Wimm-Bill-Dann Foods OJSC Reports Improved Margins for 2Q 2009

In a release on September 4, the Company noted highlights for the second quarter and first half of 2009:

- Group gross margin improved by 220 basis points to 35.2 percent in the second quarter of 2009 compared to the second quarter of 2008, and by 240 basis points year-on-year to 33.9 percent in the first half of 2009

- EBITDA1 margin improved significantly by 320 basis points to 15.4 percent in the second quarter of 2009 compared to the second quarter of 2008, and by 250 basis points year-on-year to 14.8 percent in the first half of 2009

- Operating profit margin increased substantially to 11.1 percent in the second quarter of 2009 from 8.2 percent a year ago, and to 10.4 percent in the first half of 2009 from 8.4 percent in the first half of 2008

- Group revenue in US dollars decreased 28.2 percent year-on-year to US$1,071.5 million in the first half of 2009, driven by ruble devaluation, and partially offset by stronger mix

- Net income in US dollars increased 42.6 percent year-on-year to US$52.3 million in the second quarter of 2009

- On a constant currency basis, (in rubles) net income almost doubled in the second quarter of 2009 compared to the second quarter of 2008, and increased by 12.3 percent year-on-year in the first half of 2009

- Operating cash flow rose 64.0 percent year-on-year to US$180.3 million in the first half of 2009

"The second quarter of 2009 demonstrated our ability to adapt quickly to changing market conditions, the resilience of our brands and our business model. It also proved that profitable growth can be achieved despite somewhat weakened consumer demand," said Tony Maher, Wimm-Bill-Dann's Chief Executive Officer.

"We are very pleased with our results. We have delivered substantial margin improvement on the EBITDA and gross margin levels. In the second quarter of 2009, group gross margin improved 220 basis points year-on-year to 35.2 percent. It also improved for each of the business segments, reaching 31.4 percent in dairy, 40.4 percent in beverages and 48.8 percent in baby food. Our EBITDA margin stood at 15.4 percent in the second quarter of 2009, reflecting both enhanced efficiency and seasonally lower input costs. Our net profit in the second quarter grew 42.6 percent."

"Our operating cash flow continued to show significant improvement, while our net debt decreased 49.0 percent year-on-year and stood at US$280.8 million, the lowest level for many years," Tony Maher added.

Key Cost Elements

In the first six months of 2009, selling and distribution expenses decreased 23.5 percent year-to-year to US$184.5 million. Sales and distribution expenses as a percentage of sales increased to 17.2 percent in the first half of 2009, compared to 16.2 percent in the same period of 2008, driven by advertising and marketing expenditure, which increased, as a percentage of sales, to 6.2 percent from 4.0 percent. General and administrative expenses decreased 34.1 percent year-on-year to US$63.8 million in the first half of 2009. General and administrative expenses, as a percentage of sales, decreased to 6.0 percent in the first six months of 2009 from 6.5 percent in the same period last year.

Operating profit in US dollars decreased 11.3 percent year-on-year to US$111.8 million in the first half of 2009. Operating profit margin improved to 10.4 percent in the first half of 2009 from 8.4 percent last year. EBITDA in US dollars declined 13.9 percent to US$158.3 million. EBITDA margin improved significantly to 14.8 percent in the first half of 2009 compared to 12.3 percent in the same period last year, and to 15.4 percent in the second quarter of 2009 from 12.2 percent in the second quarter of 2008.

In the first six months of 2009, financial expenses increased 119.3 percent to US$25.8 million compared to US$11.8 million in the same period of 2008. This was mainly due to currency remeasurement loss incurred in the first half of 2009, as a result of our US$250 million syndicated loan taken out in the second quarter of 2008. In the first half of 2009, currency remeasurement loss amounted to US$11.1 million compared to currency remeasurement gain of US$11.3 million in the first half of 2008. Currency remeasurement loss is not a cash item.

Our effective tax rate decreased to 24.1 percent in the first six months of 2009 from 28.8 percent in the same period of 2008.

Net Income

In the second quarter of 2009, net income in US dollars increased 42.6 percent to US$52.3 million from US$36.7 million in the same period last year. Net income in US dollars decreased 17.4 percent to US$64.9 million in the first half of 2009 from US$78.6 million in the first half of 2008 as a result of ruble devaluation.

On a constant currency basis (in rubles), net income increased by 12.3 percent year-on-year in the first half of 2009, and almost doubled in the second quarter of 2009 year-on-year.

Debt and Cash Flows

As of the end of the first six months of 2009, our net debt decreased by 49.0 percent year-on-year to US$280.8 million.

As a result of effective working capital management, our operating cash increased 64.0 percent to US$180.3 million in the first half of 2009 from US$109.9 million in the same period of 2008. Free cash flow grew to US$131.1 million in the first six months of 2009 from US$13.5 million in the same period last year.

Wimm-Bill-Dann Foods OJSC is a manufacturer of dairy products and a producer of juices and beverages in Russia and the CIS.

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