Wimm-Bill-Dann Foods OJSC [NYSE: WBD] today announced its financial results for the quarter ended March 31, 2008.
Group sales rose 34.8% year-on-year to US$731.9 million
Gross profit increased 26.2% to US$219.5 million
Operating income increased 23.2% to US$63.4 million
EBITDA1 increased 29.0% to US$90.7 million
Net income increased 30.6% to US$41.9 million
Commenting on first quarter 2008 results, Tony Maher, Wimm-Bill-Danns Chief Executive Officer said: We are pleased with the very solid performance we achieved this quarter, in particular our sales growth of 34.8% on a year-over-year basis.
Our baby food business continued its impressive growth with sales increasing 67.1% year-on-year, outpacing market growth and strengthening our leading market share position. Gross margin for the baby food business strengthened as well, increasing to 47.5% in the first quarter, up from 44.8% for the same period last year. Our beverage business achieved 25.8% growth in sales year-on-year. Finally, our dairy business delivered 34.1% growth in the first quarter in comparison to the same period last year. Despite the challenging raw materials pricing environment that continued well into the first quarter, gross margin was relatively stable at 26.4% in comparison with 26.9% lasting the fourth quarter of 2007.
Group gross profit for the first quarter 2008 grew 26.2% over the same period last year driven by a healthier product mix and higher sales. EBITDA increased 29.0% over the same period last year. Our EBITDA margin rebounded from last quarter to 12.4%, an improvement of 193 basis points, despite challenging raw materials pricing environment.
In conclusion, I would like to emphasise, that despite the raw material cost environment which continued well into the first months of the year, the first quarter was a very solid start to 2008.
Key Financial Indicators of 1Q 2008
1Q2008 1Q2007 Change
US$ mln US$ mln
Sales 731.9 542.8 34.8%
Dairy 555.4 414.2 34.1%
Beverages 116.8 92.9 25.8%
Baby Food 59.7 35.7 67.1%
Gross profit 219.5 173.9 26.2%
Selling and distribution expenses 110.0 82.0 34.1%
General and administrative expenses 42.1 41.7 0.8%
Operating income 63.4 51.4 23.2%
Financial income and expenses, net 3.4 5.7 (41.2)%
Net income 41.9 32.1 30.6%
EBITDA 90.7 70.4 29.0%
CAPEX excluding acquisitions 49.9 23.7 100.5%
Dairy
Sales in the Dairy Segment increased 34.1% to US$555.4 million in the first quarter of 2008 from US$414.2 million in the first quarter of 2007 driven mainly by selling price increases. The average dollar selling price rose 34.9% to US$1.36 per 1 kg in the first quarter of 2008 from US$1.01 per 1 kg in the first quarter of 2007 driven mainly by the average ruble price growth. Our raw milk purchasing price grew 62.3% year-on-year in ruble terms (76.2% in US dollar terms) in the first quarter of 2008. The gross margin in the Dairy Segment decreased to 26.4% from 29.2% in the first quarter 2007, but despite such a sharp rise in raw milk prices decreased only slightly from 26.9% in the fourth quarter 2007.
Beverages
Sales in the Beverage Segment grew 25.8% to US$116.8 million in the first quarter of 2008 compared to US$92.9 million in the first quarter of 2007 driven primarily by product mix and selling price increases. The average selling price increased 27.1% to US$1.02 per liter in the first quarter of 2008 from US$0.81 per liter in the first quarter of 2007. The gross margin in the Beverage Segment decreased to 38.0% from 39.9% year-on-year, due to rising raw materials cost pressure, which commenced in the latter part of 2007. Apple concentrate purchasing price almost doubled in the first quarter of 2008 compared to the same period last year. Despite such a sharp rise in raw material costs, gross margin in the first quarter 2008 remained in line with the fourth quarter 2007.
Baby Food
Sales in the Baby Food Segment grew 67.1% to US$59.7 million in the first quarter of 2008 from US$35.7 million in the first quarter of 2007. This increase was driven mainly by improved mix, volume growth and selling price increases. The average selling price rose 31.2% to US$2.42 per 1 kg in the first quarter of 2008 from US$1.84 per 1 kg in the first quarter of 2007. This increase was driven mainly by a healthier mix and the ruble price growth. The gross margin in the Baby Food Segment increased to 47.5% from 44.8% driven by constantly improving sales mix.
Key Cost Elements
In the first quarter of 2008, selling and distribution expenses as a percentage of sales remained almost flat at 15.0% comparing to 15.1% in the first quarter of 2007. General and administrative expenses as a percentage of sales decreased to 5.8% in the first quarter of 2008 from 7.7% in the same period of 2007.
Operating profit increased 23.2% to US$63.4 million in the first quarter of 2008. EBITDA grew 29.0% to US$90.7 million.
Net financial expenses during the first quarter of 2008 decreased 41.2% to US$3.4 million compared to US$5.7 million in the same period of 2007. This was mainly a result of increased foreign currency gain. In the first quarter of 2008 foreign currency gain amounted to US$9.0 million compared to US$3.2 million for the same period of 2007.
Income tax expenses totalled US$17.2 million in the first quarter of 2008 compared to US$13.1 million in the first quarter of 2007. The effective tax rate remained 28.7%.
Net Income
Net income increased 30.6% to US$41.9 million in the first quarter of 2008 from US$32.1 million in the first quarter of 2007.
Attachment A
Reconciliation of EBITDA and EBITDA margin to US GAAP Net Income
EBITDA is a non-U.S. GAAP financial measure. The following table presents reconciliation of EBITDA to net income (and EBITDA margin to net income as a percentage of sales), the most directly comparable U.S. GAAP financial measure.
3 months ended 3 months ended
March 31, 2008 March 31, 2007
US$ mln % of sales US$ mln % of sales
Net income 41.9 5.7% 32.1 5.9%
Add: Depreciation and amortization 27.3 3.7% 19.0 3.5%
Add: Income tax expense 17.2 2.3% 13.1 2.4%
Add: Interest expense 12.6 1.7% 9.3 1.7%
Less: Interest income (0.8) (0.1)% (0.9) (0.2)%
Less: Currency remeasurement gains, net (9.0) (1.2)% (3.2) (0.6)%
Add: Bank charges 0.8 0.1% 0.5 0.1%
Add: Minority interest 0.9 0.1% 0.5 0. 1%
Add:(Gain)/Loss on sales/purchase of currency. (0.2) (0.03)% (0.05) (0.01)%
EBITDA 90.7 12.4% 70.4 13.0%
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. EBITDA margin is EBITDA expressed as a percentage of sales.
We present EBITDA because we consider it an important supplemental measure of our operating performance. In particular, we believe 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.
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. Moreover, other companies in our industry may calculate EBITDA differently or may use it for different purposes than we do, limiting its usefulness as a comparative measure.
EBITDA also should not be considered as an alternative to cash flow from operating activities or as a measure of our liquidity. In particular, 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 Balance Sheets (unaudited)
(Amounts in thousands of U.S. dollars)
March 31,
2008
December 31,
2007
ASSETS
Current assets:
Cash and cash equivalents $ 204,349 $ 33,452
Trade receivables, net 196,153 157,608
Inventory 262,880 261,254
Taxes receivable 67,924 65,689
Advances paid 48,969 43,924
Net investment in direct financing leases 1,153 1,349
Deferred tax asset 20,187 17,479
Other current assets 12,929 11,903
Total current assets 814,544 592,658
Non-current assets:
Property, plant and equipment, net 810,785 767,654
Intangible assets 37,204 34,015
Goodwill 133,918 129,391
Net investment in direct financing leases
long-term portion
927 972
Long-term investments 0 38
Deferred tax asset long-term portion 2,470 2,947
Other non-current assets 6,035 5,427
Total non-current assets 991,339 940,444
Total assets $ 1,805,883 $ 1,533,102
Wimm-Bill-Dann Foods
Consolidated Balance Sheets (unaudited)
(continued)
March 31,
2008
December 31, 2007
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities:
Trade accounts payable $ 127,271 $ 130,729
Advances received 11,157 13,626
Short-term loans 95,528 98,819
Long-term loans current portion 6,252 6,455
Current portion of long-term bonds payable 300,000 300,000
Taxes payable 20,180 14,351
Accrued liabilities 56,987 51,877
Government grants current portion 81 77
Dividends payable - 116
Other payables 52,102 40,156
Total current liabilities 669,558 656,206
Long-term liabilities:
Long-term loans 45,840 34,631
Long-term notes payable 280,664 105,922
Other long-term payables 13,395 17,372
Government grants long-term portion 1,000 974
Deferred taxes long-term portion 34,258 31,011
Total long-term liabilities 375,157 189,910
Total liabilities 1,044,715 846,116
Minority interest 15,431 13,862
Shareholders equity:
Common stock: 44,000,000 shares authorized, issued and outstanding with a par value of 20 Russian rubles at March 31, 2008 and December 31, 2007 29,908 29,908
Share premium account 164,132 164,132
Retained earnings 410,809 368,913
Accumulated other comprehensive income:
Currency translation adjustment 140,888 110,171
Total shareholders equity 745,737 673,124
Total liabilities and shareholders equity $ 1,805,883 $ 1,533,102
Wimm-Bill-Dann Foods
Consolidated Statements of Income and
Comprehensive Income (unaudited)
(Amounts in thousands of U.S. dollars, except share and
per share data)
Three months ended
March 31,
2008 2007
Sales $ 731,930 $ 542,792
Cost of sales (512,402) (368,867)
Gross profit 219,528 173,925
Selling and distribution expenses (110,029) (82,046)
General and administrative expenses (42,083) (41,731)
Other operating incomes and expenses, net (4,020) 1,297
Operating income 63,396 51,445
Financial income and expenses, net (3,379) (5,742)
Income before provision for income taxes
and minority interest
60,017 45,703
Provision for income taxes (17,195) (13,132)
Minority interest (926) (489)
Net income $ 41,896 $ 32,082
Other comprehensive income
Currency translation adjustment 30,717 6,250
Comprehensive income $ 72,613 $ 38,332
Net income per share - basic and diluted $ 0.95 $ 0.73
Weighted average number of shares outstanding 44,000,000 44,000,000
Consolidated Statements of Cash Flows (unaudited)
(Amounts in thousands of U.S. dollars)
Three months ended
March 31, 2008 2007
Cash flows from operating activities:
Net income $ 41,896 $ 32,082
Adjustments to reconcile net income
to net cash provided by operating activities:
Minority interest 926 489
Depreciation and amortisation 27,346 18,917
Currency remeasurement gain relating to bonds payable, long-term payables, investments in foreign subsidiaries, and fixed assets of foreign subsidiaries (12,134) (3,513)
Change in provision for obsolescence and net realizable value (241) (691)
Provision for doubtful accounts 791 1,536
(Gain) /loss on disposal of property, plant and equipment 1,073 (1,399)
Earned income on net investment in direct financing leases (129) (164)
Deferred tax benefit 387 270
Non-cash rental received 639 258
Accrual of tax contingent liability 118 908
Write off of long-term investments 29 11
Impairment of tangible assets and intangible assets 48 929
Write off of unrecoverable
investments in direct finance lease (207) 57
Amortization of bonds issue expenses 473 625
Changes in operating assets
and liabilities net of acquisitions:
Inventory 9,928 35,690
Trade accounts receivable (31,867) (22,666)
Advances paid (3,059) 176
Taxes receivable 790 5,030
Other current assets (140) 3,079
Other long-term assets (639) -
Trade accounts payable (8,773) (1,694)
Advances received (2,959) (4,728)
Taxes payable 4,946 6,901
Accrued liabilities 1,814 4,147
Other current payables 12,346 4,614
Other long-term payables (2,106)
Total cash provided by operating activities $ 43,402 $ 78,758
Consolidated Statements of Cash Flows (unaudited)
Three months ended March 31, 2008 2007
Cash flows from investing activities:
Cash paid for acquisition
of subsidiaries, net of cash acquired $ (293 ) $ (5,118 )
Proceeds from disposal of subsidiary 113
Cash paid for intangible assets and property, plant and equipment (43,357 ) (26,665 )
Cash paid for acquisition of investments (1,115 )
Proceeds from disposal of property, plant and equipment 1,665 3,957
Cash paid for net investments in direct financing leases (25 )
Cash invested in short-term bank deposits (22,798 )
Total cash used in investing activities (41,985 ) (51,651 )
Cash flows from financing activities:
Proceeds from long-term notes payable 166,188 151,061
Short-term loans and notes, net (7,385 ) (120,890 )
Proceeds from long-term loans 10,458 1,612
Repayment of long-term loans (1,706 ) (904 )
Repayment of long-term payables (3,260 ) (4,617 )
Total cash provided by (used in) financing activities 164,295 26,262
Total cash used in operating, investing and financing activities 165,712 53,369
Impact of exchange rate differences on cash and cash equivalents 5,185 189
Net decrease in cash and cash equivalents 170,897 53,558
Cash and cash equivalents, at beginning of period 33,452 40,310
Cash and cash equivalents, at the end of period $ 204,349 $ 93,868