- Group sales rose 17.7% year-on-year to US$1.4 billion
- Gross profit increased 21.2% with gross margins increasing to 28.4% from 27.5%
- Operating income up 65.4% to US$87.5 million
- Adjusted EBITDA grew 45.4% to US$140.9 million, adjusted EBITDA margin 1 increased to 10.1% from 8.1%
- Net income up 31.7% to US$30.3 million
- Operating cash flow increased 58.9% amounting to US$113.9 million
Note: See Attachment A for definitions of Adjusted EBITDA and Adjusted EBITDA margin and reconciliations to net income.
Commenting on the results, Chief Executive Officer Sergei Plastinin said: “We are pleased to have witnessed a recovery in profitability in 2005, as a result of a number of long-term strategies aimed at efficiency and cost control. The modernization of our dairy production facilities and re-deployment of production resources, begun in 2003, have led to real gains in efficiency at our regional facilities. Our sales grew 18% year-on-year, having been driven by an organic increase in dairy sales. Our sales outside of the Moscow region also continue to grow. As of the end of 2005, regional sales made up 51% of our overall sales, compared to 49% in 2004. We also saw impressive 36% growth in baby food sales, all of which was organic. With operating income rising 65% and net income increasing by 32%, we believe that our strategy of achieving sustainable and profitable growth is a viable one. I would also like to note that our investment activity was fully financed from an operating cash flow this year .”
Key Operating and Financial Indicators of FY 2005
|
|
FY 2005 |
FY 2004 |
Change |
|
Sales volumes, thousand tons |
1689.5 |
1,611.1 |
4.9% |
|
|
|
|
|
|
|
US$ ‘mln |
US$ ‘mln |
|
|
|
|
|
|
|
Sales |
1,399.3 |
1,189.3 |
17.7% |
|
Dairy |
1,007.7 |
822.9 |
22.5% |
|
Beverages |
303.8 |
301.7 |
0.7% |
|
Baby Food |
87.8 |
64.7 |
35.7% |
|
Gross profit |
397.0 |
327.6 |
21.2% |
|
Selling and distribution expenses |
(192.0) |
(173.4) |
10.7% |
|
General and administrative expenses |
(109.6) |
(92.8) |
18.1% |
|
Operating income |
87.5 |
52.9 |
65.4% |
|
Financial income and expenses, net |
(22.9) |
(14.6) |
56.8% |
|
Net income |
30.3 |
23.0 |
31.7% |
|
Adjusted EBITDA 1 |
140.9 |
96.9 |
45.4% |
|
CAPEX including acquisitions |
104.4 |
72.6 |
43.8% |
|
This was attributable to organic growth and driven by an increase in average selling prices and volume growth in the main product categories. The overall impact of acquisitions made in 2005 on the segment's financial performance was relatively limited and accounted for about 1% of the total Dairy Segment sales volume. The average dollar selling price rose 12.5% from US$0.75 per 1 kg in 2004 to US$0.84 per 1 kg in 2005. This increase was driven mainly by ruble price increases. The gross margin in the Dairy Segment increased to 25.2% from 24.5% due to the rise in average selling price outstripping the rise in raw milk prices at the end of the year, improvements in efficiency and cost control.
Sales in the Beverages Segment stayed almost flat at US$303.8 million in 2005. The average selling price increased 6.8% from US$0.65 per liter in 2004 to US$0.70 per liter in 2005. This increase was chiefly due to ruble price increases. The gross margin in the Beverages Segment grew to 36.0% from 33.8% , driven by increased selling prices and improved efficiency in the supply chain.
Sales in the Baby Food Segment increased 35.7% from US$64.7 million in 2004 to US$87.8 million in 2005. This was due to organic growth. The average selling price rose 17.6% from US$1.29 per 1 kg in 2004 to US$1.52 per 1 kg in 2005. This increase was driven primarily by an increase in the average ruble selling price as well as the continuing increase of the proportion of higher priced products such as drinkable yogurts and curd desserts in the overall product mix. The gross margin in the Baby Food Segment increased to 38.0% from 37.2%.
Selling and distribution expenses decreased from 14.6% to 13.7% y-o-y as a percentage of sales. Advertising and marketing expenses decreased as a percentage of sales from 4.6% in 2004 to 4.1% in 2005. Transportation expenses decreased slightly as a percentage of sales from 3.9% in 2004 to 3.8% in 2005 due to more effective logistics and despite transportation tariffs that almost doubled during the year. General and administrative expenses as a percentage of sales remained flat at 7.8% . Operating margin increased from 4.4% to 6.3% as a result of cost cutting initiatives at the level of production and operational expenses.
Financial expenses in 2005 increased 56.8% to US$22.9 million compared to US$14.6 million in 2004 including a decline in foreign currency translation gain to US$1.2 million in 2005, compared to US$7.7 million in 2004 .
Income tax expense totalled US$30.7 million compared to US$12.2 million in 2004. This change is mainly due to an increase of income before tax as well as an increase in expenses not deductible for statutory purposes and negative charges to deferred tax verses positive charges in 2004.
Net income increased by 31.7%, from US$23.0 million to US$30.3 million.
Attachment A
*Reconciliation of Adjusted EBITDA and Adjusted EBITDA margin to US GAAP Net Income
Adjusted EBITDA is a non-U.S. GAAP financial measure. The following table presents reconciliation of Adjusted EBITDA to net income (and Adjusted EBITDA margin to net income as a percentage of sales), the most directly comparable U.S. GAAP financial measure.
|
|
Full year ended December 31, 2005 |
Full year ended December 31, 2004 |
|
|
US$ ‘mln |
% of sales |
US$ ‘mln |
% of sales |
|
Net income |
30.3 |
2.2% |
23.0 |
1.9% |
|
Add: Depreciation and amortization |
53.4 |
3.8% |
44.0 |
3.7% |
|
Add: Income tax expense |
30.7 |
2.2% |
12.2 |
1.0% |
|
Add: Interest expense |
23.4 |
1.7% |
22.3 |
1.9% |
|
Less: Interest income |
(1.6) |
0.1% |
(1.4) |
0.1% |
|
Less: Currency remeasurement gains, net |
(1.2) |
0.1% |
(7.7) |
0.6% |
|
Add: Bank charges |
2.0 |
0.1% |
1.9 |
0.2% |
|
Add: Other financial expenses (gain) |
0.3 |
0.0% |
(0.6) |
0.0% |
|
Add: Minority interest |
3.6 |
0.3% |
3.2 |
0.3% |
|
Adjusted EBITDA |
140.9 |
10.1% |
96.9 |
8.1% |
|
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)
|
|
2005 (unaudited) |
2004 |
|
Sales |
$ 1,399,289 |
$ 1,189,291 |
|
Cost of sales |
(1,002,246) |
(861,661) |
|
Gross profit |
397,043 |
327,630 |
|
Selling and distribution expenses |
(191,990) |
(173,433) |
|
General and administrative expenses |
(109,642) |
(92,816) |
|
Other operating expenses, net |
(7,916) |
(8,458) |
|
Operating income |
87,495 |
52,923 |
|
Financial income and expenses, net |
(22,868) |
(14,618) |
|
Income before provision for income taxes and minority interest |
64,627 |
38,305 |
|
Provision for income taxes |
(30,712) |
(12,170) |
|
Minority interest |
(3,649) |
(3,161) |
|
Net income |
$ 30,266 |
$ 22,974 |
|
Other comprehensive income, net of tax |
|
|
|
Currency translation adjustment |
(14,139) |
23,324 |
|
Comprehensive income |
$ 16,127 |
$ 46,298 |
|
Earnings per share - basic and diluted: |
|
|
|
Net income |
$ 0.69 |
$ 0.52 |
|
Weighted average number of shares outstanding, basic and diluted |
44,000,000 |
44,000,000 |
|
WIMM-BILL-DANN FOODS
Consolidated Balance Sheets
(Amounts in thousands of U.S. dollars)
|
|
December 31, |
|
|
2005 (unaudited) |
2004 |
|
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ 93,103 |
$ 23,791 |
|
Short-term bank deposits |
32,164 |
- |
|
Trade receivables, net |
59,968 |
62,210 |
|
Inventory |
130,597 |
102,039 |
|
Taxes receivable |
61,480 |
85,578 |
|
Advances paid |
9,715 |
19,494 |
|
Net investment in direct financing leases |
2,335 |
2,109 |
|
Deferred tax asset |
8,750 |
6,265 |
|
Other current assets |
8,915 |
7,145 |
|
Total current assets |
407,027 |
308,631 |
|
Non-current assets: |
|
|
|
Property, plant and equipment, net |
459,527 |
437,320 |
|
Intangible assets, net |
7,078 |
5,027 |
|
Goodwill |
32,008 |
26,291 |
|
Net investment in direct financing leases – long-term portion |
3,072 |
3,895 |
|
Long-term investments |
138 |
2,417 |
|
Deferred tax asset – long-term portion |
5,554 |
7,001 |
|
Other non-current assets |
6,153 |
5,506 |
|
Total non-current assets |
513,530 |
487,457 |
|
Total assets |
$ 920,557 |
$ 796,088 |
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
Current liabilities: |
|
|
|
Trade accounts payable |
$ 65,780 |
$ 62,400 |
|
Advances received |
5,291 |
3,492 |
|
Short-term loans |
19,554 |
17,554 |
|
Long-term loans, current portion |
3,823 |
936 |
|
Notes payable |
49,794 |
- |
|
Taxes payable |
13,406 |
13,281 |
|
Accrued liabilities |
17,071 |
14,691 |
|
Government grants – current portion |
2,174 |
2,329 |
|
Other payables |
30,200 |
29,615 |
|
Total current liabilities |
207,093 |
144,298 |
|
Long-term liabilities: |
|
|
|
Long-term loans |
1,824 |
7,120 |
|
Long-term notes payable |
254,230 |
201,709 |
|
Other long-term payables |
2 6 ,893 |
39,294 |
|
Government grants – long-term portion |
3,219 |
5,156 |
|
Deferred taxes – long-term portion |
15,636 |
10,268 |
|
Total long-term liabilities |
301,802 |
263,547 |
|
Total liabilities |
508,895 |
407,845 |
|
Commitments and contingencies |
- |
- |
|
Minority interest |
24,619 |
17,327 |
|
Shareholders' equity : |
|
|
|
Common stock: 44,000,000 shares authorized, issued and outstanding with a par value of 20 rubles at December 31, 200 5 and 200 4 |
29,908 |
29,908 |
|
Share premium account |
164,132 |
164,132 |
|
Accumulated other comprehensive income: |
|
|
|
Currency translation adjustment |
29,766 |
43,905 |
|
Retained earnings |
163,237 |
132,971 |
|
Total shareholders' equity |
387, 043 |
3 70,916 |
|
Total liabilities and shareholders' equity |
920,557 |
796,088 |
|
WIMM-BILL-DANN FOODS
Consolidated Statements of Cash Flows
(Amounts in thousands of U.S. dollars)
|
|
2005 (unaudited) |
2004 |
|
Cash flows from operating activities: |
|
|
|
Net Income |
$ 30,266 |
$ 22,974 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
Minority interest |
3,649 |
3,161 |
|
Depreciation and amortisation |
53,435 |
44,003 |
|
Currency remeasurement loss(gain) relating to bonds payable and long-term payables |
990 |
(9,938 ) |
|
Obsolescence and net realizable value expense |
1,077 |
3,482 |
|
Provision for doubtful accounts |
3,908 |
3,722 |
|
Loss on disposal of property, plant and equipment |
1,321 |
1,013 |
|
Earned income on net investment in direct financing leases |
(402) |
(639) |
|
Deferred tax expense(benefit) |
3,327 |
(6,019) |
|
Non-cash rental received |
2 ,496 |
1,957 |
|
Reversal of tax contingent liability |
(800) |
(128) |
|
Loss on disposal of long-term investments |
1,786 |
190 |
|
Amortisation of bonds issue expenses |
1,046 |
1,025 |
|
Changes in operating assets and liabilities: |
|
|
|
I ncrease in inventories |
(25,361) |
(9,208) |
|
Increase in trade accounts receivable |
(2,636) |
(4,883) |
|
Decrease in advances paid |
9,553 |
1,356 |
|
Decrease in taxes receivable |
15,082 |
13,979 |
|
Increase in other current assets |
(1,062) |
(3,346) |
|
Increase in trade accounts payable |
3,649 |
7,000 |
|
Increase in advances received |
1,880 |
719 |
|
Increase in taxes payable |
6,698 |
1,526 |
|
Increase in accrued liabilities |
2,816 |
2,913 |
|
Increase (decrease) in other current payables |
678 |
(3,148) |
|
Increase in other long-term payables |
541 |
9 |
|
Total cash provided by operating activities |
113,937 |
71,720 |
|
Cash flows from investing activities: |
|
|
|
Cash paid for acquisition of subsidiaries, net of cash acquired |
$ (24,964) |
$ (6,697) |
|
Cash paid for property, plant and equipment |
(72,805) |
(68,103) |
|
Cash paid for acquisition of investments |
(71) |
- |
|
Proceeds from disposal of investments |
538 |
675 |
|
Proceeds from disposal of property, plant and equipment |
5,944 |
2,081 |
|
Cash paid for net investments in direct financing leases |
(1,982) |
(1,764) |
|
Cash invested in short-term bank deposits |
(31,817) |
- |
|
Net cash used in investing activities |
(125,157) |
(73,808) |
|
Cash flows from financing activities: |
|
|
|
Proceeds from long-term notes payable, net of debt issuance expenses |
106,000 |
- |
|
Short-term loans and notes, net |
(3,795) |
7,967 |
|
Repayment of long-term loans |
(4,099) |
(2,481) |
|
Proceeds from long-term loans |
1,636 |
343 |
|
Repayment of long-term payables |
(17,123) |
(19,727) |
|
Repayment of long-term notes payable |
- |
(2,261) |
|
Total cash provided by (used in) financing activities |
82,619 |
(16,159) |
|
Impact of exchange rate differences on cash and cash equivalents |
(2,087) |
1,774 |
|
Net increase(decrease) in cash and cash equivalents |
69,312 |
(16,473) |
|
Cash and cash equivalents , at beginning of the year |
23,791 |
40,264 |
|
Cash and cash equivalents, at the end of the year |
$ 93,103 |
$ 23,791 |
| |
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