April 6, 2015, Moscow, Russia PRESS

April 6, 2015, Moscow, Russia
PRESS-RELEASE
Synergy announces its financial results for the full year 2014: sales increased by 5% and
amounted to 46 814 RUR million, net revenue increased by 7% and amounted to 28,163
RUR million, gross profit showed 7% increase and amounted to 12,028 RUR million.
Synergy
OJSC
(Synergy,
Synergy
Group
of
Companies,
Group
or
Company) (MOEX: SYNG), the leading spirits producer in Russia, today announces
consolidated financial results for the full year 2014, prepared in accordance with International
Financial Reporting Standards (IFRS).
Key financial figures for full year 2014 and major corporate events:





Sales in volume terms
-12%
Net Revenue
+7%
Alcohol Segment Revenue
+6%
Gross Profit
+7%
Alcohol Segment Gross Profit
+5%
EBITDA
-19%
Synergy has entered into important long-term agreements with Distell LTD and
Cono Sur to distribute the South-African liquor and Chilean wines in Russia;
The distribution agreement for 5 years was signed with the Spanish brandy
producer Torres;
The Company has also signed an agreement with the Dominican company Barcelo
Export Import S.R.L. Under the agreement, Synergy obtained exclusive rights to
sell a popular brand - rum Ron Barcelo on the territory of Russia;
The Rating Agency Fitch has upgraded the international credit rating of the
Company from B to B+ level. Synergy OJSC was assigned stable outlook rating;
The brand Belenkaya was awarded Product of the Year 2014 as the best vodka.
Page 1 of 12
SYNERGY GROUP
Press release. IFRS Consolidated Financial Results 2014.
Commenting the financial results, the Chairman of the Board Alexander Mechetin said, "In
2014, the Company continued its development under a long-term strategy focused on
innovative and diversified approach to the business. Against the backdrop of a significant
increase of the excise rates at the beginning of the reporting year and general unstable
economic environment in 2014, Synergy demonstrated growth of certain financial figures
owing to intensive development of the Company in all areas of activities.
The Company increased sales by 5% following the results of the year. Our sales were
supported by pro-active pricing policy and dynamic development of export/import
transactions. The Company increased its gross profit by 7% having kept profitability on the
2013 level. Despite that shipment decreased by 12%, Company showed at the same time
considerably the best dynamic in comparison with the general spirits market which was
reduced by 22%. That is allowed Synergy to increase its market share.
The decrease of EBITDA to 19% was determined by increase of the excise tax by 25% at the
beginning of the year, which contributed to the growth of the illegal market share. It should
be mentioned that, at the end of 2014, in the view of the Russian Government’s Resolution
on excise rates freeze, the distributors of the Company did not increase stocks of finished
products as it had happened in previous years and supported sales in Q4. At the same time,
the Company's management thinks that excise rates freeze on the current level will positively
influence on the spirits market in general and will help to stabilize it.
Currently, Synergy is a leader on alcoholic beverages market, owning well-diversified
brands-leaders and unique distribution platform. It is an independent importer #1 of premium
brands and one of the greatest exporters of spirits in the country.
In the reporting period, the Company continued building the presence of its super-premium
brand Beluga, export of which rose by 21% in volume terms. In general, export transactions
of the Company increased by 27%, and import by 37% in 2014.
The important stages of the development of the Synergy's distribution business in 2014 are
exclusive agreements with the South-African and Spanish partners - Distell LTD and Torres.
Now, the Company represents cream-liquor #2 in the world Amarula and brandy Torres on
the territory of Russia. Besides, Ron Barcelo rum and wine trade marks inclusive of
worldwide popular series of the Chilean wines Cono Sur were added to the Company’s
portfolio. Currently, Synergy strongly operates in the majority of highly profitable fields, that
has positive impact on the profitability of Synergy in general and directly influences on its
stability.
We should mention that Fitch International Rating Agency has upgraded the international
credit rating of the Company from B to B+ level with stable outlook rating assigned. In the
official release, the Fitch Agency highlighted that Synergy occupies leading positions on the
Russian market which are supported by strong brands portfolio, well developed distribution
platform, and a significant scale of activity in comparison with the majority of it’s
competitors."
Page 2 of 12
SYNERGY GROUP
Press release. IFRS Consolidated Financial Results 2014.
FINANCIAL OVERVIEW
Financial Performance and Operations Results
The table below illustrates the consolidated financial results of the Company’s activities for
the year 2014 as compared with the year 2013.
(in million roubles, except for those indicators which are otherwise stated)
2014
2013
Change
Sales, thousands dL
11,021
12,534
-12%
Sales, including excise
46,814
44,594
+5%
Net Revenue
28,163
26,378
+7%
COGS
16,135
15,098
+7%
Gross Profit
12,028
11,280
+7%
Gross Profit Margin, %
42.7%
42.8%
-0.1pp
General and Administrative Expenses
2,411
2,053
+17%
Distribution Expenses
7,389
5,871
+26%
2,973
10.6%
3,674
13.9%
-19%
-3.3pp
Operating Income
2,274
3,127
-27%
Operating Income Margin, %
8.1%
11.9%
-3.8pp
945
1,202
-21%
Net Income
1,090
1,541
-29%
Net Income Margin, %
3.9%
5.8%
-1.9pp
Earnings per Share, RUR
61.73
82.32
-25%
EBITDA
EBITDA Margin, %
Net Financial Expenses
The excise tax significantly increased on January 1, 2014, which resulted in an overall strong
alcohol market decrease by over 22%. Synergy Group sales showed a 12% decrease (from
12,534 million dL to 11,021 million dL), however, due to an increase in shipment prices and
intense development of export-import operations, the Company managed to completely
mitigate this decline (Net revenue increase by 7% from ₽26,378m to ₽28,163m).
Gross Margin remained stable, thus gross profit showed the same increase as revenue +7% to
₽12,028m.
General and administrative expenses increased by 17% to ₽2,411m through increase in
wages and growth in office rent expenses mostly nominated in US Dollars.
Growth in sales expenses by 26% was addressed to maintain market share under background
of declining sales and simultaneous increase in shipment prices. Substantial share of sales
expenses correlates with product price where excise is included and grows in line with excise
tax rate (increase by 25% since 1 January 2014).
The consolidated 2014 EBITDA decreased by 19% from ₽3,674m to ₽2,973m. Decline in the
figure was forced by key factors:
1) Excise tax rate increase by 25% since 1 January 2014 led to substantial growth of
non-excise production, followed by decrease of legal market.
2) Regular seasonal driver of additional sales was absent at the end of the year 2014.
Distributing companies used to build additional stocks ahead of scheduled excise tax
increase since 1 January of the following year. But in 2015-2016 excise tax rate was
Page 3 of 12
SYNERGY GROUP
Press release. IFRS Consolidated Financial Results 2014.
set flat by government decision and distributers had no intention to set up extra
inventories in November-December 2014. The Group estimates influence of this
factor as 1 million dL shortfall in shipments and ₽350-400m lack in operational
income.
Nevertheless the Group is positive over excise tax rate freeze during future 2 years and
expects recent government measures in aiding producers to be effective.
Net Profit decreased by 29% from ₽1,541m to ₽1,090m. Main drivers of the decline are the
same as for EBITDA with additional influence of increase in interest expense. Growth of
interest expense is also connected with excise tax rate growth through additional
requirements for bank guarantees and financing of growing accounts receivable.
Segment reporting
The table below illustrates changes in segment revenue and gross profit for the year 2014 as
compared with 2013. The data presented below does not include intersegment revenue.
(RUR million)
Alcohol Segment
2014
Increase
2013
Food Segment
2014
Increase
2013
Revenue
22,441
+6%
21,150
5,722
+9%
5,228
Gross Profit
10,779
+5%
10,253
1,369
+33%
1,027
Gross Profit Margin, %
48.0%
-0.5pp
48.5%
23.9%
+4.3pp
19.6%
Alcohol Segment
Drivers for alcohol segment results are the same as for the Group as a whole – decrease in
volumes covered by increase in revenue on the back of increase in prices and dynamic
diversification of the Group operations.
Food Segment Impact on the Group Results
Significant positive contribution to results of the segment was made by Mikhailovskaya
Poultry Plant. After reconstruction finished in 2013 the plant increased production efficiency
followed by substantial improvement of profitability on the back of the favourable pricing
environment.
Page 4 of 12
SYNERGY GROUP
Press release. IFRS Consolidated Financial Results 2014.
Capital Structure
The table below illustrates changes in the equity structure as of December 31, 2014, as
compared to the previous period.
(in million roubles, except for those indicators which are otherwise stated)
December 31,
2014
December 31,
2013
Year-on-Year
Total Debt
8,708
6,679
+30.4%
Long-Term Debt
5,544
5,802
-4.5%
Short-Term Debt
2,904
877
+261.6%
Share of long-term debt in total debt, %
64%
87%
-23pp
Share of unsecured liabilities in total debt, %
49%
62%
-13pp
482
467
+3.2%
Total Capital and Reserves
19,144
18,369
+4.2%
Total Capital
25,220
24,716
+2%
2.77
1.69
+63.6%
Cash and Equivalents
Net Debt / EBITDA
In 2014 total debt increased by ₽2,029m and amounted to ₽8,708m. Increase in accounts
receivable, growth in stocks of raw materials and shares buy-back (₽418m in 2014) required
additional financing while cash outflow on decreasing tax liabilities was mitigated by
positive effect of reduced finished goods stock. Increase in accounts receivable was
stimulated by growing excise tax rate as receivables contain both VAT and excise.
The fact that excise tax rate stays stable till the end of the year 2016 allows to expect that
additional working capital requirements will not arise in 2015. In addition the Group intends
to implement set of measures to reduce working capital.
Fitch ratings agency was positive on excise tax rate freeze which will allow to stabilize the
market and upgraded in December Synergy's Long-term foreign and local currency Issuer
Default Ratings (IDRs) to 'B+' from 'B' and a National Long-term Rating from “BBB+” (rus)
to “A-” (rus). The Outlook is Stable.
Page 5 of 12
SYNERGY GROUP
Press release. IFRS Consolidated Financial Results 2014.
About Synergy, Co
OJSC “Synergy” is the leading diversified spirits group in Russia with a 15% share of the
legal vodka market in Russia. The Company`s strategic focus lays on production and
distribution of alcoholic beverages. Synergy is #1 Russian independent importer of spirits.
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. Also
the imported portfolio of Synergy includes Ron Barcelo rum, Amarula liqueur, Milagro
tequila, brandy "Tsar Tigran", "Yerevan Traditional" and the balms line of Latvijas balzams.
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 http://sygroup.ru/ for more information on the Company.
For further information please contact:
Prokhor Malytin
Director, Public Relations
OJSC “Synergy”
Sergey Kuptsov
Director, Corporate
finance
OJSC “Synergy”
Tel. +7 495 510 26 95
Fax +7 495 510 26 97
e-mail: [email protected]
Tel. +7 495 510 26 95
Fax +7 495 510 26 97
e-mail: [email protected]
Page 6 of 12
SYNERGY GROUP
Press release. IFRS Consolidated Financial Results 2014.
Cautionary note concerning forward looking statements
Matters discussed in this press release may constitute forward-looking statements. Forwardlooking statements are the statements other than ones related to the historical facts. The
words “believe”, “expect”, “anticipate”, “intend”, “estimate”, “will”, “may”, "continue",
“should” and similar expressions identify the 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 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.
Page 7 of 12
APPENDIX
SYNERGY GROUP
Consolidated Financial Statements for the year ended 31 December 2014
(All amounts in Russian Rubles million, unless stated otherwise)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2014
Sales
2013
46 814
44 594
Excise duties
(18 651)
(18 216)
Net revenue
28 163
26 378
Cost of sales
(16 135)
(15 098)
Gross profit
12 028
11 280
General and administrative expenses
(2 411)
(2 053)
Distribution expenses
(7 389)
(5 871)
46
(229)
Operating profit
2 274
3 127
Net finance costs
(945)
(1 202)
Profit before tax
1 329
1 925
Income tax
(239)
(384)
Total comprehensive income for the period
1 090
1 541
1 065
1 486
25
55
61.73
82.32
Other income/(expense)
Attributable to
Equity holders of the Company
Non-controlling interest
Basic earnings per share
(expressed in Russian Rubles per share)
Page 8 of 12
APPENDIX
SYNERGY GROUP
Consolidated Financial Statements for the year ended 31 December 2014
(All amounts in Russian Rubles million, unless stated otherwise)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 December
2014
31 December
2013
ASSETS
Non-current assets
Property, plant and equipment
Goodwill
Intangible assets
Other long-term assets
Deferred tax assets
Total non-current assets
7 021
6 327
235
213
7 002
6 693
122
254
456
506
14 836
13 993
5 355
7 096
290
163
13 153
12 162
571
383
Current assets
Inventories
Biological assets
Trade and other receivables
Prepayments
Income tax overpaid
32
18
482
467
Total current assets
19 883
20 289
TOTAL ASSETS
34 719
34 282
Share capital
2 495
2 495
Treasury Shares
(785)
(733)
11 127
10 062
Cash and cash equivalents
SHAREHOLDERS’ EQUITY AND LIABILITIES
Equity and reserves
Retained earnings
Other reserves
Total equity attributable to shareholders of OAO Synergy
Non-controlling interest
Total equity and reserves
5 572
5 829
18 409
17 653
735
716
19 144
18 369
5 544
5 804
Non-current liabilities
Loans and borrowings
Deferred tax liabilities
Total non-current liabilities
532
543
6 076
6 347
Current liabilities
Loans and borrowings
3 164
875
Trade and other payables
6 153
8 377
Income tax payable
Total current liabilities
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES
182
314
9 499
9 566
34 719
34 282
Page 9 of 12
APPENDIX
SYNERGY GROUP
Consolidated Financial Statements for the year ended 31 December 2014
(All amounts in Russian Rubles million, unless stated otherwise)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Treasury
Shares
Retained
earnings
Other
reserves
Total
shareholder
s' equity
Non–
controlli
ng
interest
2 567
(704)
8 576
6 263
16 702
669
17 371
–
–
–
–
–
1
1
–
–
–
–
–
(9)
(9)
Share
capital
Balance at 31 December 2012
Other changes in non–controlling
interest
Dividends accrued to non–
controlling interest
Repurchase of own shares
Total
–
(101)
–
(434)
(535)
–
(535)
Cancellation of shares
(72)
72
–
–
–
–
–
Total changes, not recorded
into net profit
(72)
(29)
–
(434)
(535)
(8)
(543)
Total comprehensive income for
the period
–
–
1 486
–
1 486
55
1 541
Balance at 31 December 2013
2 495
(733)
10 062
5 829
17 653
716
18 369
Other changes in non–controlling
interest
–
–
–
–
–
1
1
Dividends accrued to non–
controlling interest
–
–
–
–
–
(7)
(7)
Share based benefits
–
20
–
89
109
–
109
Repurchase of own shares
–
(72)
–
(346)
(418)
–
(418)
Total changes, not recorded
into net profit
–
(52)
–
(257)
(309)
(6)
(315)
Total comprehensive income for
the period
–
–
1 065
–
1 065
25
1 090
Balance at 31 December 2014
2 495
(785)
11 127
5 572
18 409
735
19 144
Page 10 of 12
APPENDIX
SYNERGY GROUP
Consolidated Financial Statements for the year ended 31 December 2014
(All amounts in Russian Rubles million, unless stated otherwise)
CONSOLIDATED CASH FLOW STATEMENT
2014
2013
Cash flows from operating activities
Profit before income tax and finance costs
2 274
3 127
Depreciation and amortisation
699
547
(Gain)/loss on disposal of property, plant and equipment
(10)
66
Share based benefits
109
–
(Gain) on change in fair value of biological assets
(87)
(12)
78
(47)
1 826
(288)
(Increase)/decrease in accounts receivable
(1 288)
(2 553)
Increase/(decrease) in accounts payable
(2 854)
1 765
747
2 605
Adjustments to reconcile profit to cash generated from
operations
Other non-cash transactions
Changes in working capital:
(Increase)/decrease in inventories and biological assets
Cash flows from operating activities
Interest paid
(1 265)
(1 276)
Income tax paid
(360)
(319)
Net cash flow from operating activities
(878)
1 010
11
44
(790)
(1 147)
Cash flows from investing activities
Acquisition of subsidiaries
Acquisition of property, plant and equipment and intangible
assets
Disposal of property, plant and equipment
Net cash flow from investing activities
96
450
(683)
(653)
(418)
(535)
Cash flows from financing activities
Repurchase of own shares
Dividends paid to non-controlling interest
Loans received
Loans repaid
Net cash flow from financing activities
Net increase/(decrease) in cash and cash equivalents
(16)
–
30 926
22 813
(28 916)
(22 875)
1 576
(597)
15
(240)
Cash and cash equivalents at beginning of the year
467
707
Cash and cash equivalents at end of the year
482
467
Page 11 of 12
APPENDIX
SYNERGY GROUP
Consolidated Financial Statements for the year ended 31 December 2014
(All amounts in Russian Rubles million, unless stated otherwise)
EBITDA CALCULATION (UNAUDITED)
2014
Profit for the period
2013
1 090
1 541
Income tax
239
384
Net finance costs
945
1 202
Depreciation and amortisation
EBITDA
699
547
2 973
3 674
*- 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.
Page 12 of 12