Wimm-Bill-Dann Foods OJSC (WBD)
Q1 2010 Earnings Call
June 3, 2010 9:00 AM ET
Marina Kagan – Head, Public Affairs
Tony Maher – Chairman and Chief Executive Officer
Dmitry Vladimirovich Ivanov – Chief Financial Officer
Natasha Zagvozdina – Renaissance Capital
Daniel Wakerly – Morgan Stanley
Elena Mills – Alfa Bank
Victoria Sokolova – Troika Dialog Group
Victoria Petrova – Credit Suisse
Odile Broussy – Aton Capital
Tigran Hovhannisyan – MDM Bank
Previous Statements by WBD
» Wimm-Bill-Dann Foods OJSC Q4 2009 Earnings Call Transcript
» Wimm-Bill-Dann Foods Q1 2009 Earnings Call Transcript
» Wimm-Bill-Dann Foods OJSC Q3 2008 Earnings Call Transcript
Good morning. My name is Andrea, and I will be your conference operator today. At this time, I would like to welcome everyone to the Wimm-Bill-Dann Q1 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. (Operator Instructions)
Thank you. Ms. Marina Kagan, you may begin.
Hello, ladies and gentlemen. And thank you for joining us to discuss the financial results of Wimm-Bill-Dann for the first quarter of 2010. As always, after our presentation, we will be happy to take your questions.
Before I hand the call over to our Chief Executive Officer, Tony Maher, I would ask that you please refer to the cautionary statements included in the press release covering any comments made during this conference call. Tony?
Thanks Marina. Good afternoon to those of you joining us from Russia and Europe, and good morning to our participants from U.S. The first quarter was defined by three important themes, broad base growing demand, market share gains across nearly our entire portfolio, and raw milk prices.
On the first point, volumes were up across all of our segments, testing that we are seeing demand growth driven by improved consumer sentiment. This significant change from what we have seen over the past number of quarters.
The volume growth was strong in dairy, which is especially good sign given the difficulties in the industry during the recent economic downturn. Our outperformance of the market continued in juices and baby food as well.
As the market recovers, our portfolio product is performing extremely well. In fact, we are growing our market share across the board, this is happening in traditional dairy and in higher value areas such as yogurts and desserts.
It is also true in baby food while our market share gained continue quarter-after-quarter, and in beverages, our market share increased across our juice portfolio pushing us firmly into the number two position in the marketplace.
In summary, we are not just benefiting from demand recovery, we are gaining market share in all categories.
Looking back for a moment, I have mentioned the clear message about our strategy during these uncertain economic times. Our focus has been on driving efficiency improvements, driving healthy cash flows from all our businesses to fuel our growth initiatives, and investing in our brands for more strategic and profitable growth.
Now that demand is recovering, we see the benefits of this strategy and of course, we remain committed to it. This is especially important because the improvement in demand we are seeing in the dairy segment is exacerbating to some degree the issues on the supply side of the equation.
On our last call, I shared with you that the conditions we saw in relation to raw milk were continuing into first quarter. Supply remained tight and as a result raw milk prices remained quite high.
Our raw milk purchasing price increased 34% year-over-year in U.S. dollar terms in the first quarter. We spend an additional $24 million spend on the procurement of raw milk in the period, compared to the first quarter of 2009. This in term affected our first quarter margins in dairy and overall for the group, which declined by 450 basis points versus a year ago to 28%.
I continue to believe that we will see healthier margins moving forward, as raw milk prices moderate and the price increases reached up in the first quarter fully flow through. However, we do not see raw milk prices going back to the levels of last year in the near-term.
Let me now highlight some of the numbers. Our group sales in the first quarter improved on the year-over-year and sequential basis, illustrating the impact of the importance of demand improvement.
On the constant currency basis sales were up nearly 5% over the same quarter last year and almost 6% sequentially. On the U.S. dollar basis sales were up 19.1% from the year ago quarter and 5.1% sequentially. Most important these gains were across all our segments dairy, beverages and baby food.
EBITDA in U.S. dollars was up slightly in the first quarter over the same period year ago and improved by 22.4%, sequentially to $73.5 million. First quarter EBITDA margins were down 220 basis points from the first quarter of ’09.
Now, turning to our market segments, starting with dairy segment, first quarter sales were $434.5 million, an increase of 17.7% on the year-over-year basis and 3.7% on the comparable currency basis, reflecting improvement in demand and that drove improve volumes for our dairy products and market share gains.
We have also been active in introducing new products and packaging into the markets with very strong results. For example, the launch of Domik v Derevne bottle pasteurized milk was so successful that we’ve already increased our production capacity for this product and are now considering the addition of further production lines.
Some other new products were launched in Domik v Derevne which coupled with the overall the brand image yielded improve sales and attracted additional consumers, and we successfully re-launched our Vesely Molochnik brand for processed cheese with new packaging and improve branding.