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Disclaimer
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 be relied on in connection with, any contract, commitment or investment decision in relation thereto.

The information contained in this presentation has not been independently verified. The information included in this presentation is subject to updating, completion, revision and amendment and such information may change materially. No person, including the Company, is under any obligation to update or keep current the information contained in the presentation and any opinions expressed in relation thereto are subject to change without notice. Accordingly, no representation or warranty or undertaking, express or implied, is given by or on behalf of the Company or any of its respective members, directors, officers or employees or any other person as to, and no reliance should be placed on, the accuracy, completeness or fairness of the information or opinions contained herein. None of the Company or any of its respective members, directors, officers or employees nor any other person accepts any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or otherwise arising in connection therewith.

This presentation includes forward-looking statements that reflect the Company's intentions, beliefs or current expectations. Forward-looking statements involve all matters that are not historical fact. The Company has tried to identify those forward-looking statements by using the words "may", "will", "would", "should", "expect", "intend", "estimate", "anticipate", "project", "believe", "seek", "plan", "predict", "continue" and similar expressions or their negatives. None of the future projections, expectations, estimates or prospects in this presentation should be taken as forecasts or promises nor should they be taken as implying any indication, assurance or guarantee that the assumptions on which such future projections, expectations, estimates or prospects have been prepared are correct or exhaustive or, in the case of the assumptions, fully stated in the presentation. The Company assumes no obligations to update the forward-looking statements contained herein to reflect actual results, changes in assumptions or changes in factors affecting these statements.

These forward-looking statements are subject to risks, uncertainties and assumptions and other factors that could cause the Company's actual results of operations, financial condition, liquidity, performance, prospects or opportunities, as well as those of the markets it serves or intends to serve, to differ materially from those expressed in, or suggested by, these forward-looking statements. Important factors that could cause those differences include, but are not limited to: changing business or other market conditions, general economic conditions in Russia, the European Union, the United States and elsewhere, and the Company's ability to respond to trends in its industry. Additional factors could cause actual results, performance or achievements of the Company to differ materially. The Company and each of its directors, officers, employees and advisors assume no obligation or undertaking to release any update of or revisions to any forward-looking statements in this presentation and any change in the Company’s expectations or any change in events, conditions or circumstances on which these forward-looking statements are based, except as required by applicable law or regulation.

This presentation is made to and directed only at persons in Member States of the European Economic Area who are qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive (2003/7/EC) ("Qualified Investors"). In addition, this presentation is made to and directed at (i) persons outside the United Kingdom, (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order"), (iii) high net worth individuals, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (such persons, "Relevant Persons"). Any person who is not a Relevant Person should not act or rely on this presentation or any of its contents.

This presentation is not an offer of securities for sale in the United States.  The Company has not registered and does not intend to register any of its securities in the United States or to conduct a public offering of any securities in the United States.  Any of the Company’s securities may not be offered or sold in the United States absent registration or pursuant to an exemption from, or transaction not subject to, the registration requirements of the Securities Act of 1933 (the "Securities Act"). You understand that this presentation is not directed at persons located in the United States other than “qualified institutional buyers” (“QIBs”) as defined in Rule 144A (“Rule 144A”) under the Securities Act. You acknowledge that you are a QIB in the United States or that you are not located in the United States.

Neither this presentation nor any copy of it may be taken or transmitted into Australia, Canada or Japan or to any persons or to any securities analyst or other person in any of those jurisdictions. Any failure to comply with this restriction may constitute a violation of Australian, Canadian or Japanese securities law. The distribution of this presentation in other jurisdictions may be restricted by law and persons into whose possession this presentation comes should inform themselves about, and observe, any such restrictions. The Company has not registered and does not intend to register any of its securities under the applicable securities laws of Australia, Canada or Japan, and, subject to certain exceptions, none of the Company’s securities may be offered or sold within Australia, Canada, or Japan or to any national, resident or citizen of Australia, Canada or Japan.


Cherkizovo group the integrated meat producer
Cherkizovo Group – The Integrated Meat Producer

FY2011 Sales: $1,472.9m

FY2011 EBITDA: $245.5m

Poultry

FY2011 Total sales: $691.5m

FY2011 EBITDA: $110.9m

Pork

FY2011Total sales: $270.5m

FY2011 EBITDA: $109.5m

Meat Processing

FY2011 Total sales: $635.4m

FY2011 EBITDA: $41.7m

  • #2 in Russia

  • #2 in Russia

  • #3 in Russia

Market Position

  • Sausages, salamis, fresh retail-format meat, ready-to-cook products

Key Products

  • Chilled/frozen poultry

  • Live pigs, pork carcasses, fresh pork cuts

Key Brands

Production Facilities

  • 7 clusters

  • Total capacity (t.p.a): 260,200 *

  • 7 plants

  • Total capacity (t.p.a): 145,270***

  • 10 farms

  • Total capacity (t.p.a):91,400**

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



Key highlights of fy2011
Key Highlights of FY2011

Revenues increased 24% to $1,472.9 mln (20% in RUR)

Adjusted EBITDA* increased 12% to $245.5 mln (9% in RUR)

Adjusted EBITDA* margin was 17%

Gross profit increased 14% to $369.3 mln (10% in RUR)

Group gross margin was 25%

Net income increased 2% to $147.8 mln (decreased 1% in RUR)

Net debt was $719.2 mln

The effective cost of debt was 2,0%.

In the Penza poultry cluster: commenced the poultry breeding facility “Komarovka”, with a combined capacity of almost 1.1 million broilers; launched a large incubation facility with an annual capacity of 105 mln eggs; launched slaughtering facility with an hourly capacity of 8,000 heads

In the Bryansk poultry cluster: commenced a second line at the poultry breeding facility with a combined capacity of almost 880,000 broilers; launched a large incubation facility with an annual capacity of 43 mln eggs (increase to 66 mln eggs in 1Q2012)

In the pork segment by launching the breeding sites we started production at our three new greenfield farms in Tambov, Voronezh and Lipetsk

In the meat processing segment we launched reconstructed Kaliningrad plant

Cherkizovo has acquired and integrated Mosselprom - a diversified vertically-integrated agro-industrial company

Cherkizovo has started construction of the Elets agroindustrial complex in Lipetsk

EBITDA and EBITDA Margin Evolution, 2006-2011, RUR mln

SOLID FINANCIAL RESULTS

CAGR +30%*

9%

15%

7214,1

53%

6641,6

27%

5782,9

51%

3786,4

2997,0

1967,1

OPERATIONAL DEVELOPMENTS

Source: Management estimates, Company reports

 CAGR growth is calculated between 2006 to 2011


Group performance
Group Performance

4Q2010

4Q2011

2010

2011

%

change

%

change

  • Total sales increased 24% in US$ terms and 20% in RUR terms reflecting solid organic volume growth

  • Gross profit increased 14% in US$ terms and 10% in RUR terms; gross margin was 25%

  • Operating expenses as percentage of sales increased to 14%

  • EBITDA increased 12% in US$ terms and 9% in RUR terms, EBITDA margin was at 17%

  • Net income increased 2% in US$ terms and decreased 1% in RUR terms. Net income margin was 10%

US$/RUR rate

30.37

29.39

24%

Total Sales, US$ mln

1,188.2

1,472.9

392.5

320.5

22%

Gross Profit, US$ mln

323.8

369.3

14%

80.5

98.8

23%

Gross Margin, %

25%

27%

25%

25%

EBITDA, US$ mln

245.5

218.5

12%

65.5

50.3

30%

EBITDA Margin, %

18%

17%

17%

16%

Net Income, US$ mln

147.8

2%

144.4

28.6

37%

39.3

12%

10%

Net Income margin %

10%

9%

* EBITDA was adjusted for two non-cash one-off items - the impairment of a non-significant subsidiary in the amount of US$3.4 million, as well as for the write-off of uncollectable fodder subsidies in the amount of US$4.8 million

Total Group Sales, US$ mln

EBITDA and EBITDA margin, US$ mln, %

Net Income, US$ mln

180

147.8

144.4

1,472.9

300

160

245.5

1 600

18%

1,188.2

218.5

17%

250

140

1 400

51%

42%

45%

120

18%

1 200

200

39%

17%

43%

100

1 000

150

80

800

40%

45%

600

60

42%

100

44%

48%

400

40

40%

42%

50

200

20

16%

16%

6%

7%

0

0

0

2010

2011

2010

2011

2010

2011

Meat Processing

Poultry

Pork

Meat Processing

Poultry

Pork

Meat Processing

Poultry

Pork

Source: Management estimates, Company reports


Poultry division
Poultry Division

2010 2011 % change%change $US RUR

  • Prices increased by 5% to $2.48 per kg for 2011* (excl. VAT) and increased by 1% to 72.79 RUR per kg (excl. VAT)

  • Total sales increased 38% to US$691.5 mln

  • Gross Profit increased 10% to US$160.4 mln, Gross Margin was 23%

  • In 2011 the segment accounted for a one-off direct subsidy of 405,0 mln RUR or US$13.8 which offset the cost of sales

  • Operating expenses as a percentage of sales went down to 12%

  • EBITDA increased 5% to US$110.9 mln, EBITDA margin decreased to16% for 2011

  • Division profit decreased 3% to US$72.4 mln, division profit margin was 11%

30.37

29.39

US$/RUR rate

38%

Total Sales, US$ mln

501.0

691.5

34%

146.2

Gross Profit, US$ mln

160.4

10%

6%

Gross Margin, %

23%

29%

105.6

110.9*

5%

2%

EBITDA, US$ '000

EBITDA Margin, %

21%

16%

74.6

72.4

(3)%

(6)%

Division profit US$ '000

15%

11%

Division profit margin %

* EBITDA was adjusted for the one-off non-cash item – a write-off of uncollectable fodder subsidies in the amount of US$2.9mln

EBITDA and Division Profit, US$ mln

Total Sales, US$ mln

Volume and Price** Dynamics

$2.48

5%

38%

120

30%

$2.36

100

34%

21%

80

20%

16%

60

110.9

105.6

260,200

185,620

40

194,100

10%

691.5

74.6

72.4

20

501.0

0

0%

2010

2011

EBITDA, US$ '000 (left axis)

Division profit, US$ '000 (left axis)

EBITDA margin, % (right axis)

Source: Management estimates, Company reports

* Company’s selling price


Investments to drive capacity and efficiency growth

500

450

110

400

20

2

350

60

60

60

300

55

250

33

200

300

300

295

150

255

227

100

194

50

0

2010

2011

2012E

2013E

2014E

2015E

Organic growth

Mosselprom

Elets project

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 be the end of 2012

  • Sites launched: additional breeding facilities and 1st line of the new hatchery with an annual capacity of 43 mln eggs

  • Sites to be launched in 2012: fodder factory with a storage capacity of 300 000 tonnes; additional bird houses facilities; 2nd line of the new hatchery to increase annual capacity to 66 mln eggs

+142%*

470

+23%

+6%

380

357

+15%

310

+19%

260

+34%

194

Penza Cluster Capacity Increase Overview

  • 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 a state-of-the art slaughtering facility of 8,000 units per hour

  • Sites to be launched in 2012: additional bird houses and a fodder factory with a storage capacity of 300 000 tonnes.

* Expected increase in 2015 compared to 2010 levels

* For 2011 Mosselprom volumes are consolidated from 13 May 2011

Source: Company, Management estimates


Pork division
Pork Division

20102011 % change%change $US RUR

  • Prices increased by 15% to $2.72 per kg in 2011* (excl. VAT) and by 11% to 80.04 RUR per kg (excl. VAT)

  • Total sales increased 22% to US$270.5 mln

  • Gross Profit increased 20% to US$107.6 mln; Gross Margin was 40%

  • In 2011 the segment accounted for a one-off direct subsidy of 176.4 mln RUR or US$6.0 mln which offset the cost of sales

  • Operating expenses as a percentage of sales were 8%

  • EBITDA increased 22% to US$109.5 mln; EBITDA Margin was 41%

  • Division profit increased by 19% to $US82.6 mln, division profit margin was 31%

US$/RUR rate

30.37

29.39

22%

Total Sales, US$ mln

222.2

270.5

18%

90.0

Gross Profit, US$ mln

107.6

16%

20%

Gross Margin, %

40%

41%

90.0

18%

109.5*

22%

EBITDA, US$ '000

41%

EBITDA Margin, %

41%

Division profit US$ '000

82.6

69.4

19%

15%

Division profit margin %

31%

31%

* EBITDA was adjusted for the one-off non-cash item – a write-off of uncollectable fodder subsidies in the amount of US$2.0mln

Volume and Price* Dynamics

EBITDA and Division Profit, US$ mln

Total Sales, US$ mln

120

45%

$2.72

15%

$2.37

41%

41%

22%

100

4%

80

30%

109.5

60

90.0

91,400

87,650

69.4

40

15%

270.5

82.6

222.2

20

0

0%

2010

2011

EBITDA, US$mln (left axis)

Division profit, US$mln (left axis)

EBITDA margin, % (right axis)

Source: Company

* Company’s selling price


Cherkizovo consolidates the russian meat market
Cherkizovo Consolidates the Russian Meat Market

Volume sales (thous. live-weight tonnes)

Acquisition of new farms in Lipetsk and Penza

  • In November 2010 Cherkizovo acquired two greenfield pork complexes:

  • Located in Penza and Lipetsk regions best-in-class integrated multi-site complexes, each complex includes breeding, rearing and fattening facilities

  • Transaction price of $100mln including $80mln of subsidized debt (effective interest is appr. 3%) represents cost of construction

+111%*

185,0+

185,0

+3%

200

180,0+

+50%

180

12,5

12,5

12,5

25,0

25,0

160

25,0

120.2

140

+32%

37,5

37,5

34,5

9,8

120

91,4

23,3

+4%

87,7

100

5,4

6,1

Greenfield construction in Tambov, Voronezh and Lipetsk

11,2

80

14,4

60

110,0

110,0

108,0

  • 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 facilities at all three sites were launched in 2011

  • Sites are expected to reach their full capacity by the end of 2013

81,0

40

71,6

76,5

20

0

2010

2011

2012E

2013E

2014E

2015E

Existing farms

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

Source: Company, Management estimates


Meat processing division
Meat Processing Division

  • Prices increased by 17% to $4.55 per kg for 2011* (excl. VAT) and increased by 13% to 133.65 RUR per kg

  • Total sales increased 20% to US$635.4 mln

  • Gross Profit increased 20% to US$104.8 mln; Gross Margin was flat at 17%

  • Operating expenses as a percentage of sales were flat at 12%

  • EBITDA increased 13% to US$41.7 million; EBITDA margin was 7%

  • Division profit was US$15.3 mln, division profit margin was 2%

20102011 % change% change $US RUR

US$/RUR rate

30.37

29.39

20%

Total Sales, US$ mln

529.4

635.4

16%

87.5

Gross Profit, US$ mln

104.8

16%

20%

Gross Margin, %

17%

17%

41.7*

13%

9%

EBITDA, US$ '000

36.9

EBITDA Margin, %

7%

7%

(16%)

18.3

15.3

Division profit US$ '000

(19)%

Division profit margin %

4%

2%

* EBITDA was adjusted for the one-off non-cash item – the impairment of a non-significant subsidiary in the amount of US$3.4 mln

Volume and Price* Dynamics

Total Sales, US$ mln

EBITDA and Division Profit, US$ mln

50

10%

20%

$4.55

17%

$3.89

40

8%

7%

7%

3%

30

6%

36.9

41.7

635.4

20

4%

145,270

141,550

529.4

15.3

10

18.3

2%

0

0%

2010

2011

EBITDA, US$mln (left axis)

Division profit, US$mln (left axis)

EBITDA margin, % (right axis)

Source: Company

* The company selling price


Capital expenditures and debt
Capital Expenditures and Debt

Subsidized

Non-subsidized

Capital Expenditure, US$ mln

Total Debt, RUR mln

All Group Debt is in RUR, Cost of Debt for 2011 was 2%

24,063.5

212.8

240

0.1

19,759.9

200

29%

173.7

160

28%

109.3

79.8

120

71%

80

72%

92.6

85.2

40

4.8

10.8

0

2010

2011

Meat Processing

Poultry

Pork

Grain

7%

12%

Poultry: investments into capacity

Penza cluster:

  • slaughter facility: 8000 units/hour

  • incubation site: 105 mln eggs

  • poultry breeding facilities

    Bryansk cluster

  • 1st line of the incubation site: 43 mln eggs

  • poultry breeding facilities

  • Pork: investments into capacity

  • Launch of breeding facilities at three greenfield farms in Tambov,

  • Voronezh, Lipetsk

  • Meat processing: capital maintenance

  • Launch of the reconstructed plant in Kaliningrad (acquired in 2010)

93%

88%

2010

2011

17,682.5

Net debt, RUR mln*

23,154.1

2.5%

Cost of Debt*

2%

Debt/Equity*

1.0x

1.0x

Interest coverage* **

13.7x

16.6x

**Defined as EBITDA divided by interest expense



Investment highlights

2

3

4

6

7

5

8

9

1

Investment Highlights

Attractive market fundamentals

Well positioned to drive industry consolidation

Leading portfolio of brands

Best in class distribution network reaching a well-diversified customer base

Vertically integrated within the segments

Well-invested production assets

Favourable regulatory and tax environment

Attractive financial profile

Strong management team and corporate governance


The russian economy is re bounding towards its historical growth path
The Russian Economy is Re-bounding Towards its Historical Growth Path

1

2006

2007

2008

2009

2010

2011E

2012E

2013E

Real Disposable Income Growth (%)*

Real GDP Growth (%)

10-13E World CAGR: 3.1%

8.5%

8.2%

13.3%

10.4%

5.2%

4.3%

4.3%

4.0%

4.0%

5.1%

5.0%

5.0%

2.7%

10-13E Euro AreaCAGR: 1.5%

0.8%

(7.8%)

(2.0%)

2006

2007

2008

2009

2010

2011E

2012E

2013E

Source: Rosstat, Broker estimates

* Denotes real personal disposable income (% change pa)

Source: Rosstat, Broker estimates

RUB/USD FX

Commodities Price Performance (rebased to 100)*

Estimates**

Q2 2012

Q4 2012

Current: 29.66

Avg. 28.59

March.07

Aug.11

Aug.10

March.12

Aug.09

Aug.08

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

14

14

14

14


The russian meat market is a sizeable and fast growing opportunity
The Russian Meat Market is a Sizeable and Fast Growing Opportunity

Production Volume(mln tonnes)

1

31%

33%

34%

33%

27%

39%

39%

41%

38%

28%

25%

24%

2%

2%

2%

2%

2000

2009

2011

2015E

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

CAGR: 6.3%

9,2

8,4

7,1

6,6

6,2

72

5,6

5,1

4,9

4,9

4,9

4,6

4,4

4,4

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2015E

Source: Russian Meat Union, FAPRI, Global Insight, World Bank Database

Source: Russian Meat Union

Shift in Russian Meat Market Structure (volume)1

Production value1(US$ bn)

Pork

CAGR: 21.3%

Poultry

Beef

Mutton

Source: Russian Meat Union

1 Basing on internal consumption

Source: Russian Meat Union

1 Meat prices in 2010 -2015 assumed to grow at CPI rate (EIU)

15

15

15


2 Opportunity

Well Positioned to Drive Industry Consolidation

Fragmented market creates a platform for organic growth and consolidation

Meat Processing*

Poultry**

Pork***

Top 3 producers in USaccount for approx. 38% of the market****

Top 3 producers in US account for approx. 57% of the market ****

Top 3 producers in US account for approx. 50% of the market****

Source: Russian Poultry Union, Company

Source: Meat Union Estimates, Company Estimates

Source: National Pork Union of Russia, Company

  • * In volume terms (2011)

  • ** In volume terms (slaughter-weight, 2011)

  • *** In volume terms (live weight, 2011)

  • **** Management estimates


3 Opportunity

Leading Portfolio of Brands

Strong portfolio of federal brands covering the entire price spectrum

Poultry

Meat Processing

Powerful well-known brands

  • Cherkizovsky products enjoy very high levels of brand recognition and customer loyalty in the Central Russia and Volga region

  • 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

  • During 2011 we added the high-profile Mosselprom brand to our portfolio

National

National

Local

Local

Premium

# 1 in Moscow region

Medium

Low


4 Opportunity

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

  • 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

  • Unique software system to ensure timeliness and quality of delivery

Meat Processing breakdown of sales by channel*, 2011

Poultry breakdown of sales by channel*, 2011

21%

14%

*Source: Company


Vertically integrated within the segments
Vertically Integrated within the Segments Opportunity

5

Fodder

Pork and Poultry

Processing

Distribution

Land and Grain

Quality control andcost optimisation

Quality andbiological safety

Lower dependence onimports and suppliers

Capture margins fromvalue-added products

Fully Owned Farms as a Key Differentiating Factor

5

4

4

4

4

3

4

Note: Degree of integration of different players based on Cherkizovo management judgment

* Cattle activities ** Former Sadia operations *** Attributable to Pilgrim’s Pride acquisition

19


5 Opportunity

Vertically Integrated within the SegmentsAgricultural Land

Key facts

Significant strategic benefits

  • 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

Access to landbank of approx. 100,000 ha

  • 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


Well invested production assets
Well-invested Production Assets Opportunity

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

6

Low cost production assets enabling high profit margins

Annual production capacity

Meat processing (tpa)

Incl. slaughter facilities

.

Poultry (lwt)

Pork (lwt)

Pork - greenfield acquisitions (lwt)

Vologda

Pork - greenfield construction (lwt)

5.0

Kaliningrad

Moscow

4.3

121.3

.

Bryansk

56.0

.

10

.

8

71.0

Tula

31.0

Orel

22.0

Kursk

12.5

Lip

etsk

12.0

85.0

Tambov

50

.

0

Penza

25

.

0

12.5

12.5

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

21


7 Opportunity

Favourable Regulatory and Tax Environment

Import Quotas and Regulation

Attractive Tax Regime

Subsidised Interest Rate Rebate

  • 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%

  • Duty on import of live pigs will decrease from 40% to 5% in the second half of 2012.

  • Attractive tax rate for agricultural producers

  • Low effective Group tax rate

  • Government considers prolongation of the zero rate

  • Effective cost of debt is 2% in 2011

  • Attractive returns on invested capital

Import quotas (000’ tonnes)

Debt Structure as of 2011

Profit Tax Rate for Producers, %

RUR 24,063.5 mln

500

7%

450

20

18

400

500

350

300

430

93%

250

350

200

330

150

100

50

0

0

2011

2012

2011

2012

1

Poultry import quotas

Pork import quotas

Subsidized

Not subsidized

High EBITDA to Net Income conversion ratio

Opportunity for domestic producers

Source: Official Statistics, MinFin

Source: Official Statistics

Source: Company reports


Attractive financial profile profitability
Attractive Financial Profile OpportunityProfitability

8

Leading profitability indicators (EBITDA margin %)

Poultry

Pork

Meat processing

Cherkizovo*

Brazil Foods****

Fleury Michon****

Atria****

Cherkizovo**

China Yurun****

Cherkizovo***

HKScan****

People's Foods****

Brazil Foods****

41%

41%

40%

37%

26%

21%

18%

16%

Avg. 8%

13%

14%

14%

Avg. 10%

12%

13%

10%

12%

Avg. 6%

Avg. 6%

Avg. 6%

Avg. 4%

Avg. 6%

10%

Avg. 9%

Avg. 10%

Avg. 10%

7%

9%

9%

9%

6%

8%

8%

8%

7%

6%

8%

Avg. 5%

7%

6%

5%

5%

Avg. 4%

5%

4%

6%

4%

5%

4%

4%

4%

4%

2%

EBITDA

EBITDA

EBITDA

EBITDA

EBITDA

EBITDA

EBITDA

EBITDA

EBITDA

EBITDA

EBITDA

EBITDA

margin 08

margin 09

margin 10

margin 11

margin 08

margin 09

margin 10

margin 11

margin 08

margin 09

margin 10

margin 11

Source: Company filings; operating income is assumed to be equivalent to EBIT for benchmarking purposesNote: Average excludes Cherkizovo

*Poultry division **Pork division ***Meat processing ****Group margin

23


Attractive financial profile best in class financial performance
Attractive Financial Profile OpportunityBest In Class Financial Performance

8

Significant Improvement in Financial Performance (RUB mln)

Sales Growth

EBITDA Margin (%)

43,284.4

18.4%

36,085.1

+20%

17.8%

60.4%

16.7%

16.7%

32,330.7

14.2%

28,991.4

12.7%

30.9%

13.1%

11.5%

20,992.7

20.4%

8.2%

17,042.3

5.6%

6.8%

4.5%

5.1%

2006

2007

2008

2009

2010

2011

2006

2007

2008

2009

2010

2011

Sales CAGR (2006-2011)

EBITDA Margin 2011

EBITDA Growth

Net Income Growth

7,214.1

4,344.2

4,385.6

6,635.6

44.4%

37.7%

+30%

+38%

3,789.1

5,782.9

30.0%

29.1%

3,786.4

15.4%

28.0%

2,977.0

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

2008

2009

2010

2011

Net Income CAGR (2006-2011)

EBITDA CAGR (2006-2011)

Source: Broker estimates, Company filings (figures as per company’s fiscal year end),

24

24


Corporate governance strong board of directors
Corporate Governance OpportunityStrong Board of Directors

9

Igor Babaev

Chairman

30+ years of experience in the Russian meat industry

Marcus Rhodes

Sergey

Mikhailov

Yury Dyachuk

Evgeny Mikhailov

MushegMamikonian

Samuel B.

Lipman

  • Independent member

  • Chairman of Audit Committee

  • 20 years in audit

  • 2002-2008 - Audit Partner, E&Y

  • Degrees from Loughborough University and ICA, Great Britain

  • Independent member

  • American poultry expert

  • 20+ years of experience in the poultry industry

  • CEO and shareholder

  • Head of Legal Department

  • Head of Project Development and shareholder

  • Independent member

  • President of Meat Union of Russia

  • 20+ years of experience in the industry

25


Dedicated management team

9 Opportunity

Dedicated Management Team

Sergey MikhailovCEO

Ludmila MikhailovaCFO

Arthur MinosyantsCOO

  • 10 years in the industry

  • 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

  • 15 years in the industry

  • 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

  • 11 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)


Appendix Opportunity



Key consolidated income statement and data
Key Consolidated Income Statement and Data Opportunity

Period, US$ mln 2010 2011

Sales

1,188.2

1,472.9

Cost of sales

864.4

1,103.6

Gross Profit

323.8

369.3

Gross Margin

25%

27%

195.5

156.9

Operating Expenses

-

3.4

Impairment of assets

218.5

245.5

EBITDA

17%

18%

EBITDA Margin

170.4

166.9

Operating Income

14%

12%

Operating Income Margin

Net Income

147.8

144.4

As % of Sales

12%

10%


Cherkizovo group balance sheet
Cherkizovo Group – Balance Sheet Opportunity

Period, US$ mln 2011 2010

68.2

Cash and Equivalents

28.2

81.3

Trade Accounts Receivable

77.6

183.2

Inventory

219.7

135.0

Other Current Assets

98.7

467.7

424.2

Total Current Assets

937.6

Plant, Property and Equipment

1,142.4

66.7

Other Non-current Assets

116.1

1,004.3

Total Non-current Assets

1,258.5

1,471.9

Total Assets

1,682.7

73.3

Trade Accounts Payable

88.2

182.5

Short-term Debt

214.1

50.6

Other current liabilities

56.0

306.4

Total current liabilities

358.3

465.9

Long-term debt

533.3

29.6

Other non-current liabilities

30.6

495.5

Total non-current liabilities

563.9

Shareholders’ equity

670.1

760.5

1,471.9

Total Liabilities and Shareholders’ Equity

1,682.7


Summary consolidated cashflow statement
Summary Consolidated Cashflow Statement Opportunity

Period, US$ mln 2011 2010

Net Income

150.8

148.7

Depreciation

65.3

50.7

Adjustments for Non-Cash Items

11.9

4.4

Change in Net Working Capital

4.2

(37.5)

166.3

232.2

Net Operating Cash Flow

Purchases of PP&E

(170.6)

(211.9)

Other Investing Cash Flow

(2.1)

(42.3)

(214.0)

(212.9)

Net Investing Cash Flow

Proceeds from/(Repayment of) Debt

90.9

(29.2)

Other financing Cash Flow

(29.8)

(15.4)

Net Financing Cash Flow

(59.0)

75.5

Exchange Rate Difference

0.9

(0.6)

(39.9)

28.3

Net Increase in Cash and Equivalent


Transformational project elets agroindustrial park
Transformational OpportunityProject – Elets Agroindustrial Park

New production–125 000tonnes of poultry, sellable-weight

Investments into total project – 19.5bln roubles (incl. VAT and working capital)

Production volumes,

000, sellable-weight tonnes

Construction of state-of-the-art sites in one

production area

470

500

450

380

357

110

  • 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

110

20

2

20

350

2

300

360

360

250

355

200

310

150

260

300

300

295

255

228

194

100

194

50

0

2010

2011

2012E

2013E

2014E

2015E

Organic growth and Mosselprom

Elets project

Estimated project parameters

  • 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


THANK YOU! Opportunity


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