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Central European Distribution Corporation (CEDC)

Q4 2009 Earnings Call

March 1, 2010 8:30 am ET

Executives

William Carey – President & CEO

Chris Biedermann – CFO

James Archbold – Director IR

Analysts

Douglas Lane - Jefferies & Company

Margaret Kalvar - Harding Loevner

Andrzej Knigawka - ING Financial Markets

Michal Potyra – UniCredit

[Victor Dima] - Unspecified Company

Daniel Wakerly - Morgan Stanley

Presentation

Operator

Good day and welcome to the CEDC fourth quarter and full year 2009 earnings conference call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to the Director of Investor Relations, Mr. James Archbold. Please go ahead, sir.

James Archbold

I'd like to welcome everyone today to CEDC's fourth quarter and full year 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 contents of this call contains time sensitive information that is accurate only as of the date of the live broadcast, March 1, 2010. The online replay will be available shortly after the conclusion of the call. You may also view a copy of today’s press release on our website.

Please also note that the 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 Reform Act of 1995. Without limiting the foregoing discussions, the forecasts, estimates, targets, schedules, plans, beliefs, expectations, and the like are 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 and 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 from those forward-looking statements are contained in the press release issued today and in the 2009 Form 10-K 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.

William Carey

Thank you Jim, I want to welcome everyone to our fourth quarter and full year earnings call for 2009. Just to give you a little bit background, first of all the very brief economic data, really not getting into too much of that, because most of you obviously know what’s happening in the economy in our core markets.

We’ll give you the fourth quarter results and full year results. Chris will take you through the balance sheet, the recent financing that we did in the fall, including the impact of that refinancing, cash flow and other balance sheet items. I’ll take it back over and go over some of the government regulations that we saw in Russia recently and how that’s looking for 2010, get into 2010 outlook, also talk a little bit about the distribution business here in Poland, also some of the speculations surrounding this [inaudible] process that’s been ongoing, touch on that a bit, see how the synergies are progressing, and we’ll talk projections and guidance. Then open the call for any questions.

So first off on the economic data, generally most of you know that Russia had a quite negative year last year, close to minus 8% GDP decline. Most analysts are projecting this year about 2% to 3% to 4% increase. In Poland its ranging anywhere from 2% to 3% increase this year, up from around 1% last year. So a very slight increase for Poland, quite a different mood for Russia.

Inflation is coming down in both markets of Russia and Poland which we forecast to continue to come down. There’s been some rate reductions in Russia recently. Expectations are further rate reductions in Russia. Poland is estimated probably to keep rates stable at least for the next five, six months. Generally we’re seeing exchange rates moving pretty much in line with the euro dollar move except the currencies with the dollar strengthening over the last two months, what you’ve seen is a pretty stable actual Zloty and Ruble currency, which actually is helping us on the revaluation of some of our euro liabilities from the bond offer we did last fall.

Unemployment is holding fairly steady in both markets, has moved up a touch but nothing that significant. So what we’re seeing generally how this impacted the consumer, we’re seeing generally a fairly, through the fourth quarter a general softness still from the consumer. We did see the markets increase a bit in the second half of the fourth quarter which I’ll get into in a minute. But generally we’re anticipating a bigger step up from the consumer especially in Russia, probably later in the second half of this year, beginning 2011.

If you look at our fourth quarter results, first off it was impacted slightly by the currency. The Zloty was fairly stable year on year on the fourth quarter, the Ruble lost about 8% year on year so we did have some drop of currency for our numbers of top line down to the bottom line. If you look at the vodka market in general for Poland and Russia, were quite similar. We saw in the first half of the quarter roughly around a 3% to 6% decline in the vodka markets and we saw a, which went in line with the decline from the year before which really we saw the decline coming in the second half of the quarter in 2008.

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