Moscow, Russia — December 2, 2004 — Wimm-Bill-Dann Foods OJSC [NYSE: WBD] today announced its financial results for the nine months ended September 30, 2004.
During the first nine months of 2004, Wimm-Bill-Dann's sales increased 26.9% compared to the same period last year. Gross profit increased 18.2% year-on-year, while gross margins for the group declined to 28.4% in the first nine months of 2004 from 30.4% during the same period last year. Adjusted EBITDA* increased 21.1% compared to the same period last year, while net income fell 9.6%.
Commenting on today's announcement, Sergei Plastinin, CEO of Wimm-Bill-Dann Foods OJSC, said: "While maintaining strong top line growth, we continue to further enhance our overall operations to reflect a more costly and competitive marketplace, which has evolved in Russia today. Dairy gross margins in the third quarter showed lower year-on-year deterioration than during the first six months of 2004 despite the growing price of raw milk. Dairy sales in the nine months of 2004 continued to post strong growth of 34.3%, well above the growth rate of the Russian dairy market, while our regional coverage continue to expand. Juice sales grew 9% in the nine months of 2004, 36.2% year-on-year in the third quarter, with juice gross margins showing a noticeable improvement during the third quarter year-on-year. Due to cost control measures we are undertaking throughout the company and despite higher property taxes and a general increase in the cost of doing business, our selling and distribution expenses stayed flat as a percentage of sales. General and administrative expenses decreased slightly as a percentage of sales while growth in absolute terms, compared to the same period last year, was slower than in the previous quarters. EBITDA showed a healthy 21.1% increase."
Key Operating and Financial Indicators of 9m 2004
|
9m ‘04 |
9m ‘03 |
Change |
|
|
|
|
|
US$ 'mln |
US$ 'mln |
|
Sales |
868.9 |
684.6 |
26.9% |
Dairy |
644.2 |
479.5 |
34.3% |
Juice |
222.2 |
203.8 |
9.0% |
Water |
2.5 |
1.2 |
- |
Gross profit |
246.4 |
208.4 |
18.2% |
Selling and distribution expenses |
(126.8) |
(100.2) |
26.5% |
General and administrative expenses |
(66.5) |
(57.7) |
15.3% |
Operating income |
48.6 |
44.8 |
8.5% |
Financial income and expenses, net |
(14.7) |
(13.1) |
12.2% |
Net income |
18.8 |
20.8 |
(9.6%) |
Adjusted EBITDA* |
80.9 |
66.8 |
21.1% |
CAPEX including acquisitions |
57.0 |
101.5 |
(43.8%) |
|
* 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$868.9 million in the first nine months of 2004, compared to US$684.6 million in the same period of 2003.
Sales in the Dairy Segment increased 34.3% from US$479.5 million in the first nine months of 2003 to US$644.2 million in the first nine months of 2004, while the average selling price increased 15.4% from US$0.65 per 1 kg in the first nine months of 2003 to US$0.75 per 1 kg in the same period this year. This increase was primarily driven by ruble price increase and ruble appreciation. Gross margins in the Dairy Segment declined from 29.1% in the first nine months of 2003 to 26.0% in the first nine months of 2004. This change was primarily caused by an 18% year-on-year increase in the average ruble price of raw milk as well as rising depreciation charges and personnel costs.
Sales in the Juice Segment increased from US$203.8 million in the first nine months of 2003 to US$222.2 million in the first nine months of 2004 while the average selling price increased 14.0% from US$0.57 per liter in the first nine months of 2003 to US$0.65 per liter in the same period this year. This increase was primarily due to ruble price increase, introduction of new higher priced products and ruble appreciation. Gross margin in the Juice Segment improved from 33.8% in the first nine months of 2003 to 35.4% in the first nine months of 2004 mainly due to the higher average price.
Selling and distribution expenses remained flat as a percentage of sales, while in absolute terms they grew 26.5% in the first nine months of 2004 due to higher transportation expenditures, advertising and marketing costs and personnel costs.
General and administrative expenses decreased as a percentage of sales from 8.4% during the first nine months of 2003 to 7.7% in the same period this year, but grew in absolute terms by 15.3%. This increase was caused by the repeal of the property tax privilege in the Dairy Segment as well as rising personnel costs.
Financial expense in the first nine months of 2004 totaled US$14.7 million compared to US$13.1 million in the first nine months of 2003. Interest expenses rose from US$15.3 million to US$17.0 million. The foreign currency gain was US$2.5 million compared to US$2.0 million in the first nine months of last year.
Net income decreased by 9.6% and stood at US$18.8 million. Adjusted EBITDA in the first nine months of 2004 increased 21.1% year-on-year and amounted to US$80.9 million. Adjusted EBITDA margin was slightly lower at 9.3% compared to 9.8% in the first nine months of 2003.
Attachment A
*Reconciliation of Adjusted EBITDA and Adjusted EBITDA margin to US GAAP Net Income
Adjusted EBITDA is a non-U.S. GAAP financial measure. The following table presents reconciliation of Adjusted EBITDA to net income (and Adjusted EBITDA margin to net income as a percentage of sales), the most directly comparable U.S. GAAP financial measure.
|
Nine Months ended September 30, 2004 |
Nine Months ended September 30, 2003 |
|
US$ 'mln |
% of sales |
US$ 'mln |
% of sales |
Net income |
18.8 |
2.2% |
20.8 |
3.0% |
Add: Depreciation and amortization |
32.2 |
3.7% |
22.0 |
3.2% |
Add: Income tax expense |
12.4 |
1.4% |
8.9 |
1.3% |
Add: Interest expense |
17.0 |
2.0% |
15.3 |
2.3% |
Less: Interest income |
(1.1) |
0.1% |
(1.9) |
0.3% |
Less: Currency remeasurement gains, net |
(2.5) |
0.3% |
(2.0) |
0.3% |
Add: Bank charges |
1.3 |
0.1% |
1.6 |
0.3 |
Add: Other financial (income) expenses, net |
0.0 |
0.0% |
0.1 |
0.01% |
Add: Minority interest |
2.8 |
0.3% |
2.0 |
0.3% |
Adjusted EBITDA |
80.9 |
9.3% |
66.8 |
9.8% |
|
We changed the way of reporting Adjusted EBITDA. 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 US dollars, except share and per share data)
|
Nine months ended September 30, |
|
2004 |
2003 |
Sales |
$868,949 |
$684,624 |
Cost of sales |
(622,575) |
(476,203) |
Gross profit |
246,374 |
208,421 |
Selling and distribution expenses |
(126,757) |
(100,156) |
General and administrative expenses |
(66,476) |
(57,685) |
Other operating expenses, net |
(4,499) |
(5,742) |
Operating income |
48,642 |
44,838 |
Financial income and expenses, net |
(14,689) |
(13,067) |
Income before provision for income taxes and minority interest |
33,953 |
31,771 |
Provision for income taxes |
(12,380) |
(8,943) |
Minority interest |
(2,801) |
(2,045) |
Net income |
18,772 |
$20,783 |
Other comprehensive income, net of tax |
|
|
Currency translation adjustment |
2,670 |
8,462 |
Comprehensive income |
$21,442 |
$29,245 |
Net income per share — basic and diluted: |
$0.43 |
$0.47 |
Weighted average number of shares outstanding |
44,000,000 |
44,000,000 |
|
WIMM-BILL-DANN FOODS
Consolidated Balance Sheets (Amounts in thousands of US dollars)
|
September 30, 2004 |
December 31, 2003 |
|
(unaudited) |
(audited) |
ASSETS |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$31,752 |
$40,264 |
Trade receivables, net |
56,725 |
57,424 |
Inventory, net |
120,704 |
88,243 |
Taxes receivable |
85,569 |
92,624 |
Advances paid |
27,737 |
19,690 |
Net investment in direct financing leases |
1,965 |
1,551 |
Deferred tax asset |
7,639 |
5,210 |
Other current assets |
6,076 |
3,648 |
Total current assets |
338,167 |
308,654 |
|
|
|
Non-current assets: |
|
|
Property, plant and equipment, net |
409,954 |
393,769 |
Intangible assets |
3,065 |
3,005 |
Goodwill |
24,895 |
24,695 |
Net investment in direct financing leases — long-term portion |
4,496 |
4,391 |
Long-term investments |
2,683 |
2,931 |
Deferred tax asset — long-term portion |
1,258 |
1,893 |
Other long-term assets |
5,692 |
4,547 |
Total non-current assets |
452,043 |
435,231 |
Total assets |
$790,210 |
$743,885 |
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
Current liabilities: |
|
|
Trade accounts payable |
$64,619 |
$51,487 |
Advances received |
3,175 |
2,586 |
Short-term loans |
18,847 |
493 |
Long-term loans, current portion |
1,675 |
1,769 |
Notes payable |
5,910 |
6,032 |
Taxes payable |
13,648 |
9,272 |
Accrued liabilities |
15,853 |
10,983 |
Government grants — current portion |
2,212 |
2,194 |
Other payables |
32,709 |
36,033 |
Total current liabilities |
158,648 |
120,849 |
|
|
|
Long-term liabilities: |
|
|
Long-term loans |
6,586 |
7,882 |
Long-term notes |
199,110 |
200,926 |
Other long-term payables |
42,087 |
49,020 |
Government grants — long-term portion |
5,450 |
7,052 |
Deferred taxes — long-term portion |
12,138 |
12,370 |
Total long-term liabilities |
265,371 |
277,250 |
|
|
|
Total liabilities |
424,019 |
398,099 |
|
|
|
Minority interest |
20,131 |
21,168 |
|
|
|
Shareholders’ equity: |
|
|
Common stock |
29,908 |
29,908 |
Share premium account |
164,132 |
164,132 |
Accumulated other comprehensive income: |
|
|
Currency translation adjustment |
23,251 |
20,581 |
Retained earnings |
128,769 |
109,997 |
Total shareholders’ equity |
$346,060 |
$324,618 |
|
|
|
Total liabilities and shareholders’ equity |
$790,210 |
$743,885 |
|
WIMM-BILL-DANN FOODS
Consolidated Statements of Cash Flows (unaudited) (Amounts in thousands of US dollars)
|
Nine months ended September 30, |
|
2004 |
2003 |
Cash flows from operating activities: |
|
|
Net income |
$18,772 |
$20,783 |
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
Depreciation and amortisation |
32,249 |
21,995 |
Minority interest in net profits of subsidiaries |
2,801 |
2,039 |
Bad debt and inventory provisions |
7,931 |
9,195 |
Currency exchange gain/loss |
(1,839) |
(3,520) |
Other adjustments |
1,037 |
(3,359) |
Changes in operating assets and liabilities: |
|
|
Increase in inventories |
(35,849) |
(7,669) |
Increase in trade accounts receivable |
(3,844) |
(646) |
Increase in advances paid |
(7,970) |
(14,039) |
Decrease (increase) in taxes receivable |
13,112 |
(35,406) |
Increase in other current assets |
(2,175) |
(4,116) |
Increase in trade accounts payable |
12,847 |
7,461 |
Increase in advances received |
575 |
395 |
(Decrease) increase in taxes payable |
(876) |
5,537 |
Increase in accrued liabilities |
4,831 |
7,697 |
Increase in other current payables |
700 |
1,777 |
Increase (decrease) in other long-term payables |
23 |
(188) |
Total cash provided by operating activities |
42,325 |
7,936 |
|
|
|
Cash flows from investing activities: |
|
|
Cash paid for acquisition of subsidiaries, net of cash acquired |
(4,166) |
(6,876) |
Cash paid for property, plant and equipment |
(47,467) |
(70,439) |
Cash paid for acquisition of short-term investments |
(248) |
(62,347) |
Proceeds from disposal of short-term investments |
274 |
24,554 |
Proceeds from disposal of investments and property, plant and equipment |
1,425 |
1,570 |
Cash received (paid) for net investments in direct financing leases |
— |
(4,234) |
Other |
(1,646) |
1,740 |
|
|
|
Total cash used in investing activities |
(51,828) |
(116,032) |
|
|
|
Cash flows from financing activities: |
|
|
Proceeds from notes payable, net of debt issuance expenses |
— |
194,106 |
Repayment of short-term loans and notes payable |
(1,715) |
(86,919) |
Repayment of long-term notes |
(2,254) |
— |
Proceeds from short-term loans |
20,086 |
— |
Proceeds from long-term loans |
13 |
4,892 |
Repayment of long-term loans and long-term payables |
(15,559) |
(12,989) |
|
|
|
Total cash (used in) provided by financing activities |
571 |
99,090 |
|
|
|
Net increase in cash and cash equivalents |
(8,932) |
(9,006) |
Impact of exchange rate differences on cash and cash equivalents |
420 |
102 |
Cash and cash equivalents,at beginning of period |
40,264 |
29,340 |
Cash and cash equivalents,at the end of period |
$31,752 |
$20,436 |
|
|