WBD » Topics » Overview

This excerpt taken from the WBD 20-F filed Jun 18, 2009.

Overview

 

We are one of the largest Russian manufacturers of dairy and juice products, with sales of $2,823.6 million, $2,438.3 million and $1,762.1 million in 2008, 2007 and 2006, respectively. Our reportable business segments in 2008 were dairy products, beverage products and babyfood products. In 2008, the dairy segment accounted for 74.2% of our sales, the beverages segment, which includes juice and bottled mineral water products, accounted for 16.8% of our sales and the babyfood segment accounted for 9.0% of our sales. In 2007, the dairy segment accounted for 76.0% of our sales, the beverages segment accounted for 17.0% of our sales and the babyfood segment accounted for 7.0% of our sales. In 2006, the dairy segment accounted for 75.0% of our sales, the beverages segment accounted for 18.4% of our sales and the babyfood segment accounted for 6.6% of our sales. Our principal geographic market is Russia, which accounted approximately for 93% of our sales in each of 2008, 2007 and 2006. We also have production facilities and distribution chains in the CIS countries of Ukraine, Kyrgyzstan, Uzbekistan and Georgia, as well as a distribution center in Kazakhstan.

 

Our products are typically priced in rubles for Russian sales and in local currencies for our sales in other CIS countries. Our direct costs, including personnel, utility and transportation expenses are incurred primarily in rubles, while direct materials costs are incurred primarily in rubles and U.S. dollars.

 

The appreciation in real terms of the ruble against the U.S. dollar tends to result in an increase in our costs and revenues, while depreciation of the ruble against the U.S. dollar in real terms tends to result in a decrease in our costs and revenues. Following the general economic downturn, the ruble depreciated against the U.S. dollar in 2008 by 19.9%. The ruble depreciated by 2.4% against the U.S. dollar based on the average exchange rate in the year ended December 31, 2008 as

 

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compared to the average exchange rate in the year ended December 31, 2007. This generally resulted in a decrease in the reported U.S. dollar value of our ruble-denominated assets and liabilities. Additionally, nominal depreciation of the ruble against the U.S. dollar has a similar effect when income statements of our non-U.S. dollar-denominated subsidiaries are translated into U.S. dollars while preparing our consolidated financial statements. As a result of the ruble depreciation, in 2008 the translation loss increased to $127.4 million, compared to a gain of $41.0 million recognized in 2007. See also “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Financial Condition— Ruble depreciation could increase our costs, decrease our cash reserves, or make it more difficult for us to comply with financial ratios and to repay our debts and will affect the value of dividends received by holders of ADSs.”

 

In 2009, the Company experienced significant adverse currency fluctuations. The U.S. dollar and euro exchange rates increased from 29.38 and 41.44 as at December 31, 2008 to 31.15 and 43.30 as at June 16, 2009, respectively. The effect of this change in exchange rate on the amounts outstanding as of December 31, 2008 would have resulted in a foreign currency loss of approximately $15.7 million for the period from January 1, 2009 through June 16, 2009.

 

In 2008, our net income decreased by 27.3% to $101.7 million from $140.0 million in 2007 primarily due to the adverse effect of foreign currency exchange losses, which were $58.8 million in 2008 in comparison with a gain of $18.1 million in 2007. Our sales increased by 15.8% in 2008, including year-on-year sales increases of 13.1%, 14.3% and 48.2% in the dairy, beverage and babyfood segments, respectively. By volume, dairy segment sales were lower by 9.2%, beverage segment sales increased by 3.7% and babyfood sales volume increased by 27.6% in 2008.

 

The gross margin in the dairy segment decreased slightly to 29.1% in 2008 from 29.2% in 2007. The gross margin in the beverage segment decreased to 39.1% in 2008 from 39.8% in 2007 due to constant raw material (primarily concentrates) prices growth in the first half of 2008. The gross margin in the babyfood segment increased to 46.9% in 2008 from 45.1% in 2007, driven by a growing share of non-dairy babyfood and a decreased share of babyfood produced by co-packing in our sales.

 

Our selling and distribution expenses increased in 2008 as compared to 2007 in absolute terms and also as a percentage of sales, from 15.9% to 17.3%. In particular, our personnel and transportation costs were higher in 2008, which is in line with improving of our route-to-market initiatives.

 

Over the past three years, we have been constructing new capacity, modernizing existing capacity and making strategic acquisitions. Our capital expenditures (excluding acquisitions) in 2008, 2007 and 2006 were $195.3, $192.7 and $130.0 million, respectively. Expenditures for acquisitions of subsidiaries in 2008, 2007 and 2006 totaled $3.3, $21.8 and $137.3 million (exclusive of advances made in 2006 for acquisitions completed in 2007), respectively.

 

As of December 31, 2008, we had a total of $673.2 million in outstanding debt (consisting of loans, notes payable and vendor financing obligations), of which $158.6 million was repaid in March 2009. Of our total indebtedness as of December 31, 2008, 41.3% was denominated in foreign currency and 58.7% was denominated in rubles.

 

Below is a summary of our operational highlights for 2008 and the beginning of 2009.

 

This excerpt taken from the WBD 20-F filed Jun 26, 2008.

Overview

 

We are one of the largest Russian manufacturers of dairy and juice products, with sales of $2,438.3 million, $1,762.1 million and $1,394.6 million in 2007, 2006 and 2005, respectively. Our reportable business segments in 2007 were dairy products, beverage products and baby food products. In 2007, the dairy segment accounted for 76.0% of our sales, the beverages segment, which includes juice and bottled mineral water products, accounted for 17.0% of our sales and the baby food segment accounted for 7.0% of our sales. In 2006, the dairy segment accounted for 75.0% of our sales, the beverages segment accounted for 18.4% of our sales and the baby food segment accounted for 6.6% of our sales. Our principal geographic market is Russia, which accounted approximately for 93%, 93% and 92% of our sales in 2007, 2006 and 2005, respectively. However, we also have production facilities in Ukraine, Kyrgyzstan and Uzbekistan and acquired a dairy production facility in Georgia in the fourth quarter of 2007.

 

In 2007, our net income increased by 46.8% to $140.0 million from $95.4 million in 2006. Our sales increased by 38.4% in 2007, including year-on-year sales increases of 40.2%, 27.8% and 46.6% in the dairy, beverage and baby food segments, respectively. By volume, dairy segment sales were higher by 18.2%, beverage segment sales increased by 9.8% and baby food sales increased by 31.9% in 2007.

 

The gross margin in the dairy segment decreased slightly to 29.2% in 2007 from 30.5% in 2006 due to a sharp rise in the price of raw milk of 35.7% which was partially offset by selling price increases and a more favorable product mix. The gross margin in the beverage segment increased to 39.8% in 2007 from 35.3% in 2006 despite raw materials cost pressure, driven by continued efficiency improvements and better pricing and discount management in all regions. The gross margin in the baby food Segment increased to 45.1% in 2007 from 43.1% in 2006, driven by a growing share of non-dairy baby food and a decreased share of baby food produced by co-packing in our sales.

 

Our selling and distribution expenses increased in 2007 as compared to 2006 in absolute terms and also as a percentage of sales, from 14.0% to 15.9%. In particular, our marketing, advertising and transportation costs were higher in 2007 in line with our strategy of supporting strong national brands, improving our route-to-market and expanding our geography.

 

Our net income increased 46.8% to $140.0 million for the full year of 2007 from $95.4 million in 2006.

 

Over the past three years, we have been constructing new capacity, modernizing existing capacity and making strategic acquisitions. Our capital expenditures (excluding acquisitions)

 

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in 2007, 2006 and 2005 were $192.7 million, $130.0 million and $75.1 million, respectively. Expenditures for acquisitions of subsidiaries in 2007, 2006 and 2005 totaled $21.8, $137.3 million (exclusive of advances made in 2006 for acquisitions completed in 2007) and $24.3 million (exclusive of advances made in 2005 for acquisitions completed in 2006 but including advances made in 2004 for acquisitions made in 2005), respectively.

 

As of December 31, 2007, we had a total of $579.6 million in outstanding debt (consisting of long-term loans, notes payable, vendor financing obligations and $0.7 million of third parties guarantees). Of our total indebtedness as of December 31, 2007, 58.3% was denominated in foreign currency and 41.7% was denominated in rubles.

 

Below is a summary of our operational highlights for 2007 and the beginning of 2008.

 

This excerpt taken from the WBD 20-F filed Jun 25, 2007.
Overview

We are one of the largest Russian manufacturers of dairy and juice products, with sales of $1,762.1 million, $1,394.6 million and $1,184.0 million in 2006, 2005 and 2004, respectively. Our reportable business segments in 2006 were dairy products, beverage products and baby food products. In 2006, the dairy segment accounted for 75.0% of our sales, the beverages segment, which includes juice and bottled mineral water products, accounted for 18.4% of our sales and the baby food segment accounted for 6.6% of our sales. In 2005, the dairy segment accounted for 72.0% of our sales, the beverages segment accounted for 21.7% of our sales and the baby food segment accounted for 6.3% of our sales. Our principal geographic market is Russia, which approximately accounted for 93%, 92% and 94% of our sales in 2006, 2005 and 2004, respectively. However, we also have production facilities in Ukraine, Kyrgyzstan and Uzbekistan.

In 2006, our net income increased to $95.4 million from $30.3 million in 2005, an increase of 215.2%, and sales increased by 26.4%, including sales increases of 31.6%, 6.9% and 33.4% in the dairy, beverages and baby food segments, respectively. By volume, dairy segment sales were higher by 13.2%, beverages segment sales increased by 2.5% and baby food sales increased by 14.7%.

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In the dairy segment, our gross margin in 2006 improved primarily due to higher average selling prices due to general price increases, a more favorable product mix, ruble appreciation and a moderate increase in the cost of raw milk compared to prior years. Gross margin decreased in the beverages segment primarily due to certain changes in the structure of our sales which lead to a faster increase of cost of sales than the average price increase. Gross margin was higher in the baby food segment. This was driven primarily by volume growth, as Russia’s baby food market continues to grow rapidly in both value terms and geographic reach and also due to a moderate increase in the cost of raw milk compared to prior years, higher average selling prices as a result of general price increases and a shift in our product mix to include more value-added products. Our selling and distribution expenses increased in 2006 as compared to 2005 in absolute terms and also as a percentage of sales, from 13.8% to 14.0%. In particular, our transportation, personnel and advertising costs were higher in 2006 as a result of our regional expansion program.

Over the past three years, we have been constructing new capacity, modernizing existing capacity and making strategic acquisitions. Our capital expenditures (excluding acquisitions) in 2006, 2005 and 2004 were $130.0 million, $75.1 million and $72.6 million, respectively. Expenditures for acquisitions of subsidiaries in 2006, 2005 and 2004 totaled $137.3 million (exclusive of advances made in 2006 for acquisitions completed in 2007), $24.3 million (exclusive of advances made in 2005 for acquisitions completed in 2006 but including advances made in 2004 for acquisitions made in 2005) and $5.3 million (exclusive of advances made in 2004 for acquisitions completed in 2005), respectively.

As of December 31, 2006, we had a total of $443.0 million in outstanding debt (consisting of notes, vendor financing for property, plant and equipment and loans). Of our total indebtedness as of December 31, 2006, 43.5% was denominated in U.S. dollars and euros and 56.6% was denominated in rubles.

This excerpt taken from the WBD 20-F filed Jun 16, 2006.

Overview

We are one of the largest Russian manufacturers of dairy and juice products, with sales of $1,399.3 million, $1,189.3 million and $938.5 million in 2005, 2004 and 2003, respectively. Our reportable business segments in 2005 were dairy products, beverage products and baby food products. In 2005, the dairy segment accounted for 72.0% of our sales, the beverage segment, which includes juice and bottled mineral water products, accounted for 21.7% of our sales and the baby food segment accounted for 6.3% of our sales. In 2004, the dairy segment accounted for 69.2% of our sales, the beverage segment accounted for 25.4% of our sales and the baby food segment accounted for 5.4% of our sales. Our principal geographic market is Russia, which approximately accounted for 92%, 94% and 94% of our sales in 2005, 2004 and 2003, respectively. However, we also have production facilities in certain CIS countries, including Ukraine, Kyrgyzstan and Uzbekistan.

In 2005, our net income increased to $30.3 million from $23.0 million in 2004, an increase of 31.7%, and sales increased by 17.7%, including sales increases of 22.4%, 0.7% and 35.9% in the dairy, beverage and baby food segments, respectively. By volume, dairy segment sales were higher by 8.8%, beverage segment sales decreased by 5.7% and baby food sales increased by 15.5%. In the dairy segment, our gross margin in 2005 improved primarily due to a moderate increase in the cost of raw milk compared to prior years and higher average selling prices due to general price increases and ruble appreciation. Gross margin was higher in the beverage segment mainly due to cost control measures, general price increases and ruble appreciation against the euro, which had a favorable impact on raw material costs denominated in euros. Gross margin was higher in the baby food segment due to a moderate increase in the cost of raw milk compared to prior years, higher average selling prices as a result of general price increases and a shift in our product mix to include more value-added products. Our selling and distribution expenses increased in 2005 as compared to 2004 in absolute terms but decreased as a percentage of sales, from 14.6% to 13.7%. In particular, our transportation, personnel and advertising costs were higher in 2005 as a result of our regional expansion program.

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Over the past three years, we have been constructing new capacity, modernizing existing capacity and making strategic acquisitions. Our capital expenditures (excluding acquisitions) in 2005, 2004 and 2003 were $75.1 million, $72.6 million and $107.2 million, respectively. Expenditures for acquisitions of subsidiaries in 2005, 2004 and 2003 totaled $24.3 million (exclusive of advances made in 2005 for acquisitions completed in 2006 but including advances made in 2004 for acquisitions made in 2005), $5.3 million (exclusive of advances made in 2004 for acquisitions completed in 2005) and $9.9 million, respectively.

At December 31, 2005, we had a total of $371.6 million in indebtedness (consisting of notes, vendor financings for property, plant and equipment and loans). Of our total indebtedness at December 31, 2005, 52.7% was denominated in U.S. dollars and euros and 47.3% was denominated in rubles.

This excerpt taken from the WBD 20-F filed Jun 30, 2005.

Overview

        We are one of the largest Russian manufacturers of dairy and juice products, with sales of $1,189.3 million, $938.5 million and $824.7 million in 2004, 2003 and 2002, respectively. Our reportable business segments in 2004 were dairy products, juice products and water. In 2004, the dairy segment accounted for 74.6% of our sales and the juice segment accounted for 25.1% of our sales. In 2003, our dairy segment accounted for 70.6% of our sales and the juice segment accounted for 29.2% of our sales. Our water business, which we commenced in 2003, accounted for 0.3% of our sales in 2004. Our principal geographic market is Russia, which accounted for 94%, 94% and 95% of our sales in 2004, 2003 and 2002, respectively.

        In 2004, our net income increased to $23.0 million from $21.2 million in 2003, an increase of 8.6%, and sales increased by 26.7%, including a sales increase of 33.7% and 8.5% in the dairy and juice segments, respectively. By volume, dairy segment sales were higher by 14.2% and juice segment sales decreased by 4.5%. In the dairy segment, our gross margin in 2004 was lower primarily due to the increased costs of raw milk and higher depreciation expense, even though our average selling prices were higher due to general price increases and ruble appreciation. Gross margin was higher in the juice segment due to general price increases and ruble appreciation. Our selling and distribution expenses increased in 2004 as compared to 2003 in absolute terms but decreased as a percentage of sales, from 15.0% to 14.6%. In particular, our advertising, personnel and transportation costs were higher in 2004 as a result of our regional expansion program.

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        Over the past three years, we have been constructing new capacity, modernizing existing capacity and making strategic acquisitions. Our capital expenditures (excluding acquisitions) in 2004, 2003 and 2002 were $72.6 million, $107.2 million and $136.1 million, respectively. Expenditures for acquisitions of subsidiaries in 2004, 2003 and 2002 totaled $5.3 million (exclusive of advances made in 2004 for acquisitions completed in 2005), $9.9 million and $39.6 million, respectively. In the next three years, we expect to invest approximately $300 million in property, plant and equipment and approximately $50 million in new acquisitions.

        At December 31, 2004, we had a total of $283.2 million in indebtedness (consisting of notes, vendor financings for property, plant and equipment and loans). Of our total indebtedness at December 31, 2004, approximately 75% was denominated in U.S. dollars and euro.

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