Wimm-Bill-Dann Foods OJSC Announces Full Year 2003 Financial Results
MOSCOW--(BUSINESS WIRE)--March 22, 2004--Wimm-Bill-Dann Foods OJSC (NYSE:WBD) today announced its financial results
for the year ended December 31, 2003.
In 2003, Wimm-Bill-Dann's sales rose 13.8% to US$938.5 million compared to US$824.7 million in 2002. Gross
profit increased by 11.6% compared to last year, while gross margins decreased to 29.1% in 2003 from 29.7% in 2002. Net
income decreased to US$21.2 million in 2003 from US$35.7 million last year. Adjusted EBITDA(a) increased by 2.5%
year-on-year to US$85.4 million. Adjusted EBITDA(a) margin was 9.1% in 2003 compared to 10.1% in the year 2002.
FY 2003 FY 2002 Change --------- --------- ------- Sales volumes, thousand tons 1484.5 1422.7 4.3% US$ 'mln US$ 'mln
Sales 938.5 824.7 13.8% Dairy 662.3 563.0 17.6% Juice 274.5 261.7 4.9% Water 1.6 - - Gross profit 273.4 245.0 11.6%
Selling and distribution expenses (140.7) (109.5) 28.5% General and administrative expenses (76.0) (63.0) 20.6%
Operating income 49.2 66.0 (25.5%) Financial income and expenses, net (15.3) (14.1) 8.5% Net income 21.2 35.7 (40.6%)
Adjusted EBITDA(a) 85.4 83.3 2.5% CAPEX including acquisitions 117.0 175.7 (33.4%) --------- --------- -------
"For Wimm-Bill-Dann, the year 2003 became a year of major modernization initiatives and significant strategic
choices", - David Iakobachvili, Chairman of the Board of Directors of Wimm-Bill-Dann Foods OJSC, said in a
statement. "The company retained its leading market position, despite a number of internal and external factors,
which affected its performance in 2003. We remain committed to maintaining our leadership in both the dairy and juice
segments while steadily increasing our share in the water and cheese markets. In 2003, we also made substantial changes
to our Management Board and strengthened our management, which makes us confident that we have a strong and capable team
taking the company into 2004 and beyond".
Key Operating and Financial Indicators of FY 2003
(a) Note: See Attachment A for definitions of Adjusted EBITDA and
Adjusted EBITDA margin and reconciliations to net income.
Sales in the Dairy Segment increased 17.6% from US$563.0 million in 2002 to US$662.3 million in 2003. Sales growth
was made up of sales volume growth of 6.3% and selling price increase. The average selling price increased by 10.0% from
US$0.60 per 1 kg in 2002 to US$0.66 per 1 kg in 2003 driven by incremental ruble price increase, ruble appreciation and
change in product mix favoring value added products. Gross margins tightened from 29.3% in 2002 to 27.1% in 2003 due to
the growth in raw milk prices, additional depreciation of newly installed capacity and personnel expenses growth.
Sales in the Juice Segment increased 4.9% from US$261.7 million in 2002 to US$274.5 million in 2003. Sales growth was
made up of sales volume decrease by 0.6% and the increase of the selling price. The average selling price increased from
US$0.55 per liter in the year 2002 to US$0.58 per liter in the year 2003, primarily due to incremental ruble price
increase and ruble appreciation partially offset by the change in product mix in favor of lower priced brands. Gross
margins in Juice segment rose from 31.0% in 2002 to 34.2% in 2003 as a result of a higher pricing on the backdrop of
essentially flat sales volume and cost of sales.
In 2003, Wimm-Bill-Dann's total selling and distribution expenses increased 28.5% to US$140.7 million from
US$109.5 million in 2002, reaching 15.0% of 2003 sales against 13.3% in 2002. Media inflation, continuing regional
expansion and provisions recorded for bad debts were the main factors affecting selling and distribution expenses.
Increased personnel costs and expenses for professional services contributed to a 20.6% increase in general and
administrative expenses from $63.0 million in 2002 to $76.0 million in 2003. Wimm-Bill-Dann's expenses for audit,
legal and consulting services almost doubled as a result of the company' expansion, more stringent requirements
imposed upon Wimm-Bill-Dann as a public company and the launch of a number of initiatives aimed at improving our
performance.
-- January - Acquisition of Refrigerating and Warehousing Complex in Novosibirsk -- March - Installation of new
production lines for dairy products in the central region, at LMK and Anna -- March - Launch of a new bottled water
factory in the Novgorod region -- March - Launch of the first water brand Zapovednik Valday -- March - Launch of NEO
brand -- July - Installation of new production lines for plastic bottles production at LMK and for yogurt and soft
cottage cheese at Timashevsk -- July - Launch of new cheese spread production in the Krasnodar region -- July -
Installation of a new production line for liquid dairy products at Baby Food Dairy Plant -- August - Launch of new line
for processed cheese production at Ufa Dairy Plant -- September - Acquisition of Essentuki Bottling Facilities --
October - Installation of a new yogurt production line at Kharkov Dairy Plant, Ukraine -- October - Installation of a
hard cheese production line at Rubtsovsk Dairy Plant and launch of Lamber, a new cheese brand, -- October - Launch of a
new production line for sour milk at Roska, Saint-Petersburg -- November - Launch of J-7 PET package and a PET
production line at Depsona
Financial expenses increased by 8.5% due to the interest expense growth to US$20.9 million and were partially offset
by currency gain of US$4.9 million and interest income of US$2.9 million.
Commenting on today's announcement Sergei Plastinin, Chief Executive Officer of Wimm-Bill-Dann Foods OJSC, said:
"In 2003, we spent time and effort digesting our rapid growth. In addition to modernization of our production
facilities and warehouses we focused on innovative product development and improvement of our distribution network,
laying a solid foundation for the future growth."
2003 Operational Highlights
Full year ended Full year ended December 31, December 31, 2003 2002 ---------------- --------------- US$ 'mln % of US$
'mln % of sales sales Net income 21.2 2.3% 35.7 4.3% Depreciation and amortization 30.6 3.3% 18.6 2.3% Interest expense
20.9 2.2% 12.8 1.6% Income tax expense 10.7 1.1% 14.2 1.7% Minority interest 2.0 0.2% 1.9 0.2% Adjusted EBITDA 85.4 9.1%
83.3 10.1%
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.
We present Adjusted EBITDA because we consider it important supplemental measure of our performance and believe it is
frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our
industry. Adjusted EBITDA represents net income before interest expense, income taxes and depreciation and amortization
adjusted for minority interest. Adjusted EBITDA margin is Adjusted EBITDA expressed as a percentage of sales.
We use Adjusted EBITDA for the following purposes: (1) according to our compensation policy, certain executive
incentive compensation payments are based on our Adjusted EBITDA performance against budgets; and (2) certain loan
agreements use Adjusted EBITDA (with additional adjustments) to measure our compliance with covenants.
Adjusted EBITDA has limitations as analytical tool, and you should not consider it in isolation, or as substitute for
analysis of our results as reported under U.S. GAAP. Other companies in our industry may calculate Adjusted EBITDA
differently than we do, limiting its usefulness as a comparative measure.
WIMM-BILL-DANN FOODS
2003 (unaudited) 2002 ----------- ----------- Sales $938,459 $824,734 Cost of sales (665,104) (579,707) -----------
----------- Gross profit 273,355 245,027 Selling and distribution expenses (140,746) (109,527) General and
administrative expenses (75,973) (62,955) Other operating expenses (7,481) (6,497) ----------- ----------- Operating
income 49,155 66,048 Financial income and expenses, net (15,273) (14,131) ----------- ----------- Income before
provision for income taxes and minority interest 33,882 51,917 Provision for income taxes (10,717) (14,249) Minority
interest (2,012) (1,922) ----------- ----------- ----------- ----------- Net income $21,153 $35,746 ===========
=========== Other comprehensive income, net of tax Currency translation adjustment 20,581 - ----------- -----------
Comprehensive income $41,734 $35,746 =========== =========== Earnings per share - basic and diluted: Net income per
share $0.48 $0.83 Weighted average number of shares outstanding 44,000,000 43,063,014
Consolidated Statements of Operations and Comprehensive Income
(Amounts in thousands of U.S. dollars,
except share and per share data)
2003 unaudited 2002 --------- --------- ASSETS Current assets: Cash and cash equivalents $40,264 $29,340 Trade
receivables, net 57,424 60,146 Inventory, net 88,243 86,063 Taxes receivable 92,624 57,734 Advances paid 19,690 10,811
Net investment in direct financing leases 1,551 1,338 Deferred tax asset 5,210 1,850 Other current assets 3,648 5,810
--------- --------- Total current assets 308,654 253,092 Non-current assets: Property, plant and equipment, net 393,769
293,580 Intangible assets, net 3,005 2,736 Goodwill 24,695 19,885 Net investment in direct financing leases - long-term
portion 4,391 4,381 Long-term investments 2,931 1,989 Other non-current assets 6,440 2,812 --------- --------- Total
non-current assets 435,231 325,383 --------- --------- Total assets $743,885 $578,475 ========= ========= LIABILITIES
AND SHAREHOLDERS' EQUITY Current liabilities: Trade accounts payable $51,487 $40,144 Advances received 2,586 3,905
Short-term loans 493 94,050 Long-term loans, current portion 1,769 2,483 Notes payable 6,032 16,096 Taxes payable 9,272
4,933 Accrued liabilities 10,983 8,346 Government grants - current portion 2,194 2,033 Other payables 36,033 25,770
--------- --------- Total current liabilities 120,849 197,760 Long-term liabilities: Long-term loans 7,882 4,546
Long-term notes 200,926 - Other long-term payables 49,020 55,047 Government grants - long-term portion 7,052 8,568
Deferred taxes - long-term portion 12,370 8,121 --------- --------- Total long-term liabilities 277,250 76,282 ---------
--------- Total liabilities 398,099 274,042 --------- --------- Minority interest 21,168 21,549 Shareholders' equity :
Common stock 29,908 29,908 Share premium account 164,132 164,132 Currency translation adjustment 20,581 - Retained
earnings 109,997 88,844 --------- --------- Total shareholders' equity $324,618 $282,884 --------- --------- Total
liabilities and shareholders' equity $743,885 $578,475 --------- ---------
WIMM-BILL-DANN FOODS
Consolidated Balance Sheets
(Amounts in thousands of U.S. dollars)
2003 unaudited 2002 --------- --------- Cash flows from operating activities: Income from operations $21,153 $35,746
Adjustments to reconcile net income to net cash provided by operating activities: Minority interest 2,012 1,922
Depreciation and amortisation 30,627 18,611 Provision for obsolete inventory 2,100 1,154 Provision for doubtful accounts
8,709 1,970 (Gain) loss on disposal of property, plant and equipment (358) 606 Earned income on net investment in direct
financing leases (483) (395) Deferred tax (benefit) expense (4,149) 38 Currency remeasurement gain relating to bonds
payable and long-term payables (11,538) (1,295) Currency remeasurement loss relating to cash and cash equivalents 2,753
639 Unrealised holding gain for trading securities (1,903) (742) Non-cash rental received 2,095 1,606 Write off of trade
receivables 1,511 1,262 Write off of net investment in direct finance leases 162 Amortisation of bonds issue expenses
613 Changes in operating assets and liabilities: Decrease (increase) in inventories 2,394 5,194 Increase in trade
accounts receivable (2,985) (34,893) (Increase) decrease in advances paid (7,681) 3,189 Increase in taxes receivable
(30,723) (32,880) Decrease (increase) in other current assets 1,068 2,782 Increase (decrease) in trade accounts payable
6,363 (13,279) (Decrease) increase in advances received (1,565) 1,390 Increase in taxes payable 5,492 1,028 Increase
(decrease) in accrued liabilities 1,898 (1,081) Increase in other current payables 2,071 619 (Decrease) increase in
other long-term payables (227) (216) --------- --------- Total cash provided by (used in) operating activities 29,247
(6,863) --------- --------- Cash flows from investing activities: Cash paid for acquisition of subsidiaries, net of cash
acquired (7,002) (39,571) Cash paid for property, plant and equipment (88,528) (78,505) Cash paid for net investments in
direct financing leases (2,046) (1,843) Cash paid for acquisition of investments (753) (285) Proceeds from disposal of
short-term investments 4,196 - Proceeds from disposal of property, plant and equipment 2,437 - Cash paid for other
long-term assets - (2,473) --------- --------- Net cash used in investing activities (91,696) (122,677) ---------
--------- Cash flows from financing activities: Proceeds from issuance of capital stock, net of direct expenses -
162,127 Repayment of obligations under finance leases - (95) (Repayment) proceeds of (from) short-term loans and notes
payable (107,820) 771 Proceeds from long-term loans 5,138 4,226 Repayment of long-term payables (15,371) (5,058)
Proceeds from notes payable, net of debt issuance expenses 194,476 559 Repayment of long-term loans (3,024) (9,930)
--------- --------- Net cash provided by financing activities 73,399 152,600 --------- --------- Total cash provided by
operating, investing and financing activities 10,950 23,060 Impact of exchange rate differences on cash and cash
equivalents (26) (639) Net increase (decrease) in cash and cash equivalents 10,924 22,421 Cash and cash equivalents, at
beginning of period 29,340 6,919 --------- --------- Cash and cash equivalents, at the end of period $40,264 $29,340
========= =========
WIMM-BILL-DANN FOODS
Consolidated Statements of Cash Flows
(Amounts in thousands of U.S. dollars)
Some of the information contained in this press release may contain projections or other forward-looking statements
regarding future events or the future financial performance of Wimm-Bill-Dann Foods OJSC, as defined in the safe harbor
provisions of the U.S. Private Securities Litigation Reform Act of 1995. We wish to caution you that these statements
are only predictions and that actual events or results may differ materially. We do not intend to update these
statements to conform them to actual results. We refer you to the documents Wimm-Bill-Dann Foods OJSC files from time to
time with the U.S. Securities and Exchange Commission, specifically, the Company's most recent Form 20-F. These
documents contain and identify important factors, including those contained in the section captioned "Risk
Factors" in our Form 20-F, that could cause the actual results to differ materially from those contained in our
projections or forward-looking statements, including, among others, potential fluctuations in quarterly results, and
risks associated with our competitive environment, acquisition strategy, ability to develop new products or maintain
market share, brand and company image, operating in Russia, volatility of stock price, financial risk management, and
future growth.
NOTES TO EDITORS
Wimm-Bill-Dann Foods OJSC is a leading manufacturer of dairy and juice products in Russia. The company was founded in
1992.
The Company currently owns 24 manufacturing facilities in 20 locations in Russia and the Commonwealth of Independent
States (CIS), as well as trade affiliates in 26 cities in Russia and the CIS.
--30--KO/lo* CONTACT: Wimm-Bill-Dann Foods OJSC Olga Motovilova, +7 095 733 9726/9727 Fax: +7 095 733 9725
motovilova@wbd.ru or Marina Kagan, +7 095 733 9726/9727 or + 7 095 762 2387 Fax: +7 095 733 9725 kagan@wbd.ru
www.wbd.com
Wimm-Bill-Dann has a strong and diversified branded portfolio with over 1,100 types of dairy products and over 150
types of juice, nectars and still drinks. The company currently employs over 18,000 people.
Wimm-Bill-Dann was rated first best out of 45 firms in terms of transparency in the S&P survey of leading Russian
companies, and was rated third best in the latest Brunswick UBS Warburg survey of corporate governance in Russia.
Wimm-Bill-Dann was awarded best European Equity Deal of 2002 for its initial public offering by Euroweek and
Institutional Investor magazines. In addition, the company received the Grand Prix for Best Overall Investor Relations
among small and mid-cap companies at the First Annual IR Magazine Russia Awards held in 2004 and organized by IR
Magazine and the Association of Investor Relations Professionals.
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