Daily analyst comments
Milk prices show downward trend
16.02.09 13:53
Improvements in procurement conditions in the raw and dehydrated milk segments could lend support to Wimm-Bill-Dann’s profit margins in 2009.
Beneficial price trends for domestic producers in the dehydrated milk market, caused by the fall in demand after the implementation of new regulations, could have aftereffects for the raw milk market. The Russian Dairy Union foresees a 30% drop in raw milk prices in upcoming months.
In our view, the decline in raw milk prices could benefit Wimm-Bill-Dann, a major Russian dairy producer, enabling it to boost profit margins. Expenses on raw milk purchases constitute more than 50% of the dairy producer’s total production costs. In view of its fairly aggressive pricing policy, we do not expect the company to dramatically reduce its selling prices amid price hikes on imported dairy products.
We estimate the fair price of Wimm-Bill-Dann at USD 34.6 per share as of year-end 2009.