Higher costs have weighed on half-year profits at Russian meat processor Cherkizovo.

The UK-listed company today (14 September) reported a 15% drop in net income to RUB1.89bn for six months to the end of June. Operating income fell 19% to RUB2.16bn.

The lower profits came despite sales climbing 15% to RUB19.72bn, helped by improved volumes from Cherkizovo’s poultry and meat processing divisions. Pork volumes were flat but Cherkizovo said prices across all three divisions rose.

However, Cherkizovo’s profits did improve in the second quarter of the year. Net income increased 6%, while operating income was up 1%. Sales climbed 15%.

CEO Sergey Mikhailov said the company had “delivered a strong set of results” despite a “challenging operating environment”.

Mikhailov was optmistic that the pressure on costs could lessen. “We welcome the Government’s recent decision to offer direct subsidies to offset sharp cost increases, and allow domestic producers to continue developing quality local products, despite the difficult trading conditions. Moreover, the current grain harvest is turning out to be favourable for Russia, which, we expect, is set to further stabilise input costs.”

He added: “Overall, we expect that in the second half of the year we will return to normalised profitability levels, which we already demonstrated in the second quarter, and this will offset the negative impact of the performance in the first quarter. Accordingly, management is optimistic that we are on track to meet expectations for the full year.”