News

The year marked the company’s fourth consecutive year of profitable growth following Russia’s financial crisis in 1998. During 2002, Wimm-Bill-Dann’s sales increased by 22.3% compared to 2001. Gross profit increased by 34.9% with gross margins rising by 2.8% year-on-year due to the increased share of high-margin products in dairy, improved economies of scale and lower cost of raw milk. Operating income rose by 9.1% year-on-year, net income grew by 12.3% compared to 2001 and EBITDA increased by 13.0%.

As anticipated, net income was affected mostly by strong competitive pressures on juice pricing and the increase in selling and distribution expenses as the company continued to carry out its long-term regional expansion program in line with its strategy of becoming Russia’s leading nation-wide food producer.

Sergei Plastinin, CEO of Wimm-Bill-Dann Foods OJSC, said: “Last year has been a momentous one for Wimm-Bill-Dann, beginning with our listing in February 2002 on the NYSE. In 2002, we embarked on an aggressive strategy of expansion to enter and bolster our presence in Russia’s fast-growing regional markets, which included a number of acquisitions and the start of a major upgrade of our production facilities. Looking forward, we see 2003 as a year of intensive investment in modernization and reorganization, as we consolidate the newly acquired companies, while continuing to focus on operational efficiency.”

In 2002, Wimm-Bill-Dann’s sales amounted to US$824.7 million compared to US$674.6 million in 2001. Sales in Wimm-Bill-Dann’s dairy segment increased by 16.0% from US$485.5 million in 2001 to US$563.0 million in 2002. Volume growth (9.7% organic and 2.0% from acquisitions) was 11.7%, whereas average price increase accounted for another 4.3% of growth. Sales in Wimm-Bill-Dann’s juice segment increased 38.4% from US$189.1 million in 2001 to US$261.7 million in 2002. This was driven by a 45.4% organic increase in sales volumes and affected by the higher portion of lower-end brands in the sales mix, competitive pricing pressures and changes in the distribution policy aimed at incentivising key accounts.

In 2002, in the dairy division, gross margins of 29.3% accounted for 3.6% of total margin growth due to lower cost of raw milk (decreased on average by 14% compared to 2001), higher share of value-added products and improved economies of scale. In the juice division, 2002 gross margins of 31.0% reduced the group margin growth by 0.8%, due to increased concentrate prices, competitive pricing pressures and a change in product mix towards lower-end brands. Overall, Wimm-Bill-Dann saw a 2.8% increase in gross margins in 2002.

The regional expansion program has led to an increase in selling and distribution costs, particularly in advertising and personnel. We strengthened our advertising presence in key markets, and the share of regional advertising increased to 14.1% of our total advertising and marketing budget. Annual media inflation on leading national TV channels exceeded 80%, however, Wimm-Bill-Dann was able to obtain volume discounts and hence manage the cost increase more effectively.

A substantial increase in the number of employees, averaging from about 11,000 in 2001, to over 16,000 in 2002, is also attributable to expansion. This factor contributed to an over 90% increase in the personnel portion of S&D expenses year-on-year. External factors, linked to broader Russian market conditions, have also exerted pressure on cost components, such as transportation costs.

In 2002, general and administrative expenses showed positive dynamics, decreasing to 7.6% of sales from 8.1% in 2001. This was managed in line with our growth.

The company also saw growth of net financial expenses in 2002. This is attributable to the 2002 currency remeasurement loss of US$2.9 million against the background of a US$2.5 million currency remeasurement gain booked last year. The loss was partially offset by interest income, however, interest expenses also increased this year as a result of our intensive investment in CAPEX and additional working capital requirements in the second half of the year.

EBITDA increased to US$83.3 million in 2002, compared to US$73.7 million in 2001, while the EBITDA margin in 2002 was 10.1%.

Preview file with financial results for the year ended December 31, 2002
To view this information you will need the Microsoft Word or Microsoft Word Viewer.

Wimm-Bill-Dann Foods OJSC
16 Yauzsky Boulevard, Moscow, Russia
Phone: +7 095 733-97-26/9727
Fax: +7 095 733-97-25
web: http://www.wbd.com
E-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