Kyiv, 20th April 2012 – Milkiland N.V. has published its consolidated annual report for the year 2011. The Group demonstrated healthy 2011 results in a challenging market environment. New drivers will fuel the Group’s growth in 2012.
Key highlights of 2011
Financials
· Financial performance: Revenue grew 9% to EUR 279.8 million. EBITDA 22% down, EBITDA margin down to 12.4% in 2011 on the back of high raw milk prices in Russia and de facto cancellation of milk subsidies in Ukraine. Net profit of EUR 14.8 million 33% down y-o-y
· Financial position: The Group’s total assets grew 22% y-o-y to EUR 327.7 million. Balance sheet strengthened with total debt ratio reduced from 0.54 to 0.49, net debt stayed at the level of 2010. Net Debt/EBITDA ratio somewhat increased from 0.95 to 1.21 due to lower EBITDA in 2011, however stayed at a healthy level.Workingcapital grew 17% from EUR 47.7 million to EUR 55.7 million
· Net cash by the year end increased by EUR 15.7 millionand reached EUR 53.4 million
Operations
· Raw milk prices: Continuing stagnation of raw milk production in Russia and Ukraine, as well as high feed prices in the first half of the year resulted in a high level of milk prices. In Russia, raw milk priced c. 15% higher y-o-y, despite a feeble summer downward correction. In Ukraine, milk prices were stable y-o-y, but de-facto cancellation of government subsidies to dairy farmers led to an increase in producer costs
· Milk sourcing system: In order to offset the increase in input costs, as well as to ensure the availability of quality raw milk, Milkiland management elaborated and implemented a new milk sourcing plan for Ukrainian facilities. The new milk sourcing plan covered two areas, (a) further vertical integration of the Group’s manufacturing and in-house milk production and (b) support of milk cooperatives in the regions of operations
· Milkiland retained its positions of cheese exporter No. 1 in Ukraine with the share in the total export of this product of 29% in volume terms. The Group’s share in the Russian cheese market grew to almost 3%
· Operational performance in focus: changes in the corporate structure of the Group are introduced to make it more agile, consumer responsive and fit to control Milkiland’s international business
· Increased profitability in Ostankino due to improved sales and cost cutting: Ostankino EBITDA rose from EUR 4.3 million in 2010 to EUR 5.7 million in 2011 or by roughly one third
Milkiland reached historically record high earnings driven by better volume sales and a favourable price situation. As a result, revenue grew 9% to EUR 279.6 million. At the same time, challenging situation on the raw milk market contributed to a 22% decrease in EBITDA to EUR 34.6 million with EBITDA margin of 12.4%.
After the repayment of the most expensive loans and their substitution with the loans with lower interest rates, Milkiland’s finance expense decreased by 40% to EUR 7.8 million. The average interest rate for short-term loans fell from 13.0% to 10.7%, for long-term loans from 13.0% to 12.7%.
In the year 2011 Milkiland made important steps to a more sustainable system of raw milk supply which, we believe, will allow us to improve the security of milk supply and to better control the costs.
First, the Group started to support milk cooperatives by providing aid to establishment and operations of 16 milk cooperatives in 12 regions of Ukraine. Starting from June 2011, by the end of the year, cooperatives attracted over 17,000 members and accounted for more than 21,000 milking cows in lease. The share of cooperative milk in the total Milkiland’s milk collection in Ukraine reached c. 18% in December 2011 and amounted to c. 6% for the whole year. In 2012, this share is planned to exceed 20%.
Second, organic growth of Milkiland’s agricultural operations as well as acquisition of four new agricultural subsidiaries in 2011 contributed to an increase in milking cow headcount to 2,900, while in-house milk production more than doubled to 11,000 tons (c. 2% of the total milk intake). The land bank under the Group’s control rose by one third to c. 21,000 hectares.
We plan to build a long term competitive advantage on access to quality raw milk, as we consider this is one of the most challenging issues for local players. To support our growth and ensure quality offering, we plan to establish our own milk production facilities in order to eventually satisfy 20-25% of our internal needs. Another way to this goal we see in the support of diary cooperatives in Ukraine, which in the nearest perspective can cover another c. 20% of our demand in raw milk.
Over the next five years, the Group targets to organically increase its volume sales by no less than 40% in fresh dairy, and by at least 30% in cheese. The value growth will be more significant, as Milkiland plans to advance more in the segments of higher value added.
We closely watch attractive acquisition opportunities. Milkiland successfully integrated many companies over its history, and we believe this is our strong point. Our target markets are Russia and Ukraine, where the fragmented market structure is favorable for acquisition of smaller players. Paying attention to the other important factors, including access and cost of the raw milk, possibilities of new markets entry, we are also searching for targets in Poland and Belarus. In any case, the final decision we will make would be made on strategic criteria of providing a long term benefit for Milkiland. Therefore, we will prefer to focus on a few but really winning deals rather than spending our efforts on several smaller targets.
Comment by Anatoliy Yurkevich, Chairman of the Board of Directors, Milkiland N.V.
“We believe that our strong commitment and constant efforts to deliver the Group’s development strategy in 2012 will bring positive results, new prospects and will strengthen our positions as TOP-5 CIS diary market player. We would like to bring a new international scale to the Group’s business through an M&A in the target markets of Poland, Belarus or Russia.”
The report is available here:
http://www.milkiland.nl/en/Investor_relations/Reporting_Obligations/Periodical_Reports/2011
About Milkiland N.V.
Milkiland is a TOP-5 diversified dairy producer operating in Russia and Ukraine, offering a wide range of dairy products such as fresh dairy, cheese and butter, to satisfy consumers in their everyday needs for healthy and tasty foods.
In Russia, the company produces fresh dairy products at Moscow-based OJSC “Ostankino Milk Combine” and sells under Dobryana and Ostankinskaya brands. Also, Dobryana Ukrainian cheese is sold in most of Russian regions. In Ukraine, the company operates 10 plants and offers wide range of fresh dairy, cheese and butter under Dobryana and Kolyada brands. Milkiland exports dairy products from Ukraine to over 30 countries.
Shares of Milkiland N.V. has been listed on the Warsaw Stock Exchange since December, 6, 2010.
For additional information please contact:
Sergey Trifonov,
IR Officer, Milkiland N.V.
tel. + 380 67 327 9838 mob.
e-mail:
