• Full-year net losses of US$1.29bn, versus losses of $104m in 2010
  • Net sales rise by  23% to $877.6m
  • Operating losses hit $981m, versus $23.6m a year ago
  • Russian Standard deal one of several options under consideration


Worsening full-year losses have convinced Central European Distribution Corp that it cannot pay short-term debt from its current resources, but it is still mulling strategic options.

Net losses for the 12 months to the end of December sank to $1.29bn, versus losses of $104m in 2010, Central European Distribution Corp (CEDC) said today (29 February). The Eastern Europe-focused, US-based drinks distributor said that it was damaged by a $1bn impairment charge on goodwill of brands during the year.

The losses will heighten existing concerns about CEDC's ability to continue in business in its present form. In its full-year results filing with the US Securities & Exchange Commission, the group warned that its auditors will be forced to note "certain matters [that] raise a substantial doubt about the company's ability to continue as a going concern". 

This is mostly related to the repayment of debt due in March 2013, which, CEDC conceded today, the firm is unable to meet from its current resources.

As a result, the group has been reviewing its strategic options for the past few months. "This review has taken on added importance given the challenging market conditions and a difficult operating environment," said CEDC's CEO, William Carey, today. 

Among the options is a proposal from Russian Standard, which seeks to increase its stake in CEDC from 9.9% to close to 30%, in exchange for offering financial assistance and several unidentified assets. Carey said that today CEDC is keeping its options open.

CEDC said: "The company and its advisors are working to develop various alternatives to address the 2013 obligation, including a strategic alliance with several potential investors, including Mr Roustam Tariko and Russian Standard Corporation, other strategic investments, sale of certain assets, an exchange of the convertible notes and issuing equity."

In 2011, operating losses followed net losses deeper into the red, coming in at $981m, versus $23.6m in 2010. A silver lining for CEDC came at the top-line, where it reported net sales up by 23% to $877.6m, helped by acquisitions.

Despite the higher sales, Carey said: "In Russia, as stated above, we continued to experience a difficult trading environment in the fourth quarter with high shelf prices reducing consumption, substantially higher spirit pricing negatively impacting our cost of goods sold, route to market challenges following the overhaul of the 2011 re-licensing issues and management execution challenges that we are addressing." 

However, he said that export business remains "robust" and that the group has achieved its sales targets in Poland. Furthermore, the firm said that Grant Winterton will take over as general manager of its Russian business from 1 April. His appointment will be followed by other senior management changes in the country.

To view the company's announcement, click here.