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. Last Updated: 07/27/2016

WBD Net Profits Slide on Costs of Expansion

Top juices and dairy firm Wimm-Bill-Dann said Monday its first-half net profit slid as costs grew with a big expansion campaign.

Profits slipped in the first half to $22.41 million from $23.19 million.

However, the company posted a quarter-on-quarter profit increase to $11.81 million from $9.6 million, slightly ahead of forecasts. The company said the increase in costs due to national and foreign expansion projects was temporary. Chief executive Sergei Plastinin said the "aggressive expansion stage" was coming to an end.

"We acquired factories fairly aggressively this year," Plastinin told a news conference. "Now we cover all the main regions ... although it's true we don't rule out that we might buy another, or two, or three companies."

The company produces most of its goods near Moscow but has been on a campaign to expand across Russia and even outside its borders in former Soviet states such as Kyrgyzstan.

The quarterly profit figure came in slightly above the expectations of analysts polled, which ranged from $10 million to $11.6 million.

"There were almost no surprises. The figures are slightly higher at EBITDA level, but I think some charges are not included in EBITDA the way the company calculated it," United Financial Group analyst Alexei Krivoshapko said.

"Margins on juice compressed, margins on dairy expanded. The effective tax rate was lower ... all the rest was absolutely predictable," he said.

WBD shares, which remain relatively illiquid, were untraded at $16.09 on Monday, a low for the year.

The company listed its stock in New York in February at a price of $19.50, raising $134 million. The stock peaked at $25.35 but has declined as Russian shares fall victim to declining world markets.

Wimm-Bill-Dann was founded and named to sound foreign in the early 1990s at a time when Russians preferred to buy imported goods, a situation that has now reversed.

EBITDA (earnings before interest, taxes, depreciation and amortization) rose to $46.70 million from $46.03 million in the first half of last year. Revenues were up to $402.87 million from $331.55 million. "We saw sales growth in the first half that reflects our efforts to increase scale and profitability," Plastinin said. "As we expected, this brought about an increase in operating costs."

Sales expenses more than doubled year on year to $50.56 million from $24.29 million in the first half of 2001, while administrative expenses edged up to $29.76 million from $25.28 million.

Accounts are to U.S. Generally Accepted Accounting Standards.