CEDC explores options after US$1,291m loss

The Central European Distribution Corporation has posted a pessimistic outlook for the Russian and Polish vodka markets as the company posted a net loss of US$1,291.8 million.

Presenting these worse than expected full year results, the company, which owns vodka brands including Zubrówka and Bols, conceded: “all strategic alternatives should be evaluated.” It added that it was “not ruling out any transaction that is in the best interests of stockholders.”

As CEDC acknowledged that its existing credit facilities “would not be sufficient” to meet its debt repayment obligations due in March 2013, the company is now exploring a possible “strategic alliance” with Russian Standard Corporation.

Analysing the company’s latest results, William Carey, CEDC’s president and CEO, observed: “Although the fourth quarter of 2011 showed marked improvement as compared to the prior year in many of our business units, primarily Poland, RTD and the Ukraine, our largest market and business in Russia under-performed the market and our expectations.

Carey also attributed the company’s problems to “a large foreign exchange loss as local currencies experienced declines against the euro and US dollar for the quarter.”

Despite the worrying situation with domestic sales, CEDC reported better news in its Russian exports, with Carey revealing: “We became the largest exporter out of Russia with a 35.5% share of all export volume in the vodka sector from Russia, with all of our export brands doing extremely well.”

The outlook from the Polish market was brighter, with Carey noting: “We achieved our sales volume target of +10% and value target of +12% in local currency and are making substantial progress on our goals of growing profitable market share with pricing, sales and mix as well as improvements in distribution coverage.

Offering a similarly positive outlook for the Polish market in the year ahead, Carey maintained: “We believe we are well positioned from a management and product stand point to continue to grow off of our 2011 base in terms of top line and bottom line growth into 2012.”

In a bid to improve its performance in 2012, CEDC confirmed the strengthening of its senior management team in Russia, including the appointment of Grant Winterton, former general manager for Red Bull in Russia, to head up its operations in this market with effect from 1 April.

The company also promised “a more pro-active approach to route to market and improved control over the costs and effectiveness of spend associated with sales.”