Schloss Wachenheim AG - Konzern


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Sektkellerei Schloss Wachenheim AG expands sales and profits

Thursday, 16. February 2006

First half of 2005/06 business year: Growth strategy in the European abroad pays off / High demand for the Group's nonalcoholic beverages

Frankfurt, February 16, 2006. Sektkellerei Schloss Wachenheim AG remains on course for further success and growth. In the first half of the 2005/06 business year (July 1 through December 31, 2005) the world's leading producer of sparkling and semi-sparkling wine (with an annual output of more than 200 million bottles) once again markedly increased its sales and profits. Group revenues rose by 3.2 percent to 203.2 mil. Euros after 196.8 mil. Euros over the same period last year. Group earnings (EBIT) expanded by 16.7 percent to 17.5 (15.0) mil. Euros, and the Group's annual net profit rose 24.2 percent to 10.9 (8.7) mil. Euros.

EU accession countries continue to drive growth
Meeting with journalists in Frankfurt last Thursday, Board Chairman Nick Reh explained that "Our positive semi-annual results grew out of our long-term strategy based on opening up new markets in the European abroad and developing innovative trend and wellness beverages. The strongest growth stimuli for our company are still coming from the former Eastern Bloc countries, where we have assumed a leading market position." The Ambra subgroup, where our business activities in Poland, the Czech Republic, the Slovak Republic, Romania and other Eastern and Central-Eastern European countries are bundled, is reportedly developing excellently and giving the entire group lots of impetus, especially since its IPO in June 2005.

Marked increase in full-year earnings targeted
The CEO has predicted a 5.6 percent increase in revenues, to 354.0 mil. Euros for the current business year 2005/2006 ending June 30, 2006, after 335.1 mil. Euros the year before. Earnings are also expected to increase strongly. An 8.0 percent increase in group earnings (EBIT), to 18.9 (17.5) mil. Euros, is anticipated. If all goes as planned, the Group's annual net profit will rise to 9.5 (8.3) mil. Euros, for a gain of 13.7 %.

Stock price developing nicely
The excellent business situation at Sektkellerei Schloss Wachenheim AG is being duly honored by the stock market. In the course of the last business year, i.e., from June 30, 2004 to June 30, 2005, SSW's list price climbed more than 32 percent, from 7.45 Euros to 9.87 Euros. On February 14, 2006, a share of Wachenheim stock was quoted at 10.25 Euros (opening quotation).

Inland: Wellness wave helps sale of lifestyle drinks
The average German drinks 3.8 liters of sparkling wine a year, hence earning the country the title of "world-champion drinkers of sparkling wine". However, figures in excess of five liter per capita, which were common in the mid-90s, have become a thing of the past.

Sektkellerei Schloss Wachenheim adopts a two-prong strategy for the stagnating domestic market: The company's first prong is to strengthen its traditional labels Faber, Feist Riesling, Belmont, Schloss Wachenheim and Nymphenburg. As Deputy Board Chairman Uwe Moll observes, "Sparkling wine is a high-quality beverage for festive occasions and shouldn't be sold dirt cheap. Even lots of consumers are getting sick and tired of pinching pennies and are now and increasingly in a mood to pay a fair price for good quality from domestic sources."

Light live – The party alternative sans alcohol
The second prong consists of developing alternative lifestyle beverages with which to tap into new sources of turnover. "Our nonalcoholic 'Light live' label is becoming increasingly popular among fitness-conscious consumers," Moll explained. In 2005 alone, this nonalcoholic alternative to sparkling wine sold 3.4 million bottles (0.75 liters each), for a gain of 22 percent over the previous year. This year, sales are expected to surpass the 4 million mark (up 18 percent). "We were the first in our branch to perceive the trend toward new, modern beverages," Marketing / Sales Director Moll pointed out, "and that has made us the practically unrivaled dominator of the nonalcoholic still / sparkling wine segment."

Children love to party with Robby Bubble
Our nonalcoholic party beverage Robby Bubble also enjoys a singular selling position in supermarkets. Children love it. We sold nearly seven million bottles (0.75 liter each) in 2005 and are aiming for 8.5 million bottles (an increase of 21 percent) this year.

As Uwe Moll explains, "Beverages external to the traditional sparkling-wine sector are already accounting for 40 percent of our domestic turnover and are driving more and more of our export business." Thanks to heavy demand abroad - including Great Britain, the USA and Scandinavia - the German members of the Wachenheim Group are now reporting an export quota of 13 percent.

Moll said there would be a number of additional innovative beverages appearing in 2006, and that the company would be presenting some of them in March at the Prowein wine fair in Düsseldorf. "We believe," he said, "that this will be just what lots of consumers are looking for."

Leading wine supplier in Eastern Europe
Ambra, the Wachenheim subsidiary listed on the Warsaw stock exchange since June of last year, has spent the last few years working its way up to become the leading producer, importer and distributor of still and sparkling wine in Central and Eastern Europe. With upwards of 50 labels, the Ambra Group sells some 46 million bottles of its own sparkling wine, still wine, vermouth and nonalcoholic beverages.  Another 10 million bottles with international labels are imported and marketed. Ambra has production facilities in Poland, the Czech Republic and Romania, and their products are very successfully exported to most countries of Central and Eastern Europe.

In Poland, Ambra now supplies 51 percent of all sparkling wine and 28 percent of all other wine (still wine, semi-sparkling wine, vermouth) consumed by the country's population of 38.6 million. Ambra owns and distributes all three of Poland's leading brands of sparkling wine (Cin&Cin Spumante, Dorato and Igristoje), in addition to the most popular vermouth (Cin&Cin), the most-sold wine (Fresco) and the leading kiddy drink (Piccolo).

Ambra is also the number two purveyor of sparkling wine in the Czech Republic and Romania, and of wine per se and vermouth in the Czech Republic. CEO Nick Reh: "We will continue to write new chapters of this success story." He noted that the company has adequate resources to finance the acquisition of additional companies, holdings and labels. In the years to come, further expansion efforts will focus on gaining additional chunks of the Polish, Romanian and Czech markets and on developing the Hungarian, Bulgarian and Russian markets.

Strong market position in France
In France, the mother country of sparking wine, the 100 percent Wachenheim subsidiary CEVIM turns over 75.5 million bottles of sparkling and semi-sparkling wine every year, hence commanding a market share in excess of 40 percent. With a view to increasing the sale of such leading labels as Charles Volner, Opéra, Muscador and Veuve Amiot, the Group reorganized its structures of distribution. The field staff was downsized, and Bardinet was entrusted with the distribution of the CEVIM labels. In substantiation of those measures, Uwe Moll declared, "Bardinet is one of the most capable and highly effective marketing organizations in all of France." Assuming further successful cooperation with Bardinet, Moll said that a joint enterprise might be launched within two or three years.

Large growth potential abroad
Systematic expansion of the share of external business is part of the Wachenheim Group's long-term strategy. While the 2004/2005 business year still had Germany and "the rest of the world" each accounting for 50 percent of Group revenues, the percentage share of external business is supposed to be increased to 52 percent this year. Indeed, according to CEO Reh, "The 2007/08 business year will see us selling 70 ... 75 percent of our volume on foreign markets."

The Group presently has approximately 900 employees, nearly two-thirds of whom (567) are located outside of Germany.



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