MOSCOW (Business News) - Russian meat producer Cherkizovo (GCHE.MM) (CHEq.L) will hold off on new investments in pork in anticipation of a slump in prices following Russia's accession to the World Trade Organization, the group's chief executive said in an interview.
"WTO is the main issue affecting our plans, capital expenditure and strategy. In pork and meat processing ... the prices may come under serious pressure due to the lowering of import tariffs," Sergei Mikhailov told Business News.
"It may be not lucrative to invest into new projects - if it currently takes such projects at least seven years to break even, a fall in prices means it will be more than 10 years."
The freeze will not affect Cherkizovo in the short term, Mikhailov said, adding he did not rule out that the Russian government would take measures to protect domestic producers.
"We have already launched many projects in pork ... and will see significant growth in this division this and next year. This may rather affect our revenues in 3-5 years," he said.
"Whether we will build more pig farm s (after 2012) and how much we will invest will largely depend on government policy as a whole and in respect of the WTO. We, by intuition, understand that some (protective) measures will be taken."
The group plans to increase pork production by 31 percent this year to 120,000 metric tons.
It also expects a 19 percent rise in poultry production to 310,000 tons. Output in its meat processing unit will decline 3 percent to 141,000 tons, but revenues will be higher than in 2011 due to a bigger share of more expensive products.
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