Wimm-Bill-Dann Foods OJSC (WBD) Q2 2010 Earnings Call September 2, 2010 8:00 am ET Executives Marina Kagan - Head of Public Affairs Tony Maher - Chairman and Chief Executive Officer Dmitry Ivanov - Chief Financial Officer Analysts Daniel Wakerly - Morgan Stanley Michael Gabovich - Glenrock Asset Brady Martin - Citibank Natasha Zagvozdina - Renaissance Capital Presentation Operator Good morning and good afternoon and welcome to today's conference, Wimm-Bill-Dann Foods second quarter results. (Operator Instructions) Thank you. At this time, I would like to turn the call over to Marina Kagan. Marina Kagan
Previous Statements by WBD
» Wimm-Bill-Dann Foods OJSC Q1 2010 Earnings Call Transcript
» Wimm-Bill-Dann Foods OJSC Q4 2009 Earnings Call Transcript
» Wimm-Bill-Dann Foods Q1 2009 Earnings Call Transcript
We are also realizing the benefits of our strategic actions to improve the profitability of our business through pricing and efficiency. More of the investments we made in our product portfolio and our marketing during the downturn are paying off in the form of share gains.We gained market share in seven key categories including value-added dairy, juice and baby food. This positions us favorably in each of our three segments and it supports our long-term objective of expanding profitability through efficiency gains and greater participation in high-value categories. We're very pleased with our progress on this front. Our markets are growing again and the strong footing we have built will enable us to capture more of that upside. The other dominant issue in the quarter, as I mentioned earlier, was the raw milk environment. The abnormally hot summer season adversely impacted raw milk pricing and production in a number of ways. First, the heat impacted grain production, raising price of feed. Second, the heat impacted production of milk. Cows produced less milk and so cheese, which created a shortage of supply, given the demand was growing. Also, second quarter raw milk prices were more than 30% higher than the same period a year ago. As a result of the increased prices of raw milk, our gross margin in the second quarter decreased 340 basis points year-over-year. The cost and availability of milk is an ongoing issue, as you know, but we are working with our suppliers to manage through this temporary shortage. We believe we are in a strong competitive position because of our long-term relationships with milk producers on the one hand and also our mix of higher margin dairy and non-dairy businesses as well. Now, before we move to the highlights of our performance, let me touch on the agreement we announced with Danone to repurchase 18.4% stake in our company. This agreement represents the amicable conclusion of Danone's investments in our business. Once this repurchase closes, we will move forward unencumbered.
Also, I want to emphasize that we have no intention as of today to float this stock on any public markets. This concerns both ordinary shares and ADRs. Several other options are open to up in this regard. We may cancel the shares, thus reducing the number of shares outstanding, which in effect would be equal to paying dividends to our shareholders. Or we may use them as a tool in an appropriate M&A transaction, driving forward to profitability.These options will be explored later as there is no immediate pressure to decide now. Let me now turn to some of our performance highlights. Second quarter Group sales improved 15.3% year-over-year in U.S. dollar terms. On a comps and currency basis, Group sales improved 8.3% year-over-year and 5.2% sequentially. First half revenues are up 17.1% year-over-year. Importantly, this revenue growth was driven by topline improvements in each of our segments. On a U.S. dollar basis, EBITDA improved to $86.2 million in the second quarter and $159.7 million for the first half of 2010, up about 1% for both periods. EBITDA margin for the second quarter was 13.5%, down 190 basis points year-over-year. First half EBITDA margin was 12.7%, down 210 basis points year-over-year period. However, we are confident that we are well positioned for future margin expansion, as demand continues to rebound and raw material environment normalizes. Moving on to our segment performance, the dairy segment reported second quarter sales of $427.1 million, an increase of 13.1% on a year-over-year basis or 6.3% on a constant currency basis. First half dairy sales totaled $861.6 million, up 15.4% year-over-year and 4.9% on a constant currency basis. Revenue growth in dairy was driven by gains on several value-added products such as drinkable yogurts, curds and probiotics. Read the rest of this transcript for free on seekingalpha.com