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UPDATE 2-Russia's Cherkizovo fears price hit from WTO entry
March 14, 2012 / 7:48 AM / 6 years ago

UPDATE 2-Russia's Cherkizovo fears price hit from WTO entry

* WTO entry to put downward pressure on domestic prices

* Q4 net income rises 15 pct yr/yr to 1.23 bln roubles

* Revenues rise 25 pct to 12.26 bln roubles

* Shares rise 2 percent

By Maria Kiselyova

MOSCOW, March 14 (Reuters) - Meat producer Cherkizovo warned on Wednesday that Russia’s expected entry into the World Trade Organization could hit domestic prices, making it hard to predict the performance of the company in the near term.

Russian meat producers have historically benefited from tariff incentives from the Russian government -- part of plan to boost local production of poultry and pork -- but WTO accession will result in a gradual reduction of import duties.

“Much will depend on what measures will be taken by the government to compensate for the reduction of the duty...” Chief Executive Sergei Mikhailov told a conference call with analysts.

State subsidies, aimed to help offset higher grain prices after a severe drought in 2010, helped Cherkizovo to grow earnings by 15 percent year-on-year in the fourth quarter of 2011.

Its Moscow-traded shares were up 2.02 percent by 1446 GMT, ahead of a 1.2 percent rise in the broad market index.

The company warned grain prices could again be affected by the size of the harvest and changes in global pricing trends in 2012, but said it would continue to invest in capacity.

Chief Financial Officer Lyudmila Mikhailova said Cherkizovo planned up to $300 million in capital expenditure for this year - the bulk of which will come from the poultry segment - against around $213 million in 2011.

Its fourth-quarter net profit rose to 1.23 billion roubles ($41.79 million) from 1.06 billion roubles in the same period of 2010, also up 13 percent in dollar terms.

The result came on the back of a 25 percent increase in revenues to 12.26 billion roubles, which were boosted by its acquisition of poultry firm Mosselprom and organic expansion.

Adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) grew 33 percent to 2.05 billion roubles, with a 17 percent margin against 16 percent a year ago.

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