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Cherkizovo Constructs Pig Farm in Lipetsk

29 October 2010

RUSSIA - As part of Cherkizovo Group’s dynamic development strategy of its Pork segment, the Company has now started the construction of a new greenfield pork farm in the Lipetsk region of Central Russia.

The new best-in-class integrated multi-site complex will house 4,800 sows and will have an estimated full capacity of 12,500 tonnes of live-weight pork per year. The complex will include separate breeding, rearing and fattening facilities, equipped with state-of-the art technology. The farms will be populated with our own parent stock, using sows from the high yielding and efficient pork breed, DanBred.

The launch of breeding facilities at the new Lipetsk site is scheduled for August 2011, with the rearing and fattening facilities expected to be operational from October 2011. It is expected that the new complex will operate at full capacity in 2013.

The total consideration for the planned investments is expected to be approximately US$50 million, of which approximately 20% will be funded by Cherkizovo and the remaining approximately 80% by bank loans.

Taking into account the recently announced Greenfield construction of pork complexes in the Tambov and Voronezh regions, the Group's overall pork production capacity will total an estimated 153,000 tonnes per year by 2013. Additionally, the new site will be closely located to Cherkizovo Group's existing pork production operations, and the Company’s high quality fodder production plant in the Lipetsk region. This proximity is expected to contribute to substantial cost and scale synergies within the high-margin Pork division.

Cherkizovo would like to thank the Lipetsk regional administration for their co-operation in undertaking infrastructure projects to support the facility, and their subsidy support on interest rates and tax benefits, which have facilitated the initiation of work on this site.

Sergey Mikhailov, CEO of Cherkizovo Group, commented: "We are excited to have this project underway; it is a significant step in our strategy to prioritise the development of our high-margin Pork business. We are confident that our investment in these greenfield projects will enable us to further increase efficiency, the performance of the segment and the overall results of the Group. This additional capacity will also help strengthen our position in the highly fragmented Russian pork market and bring operational benefits to our increasingly efficient Pork segment."

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