Annual Report 2010 - Baltika Breweries

Financial Position
Liquidity and efficiency
Due to high operating profit
in 2010 and working capital
optimization, as well as the
implementation of the strategy
for investing in priority projects,
the Company accumulated
a considerable volume
of free cash flow, the major
share of which was used for
dividend payments according
to a resolution adopted at the
Annual General Shareholders
Meeting. Dividends paid
by the Company in 2010
exceeded RUB 27 billion,
of which RUB 21 billion
were 2009 dividends and
the rest — the interim 2010
dividends. Temporarily free cash
funds were used by the Company
for short-term investments on the
capital market.
During 2010, the Company
continued to upgrade its working
capital management system.
Reducing the working capital / net
revenue indicator more than two
times demonstrates success
in this field.
Despite an increase in the
excise component of receipts,
the share of trade receivables
was considerably reduced.
The improved turnover in trade
receivables can primarily be
attributed to efficient interaction
with the Company’s distributors
and the maintenance of low
overdue trade receivables in the
traditional retail and on-trade
channels.
The deficit on the grain market
(caused by poor grain crop) led
to the establishment of reserve
stocks of barley and malt to cover
market risks, thereby influencing
material stock levels as of the
end of the year. However, the
Company successfully
implemented projects to upgrade
supply chain management, which
helped maintain sufficient stock
throughout the year and reduced
the average level considerably.
10
8
6
4
2
0
Trade working capital / net revenue, 2009 / 2010
%
6.3 %
Trade
working
capital /
Net
revenue
2009
2.7 %
-3.2 %
Stocks Trade
receivables
-2.5 %
Trade
accounts
payable
Achieving strong results for optimizing working
capital made it possible for the Company to focus on
upgrading the quality of services for distributors while
maintaining a sufficient stock of products in highly
volatile demand conditions.
Strengthening partner relationships with suppliers and
implementing efficient financial instruments improved
the turnover of trade accounts payable with no
appreciable effect on the Company’s costs.
Despite a considerable improvement in working capital
efficiency and on-line investment management, the
efficiency of the Company’s assets declined slightly
due to the reduction in operating profit under the
above-mentioned market conditions. It is worth noting,
however, that the efficiecy of the Company’s assets
is still higher than the industry average.
3.3 %
Trade
working
capital /
Net
revenue
2010
27