Pork: investments into capacity
greenfield construction in Tambov, Voronezh, Lipetsk: rearing facilities
launched in 1Q2012
Meat processing: investments into Kaliningrad plant
93%
93%
2011
1Q2012
23 154.1
22,729.5
Cost of Debt
1.8%
1.7%
Debt/Equity
1.0x
1.0x
Debt/EBITDA*
3.2x
3.1x
16.6x
18.0x
Net debt, RUR mln
Interest coverage**
*Defined as EBITDA divided by interest expense
12
Investment Highlights
Investment Highlights
1
Attractive market fundamentals
2
Well positioned to drive industry consolidation
3
Leading portfolio of brands
4
Best in class distribution network reaching a well-diversified customer base
5
Vertically integrated within the segments
6
Well-invested production assets
7
Favourable regulatory and tax environment
8
Attractive financial profile
9
Strong management team and corporate governance
14
1
The Russian Economy is Re-bounding Towards its Historical
Growth Path
Real Disposable Income Growth (%)*
Real GDP Growth (%)
8.2%
13.3%
8.5%
10-13E World
CAGR: 3.1%
10.4%
5.2%
5.1%
4.3%
4.3%
4.0%
4.0%
5.0%
5.0%
2.7%
0.8%
10-13E Euro Area
CAGR: 1.5%
(7.8%)
(2.0%)
2006
2007
2008
2009
2010
2011
2012E
2006
2013E
Source: Rosstat, Broker estimates
* Denotes real personal disposable income (% change pa)
2007
2008
2009
2010
2011
2012E
2013E
Source: Rosstat, Broker estimates
RUB/USD FX
Commodities Price Performance (rebased to 100)*
40
Estimates**
250
Q2 2012 Q4 2012
230
36
196.7
210
190
32
Current: 29.66
159.2
170
170.2
169.6
150
28
Avg. 28.59
147.4
130
24
90
20
Март
142.9
110
Ав густ
March.07
2007
2007
Фев раль
2008
Ав густ
Aug.082008
Фев раль
2009
Ав густ
2009
Aug.09
Фев раль
2010
Ав густ
Aug.10
2010
Фев раль
2011
Ав густ
Фев раль
Aug.11 2011March.12
2012
Wheat
Corn
Q2 2012E
Soybean
Q4 2012E
70
Mar 10
Jun 10
Sep 10
Dec 10
Mar 11
Jun 11
Sep 11
Dec 11
Mar 12
Source: Bloomberg
Source: Bloomberg
* Prices for Wheat (Cts/Bu), Soyabeans (C/Bushel), Barley (CAD/MT) and Corn (yellow)
** Rebased to 100 at September 1, 2009
15
1 The Russian Meat Market is a Sizeable and Fast Growing
Opportunity
Significant growth of Russian economy and disposable income creates significant
opportunities for the domestic meat market
Annual Per Capita Meat Consumption, kg (2011)
Russian Meat Market evolution
Biological norm – 75 kg
2016E
(mln tonnes)
110
90
109
70
72
93
83
76
65
Canada
EU
Russia
50
USA
Australia
Production Volume
4,4
4,4
4,6
4,9
4,9
4,9
5,1
5,6
6,2
6,6
7,1
8,4 9,2
78
USSR
(1988)
Source: Russian Meat Union, FAPRI, Global Insight, World Bank Database
Shift in Russian Meat Market Structure (volume)1
Source: Russian Meat Union
Production value1
70,1
(US$ bn)
Pork
33%
Poultry
27%
Beef
Mutton
38%
31%
39%
34%
33%
39%
41%
28%
25%
24%
2%
2%
2%
2%
2000
2009
2011
2015E
Source: Russian Meat Union
1 Basing on internal consumption
6,9
9,4
10,1 12,8
18,2
23,6 24,4 26,1
35,8 31,0 35,8
Source: Russian Meat Union
1 Meat prices in 2010 -2015 assumed to grow at CPI rate (EIU)
16
2
Well Positioned to Drive Industry Consolidation
Fragmented market creates a platform for organic growth and consolidation
Meat Processing*
Poultry**
Ostankino
5.9%
Pork***
Cherkizovo
5,4%
Prodo
4,2%
Tsaritsino
2,4%
Tavr
1,0%
Dymov
1,0%
Top 3 producers in US account for
approx. 38% of the market****
Source: Meat Union Estimates, Company Estimates
* In volume terms (2011)
** In volume terms (slaughter-weight, 2011)
*** In volume terms (live weight, 2011)
**** Management estimates
Rusagro
3,4%
Severnaya
poultry farm 5,9%
Resurs
5,8%
Alpi Holding
1,6%
Chelny Broiler
1,7%
Cherkizovo Group
5.4%
Prodo
3,8%
Others
45,7%
Mikoms
2,5%
(1)
(2)
(3)
(4)
Agro-Belogorie
5,7%
Cherkizovo Group
10,1%
ABI Group
4,4%
Others
73,2%
Miratorg
7,7%
Prioskolie
14,1%
Agrarian Group
3,3%
Others
61,7%
KoPitania
3,2%
Komos Group
2,1%
Belgrankorm
5,6%
Belaya Ptitsa
2,9%
Lisko Broiler
1,8%
Prodo-Trade
4,8%
Top 3 producers in US account for
approx. 57% of the market ****
Source: Russian Poultry Union, Company
Eksima
1,9%
APK Don
1,8%
Top 3 producers in US account for
approx. 50% of the market****
Source: National Pork Union of Russia, Company
17
3
Leading Portfolio of Brands
Strong portfolio of federal brands covering the entire price spectrum
Poultry
Powerful well-known brands
– Cherkizovsky products enjoy very high levels
of brand recognition and customer loyalty in
the Central Russia and Volga region
Premium
– Petelinka accounts for almost all of the
Company’s chilled cut poultry sales
– Petelinka – #1 brand in Moscow and Moscow
region
– Chicken Kingdom has very high customer
loyalty throughout the Central Federal District
of Russia
Medium
– During 2011 we added the high-profile
Mosselprom brand to our portfolio
National
Local
Meat Processing
National
Local
# 1 in Moscow region
Low
18
4
Best in Class Distribution Network reaching a Well-diversified
Customer Base
Company’s well developed distribution network is a key success factor and major
barrier for entry
St. Petersburg
Naro-Fominsk
Lipetsk
Belgorod
Company’s distribution network covers all Russian Federal
Districts

Daily deliveries by a dedicated fleet of refrigerated trucks
provide a significant competitive advantage

Warehouse network throughout European part of Russia

Strong relationship with independent distributors

Vologda
Moscow

Kazan
Tambov
Penza
Ulyanovsk
Ekaterinburg
Rostov
Unique software system to ensure timeliness and quality of
delivery
Meat Processing breakdown
Poultry breakdown of sales
of sales by channel*, 2011
by channel*, 2011
13%
23%
21%
Chelyabinsk
40%
14%
Labinsk
55%
22%
Distribution and Storage Network
Traditional Retail
Modern Retail
Wholesale
47%
Traditional Retail
Modern Retail
Wholesale
*Source: Company
19
5
Vertically Integrated within the Segments
Fodder
Land and Grain
Quality and
biological safety
Pork and Poultry
Processing
Lower dependence on
imports and suppliers
Capture margins from
value-added products
Distribution
Quality control and
cost optimisation
Fully Owned Farms as a Key Differentiating Factor
Prodo
Land and Grain







Fodder

*** ()*

**



Farm ownership







/ 
/*** ()*
/
/**
/
/
/
Meat Processing







Centralised distribution







Degree of vertical integration
5
4
4
4
4
3
4
Pork/Poultry Breeding
Note: Degree of integration of different players based on Cherkizovo management judgment
* Cattle activities ** Former Sadia operations *** Attributable to Pilgrim’s Pride acquisition
20
5
Vertically Integrated within the Segments
Agricultural Land
Key facts
Significant strategic benefits
Access to landbank of approx. 100,000 ha





28,212 ha Tambov Region – in ownership
14,615 ha in Lipetsk and 5,454 ha in Penza regions –
long-term lease
16,000 ha in Saratov region – 10,000 ha is in ownership
and 6,000 is in long-term lease
Appr. 30,000 ha in Orel region – acquired as part of
Mosselprom
Access to quality land – the “black earth” farming region
is considered one of the best land in the world




Conveniently located close to pork facilities
Securing feedstock on a long-term basis at
controllable cost
Option to use manure as highly efficient and natural
fertilizer
Cropping is outsourced to NAPKO, a crop raising
company
Opportunity to secure reliable feedstock
Land is a strategic asset that provides a hedge
against grain price increase
21
6
Well-invested Production Assets
Low cost production assets enabling high profit margins


Greenfield pork facilities enable to
achieve industry leading margins as
efficiency indicators are 50-70% higher
compared to old pork farms
State-of-art broiler and breeder farms
and processing plants use finest breeds
and latest technologies

Cherkizovo controls the quality for the
customer throughout the production
chain

Pork quality confirmed by “Ecological
Product” certification
Annual production capacity
Meat processing (tpa)
Incl. slaughter
facilities
.
Poultry (lwt)
Pork (lwt)
Pork - greenfield acquisitions (lwt)
Pork - greenfield construction (lwt)
Kaliningrad
4.3
Vologda
5.0
Moscow
121.3
.
Bryansk
56.0
.
10.8
71.0
Tula
31.0
Orel
22.0
Kursk
12.5 Lipetsk
12.0
85.0
50.0 Tambov
12.5 12.5 25.0 Penza
70.5. Ulyanovsk
Voronezh
83.0
12.5
8.6
12.5
12.5
tpa – ‘000 tons per annum
swt – ‘000 slaughter weight tonnes
lwt – ‘000 live weight tonnes
22
7
Favourable Regulatory and Tax Environment
Import Quotas and Regulation



Poultry import – all imports are leg
quarter parts, no bird in whole is allowed
Russia’s admission to WTO – pork
quotas will remain at the level of 2012
until 2020 and poultry quotas - until 2020
and beyond. After 2020 duty on pork will
be 25%
Subsidised Interest Rate Rebate


Effective cost of debt is 2%
in 2011
Attractive returns on
invested capital
Attractive Tax Regime

Attractive tax rate for agricultural
producers
Low effective Group tax rate
Government considers
prolongation of the zero rate


Duty on import of live pigs will
decrease from 40% to 5% in the second
half of 2012.
Import quotas (000’ tonnes)
500
450
400
350
300
250
200
150
100
50
0
Debt Structure as of 2011
RUR 24,063.5 mln
7%
Profit Tax Rate for Producers, %
24
24
24
500
18
430
350
18
18
93%
330
20
18
12
12
12
6
6
2011
2012
Poultry import quotas
2011
6
2012
Pork import quotas
0
1
Subsidized
Not subsidized
0
2010
0
2012
0 2011
2012
Opportunity for domestic producers
Source: Official Statistics
2013
2012
2013
2014
2013
2014
2015
2014
2015
2016
2015
2016
2017
2016
2017
2018
2018
High EBITDA to Net Income conversion ratio
Source: Company reports
Source: Official Statistics, MinFin
23
8
Attractive Financial Profile
Profitability
Leading profitability indicators (EBITDA margin %)
Poultry
Pork
Cherkizovo*
Brazil Foods****
Meat processing
Cherkizovo**
People's Foods****
China Yurun****
Brazil Foods****
41%
40%
Fleury Michon****
Cherkizovo***
Atria****
HKScan****
41%
37%
26%
21%
18%
16%
Avg. 8%
12%
10%
Avg. 6%
6%
Avg. 4%
13%
Avg. 10%
10%
9% 9%
7%
14%
13%
Avg. 9%
6%
5%
Avg. 5%
14%
12%
Avg. 10%
4%
Avg. 6%
Avg. 10%
8%
8%
6%
4%4%
2%
EBITDA
EBITDA
EBITDA
EBITDA
margin 08 margin 09 margin 10 margin 11
EBITDA
margin 08
EBITDA
EBITDA
margin 09 margin 10
Source: Company filings; operating income is assumed to be equivalent to EBIT for benchmarking purposes
Note: Average excludes Cherkizovo
EBITDA
margin 11
EBITDA
margin 08
Avg. 6%
9%
6%4%5%
Avg. 6%
Avg. 4%
8% 7%
8%
7%
4%
5% 5%
4%
EBITDA
EBITDA
margin 09 margin 10
EBITDA
margin 11
*Poultry division **Pork division ***Meat processing
****Group margin
24
8
Attractive Financial Profile
Best In Class Financial Performance
Significant Improvement in Financial Performance (RUB mln)
Sales Growth
36,085.1
EBITDA Margin (%)
43,284.4
17.8%
60.4%
18.4%
16.7%
16.7%
32,330.7
14.2%
28,991.4
30.9%
12.7%
13.1%
11.5%
20,992.7
20.4%
17,042.3
8.2%
5.6%
6.8%
4.5%
2006
2007
2008
2009
2010
2011
5.1%
Sales CAGR (2006-2011)
2006
2007
2008
2009
EBITDA Growth
2010
2011
EBITDA Margin 2011
Net Income Growth
7,214.1
6,635.6
4,385.6
44.4%
4,344.2
37.7%
3,789.1
5,782.9
30.0%
29.1%
3,786.4
28.0%
2,977.0
15.4%
1,941.3
1,575.1
1,967.1
9.8%
12.0%
876.1
(11.5%)
7.6%
2006
2007
2008
2009
2010
2011
2006
2007
EBITDA CAGR (2006-2011)
2008
2009
2010
2011
Net Income CAGR (2006-2011)
Source: Broker estimates, Company filings (figures as per company’s fiscal year end),
25
9
Corporate Governance
Strong Board of Directors
Igor Babaev
Chairman
30+ years of experience in the
Russian meat industry
Sergey
Mikhailov
• CEO and
shareholder
Yury
Dyachuk
• Head of Legal
Department
Evgeny
Mikhailov
Musheg
Mamikonian
Samuel B.
Lipman
• Head of Project
Development and
shareholder
• Independent
member
• President of Meat
Union of Russia
• 20+ years of
experience in the
industry
• Independent
member
• American poultry
expert
• 20+ years of
experience in the
poultry industry
Marcus Rhodes
• Independent
member
• Chairman of Audit
Committee
• 20 years in audit
• 2002-2008 - Audit
Partner, E&Y
• Degrees from
Loughborough
University and
ICA, Great Britain
26
9
Dedicated Management Team
Sergey Mikhailov
CEO
Ludmila Mikhailova
Arthur Minosyants
CFO
COO
• 11 years in the industry
• 10 years in the industry
• 15 years in the industry
• Joined the Company in
2001 as Director for
Marketing
• Prior to that, founder of
aTelo telecommunications
company, in Washington,
DC
• BA from Georgetown
University (Finance and
Economics)
• 2002-2004- Financial
Analyst in General Mills
Corporation, Canada
• Prior to that - Head of
corporate finance
division of Cherkizovsky
MPP
• BA from Finance
Academy, Moscow;
MBA from York
University, Canada
• 2000-2006 – First
Deputy President for
Finance and
Economics,
Cherkizovsky MPP
• Prior to that – Finance
and Economics Director
of Birulovsky Meat
Processing Plant
• PhD in Economics from
the Moscow Plekhanov
Institute for National
Economy
27
Appendix
1Q2012 Consolidated Financial
Statements
Key Consolidated Income Statement and Data
Period, USD mln
1Q2012
Sales
357.8
308.2
(264.1)
(243.6)
Gross Profit
93.7
64.6
Gross Margin
26%
21%
(51.5)
(43.2)
EBITDA
60.8
34.9
EBITDA Margin
17%
11%
Operating Income
42.2
21.3
Operating Income Margin
12%
7%
Net Income
39.3
18.4
As % of Sales
11%
6%
Cost of sales
Operating Expenses
1Q2011
30
Cherkizovo Group – Balance Sheet
Period, USD mln
1Q2012
2011
Cash and Equivalents
30.6
28.3
Trade Accounts Receivable
77.7
77.6
Inventory
237.7
219.4
Other Current Assets
108.2
98.6
Total Current Assets
454.2
423.9
1,329.5
1,197.6
76.4
69.4
Total Non-current Assets
1,405.9
1,267.0
Total Assets
1,860.1
1,690.9
78.1
88.2
238.9
214.2
61.4
55.9
Total current liabilities
378.4
358.3
Long-term debt
566.7
533.6
44.4
41.5
Total non-current liabilities
611.1
575.1
Shareholders’ equity
839.4
727.3
1,860.1
1,690.9
Plant, Property and Equipment
Other Non-current Assets
Trade Accounts Payable
Short-term Debt
Other current liabilities
Other non-current liabilities
Total Liabilities and Shareholders’ Equity
31
Summary Consolidated Cashflow Statement
Period, USD mln
1Q2012
1Q2011
Net Income
40.3
18.4
Depreciation
18.3
13.6
Adjustments for Non-Cash Items
(2.1)
0.6
0.5
(0.3)
57.0
32.3
(40.8)
(42.1)
Other Investing Cash Flow
0.1
(9.2)
Net Investing Cash Flow
(40.7)
(51.3)
Proceeds from/(Repayment of) Debt
(14.2)
1.9
Other financing Cash Flow
(2.5)
0.0
Net Financing Cash Flow
(16.7)
1.9
Exchange Rate Difference
2.8
4.4
Net Increase in Cash and Equivalent
2.3
(12.7)
Change in Net Working Capital
Net Operating Cash Flow
Purchases of PP&E
32
Transformational Project – Elets Agroindustrial Park
New production – 125 000 tonnes of poultry, sellable-weight
Investments into total project – 19.5 bln roubles (incl. VAT and working capital)
Construction of state-of-the-art sites in one
production area
Production volumes,
000, sellable-weight tonnes
470
500
450
•
•
•
•
•
•
Incubation site – 230 mln incubation eggs per year
5 broiler sites for 280 broiler houses and 4 parent stock sites
Fodder plant – 90 tonnes of fodder per hour
Poultry slaughter and processing plant – 24 000 units per hour
Pig slaughter and processing plant – 650 units per hour
Transport and logistical infrastructure
400
357
350
2
2
300
380
20
360
250
360
355
200
310
150
100
110
20 110
194
194
260
228
255
295
300
300
50
0
2010
2011
2012E
2013E
Organic growth and Mosselprom
2014E
Elets project
Investments,
mln RUR
(excl. VAT)
per unit
Estimated project parameters
POULTRY PROJECT
•
•
•
•
•
Est. Debt – 15,6 bln RUR
Est. Equity – 3,9 bln RUR
Est. Payback – 6,5 years
Cost of Debt – 0,22%
Debt maturity – 10 years
2015E
Broiler farm
115 thous. tonnes selleable weight
4441
38,7
Feed mill
Elevators
558 thous, tonnes per year
462 thous. cubic m (grain)
2288
4,1
2758
847
3061
1169
14564
28,0
3,7
27,1
Breeder farm
Hatchery
Slaughter plant
Logistics
98,5 mln hatching eggs
230 mln eggs
24 000 units per hour
113,1 mln units per year
TOTAL
33
Alexander Kostikov
Head of Investor Relations and Communications
+7 495 788 3232 ext. 5019
[email protected]
34
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