RUSSIA: Weak rouble weighs on Wimm-Bill-Dann H1, warns of tough H2
Russian food and beverage group Wimm-Bill-Dann has posted a jump in second-quarter earnings, although a weak rouble weighed on half-year profits.
The company, which operates in the milk and juice sectors in Russia, today (4 September) posted a 42.6% rise in second-quarter net income to US$52.3m.
First-half net income, however, slid by 17.4% to $64.9m, due to the weakness of the Russian rouble. On a constant-currency basis, first-half net income was up 12.3%.
The fall in revenues slowed during the second quarter when sales dropped 27% to $554.6m. The decrease in sales, the company said, was thanks to the depreciation of the rouble. Half-year revenues fell 28.2% to $1.07bn.
However, Wimm-Bill-Dann's saw some improvement in profits at an operating level. Operating income dipped 1.9% during the second quarter to $61.4m. Over the first half, operating income was down 11.3% to $111.8m.
In a conference call this afternoon, Wimm-Bill-Dann's CEO, Tony Maher, warned that conditions in the Russian economy may worsen in the latter half of 2009. Russia's economy had yet to show the signs of recovery seen in some EU countries, Maher said, pointing to falling retail sales in July as evidence that the Russian economy remained weak and could worsen before the end of the year.
"There are some signs that the retail side is not recovering," he said. "We're coming out of the summer into the dark of the Russian winter and there a lot of people who say that the bottom has not been reached in Russia. So far we have shown that we are managing the current environment better than expected but it's difficult to be predictive."
The company had also moved to combat investment in private label by the likes of Russia's largest retailer, X5 Retail Group, in the half-year, through the launch of a cut-price juice brand called 100% Gold Classic. The juice retails at around RUB30 (US$0.94) per serving.
"In juice, we felt that the trend [for private label] was very much there and we came out with 100% Gold Classic - which is less than 30 roubles - which doesn't leave much room for private label," Maher said. "That was our reaction."
Maher also noted that there was a promotional battle on juice brands in Russia this year. "Store by store," he said, "we're on promotion on juice, Pepsi is on promotion. If you go into any major retail store, there is always juice on promotion right now. We're gaining share in juice, which means others are losing share."
For Wimm-Bill-Dann's official half-year report, click here.
It's been a good week for global beverage and snack maker PepsiCo as it booked a 16% increase in full-year profits on Thursday (11 February)....
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