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By Mike Ramey
Russia’s biggest juice maker, Lebedyansky, made a loss in the first quarter of this year.
The company, which is in the process of selling its juice business to PepsiCo and the Pepsi Bottling Group (PBG), said Q1 sales rose 17% to $245.3 million despite a 1% dip in juice volumes to 230.2 million litres. However, Lebedyansky finished with a net loss of $5.4 million under International Financial Reporting Standards (IFRS), compared with a profit of $24.2 million in the same period of 2007.
Lebedyansky’s revenue growth was the result of higher selling prices coupled with strong volume increases in baby food and mineral water. But these gains were wiped out by higher costs for raw materials and packaging, as well operating expenses.
Gross profit rose just 3% to $91.7 million – representing a margin of 37.4% compared with 42.3% in the first quarter of 2007 – while EBITDA plunged 62% to $15.9 million.
Pepsi’s record purchase In March, PepsiCo and its major distributor PBG agreed to buy 75.5% of Lebedyansky for $1.4 billion, in a deal that excludes Lebedyansky’s mineral water and baby food operations. The price will make it PepsiCo’s biggest acquisition since the purchase of Quaker Oats and Gatorade for $14 billion in 2001, and its biggest ever outside the US.
The deal is not expected to be completed until the third quarter of this year, and PepsiCo and PBG may then acquire the remaining 24.5% of Lebedyansky shares.
PepsiCo is expanding strongly in Eastern Europe, and had been seeking for some time to secure a leading position in Russian juice. Lebedyansky is the world’s sixth biggest producer of juice and nectar, and heads the Russian market with a share of about 30%. Last year, the company’s juice sales topped $800 million, while its mineral water and baby food businesses added revenue of $18 million and $123.8 million respectively.
European Coke bottler Coca-Cola Hellenic and The Coca-Cola Company already own Russia’s second biggest juice company, Multon, which has a market share of about 25%.