Downloard press release (pdf).
Commenting on first quarter 2008 results, Tony Maher, Wimm-Bill-Dann’s Chief Executive Officer said: “We are pleased with the very solid performance we achieved this quarter, inparticular our salesgrowth of 34.8% on a year-over-year basis.”
“Our baby food business continued its impressive growth with sales increasing 67.1% year-on-year, outpacing market growth and strengthening our leading market share position. Gross margin for the baby food business strengthened as well, increasing to 47.5% in the first quarter, up from 44.8% for the same period last year. Our beverage business achieved 25.8% growth in sales year-on-year. Finally, our dairy business delivered 34.1% growth in the first quarter in comparison to the same period last year. Despite the challenging raw materials pricing environment that continued well into the first quarter, gross margin was relatively stable at 26.4% in comparison with 26.9% lasting the fourth quarter of 2007.”
“Group gross profit for the first quarter 2008 grew 26.2% over the same period last year driven by a healthier product mix and higher sales. EBITDA increased 29.0% over the same period last year. Our EBITDA margin rebounded from last quarter to 12.4%, an improvement of 193 basis points, despite challenging raw materials pricing environment.”
“In conclusion, I would like to emphasise, that despite the raw material cost environment which continued well into the first months of the year, the first quarter was a very solid start to 2008.”
US$ ‘mln
Sales
731.9
542.8
34.8%
Dairy
555.4
414.2
34.1%
Beverages
116.8
92.9
25.8%
Baby Food
59.7
35.7
67.1%
Gross profit
219.5
173.9
26.2%
Selling and distribution expenses
110.0
82.0
General and administrative expenses
42.1
41.7
0.8%
Operating income
63.4
51.4
23.2%
Financial income and expenses, net
3.4
5.7
(41.2)%
Net income
41.9
32.1
30.6%
EBITDA
90.7
70.4
29.0%
CAPEX excluding acquisitions
49.9
23.7
100.5%
Sales in the Dairy Segment increased 34.1% to US$555.4 million in the first quarter of 2008 from US$414.2 million in the first quarter of 2007 driven mainly by selling price increases. The average dollar selling price rose 34.9% to US$1.36 per 1 kg in the first quarter of 2008 from US$1.01 per 1 kg in the first quarter of 2007 driven mainly by the average ruble price growth. Our raw milk purchasing price grew 62.3% year-on-year in ruble terms (76.2% in US dollar terms) in the first quarter of 2008. The gross margin in the Dairy Segment decreased to 26.4% from 29.2% in the first quarter 2007, but despite such a sharp rise in raw milk prices decreased only slightly from 26.9% in the fourth quarter 2007.
Sales in the Beverage Segment grew 25.8% to US$116.8 million in the first quarter of 2008 compared to US$92.9 million in the first quarter of 2007 driven primarily by product mix and selling price increases. The average selling price increased 27.1% to US$1.02 per liter in the first quarter of 2008 from US$0.81 per liter in the first quarter of 2007. The gross margin in the Beverage Segment decreased to 38.0% from 39.9% year-on-year, due to rising raw materials cost pressure, which commenced in the latter part of 2007. Apple concentrate purchasing price almost doubled in the first quarter of 2008 compared to the same period last year. Despite such a sharp rise in raw material costs, gross margin in the first quarter 2008 remained in line with the fourth quarter 2007.
Sales in the Baby Food Segment grew 67.1% to US$59.7 million in the first quarter of 2008 from US$35.7 million in the first quarter of 2007. This increase was driven mainly by improved mix, volume growth and selling price increases. The average selling price rose 31.2% to US$2.42 per 1 kg in the first quarter of 2008 from US$1.84 per 1 kg in the first quarter of 2007. This increase was driven mainly by a healthier mix and the ruble price growth. The gross margin in the Baby Food Segment increased to 47.5% from 44.8% driven by constantly improving sales mix.
Key Cost Elements
In the first quarter of 2008, selling and distribution expenses as a percentage of sales remained almost flat at 15.0% comparing to 15.1% in the first quarter of 2007. General and administrative expenses as a percentage of sales decreased to 5.8% in the first quarter of 2008 from 7.7% in the same period of 2007.
Operating profit increased 23.2% to US$63.4 million in the first quarter of 2008. EBITDA grew 29.0% to US$90.7 million.
Net financial expenses during the first quarter of 2008 decreased 41.2% to US$3.4 million compared to US$5.7 million in the same period of 2007. This was mainly a result of increased foreign currency gain. In the first quarter of 2008 foreign currency gain amounted to US$9.0 million compared to US$3.2 million for the same period of 2007.
Income tax expenses totalled US$17.2 million in the first quarter of 2008 compared to US$13.1 million in the first quarter of 2007. The effective tax rate remained 28.7%.
Net Income
Net income increased 30.6% to US$41.9 million in the first quarter of 2008 from US$32.1 million in the first quarter of 2007.
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.
3 months ended
March31, 2008
March31, 2007
% of sales
Net income ………………………………………
5.7%
5.9%
Add: Depreciation and amortization……………..
27.3
3.7%
19.0
3.5%
Add: Income tax expense………………………..
17.2
2.3%
13.1
2.4%
Add: Interest expense…………………………….
12.6
1.7%
9.3
Less: Interest income……………………………..
(0.8)
(0.1)%
(0.9)
(0.2)%
Less: Currency remeasurement gains, net………..
(9.0)
(1.2)%
(3.2)
(0.6)%
Add: Bank charges………………………………..
0.8
0.1%
0.5
Add: Minority interest ……………………………
0.9
0. 1%
Add:(Gain)/Loss on sales/purchase of currency….
(0.2)
(0.03)%
(0.05)
(0.01)%
EBITDA….……………………………….………
12.4%
13.0%
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.
Wimm-Bill-Dann FoodsConsolidated Balance Sheets(unaudited)(Amounts in thousands of U.S. dollars)
ASSETS
Current assets:
Cash and cash equivalents
$204,349
$33,452
Trade receivables, net
196,153
157,608
Inventory
262,880
261,254
Taxes receivable
67,924
65,689
Advances paid
48,969
43,924
Net investment in direct financing leases
1,153
1,349
Deferred tax asset
20,187
17,479
Other current assets
12,929
11,903
Total current assets
814,544
592,658
Non-current assets:
Property, plant and equipment, net
810,785
767,654
Intangible assets
37,204
34,015
Goodwill
133,918
129,391
Net investment in direct financing leases – long-term portion
927
972
Long-term investments
0
38
Deferred tax asset – long-term portion
2,470
2,947
Other non-current assets
6,035
5,427
Total non-current assets
991,339
940,444
Total assets
$1,805,883
$1,533,102
Wimm-Bill-Dann FoodsConsolidated Balance Sheets(unaudited)(continued)
March 31, 2008
December 31, 2007
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable
$127,271
$130,729
Advances received
11,157
13,626
Short-term loans
95,528
98,819
Long-term loans – current portion
6,252
6,455
Current portion of long-term bonds payable
300,000
Taxes payable
20,180
14,351
Accrued liabilities
56,987
51,877
Government grants – current portion
81
77
Dividends payable
-
116
Other payables
52,102
40,156
Total current liabilities
669,558
656,206
Long-term liabilities:
Long-term loans
45,840
34,631
Long-term notes payable
280,664
105,922
Other long-term payables
13,395
17,372
Government grants – long-term portion
1,000
974
Deferred taxes – long-term portion
34,258
31,011
Total long-term liabilities
375,157
189,910
Total liabilities
1,044,715
846,116
Minority interest
15,431
13,862
Shareholders’ equity:
Common stock: 44,000,000 shares authorized, issued and outstanding with a par value of 20 Russian rubles at March 31, 2008 and December 31, 2007
29,908
Share premium account
164,132
Retained earnings
410,809
368,913
Accumulated other comprehensive income:
Currency translation adjustment
140,888
110,171
Total shareholders’ equity
745,737
673,124
Total liabilities and shareholders’ equity
Wimm-Bill-Dann FoodsConsolidated Statements of Income and Comprehensive Income (unaudited)(Amounts in thousands of U.S. dollars, except share and per share data)
$731,930
$542,792
(512,402)
(368,867)
219,528
173,925
(110,029)
(82,046)
(42,083)
(41,731)
Other operating incomes and expenses, net
(4,020)
1,297
63,396
51,445
(3,379)
(5,742)
Income before provision for income taxes and minority interest
60,017
45,703
Provision for income taxes
(17,195)
(13,132)
(926)
(489)
$41,896
$32,082
Other comprehensive income
30,717
6,250
Comprehensive income
$72,613
$38,332
Net income per share - basic and diluted
$0.95
$0.73
Weighted average number of shares outstanding
44,000,000
Consolidated Statements of Cash Flows (unaudited)(Amounts in thousands of U.S. dollars)
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
926
489
Depreciation and amortisation
27,346
18,917
Currency remeasurement gain relating to bonds payable, long-term payables, investments in foreign subsidiaries, and fixed assets of foreign subsidiaries
(12,134)
(3,513)
Change in provision for obsolescence and net realizable value
(241)
(691)
Provision for doubtful accounts
791
1,536
(Gain) /loss on disposal of property, plant and equipment
1,073
(1,399)
Earned income on net investment in direct financing leases
(129)
(164)
Deferred tax benefit
387
270
Non-cash rental received
639
258
Accrual of tax contingent liability
118
908
Write off of long-term investments
29
11
Impairment of tangible assets and intangible assets
48
929
Write off of unrecoverable investments in direct finance lease
(207)
57
Amortization of bonds issue expenses
473
625
Changes in operating assets and liabilities net of acquisitions:
9,928
35,690
Trade accounts receivable
(31,867)
(22,666)
(3,059)
176
790
5,030
(140)
3,079
Other long-term assets
(639)
(8,773)
(1,694)
(2,959)
(4,728)
4,946
6,901
1,814
4,147
Other current payables
12,346
4,614
–
(2,106)
Total cash provided by operating activities
$43,402
$78,758
Consolidated Statements of Cash Flows (unaudited)(continued)
2008
2007
Cash flows from investing activities:
Cash paid for acquisition of subsidiaries, net of cash acquired
$(293)
$(5,118)
Proceeds from disposal of subsidiary
113
Cash paid for intangible assets and property, plant and equipment
(43,357)
(26,665)
Cash paid for acquisition of investments
(1,115)
Proceeds from disposal of property, plant and equipment
1,665
3,957
Cash paid for net investments in direct financing leases
(25)
Cash invested in short-term bank deposits
(22,798)
Total cash used in investing activities
(41,985)
(51,651)
Cash flows from financing activities:
Proceeds from long-term notes payable
166,188
151,061
Short-term loans and notes, net
(7,385)
(120,890)
Proceeds from long-term loans
10,458
1,612
Repayment of long-term loans
(1,706)
(904)
Repayment of long-term payables
(3,260)
(4,617)
Total cash provided by (used in) financing activities
164,295
26,262
Total cash used in operating, investing and financing activities
165,712
53,369
Impact of exchange rate differences on cash and cash equivalents
5,185
189
Net decrease in cash and cash equivalents
170,897
53,558
Cash and cash equivalents, at beginning of period
33,452
40,310
Cash and cash equivalents, at the end of period
$93,868
- Ends -
For further enquiries contact:
Marina KaganWimm-Bill-Dann Foods OJSCSolyanka, 13, Moscow 109028 RussiaTel +7 495 925 5805Fax +7 495 9205 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.
[1] Note: See Attachment A for definitions of EBITDA and EBITDA margin and reconciliations to net income.