Wimm-Bill-Dann profits despite dairy cost crunch

By Neil Merrett

- Last updated on GMT

Related tags: Cent, Milk, Chief executive officer

Russian group Wimm-Bill-Dann posted a 40.4 per cent increase in
sales to $1.75bn (€1.2bn) during the nine months of its current
financial year, on the back of a strong performance from both its
dairy and infant nutrition brands.

Pre-tax operating profit was up by 30.9 per cent for the nine-month period ending 30 September, as the group offset increasing commodity pressures to lift operating margins by 0.8 percentage points to 13.5 per cent. Group chief executive officer Tony Maher said that despite a sharp rise in milk prices in particular over the period, the company had managed to increase cost efficiency within its overall operations to defy the impact on its dairy operations. "We are very pleased with the strong results we achieved for the first nine months of 2007 especially in the most challenging raw material cost environment,"​ he said. The company's dairy operations continued to dominate group earnings during the period, with sales increasing by 43.1 per cent to $1.32bn (€915m). This growth was attributed mainly to an expansion program during late 2006, which added about $116.4m (€80m) to sales, according to the group. A 17.3 per cent year-on-year increase in raw milk costs in ruble terms during the nine-months did negatively impact the dairy segment though. However, gross margins for the segment fell only slightly during the period by 0.7 percentage points to 30.1 per cent over the same period last year, according to Wimm-Bill-Dann. While the company is becoming an increasingly significant player within Eastern European dairy production, the group also posted strong growth for both its beverage and baby food brands as well. Sales of the company's beverages, which include the Wonder Berry andRio Grandejuice brands,​ rose by 28.6 per cent to $310.6m (€215) on the back of increased sales volumes and a strategy of price hikes. While the group said that raw materials costs for the segment put further financial pressure on the operations, gross margins were up by six percentage points to 40.4 per cent for the nine-months. Wimm-Bill-Dann's baby food segment posted the largest growth during the period with sales rising by 44 per cent to $119m (€82m), driven by improvements within volume growth, the company said. Gross margins were also up by 3.1 percentage points to 44.4 per cent for the period, due to the effects of the company's first production facility for the segment coming on line in Kursk, Russia.

Related topics: Manufacturers

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