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Wimm-Bill-Dann

March 22, 2005

Moscow, Russia — March 21, 2005 — Wimm-Bill-Dann Foods OJSC [NYSE: WBD] today announced its financial results for the year ended December 31, 2004

In 2004, Wimm-Bill-Dann’s sales rose 26.7% to US$1,189.3 million compared to US$938.5 million in 2003. Gross profit increased 19.8% compared to last year, while gross margins decreased to 27.5% in 2004 from 29.1% in 2003. Net income increased 8.5% to US$23.0 million in 2004 from US$21.2 million last year. Adjusted EBITDA* increased 21.3% year-on-year to US$96.9 million. Adjusted EBITDA* margin stood at 8.1%.

Commenting on today’s announcement Sergei Plastinin, Chief Executive Officer of Wimm-Bill-Dann Foods OJSC, said: «Summing up the results of 2004, I would like to emphasize that I am pleased with EBITDA and top line growth we demonstrated in 2004, as well as with improvements in operating cash flow. At the same time we remain focused on improving our profitability and tightening our cost control procedures and mechanisms. At the end of last year we laid the foundation for the beginning of our structural reform and abolished the Centre regional division in Dairy. We believe that some additional steps that we carried out in the beginning of this year, including the merger of Juice and Water businesses, will allow us to benefit further from economies of scale and more streamlined operations at every level — from production to marketing to distribution. The strategic and ever growing role of the baby food market prompted us to organize Baby Food into a separate business unit. On the operation level, dairy sales grew a healthy 34% year-on-year, with cheese sales more than doubling compared to 2003. At the same time yogurts, dairy deserts and juice containing dairy drinks grew 36% year-on-year, a slower pace than we initially anticipated. However, we believe that the consumption of these higher margin products will intensify in 2005 and beyond. In the course of last year we completed the enhancement of our distribution network and launched new packaging formats in juice. We continue to improve our corporate governance procedures within the company and are in the process of taking all the necessary steps required in compliance with the Sarbanes-Oxley Act.»

 

Key Operating and Financial Indicators of FY 2004

 

FY 2004

FY 2003

Change

Sales volumes, thousand tons

1,611.1 

1,484.5 

8.5%

 

US$ mln

US$ mln

 

Sales

1,189.3 

938.5 

26.7%

Dairy

886.0 

662.3 

33.8%

Juice

298.7 

274.5 

8.8%

Water

4.6 

1.6 

— 

Gross profit

327.6 

273.4 

19.8%

Selling and distribution expenses

(173.4)

(140.7)

23.2%

General and administrative expenses

(92.8)

(76.0)

22.1%

Operating income

52.9 

49.2 

7.5%

Financial income and expenses, net

(14.6)

(15.3)

(4.6%)

Net income

23.0 

21.2 

8.5%

Adjusted EBITDA*

96.9 

79.9 

21.3%

CAPEX including acquisitions

82.7 

117.0 

(29.3%)

 

* Note: See Attachment A for definitions of Adjusted EBITDA and Adjusted EBITDA margin and reconciliations to net income.

Wimm-Bill-Dann’s sales reached US$1,189.3 million in 2004 compared to US$938.5 million in 2003.

Sales in the Dairy Segment increased 33.8% from US$662.3 million in 2003 to US$886.0 million in 2004, while the average selling price increased 16.7% from US$0.66 per 1 kg in 2003 to US$0.77 per 1 kg in 2004. This increase was primarily driven by a ruble price increase and ruble appreciation. Gross margins in the Dairy Segment declined from 27.1% in 2003 to 25.4% in 2004. This change was primarily caused by a 16.6% year-on-year increase in the weighted average ruble price of raw milk as well as rising depreciation charges and personnel costs.

Sales in the Juice Segment increased 8.8% from US$274.5 million in 2003 to US$298.7 million in 2004, while the average selling price increased 13.8% from US$0.58 per liter in 2003 to US$0.66 per liter in 2004. This increase was primarily due to ruble price increase, ruble appreciation and the introduction of new higher priced products. Gross margin in the Juice Segment stayed almost flat at 34.1%.

Selling and distribution expenses decreased as a percentage of sales from 15.0% during the 2003 to 14.6% in 2004, while in absolute terms they grew 23.2% in 2004 due to higher transportation expenditures, advertising and marketing costs, personnel and warehousing costs but were partially offset by a lower growth of bad debt provision. Advertising and marketing costs as a percentage of sales stayed almost flat year-on-year at 4.6% in 2004.

General and administrative expenses decreased as a percentage of sales from 8.1% during the 2003 to 7.8% in 2004, but grew in absolute terms 22.1%. This increase was caused by rising personnel costs combined with the repeal of the property tax privilege in the Dairy Segment that brought additional expense of about US$5.7mln in 2004.

Financial expense in 2004 totaled US$14.6 million compared to US$15.3 million in 2003. Interest expenses rose from US$20.9 million to US$22.3 million. Foreign currency gain was US$7.7 million compared to US$4.8 million in 2004.

Net income grew 8.5% and stood at US$23.0 million. Adjusted EBITDA in 2004 increased 21.3% year-on-year and amounted to US$96.9 million. Adjusted EBITDA margin was 8.1% in comparison to 8.5% in 2003.


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.

 

Full year ended December 31, 2004

Full year ended December 31, 2003

 

US$ ‘mln

% of sales

US$ ‘mln

% of sales

Net income

23. 0 

1.9

21.2 

2.3

Add: Depreciation and amortization

44.0 

3.7

30.8 

3.3

Add: Income tax expense

1 2. 2 

1.0

10.7 

1.1

Add: Interest expense

22.3 

1.9

20.9 

2.2

Less: Interest income

(1.4)

0.1

(2.9)

0.3

Less: Currency remeasurement gains, net

(7.7)

0.6

(4.8)

0.5

Add: Bank charges

1.9 

0.2

1.9 

0.2 

Add: Other financial (income) expenses, net

(0. 6)

0.0

0.1 

0.0

Add: Minority interest

3. 2 

0.3

2.0 

0.2

Adjusted EBITDA

96.9 

8.1

79.9 

8.5

 

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

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

 

2003

2004

Sales

1,189,291

938,459

Cost of sales

(861,661)

(665,104)

Gross profit

327,630

273,355

Selling and distribution expenses

(173,433)

(140,746)

General and administrative expenses

(92,816)

(75,973)

Other operating expenses

(8,458)

(7,481)

Operating income

52,923

49,155

Financial income and expenses, net

(14,618)

(15,273)

Income before provision for income taxes and minority interest

38,305

33,882

Provision for income taxes

(12,170)

(10,717)

Minority interest

(3,161)

(2,012)

Net income

22,974

21,153

Other comprehensive income, net of tax

 

 

Currency translation adjustment

23,324

20 581

Comprehensive income

46,298

41 734

Earnings per share — basic and diluted:

0.52 

0,48 

 

 

 

Weighted average number of shares outstanding, basic and diluted

44 000

44 000

 

 

WIMM-BILL-DANN FOODS
Consolidated Balance Sheets

(Amounts in thousands of U.S. dollars)

 

31 December 2004

31 December 2003

 

unaudited

audited

Assets

 

 

Current assets:

 

 

Cash and cash equivalents

23,791

40,264

Trade receivables, net

62,210

57,424

Inventory, net

102,039

88,243

Taxes receivable

85,578

92,624

Advances paid

19,494

19,690

Net investment in direct financing leases

2,109

1,551

Deferred tax asset

6,265

5,210

Other current assets

7,145

3,648

Total current assets

308,631

308,654

Non-current assets:

 

 

Property, plant and equipment, net

436,793

393,769

Intangible assets, net

5,000

3,005

Goodwill

26,291

24,695

Net investment in direct financing leases — long-term portion

3,895

4,391

Long-term investments

2,971

2,931

Deferred tax asset — long-term portion

7,001

1,893

Other non-current assets

5,506

4,547

Total non-current assets

487,457

435,231

Total assets

796,088

743,885

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

Current liabilities:

 

 

Trade accounts payable

58,214

51,487

Advances received

3,492

2,586

Short-term loans

17,554

493

Long-term loans, current portion

936

1,769

Notes payable

— 

6,032

Taxes payable

13,281

9,272

Accrued liabilities

14,691

10,983

Government grants — current portion

2,329

2,194

Other payables

33,801

36,033

Total current liabilities

144,298

120,849

Long-term liabilities:

 

 

Long-term loans

7,120

7,882

Long-term notes

201,709

200,926

Other long-term payables

39,294

49,020

Government grants — long-term portion

5,156

7,052

Deferred taxes — long-term portion

10,268

12,370

Total long-term liabilities

263,547

277,250

Total liabilities

407,845

398,099

Minority interest

17,327

21,168

Shareholders’ equity:

 

 

Common stock: 44,000,000 shares authorized, issued and outstanding with a par value of 20 rubles at December 31,2004 and 2003

29,908

29,908

Share premium account

164,132

164,132

Accumulated other comprehensive income:

43,905

20,581

Currency translation adjustment

 

 

Retained earnings

132,971

109,997

 

 

 

Total shareholders’ equity

370,916

324,618

 

 

 

Total liabilities and shareholders’ equity

796,088

743,885

 

 

WIMM-BILL-DANN FOODS
Consolidated Statements of Cash Flows
(Amounts in thousands of U.S. dollars)

 

2003

2004

Cash flows from operating activities:

 

 

Net Income

22,974

21,153

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

 

 

Minority interest

3,161

2,012

Depreciation and amortisation

44,003

30,780

Currency remeasurement gain relating to bonds payable and
long-term payables

(10,342)

(8,245)

Provision for obsolete inventory

3,482

2,100

Provision for doubtful accounts

1,784

8,230

(Gain) loss on disposal of property, plant and equipment

1,013

(358)

Earned income on net investment in direct financing leases

(407)

(483)

Deferred tax benefit

(6,0 21)

(4,149)

Currency remeasurement loss relating to cash and cash equivalents

1,557

1,244

Non-cash rental received

2,036

2,095

Gain from sale of trading securities

— 

(1,903)

Write off of trade receivables

1,938

1,361

Amortisation of bonds issue expenses

1,025

613

Changes in operating assets and liabilities:

 

 

(Increase) decrease in inventories

(9,208)

2,394

Increase in trade accounts receivable

(4,883)

(2,356)

Decrease (increase) in advances paid

1,356

(7,681)

Decrease (increase) in taxes receivable

13,979

(30,723)

(Increase) decrease in other current assets

(1,101)

1,068

Increase in trade accounts payable

2,969

6,363

Increase (decrease) in advances received

719

(1,565)

Increase in taxes payable

1,526

5,492

Increase in accrued liabilities

2,785

1,898

(Decrease) increase in other current payables

(3,148)

2,071

Increase (decrease) in other long-term payables

(227)

Total cash provided by operating activities

71, 205

31,184

Cash flows from investing activities:

 

 

Cash paid for acquisition of subsidiaries, net of cash acquired

(5,318)

(7,002)

Cash paid for property, plant and equipment

(64,228)

(91,974)

Cash paid for acquisition of long term investments

(1,679)

(753)

Cash paid for acquisition of short-term investments

(2,048)

— 

Proceeds from disposal of long term investments

134

4,196

Proceeds from disposal of property, plant and equipment

2,081

2,437

Cash paid for (proceeds from) net investments in direct financing leases

267

(2,046)

Total cash used in investing activities

(70,791)

(95,142)

Cash flows from financing activities:

 

 

Proceeds from notes payable, net of debt issuance expenses

— 

194,476

Proceeds from short-term loans

19,414

— 

Repayment of short-term loans and notes payable

(11,447)

(107,820)

Repayment of long-term loans

(6,995)

(3,024)

Proceeds from long-term loans

4,856

5,138

Repayment of long-term payables

(20,673)

(15,371)

Repayment of long-term notes

(2,261)

— 

Total cash (used in) provided by financing activities

(17,106)

73,399

Total cash (used in) provided by operating, investing and financing activities

(16,692)

9,441

Impact of exchange rate differences on cash and cash equivalents

219

1,483

Net (decrease) increase in cash and cash equivalents

(16,473)

10,924

Cash and cash equivalents,at beginning of period

40,264

29,340

Cash and cash equivalents, at end of period

23,791

40,264

 

 

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.

 

 

 

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