OREANDA-NEWS. June 6, 2007. Wimm-Bill-Dann Foods OJSC [NYSE: WBD] today announced its financial results for the quarter ended March 31, 2007.

Downloard press release (pdf).
Group sales rose 40.1% year-on-year to US$542.8 million
Gross profit increased 53.3% with gross margins increasing to 32.0% from 29.3%
Operating income increased 73.1% to US$51.4 million
EBITDA [1] increased 58.8% to US$70.4 million, EBITDA margin1 increased to 13.0% from 11.4%
Net income increased 84.8% to US$32.1 million
Operating cash flow increased 36.0%, amounting to US$78.8 million

“I’m very pleased with the excellent results we achieved during the first quarter of this year,” commented Tony Maher, chief executive officer of Wimm-Bill-Dann Foods OJSC. “Our group revenue increased an unprecedented 40.1% over prior year period, driven by an excellent quarter for all of our businesses. Organic growth remained the key driver, delivering 29.7% of our revenue growth, with acquisitions contributing 10.4%. In just one year we doubled the rate at which our revenue is growing. Despite continued cost pressure from raw milk, juice concentrate and sugar, we continued to improve gross margins from 29.3% in the first quarter of 2006 to 32% the first quarter of 2007.

“During the quarter sales in our Dairy division increased 43.9% to US$414.2 million, significantly exceeding industry growth rates, with gross margins reaching 29.2% compared to 27.4% a year ago. Our Beverage division turnaround strategy continued to make progress, resulting in a revenue increase of 26.4% to US$92.9 million, with gross margins improving to 39.9% compared to 33.9% in the prior year period. Our Baby Food sales grew 36.8% to US$35.7 million, with gross margins expanding to 44.8% from 37.3% in the prior year period. EBITDA for the group increased 58.8% in the quarter to $70.4 million.

During the quarter we continued to make good progress on the consolidation of legal entities and the simplification of our corporate structure. As of the end of May, we have legally consolidated 16, well ahead of our internal deadlines. Our effective tax rate is down significantly to 28.7% from 34.8% in the prior year period”.

Dairy

Sales in the Dairy Segment increased 43.9% to US$414.2 million in the first quarter of 2007 from US$287.9 million in the first quarter of 2006 driven primarily by volume growth. The impact of acquisitions made at the end of 2006 was 14.2% of the total Dairy revenue growth. The average dollar selling price rose 15.8% to US$1.01 per 1 kg in the first quarter of 2007 from US$0.87 per 1 kg in the first quarter of 2006 driven by the average ruble price growth and exchange rate effect**. The gross margin in the Dairy Segment increased to 29.2% from 27.4%* due to the rise in the average selling price outstripping raw milk price increases. The price of raw milk grew 11% in dollar terms over prior year period.

Beverages

Sales in the Beverage Segment grew 26.4% to US$92.9 million in the first quarter of 2007 compared to US$73.5 million in the first quarter of 2006 driven primarily by an increase in selling prices and volume growth. The average selling price increased 20.3% to US$0.81 per liter in the first quarter of 2007 from US$0.67 per liter in the first quarter of 2006. The gross margin in the Beverage Segment increased to 39.9% from 33.9% year-on-year, driven primarily by the rise in selling price outstripping concentrate and sugar price increases.

Baby Food

Sales in the Baby Food Segment increased 36.8% to US$35.7 million in the first quarter of 2007 from US$26.1 million in the first quarter of 2006. The average selling price rose 10.8% to US$1.84 per 1 kg in the first quarter of 2007 from US$1.66 per 1 kg in the first quarter of 2006. This increase was driven by both positive currency exchange rate effect** and the average ruble price growth. The gross margin in the Baby Food Segment increased to 44.8% from 37.3%.

Key Cost Elements

In the first quarter of 2007, selling and distribution expenses increased to 15.1% from 13.6% year-on-year as a percentage of sales due to increased marketing and advertising expenditure, transportation and personnel costs, an expected result of enhancing our route-to-market, reaching new geographies and establishing new sales channels. General and administrative expenses remained flat as a percentage of sales at 7.7%.

Operating margin increased to 9.5% in the first quarter of 2007 from 7.7% in prior year period. EBITDA margin increased to 13.0% in the first quarter of 2007 from 11.4% in prior year period.

Financial expenses during the first quarter of 2007 increased 191.8% to US$5.7 million compared to US$2.0 million in the same period of 2006. This was mainly a result of increased interest expense payable on bonds as well as decreased foreign currency gain. In the first quarter of 2007 foreign currency gain amounted to US$3.2 million compared to US$5.0 million for the same period of 2006.

Income tax expenses totalled US$13.1 million in the first quarter of 2007 compared to US$9.7 million in the first quarter of 2006. At the same time, the effective tax rate decreased to 28.7% from 34.8% mainly as a result of corporate restructuring and the financial effect of consolidation of legal entities.

Net Income

Net income increased 84.8% to US$32.1 million in the first quarter of 2007 from US$17.4 million in the first quarter of 2006.