April 10, 2012, Moscow, Russia

Transcription

1 April 10, 2012, Moscow, Russia PRESS RELEASE Synergy announces its financial results for the second half of 2011 and full year 2011: consolidated revenue increased by 22% and 19% respectively, and gross profit by 24% and 21% Synergy OJSC (Synergy, Synergy Group of companies, Group or Company) (RTS/MICEX: SYNG), one of the leading spirits producers in Russia, today announces consolidated financial results for the full year 2011, prepared in accordance with IFRS. Key financial figures for the 2nd half of 2011, compared with indicators of the 2nd half of 2010, full year 2011 compared with the full year 2010, and also major corporate events: 2nd half of full Volume growth, decaliters +17.5% +19% Increase in Revenue +22% +19% Growth of the alcohol segment revenue +25% +20% Increase in Gross Profit +24% +21% Increase in Gross Profit of the alcohol segment +28% +23% Gross Margin +0.4% +0.5% Alcohol segment Gross Margin +1% +1% EBITDA 1 +7% -3% Net Profit -12% +6% The company increased its market share from 10 to 15% The Company has leveraged its distribution portfolio with the brands of William Grant & Sons, a world leader in whiskey producer All production plants and distribution companies of Synergy have successfully been re-licensed. Launch of new ultra-premium Beluga Allure Vodka and super-premium Beluga Transatlantic Racing Vodka According to the Drinks International Magazine Belenkaya Vodka was included in the Top-10 list of the world's largest brands of vodka The company restyled Myagkov and Gosudarev Zakaz brands. Commenting on the financial results, Chairman of the Board of Synergy, Alexander Mechetin, said, "The year 2011 was one of the most successful years in the company s history. Synergy has implemented its strategic development plans, achieving leadership in the Russian spirits market. Significant growth of the Company was achieved by the developed infrastructure, experienced management and employees, as well as due to favorable market opportunities on the back of changing competitive environment. As a result, by the end of 2011, the Company has significantly increased its market share from 10 to 15%. The Company couldn t achieve such results without dedicated investments into marketing and distribution. 1 Unaudited. See reconciliation of EBITDA to net income on page 12 of the Appendix 1

2 Also, I would like to point out the fact that all production and distribution divisions of Synergy Group have successfully been relicensed. In addition the Company has completed in general the formation of one of the largest distribution platforms in the country. The achieved market positions allowed the management to focus on tasks bounded with our revised strategy, primarily aimed at improving the operational efficiency of the company. This strategy, in our opinion is most suitably adapted to the new realities of the Russian spirits market, stipulated by significant increase in government regulations, including the excise policy, and, by the final stage of consolidation of the industry and its legalization. These achievements are fully reflected in the financial reports presented today. Thus, Revenue and Gross Profit rose by 19% and 21% for With that, in the second half of the year, these figures have increased by 22% and 24% respectively. Similar numbers of alcohol segment reporting of the Company show even more impressive growth: Revenue and Gross Profit of this segment grew by 20% and 23% comparing to 2010, and in the second half of the year - by 25% and 28% respectively, with Volume growing by 19% and 17.5%. Rapid growth of these numbers is the result of premiumization of sales mix, as well as increasing prices in the second half of Also, it is necessary to note a significant increase in the sales of Belenkaya vodka in As a result, the brand was included in the Top-10 list of the world's largest brands of vodka (7th position) by the Drinks International Magazine. During the reporting period the Company also increased the presence of Beluga superpremium brand in the travel retail system and improved its representation in the HoReCa channel in the U.S.A. On the whole, exports of Beluga rose by 17% in volume and 31% in value. In addition, in the second half of the year, the Company launched new SKUs of the Beluga brand - Ultra-premium Beluga Allure Vodka and Super-premium Beluga Transatlantic Racing Vodka. Thus, Synergy is exploiting the success achieved in the most profitable vodka segments. In 2011, we restyled two other strategic brands: sub-premium vodka Myagkov and middle price Gosudarev Zakaz vodka. As a result of the restyling, these brands have increased their competitiveness, which had a positive impact on their sales. In 2011, an important event for the company became the five-year exclusive distribution agreement signed with the William Grant & Sons Company, one of the leading whiskey producers in the world. Thanks to this agreement, Synergy has strengthened its distribution portfolio of world famous brands of whiskey and got exposure to one of the largest and fastest-growing spirits categories in Russia." FINANCIAL OVERVIEW Financial performance and operations The table below illustrates the consolidated results for the second half of 2011, compared to the same period of 2010, as well as for full year

3 (In million rubles, except for those indicators which are otherwise stated) 2H2011 2H2010 increase increase Revenue 14,994 12, % 25,213 21, % Cost of sales (9,793) (8,049) +21.7% (16,275) (13,748) +18.3% Gross Profit 5,200 4, % 8,937 7, % Gross Profit Margin 34.7% 34.3% % 34.9% - General and administrative expenses (1,044) (798) +31% (1,880) (1,367) +29% Selling and distribution expenses (2,139) (1,708) +25% (3,963) (3,061) +29% EBITDA 1,899 1,768 +7% 3,243 3,340-3% EBITDA Margin 12.7% 14.4% % 15.8% - Operating Income 1,692 1, % 2,843 2,915-2% Operating Profit Margin 11.3% 12.6% % 13.8% - Net Financial Cost (665) (394) +69% (665) (759) -12% Net Income % 1,661 1,572 +6% Net Profit Margin 5% 6% - 7% 7% - Consolidated Revenue for the 2nd half of 2011 amounted to RUR 14,994 million, which is 22% more than in the same period of 2010 (RUR 12,249 million). The growth of Revenue for the full year 2011 amounted to 19% - from RUR 21,127 million to RUR 25,213 million. Consolidated Revenue growth were driven by increase in sales volume, the expansion of the distribution platform of the company, increase in the selling prices in the second half of the year, the beginning of distribution of William Grant & Sons products and the positive dynamics of the food segment. Gross Profit in the 2nd half of 2011 rose by 24%, from RUR 4,199 million to RUR 5,200 million. The growth rate for the full year amounted to 21%, from RUR 7,379 million up to RUR 8,937 million due to a premiumization of the sales mix. Also actions taken by the Company to improve operating efficiency in the 2H 2011 had a positive effect. As a result, Gross Profit Margin rose from 34.9% to 35.4% in General and administrative expenses increased in the 2H 2011, and for the full year, by 31% (from RUR 798 million up to RUR 1,044 million) and by 38% (from RUR 1,367 million to RUR 1,880 million in 2010) respectively. This increase was caused mainly by the increases in wages, social tax and rent. Taking into account the fact of the growth of these expenditures in the first half of the year was 47%, we can note that there was a significant decrease in the expansion rate of expenses in the second half of the year. This means the decline in influence of one-off factors, such as costs incurred during the relicensing process, as well as indicating the gradual stabilization level of these costs corresponding to the increased scale of the Company s operations. In the second half of 2011, the selling and distribution expenses increased by 25%, from RUR 1,708 million up to RUR 2,139 million. The growth for the full year was 29%, from RUR 3,061 million in 2010 up to RUR 3,963 million. This is due to growth in the costs of distribution and marketing, which have provided the Company with a significant increase in the market share. The company strengthened its distribution platform, which exposed increase in warehousing capacity expenses and costs related to an expansion of our sales force. Thanks to investments during the reporting period, the Synergy distribution system became one of the 3

4 largest in Russia. The active growth phase of the distribution platform was completed in the first half of 2011, as is evidenced by slowdown in these costs from 35% in the first half to 25% in the second half of the year. For the second half of 2011, the consolidated EBITDA increased by 7% from RUR 1,768 million up to RUR 1,899 million. The comparable figure for the full year 2011 decreased by 3% from RUR 3,340 million to RUR 3,243 million, due to large non-recurring expenses in the first half of 2011: relicensing, investments in VEDA brand, social tax increase, the active growth of sales force, including dedicated sales teams. In the second half of 2011, EBITDA growth indicates a stabilization of the company`s growth, improvement in its operational efficiency. The amount of net financial expenses decreased by 12% from RUR 759 million in 2010 to RUR 665 million in 2011, due to lower average costs of debt financing. Net profit increased by 6% from RUR 1,572 million in 2010 to RUR 1,661 million in 2011, net profit margin remained stable at 7%. Segmentation reporting The tables below illustrate the changes in the segmental breakdown of revenue and gross profit for the second half of 2011 and for the full 2011, compared to previous corresponding periods. The data presented below is net of intersegment revenues. (In million rubles except for those indicators which are otherwise stated) Alcohol segment Food segment 2011 increase increase 2010 Revenue 21, % 17, % Gross profit 8, % 6, % 807 Gross profit margin 38.0% % 21.3% % Alcohol segment Food segment 2H 2011 increase 2H H 2011 increase 2H 2010 Revenues 13, % 10,514 1,889 +9% Gross profit 4, % 3, % 374 Gross profit margin 37.9% % 11.4% % Alcohol segment In the second half and for the FY 2011, the Alcohol segment s Revenue grew by 25% (from RUR 10,514 million to RUR 13,104 million), and by 20% (from RUR 17,641 rubles to RUR 21,228 million) respectively. During the year 2011 Synergy used the opportunity to gain additional market share that arose on the back of accelerated consolidation of the industry and relicensing held in the first half of Also, in order to improve the quality of distribution and sales increasing of strategic brands for the reporting period, the Company increased its distribution staff. In the second half of 2011, according to the new strategy which implies improvement of the operational efficiency of the Company, prices were actively increased. The start of the exclusive distribution of William Grant & Sons products had also positive impact on Alcohol segment s Revenue in the second half of the year. 4

5 As a result, the premiumization sales mix and the pro-active pricing policy, the gross profit in the alcohol segment has increased in the second half of 2011 by 28% (from RUR 3,873 million up to RUR 4,973 million). Growth for the full year 2011 was 23% (from RUR 6,562 million up to RUR 8,074 million). Gross Profit Margin in the alcohol segment improved from 37% to 38% for the full year Food Segment Food segment s Revenue increased by 14%, from RUR 3,486 million up to RUR 3,984 million in In 2011, the food segment s Gross Profit increased by 5% from RUR 807 million to RUR 848 million, while the Gross Profit Margin for the segment decreased from 23% to 21%. Capital structure The table below illustrates the changes in the capital structure as of December 31, 2011, compared to previous period. (In millions of rubles except for those indicators which are otherwise stated) As on 31 December 2011 As on 31 December 2010 In annual terms Total debt 5,566 6,161-10% Long term debt 4,324 4,967-13% Short term debt 1,243 1,194 +4% Share of short term debt in total debt 22% 19% - Cash flow and cash flow equivalents 718 2,000-64% Total Capital and Reserves 16,691 14, % Total Capital 28,078 25,059 +8% Commenting on the results of 2011, Nikolay Belokopytov, Chief Financial Officer, said, "In 2011, we continued the implementation of a debt management strategy, which aims to keep company s debt on the conservative level and to reduce the average costs of borrowings. As of December 31, 2011 the total debt amounted to RUR 5,566 million, which is 10% less than the RUR 6,161 million as of December 31, During the reporting period the Company has reduced the cost of borrowings up to % in 2011, from 11-13% in The average term of borrowings did not significantly change and amounted to 3 years. 5

6 Debt Management Strategy The priority of debt management strategy is to optimize the company's corporate loan portfolio. The company aims to ensure that net debt/ebitda ratio should not exceed the ratio of 1.5. Debt Management Strategy aims to restructure the debt instruments, to reduce the average cost of borrowing, increasing the share of long-term financing, as well as a decrease in the proportion of loans, secured by pledge. About Synergy, Co # # # OJSC Synergy is the leading producer of distilled spirits in Russia with a 15% share of the legal vodka market in Russia. The Company`s strategic focus lays on production of alcoholic beverages. Synergy possesses its own distributional platform, ensuring the largest possible market coverage, and diversified portfolio of federal brands, addressing market demands across the full spectrum of price points, from the low-middle to the super-premium price segments. The Company`s federal brand portfolio includes super-premium vodka Beluga, premium vodka Veda, sub-premuim vodkas Myagkov and Russky Lyod, middle vodka Belenkaya, low-middle vodka Gosudarev Zakaz and brandy Zolotoy Reserv. The Company operates seven spirits production plants and one of the largest distributional platform in Russia. Synergy is the exclusive distributor of one of the global premium spirits producer William Grant & Sons, representing in Russia such brands as Scottish whisky Glenfiddich, Grant s, Clan McGregor, The Balvenie, gin Hendrick s and Irish whisky Tullamore Dew. In addition to this, the Company distributes also the products of French house of Camus cognac. The combination of strong portfolio of brands, strong production base and developed sales system supports Synergy`s competitive advantages and profound organic growth year on year. Click on for more information on the Company. For further information please contact: Prokhor Malytin Director, Public Relations Sergey Kuptsov Director, Corporate finance OJSC Synergy Tel Fax malyutin@sygroup.ru OJSC Synergy Tel Fax kuptsov@sygroup.ru Cautionary note concerning forward looking statements Matters discussed in this press release may constitute forward-looking statements. Forward-looking statements are other than statements of historical facts. The words believe, expect, anticipate, intend, estimate, will, may, "continue," should and similar expressions identify forward-looking statements. Forward-looking statements include statements regarding: objectives, goals, strategies, outlook and growth prospects; future plans, events or performance and potential for future growth; liquidity, capital resources and capital expenditures; economic outlook and industry trends; developments of our markets; the impact of regulatory initiatives; and the strength of our competitors. The forward-looking statements in this press release are based upon various assumptions and estimates based on management s examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions and estimates were reasonable when made, they are inherently subject 6

7 to significant known and unknown risks, uncertainties, contingencies and other important factors which are difficult or impossible to predict and are beyond our control. Such risks, uncertainties, contingencies and other important factors could cause the actual results of Synergy, Co. or the industry to differ materially from those results expressed or implied in this press release by such forward-looking statements. Such risks, uncertainties, contingencies and other important factors include, among others: political and social developments; general economic, market and business conditions; trends in the markets in which we operate or plan to operate; our business and growth strategies; planned acquisitions or divestitures; our expansion into other geographic regions or market segments; the effects of legislation, regulation, bureaucracy or taxation on our business; and our anticipated future revenues, capital expenditures and financial resources. Accordingly, such forward-looking statements cannot be relied on, and neither Synergy, Co., nor any other person can assure you that projected results will be achieved in the future. The information, opinions and forward-looking statements contained in this presentation speak only as at the date of this presentation, and are subject to change without notice. Neither Synergy, Co. nor any other person undertakes, nor do they have any obligation, to provide updates or to revise any forward-looking statements except as may be required by applicable law and regulation. 7

8 APPENDIX SYNERGY GROUP Consolidated Statement of Comprehensive Income (all amounts in Russian Roubles thousand, unless stated otherwise) Year ended 31 December Revenue Cost of sales ( ) ( ) Gross profit General and administrative expenses ( ) ( ) Distribution expenses ( ) ( ) Other income/(expense) ( ) (35 067) Operating profit Net finance costs ( ) ( ) Profit before tax Income tax ( ) ( ) Net Income Attributable to: Equity holders of the Company Non-controlling interest Basic earnings per share (expressed in RUB per share) 8

9 APPENDIX (cont d) SYNERGY GROUP Consolidated Statement of Financial Position (all amounts in Russian Roubles thousand, unless stated otherwise) 31 December December 2010 ASSETS Non-current assets Property, plant and equipment Goodwill Intangible assets Other long-term assets Deferred tax assets Total non-current assets Current assets Inventories Biological assets Trade and other receivables Prepayments Income tax overpaid Cash and cash equivalents Total current assets TOTAL ASSETS SHAREHOLDERS EQUITY AND LIABILITIES Equity and reserves Owners equity: Share capital Treasury Shares ( ) ( ) Retained earnings Other reserves Non-controlling interest Total equity and reserves Non-current liabilities Loans and borrowings Deferred tax liabilities Total non-current liabilities Current liabilities Loans and borrowings Trade and other payables Income tax payable Total current liabilities TOTAL SHAREHOLDERS EQUITY AND LIABILITIES

10 APPENDIX (cont d) SYNERGY GROUP Consolidated Statement of Changes in Equity (all amounts in Russian Roubles thousand, unless stated otherwise) Share capital Treasury Shares Retained earnings Other reserves Total shareholders' equity Noncontrolling interest Balance at 31 December (56 890) Total Shares issue Repurchase of shares - ( ) - ( ) ( ) - ( ) Issue of share capital Contribution of non-controlling shareholders to the Group s subsidiary Total changes, not recorded into net profit ( ) Net profit for the period Balance at 31 December ( ) Shares issue Other changes in non-controlling interest (20 812) (15 892) Disposal of a subsidiary (10 680) (10 680) Repurchase of shares - ( ) - ( ) ( ) - ( ) Total changes, not recorded into net profit ( ) (31 492) Net profit for the period Balance at 31 December ( )

11 APPENDIX (cont d) SYNERGY GROUP Consolidated Cash Flow Statement (all amounts in Russian Roubles thousand, unless stated otherwise) Year ended 31 December Cash flows from operating activities Profit before income tax and finance costs Adjustments for: Depreciation and amortisation (Gain)/loss on disposal of property, plant and equipment (7 896) (868) (Gain)/loss on disposal of materials (Gain)/loss on disposal of subsidiaries (Gain)/loss on write-off of accounts payable (9 694) ( ) (Gain)/loss on change in fair value of biological assets (30 843) (66 801) Reserves and accruals (Gain)/loss on disposal of financial assets Other non-cash transactions ( ) (46 252) Changes in working capital: (Increase)/decrease in inventories and biological assets ( ) ( ) (Increase)/decrease in accounts receivable ( ) ( ) Increase/(decrease) in accounts payable Cash flows from operating activities Interest paid ( ) ( ) Income tax paid ( ) ( ) Net cash flow from operating activities ( ) (75 349) Cash flows from investing activities Acquisition of subsidiaries Disposal of subsidiaries Disposal of other financial assets Acquisition of property, plant and equipment and intangible assets ( ) ( ) Disposal of property, plant and equipment and intangible assets Net cash flow from investing activities ( ) ( ) Cash flows from financing activities Issue of share capital Repurchase of own shares ( ) ( ) Loans received Loans repaid ( ) ( ) Net cash flow from financing activities (15 285) Net increase/(decrease) in cash and cash equivalents ( ) Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year

12 APPENDIX (cont d) SYNERGY GROUP EBITDA Calculation (unaudited)* (all amounts in Russian Roubles thousand, unless stated otherwise) Year ended 31 December Profit for the period Income tax Net finance costs Depreciation and amortisation EBITDA *- EBITDA represents net income before interest, income taxes and depreciation and amortization, adjusted for interest income, and other financial expenses. EBITDA margin is EBITDA expressed as a percentage of sales. The Company presents EBITDA because it considers it an important supplemental measure of the operating performance. EBITDA has limitations as an analytical tool, and it should not be considered in isolation, or as substitute for analysis of our operating results as reported under IFRS. Moreover, other companies may calculate EBITDA differently or may use it for different purposes than Synergy, Co. does, limiting its usefulness as a comparative measure. EBITDA also should not be considered as an alternative to cash flow from operating activities or as a measure of our liquidity. 12