Central European Distribution Corp. (CEDC)
Q2 2009 Earnings Call
August 05, 2009 08.00 AM ET
Jim Archbold - Vice President, Secretary and Director of Investor Relations
William Carey - Chairman, President and Chief Executive Officer
Christopher F. Biedermann - Vice President and Chief Financial Officer
James Archbold - Vice President, Secretary and Director of Investor Relations
Douglas Lane - Jefferies and Company
Daniel Wakerly - Morgan Stanley
Natasha Zagvozdina - Renaissance Capital
Previous Statements by CEDC
» Central European Distribution Corp. Q3 2009 Earnings Call Transcript
» Central European Distribution Corporation Q1 2009 Earnings Call Transcript
» Central European Distribution Corporation Q4 2008 Earnings Call Transcript
Thank you. I'd like to welcome everyone today to CEDC second quarter 2009 earnings conference call. Joining me this morning are William Carey, our President, CEO and Chairman and Chris Biedermann our Chief Financial Officer.
Please note that the content of this call contains time sensitive information that is accurate only as of today with the live broadcast. Excuse me, -- August 5, 2009. The online replay will be available shortly after the conclusion of the call. You may also view a copy of yesterday's press release on our website. Please also note that statements made during this conference call other than those related to historical information constitute forward-looking statements within the meaning of the Private Securities Litigation and Reform Act of 1995. Without limiting the foregoing discussions of the forecast estimate targets scheduled plan believes, expectations and the like intended to identify forward-looking statements.
These forward-looking statements which are based on management's current beliefs and assumptions, and current information known to management involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to differ materially from any future results performance or achievements expressed or implied by forward-looking statements. Additional information concerning factors that could cause actual results to differ materially for those forward-looking statements are contained in the press release issued August 4th, in the Form 10-Q to be filed with the Securities and Exchange Commission. CEDC is under no duty and undertakes no obligation to update any forward-looking statements made in this call.
With that, I'll turn the call over to William Carey, our President and Chief Executive Officer. Bill?
Thank you, Jim. I want to welcome everyone to our second quarter earnings call. As we typically do in these calls, get to a brief summary of what we're going to be discussing. First half, I'd like to discuss about the economy and our markets we work in, little about the market overview kind of what we're seeing in Poland and Russia today, are given to the P&L down to operating profit. I'll turn it over to Chris Biedermann, our CFO who'll take you through the changes in our balance sheet that took place with the consolidation of RAG this quarter and then I'll take you through a bit the outlook and then open up the call to questions.
But generally on the economy what we're seeing is certainly in terms of sentiments, certainly sentiment is improving for emerging markets. It's vastly improved over last four to five months. GDP is coming off to lows, as you know most markets hit their lows in the first quarter through April and Russia and Poland is coming off these lows and both markets are expecting around a 2 to 3% GDP growth going into 2010.
Interest rates have been coming down in both markets, 2-300 basis points over the last six months. Inflation has been somewhat slowing, we're seeing cost pressure certainly reduced in both of our markets and obviously with these more positive dynamics you've seen of the currencies, with the sentiment also have been quite strong over the last 60 to 90 days and also I think oil had to play in the ruble. Also that the oil price moving from around 50 to $70.
If you look at the market overview, generally what we're out of Poland, we're seeing the vodka market slightly improving. As said before the vodka market was generally down about 9 to 10%. What we're seeing now is projected probably about a 5 to 6% decline versus the 10% decline before, slight improvement in July, spirit pricing remaining low still down 30-40% from year ago periods, that's the raw spirit pricing. The other cost pressures and the raw material goods we don't really see any. Import still doing quite well, still holding out, we have 12% in the quarter, our margins are trying to improve. Also the imports now with the strengthening of the currency over the last 90 days. Our exports are doing extremely well, we're up 40% in the quarter even when we look at July, we're up over 100% on exports in July, obviously coming off a little bit but still it's encouraging to see the exports picking up quite dramatically.
Inventories which you know, we had a problem in the first quarter; inventories have walked its way through, inventories are more at the market norms today and if you look at the excise situation, the government is pretty much flat this year on six to seven months of excise collections and from meetings we've had with the administrative finance, we're not really seeing probably any bigger interest to increase excise to any same degree as you saw this year, starting in 2010 and what even talking 2009 but that win squashed on because they're barely breakeven now with the excise reduction...with the excise increase from beginning of this year.