Downloard press release (pdf).Highlights of nine months 2007:
·Group sales saw impressive 40.4% growth to US$1,758.3 million·Gross profit increased 43.4% to US$578.4 million ·Underlying* operating income rose 30.2% to US$168.3 million ·Underlying net income increased 33.4% to US$105.6 million ·Underlying EBITDA[1] increased 30.9% to US$229.4 million ·Earnings per share grew to US$2.40 from US$1.50
Commenting on the results, Tony Maher, Wimm-Bill-Dann’s chief executive officer said, “We are very pleased with the strong results we achieved for the first nine months of 2007 especially in the most challenging raw material cost environment. Despite a sharp rise in raw milk prices, we continued to improve our EBITDA margin to 13.5% in the third quarter of 2007 compared to 12.7% in the second quarter of 2007. During the nine months of 2007 net profit growth was a solid 33.4% and we continued to show impressive revenue growth of 40.4% at the group level.
“Our beverages business continues to progress well realizing a solid 28.6% sales increase and a significant margin improvement to 40.4% in the first nine months of 2007 from 34.4% in the same period last year. Our dairy division delivered strong results during first nine months of 2007 with sales increasing 43.1% to US$1,328.7 million, while gross margins decreased only slightly – a significant achievement given the sharp rise in the price of raw milk. Our baby food division continued to gain momentum with sales increasing 44.0% to US$119.0 million while gross margins expanded to 44.4% from 41.3% in the prior year period.
“In conclusion, I am pleased with our performance for the 9 month period as we continue to successfully execute on our strategy and deliver on our commitment to improve our route-to-market and invest in building consumer preference in our brands. I am confident that Wimm-Bill-Dann is well positioned to continue to achieve consistently strong results and significant value for our customers and stockholders.”
9Ì 2007
9Ì 2006
Change
US$ ‘mln
Sales
1,758.3
1,252.6
40.4%
Dairy
1,328.7
928.5
43.1%
Beverages
310.6
241.5
28.6%
Baby Food
119.0
82.6
44.0%
Gross profit
578.4
403.4
43.4%
Selling and distribution expenses
(281.7)
(164.8)
70.9%
General and administrative expenses
(129.5)
(100.1)
29.4%
Operating income
168.3
129.2
30.2%
Financial income and expenses, net
(15.4)
(10.3)
50.1%
Net income
105.6
79.2
33.4%
EBITDA
229.4
175.2
30.9%
CAPEX excluding acquisitions
127.7
74.9
70.5%
3Q 2007
3Q 2006
610.5
439.0
39.1%
470.3
333.5
41.0%
98.5
77.8
26.6%
41.7
27.7
50.6%
200.6
149.8
33.9%
(95.8)
(52.8)
81.5%
(43.2)
(37.4)
15.5%
(2.9)
(4.7)
(38.5)%
Including Special Charges
Excluding Special Charges
59.9
37.9
57.8%
54.1
10.7%
39.8
19.4
104.9%
32.4
22.7%
82.2
54.2
51.7%
70.4
16.8%
58.6
29.0
102.5%
Sales in the Dairy Segment increased 43.1% to US$1,328.7 million in the first nine months of 2007 from US$928.5 million in the same period of 2006. Acquisitions made in late 2006 contributed US$116.4 million to overall sales growth in the Segment. Top-line growth was driven mainly by a healthy balance of volume and pricing. The average dollar selling price rose 15.9% to US$1.05 per kg in the first nine months of 2007 from US$0.91 per kg in the same period of 2006. This increase was driven primarily by average ruble price growth. The latter part of the year saw an unprecedented rise in the price of raw milk, both globally and in Russia. Our raw milk cost increased 34.3% year-on-year in ruble terms (41.2% in dollar terms) in the third quarter and 17.3% year-on-year in ruble terms (24.0% in dollar terms) in the first nine months of 2007. Despite such a sharp rise in the price of raw milk, the gross margin in the Dairy Segment decreased only slightly to 30.1% in the first nine months of 2007 from 30.8% for the same period last year.
Sales in the Beverages Segment increased 28.6% to US$310.6 million in the first nine months of 2007 from US$241.5 million in the same period last year, driven mainly by volume growth and selling price increase. The average selling price increased 16.3% to US$0.83 per liter in the first nine months of 2007 from US$0.71 per liter in the first nine months of 2006. Despite continued raw materials cost pressure, the gross margin in the Beverages Segment increased to 40.4% in the first nine months of 2007 from 34.4% in the first nine months of 2006, driven by continued efficiency improvements and better pricing and discount management in all regions.
Sales in the Baby Food Segment increased 44.0% to US$119.0 million in the first nine months of 2007 from US$82.6 million in the same period last year. This was driven primarily by volume growth. The average selling price rose 7.1% to US$1.86 per kg in the first nine months of 2007 from US$1.74 per kg in the first nine months of 2006. The gross margin in the Baby Food Segment increased to 44.4% from 41.3%, owing to the launch of our own production facility in Kursk and a decreased share of co-packing in the overall sales.
Key Cost Elements
In line with our previous communications, improving our route-to-market and continued investment in top-line growth through marketing led to an increase in selling and distribution expenses to 16.0% of sales during the first nine months of 2007 compared to 13.2% of sales in the first nine months of 2006. General and administrative expenses fell to 7.4% of sales in the first nine months of 2007 compared from 8.0% of sales in the first nine months of 2006.
In the first nine months of 2007, financial expenses increased 50.1% year-on-year to US$15.4 million, primarily due to higher interest expenses. Our effective tax rate decreased to 29.3% in the first nine months of 2007 from 33.4% in the same period of 2006.
Net Income
Underlying net income increased 33.4% to US$105.6 million in the first nine months of 2007 from US$79.2 million in the first nine months of 2006._____________________Note: The Company has filed 20-F for FY 2006 to the SEC. The report can be also downloaded from our web site www.wbd.com
Attachment AReconciliation of EBITDA and EBITDA margin to US GAAP Net Income
EBITDA is a non-U.S. GAAP financial measure. The following table presents reconciliation of EBITDA to net income (and EBITDA margin to net income as a percentage of sales), the most directly comparable U.S. GAAP financial measure.
9 months ended
September 30, 2007
September 30, 2006
% of sales
Net income ………………………………………
6.0%
66.2
5.3%
Add: Depreciation and amortization……………..
61.1
3.5%
46.0
3.7%
Add: Income tax expense………………………..
44.7
2.5%
34.3
2.7%
Add: Interest expense…………………………….
29.5
1.7%
21.9
Less: Interest income……………………………..
(2.3)
(0.1%)
(3.1)
(0.2)%
Less: Currency remeasurement gains, net………..
(14.0)
(0.8%)
(10.0)
(0.8)%
Add: Bank charges………………………………..
2.1
1.4
0.1%
Add: Minority interest ……………………………
2.5
2.3
0.2%
Add:(Gain)/Loss on sales/purchase of currency….
0.1
0.004%
0.0%
EBITDA….……………………………….………
13.0%
159.1
12.7%
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. EBITDA margin is EBITDA expressed as a percentage of sales.
We present EBITDA because we consider it an important supplemental measure of our operating performance.In particular, we believe 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.
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.Moreover, other companies in our industry may calculate EBITDA differently or may use it for different purposes than we do, limiting its usefulness as a comparative measure.
EBITDA also should not be considered as an alternative to cash flow from operating activities or as a measure of our liquidity.In particular, EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business.
September 30,2007
(unaudited)
(audited)
ASSETS
Current assets:
Cash and cash equivalents
$37,254
$40,310
Trade receivables, net
153,005
89,932
Inventory
241,543
174,074
Taxes receivable
61,457
51,161
Advances paid
54,019
30,695
Net investment in direct financing leases
1,564
2,095
Deferred tax asset
16,345
12,749
Short-term investments
907
576
Other current assets
11,738
19,154
Total current assets
577,832
420,746
Non-current assets:
Property, plant and equipment, net
705,641
606,728
Intangible assets
29,137
26,844
Goodwill
121,707
105,990
Net investment in direct financing leases – long-term portion
1,093
1,673
Long-term investments
37
25
Deferred tax asset – long-term portion
5,502
8,737
Other non-current assets
6,096
5,193
Total non-current assets
869,213
755,190
Total assets
$1,447,045
$1,175,936
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable
$127,540
$104,066
Advances received
14,025
13,230
Short-term loans
41,968
123,849
Long-term loans – current portion
5,402
4,137
Current portion of long-term bonds payable
300,000
–
Taxes payable
20,154
9,494
Accrued liabilities
59,129
37,103
Government grants – current portion
613
1,422
Dividends payable
112
Other payables
49,704
37,035
Total current liabilities
618,647
330,336
Long-term liabilities:
Long-term loans
35,061
30,082
Long-term notes payable
104,211
248,742
Other long-term payables
15,130
20,905
Government grants – long-term portion
980
1,125
Deferred taxes – long-term portion
29,814
28,275
Total long-term liabilities
185,196
329,129
Total liabilities
803,843
659,465
Minority interest
14,762
18,977
Shareholders’ equity:
Common stock: 44,000,000 shares authorized, issued and outstanding with a par value of 20 Russian rubles at September 30, 2007 and December 31, 2006
29,908
Share premium account
164,132
Retained earnings
334,487
234,285
Accumulated other comprehensive income:
Currency translation adjustment
99,913
69,169
Total shareholders’ equity
628,440
497,494
Total liabilities and shareholders’ equity
$1,758,316
$1,252,630
(1,179,894)
(849,251)
578,422
403,379
(281,704)
(164,846)
(129,495)
(100,083)
Other operating incomes and expenses, net
1,025
(25,406)
168,248
113,044
(15,401)
(10,259)
Income before provision for income taxes
and minority interest
152,847
102,785
Provision for income taxes
(44,712)
(34,296)
(2,514)
(2,303)
$105,621
$66,186
Other comprehensive income
30,744
30,972
Comprehensive income
$136,366
$97,158
Net income per share - basic and diluted
$2.40
$1.50
Weighted average number of shares outstanding
44,000,000
2007
2006
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
2,514
2,303
Depreciation and amortisation
61,127
46,038
Currency remeasurement gain relating to bonds payable, long-term payables, investments in foreign subsidiaries, and fixed assets of foreign subsidiaries
(16,444)
(10,397)
Change in provision for obsolescence and net realizable value
487
723
Provision for doubtful accounts
3,624
1,999
(Gain) /loss on disposal of property, plant and equipment
(4,410)
1,972
Earned income on net investment in direct financing leases
(614)
(522)
Deferred tax benefit
1,904
(3,579)
Non-cash rental received
2,319
2,271
Accrual of tax contingent liability
1,199
588
Write off of long-term investments
11
86
Impairment of tangible assets and intangible assets
920
13,063
Impairment of goodwill
2,520
Write off of unrecoverable investments in direct finance lease
58
190
Write-off of unrecoverable VAT
584
Amortization of bonds issue expenses
1,990
890
Changes in operating assets and liabilities net of acquisitions:
(54,313)
(40,538)
Trade accounts receivable
(59,828)
(14,556)
(20,702)
(17,712)
(8,064)
3,191
5,187
(8,037)
Other long-term assets
(90)
45
15,837
24,445
(405)
1,345
10,056
7,855
17,894
15,872
Other current payables
(816)
4,022
(57)
(470)
Total cash provided by operating activities
$65,005
$100,377
Cash flows from investing activities:
Cash paid for acquisition of subsidiaries, net of cash acquired
$(21,005)
$(13,433)
Proceeds from disposal of subsidiary
683
Cash paid for intangible assets and property, plant and equipment
(108,207)
(72,760)
Cash paid for acquisition of investments
(155)
Proceeds from disposal of property, plant and equipment
3,042
2,715
Cash paid for net investments in direct financing leases
(174)
(1,261)
Cash received from other long-term assets
1,419
Cash invested in short-term bank deposits
6,718
2,921
Total cash used in investing activities
(118,943)
(80,554)
Cash flows from financing activities:
Proceeds from long-term notes payable
151,466
Short-term loans and notes, net
(86,177)
19,399
Proceeds from long-term loans
7,692
21,416
Repayment of long-term loans
(3,621)
(17,905)
Repayment of long-term payables
(15,691)
(13,439)
Repayment of long-term notes payable
(52,332)
Dividends paid
(4,832)
(9,754)
Total cash provided by (used in) financing activities
48,837
(52,615)
Total cash used in operating, investing and financing activities
(5,101)
(32,792)
Impact of exchange rate differences on cash and cash equivalents
2,045
6,235
Net decrease in cash and cash equivalents
(3,056)
(26,557)
Cash and cash equivalents, at beginning of period
40,310
93,103
Cash and cash equivalents, at the end of period
$66,546
For further enquiries contact: Anton SaraikinPress SecretarySolyanka, 13, Moscow, 109028 RussiaTel +7 (495) 105-5805 (ext. 116-99)Fax +7 (495) 105-5800saraikinas@wbd.ru
Marina KaganWimm-Bill-Dann Foods OJSCSolyanka, 13, Moscow 109028 RussiaTel +7 495 105 5805Fax +7 495 105 5800e-mail: kagan@wbd.ru
Some of the information contained in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of Wimm-Bill-Dann Foods OJSC, 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 Foods OJSC files from time to time with the U.S. Securities and Exchange Commission, specifically, the Company's most recent Form 20-F. These documents contain and identify important factors, including those contained in the section captioned "Risk Factors" in our Form 20-F, 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, and risks associated with our competitive environment, acquisition strategy, ability to develop new products or maintain market share, brand and company image, operating in Russia, volatility of stock price, financial risk management, and future growth.
Wimm-Bill-Dann Foods OJSC was founded in 1992 and is the largest manufacturer of dairy products and a leading producer of juices and beverages in Russia and the CIS. The company produces dairy products (main brands include: Domik v Derevne, Neo, 2Bio, 33 Korovy, Chudo and more), juices (J7, Lubimy Sad, 100% Gold), Essentuki mineral water and Agusha baby food. The company has 37 manufacturing facilities in Russia, Ukraine, Kyrgyzstan, Uzbekistan and Georgia with over 19,000 employees. In 2005, Wimm-Bill-Dann became the first Russian dairy producer to receive approval from the European Commission to export its products into the European Union.
In 2007, Standard & Poor's Governance Services confirmed WBD's Corporate Governance Score (CGS) 7+ (7.7 accordingly on the Russian national scale), which makes the Company's score the highest rating in Russia. The increase in the score reflects the effective work of the Board of Directors and, in particular, the real influence of independent directors in the decision-making process and the adherence of the controlling shareholders to the highest standards of corporate governance.