US/POLAND: CEDC swings to H1 losses

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  • Group plans to cut debt and costs

Higher charges caused Central European Distribution Corp to drop into the red for the first half of 2010, despite a strong rise in sales.


Central European Distribution Corp (CEDC) reported net losses from continuing operations of US$58.5m for the six months to the end of June, compared to profits of $120.4m in the first half of 2009. Operating profits also plunged, to $66.5m from $248m a year earlier, said the firm yesterday (5 August).

The collapse in earnings was due to a one-off gain in the first half of 2009 relating to the drinks distributor's acquisition of Russian Alcohol Group, said CEDC. It also reported higher non-operating charges in the first six months of 2010. 

While earnings suffered, the group reported a strong rise in net sales for the period.

Sales jumped to $325.4m for the six months, against $246.6m a year earlier. However, the firm reported a marked slowdown in the second quarter, when sales slipped to $175.6m from $175.9m in the second quarter of 2009.

Russian vodka sales drove growth during the half-year, while the group's vodka volumes in Poland fell by 12% in the second quarter.

CEDC chief executive and president William Carey said: "Management is extremely focused on improving the volume numbers in Poland and with a major launch of a new mainstream/subpremium vodka brand planned for the fourth quarter of this year and improved execution; we believe we are on track to deliver increased top line growth and a continued improvement in our operating profit margins."

Chief financial officer and vice-president Chris Biedermann added: "We have continued to move forward in our objective of de-levering our balance sheet with continued improvement of our net debt to EBITDA ratio. Going forward, we expect to be further de-levering with the proceeds from the sale of our Polish Wholesale business applied primarily to debt reduction."

Earlier this week, CEDC announced that it had completed the sale of its Polish drinks distribution arm to wholesale distributor Eurocash for PLN400m (US$132.7m).

For the full results announcement, click here.

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