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US: Russian Alcohol Group boosts CEDC in Q3

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Central European Distribution Corporation has posted a huge leap in profits for its third quarter.

The US-based wine and spirits company, which operates mainly in Central and Eastern Europe, said earlier this week that net profits for the three months to the end of September leapt to US$48.4m, compared to $2.3m in the corresponding quarter a year ago. The results include the consolidation beginning in the second quarter of this year of the Russian Alcohol Group, which was previously accounted for as an equity investment.

On a comparable basis, however, the company saw net profits fall by 33% to $27.2m, driven primarily by the 35% average devaluation of CEDC's primary functional currencies.

Net sales for the quarter were down to $390.1m from $452.4m, while operating profits fell to $34.8m from $52.8m. The slide in sales was blamed in part on the currency devaluations and the effects of consolidation of the Russian Alcohol Group.

For the first nine months of 2009, net profits are running at $176.2m versus $69.4m, with sales at $970.1m compared to $1.19bn. Operating profits are performing well, totalling $302.3m against $121.2m.

"The company is continuing to focus its core strategy on higher-margin owned and imported lines," said company president and CEO William Carey. "We believe that as the consumer demand starts to rebound the company should be well-positioned with its overall strategy and superior product line to benefit from this top line expansion of its higher margin business."

Carey also noted that CEDC has launched two lower mainstream vodkas in Russia in the last few weeks. "We believe that the middle class will continue to evolve in Russia over the next three to five years which should drive the growth of the mainstream and sub-premium sectors in Russia where we currently are market leaders," he said.

The company reconfirmed its full year 2009 net sales guidance of between $1.58bn and $1.70bn and its full year comparable fully-diluted earnings per share guidance of $2.35 to $2.50.

Looking to 2010, CEDC said it expects full-year net sales guidance of between $1.80bn and $2.00bn and comparable fully-diluted earnings per share guidance of $3.00 to $3.15.


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