During the first three months of 2005, Wimm-Bill-Dann’s sales rose by 17.0% to US$325.7 million, compared to US$278.3 million in the first quarter of 2004. Gross profit increased by 15.7% compared to the same period last year, while gross margins declined to 25.7% in the first three months of 2005 from 26.0% in the same period of 2004. Operating income increased by 26.3% year-on-year from US$7.6 million to US$9.6 million. Adjusted EBITDA* increased by 17.2% year-on-year from US$18.6 million to US$21.8 million. Adjusted EBITDA* margin remained flat at 6.7%. Net income decreased to US$ 2.9 million in the first quarter of 2005 from US$5.3 million in the first quarter of 2004.
Commenting on today’s announcement Sergei Plastinin, Chief Executive Officer of Wimm-Bill-Dann Foods OJSC, said: «Traditionally, the first quarter is the most challenging one throughout the year. Despite this, our sales continued to demonstrate stable growth: our dairy sales were up 18.4% largely due to regional expansion, the launch of new innovative products and the strengthening of the already existing product range. Following the success of Imunele, our immune system booster, we launched Imunele Forte, a new product enriched with probiotics and vitamins. We also initiated an awareness campaign to focus people’s minds on healthier lifestyles. During the first quarter we almost doubled the output of Lamber cheese, following increasing consumer demand for this product. Our operating income grew 26.3%, while our net income decreased mainly as a result of substantial decline in foreign currency translation gain as compared to the first quarter of 2004 due to the change in the exchange rate dynamics».
Key Operating and Financial Indicators of 3m 2005
Q1 2005
Q1 2004
Change
US$ mln
Sales
325.7
278.3
17.0%
Dairy
232.0
195.9
18.4%
Baby Food
20.8
14.7
41.5%
Beverages
72.9
67.7
7.7%
Gross Profit
83.8
72.4
15.7%
Selling and distribution expenses
(44.7)
(40.9)
9.3%
General and administrative expenses
(27.0)
(21.6)
25.0%
Operating income
9.6
7.6
26.3%
Financial income and expenses, net
(3.9)
1.8
—
Net income
2.9
5.3
(45.3)%
Adjusted EBITDA*
21.8
18.6
17.2%
CAPEX including acquisitions
20.3
10.8
88.0%
* Note: See Attachment A for definitions of Adjusted EBITDA and Adjusted EBITDA margin and reconciliations to net income.
Wimm-Bill-Dann’s sales reached US$325.7 million in the first three months 2005 compared to US$278.3 million in the same period 2004.
Baby Food as a separate business unit came into effect as of January 1, 2005. Prior to 2005, Baby Food was part of the Dairy Segment. Juice and Water segments were merged into a singe Beverages Segment as of March 1, 2005.
Sales in the Dairy Segment increased by 18.4% from US$195.9 million in the first three months of 2004 to US$232.0 million in the first three months of 2005, while the average selling price rose by 15.5% from US$0.71 per 1 kg in the first three months of 2004 to US$0.82 per 1 kg in the same period of 2005. This increase was primarily driven by ruble price increases. Gross margins in the Dairy Segment declined from 22.8% in the first three months of 2004 to 22% in the same period of 2005. This change was primarily driven by the increase in raw materials costs mostly due to the 14.1% year-on-year increase in the weighted average US dollar price of raw milk and higher packaging and personnel costs.
Sales in the Baby Food Segment increased by 41.5% from US$14.7 million in the first three months of 2004 to US$20.8 million in the first three months of 2005, while the average selling price rose by 19.7% from US$1.22 per 1 kg in the first three months of 2004 to US$1.46 per 1 kg in the same period of 2005. This increase was primarily driven by ruble average price growth. Gross margins in the Baby Food Segment rose from 32.7% in the first three months of 2004 to 35.1% in the same period of 2005.
Sales in the Beverages Segment (combined Juice and Water Segments) increased by 7.7% from US$67.7 million in the first three months of 2004 to US$72.9 million in the same period of 2005, while the average selling price increased by 7.8% from US$0.64 per liter in the first three months of 2004 to US$0.69 per liter in the same period of 2005 primarily due to ruble price increases. Gross margin in the Beverages Segment increased to 35.2% in the first quarter 2005 from 34.0% in the same period last year.
Selling and distribution expenses decreased as a percentage of sales from 14.7% during the first three months of 2004 to 13.7% in the same period of 2005. Advertising and marketing expenses decreased as a percentage of sales from 4.5% in the first quarter of 2004 to 3.9% in the first quarter of 2005.
General and administrative expenses increased as a percentage of sales from 7.8% during the first three months of 2004 to 8.3% in the same period of 2005. This increase was primarily caused by rising personnel expenses mostly due to additional personnel in the Baby Food Segment and in the Dairy Segment in key regions, as well as the recruitment of additional managers at the holding company level in 2004.
Financial expenses in the first three months of 2005 totaled US$3.9 million compared to US$1.8 million financial income in the same period of 2004. Foreign currency translation gain decreased from US$7.5 million to US$1.7 million in the first three months of 2005. Interest expenses stayed almost flat at US$5.5 million.
Attachment A
*Reconciliation of Adjusted EBITDA and Adjusted EBITDA margin to US GAAP Net Income
Adjusted EBITDA is a non-U. S. GAAP financial measure. The following table presents reconciliation of Adjusted EBITDA to net income (and Adjusted EBITDA margin to net income as a percentage of sales), the most directly comparable U. S. GAAP financial measure.
3 months endedMarch 31, 2005
3 months ended March 31, 2004
US$ ‘mln
% of sales
0.9%
1.9%
Add: Depreciation and amortization
12.2
3.7%
11.0
4.0%
Add: Income tax expense
2.0
0.6%
3.0
1.1%
Add: Interest expense
5.5
1.7%
2.0%
Less: Interest income
(0.3)
0.1%
(0.2)
Less: Currency remeasurement gains, net
(1.7)
0.5%
(7.5)
2.7%
Add: Bank charges
0.5
0.2%
0.4
Add: Minority interest
0.7
1.1
0.4%
Adjusted EBITDA
6.7%
Adjusted EBITDA represents net income before interest, income taxes and depreciation and amortization, adjusted for interest income, currency remeasurement gains, bank charges and other financial expenses and minority interest. Adjusted EBITDA margin is Adjusted EBITDA expressed as a percentage of sales.
We present Adjusted EBITDA because we consider it an important supplemental measure of our operating performance. In particular, we believe Adjusted EBITDA provides useful information to securities analysts, investors and other interested parties because it is used in the «debt to EBITDA» debt incurrence financial measurement in certain of our financing arrangements.
Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as substitute for analysis of our operating results as reported under U. S. GAAP. Since we adjust EBITDA for recurring items in order to calculate Adjusted EBITDA, we particularly caution users that Adjusted EBITDA is not an alternative to net income, operating income or any other GAAP measure, nor to EBITDA. Moreover, other companies in our industry may calculate Adjusted EBITDA differently or may use it for different purposes than we do, limiting its usefulness as a comparative measure.
Adjusted EBITDA also should not be considered as an alternative to cash flow from operating activities or as a measure of our liquidity. In particular, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business.
WIMM-BILL-DANN FOODSConsolidated Statements of Operations (unaudited)(Amounts in thousands of U.S. dollars, except share and per share data)
Three months ended March 31,
WIMM-BILL-DANN FOODSConsolidated Balance Sheets(Amounts in thousands of U.S. dollars)
March 31,2005
December 31,2004
(unaudited)
(audited)
ASSETS
Current assets:
Cash and cash equivalents
$ 38,442
$ 23,791
Trade receivables, net
58,568
62,210
Inventory, net
95,606
102,039
Taxes receivable
82,867
85,578
Advances paid
21,039
19,494
Net investment in direct financing leases
2,368
2,109
Deferred tax asset
9,366
6,265
Other current assets
10,234
7,145
318,490
308,631
Non-current assets:
Property, plant and equipment, net
444,401
440,096
Intangible assets
2,201
2,251
Goodwill
26,575
26,291
Net investment in direct financing leases — long-term portion
3,905
3,895
2,307
2,417
Deferred tax asset — long-term portion
8,081
7,001
Other non-current assets
6,368
5,506
Total non-current assets
493,838
487,457
Total assets
$ 812,328
$ 796,088
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable
$ 67,607
$ 62,400
3,239
3,492
17,313
17,554
6,760
936
13,824
13,281
20,303
14,691
2,322
2,329
Other payables
36,632
29,615
Total current liabilities
168,000
144,298
Long-term liabilities:
771
7,120
201,653
201,709
35,509
39,294
4,561
5,156
11, 783
10,268
Total long-term liabilities
254,277
263,547
Total liabilities
422,277
407,845
Minority interest
17,327
Shareholders’ equity :
Common stock: 44,000,000 shares authorized, issued and outstanding with a par value of 20 Rubles at March 31, 2005 and December 31, 2004
29,908
Share premium account
164,132
Accumulated other comprehensive income:
Currency translation adjustment
42,827
43,905
Retained earnings
135,900
132,971
Total shareholders’ equity
$ 372,7 67
$ 370,916
WIMM-BILL-DANNFOODSConsolidated Statements of Cash Flows(Amounts in thousands of U.S. dollars)
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortisation
Currency remeasurement gain relating to bonds payable and long-term payables
Obsolescence and net realizable value expense
Provision for doubtful accounts
Loss on disposal of property, plant and equipment
Earned income on net investment in direct financing leases
Deferred tax benefit
Non-cash rental received
Write off of long-term investments
Write off of trade receivables
Amortisation of bonds issue expenses
Other
Changes in operating assets and liabilities:
Decrease in inventories
Decrease (increase) in trade accounts receivable
Increase in advances paid
Decrease in taxes receivable
Increase in other current assets
Increase in trade accounts payable
Decrease in advances received
Increase (decrease) in taxes payable
Increase in accrued liabilities
Increase in other current payables
Increase (decrease) in other long-term payables
Total cash provided by operating activities
Cash flows from investing activities:
Cash paid for acquisition of subsidiaries, net of cash acquired
Cash paid for property, plant and equipment
Cash paid for acquisition of investments
Proceeds from disposal of property, plant and equipment
Cash paid for net investments in direct financing leases
Cash (paid) received for other long-term assets
Total cash used in investing activities
Cash flows from financing activities:
Short-term loans and notes, net
Repayment of long-term payables
Total cash used in financing activities
Total cash provided by operating, investing and financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents, at beginning of period
Wimm-Bill-Dann Foods OJSC16 Yauzsky Boulevard, Moscow, RussiaPhone: +7 095 733-97-26/9727Fax: +7 095 733-97-25web: http://www.wbd.comE-mail: kagan@wbd.ru
Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of Wimm-Bill-Dann, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not intend to update these statements to conform them to actual results. We refer you to the documents Wimm-Bill-Dann files from time to time with the U.S. Securities and Exchange Commission, including our Form F-1. These documents contain and identify important factors, including those contained in the section captioned “Risk Factors” in our Form F-1, that could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, potential fluctuations in quarterly results, our competitive environment, acquisition strategy, risks associated with operating in Russia, volatility of stock price, financial risk management, and future growth subject to risks.All news