In line with Lebedyansky's press release, consolidated sales surged 38.2% on the year to $476.9 mln or slightly short of our forecasts. Revenues climbed on the strength of efforts aimed at optimizing the regional distribution system, rolling out direct sales and also a spike in average product prices, up 15% in the baby food segment, a 10% jump in the juice segment and a 33% upturn in the mineral water segment. Rising prices for raw material purchased in the juice segment depressed gross margin in this segment, while this indicator in the baby food segment grew to 54.6% and jumped from 27% to 42% in the mineral water segment. Overall, on the back of a spike in average product selling prices the company's gross margin remained flat on H106.
Table 1. Lebedyansky's H107 headline financials, $ mln
| | H106 | H107 | Chng, y-o-y |
| Sales |
345.1 |
476.9 |
38.2% |
| Juices |
300.2 |
410.4 |
36.7% |
| Baby food |
42.3 |
59.0 |
39.5% |
| Mineral water |
2.6 |
7.5 |
188.5% |
| COGS |
196.2 |
272.5 |
38.9% |
| Gross profit |
148.9 |
204.4 |
37.3% |
| Gross margin |
43.1% |
42.9% |
|
| Selling costs |
59.80 |
96.80 |
61.9% |
| G&A costs |
17.40 |
29.50 |
69.5% |
| EBITDA |
78.8 |
92.3 |
17.1% |
| EBITDA margin |
22.8% |
19.4% |
|
| Net profit |
53.3 |
53.6 |
0.6% |
| Net margi |
15.4% |
11.2% |
|
Source: Company data, Finam estimates
A faster rise in opex compared to sales exerted a negative impact on EBITDA in January-June 2007, up 17% against the first six months of 2006. The rise in opex to 26.3% from 22.5% in H106 against sales is primarily attributable to a 75% upsurge in transport costs and a record 128% y-o-y increase in warehousing expenses. As a result, EBITDA margin came in at 19.4%, down from 22.8% in 2006, whereas net margin dropped more than 4% to 11.2% against the backdrop of a modest rise in net profit vs. January-June 2006.
By and large, we are upbeat about robust growth in the company's sales in all segments and also the upswing in average product selling prices, which will have a positive impact on the company's cash flows. Still, if the company's COGS/sales ratio remains, in line with guidance, at 27%, this could put downward pressure on Lebedyansky's 2007 margins. According to the company's forecasts, EBITDA margin is projected at some 18.5-19% in 2007 and roughly 19-20% in 2008.
In line with our estimates, the fair price of Lebedyansky shares is $102.40 per share and our recommendation is Hold.
0.553
1.6
