Daily analyst comments
Wimm-Bill-Dann: widening of margins in 1Q 2009
19.06.09 10:42
We are positive on the 1Q 2009 financials from Wimm-Bill-Dann. Optimization of the capital structure and a fairly robust growth in profit margins, despite a drop in revenue in dollar terms, could lend support to quotes for WBD shares in the mid term.
Wimm-Bill-Dann has reported financials for 1Q 2009, which show a drop of over 29% in sales revenue in dollar terms, put down to the ruble devaluation. If measured in ruble terms, revenue was unchanged from its level in 1Q 2008. The drop in dairy product sales, put at over 5%, was offset by strong results in the beverages and baby food segments, which posted revenue growth of over 14% and 27%, respectively.
Table. WBD: basic financial results for 1Q 2009, USD mn
Source: company data, Finam estimates
The results have marginally outpaced market expectations. Despite fairly complex conditions in the retail food sector, WBD has managed to markedly widen its profit margins, helped by favorable trends in the agricultural sector. The gross margin has widened from 30% to 32.5% and the operating margin has increased from 8.7% to 9.8%. A narrowing in the net margin was caused by Forex losses, attributable to the ruble devaluation. The adjusted net income (i.e., net of Forex losses) would have shown growth of over 25%. On the upside, we point out the optimization of the company’s capital structure. In the reporting period, the company saw it net debt shrink to USD 304 million, with a net debt/EBITDA 2009 ratio at around 1.
We retain a positive view on the company’s long-term prospects. Our target price for WBD is USD 34.60 per share as of year-end 2009. In the near future, we intend to review our valuation of the company as a result of its 1Q financial results.