wimm-bill-dann foods ojsc [nyse: wbd] · 5 1h 2006 operational highlights • profitable growth...
TRANSCRIPT
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www.wbd.com
Wimm-Bill-Dann Foods OJSC[NYSE: WBD]
Investor Presentation1H 2006
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Forward Looking Statements
This presentation contains forward-looking statements that reflect Wimm-Bill-Dann’s current views and estimates, which
are based on many factors and assumptions.
Changes in such factors or assumptions could produce significantly different results.
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Who is Wimm-Bill-Dann?
Headquarters: Moscow
Founded: 1992
Manufacturing: 31 production sites in Russia and the Commonwealth of Independent States (CIS)
Products: A full range of diversified branded dairy products, over 150 types of juice, nectars, water and fast growing baby food
Listing: WBD: NYSE - Level 3 ADR
Market Cap: US $2.0 Billion
Employees: 18,500
Market Position: Russian dairy market leader
Revenue Structure: Dairy ~75%; Beverages ~20%; Baby Food ~5%
Corporate Governance: WBD assigned highest corporate governance score in Russia by Standard & Poor's Governance Services
Russia’s Largest Food Company with Growing CIS Business
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MoscowN.Novgorod
KazanUfa
Volgograd
Samara
Ekaterinburg Omsk
Tuimazy
Timashevsk
Krasnodar
Rostov-na-Donu
Voronezh
BelgorodTula
St.Peterburg
Ramenskoe
Kiev
Sumi
Kharkov
Bishkek
Almaty
Tashkent
Obninsk
Kursk
Essentuki
Pervouralsk
Growing National & CIS Platform
Dairy production sitesBeverages production sites
Large distribution centers
Baby Food production sitesFarms
31 Production facilities in Russia & CIS
Surgut
Novosibirsk
Rubtsovsk
Krasnoyarsk
Irkutsk
Vladivostok
Khabarovsk
Dairy production sites with beverages lines
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1H 2006 Operational Highlights
• Profitable growth continues in 1H 2006
• New CEO Tony Maher appointed
• Beverage segment turnaround plan in place
• Optimization of the corporate structure
• Baby food segment continues rapid growth
• Dividend payments approved for 2002-2004, 1Q’06, future policy determined
• New regional dairy plants – Pervouralsk & Surgut (3Q’06) acquired
• New Head, new Head of Marketing, and new Commercial Director appointed in Beverages segment (3Q’06)
• New Group Head of Marketing and Innovation appointed
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1H 2006 Financial Highlights
1H 2006 1H 2005 Change, %
US$mln US$ mln
Sales 813.6 681.7 19.4%Dairy 595.0 479.5 24.1%Beverages 163.7 159.5 2.6%Baby Food 55.0 42.6 28.9%
Gross Profit 253.8 187.8 35.2%Selling and distribution expenses 112.0 98.3 13.9%General and administrative expenses 62.9 53.5 17.6%Operating income 75.1 30.8 143.5%Net income 46.7 8.3 465.2%Adjusted EBITDA* 104.9 56.6 85.3%CAPEX including acquisitions 50.4 38.9 30.1%
Profitable growth across all segments
* Non-GAAP indicator: for reconciliation of Adjusted EBITDA to US GAAP Net Income see www.wbd.com/f_reports/
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New Team – New Horizons
Tony Maher – CEO: 30-year veteran of Coca-Cola system, former Regional Director for CIS & a number of WE markets for CCHBC, served as COB of Multon. Appointed April 2006.
Visited all WBD facilities, launched wide-range review of beverages business & cost structures in all businesses.
Working to ensure sustainable market leadership and profitable growth
Silviu Popovici – Head of Beverages: veteran of global companies BMS & Coca-Cola in EE, Russia & Ukraine. Most recently head of CCHBC in Ukraine, fastest growing Coca-Cola market in the world. Appointed August 2006.
Grant Winterton – Group Head of Marketing & Innovation: extensive experience in marketing and sales with WellaHaircare, Australian National Dairies, Campbell Soup Co and Coca-Cola in Australia, Russia, Ukraine, Belarus and China.
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Dairy – Market Overview
WBD34%
Unimilk7%
Ochakovsky5%
Danone14%
Ehrmann2%
Campina2%
Others36%
WBD remains clear market leader with room to grow
0 20 40 60 80 100 120
Spain
Germany
France
GB
Italy
Poland
Russia
Dairy consumption, kg/person Structure of Russian Dairy Market (2005)
Source: Datamonitor, Reuters Business Insight, GKS Source: ACNielsen Retail Audit; value terms
• Russian dairy consumption trails CEE & WE peers
• Market remains fragmented with many small producers
• Sustainable growth outlook in higher margin yogurts & desserts
• Continued growth in traditional segment in the regions
• WBD maintains market share in 2005 (34.0% vs 33.8% in 2004)
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4,04,55,05,56,06,57,07,58,0
Jan Feb Mar Apr May Jun Jul Aug Sep Octv Nov Dec
RUR
2003 2004 2005
-5
0
5
10
15
20
25
2000 2001 2002 2003 2004 2005
Milk producer ruble prices change y-o-y WBD Raw Milk Purchase Price (rubles/ liter)
Source: GKS Source: WBD
Dairy – Raw Milk Challenge
WBD is working to ensure predictable supply, smoothing out seasonality
• Move toward long-term supply contracts & direct contracts with farmers
• Milk Rivers program leases milking & refrigeration equipment to farms
• Working with Russian government to develop plan for sector and increase investments
• Agro SBU established to gauge vertical integration
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Dairy – Successful Regional Strategy
Central48%
Urals8%
Volga7%
South11%
Central Asia2%
North West8%
Ukraine7%
Siberia & Far East
9%
Regional, CIS markets provide long-term basis for growth
Dairy Segment – Regional Sales (2005) Dairy Segment – Regional Sales (1H 2006)
Source: WBD Source: WBD
• All regions profitable since 2005
• Fastest growth in Urals, Ukraine & Siberia
• Diversification – Central region now less than half of dairy sales
• Product portfolio optimized – from 340 to 221 SKUs in Central region
• Market leadership achieved in Ukraine, South, Urals & Volga in 1H 2006
Central45%
Siberia & Far East10%
Urals9%
South11%
Central Asia2%
Ukraine8%
North West8%
Volga7%
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Dairy – New High Margin Products
Continued launch of innovative products to ensure leadership
• La Frut smoothie launched in 2005
• Dairy drink based on Chinese recipe
• Chudo-lunch with spoon
• New ready-to-eat dairy porridges
Ads – new products with enduring values
= New products for the Russian market using trusted brands
New products under existing umbrella brands
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Dairy – Cheese Brands Strengthened
Increased capacity and strong brand in cheese segment
• New line at Rubtsovsk dairy plant doubles Lamber production
• Lamber challenging imports on price & quality basis
• New brand & packaging for Happy Milkman soft cheeses
• Cheese accounted for 4% of dairy in 1H 2006
Lamber hard cheese #1 domestic mid-market brand
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0
100
200
300
400
500
600
2002200320042005e2006e2007e2008e2009e
mln USD
Baby Food – A ‘Young’ Market
0 500 1000 1500 2000 2500 3000 3500
France
UK
Germany
Portugal
Poland
Hungary
Russia
Baby Food – Estimated Mkt Value 2002-2009 Baby Food– Annual Per Capita Consumption (kg)
Source: Euromonitor Source: Euromonitor
More than 11% CAGR projected for Russian mkt up to 2009
• Russian baby food consumption still trails CEE & WEE peers
• Companies establishing leadership by sub-segments (WBD in dairy)
• New niches & regional markets entry expected to continue in 2006-2007
• Regional market potential largely untapped
• CIS markets also have strong long-term potential (i.e. Ukraine)
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Baby Food – New Segment Delivers
Strong margins & leadership in dairy baby food sub-segment
• Sales up 29% & margins up 42% y-on-y in 1H 2006
• Portfolio expanding into juice, vegetable & meat products
• 56% market share in dairy baby foods
• Kursk baby food plant re-launch anticipated in 4Q’06
• Agusha brand platform for new baby food product launches
Agusha – Symbol of Quality & Trust for Parents
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0 50 100 150 200
Italy
France
Belgium
Germany
Greece
Portugal
Hungary
Poland
UK
Russia
Beverages – Market Overview
0%
10%
20%
30%
40%
50%
60%
70%
2001 2002 2003 2004 2005e
Juice Market Y-o-Y growth, volume %
Source: WBD
Challenging juice environment, opportunities in water
• WBD No.3 in juice market in 2005 (24%)
• 4 domestic players control 90% of the market
• ‘Commodification’ of juice market in Moscow, St Petersburg
• Regional growth driving market – dominated by lower-middle segment
• Bottled water market fragmented & few true mineral waters
Bottled Water per capita (liters, 2005)
Source: ACNielsen Retail Audit; value terms
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Beverages – WBD Restructuring
J737%
100% Gold14%
Lovely Garden
42%
Wonder Berry4%
Water2%
Others1%
Strong regional presence, re-invigorated brands key
• Major promotion campaign to re-invigorate brands • New flavors, PET packaging for Lovely Garden – regional leader• Essentuki water production upped, Novoessentukskaya brand added
Beverages – Sales by Brand (2005) Beverages – Sales by Brand (1H 2006)
Source: WBDSource: WBD
J730%
100% Gold12%
Lovely Garden
49%
Others1%Water
4%Wonder Berry4%
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Beverages – Turnaround Plan
Developing strategy for long-term restructuring of business
• No.1 focus for CEO
• No options off the table
• New team being put in place – new Head & Head of Marketing
• Continued focus on regional markets & production
• R&D team exploring new products
• Cost structure under tight scrutiny
• Historic strength & trust in core brands platform for next stage
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WBD – Challenges Ahead
Growing strength of retailers & cost growth remain issues
• Growth of hypermarkets & supermarkets putting pressure on producers
• Retail chains reduce intermediaries but have strong pricing power
• Side effects of economic growth: higher wages, higher tariffs
• New TV advertising rules reduce airtime, driving up rates
• Continued market entry by multinational food co’s
• Consolidation among Russian players increases competition
Russian Retail Landscape – end 2005 Russian Retail Landscape – end 2010 (forecast)
Source: GKS, Renaissance Capital Source: Renaissance Capital
Traditional Grocery Stores41%
Supermarkets10%Hypermarkets
3%
Discounters10%
Kiosks & Pavilions15%
Markets21%
Traditional Grocery Stores25%
Supermarkets15%
Hypermarkets12%
Discounters21%
Kiosks & Pavilions12%
Markets15%
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$1 000
$2 000
$3 000
$4 000
$5 000
$6 000
$7 000
$8 000
$9 000
$10 000
$11 000
$12 000
2001
2002
2003
2004
2005
2006
e20
07e
2008
e20
09e
2010
e
GDP per capita, US$ PPP GDP/capita, US$
WBD – Russian Opportunities
0
50100
150200
250
300350
400
Centr al NW South Volga Ur als Siber ia FE
2000 2001 2002 2003 2004
Avg. Monthly Nominal Wages by Region (US$)
Source: GKS
Rising incomes across Russia driving demand for WBD products
• Current macro outlook for Russia remains strong
• Russian incomes rising across all regions
• WBD loyalty in regions = consumers switch to higher margin products
• WBD’s first-mover advantage persists as markets grow
• Stable operating environment aids long-term planning
GDP per capita Trends to 2010 (US$)
Source: GKS, RenCap
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500
1000
1500
2000
2500
3000
3500
2000 2001 2002 2003 2004 2005
Uzbekistan Kyrgyzstan Ukraine Kazakhstan
WBD – CIS Opportunities
-2.0
.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
2000 2001 2002 2003 2004 2005
Kyrgyzstan Ukraine Uzbekistan Kazakhstan
Selected CIS Markets GDP Change Y-o-Y
Source: Business Monitor Int’l
• CIS economies are growing & aiming to diversify
• WBD has production presence in Ukraine, Kyrgyzstan & Uzbekistan
• WBD has strengthening sales presence in Kazakhstan
• Considerable unmet demand for modern dairy & beverage products
• CIS accounts for 9% of all Dairy Segment sales (2005)
Selected CIS Markets GDP per capita (US$)
Source: Business Monitor Int’l
WBD Can Build on Production & Trade Presence in CIS
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WBD – ADR Performance
Closing price of ADR on NYSE (US$)
ADR price on 3 January 2006: $25.33
ADR price on 15 September 2006: $46.10
10
15
20
25
30
35
40
45
50
Jan-
06
Jan-
06
Jan-
06
Feb-
06
Feb-
06
Mar
-06
Mar
-06
Apr
-06
Apr
-06
May
-06
May
-06
Jun-
06
Jun-
06
Jul-0
6
Jul-0
6
Aug
-06
Aug
-06
Aug
-06
Sep
-06
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WBD – Shareholder Structure
As of 1H 2006
ADRs32,7%Founders of the
company58,4%
Other holders of ordinary shares
8,9%
Danone9,9%
Other ADR holders22,8%
Based on Company’s List of affiliates from 31.12.2005 with later amendments(http://www.wbd.ru/content/files/aff_list_300605.pdf)
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6m 2006 Financials
Sales growth by segment
160
43
682595
164
55
814
480
0100200300400500600700800900
Dairy Juice Baby food Group
mln USD
1H 2005 1H 2006
24%
3% 29%
19%
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83 80
97
141
57
105
0
20
40
60
80
100
120
140
160
2002 2003 2004 2005 1H 2005 1H 2006
EBITDA, mln USD
6m 2006 Financials
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6m 2006 Financials
Operating Cash flow, mln USD
30
72
116
52
84
-7-20
0
20
40
60
80
100
120
140
2002 2003 2004 2005 1H 2005 1H 2006
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Debt Levels & Ratings
S&P Moody's Corporate credit rating
Global Scale B+ B1 National Scale ruA+
Debt rating
USD Eurobond B+ B3 RUR Domestic ruA+
Corporate governance 7+ (of 10)
Credit Ratings at Top of National ScaleTotal Debt to EBITDA Ratio
Reduced Debt Ratios
3,5
3,02,7
1,5
2003 2004 2005 1H 2006
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IR Contacts
Also see our re-launched IR site: www.wbd.com
Marina Kagan, Head of Corporate Affairs
Phone: +7 495 105 5805, ext. 1154Fax: +7 495 105 5800e-mail: [email protected]
Natalya Belyavskaya, Senior Investor Relations Manager
Phone: +7 495 105 5805, ext. 1611Fax: +7 495 105 5800e-mail: [email protected]
Wimm-Bill-Dann Foods OJSC13, Solyanka st., Bld. 2, Moscow, 109028, Russiahttp://www.wbd.com