During the first half of 2005, Wimm-Bill-Dann’s sales rose 17.5% to US$681.7, compared to US$580.4 million int he first six months of 2004. Gross profit increased 16.7% compared to the same period last year, while gross margins remained flat at 27.5%. Adjusted EBITDA* increased 11.4% year-on-year from US$50.8 million to US$56.6 million. Adjusted EBITDA margin* decreased to 8.3% from 8.8%. Net income decreased to US$8.3 million in the first half of 2005 from US$12.9 million in the first six months of 2004.
Key Operating and Financial Indicators of 1H 2005
* Note: See Attachment A for definitions of Adjusted EBITDA and Adjusted EBITDA margin and reconciliations to net income.
Sales in the Dairy Segment increased 20.1% from US$399.1 million in the first six months of 2004 to US$479.5 million in the first six months of 2005, while the average selling price rose 13.7% from US$0.73 per 1 kg in the first half of 2004 to US$0.83 per 1 kg in the same period of 2005. This increase was primarily driven by ruble price increases. Gross margin in the Dairy Segment declined from 24.1% in the first six months of 2004 to 23.8% in the same period of 2005. This change was primarily driven by the increase in raw materials costs and ber demand for raw milk intensive traditional products in the regions.
Sales in the Beverages Segment, which is comprised of the juice and water divisions, increased 5.4% from US$151.3 million in the first six months of 2004 to US$159.5 million in the same period of 2005, while the average selling price increased 9.4% from US$0.64 per liter in the first six months of 2004 to US$0.70 per liter in the same period of 2005 primarily due to ruble price increases. Gross margin in the Beverages Segment increased to 36.0% in the first half 2005 from 35.3% in the same period last year.
Sales in the Baby Food Segment increased 42.0% from US$30.0 million in the first six months of 2004 to US$42.6 million in the first six months of 2005, while the average selling price rose 19.4% from US$1.24 per 1 kg in the first half of 2004 to US$1.48 per 1 kg in the same period of 2005. This increase was primarily driven by an increase in the average ruble selling price and an increased proportion of higher priced products in the overall product mix. Gross margins in the Baby Food Segment practically remained flat at 37.9%.
Selling and distribution expenses as a percentage of sales decreased y-o-y from 14.6% to 14.4%. Advertising and marketing expenses decreased as a percentage of sales from 4.7% in the first six months of 2004 to 4.6% in the first half of 2005. General and administrative expenses as a percentage of sales practically remained flat at 7.8% . Other operating expenses increased from US$ 2.7 million to US$5.1 million year-on-year mainly as a result of a loss on fixed assets disposals.
Financial expenses in the first six months of 2005 increased to US$10.3 million compared to US$7.1 million in the same period of 2004 mainly due to the foreign currency translation gain decreasing from US$4.3 million to US$1.5 million in the first half of 2005. Interest expenses stayed almost flat at US$11.4 million.
Net income decreased by 35.7% as a result of the above factors and a higher effective tax rate caused by a specific valuation allowance associated with tax losses carried forward in one of the subsidiaries.
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.
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 EBITDAEdebt 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 FOODS
Consolidated Statements of Operations ( unaudited)
(Amounts in thousands of U. S. dollars, except share and per share data)
Consolidated Balance Sheets
(Amounts in thousands of U.S. dollars)
Consolidated Statements of Cash Flows (unaudited)
NOTES TO EDITORS
Wimm-Bill-Dann Foods OJSC is a leading manufacturer of dairy and juice products in Russia. The company was founded in 1992.
The Company currently owns 27 manufacturing facilities in Russia and the Commonwealth of Independent States (CIS), as well as trade affiliates in 26 cities in Russia and the CIS.
Wimm-Bill-Dann has a diversified branded portfolio with over 1,100 types of dairy products and over 150 types of juice, nectars and still drinks. The company currently employs over 17,000 people.
Wimm-Bill-Dann was awarded Grand Prix for Best Overall Investor Relations in 2004 ESmall & Mid cap companies and Best Investor Relations Officer in 2004ESmall & Mid cap companies at the Second Annual IR Magazine Russia Awards held in December 2004 and organized by IR Magazine and the Association of Investor Relations Professionals. Wimm-Bill-Dann previously received the Grand Prix for Best Overall Investor Relations in 2003ESmall & Mid cap - at the first annual IR Russia Awards Ceremony held in Moscow last year.
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