Schloss Wachenheim AG - Konzern


Schloss Wachenheim improves ROI as planned in the first half of 2004/05 – Ambra listed on the Warsaw stock market as of May

Tuesday, 15. February 2005

EBIT up 20 percent to 15.0 million EUR / 32-percent gain in annual net profit to 8.7 million EUR / Polish subsidiary's IPO slated to yield 40 to 50 million EUR / Expansion in Eastern Europe as the fulcrum of future growth

Frankfurt, February 15, 2005. The Schloss Wachenheim Group, as the world's leading producer of sparkling and semi-sparkling wine, producing more than 200 million bottles annually, has further improved its profitable efficiency during the first half of the 2004/05 business year (July 1 through December 21, 2004). Earnings before interest and taxes rose by 20.2 percent to 15.0 million EUR (previous year: 12.5 million EUR). Annual net profits expanded by 32.2 percent to 8.7 (6.6) million EUR. As anticipated, group revenues declined by 11.0 percent to 196.8 (221.2) million EUR. At a press meeting in Frankfurt last Tuesday, CEO Nick Reh told journalists, "Our renouncement of the unprofitable vodka business in Poland, coupled with our product line adjustment in Germany, has diminished our sales revenues, but the bottom line nevertheless looks a lot better now." Indeed, our strategic decision to shed unprofitable business segments and product lines is really bearing fruit. "Modern products with good earnings potential, together with expansion outside of Germany," Reh emphasized, "are what is ensuring our future."

Anticipated jump in full-year profits
For the 2004/05 business year ending June 30, the board of directors is expecting total revenues of 340 million EUR and group year-end profits totaling some 10 million EUR. That would amount to a 70 percent increase over the previous year. In 2003/04, the group attained year-end profits totaling 5.8 million EUR - and that was already nearly three times as much as the year before (1.8 million EUR). On the other hand, the group stopped writing down its labels at the beginning of the old business year 2003/04. Sales proceeds came to 370.1 million EUR that year (after 403.8 million EUR the year before), while group EBIT was successfully expanded to 14.3 million EUR (after 9.7 million EUR the previous year).

Major international growth potential
The Wachenheim Group's revenues from the last business year break down to 46.5 percent from Germany and 53.5 percent from foreign-based companies. Due to the elimination of our vodka business in Poland and to losses on exchange in Eastern Europe, our foreign revenues are temporarily lower and now expected to contribute 50 percent of overall sales proceeds in the current business year. "With the exception of that one special effect," Reh noted, "foreign business activities offer outstanding growth potential for our group. In the medium and long term we certainly will be expanding our sales on foreign markets."

As of December 31, 2004, the group counted 887 employees (previous year: 906). Our foreign-based companies account for well over half of that number, namely 549 (previous year: 567).

Outstanding stock price development
Over the past 18 months, shares of Wachenheim stock (on the market since 1948) have appreciated outstandingly. During the last full business year, i.e., between July 1, 2003, and June 30, 2004, our quoted price rose by nearly 50 percent, from 4.99 EUR to 7.45 EUR. And during the first half of the current business year, the paper again increased significantly in value, listing at 11.69 EUR (opening quotation) on February 14, 2005.

Ambra's IPO makes room for further expansion
Our biggest project in the current business year will culminate in May with the initial public offering of our Polish subsidiary Ambra S.A. on the Warsaw stock market. "We," said Nick Reh, "are expecting proceeds on the order of 40 to 50 million EUR, which we plan to split evenly for use in further developing the East European markets and for paying off loans."

In the course of the past ten years, the Wachenheim Group has secured itself a strong-to-leading market position in a number of Eastern European countries. Production facilities are now up and running in Poland (Ambra), the Czech Republic and the Slovak Republic (Soare Sekt) and in Romania (Karom Drinks). Their products (sparkling wine, wine, vermouth, non-alcoholic beverages) are being exported to most other countries of Eastern Europe. "We intend to keep this success story going," the CEO emphasized, "and we are considering further acquisitions and participations in Poland, the Czech Republic, Hungary, Romania and Russia." The group, he said, also intends to share the great opportunities - as well as the risks - of such expansion with additional investors, and the planned floatation is seen as the best way to do so. The capital-market and exchange-rate situation in Poland is presently very good, Reh pointed out, and "Ambra's planned IPO will help us double our group's equity capital and simultaneously reduce our bank liabilities."

Ambra was established in 1992. Sektkellerei Schloss Wachenheim acquired a majority interest in the company in 1998. In mid-2004, the Group expanded its ownership of Ambra from just under 89 percent to 100 percent. In the meantime, Ambra has emerged as an umbrella for Wachenheim's entire Eastern-European business scope. For the current business year the subgroup plans to achieve segment earnings of 3.0 million EUR on a turnover of around 80 million EUR.

Ambra: Poland's market leader for sparkling wine and wine
In Poland, with its 38.6 million people, the Wachenheim Group already provides roughly 50 percent of all sparkling wine and 25 percent of all wine in general (including sparkling wine and vermouth). Ambra markets all three of Poland's leading sparkling-wine labels: Dorato, Cin&Cin Spumante and Michelangelo, plus the most popular vermouth (Cin&Cin), the most-sold wine (Fresco) and the leading kiddy drink (Piccolo).

Position defended on the stagnating German market
On the domestic market, Sektkellerei Schloss Wachenheim has held its ground well in the face of persistently sluggish consumption. Despite the fact that the Germans are still "world champion" consumers of sparkling wine, overall consumption has declined in recent years. Per capita consumption dropped from more than 5 liters a year in 1994 to less than 3.8 liters a year in 2003 and 2004. Those are the lowest levels since 1978. Indeed, that downturn is one reason why Schloss Wachenheim AG's sparkling wine sales figures for 2003/04 receded from 71.2 million bottles (0.75 liter) to 65.7 million bottles. Other contributing factors included price hikes and our market streamlining of the Wachenheim product profile. In the words of Deputy Board Chairman Uwe Moll, who is responsible for marketing and sales, "Sparkling wine is a high-quality beverage that simply does not lend itself to being sold off at rock-bottom, garage-sale prices." In the future, too, he says, Wachenheim will not succumb to the temptation of "generating volume growth via aggressive pricing."

For years now, Sektkellerei Schloss Wachenheim has maintained a nearly stable German market share of 21.1 percent. This translates to third place behind Rotkäppchen-Mumm and Henkell & Söhnlein (Oetker Group). Wachenheim's most well-known labels are Faber (19 million bottles sold last year), Belmont, Feist Riesling, Schloss Wachenheim and Nymphenburg.

Market leader for novelty beverage prosecco
Wachenheim played a decisive role in turning Italy's sparkling wine prosecco into a real novelty beverage on the German market, and we have further consolidated our market leadership in the course of the past business year. While rising purchase prices did have to be passed on to the customer, resulting in, for some, a transgression of psychologically salient price thresholds, Uwe Moll reminds consumers that, "our labels 'Linea Vini’ and 'Azzurro’ are the leaders of the beyond-three-Euro price range, that is, they have cut our competitors down to size."

Fit and trim without alcohol: Light live sets trends
Uwe Moll described the "Light live" label's de-alcoholized wines and sparkling wines as last year's most successful products. "We hit the right nerve with them. People are paying attention to healthy, low-calorie nutrition and physical fitness nowadays, and our nonalcoholic party alternatives are really catching on," he said. In Germany alone, we have already sold 2.5 million bottles (0.75 liter) of these trendy products, and Uwe Moll is expecting demand to keep increasing not only in Germany, but just as well in such other western countries as Great Britain, the USA and Scandinavia.

Robby Bubble sans "bubbles"
With 6.6 million bottles sold, the kiddy drink Robby Bubble was equally successful. Due to irritations in Germany caused by the obligatory deposit uproar, this innovative product was not on the market between January and October 2003 and eventually had to be left uncarbonated to get it back on sale while avoiding, as Uwe Moll put it, "[German Ministry of the Environment] Trittin's nonsensical bottle deposit regulation. Even with the latest version of the regulation, which is soon to take effect," Sales Director Moll continued, "we will still be able to offer Robby Bubble free of deposit.

Major market power in the mother country of sparkling wine
In France, the mother country of sparkling wine, Schloss Wachenheim has markedly expanded its market position since acquiring the "Charles Volner“ label from the Bacardi Martini Group in October 2003. "Our share of the sparkling and semi-sparkling wine market (excl. Champagne)", Nick Reh asserts, "has reached nearly 50 percent. That strategic success will certainly help us continue to fortify our cost + market leadership in Europe."