Wimm-Bill-Dann expansion hits profits

Related tags Profit Pasteurization

Expanding away from its traditional Moscow heartland has helped
increase sales and volumes at dairy product and fruit juice maker
Wimm-Bill-Dann - but the cost of this programme took its toll on
first half profits.

Russia's largest dairy producer, Wimm-Bill-Dann, has registered net profits of $22.4 million (€22.8m) for the first half of fiscal 2002, a 3 per cent decline compared to the previous year caused by the high cost of its expansion programme.

The company, which is also a major fruit juice processor, said that its second quarter profits had nonetheless risen from $9.6 million to $11.81 million.

The expansion programme seemed to be working in terms of driving revenues, however. Sales were up 21.5 per cent from $331.55 million to $402.87 million as the company's efforts to improve scale and profitability began to pay off. Sales volumes were up by an impressive 18.9 per cent to 688,000 tons.

Earnings before interest, taxes, depreciation and amortisation (EBITDA) were up 1.5 per cent from $46.03 million to $46.7 million year-on-year.

"The first six months of 2002 saw a continuing increase in sales momentum and underlying gross profit, which reflects our determination to grow our business steadily and profitably. We are on track with our national expansion plans. As expected, this has resulted in a temporary increase in costs compared to last year,"​ commented Sergei Plastinin, WBD's CEO.

"We currently own 19 production facilities spread across diverse geographical regions, and I believe we already have an unmatched presence in the market place. We remain committed to becoming a truly nationwide dairy and juice manufacturer of choice with a vision towards investing for the future."

WBD has traditionally been based in the Moscow region, but has recently begun extending into other parts of the country as a means of increasing economies of scale and lifting sales and profits.

Plastinin said that dairy sales were up 15.2 per cent to $274.1 million in the first half 2002, primarily due to increases in dairy products sales volumes. Juice sales, meanwhile, were ahead 37.5 per cent to $128.7 million in the first half 2002, again due to higher volumes.

But these volume increases, which came about as a result of the expansion programme, also came at a cost - higher transportation costs entailed by the company's growth, as well as increased personnel costs and a rise in advertising and marketing expenditure.

WBD is quoted on the New York Stock Exchange and compiles its accounts in accordance with US regulations.

Related topics Manufacturers