Russian Sea Group announces financial results for 2011
Consolidated Statement of Comprehensive Income for 12 months ended 31 december 2011
(in million of Russian Roubles)
- | For 12 months ended 31 December, 2011 | For 18 months ended |
Revenue | 18,557.6 | 26,209.8 |
Cost of sales | (16,198.2) | (22,708.2) |
Gross margin | 2,359.4 | 3,501.6 |
Selling, general and administrative expenses | (2,383,7) | (3673,3) |
Interest income | 2.7 | 76.8 |
Interest expense | (372.6) | (779.9) |
Exchange (loss)/gain | (58.9) | 146.3 |
(Loss)/ profit before income tax | (453.1) | (728.5) |
Net (loss) for the period | (486.7) | (752.7) |
The Group's management decided to change the financial year end in order to synchronize it with the calendar year. The consolidated financial statements for the last period were prepared for the eighteen months starting from the 1st of July 2009 till the 31st of December 2010. As a result of the change of reporting period the figures in financial statement aren't comparable. In order to compare and analyze the results below are presented the calculated (unaudited) indicators for 2010 calendar year.
Besides the previous periods indicators were retrospectively recalculated because certain expenses and incomes were not reflected in consolidated financial statements for the 18 months ended 31st of December 2010 and the decision was taken to reflect these expenses in the corresponding period.
Key financial Indicators for 2011 vs. 2010
(in million of Russian Roubles)
- | 12 months 2011 | 12 months 2010 | % change |
Revenue | 18,557.6 | 17,245.0 | 7.6% |
Chilled and frozen segment | 14,486.7 | 13,678.9 | 5.9% |
Ready-to-eat segment | 4,052.1 | 3,566.0 | 13.6% |
Aquaculture | 18.8 | 0 | - |
Gross margin | 2,359.4 | 1,950.2 | 21.0% |
Chilled and frozen segment | 11.9% | 12.3% | - |
Ready-to-eat segment | 15.5% | 7.3% | - |
Aquaculture | 51.1% | 0 | - |
Selling, general and administrative expenses | (2,383,7) | (2,596.0) | (8,2%) |
Interest income | 2.7 | 34.3 | 92.1 |
Interest expense | (372.6) | (440.6) | (15.4%) |
Exchange (loss)/gain | (58.9) | 113.7 | - |
EBITDA | 117.1 | (556.0) | - |
Net (loss) / profit | (486.7) | (899.2) | - |
The Group revenue increased compared to the previous year by 7.6% and amounted to RUR 18,557.6 million. Consolidated EBITDA in 2011 amounted to RUR 117.1 million as compared to the loss in amount of RUR (556.0) million in 2010.
Chilled and Frozen Segment
Net sales to external customers increased by 5.9% to RUR 14,486.7 million in 2011. Gross margin equaled to 11.9% as compared to 12.3% in 2010 due to the increased cost of raw fish in 2011 that wasn't compensated fully by the sales price increase. The gross margin of certain product categories such as Far Eastern assortment, Russian pelagic fish and Asian products increased in 2011.
Ready-to-eat Segment
Net sales to external customers increased by 13.6% to RUR 4,052.1 million in 2011. Gross margin amounted to 15.5% in 2011 compared to 7.3% in the previous year. The gross margin increase resulted mainly from the restored margin of the category delicacy red fish along with decreased purchase prices for salmon and trout in the second half of 2011 and maintained margin of the herring preserves category along with the purchase price increase.
Aquaculture segment
The segment's revenue amounted to RUR 37.4 million. Net sales to external customers were equal to RUR 18.8 million. The gross margin was equal to 51.1%.
Key costs and expenses
In 2011 the Group's selling and distribution costs decreased by 6.4% as compared to 2010 despite an increase of transportation costs, warehouse rent and advertising expenses. The amount of obsolete inventory write-off was significantly reduced due to the ready-to-eat stock move to the warehouse located in Noginsk close to "Russian Sea" factory. It allowed to improve the control of deliveries and safety of goods at the stock.
General and administrative expenses reduced by 1.2% in 2011 mainly due to decreased labor costs, bank charges, audit and consulting expenses. The security expenses were increased in order to strengthen control of goods at the stock.
Interest expense decreased from RUR 440.6 million in 2010 to RUR 372.6 million in 2011 as a result of reduced debt and average cost of financing. The effective interest rate decreased to 9.7% in 2011 as compared to 11.5% in 2010 due to the floating interest rate fluctuations.
An increase of US dollar/RUR exchange rate starting from September 2011 resulted in exchange loss on revaluation of payables in amount of RUR 58.9 million in 2011.
Net loss decreased in 2011 as compared to 2010 and was equal to RUR 486.7 million.
Timofey Tarasov, the Company CEO, has commented on the Company results and major priorities:
"Today we announce the Group's 2011 financial results that we consider unsatisfactory. The result consists of the ready-to-eat segment's net loss that wasn't fully compensated by the chilled and frozen segment's net profit.
Nevertheless we see certain improvement in the Group's results in 2011 as compared to 2010: the consolidated revenue increased by 7.6%, consolidated EBITDA is positive and equals RUR 117.1 million.
The results improvement is driven by significant increase of gross profit in ready-to-eat segment by more than 20% at the end of 2011. We organized the process of timely passing the raw fish price increase on consumer. Thus when herring purchase price went up by almost 50% as a result of fishing quota reduction the Company raised its sales prices accordingly despite the inevitable decrease of sales volumes. As a result we maintained the marginality of the category and the sales volumes recover as competitors raise their sales prices.
We have launched the development of new products in 2011 that will be presented to the market in the second half of 2012 and will form the basis for the future growth.
During the last years the chilled and frozen segment has shown a stable profit but it still has significant growth possibilities. We have to start offering our clients new services that will help us to differentiate from other distributors and will bring the competition beyond purely price. Besides we will continue to develop the already launched projects. In 2012 we plan to finalize the build-up of regional trade representatives network. We will continue to develop the packaged fish products program.
In aquaculture segment two events occurred in 2011 that marked the new important stage of its development. We have finished to form the portfolio of sites for aquaculture development that includes 29 sites, on three of which we already farm fish. The overall potential of these sites can satisfy almost half of the total Russian salmon and trout market demand. The Russian Agricultural Bank approved the credit line in amount of RUR 2.8 billion for the sites development. These two events give us confidence that within the next few years Russian Sea Group will become an undisputed leader in fish farming in Russia and will significantly decrease its dependence on raw fish price fluctuations.
Generally we see the positive changes in our business in 2011 and we are sure that in 2012 we will achieve satisfactory results that will help to restore profitability of the Group".