Preliminary 2003 financial results indicate that the Baltika Brewery maintained a level of profitability above average in the sector and recorded an increase in sales volume.
According to preliminary data, during 2003 Baltika was able to achieve a legal and organizational restructuring of the company, to reorganize the system of sales, and still avoid the decline in sales volume that usually accompanies such changes in major companies. The annual financial results show that sales volume increased from 16.06 million hectoliters in 2002 to 16.17 million hectoliters in 2003. It was determined that sales increased both on the territory of Russia and in export markets. In 2003 these figures stood at 15.17 million hectoliters and 1 million hectoliters respectively.
During the year 2003 Baltika successfully completed construction and brought on line two new factories – in Samara (January) and in Khabarovsk (April). At the same time the Company modernized and expanded production capacity at factories in St Petersburg, Rostov-on-Don and Tula, all of which made it possible to create a uniquely balanced system of geographically distributed production, the basis for future strengthening of the Company’s market position.
At the start of 2003 the Company’s leadership took the decision to carry out a nationwidereorganization of the system of distribution on the territory of Russia. According to the plan this process should be completed in the first half of 2004. The result will be to achieve maximum presence of the Company’s products at points of sale, to ensure the transparency of product flow and control over the entire chain of price formation from producer to final consumer. It should be remarked that the experience of other companies, both foreign and domestic, which have traveled this road shows the following: the period of such reorganization, as a rule, is accompanied by a fall in sales and loss of market share. Baltika was prepared for these consequences and set for itself the task of minimizing their impact.
Baltika was created in 1990 and ever since 1996 it has been the leader on the Russian beer market. It should be borne in mind that the level of growth which the Company has achieved made it necessary to carry through significant changes not only in the structural organization of the system of sales but also involving major and expensive investment projects for organizing the production of ingredient supplies and other material inputs of the beer brewing sector, financing ecological measures, creating the Company’s own transportation fleet and engaging in a high level of community participation. The Company is busy finding solutions to all of these tasks already today. Other participants in the market will inevitably face these challenges in the future.
Against this background the Company continues to generate high positive cash flow, thereby creating the necessary precondition for completing the structural reorganization and for carrying out new investment plans in the coming year. The repayment of a significant part of its debt by the Belarus brewery Krinitsa was carried out on the basis of decisions of the International Commercial Arbitration Court and became a supplemental source of financial resources. In December 2003 the Company received back more than 9 million dollars.
During 2003 the Company’s successes were noted at numerous competitions including the 7th All-Russian Competition for ‘Best Russian Enterprises’ carried out by the Russian Union of Industrialists and Entrepreneurs, the Chamber of Commerce and Industry of the Russian Federation, and the Expert Institute supported by the Government of the RF. Baltika was awarded the title of ‘Enterprise - Leader’.
The leadership position of the Company was also remarked by the Kommersant Publishing House when it compiled its ratings in The Largest Companies of Russia. The Top200. In terms of stock market value during 2003 Baltika once again was the leader among enterprises in the food sector. Baltika was already previously ranked among the 20 largest companies cited in The 200 Largest Companies of Russia, compiled by the journal Den’gi
on the basis of market capitalization of companies and their sales volume in 2002.
In this context the Company’s financial results in 2003 can be seen as positive: sales volume grew; the Company severely restrained the growth of expenses while maintaining a level of profitability above average in the sector.
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