Zhytomyr Dairy’s Sales up 32.4% yoy in 2007

At its AGM on March 28, Zhytomyr Dairy (ZHMZ: BUY) announced its 2007 financials. In 2008 the company plans to launch 15 new types of ice-cream and to expand its distribution network. Also, new production facilities are to be constructed this year: production workshop (USD 4 mln) and freezing logistic center (USD 3 mln).

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Zhytomyr Dairy 2007 financials, USD mln
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               2006    2007   Change, %
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Net Revenue    57.6    76.3       32.4%
Gross Profit     12.3    16.7       35.7%
EBITDA            7.3     8.3       13.1%
Net Profit         3.5     3.8        7.6%
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Anna Dudchenko:  The company’s reported net revenue was 17% higher than we expected. However, profitability was slightly below our projections: EBITDA and net margin of 11% and 5% compared to 14% and 8% forecasted, and worse than 2006 margins of 13% and 6%, respectively. We attribute the decline in margins to the higher purchase price of raw milk which grew 70% in 2007. On a positive note, Zhytomyr Dairy announced at the AGM its plans to develop a new business segment of frozen fruits & vegetables. We believe the company will be better positioned against possible raw milk price increases in the future thanks to sales diversification into non-dairy products. We confirm our target of USD 3 per share, an upside of 50%, and maintain BUY recommendation.