Wimm-Bill-Dann Foods has released its 1H 2008 results, which are slightly below our expectations. In the reporting period, Wimm-Bill-Dann's revenue grew by 30% in US dollar terms to USD 1.49 billion. The largest revenue performance was shown by the baby food segment, up 65%. Sales in other segments did not grow so rapidly.
In our opinion, a slowdown in rate of the company's revenue growth, caused by a shift in consumer demand towards traditional dairy products and a downturn in production volumes, was the main downside driver for WBD gross margin. However, high sales prices slightly outweighed the company's growing resource costs and downturn in margins. As a result, WBD gross margin went down inconsiderably in 1H 08.
Table. Wimm-Bill-Dann: Key Financials 1H 2008, USD million
| | 1H2007 | 1H2008 | 1H2008/1H2007 |
|---|
| Revenue | 1,147.8 | 1,492.1 | 30.0% |
| including: | | | |
| Dairy | 858.4 | 1,105.4 | 28.8% |
| Beverages | 212.1 | 259.0 | 22.1% |
| Baby food | 77.3 | 127.7 | 65.2% |
| Gross profit | 377.8 | 470.4 | 24.5% |
| Gross margin | 32.9% | 31.5% | |
| Business expenses | 185.90 | 241.10 | 29.7% |
| General and administrative expenses | 86.30 | 96.80 | 12.2% |
| EBITDA | 147.2 | 183.8 | 24.9% |
| EBITDA margin | 12.8% | 12.3% | |
| Net profit | 65.8 | 78.6 | 19.5% |
| Net margin | 5.7% | 5.3% | |
Source: company data, Finam estimates
Although the ratio between the company's opex and revenue did not change in 6M 08, WBD failed to preserve its margins at the 1Q 08 level.
In our opinion, the food producer's financial report, which was below market expectations, may have a short-term negative impact on the company's stock valuations: revenue dropped 3% and EBITDA declined by 6.8% as compared to our forecasts. However, we note that the company's securities are currently fundamentally undervalued by the market.
In line with our estimates, the fair value of Wimm-Bill-Dann Foods is USD 113.3 per share.
0.569
0.073
