Press releases

27.06.08

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES

Moscow, Russia, June 26, 2008 - Nutritek Group ("Nutritek" or the "Group") (RTS, MICEX: NTRI), Russia’s largest baby food manufacturer, today announced its audited Consolidated Financial Statements for the full year ended March 31, 2008, which have been prepared in accordance with International Financial Reporting Standards ("IFRS").

The Consolidated Financial Statements are prepared in Russian Roubles and translated to US Dollars using the official exchange rates of the Central Bank for the purposes of the current press release. The exchange rates for the Consolidated Balance Sheet were as of the balance sheet dates. The exchange rates for Consolidated Income Statements and Consolidated Statement of Cash Flows were average for the reported years.

 

HIGHLIGHTS

•Consolidated revenues up 4.7% year on year to US$396.9 million

•EBITDA* up 10.7% to US$75.8 million

•Operating profit up 14.7% to US$44.8 million

•Net income of US$ 26.0 million

•Basic earnings per share of US$ 1.66

•Net debt of US$ 33.3 million

•Total consolidated assets up 5.5% to US$ 488.0 million

Commenting on the results, Oleg Ochinsky, Chief Executive Officer of Nutritek Group, said: "I’m glad to announce strong financial performance of Nutritek Group during the full year ended March 31, 2008. The Group sales increased by 4.7%, EBITDA rose by 10.7%, EBITDA margin increased to 19.1%. We have laid a strong foundation for turning to scheduled international expansion of the Group".

(USD thousand)	Apr 2007 - Mar 2008	Apr 2006 - Mar 2007	Year on year Growth
Revenues	396 873	378 909	4,7%
Gross Profit Margin (%)	81 998 20,7%	72 471 19,1%	13,1%
EBITDA Margin (%)	75 833 19,1%	68 482 18,1%	10,7%
Earning before Interest and Taxes (EBIT) Margin (%)	44 804 11,3%	39 300 10,4%	14,0%
Net interest expenses	(19 091)	(10 854)	75,9%
Profit before tax	35 087	29 404	19,3%
Net profit Margin (%)	25 964 6,5%	22 165 5,8%	17,1%
Basic & diluted earnings per share	1,66	1,72	(3,3%)
Net debt	33 300	171 001	(80,5%)
Total assets	488 015	462 785	5,5%

* EBITDA includes constructive dividends received by the Group from the loans extended to New Zealand Dairies Limited 

 

OPERATING REVIEW

Nutritek reported 4.7% year on year growth in consolidated revenues in financial year ended 31 March, 2008.

Gross profit was up 13.1% year on year amounting to US$82.0 million and the Group’s gross profit margin consequently increased from 19.1% to 20.7% year on year.  

Nutritek Group revenue, gross profit and gross profit margin increased, despite dairy business divestment in November 2007, thanks to advanced sales of baby food, growing sales of high added value products, as well as commencement of sales in South East Asia.

Group earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 10.7% year on year making US$75,8 million, whereas EBITDA margin increased from 18.1% to 19.1%.

Depreciation and amortization charges declined by 9.3% year on year from US$29.2 million to US$ 25.5 million being attributed to the Group dairy assets divestment.

Group distribution expenses increased by 8.6% year on year to US$22.6 million due to the of increase in advertising, marketing and baby food transportation expenses. Administrative expenses increased by 18.0% year on year to US$14.6 million caused by increased average monthly cost of the Group’s administrative staff and rental of office premises.

2007 financial year operating profit grew by 14.0% year on year to US$44.8 million with the operating margin increasing to 11.3%.

Other income and expenses increase by more than 10 times amounting to US$10 million as a result of the Group having profit from selling its dairy businesses for US$5.6 million, as well as constructive dividends amounting to US$4.5 million. The Group is a sole creditor   of New Zealand Dairies Limited (NZDL) and exercises control over NZDL through debt financing of operating and investingt activities. The Group received constructive dividends as interest over the loans extended, thus letting the Group consolidate NZDL EBITDA.

Net interest expenses increased by 75.9% year on year, as a result of US$4.6 profit decline attributable to the devaluation of the US dollar against the Rouble, as well as US$1.4 increase in the Group expenses associated with debt servicing. 

The Group’s effective tax rate was 26% with US$9.1 million resulting tax expense.

Net profit was up 17.1% year on year amounting to US$26.2 million and the Group’s net margin increased from 5.8% to 6.5% year on year. Despite the divestment of the dairy business in 2007 and the increase of net interest expenses, the Group’s net profit increase thanks to increased revenues and operating margin.

In 2007 financial year ended on March 31, 2008, the Group earnings per share amounted to US$1.66, reducing by 3.3% compared to USD$ 1.72 for the prior reporting period.

Baby & special nutrition

(USD thousands)	Apr 2007 - Mar 2008	Apr 2006 - Mar 2007
Revenues Cost of sales	204 631   (139 683)	148 811   (103 766)
including depreciation and amortisation	(12 723)	(10 746)
Gross profit	64 948	45 045
Babyfood sales, metric tons	49 804	43 096

The share of baby and special nutrition revenues in total Group’s revenues increased from 39% to 51.6% due to higher growth rate of baby and special nutrition sales, as well as divestment of dairy business in 2007. In Q4 2007 financial year ended on March 31, 2008, the share of dairy business in the Group’s revenue was less than 10% of the total.

Revenues from the baby food and special nutrition segment grew by 37.5% year on year to US$204.6 million in the 2007 financial year ended on March 31, 2008, and was mostly driven by incremental sales of breast milk substitutes, as well as purees and juices.

Sales increase was supported by 19% growth of overage prices associated with increased sales of the products with higher added value together with the contribution from shifting the brand portfolio towards the premium segment.

Gross profits in baby and special nutrition were up 44.2% year on year amounting to US$65.0 million, whereas the gross margin increased from 30.3% to 31.7%.

 

Dairy

(USD thousands)	Apr 2007 - Mar 2008	Apr 2006 - Mar 2007
Revenues	192 242	230 099
Cost of sales	(175 192)	(202 672)
including depreciation and amortisation	(13 757)	(18 436)
Gross profit	17 050	27 427
Dairy sales, metric tons	154 231	190 739

The share of dairy revenues in total Group’s revenues decreased from 60.7% to 48.4% in the reporting period.

Revenues from the dairy segment reduced by 16.5% year on year to US$192.2 million and were driven by the divestment of dairy assets in November 2007.

Gross profits declined by 37.8% year on year amounting to US$17.0 million and the gross margin decreased from 11.9% to 8.9%.  

 

FINANCIAL REVIEW

Cash Flow

Nutritek reported a negative cash flow from operating activities of US$43.8 million for the period, compared to a negative cash flow from operating activities of US$48.0 million for the previous year. The reduced outflow primarily reflected decreasing receivables by US$42.0 million to US$19.0 million. The decrease of receivables was mostly compensated with the increase of inventory by US$24.1 million and payables by US$11 million. Moreover, income tax went down to US$6.4.  

The Group cash flow from investments became positive and amounted to US$44.9 being this mainly attributed to the divestment of the dairy business of the Group. The increase of cash flow from dairy business divestment was offset with US$99 million outflow redirected to the construction of the plant in New Zealand.

The Group cash flow from financial operations during the reported period amounted to US$64.6 million compared to US$52.8 million in related period of the previous year, reflecting US$112.8 million of proceeds from selling shares under public offering. Increased cash flow from financial activities through selling shares was offset by US$42.1 settlement of the Group credits and loans.

Balance Sheet

The Group’s consolidated total assets increased by 5.5% year on year to US$488.0 million. The growth was primarily caused by increased long term investment in the development of the Group business in Asia, including the construction of the plant in New Zealand, and amounted to US$101.8 million, accretion of cash and its equivalent by US$72.0 million, reduction of fixed assets by US$72.0 million, receivables and inventory – by US$72.0 million following the assets divestiture.

The Group’s consolidated total liabilities increased during the reported year due to the increase in added capital, borrowings, credits and reduced receivables. Additional capital increase by US$116.0 million is mainly attributed to higher price of the shares compared to their book value during public placement.  The Group’s total debt at the end of the period declined by US$65.8 million to US$122.0 million, compared to US$187.8 million as of March 31, 2007. The Group’s payables decreased by US$21,4 due to the dairy assets divestment.

SIGNIFICANT POST BALANCE SHEET EVENTS

In April 2008 the Group issued credit notes denominated in US dollars in the amount of US$50 million. The notes yield to maturity made 9,25% with repayment on April 17, 2009.

In June 2008 the Group obtained the consent of New Zealand authorities to increase the Group’s shareholding in the milk processing plant up to 100%. In the same month the Group increased its shareholding in NZDL from 5,6% to 51,5% of the total.