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BELUGA GROUP announces the financial results for H1 2020

27
august 2020

BELUGA GROUP announces the financial results for H1 2020: net revenue and EBITDA increased by 23% to 26 283 million and 3 325 million rubles respectively, while operating profits have risen by 25% to 2 167 million rubles and net profits by 2% to 460 million rubles.

BELUGA GROUP (MOEX: BELU), the leading alcohol beverages company in Russia, has published the IFRS consolidated financial results for H1 2020.

Financial highlights and main corporate events


1H 2020

Sales in volume terms (thousands 9L cases)

7 173 (+15%)

Revenue (million RUB)

26 283 (+23%)

Operating profit (million RUB)

2 167 (+25%)

EBITDA (million RUB)

3 325 (+23%)

Net profit* (million RUB)

460 (+2%)

Earnings per share (RUB)

35,76 (+22%)

* Net profit was affected by one-off currency exchange rate losses of the group’s foreign-currency deposits (321 million rubles).

Despite the COVID-19 pandemic and ensuing financial crisis, the group continued to demonstrate sustained development in the first six months of the year by focusing on efficiency and innovations. While external factors had a one-off effect on financial performance in this period, the strategic foundations underpinning BELUGA GROUP's activities remain unchanged. Business diversification helps the group achieve its goals and hit key performance targets.

From January to June 2020, the company managed not only to maintain production levels despite the implementation of additional safety measures and social distancing rules at its production facilities but also increased its output according to production statistics. This has allowed the group to become a leading manufacturer of spirits during the reporting period in all key categories such as vodka, liquors, cognac, and whiskey.

Double-digit growth was recorded for both in-house and imported brands for which the group is the exclusive representative in Russia. The main growth drivers were Belenkaya and Arkhangelskaya vodkas, Zolotoy Reserv brandy, Fox & Dogs and Troublemaker whiskeys, and Green Baboon gin. Grant's whisky, Ron Bracelo as well as Torres, Masi, and Faustino wines were among the growth drivers for partner brands.

The global pandemic has had a predictable effect on exports, but the group still managed to achieve some positive results by changing its tactics and focusing on off-trade and digital distribution channels. As a result, the first six months of 2020 saw Beluga's sales grow by 91% in Germany and 82% in Poland compared to the same period of 2019. In addition, our flagship brand also strengthened its position in the USA, where sales grew by more than 21% between January and June 2020. This makes it the third-fastest growing brand in the retail chain channel according to IRI statistics.

The group's in-house retail operations continued to expand in Russia, with the total number of WineLab retail outlets reaching 622 by the end of Q2, as well as further special attention being devoted to e-commerce and innovations. H1 2020 saw the chain's sales grow by 53% compared to the same period last year. Meanwhile, the chain's EBITDA increased by a factor of 2.5, reaching 1.2 billion rubles.

The group invested significant funds to support the healthcare system in the regions of its presence in an effort to help combat the COVID-19 pandemic and provide assistance to local communities. Millions of rubles were allocated to buy medical equipment and personal protective gear for medical facilities in Arkhangelsk, Primorsky Krai, Moscow, and the Moscow region.

The company’s results allowed for the inclusion of BELUGA GROUP shares in the Broad Market Index and the Consumer Sector Companies Index on the Moscow Exchange in late May. In late June, the group's ordinary shares were upgraded from the Level Three Section to the Level Two Section in the Quotation List of Securities accepted for trading on the Moscow Exchange.

Commenting on the group's financial results, BELUGA GROUP CEO Alexander Mechetin noted, "Despite the COVID-19 pandemic and the resulting crisis, our group continued to deliver solid operating and financial performance in the first six months of 2020. Revenue increased by 23%, primarily as a result of a 15% growth in total shipments and a significant increase in proprietary retail sales.

Out net profits also deserve special mention. If it hadn't been for one-off expenses such as losses from foreign currency exchange rates—which totaled 321 million rubles—and an extra 35 million rubles in charitable spending during the COVID-19 pandemic, our net profits would have increased by 81%. When the ruble rapidly devaluated in March this year, BELUGA GROUP had to create additional foreign currency reserves to hedge against potential further devaluation. This also resulted in a threefold increase in the group's cash position.  

Speaking of the group's operations, I would like to note that we are continuing our strategy of diversification and focusing on the premium segment in these new circumstances, adapting our approach to suit realities and emphasizing innovations. We've been strengthening our positions in the premium segment both in the vodka category—where we unveiled several new brands during the reporting period, including Orthodox—as well as in other product categories, including the launch of the Tête de Cheval sparkling wine which is made using a traditional Champagne method. We're also developing related segments and diversifying operations to reduce risks. We're acting as distributor for more than 50 leading foreign suppliers in Russia and are constantly entering into new contracts. This year, our portfolio expanded to include the major Armenian brandy Noy and the top-selling Portuguese wine in Russia, Mateus. We're also bringing our own brands to foreign markets: our brands are now sold in more than 100 countries worldwide and we continue to develop our WineLab retail chain. WineLab stores offer customers the full range of BELUGA GROUP products, a click-and-collect option for placing orders, and the opportunity to buy new products from the company before they're available anywhere else. Solid performance in all these segments combined with in-house manufacturing of in-demand products ensure sustained and consistent growth for the company.

BELUGA GROUP's 20 years of industry experience, intimate knowledge of market conditions and trends, and focus on customers and their needs allow us to remain a market leader and demonstrate consistent financial and operating performance even during periods of serious market turbulence. We have more product launches, partnerships, and new markets lined up for the future. We're going to continue keeping our customers satisfied with our high-quality brands and products to help them celebrate the most important and memorable events in their lives."

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