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Wimm-Bill-Dann

September 16, 2005

Wimm-Bill-Dann Foods OJSC announces interim 2005 financial results

Moscow, Russia — September 16, 2005 — Wimm-Bill-Dann Foods OJSC [NYSE: WBD] today announced its financial results for the six months ended June 30, 2005.

During the first half of 2005, Wimm-Bill-Dann’s sales rose 17.5% to US$681.7, compared to US$580.4 million in the 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

 

1H 2005

1H 2004

Change

 

US$ ‘mln

US$ ‘mln

 

Sales

681.7

580.4

17.5%

 

Dairy

479.5

399.1

20.1%

 

Beverages

159.5

151.3

5.4%

 

Baby Food

42.6

30.0

42 .0%

Gross Profit

187. 8

160.9

16.7%

Selling and distribution expenses

(9 8. 3)

(84.7)

1 6. 1%

General and administrative expenses

(53.5)

(44.4)

20.5%

Operating income

30.8

29.0

6.2%

Financial income and expenses, net

(10. 3 )

(7.1)

45.1 %

Net income

8.3

12.9

(35.7%)

Adjusted EBITDA*

56.6

50.8

11.4%

CAPEX including acquisitions

38.9

32.9

18.2%

* 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 stronger 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.

6 months ended June 30, 2005

6 months ended June 30, 2004

 

US$ ‘mln

% of sales

US$ ‘mln

% of sales

Net income

8.3

1.2%

12.9

2.2%

Add: Depreciation and amortization

25.8

3.8%

21.8

3.7%

Add: Income tax expense

10.9

1. 6%

7.4

1.3%

Add: Interest expense

11.4

1. 7%

11.4

2.0%

Less: Interest income

(0.7)

0.1%

(0.8)

0.1%

Less: Currency remeasurement gains, net

(1.5)

0.2%

(4.3)

0.8%

Add: Bank charges

0.9

0.1%

0.7

0.2%

Add: Other financial expenses (gain)

0.1

0.0%

0.0

0.0%

Add: Minority interest

1. 4

0. 2 %

1.7

0.3%

Adjusted EBITDA

56.6

8. 3 %

50.8

8.8%

 

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 FOODS

Consolidated Statements of Operations ( unaudited)

(Amounts in thousands of U. S. dollars, except share and per share data)

 

Six months ended June 30 ,

 

2005

2004

 

 

 

Sales

$ 681,681

$ 580,426

Cost of sales

(493,929)

(419,565)

Gross profit

187,7 52

160,861

Selling and distribution expenses

(98,339)

(84,680)

General and administrative expenses

(53,468)

(44,444)

Other operating expenses, net

( 5,099 )

( 2,700 )

Operating income

30,84 6

29,037

Financial income and expenses, net

(10,301)

( 7,060 )

Income before provision for income taxes and minority interest

20,545

21,977

Provision for income taxes

( 10,916 )

(7,368)

Minority interest

(1, 366 )

(1,739)

Net income

$ 8 , 263

$ 12,870

Other comprehensive income, net of tax

 

 

Currency translation adjustment

(12,216)

4,793

Comprehensive (loss) income

$ ( 3,953)

$ 17,663

Net income per share - basic and diluted:

$ 0.19

$ 0.29

Weighted average number of shares outstanding

44,000,000

44,000,000

 

WIMM-BILL-DANN FOODS

Consolidated Balance Sheets

(Amounts in thousands of U.S. dollars)

 

June 30, 2005

December 31, 2004

 

(unaudited)

(audited)

ASSETS

 

 

Current assets:

 

 

 

Cash and cash equivalents

$ 49,230

$ 23,791

 

Trade receivables, net

59, 64 3

62,210

 

Inventory

126, 7 9 6

102,039

 

Taxes receivable

75,75 8

85,578

 

Advances paid

16,5 37

19,494

 

Net investment in direct financing leases

2, 598

2,109

 

Deferred tax asset

7,479

6,265

 

Other current assets

6,836

7,145

Total current assets

344,877

308,631

Non-current assets:

 

 

 

Property, plant and equipment, net

43 5 ,871

440,096

 

Intangible assets

2,523

2,251

 

Goodwill

25,790

26,291

 

Net investment in direct financing leases – long-term portion

3,767

3,895

 

Long-term investments

1,750

2,417

 

Deferred tax asset – long-term portion

6,571

7,001

 

Other non-current assets

3,507

5,506

Total non-current assets

479,779

487,457

Total assets

$ 824,656

$ 796,088

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

Current liabilities:

 

 

 

Trade accounts payable

$ 76,086

$ 62,400

 

Advances received

4,089

3,492

 

Short-term loans

36,119

17,554

 

Long-term loans – current portion

6,341

936

 

Long-term notes payable – current portion

50,043

-

 

Taxes payable

15,127

13,281

 

Accrued liabilities

15, 874

14,691

 

Government grants – current portion

2,25 3

2,329

 

Other payables

33,21 1

29,615

Total current liabilities

239,14 3

144,298

Long-term liabilities:

 

 

 

Long-term loans

2,581

7,120

 

Long-term notes payable

150,000

201,709

 

Other long-term payables

34,463

39,294

 

Government grants – long-term portion

3,846

5,156

 

Deferred taxes – long-term portion

10,5 7 8

10,268

Total long-term liabilities

201,4 68

263,547

Total liabilities

440,61 1

407,845

Minority interest

17,0 82

17,327

Shareholders' equity :

 

 

 

Common stock: 44,000,000 shares authorized, issued and outstanding with a par value of 20 Russian rubles at June 30, 2005 and December 31, 2004

29,908

29,908

 

Share premium account

164,132

164,132

 

Accumulated other comprehensive income:

 

 

 

Currency translation adjustment

31,689

43,905

 

Retained earnings

14 1 ,234

132,971

Total shareholders' equity

$ 3 66 , 963

$ 370,916

Total liabilities and shareholders' equity

$ 824,656

$ 796,088

 

WIMM-BILL-DANN FOODS

Consolidated Statements of Cash Flows ( unaudited)

(Amounts in thousands of U.S. dollars)

 

Six months ended June 30,

 

2005

2004

Cash flows from operating activities:

 

 

Net income

$ ,263

$12,870

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

Minority interest

1,366

1,739

Depreciation and amortisation

25,763

21,785

Currency remeasurement loss (gain) relating to bonds payable, long-term payables and investments

1 ,047

(3,496)

Obsolescence and net realizable value expense

1,07 5

2,214

Provision for doubtful accounts

59 8

3,277

 

Loss on disposal of property, plant and equipment

1,56 6

696

Earned income on net investment in direct financing leases

(127)

(243)

Deferred tax benefit

( 138 )

(2, 987 )

Non-cash rental received

1,199

1,187

Write off of long-term investments

901

-

Write off of trade receivables

1,3 5 3

385

Amortisation of bonds issue expenses

527

513

 

Other

(431)

661

Changes in operating assets and liabilities:

 

 

 

Increase in inventories

(23,898)

(11,212)

 

(Increase) decrease in trade accounts receivable

(1,206)

47

 

Decrease (increase) in advances paid

2,387

(363)

 

Decrease in taxes receivable

3,7 81

9,823

 

Decrease (increase) in other current assets

80

(1,669)

 

Increase in trade accounts payable

15,377

22,151

 

Increase in advances received

72 7

150

 

Increase (decrease) in taxes payable

5,759

(3,186)

 

Increase in accrued liabilities

2,177

1,909

 

Increase in other current payables

3, 9 1 5

1,841

 

Increase in other long-term payables

350

260

Total cash provided by operating activities

$ 2,411

58,352

Cash flows from investing activities:

 

 

 

Cash paid for acquisition of subsidiaries, net of cash acquired

$ 2,026)

$ 3,945)

 

Cash paid for property, plant and equipment

( 33,882 )

(30,745)

 

Cash paid for acquisition of investments

(483)

(1,047)

 

Proceeds from disposal of property, plant and equipment

3,217

1,220

 

Proceeds from disposal of investments

557

-

 

Cash paid for net investments in direct financing leases

( 1,281 )

(1,331)

 

Cash received from other long-term assets

396

-

Total cash used in investing activities

(33,502)

(35,848)

Cash flows from financing activities:

 

 

 

Short-term loans and notes, net

15,560

5,297

 

Proceeds from long-term loans

1,830

-

 

Repayment of long-term loans

(419)

(829)

 

Repayment of long-term payables

( 7,685 )

(8,599)

Total cash provided by (used in) financing activities

9,286

(4,131)

Total cash provided by operating, investing and financing activities

28,195

18,373

Impact of exchange rate differences on cash and cash equivalents

(2,756)

437

Net increase in cash and cash equivalents

25,439

18,810

Cash and cash equivalents, at beginning of period

23,791

40,264

Cash and cash equivalents, at the end of period

$ 9,230

$ 9,074

 

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 – Small & Mid cap companies and Best Investor Relations Officer in 2004– Small & 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 2003– Small & Mid cap - at the first annual IR Russia Awards Ceremony held in Moscow last year.

 

 


 

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