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Wimm-Bill-Dann

April 4, 2006

Wimm-Bill-Dann Foods OJSC announces full year 2005 financial results

  • 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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