Annual Report 2009, including financial report IFRS

Transcription

Baltika Breweries
Annual Report
CONTENTS
2
LETTER FROM THE PRESIDENT
4
ABOUT THE COMPANY
5
COMPANY'S PHILOSOPHY
6
MAIN EVENTS OF 2009
8
BRAND PORTFOLIO
14
BEER MARKET. THE COMPANY’S POSITION
20
FINANCIAL POSITION
24
KEY PROJECTS
30
CORPORATE SOCIAL RESPONSIBILITY
38
CORPORATE GOVERNANCE
46
RISK MANAGEMENT
48
SECURITIES
52
CONSOLIDATED FINANCIAL STATEMENTS
82
INTERESTED PARTY TRANSACTIONS
89
INFORMATION FOR SHAREHOLDERS AND INVESTORS
90
CONTACT INFORMATION
LETTER FROM
THE PRESIDENT
2
Annual Report 2009
Baltika has continued to expand into foreign markets: licensed Baltika
beer production has started up in Australia, shipments began to Lebanon, Vietnam, Chile and Guinea and Baltika № 7 beer is now sold in
Great Britain and Norway. Baltika continues to be Russia’s leading beer
exporter: the Company’s products can now be found in more than sixty
countries. During the past year, Baltika has maintained its market leading position as Europe’s largest selling brand (in terms of volume) and
also has become Russia’s highest selling consumer brand.
In 2009, the integration of Baltika into the Carlsberg Group continued.
Baltika and Derbes Brewery began the merger of their operations in
marketing, distribution and sales. Production of Baltika brands was also
launched in Kazakhstan.
I am sure that in the future the market will stabilize and restart its growth.
This will depend on both general economic factors, and also on legislative regulation of the industry.
Dear Shareholders,
2009 was a challenging year for the
Company and for the brewing industry as a whole. Despite the crisis and
negative legislative tendencies, we
managed to complete another successful year. Notwithstanding a difficult economic situation, lower sales
volumes, increased competitor activity
and a drop in consumers’ purchasing
power, Baltika was able to increase its
market share and improve its financial
results due to a balanced brand portfolio, innovations and the continued
development of sales and distribution channels. At the same time, we
strengthened our leadership across all
price segments, maintaining high quality production and consumer loyalty.
We looked on 2009 as a ‘year of opportunities’ – believing that unfavorable external factors would give us the impetus to search for new growth
opportunities: we were not mistaken. Thanks to the general situation on
the beer market, we focused on implementing excellence programs
aimed at improving the effectiveness of operational processes. Together
with contingency measures and the efforts of all Company employees
Baltika achieved strong performance.
2010 also promises to be a challenge, primarily due to a tripling of the
beer excise and a number of legislative initiatives to limit beer sales
and advertising. However, we would point out that Baltika, as a market leader, is fit to face any challenge. Baltika has balanced production
capacities, a strong distribution system, a powerful professional team
and experience in beer production and promotion, as well as significant
potential to develop related beverage categories.
We are prepared for variety of development scenarios and we are convinced that due to our flexible strategy and strong management team,
we will be able to successfully overcome any difficulties – as we have
done throughout our 20-year history.
I would like to express my sincerest gratitude to the Company’s employees for their hard work and diligence, for their readiness to act quickly,
proactively and boldly, and for their contribution to Baltika results.
During the past year, we finished implementing large-scale investment
projects, including increasing the capacity of the Yaroslavl malting house,
and completing modernization of the
Baltika-Baku Brewery. These investments will help the Company to decrease its exposure to fluctuations in
malt prices and to continue to develop
its sales abroad.
Anton Artemiev
President, Baltika Breweries
Senior Vice President Eastern Europe,
Carlsberg Breweries A/S
Baltika Breweries
3
ABOUT THE COMPANY
BALTIKA BREWERIES
Baltika Breweries was founded in St. Petersburg in 1990. Modern equipment and the use of
advanced technologies allowed for the highest
quality production, which made Baltika the leader
in the Russian beer market in 1996. The Company
retains its market-leading status today.
During its almost 20 year history, Baltika has
demonstrated dynamic development – acquiring plants, introducing new production capacities
and actively broadening its distribution network
both domestically and internationally. At the end
of 2006, Baltika merged with three other Russian
brewing companies – Vena, Pikra and Yarpivo.
In April 2008, Baltika joined the international
Carlsberg Group, which now holds 88.86% of the
Company’s charter capital.
Currently, Baltika is the largest consumer goods
production company in Russia and Eastern
Europe. The Company has breweries in 10 Russian cities: St. Petersburg, Yaroslavl, Tula, Voronezh, Rostov-on-Don, Samara, Chelyabinsk,
Novosibirsk, Krasnoyarsk and Khabarovsk. In
2008, the Company acquired a brewery in Azerbaijan. The total production capacity of its breweries is 52 million decaliters of beer per month. To
meet its own malt needs, the Company has built
two malt-houses in Tula and Yaroslavl and is also
developing agricultural projects in eight Russian
regions.
A diverse portfolio of brands allows the Company
to meet the most exacting consumers’ tastes. In
addition to the key Baltika brand, the Company
portfolio also includes around 40 beer, low-alcoholic and non-alcoholic brands on the national and
regional levels, including: Arsenalnoye, Nevskoye,
Yarpivo, Tuborg, Carlsberg, Kronenbourg 1664,
and Asahi. The Baltika brand stands in first place
in terms of European sales (according to data
from Canadean and Euromonitor agencies) and
is also one of the three most expensive Russian
brands. Different sorts of Baltika brand beer are
produced under license in Australia, Great Britain,
Uzbekistan and Ukraine.
Baltika has a broad distribution network. The
Company’s products can be purchased in 98% of
Russia’s points of sale.
2010 marks Baltika’s 20th anniversary.
BALTIKA IN 2009
Russian beer market leader, with a market
share of more than 40%;
Sales volume – 42.7 million hectoliters;
Revenue – RUB 93,648.7 million;
Operating profit – RUB 29,617.5 million;
Operating margin – 31.6%;
Over 11,000 employees.
4
Annual Report 2009
COMPANY’S PHILOSOPHY
MISSION
We create high quality products and develop a
culture of beer consumption to bring people joy
and pleasure while socializing.
VISION
OBJECTIVES
To help the Baltika brand achieve a leading position globally.
To increase Baltika’s share of the Russian beer market, while maintaining high profitability and high quality products.
What will contribute to achieving these objectives:
We want to become a benchmark in the brewing
industry – a model company that sets standards
for breweries worldwide.
A focus on creating powerful brands, premiumisation and innovation.
For us, being a model company means being a
leader.
Maintaining high quality products and a high level of service.
PRINCIPLES UNDER WHICH
WE OPERATE
Our customers and consumers are at the heart
of every decision we make.
Together we are stronger.
Leadership in all market segments, regions and sales channels.
Constant development of our employees’ competencies and professionalism.
Increasing business processes efficiency, along with operational
excellence.
Searching for additional sources of profit growth via:
— Widening sales geography;
— Developing related directions.
We are each empowered to make a difference.
We want to win.
We are engaged with society.
Baltika Breweries
5
MAIN EVENTS OF 2009
FEBRUARY
13
The Company launched production of Tuborg Lemon and Tuborg Black. This is the first double launch in
Baltika’s history and it is a non-standard marketing solution that allowed the Company to create a unique joint
promotion strategy for the two different sorts.
19
The Company announced financial results for FY 2008.
24
The first import brand – Corona Extra – appeared in the Company’s portfolio. Due to the agreement with Grupo
Modelo (Mexico), Baltika became the exclusive distributor of Corona Extra beer on the territory of Russia,
Belarus, Kyrgyzstan, Turkmenistan, Tadzhikistan, and Uzbekistan.
MARCH
12
Baltika began supplying Baltika № 7 Export and Baltika № 9 Extra to Lebanon. Baltika is the only Russian beer
available in this country’s market.
17
Baltika sent its first shipment of Baltika № 7 Export to Vietnam.
25
Baltika’s Vice President, HR & Corporate Affairs, Daniil Briman, was appointed Chairman of the Council of the
Union of Russian Brewers.
APRIL
02
The Company’s Annual General Shareholders Meeting was held.
08
At the Monde Selection-2009 international contest four Baltika varieties received awards.
21
Baltika started production of Khlebny Kray kvass – a product in the ‘Refreshment drinks’ category wich is a
new direction for the Company. Kvass became the first non-alcoholic drink in Baltika’s portfolio to be sold
throughout Russia.
23
At the international contest, the iTQi Superior Taste Award, Baltika’s products received 5 awards.
MAY
20
Following modernization, a grand reopening was held at the Baltika-Baku brewery in Azerbaijan.
29
During Brandbuilding 2009, an annual event, results of the ‘Absolute brand’ contest were announced. Baltika
received a prestigious professional award for its success and skills in the development and promotion of the
Baltika brand.
JUNE
12
The Company began licensed production of the Baltika № 3 Classic in Australia. This is the only Russian beer
that is produced under license in Australia.
18
In Yaroslavl, a ceremony was held to mark the opening of the second expansion of the malt-house – with a
capacity of 105,000 tons of malt per annum.
JULY
6
03
Baltika started the producing its new federal brand Zatecky Gus (Zatecky Goose). This beer is brewed using
an original recipe with the use of the famous Czech Saaz hop.
20
Baltika began exporting beer from the Company’s first foreign production site – Baltika-Baku brewery.
30
At the international World Beer Awards contest Baltika № 6 Porter received the title ‘World’s Best Stout/Porter.’
Annual Report 2009
AUGUST
10
Baltika began exporting Baltika № 7 Export to Norway.
27
Baltika № 7 Export beer was recognized as the best European lager at the BrewNZ Beer Awards international
contest.
SEPTEMBER
09
At the International Beer Challenge contest, four Baltika products received awards: Baltika № 4 Original
received a golden award; Baltika № 7 Export was given a silver award and Baltika № 6 Porter and Baltika № 8
Wheat received bronze awards.
OCTOBER
02
Baltika’s achievements in the area of personnel training and development were recognized with two awards –
in St. Petersburg, Baltika’s project ‘The school of internal coaches’ was recognized as the ‘Best HR project,’ in
Moscow it received a professional award in corporate training field at Trainings INDEX’09.
23
Ekaterina Azimina, Baltika’s Vice President, Finance and Economics, was named the winner of the national
award ‘Financial director-2009’ in the category ‘Best financial management for a large business.’
27
Baltika began supplying Chile with beer.
NOVEMBER
11
At the Russian awards ceremony, ‘Consumer good of the year,’ for the eleventh consecutive year, Baltika № 3
Classic was recognized as the ‘Best national brand’ in the ‘Beer’ category. In the ‘Licensed beer’ category, the
Tuborg brand was named the winner.
18
At the international European Beer Star Awards contest, two products from the ‘Baltika Select’ series –
Baltika № 4 Original and Baltika № 6 Porter – received awards.
23
Baltika began deliveries of beer to Malaysia.
26
The Company sent its first shipment of Baltika № 9 Extra and Baltika № 7 Export to Guinea.
DECEMBER
02
At an Extraordinary Shareholders Meeting, shareholders voted to carry out licensed production of Baltika
brands at Derbes Brewery Ltd facilities (Kazakhstan).
02
The first shipment of Baltika beer, made up of six brands, was sent to Panama.
21
According to an expert evaluation performed by Forbes magazine, Baltika was recognized as 2009’s topselling brand, among all Russian consumer goods brands created in Russia or specifically for the domestic
market.
25
Baltika began producing the new brand Eve, which is focused on women audience.
28
A decision was adopted to reorganize Baltika-Almaty LLC – resulting in its joining Derbes Brewery Ltd.
31
A 20-year license agreement for production of Baltika’s brands in Kazakstan was signed with Derbes
Brewery Ltd.
Baltika Breweries
7
BRAND PORTFOLIO
8
Annual Report 2009
During 2009, the Company continued to actively develop its brand
portfolio, which was supplemented by a broad range of novelties. This
allowed Baltika to not only maintain and strengthen its leadership across
all price segments, but also to occupy new market niches.
At the start of the reported period, the first imported brand entered the
Baltika portfolio: the famous Mexican beer Corona Extra, which is one of
the five most sold brands worldwide. In February, the Company carried
out the unique double launch of Tuborg Lemon and Tuborg Black, which
strengthened the premium image of the Tuborg brand. Successful brand
development of Kronenbourg 1664 was promoted by two exclusive art
series ‘Spirit of Paris on Kronenbourg 1664 cans.’
In a rating of Russian FMCG goods produced in Russia or specially for the Russian market, Forbes magazine named
Baltika the most popular brand. Arsenalnoye, Nevskoye, Yarpivo and Bolshaya
Kruzhka were included in the Top-50
trademarks.
At the end of December, the Company’s assortment was supplemented
by the introduction of Eve, a new super-premium brand, focused exclusively on a female target audience. It is an all natural refreshment drink
with a light sparkling taste and low alcohol content. Two Eve flavours –
featuring grapefruit and passion fruit juice – are produced under a
license from the Carlsberg Group.
In the premium segment, the main novelty of the year was Baltika Cooler
Lime beer, which reflects trends in the global market. This beer represents a combination of light refreshing beer and tropical lime tastes. This
is not the only change in the Baltika brand line-up: in the spring, Baltika
№ 4 Original joined the elite ‘Baltika Select’ series.
Baltika Breweries
9
BRAND PORTFOLIO
Baltika Breweries has a unique brand portfolio that is the strongest on the Russian beer market and includes around 40 beer,
low alcohol and non-alcoholic brands on both the national and regional level, which satisfies varied consumer demand.
Baltika beer brand portfolio by price segments
10
Annual Report 2009
At the end of June, the Nevskoye brand line-up
was supplemented by a new beer Nevskoye
Zhivoye, brewed specially for St. Petersburg
residents. This beer is not pasteurized and nonfiltered.
The mainstream portfolio was broadened by the
introduction of the new Zatecky Gus brand. This
beer is brewed using an original recipe with flavored Czech Saaz type hop.
A key 2009 project was the launch of the first federal
non-alcoholic product in the Company’s portfolio – the
Khlebny Kray (Granary Land) kvass. With enormous
brewing experience and expertise, Baltika was able to
offer its consumers an absolutely natural kvass, brewed
directly from malt using a traditional technology. Khlebny
Kray has a rich flavor and the classic refreshing taste of
a true Russian kvass*.
*Kvass is a traditional Russian non-alcoholic drink, very popular among Russians.
Significant attention was also devoted to developing regional lower mainstream brands. During
the reported period, brands such as Uralskiy
Master Zhivoye, Samara Svetloe and the
refreshing DV Ledyanoye, Sibirskiy Bochonok
Moroznoye and Don Ledyanoe, prepared based
on low-temperature filtration technology, were
added to the portfolio.
Baltika Breweries
11
BRAND PORTFOLIO
AWARDS
Throughout 2009, the Company actively participated in regional, all-Russian and international
contests. Both amateurs and professionals evaluated the quality of the Company’s products:
during the year, the Company’s beer and nonalcoholic brands received more than 50 awards
of various caliber.
In April, at the international Monde Selection
(Belgium) contest, medals were awarded to four
brands of beer: gold awards were received by
Don Classic, Baltika Nine and Nevskoye Classic,
silver award – by Uralskiy Master Classic. This
year, for the first time, the Company nominated
for an international contest the regional brands
Don and Uralskiy Master. Recognition at Monde
Selection confirmed the Company’s full compliance with international brewing standards.
A month later, the jury at another renowned European contest, the iTQi Superior Taste Award
(Belgium), awarded the Company’s products
five awards in different categories: Baltika № 7
Export, Uralskiy Master Classic, Baltika Nine and
Nevskoye Classic received silver medals and Baltika № 0 Non-alcoholic was awarded a bronze
medal.
In July, at the XI Moscow International Festival of
Beer, the first ‘gold’ was awarded to a novelty –
the Khlebny Kray kvass. During the ‘People’s
Degustation,’ guests rated it as the festival’s ‘Best
debut.’ As a result of voting by festival guests, for
the ninth consecutive time, Baltika № 3 Classic
was awarded the ‘Best People’s Beer’ and Baltika № 0 Non-alcoholic was recognized as the
‘Best non-alcoholic beer.’ Tuborg Green was recognized as the ‘Best license beer.’
12
Annual Report 2009
At the end of July, according to results from the
worldwide degustation contest World Beer Awards
(Great Britain), Baltika № 6 Porter received the
honorary title ‘World’s best Stout/Porter.’ At the
World Beer Awards, beers are evaluated on
parameters such as: flavor, taste and aftertaste
completeness and complexity, balance and character availability.
During the summer, the Company was the only
Russian brewing industry representative at the
BrewNZ Beer Awards (New Zealand) contest.
Baltika № 7 Export was recognized as the best
‘European lager.’
In the fall of 2009, results from one of the most prestigious contests in the
brewing industry, the International Beer Challenge (Great Britain), were
announced. For the first time in the history of this contest, top awards
were won by Russian brands: Baltika № 4 Original received a gold medal
and Baltika № 7 Export was awarded a silver medal, while Baltika № 6
Porter and Baltika № 8 Wheat received bronze medals.
At the ceremony for Russia’s largest consumer good award ‘Consumer
good of the year,’ Baltika № 3 Classic was named ‘Best national brand’
in the ‘Beer’ category for the 11th consecutive year. In addition, Tuborg
received a well-deserved first place in the category ‘Licensed beer.’
Numerous awards recognize the great quality and superb taste of Baltika
products, as well as the utmost mastery of the Company’s employees.
In November, for the second consecutive time,
Baltika № 4 Original was awarded best ‘Red and
amber beer’ at the European Beer Star Awards
(Germany), and Baltika № 6 Porter won the ‘Porter’
category. This year competition was particularly
fierce: ‘Baltika Select’ brands competed against
836 other beers from 35 different countries.
Baltika Breweries
13
BEER MARKET.
THE COMPANY’S
POSITION
14
Annual Report 2009
THE RUSSIAN BEER MARKET
According to the Company’s internal estimates, in 2009, the Russian
beer market totaled 98 million hectoliters. Domestic beer consumption
dropped compared with 2008 and stood at 69 liters per person.
Russian beer market development dynamics (w/o cocktails)
Year
Beer market (million hectoliters)
2005
2006
2007
2008
2009
86.3
94.9
109.7
109.3
98.0
6.0
10.0
15.7
-0.4
-10.3
Beer market growth (%)
Source: Company estimates
Russian beer consumption dynamics per person, liters
During the last 10 years, the Russian
beer market has demonstrated stable development dynamics. Its annual
growth rates have exceeded those in
more developed European markets.
However, due to the effect of the global crisis, the Russian beer market in
2009 experienced a 10.3% drop compared with 2008. This was a result of
the fact that the world economic crisis
had a much more negative impact on
Eastern Europe and Russia than it did
on other regions. The crisis resulted in
lower income for the population and a
drop in purchasing power, particularly
during the second half of 2009 against
the background of consumers’ savings
growth. This led to lower demand for
nearly all categories of food products
and beverages – and beer was not
an exception. Another specific factor which negatively affected the beer
market was negative weather conditions during summer and the fourth
quarter of 2009.
90
80
70
60
50
40
30
20
10
0
77
77
69
67
60
2005
2006
2007
2008
2009
Source: Company estimates
For large market players, a challenging situation tests a company’s strengths, but on the other hand, it also offers an opportunity to
strengthen existing market positions.
In the Russian beer market all major international brewers are presented.
The members of international groups: Baltika, SUN InBev, Heineken,
Efes and SABMiller – hold over 80% share of the market.
Leading producers share of the Russian beer market
2008
2009
38.8%
13.1%
40.6%
13.6%
6.5%
8.8%
6.2%
9.5%
Baltika
SUN InBev
Heineken
Efes
13.8%
19.0%
SABMiller
13.2%
16.9%
Others
Source: Business Analytica
Baltika Breweries
15
The general fall off in purchasing capacity and lower personal disposable income influenced the overall structure of consumption. Consumer
cost-saving primarily resulted in less frequent and lower volume purchases, and to some degree, a switch toward more economic brands
and packages and the trend for consumers to
switch from making purchases at low-size selling
points to buying through cheaper sales channels
(large discounters and supermarkets).
The structure of the beer market and Baltika’s beer portfolio based on price segments, in natural terms
Beer market
%
Baltika
100
11%
10%
10%
9%
23%
23%
26%
25%
18%
18%
25%
26%
90
80
70
60
50
40
Super-premium
30
20
48%
49%
Premium
39%
40%
Mainstream
10
Lower mainstream and Discount
0
2008
2009
2008
2009
THE COMPANY’S POSITION IN RUSSIA
In unstable economic conditions and a declining market, the Company
strengthened its positions: Baltika’s market share increased 1.8%, from
38.8% in 2008 to 40.6% in 2009. The Company’s total sales dropped
5.7%, whereas Russian beer sales fell 6.4%. The Company’s 2009 sales
volume, in natural terms, was 42.7 million hectoliters, including 41.7 million hectoliters of beer.
Dynamics of the Company’s market share in Russia
%
40
40.6%
38.3%
35
38.8%
36.1%
Baltika’s
share of the
Russian market
increased 1.8%
30
25
20
2006
16
Annual Report 2009
2007
2008
2009
During the reporting year, the Company strengthened its absolute leadership across all price segments of the market. These results were achieved
by demonstrating flexibility and successfully implementing the Company’s development strategy,
in crisis conditions, via brand portfolio innovation and maintaining consumer loyalty for Baltika
brands (despite an overall consumption decline).
The Company’s well-deserved reputation as a reliable and stable partner allows Baltika to keep attractiveness to clients and distributors.
Regional brands demonstrated strong dynamics: despite the overall
market decline, sales of the brands DV (+23%), Don (+13%) and Samara
(+10%), supported by innovations (the so called ‘live’ and ‘ice’ types of
beer), showed double digit growth. Baltika № 3 Classic – the leader of
the mainstream segment – again displayed its strength and potential,
demonstrating higher sales against an overall backdrop of lower consumption. The new sort in the Baltika brand’s line-up Cooler Lime also
positively affected brand development. In the end of the year Baltika,
developing a new prospective segment of drinks oriented at female
audience, launched a brand Eve. As part of its strategy of developing
non-beer products, during the past year, Baltika entered the kvass category with the Khlebny Kray brand and by the end of 2009, the Company
already held third place in the kvass market.
Beer market growth dynamics and the Company’s beer sales in Russia
%
19%
20
16%
15
12%
11%
10
10%
6%
5
1%
0
0%
-5
-6%
-10
The Company’s beer
sales dynamics
-10%
-15
2005
2006
2007
2008
Beer market dynamics
2009
Sources: Rosstat and Company estimates
Baltika Breweries
17
THE WORLD BEER MARKET
In 2009, growth rates for the global beer market slowed down, which
was largely due to the ongoing economic crisis, which influenced consumer activity dynamics. However, according to Euromonitor (an inter-
national research company), in 2009, world beer
sales increased 1.1% and reached 184 billion liters of volume.
Dynamics of the global beer market, billion liters
200
180
159
140
184
182
178
169
160
120
100
In 2009, growth
rates on the
global beer
market slowed
down.
80
60
40
20
0
2005
2006
2007
2008
2009F
Source: Euromonitor
Russia remains one of the world’s largest beer markets based on consumption volumes. According to estimates by the international research company Canadean, Russia is the fourth largest beer market in the world, after China, the United States and
Brazil.
2009 leading countries based on beer market volume (forecast), million hectoliters
450
400
409
350
300
241
250
200
150
108
100
98
90
65
62
52
37
36
ico
ex
M
n
pa
Ja
ain
rit
B
t
ea
Gr
ain
Sp
d
lan
Po
50
0
ina
Ch
A
US
il
az
Br
Sources: Canadean and Baltika
18
Annual Report 2009
ia
ss
Ru
y
an
m
r
Ge
Russia is the
world’s fourth
largest beer
consuming
country,
based on beer
consumption
volume.
Leading international beer market players
Anheuser-Busch InBev NV
20%
SABMiller Plc
10%
Heineken NV
7%
Carlsberg Group
6%
Others
58%
Four companies
account for
more than 40%
of the world beer
market.
Source: Euromonitor
BALTIKA IN THE WORLD
The slowing down of global beer market growth
impacted Baltika’s plans for sales abroad. As a
result of this, in 2009, the volume of the Company’s export sales totaled 1.8 million hectoliters; and taking into account licensed production
abroad, the total volume of the Company’s sales
abroad exceeded 2.7 million hectoliters. Thus,
Baltika brands’ sales abroad (including BaltikaBaku) in 2009 decreased 5% compared with
2008. The Baltika brand was responsible for more
than 65% of the 2009 total sales volume abroad.
In 2009, Baltika successfully implemented a number of key projects on
the international market: in May, following large-scale modernization, the
Company started up the Baltika-Baku Brewery in Azerbaijan; in June,
production of Baltika № 3 Classic, under a licensing agreement, was
launched in Melbourne, Australia; in December 2009, Company shareholders agreed to a licensing agreement to produce various Baltika and
Nevskoye brands at the Derbes Brewery facilities in the Republic of
Kazakhstan. More detailed information on these events can be found in
the ‘Key projects’ section of the annual report.
In 2009 Baltika continued its sales expansion and entered the new markets of: Norway, Lebanon, Guinea, Guinea-Bissau, Uganda, Chile, Panama, Vietnam and Malaysia. Today, Baltika products are sold in more
than 60 countries; and Baltika exports account for 70% of all exported
Russian beer.
Baltika Breweries
19
FINANCIAL POSITION
20
Annual Report 2009
FINANCIAL POSITION
Indicators
2009
2008
Change
2009/2008
Sales, million hectoliters
42.7
45.3
-5.7%
Including sales in Russia,
million hectoliters
39.6
42.3
-6.4%
Revenue, million RUB
93,648.7
92,482.3
+1.3%
Cost of sales, million RUB
-42,394.9
-47,599.5
-10.9%
Gross profit, million RUB
51,253.8
44,882.8
+14.2%
Distribution expenses, million RUB
-19,150.1
-20,132.5
-4.9%
Administrative expenses, million RUB
-2,528.7
-2,602.2
-2.8%
Other income/ expenses, million RUB
42.5
125.9
-66.2%
Operating profit, million RUB
29,617.5
22,273.9
+31.0%
Profit for the year, million RUB
23,372.3
15,508.2
+50.7%
Operating margin, %
31.6
24.1
+7.5p.p.
Gross margin, %
54.7
48.5
+6.2p.p.
Return on assets (ROA), %
37.2
29.7
+7.5p.p.
Return on equity (ROE), %
46.5
41.0
+5.5p.p.
Return on capital employed (ROCE), %
50.8
38.1
+12.7p.p.
147.14
97.99
+50.2%
Earnings per share, RUB
The Company’s 2009 sales volume dropped 5.7%. However, year-onyear, revenue from sales increased 1.3% from 2008 and totaled 93,648.7
million rubles.
Under conditions of decreased consumer demand and a significant
decline in the beer market, Baltika’s
business was relatively resistant to
unfavorable external environmental
conditions. The Company managed to
contain the drop in sales volume and
demonstrated good financial results
in 2009, due to active brand portfolio
optimization work, sales and distribution development and proactive cost
cutting measures.
In 2009, the Company’s operating profit substantially increased (+31%)
compared to 2008 and reached 29,617.5 million rubles.
These significant results were achieved due to brand portfolio optimization work and effective investment in the development of sales channels
and key regions.
In 2009, the Company maintained the net average price increase (6.8%)
on beer in line with the inflation rate in this category. Due to a three-fold
increase in the excise tax on beer effective as of January 2010, there
may be multi-directional dynamics affecting gross and net prices for
various brewers. However, as in previous years, Baltika plans to use a
weighted approach to pricing.
Baltika Breweries
21
FINANCIAL POSITION
A key factor contributing to increased profitability was the anticipatory cost reduction in operating costs.
In addition to favorable circumstances in the raw
materials market and lower purchase prices,
caused by economic conditions, the Company
implemented various projects to upgrade operational effectiveness. Among the most important cost-cutting projects were the Company’s
agricultural project to grow malting barley and
projects to up-grade its own malting houses,
which would dilute the Company’s dependence
on suppliers. Concluding long-term agreements
with suppliers, decreasing purchase volumes
(the prices of which are tied to foreign currency)
and outsourcing a number of functions had a
significant positive impact on cutting expenses.
As a result, 2009 expenses on producing goods
decreased 5.5% per unit year-on-year. Production costs declined 10.9% compared with 2008.
Net operating margin increased 7.5p.p. compared with the previous year and reached 31.6%.
The Company’s logistics have had an additional
positive effect on corporate cost reduction. Per
liter costs for warehousing and product transportation were 10% lower in 2009 than in 2008.
These results can be attributed to the Company’s
efforts to build the most effective supply chain in
the industry. Factors which explained lower logistics costs include: delivery route optimization,
the usage of own transport; decreased average
delivery distance as a result of cross-production and supply chain optimization; warehouse
capacity optimization and controlling services
providers’ prices.
22
Annual Report 2009
In 2009, the Company invested significant
resources in promoting its products. Compared
with 2008, promotional expenses decreased to
a lesser extent compared to other expenses. A
significant restructuring of commercial expenses
occurred during the reporting year, which
allowed for the best investment to be achieved.
In 2009, administrative expenses decreased
2.8%. As with other directions, this improvement
was achieved through increased effectiveness,
scale and the wider use of external service providers.
Investment
In 2009, the Company finalized two large
investment projects which had begun in 2008:
increasing malt-house capacity in Yaroslavl
(2009 investment reached 609 million rubles)
and modernizing the Baltika-Baku brewery
(2009 investment reached USD 13.6 million).
Other investment projects included: realizing
marketing innovations and developing sales
and management systems. Overall investment
totaled 3.7 billion rubles.
During 2009, the return on assets (ROA) increased and reached 37.2%.
This increase was primarily due to upgraded efficiency and a decrease
in overall investment volume. The return on equity (ROE) ratio increased
5.5p.p. and totaled 46.5%. Profit per share increased 50.2% and totaled
147.14 rubles per share for 2009.
In 2009, the Company carried out an extensive work to upgrade the
effectiveness of managing working capital. Due to the successful realization of numerous projects, without impact on the efficiency of the supply chain, inventory levels dropped and the turnover period for accounts
payable increased. Inventory optimization was conducted for all categories of items – finished goods, raw materials and unfinished goods. The
Company actively uses factoring schemes for interactions with materials suppliers, gradually increases the quality of demand planning and
develops inventory management across the entire distribution chain.
Changes in the structure of current assets are also linked with the temporary increase in accounts receivable, as a result of the accumulation
of product inventory in the place of sales to the final consumer, on the
eve of the New Year holidays. It is also worth noting the positive trend in
the average turnover level of these assets during the reporting period.
Year-on-year, Baltika increases the effectiveness of its asset usage,
which leads to greater profitability and earnings per share, which results
in higher paid-out dividends.
Liquidity and effectiveness
During 2009, due to higher net revenues, significantly lower operating costs and optimized
working capital, the Company accumulated a significant net cash flow – 30.4 billion rubles – which
was primarily spent on repaying loans and credits
and paying out dividends. In 2009, the Company
directed more than 7.5 billion rubles to repay earlier received loans and credits, as well as paying
out dividends in the amount of 14 billion rubles.
Free cash flow was used to make short-term
investments on the money market.
In 2009, the Company was able to maintain and
increase its rate of return on capital employed
(ROCE). As of the end of 2009, this indicator
stood at 50.8%.
Baltika Breweries
23
KEY PROJECTS
24
Annual Report 2009
Completing modernization of the Baltika-Baku brewery
By 2009, the Company had carried out large-scale reconstruction of the
Baltika-Baku – a brewery, which has a 40 year history. A high tech PET
line was installed at the brewery, in addition, the filling line for glass bottle,
the cooking order and the fermentation and filtration rooms were modernized. A ceremonial opening of the brewery was held May 20th, 2009.
All equipment installed at the Baltika-Baku brewery was manufactured
by leading producers and conforms to international standards and Baltika’s requirements regarding beer production. Post-modernization, the
brewery’s production capacity reached 1 million decaliters per month.
New equipment, coupled with the introduction of advanced brewing
technologies, allowed for higher quality local brands Xirdalan, Afsana,
Bizim and 33 Export to be produced, as well as the production launch of
Baltika and Arsenalnoye brands.
Baltika-Baku’s upgraded production capacity allows not only for the satisfaction of increasing internal demand for high quality beer, but also for
production export to neighboring regions.
Doubling malt-house capacity in
Yaroslavl
th
On June 18 , 2009, in Yaroslavl, the
Company held a ceremonial opening
of stage two of the malting plant – with
a capacity of 105,000 tons of malt per
annum. Doubling capacity of the Yaroslavl malt-house is an important stage
of Baltika’s investment policy, aimed
at decreasing production costs while
maintaining high quality production. The
decision to double malt-house capacity
in Yaroslavl was made largely due to the
Company’s successful launch of its own
agricultural project in Russia’s Central
Federal Region.
Brewery modernization was one of the largest investment projects in
the food sector in the Republic of Azerbaijan in recent years.
Baltika № 3 production in Australia
In June 2009, licensed production of Baltika № 3 Classic beer (in 0.33
liter bottles) started at the Independent Distillers Company in Melbourne, Australia. The beer has been positioned in Australia’s growing
international premium beer segment and is sold in all Australian large
retail chains.
Baltika beer has been present in the Australian market since 2004 and
it is the only Russian beer in Australia. Among different types of Baltika
products, the most popular one – both among the Russian population
and with local Australians – is Baltika № 3 Classic. This was the reason
why the Company adopted a decision to produce this type of beer under
license in Australia, which significantly cut logistics costs and satisfied
higher demand for Baltika № 3 Classic beer in Australia.
Licensed production in Kazakhstan
On December 2nd, 2009, Baltika Breweries’ shareholders voted to conclude an agreement on the licensed production of Company brands at
Derbes Brewery LLC capacities in Kazakhstan.
Derbes Brewery is part of the Carlsberg Group and is one of the leaders
in the Kazakhstan beer market. The Brewery’s production capacity is
approximately 2.2 million hectoliters per annum. Derbes utilizes modern
high tech production methods that correspond to international standards. The product range includes brands such as: Derbes, Irbis, AlmaAta and Tuborg.
Baltika Breweries
25
KEY PROJECTS
According to the license agreement signed December
31st, 2009, Baltika granted the exclusive right for the
usage of trademarks, as well as the know-how for the
production, sales and distribution of licensed products,
for the Baltika and Nevskoye brands on the territory of
the Republic of Kazakhstan. The agreement is valid until
the end of 2029.
In 2009, preparations were started for licensed production. These included: integrating Baltika’s and Derbes’
operating processes in the field of marketing, distribution and sales, conducting an audit of the Company’s
production capacities, test brewing beer and evaluating
the quality of produced beer through consumers tastetesting.
Agricultural project development
Baltika continues to develop its own agricultural
project to grow brewing barley. This project allows
the Company to restrain price growth for produced goods and decrease dependence on market malt prices. In 2009, the average expenses
for barley grown within the project decreased
23% compared with 2008.
Baltika’s partners in its agricultural project are
agro-industrial businesses, which have a solid
production base, modern equipment, grain- drying capabilities and necessary storage conditions. The Company has strict requirements
toward the barley it is supplied. Baltika specialists
control barley production technology across all
stages, which ensure the Company receives the
highest quality ingredients. Within this agricultural
project, Baltika offers its partner businesses elitetype grains as trade credit.
26
Annual Report 2009
According to data from the Institute of General
Genetics named after N. I. Vavilov of the Russian
Academy of Science, barley’s average cleanliness (eliteness and the quality of types) in Russia
is 75%; only Baltika has the ability to reach 98%
cleanliness within the framework of its agricultural project. The Company actively cooperates
with agricultural producers in Tula, Voronezh,
Lipetsk, Kursk, Penza, Ryazan, Tambov, Chelaybinsk, Orel and other Russian regions. In 2009,
the Company signed 65 agreements to purchase
grain from agricultural companies in the Russian
Central and Privolzhye Federal Regions. Utilized
cultivation area increased 52% compared with
the previous year.
Excellence programs
The Company implements programs aimed at upgrading operational
effectiveness and maintaining high business profitability. Excellence programs have been introduced in areas, including: sales, logistics, production and purchasing. In addition to this, the Company has continued
to actively work on the ‘Lean Production’ project.
‘Lean Production’ involves the systematic usage of principles, methods
and instruments to increase effectiveness, based on a voluntary sustainable enhancement culture. Its primary goal is to minimize all types
of losses. In 2009, the Company continued to introduce ‘Lean Production’ at all corporate production sites. Last year, large-scale personnel
training was conducted in the Company’s branches. The Company
continued to work on other projects: ‘Streamlining,’ ‘Visualization,’ ‘Fast
realignment,’ ‘Protection from unintentional errors’ and ‘Training leaders,’ among others.
The Company developed the special programs ‘Ideas (Projects)’ and
‘Got an IDEA!’ which are directed at soliciting top-notch suggestions from
employees on how to optimize production activity. The best employee
suggestions are rewarded.
Baltika Breweries
27
KEY PROJECTS
Sales development
In 2009, due to a general fall-off in the Russian beer market, the Company was able to significantly increase the economic efficiency of its
Russian trade operations and achieved strong distribution indicators, as
well as good results for presence in points of sale.
bled compared with 2008 and represented nearly
one half of all sales in this channel. This strengthened the Company’s share in the given market
segment and resulted in growth of profitability.
The Commercial Excellence (or ComEx) project started by the Company
is focused on improving commercial activity. In its pilot stage, project
was implemented in the North-West and Moscow-Center Regions in traditional retail channel.
In the area of on-trade beer sales, the Company
increased sales activities of PET-packaged beer
in specialized beer shops and kiosks. These
stores and kiosks have recently demonstrated
fast growth. In these segments, almost all key Baltika brands are represented. As a result, across
Russia, 2009 draft beer sales increased 6%, and
coupled with tared production, there was a 10%
increase in on-trade compared with 2008.
Active work was carried out in many directions – including improving
interactions with distributors and forming a correct product mix based
on a point of sale’s specific characteristics. Particular attention was
paid to trainings for trade representatives that instilled an individualized
approach to clients and to effectively developing territories. Investment
in points of sale was also optimized.
In the territories in which the project was launched, the number of visits per point of sale for each trade representative increased 5% compared with 2008. The number of active clients that regularly purchased
the Company’s products increased 20%. The quantity of daily orders
increased and the share of shelf space went up, as did the average
quantity of represented assortment positions.
Furthermore, in 2009, the Company continued to develop its Retail Key
Account channel (in the format of modern hyper-, super- and mini- markets). The share of Baltika’s own distribution in this channel nearly dou-
28
Annual Report 2009
In 2009, an important strategic step for the
Company’s sales department was to change its
approach towards trade marketing functions in
Russia. Its transformation into marketing through
trade channels, the basis of which is studying consumers’ behavior at points of sale, will help apply
precise solutions in promoting brands through
various sales channels. It will also help strengthen
the Company’s success in the market.
‘Reverse Bottle’ project
One of the Company’s priorities is to actively work with
returnable bottles. Over the last several years, Baltika
branches have implemented a large-scale ‘Reverse
Bottle’ project, aimed at increasing the level of returned
glassware in production. As a result of this project, during the reporting period, the number of glass bottle
buy-back centers which work with Baltika bottles significantly increased.
The use of recycled glass bottles is favorable from both
an ecological standpoint and from a business point of
view: it cuts production costs and also decreases environmental impact.
‘Master of Planning’
The cross-functional ‘Master of Planning’ system
was launched at Baltika in January 2009. This is
an automated system to distribute volumes by the
Company’s branches based on demand forecast
and other factors, including: supply, production,
logistics and sales.
The system’s primary goal is to optimize company
costs, including those connected with raw material purchases, production and finished product
transportation along the supply chain. This system allows for high precision operational planning
at all of Baltika’s Russian breweries – based on
both decade and annual sales forecasts.
The Company’s principal expectations related to
the launch of the ‘Master of Planning’ project were
proven to be correct. All main goals were achieved,
including: improving and increasing planning
accuracy and economizing along the entire supply chain, taking into account factors such as: production costs, final product delivery costs, limits on
warehouse and transport load, inventory volumes,
the repetition factor of production batches, product distribution volumes across branches and the
definition of optimal delivery routes.
Baltika Breweries
29
CORPORATE SOCIAL
RESPONSIBILITY
30
Annual Report 2009
Labor relations
The Company’s market leading position provides it with significant competitive advantages, which help it attract and retain the best specialists.
The Company aims to create working conditions that allow its employees to fully realize their potential in an effective manner.
Social partnership
The labor relations in the Company are built in accordance with the principles of social partnership.
Since 2007, Baltika has had a Labor Collective Council, which is an
organ that represents the interests of all Company employees and provides them with the opportunity to participate in managing social policy. In July 2008, at the Council’s initiative and with the participation of
principal labor union organizations, a collective agreement was signed,
which recorded social guarantees and privileges, additional to the labor
legislation.
The 2nd General Conference of Company employees, which took place
in November 2009, summarized the Labor Collective Council’s results
over a two-year period and declared its activities satisfactory.
Compensation and benefits system
Baltika’s remuneration level is among the highest in the industry. Despite
the economic crisis and negative trends in the brewing industry, in 2009
the Company maintained a social package for its employees, as well as
increased employee remuneration 10% on the average.
The corporate social package includes a broad list of various benefits
and compensation including:
Voluntary medical insurance.
Life insurance and insurance against accidents.
Free meals in the Company’s canteens or compensation for meals
when an employee is travelling on business.
Welfare assistance in cases of weddings, childbirth, anniversaries
and retirement.
Additional payments for sick leave, travel expenses, etc.
The Principle ‘We are engaged with
society’ forms the groundwork of the
Company’s philosophy. Baltika makes
its contributions to social development and environmental protection by
developing and introducing business
practices based on observing corporate social responsibility principles.
On its premises, the Company has eight sports and recreation complexes that have modern fitness centers, saunas and pools. In 2009,
the Company opened new sports and recreation complexes at its
Khabarovsk, Krasnoyarsk, Voronezh, Chelyabinsk and Novosibirsk
branches.
The Company regularly conducts sports competitions for its employees.
In 2009, at all corporate branches, Baltika held sports days; corporate
teams also participated in football, mini-football, volley, basketball and
ski tournaments.
Baltika Breweries
31
Training & Development
Baltika focuses significant attention on developing its employees. This
is underscored by the type of programs that the Company’s HR Department creates, the activities of the corporate training center and the preferences given to internal candidates when vacancies arise.
To maintain its personnel development and training system, in 2009,
the Company developed the ‘Internal coaches school’ project, which is
aimed at creating additional development opportunities for employees
within the Company and on conducting regular training programs by
attracting and training experts from the Baltika team. Currently, the Company has 10 internal programs and more than 50 of its own coaches.
The ‘Internal coaches school’ has already received two awards: the
Trainings INDEX’09 professional award in the corporate training field in
the category ‘An effective solution in the field of training and development for business support’ and recognition in the ‘Best HR project’ contest in the ‘Best anti-crisis project’ category.
Personnel Performance Appraisal
Baltika has instituted an Annual Performance Appraisal that allows the
Company to develop employees and to improve their personal skills.
This system allows to design a complex training and development plan
for each employee, prioritizing the business point-of-view, as well as
building a correct system of ‘manager-employee’ interaction based on
principles of trust and partnership.
32
Annual Report 2009
Environmental management
Company’s ecological measures have multiple
components – water protection projects, waste
management and air protection measures, as
well as measures connected with rationally using
resources.
The Company does not limit its investment to
large-scale ecological programs, such as cleaning facility construction, or alternative energy
source usage projects. Baltika conducts events
for residents of various cities, which allow everyone to contribute to improving environmental
conditions and to making their lives more comfortable. For example, during an event in Novosibirsk, were liquidated spontaneous damps in the
city parks, in Chelyabinsk, residents cleaned the
embankment and a portion of the Miass River,
in Krasnoyarsk, a boulevard of 60 elm trees was
planted, in Rostov, a litter pick up was held on the
banks of the Kuban River and in Samara, the Alekseevskiye Lakes were cleaned.
The ‘Reverse Bottle’ project
In 2009, Baltika reused 682 million glass bottles in its
production. Multiple usage of recyclable packaging
decreases the negative environmental impact of glass
production. From year to year, the Company works to
increase the number of bottles returned to its breweries.
‘Earth Day’
On March 28, 2009, Baltika employees from
St. Petersburg to Khabarovsk supported the
‘Earth Day’ initiative. The aim of this World Wildlife Fund (WWF) project is to draw attention to
the global warming and climate change challenges. For this event, for one hour, people
from all around the world stop using electricity
to decrease atmospheric greenhouse gas emissions.
Helio-system in Khabarovsk
In February 2009, a sports and recreation complex with a sauna, pool and relaxation zone was
opened at the Company’s Khabarovsk branch.
In September, the Company finished installing a
solar battery system at the site, which optimizes
energy consumption. Now, thanks to the implementation of this unique ecological project, the
complex can be heated via renewable energy.
Using solar energy helps cut energy consumption
and also decreases environmental impact.
Baltika Breweries
33
Labor protection and industrial safety
Consumer relations
Baltika undertakes special measures to control and prevent potential threats to the safety of the Company’s
employees and the employees of contractor organizations. Workplace safety depends not only on the technical level of the breweries, but also on personnel training
and the observance of safety rules (an area to which the
Company pays special attention).
Production quality is Baltika’s number one priority. The Company bears responsibility towards
its consumers and society to ensure quality production, as well as to observe its safety. The
Company must also ensure that its products are
consumed in a responsible manner.
Workplace evaluation
In 2009, to fulfill terms of its collective agreement, the
Company carried out large-scale workplace evaluations, which focused on checking that labor conditions
conformed to established standards. Fourteen parameters were measured, including: noise, vibration, microclimate, light, labor heaviness and intensity. Workplace
appraisals will allow the Company to carry out organizational, technical and health improvement measures,
as well as to provide employees with reasonable compensation and other benefits for working in harmful labor
conditions.
During the 1990s, Baltika was one of the first Russian companies to obtain the international quality
certificate ISO 9001. Since that time, the Company’s quality management system has been maintained and regularly upgraded.
In 2009, it was confirmed that the BaltikaSt. Petersburg Brewery conforms to international
food safety management standards. The site
received a certificate of conformity for its brewing production processes for its Hazard Analysis
and Critical Control Points management system.
During the certification process, both internal and
external audits were conducted, which checked
that product quality and business processes conformed to international requirements. HACCP
concept is based on seven basic principles that
focus on quality production and consumer health.
These principles call for the regular evaluation
and management of factors that affect the food
safety of production. Currently the development
and introduction of this system is ongoing at the
Company’s branches.
Participation in social affairs
Social and economic partnership:
Agricultural project
The brewing industry’s contribution to the Russian economy is not limited solely to breweries,
but also includes the development of related sectors of the economy, such as: agriculture, tare
and packaging industry, transportation, retail and
public catering enterprises. Over 600,000 Russian jobs exist at companies that are partners of
the brewing industry.
34
Annual Report 2009
Baltika contributes to the development of the
agricultural sector in Russia’s regions. In 2005,
the Company began to implement its own brewing beer barley project. The principal aim of this
project was to cut the cost of malt – one of the
primary ingredients in beer production – without
compromising quality. To achieve this result, a
decision was adopted to help Russian agricultural producers grow high class beer barley,
and thus, to replace imported ingredients with
domestic ones.
Responsible drinking
In 2009, the Company participated in more than
60 holiday events across Russia and in a number
of cases, was the initiator of these events. During the year, more than 1.5 million people visited
these events – which allowed the public to evaluate a wide selection of the Company’s beer and
non-alcoholic products, listen to a wide variety of
music and compete in various contests, as well
as to participate in events aimed at developing a
responsible beer consumption culture.
Within the framework of beer and kvass festivals, exhibits were held that
displayed beer posters from the Carlsberg Breweries A/S collection. The
exhibition included posters from Scandinavian painters from the late XIX
to the early XX centuries, demonstrating various styles and directions,
which had long crossed advertising boundaries and formed part of the
foundation for historical and cultural development. Items in the collection
illustrated to exhibition attendees the history of the brewing industry and
the creation of a beer drinking culture, as well as the development of the
poster as an art form.
In 2009, the Company participated in beer and kvass festivals in 10
Russian cities: St. Petersburg, Moscow, Yaroslavl, Tula, Sochi, Rostovon-Don, Samara, Novosibirsk, Krasnoyarsk and Khabarovsk. The Days
of Khabarovsk, Krasnoyarsk, Novosibirsk, Tula and Rostov-on-Don
received corporate support, as did the ‘Anniversary of the Leningrad
Region’ in Vyborg. Popular Company brands sponsored large music
concerts.
Baltika Breweries
35
Charity
The Company continued to implement the ‘Beer patrol’ social project.
The aim of this project is to draw public attention to the illegal sale of
beer to minors. Whereas in 2008, public control over conformity with
beer sales regulations, with the participation of Baltika, was organized
at festive events – beer festivals and Days of the City, in 2009, checks
were also carried out at retail outlets to diminish the number of salespeople violating the law. Overall, 42 raids were carried out in 24 Russian cities, as well as in one foreign city – Alma-Aty, Kazakhstan. ‘Patrol’
participants visited 890 retail points and uncovered approximately 200
breaches.
In addition, during the reporting year, Baltika again participated in the
Union of Russian Brewers ‘You are 18? Prove it!’ program, which includes
distributing special informational sticker and informing trade personnel
and buyers of the need to prohibit beer sales to minors.
36
Annual Report 2009
For many years, Baltika has been engaged in
charitable activities that provide assistance to the
regions in which it is present. In total, during the
reporting year, the Company contributed around
RUB 126 million to charitable projects and other
socially important measures.
In 2009, Baltika continued to finance capital repairs
to the regional children’s clinical hospital in Yaroslavl; this project is scheduled to be completed by
the City’s 1,000th anniversary in 2010. The Company also allocated funds to capital repair of the
Kinelskaya Central District Hospital in the Samara
Region. Within the framework of a long-term
cooperation and partnership project with the Scientific Research Institute of Pediatric Orthopedics
(named after G. I. Turner) in St. Petersburg, Baltika provided financing to create an All-Russian
Educational Medical Diagnostic Center on the
basis of the institute to assist children affected by
locomotor diseases. The Company continued to
Substantial funds were directed at restoration and reconstruction work
on the Svyato-Troitskiy Izmaylovskiy Cathedral, which is a well-known
St. Petersburg architectural monument.
For several years, Baltika has participated in the ‘Duty’ social program –
under the patronage of St. Petersburg’s Governor. The Program is
aimed at helping veterans of the World War II and survivors of the Leningrad Blockade.
The Company continued to provide assistance to sports organizations –
the ‘Dinamo’ volleyball club in Khabarovsk, the handball club ‘Rostov-onDon’ in Rostov-on-Don, the ‘Yenissey’ field hockey club in Krasnoyarsk,
the St. Petersburg Ski Racing Federation, the Novosibirsk State Social
Fund for Olympic gymnastics, among others.
In 2009, the Company sponsored the premiere staging of the St. Petersburg Russian Non-repertory Theater (named after A. Mironov) and also
provided financial assistance to conduct capital repairs on the ‘Kukly’
Theater for physically challenged children in St. Petersburg. Baltika also
provided regular support to the Krasnoyarsk Drama Theater (named
after A. S. Pushkin) and the charitable fund named after V. P. Astafiev.
Baltika received an honorary award, the ‘Golden Pelican,’ in the category
‘For the revival of arts patronage traditions.’
Taxes
provide support to Children’s Home № 8 and the
Children’s Hospice in St. Petersburg. Baltika also
acquired and installed a children’s playground
for Correctional School № 6 in St. Petersburg’s
Vyborg District.
Baltika also provided support to the following
medical institutions: the rehabilitation center
‘House of Hope on the Mountain’ in the Leningrad
Region, a recreational home for children and a
trauma department at the Emergency State Hospital in Rostov-on-Don, as well as a children’s cardiac sanatorium in Tula and a clinical hospital in
Voronezh.
Baltika is one of the largest taxpayers in the cities where its headquarters and branches are located. The timely and full payment of taxes
to the budgets of all levels of government is standard practice for a
socially responsible company, which is guided by the principle of strictly
adhering to Russian legislation.
In 2009, Baltika’s total tax payments to the Russian federal budget
totaled RUB 10.5 billion and taxes paid to regional budgets stood at
RUB 17.6 billion.
For many years, Baltika has been one of the largest corporate taxpayers
to the St. Petersburg budget.
In April 2009, the charitable program to install
playgrounds at Tshinval’s kindergartens (which
was launched in 2008) was concluded. Eduard
Kokoyty, President of the Republic of South Ossetia, personally thanked Baltika for support.
Baltika Breweries
37
CORPORATE
GOVERNANCE
38
Annual Report 2009
Corporate Governance Code observances
The Company observes the following provisions of the Corporate Governance Code concerning:
Holding the General Shareholders Meeting:
Shareholders have the right to introduce items for the General Meeting’s agenda, as well as the right to request convening a General
Shareholders Meeting without the provision of an extract from the
shareholder register;
The Company informs shareholders about convening the General
Shareholders Meeting not less than 30 days before the date of the
Meeting, regardless of agenda items, if the legislation does not foresee a longer term;
The Company’s President, members of the Board of Directors, members of the Internal Audit Committee and the Auditor, as well as candidates for the indicated management and control bodies, are obliged
to attend the General Shareholders Meeting;
The Provision on the Company’s management and control bodies
stipulates the availability of a registration procedure for participants at
the General Shareholders Meeting.
Baltika adheres to best practice corporate governance standards in full
accordance with the Corporate Governance Code approved by Russian
securities authorities:
All shareholders have the opportunity to receive effective protection in case their rights have been
infringed on;
Shareholders receive reliable and
effective settlement methods for
their share ownership rights;
Shareholders are able to participate
in the Company’s management
by adopting decisions on the most
important aspects of the Company’s
activity at the General Shareholders
Meeting;
The shareholders have the right
to receive regular, complete and
accurate information about the
Company;
Shareholders do not abuse their
rights;
The Company exercises control
over the use of confidential and proprietary information.
Activities of the Board of Directors, as well as requirements for its
members:
The Board of Directors is elected through cumulative voting;
Members of the Board have the right to receive information about the
Company that is needed to fulfill their functions. The order for conducting Board meetings is stipulated in the Provision on management
and control bodies;
The approval of the Company’s annual budget (for current economic
activities), as well as the investment budget, fall under the competency of the Board of Directors in accordance with the charter;
Conditions of the President’s labor agreement are approved by the
Company’s Board of Directors;
The Company’s Provision on management and control bodies stipulates that Board members must act in the interests of the Company
(this prevents conflicts of interest);
Members of the Board of Directors are required to inform the Company of any transactions involving Company securities;
The Board of Directors does not include individuals who have been
found guilty of crimes in the sphere of economic activity or crimes
against governmental authorities or the interests of state services and
municipal services, nor does it include individuals who have been
subject to administrative penalties for legislative breaches in the areas
of entrepreneurial activity and finance, taxation or the stock market;
The Board of Directors does not include persons, who are participants, the CEO (Director), members of a management body or
employees of a competing legal entity.
Baltika Breweries
39
Requirements on the control bodies for the Company’s financial and
economic activity:
A document was adopted that defines the Company’s internal control
procedures – the Provision on internal control and the audit of financial
and economic activity;
A special division exists in the Company that observes internal control
procedures: the internal audit and control department;
Internal control bodies do not include individuals who have been found
guilty of crimes in the sphere of economic activity or crimes against governmental authorities or the interests of state services and municipal
services, nor does it include individuals who have been subject to administrative penalties for legislative breaches in the areas of entrepreneurial
activity and finance, taxation or the stock market;
Internal control bodies do not include persons, who are executives, participants, CEOs (Directors), members of a management body or employees of a competing legal entity;
Information disclosure requirements:
A Provision on information policy was adopted to
define rules and approaches for information disclosure. On the Company’s corporate web site
(www.corporate.baltika.ru), official information
about the Company’s activity is published; other
information is also regularly disclosed on the site.
In addition to this, information that requires compulsory disclosure on the stock market is published on Interfax newswire. Izvestia newspaper
is the official print media that the Company uses
to inform shareholders about convening general
meetings. The Company’s Board of Directors
approved the Provision on insider information, for
information that is not publicly available and the
disclosure of which may substantially affect the
market price for the Company’s securities.
The internal audit department informs the Board of Directors’ Audit Committee on any detected infringements;
The Audit Committee evaluates the auditor’s conclusions before submitting it to shareholders at the General Meeting.
Governance structure
General Shareholders Meeting
Board of Directors
President
Vice President
Finance
and Economics
40
Annual Report 2009
Vice President
Marketing
Vice President
HR & Corporate
Affairs
Vice President
Supply Chain
Vice President
Sales in Russia
The General Shareholders Meeting
The General Shareholders Meeting is the Company’s highest management body. In full accordance with the law and the Company’s charter, the
following issues fall under the competency of the
General Meeting:
profit distributed as dividends as a result of first quarter, six months,
nine month or financial year) and Company losses as a result of the
financial year;
Defining the order of the General Meeting conduction;
Splitting and consolidating shares;
The introduction of amendments and alterations to the charter or the adoption of a new
edition of the charter (except for cases indicated in the Federal Russian law “On Joint
Stock Companies”);
Corporate re-organization;
Liquidation of the Company, the appointment
of a liquidation commission and approval of
intermediate and final liquidation balances;
Defining the quantitative composition of the
Company’s Board of Directors, the election of
its members and the earlier cessation of their
powers;
Defining the number, nominal value and category (type) of authorized shares and rights
granted by these shares;
Charter capital increases through a higher
nominal share value. Increased charter capital through the placement of additional shares
only in those cases, when in full accordance
with legislation, such resolutions can only be
adopted by the General Meeting;
Lower charter capital as a result of decreased
nominal share value, due to the Company
acquiring part of its shares to decrease their
total number, as well as through the cancellation of purchased or bought back by the Company shares;
The election of members of the Company’s
Internal Audit Committee, as well as the earlier
cessation of their powers;
The approval of the Company’s auditors;
Adoption of resolutions on approving transactions in cases defined
by Article 83 of the law “On Joint Stock Companies;”
The adoption of resolutions on major transactions in cases defined by
Article 79 of the law “On Joint Stock Companies;”
The Company’s purchase of placed shares in cases determined by
the law “On Joint Stock Companies;”
The adoption of decisions for participating in financial and production
groups, associations and other commercial organization unions;
The adoption of internal documents regulating the activity of the Company’s bodies;
The resolution of other issues, as foreseen by the Law “On Joint Stock
Companies.”
In 2009, the Company held two General Shareholders Meetings: one
annual and one extraordinary.
On April 2nd, 2009 the Company held its Annual General Shareholders
Meeting, which approved the annual report, the profit and loss statement based on results from the financial year and the 2008 profit distribution and dividend payments.
The General Meeting elected the Board of Directors and the Company’s
Internal Audit Committee, as well as approved the Company’s auditors:
A&P Audit and KPMG. In addition, a new addition of the Company’s
charter was adopted and interested party transactions with Russian Railways OJSC and its affiliated parties were approved.
On December 2nd, 2009 an Extraordinary General Shareholders Meeting
(EGSM) of shareholders was held by absentee vote. During this Meeting,
the shareholders approved the conclusion of an agreement on producing licensed Baltika brands at Derbes Brewery Ltd (Kazakhstan). Only
minority shareholders, who were not interested parties in this transaction,
were allowed to participate in voting. In addition, the Meeting adopted
amendments to the corporate charter relating to the Company’s usage
of the trade name held by it.
The payment (announcement) of dividends
based on first quarter, first six months and nine
month financial year results;
The approval of annual reports, annual financial reports, including the Company’s profit
and loss statements (income statements), as
well as profit distribution (including the payment (announcement) of dividends, excluding
Baltika Breweries
41
The Board of Directors
The Board of Directors’ activity is focused on
the Company’s strategic management, including
adopting effective managerial decisions that are
aligned with corporate governance best practice,
as well as controlling the sole executive body’s
activity.
Principal tasks of the Board of Directors are:
Forming an effective management system for
the Company;
Ensuring the Company’s stable financial position;
Defining prospective and priority directions for
the Company’s activities;
Developing and realizing strategic aims, which
the Company is facing.
The Company’s Board of Directors has seven
members, including two independent directors.
During the reporting period, the following changes
in the composition of the Board occurred: As
of April 2nd, 2009, Ulrik Andersen replaced Aleksander Ikonnikov as a Board member.
During 2009, 19 meetings of the Company’s
Board of Directors were conducted – both in person and in the form of absentee voting.
42
Annual Report 2009
The Board of Directors
Chairman of the Board
Jorgen Buhl Rasmussen
Born 1955, higher education
Member of the Board since 2006
Holds positions in the following organizations:
Carlsberg Breweries A/S, President
Baltic Beverages Holding AB, Chairman of the Board of Directors
Members of the Company’s Board of Directors
Anton Artemiev
• Baltika Breweries, President
• Carlsberg Breweries A/S, Senior Vice President, Eastern Europe
• Derbes Brewery Ltd, Chairman of the Supervisory Board
• UZCARLSBERG LLC, Chairman of the Supervisory Board
• Slavutich OJSC, Chairman of the Supervisory Board
• Lvovska Pivovarnya OJSC, Chairman of the Supervisory Board
• Baku-Pivo OJSC, Chairman of the Supervisory Board
• Baltika-Baku LLC, Chairman of the Board of Directors
• Malt Plant Soufflet St. Petersburg CJSC, member of the Board of Directors
• Khlebny Dom OJSC, member of the Board of Directors
• Member of Russian Union of Industrialists and Enterpreuners (RUIE)’
Management Board
Ulrik Andersen
Holds a position in the following organization:
• Carlsberg Breweries A/S, General Counsel & Vice President
Legal Counselling and Risk Management
Bjorn Sondenskov
• Carlsberg Breweries A/S, Vice President, Business Development
Eastern Europe
• Baltic Beverages Holding AB, member of the Board of Directors
• Derbes Brewery Ltd , member of the Supervisory Board
Aleksander Izosimov
Independent Director
• Vimpelcom JSC, President
• GSM Association, Chairman of the Board of Directors
• MTG AB, member of the Board of Directors
• Dynasty Foundation for Non-commercial Programs,
member of the Board of Directors
Hans Kasper Madsen
• Carlsberg Breweries A/S, Senior Vice President,
Corporate Supply Chain
• Danish Malting Group A/S, member of the Board of Directors
Aleksander Shokhin
Independent Director
• RUIE, President
• The State University – Higher School of Economics, President
• Lukoil OJSC, member of the Board of Directors
• Fortum OJSC, member of the Board of Directors
• Russian Railways OJSC, member of the Board of Directors
• TMK OJSC, member of the Board of Directors
• TNK-BP Management OJSC, member of the Board of Directors
Baltika Breweries
43
Committees of the Board of Directors
Audit Committee
The Appointments and Remuneration Committee
The aim of creating the Committee is to upgrade
the effectiveness and quality of work of the Board
of Directors in the area of fostering and ensuring
open communication with the auditors, the Internal Auditing Committee and the structural divisions of the internal audit, financial accounting
and finance and economic blocks of the Company through the preliminary consideration and
preparation of recommendations on the following issues that fall under the competence of the
Committee:
The principal goal of creating and the primary
activities of the Appointments and Remuneration
Committee are to contribute to attracting qualified
corporate management specialists and to create
incentives to stimulate successful work.
The Provisions on committees, adopted by the
Company’s Board of Directors, are principal documents that regulate the activity of committees
and define issues of their competence, as well
as how their membership is formed and how they
function.
Risks connected with the Company’s operations;
Management accounting;
Financial accounting;
External independent audit and internal audit;
Internal control procedures.
The sole executive body
The sole executive body of the Company is the
President, who is responsible for managing the
Company’s current activities. Since 2005, Anton
Artemiev has been President of the Company.
Remuneration for members of the
managerial organs
In accordance with Item 2 of Article 64 of the law
“On Joint Stock Companies,” on April 2nd, 2009,
the Company’s Board of Directors set the maximum remuneration for Independent Directors on
the Board of Directors at 130,000 USD (in ruble
equivalent). The Board also set the maximum
amount for expense compensation (incurred
while carrying out their functions as Board members) at 15,000 USD (in ruble equivalent) – leaving
this amount at the same level as in the previous
year. During 2009, Independent Directors on the
Board received remuneration in the amount of
RUB 3,278,194.
In accordance with Item 3 of Article 69 of the law
“On Joint Stock Companies,” the rights and obligations of the Company’s President are regulated
by the indicated law and the Company’s charter,
as well as the agreement concluded between the
President and the Company. Remuneration for
fulfilling the function of the sole executive organ,
as well as other work conditions, is regulated by
the labor agreement signed by the President and
the Company.
44
Annual Report 2009
The Internal Auditing Committee
The Internal Auditing Committee (a permanent
elected organ), in accordance with current legislation and the Company’s charter executes periodic
control over the Company’s financial and economic activities, as well as the actions of its managerial organs and executives (including separate
divisions, services, branches and representative
offices), through checkups:
The legitimacy, economic feasibility and effectiveness (expediency) of financial and economic operations carried out by the Company
during the examined period;
The fullness and correctness that the Company’s administrative documents reflect the Company’s economic and financial operations;
The legitimacy, economic feasibility and effectiveness (expediency) of
actions taken by the Company’s administration executives and structural division heads to ensure compliance with legislation, the charter,
adopted plans, programs and other internal corporate documents.
The three-person Internal Auditing Committee is elected at the Annual General Meeting. Members of the Internal Auditing Committee are not allowed
to be members of the Board of Directors or hold any other Company management positions while they are Auditing Committee members.
The Annual General Shareholders Meeting (AGSM) held April 2nd, 2009,
elected the following individuals to serve on the Internal Auditing Committee:
Name / year of birth / education
Position(s) held
Vibeke Aggerholm
Born 1964
higher education
Vice President for Internal Audit at Carlsberg Breweries A/S,
member of the Institute of Internal Auditors’ (IIA) Board of Directors
Charles Ericsson
Born 1948
higher education
Consultant for Baltic Beverages Holding АВ
Nadezhda Bazilevich
Born 1975
higher education
Financial manager for Baltika Breweries
Interested party and major transactions
During 2009, Baltika Breweries concluded 90 interested party transactions. No transactions that would have been recognized
as major transactions – either by applicable Russian legislation or the Company’s charter – were completed during the reporting
year.
A complete list of interested party transactions is provided in the appropriate section of this Report.
Baltika Breweries
45
Daniil Briman
Vice President, HR & Corporate Affairs
Anton Artemiev
President
Ekaterina Azimina
Vice President, Finance and Economics
Denis Sherstennikov
Vice President, Marketing
BALTIKA MANAGEMENT
Risk management
The Company’s activity is subject to various business risks. As a result of
this, Baltika developed a specialized risk management system that aims
to prevent, identify, analyze, control, monitor and minimize risks. The risk
management system is regularly reviewed by the Company’s management based on changes in market conditions, as well as changes in the
Company’s activities.
The Company’s Board of Directors is responsible for the risk management system and supervises it to ensure its effectiveness. The Board
of Directors’ Audit Committee controls the observance of corporate
policy in risk management and analyzes the risk management system
to determine its factual adequacy for risks. The Audit Committee carries
out its supervisory functions in conjunction with the Company’s internal
audit service.
In the case of one or more of the below-mentioned risks arising, the
Company is ready to undertake all necessary measures to minimize
negative consequences.
46
Annual Report 2009
Financial risks
Baltika’s principal financial risks include: credit
risk, liquidity risk, currency and inflation risks. To
manage financial risks, the Company regularly
carries out short- and long-term forecasting,
develops a budgeting and forecasting system
and improves the principles of turnover capital
management.
Credit risk
Baltika is a company that has a short operating
cycle, which means the quick turnover of financial
means. As a result, the Company carries a minimal credit load and is subject to a lower degree
of credit risk. Corporate credit risk arises primarily due to contractual obligation non-fulfillment by
the Company’s customers or counteragents and
it is principally connected with accounts receivable. The Company has implemented a credit
policy that defines interactions with customers.
The Company conducts credit evaluations of new
suppliers and clients and requests collateral guarantees for accounts payable.
Alexander Dedegkaev
Vice President, Supply Chain
Denis Lysak
Vice President, Sales in Russia
The Company is subject to a greater degree of currency risks, because
on the one side, the bulk of the Company’s sales are ruble-denominated,
whereas on the other side, the price of some components and raw materials were priced in a foreign currency. The Company focuses all of its
efforts on minimizing currency risks, including working to decrease foreign currency-denominated liabilities and gradually increasing the share
of Russian suppliers for ingredients, raw materials, capital assets and
components. The Company also sees constantly increasing its export
volume as an important task, which will in turn lead to increased foreign
currency revenues. In 2009, to minimize currency risks, the Company
used various instruments, including: maintaining dual currency liabilities
in accordance with the Russian Central Bank’s dual currency basket, a
decrease in foreign currency liabilities and the use of indirect currency
risk hedging instruments.
Industry- and country- specific risks
Key risk factors, which may negatively impact development of the brewing industry, include:
An increase in excise duty;
A strengthening of governmental policy towards limiting the advertising, consumption and sales of beer;
A shift in the structure of consumption;
Beer market approaching its saturation level;
Greater competitive struggles within the market;
Higher prices for the main ingredients, as a result of general world
trends;
Liquidity risk
Liquidity risk may arise due to the Company failing to fulfill its obligations in a timely manner. The
Company strives to maintain liquidity at an appropriate level.
Currency risks
Currency risks are due to changes in exchange
rates for foreign currency and affect the Company’s purchases of raw materials and services
that are used for corporate activities and that are
denominated in a foreign currency.
Such risks include:
Unfavorable currency exchange dynamics;
The negative influence of the financial crisis
on suppliers, which may result in decreased
liquidity or bankruptcy, narrow the market for
goods and services and also may result in
market redistribution and the appearance of
large monopolies, influencing the formation of
pricing policy.
The actions of natural monopolies in the tariff regulation sphere and
limited access to their capacities (for example, heat and electricity
and railway transport);
Unfavorable weather conditions;
Economic decline.
To strengthen its position in the sector and to minimize the potential
impact of sector-specific risks, the Company has implemented a series
of measures, which includes: ensuring profitability and managing production costs, implementing the Company’s market strategy which
focuses on building strong brands, premiumisation and innovation, the
development and production of new types of goods, the development
of a distribution system and promotion channels, the subsequent development of sales geography and adjacent directions, the optimization of
investment activity, the complex evaluation of suppliers’ financial conditions, including a preliminary one, and their support if necessary, the
continuation of the production process and geographical diversification
of risks and increased business process effectiveness and operational
excellence.
Baltika Breweries
47
SECURITIES
CHARTER CAPITAL
The Company’s charter capital totaled RUB 164,041,164 as of December 31st, 2009.
Issued and authorized shares
Share type
Number of shares
Nominal value
per share, RUB
1. Issued shares
Registered ordinary shares
Preference shares, type ‘A’ registered shares
151,714,594
1
12,326,570
1
3,808,291
1
440,450
1
2. Authorized shares
Registered ordinary shares
Preference shares, type ‘A’ registered shares
Share issues
Shares from the following issues are now being traded:
Registration
number
Share type
Number of shares
in the issue
Nominal value of the
share issue, RUB
Nominal value
per share, RUB
1-04-00265-А
Registered ordinary
shares
151,714,594
151,714,594
1
2-04-00265-А
Preference, type ‘A’
registered shares
12,326,570
12,326,570
1
Distribution of charter capital
Baltika Breweries’ largest shareholder is a subsidiary of Carlsberg Breweries A/S – Baltic Beverages Holding AB, which holds
88.86% of all shares. During the reporting year, there were no significant changes in the charter capital structure.
The Company’s charter capital structure, as of December 31st, 2009
Baltic Beverages Holding AB
48
Annual Report 2009
88.86%
Physical persons
8.08%
Nominal holders
Legal entities
2.78%
0.28%
Share circulation
Baltika Breweries shares are traded on two of
Russia’s trading platforms – the MICEX Stock
Exchange (since 2003) and RTS (since 2001). At
present, the Company’s shares that are traded on
stock exchanges are included on the List: ‘Securities approved for trading, but not listed.’ The Company’s ticker symbol for ordinary shares is: PKBA,
and preference shares trade under the ticker
PKBAP. The Company’s shares are included in
the calculation of the MICEX consumer goods
sector index (MICEX CGS).
Due to a number of Russian government stimulus programs and higher commodity prices, in
the second half of 2009, an inflow of direct and
portfolio investment re-started, which helped reinvigorate the Russian economy and increased
interest in the shares of Russian companies.
Starting in February 2009, both ruble and dollar indices for the Russian
stock exchanges began to grow. By the end of 2009, the MICEX index
had increased 121% and RTS was up 129% compared with figures as of
the end of 2008.
During spring 2009, as a result of higher oil prices and the strengthening
of the ruble relative to the dollar-euro basket, there was a general uptick
in the stock market, which contributed to the growth of share prices for
consumer sector companies.
During the reporting year, the Company’s market capitalization increased
2.2 times and by the end of 2009 reached RUB 139.8 bln according to
data from MICEX (and USD 4.4 bln, according to RTS figures). In Russia,
the Company is the largest production company in the FMCG sector.
Baltika capitalization dynamics relative to the MICEX index
%
140
120
MICEX index +121%
Company capitalization +125%
100
80
60
40
20
0
-20
December
2008
January
2009
February
2009
March
2009
April
2009
May
2009
Company capitalization (According to MICEX SE)
June
2009
July
2009
August
2009
September
2009
October
2009
November
2009
December
2009
MICEX index
Baltika Breweries
49
SECURITIES
Statistics from trading of the Company’s shares
Minimum share price*
during the year, RUB
Maximum share price*
during the year, RUB
Last transaction price*,
RUB
2008
2009
2008
2009
2008
2009
Ordinary shares
300
349
1 209
850
385
850
Preference shares
277
305
815
880
308
880
*closing price indicated
Trading statistics are given based on MICEX SE data, since most transactions with the Company’s shares were carried out on this exchange.
As a result of the rebound in the Russian economy in 2009 and strong
financial and economic indicators for the Company, Baltika’s share price
increased by 121% for ordinary shares and 186% for preference ones
during the reporting year.
Trade volume remained at approximately the
2008 level, whereas the number of transactions
in the Company’s shares increased significantly
in 2009: a 52% increase for ordinary shares and
28% higher for preference shares, which indicates greater share liquidity.
Trading volumes, RUB mln
500
400
387
376
300
200
185
147
Ordinary shares
100
Preference shares
0
2009
2008
Number of transactions
20,000
15,000
14,727
10,000
9,695
Ordinary shares
6,164
5,000
4,831
Preference shares
0
2008
50
Annual Report 2009
2009
Dividend policy
Baltika’s dividend policy is based on the principle
of fairly distributing profits among all shareholders
in direct proportion to the number of shares in a
particular category, taking into account a rational
correlation between total dividends and available
means to implement the Company’s strategic
development plans.
Dividends for preference shares cannot be lower than the level indicated
by the Company’s charter.
2008 dividends were significantly higher – 1.6 times – compared with the
previous year.
Dividend payment indicators for the Company’s shares during the last 5 years
Period, for which the
dividends were paid
Dividend paid per
ordinary share,
RUB
Dividend paid per
preference share,
RUB
Dividend dynamics
for ordinary shares,
% to 2004
Dividend dynamics
for preference shares,
% to 2004
2005
24.33
24.33
175
134
2006
39.50
39.50
283
218
2007
52.00
52.00
373
287
2008
85.10
85.10
610
470
2009*
128.00
128.00
918
706
*A recommendation from the Board of Directors
Information on the pay-out of declared (allocated) dividends
2009 accrued dividends totaled:
For ordinary shares – RUB 12,910,911,949 and 40 kopecks;
For preference shares, type ‘A’ – RUB 1,048,991,107.
As of December 31st, 2009, shareholders were paid more than 99.7% of accrued dividends. The reason for the failure to fulfill all
obligations in full is due to shareholders failing to provide all data needed for payment.
Baltika Breweries
51
OAO Baltika Breweries and subsidiaries
CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2009
52
CONTENTS
Independent Auditors’ Report
54
Consolidated Statement of Financial Position
55
Consolidated Statement of Comprehensive Income
56
Consolidated Statement of Changes in Equity
57
Consolidated Statement of Cash Flows
58
Notes to the Consolidated Financial Statements
60
Baltika Breweries
53
ZAO KPMG
69-71 A Marata st
Business centre «Renaissance Plaza»
St. Petersburg 191119, Russia
Telephone
Fax
Internet
+7 (812) 313 7300
+7 (812) 313 7301
www.kpmg.ru
Independent Auditors’ Report
To Management
OAO Baltika Breweries
We have audited the accompanying consolidated financial statements of OAO Baltika Breweries (the “Company”) and its subsidiaries (the “Group”), which comprise the consolidated statement of financial position as at 31 December 2009, and the consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, and a summary of
significant accounting policies and other explanatory notes.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance
with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material
misstatements, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting
estimates that are reasonable in the circumstances.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit
in accordance with International Standards on Auditing. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free of
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in
order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting principles
used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of
the Group as at 31 December 2009, and its consolidated financial performance and its consolidated cash flows for the year then
ended in accordance with International Financial Reporting Standards.
ZAO KPMG
19 February 2010
ZAO KPMG, a company incorporated under the Laws
of the Russian Federation and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity.
54
Annual Report 2009
Consolidated Statement of Financial Position as at 31 December 2009
000’ RUR
Note
2009
2008
(restated)
2007
(restated)
ASSETS
Non-current assets
Property, plant and equipment
12
42,177,090
43,356,748
39,366,381
Intangible assets
13
14,001,800
13,791,191
11,736,964
Investments in equity accounted investees
14
293,183
340,038
267,990
Other investments
15
9,781
9,796
9,796
56,481,854
57,497,773
51,381,131
Total non-current assets
Current assets
Inventories
17
4,296,053
7,350,814
7,451,192
Other investments
15
9,051,299
-
2,335,890
6,566
583,952
7,131
Income tax receivable
Trade and other receivables
18
8,062,093
7,511,041
5,015,410
Cash and cash equivalents
19
1,740,702
1,691,594
2,708,501
Total current assets
23,156,713
17,137,401
17,518,124
Total assets
79,638,567
74,635,174
68,899,255
84,978
84,978
85,442
Ordinary shares
736,129
736,129
736,164
Share capital
821,107
821,107
821,606
4,171,716
4,171,716
4,239,807
EQUITY AND LIABILITIES
Equity
20
Preference shares
Additional paid-in capital
Foreign currency translation reserve
691,405
433,587
18,234
Retained earnings
57,997,085
48,584,719
41,606,610
Total equity
63,681,313
54,011,129
46,686,257
176,304
580,051
Non-current liabilities
Loans and borrowings
22
-
Deferred tax liabilities
16
1,631,672
1,387,124
1,431,460
1,631,672
1,563,428
2,011,511
Total non-current liabilities
Current liabilities
Loans and borrowings
22
181,572
7,562,837
11,171,172
Trade and other payables
23
13,398,581
11,006,602
8,832,197
135,760
Deferred income
129,057
94,670
Income tax payable
616,372
396,508
62,358
14,325,582
19,060,617
20,201,487
Total liabilities
15,957,254
20,624,045
22,212,998
Total equity and liabilities
79,638,567
74,635,174
68,899,255
Total current liabilities
The consolidated statement of financial position is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements
set out on pages 60 to 81.
Baltika Breweries
55
Consolidated Statement of Comprehensive Income for the year ended 31 December 2009
’000 RUR
Note
2009
Revenue
Cost of sales
93,648,747
92,482,283
(42,394,920)
(47,599,507)
51,253,827
44,882,776
Gross profit
Other income
2008 (restated)
7
Distribution expenses
72,217
78,487
(19,150,073)
(20,132,532)
(2,528,721)
(2,602,153)
Administrative expenses
8
Finance income
10
1,834,591
1,619,812
Finance costs
10
(2,349,918)
(3,678,392)
Share of (loss) / profit of equity accounted investee (net of income tax)
Profit before income tax
Income tax expense
11
Profit for the year
(29,734)
47,370
29,102,189
20,215,368
(5,729,920)
(4,707,119)
23,372,269
15,508,249
Other comprehensive income
Foreign currency translation differences for foreign operations
Total comprehensive income for the year
257,818
415,353
23,630,087
15,923,602
147.14 RUR
97.99 RUR
Earnings per share
Basic and diluted earnings per share
21
These consolidated financial statements were approved by management on 19 February 2010 and were signed on its behalf by:
Anton Artemiev
Ekaterina Azimina
President
Vice-President of finance and economy
The consolidated statement of comprehensive income is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements set out on pages 60 to 81.
56
Annual Report 2009
Consolidated Statement of Changes in Equity for the year ended 31 December 2009
000’ RUR
Balance at 1 January 2008, as previously
reported
Impact of change in accounting policy
Preference
shares
Ordinary
shares
Additional
paid-in
capital
85,442
736,164
4,239,807
Foreign
currency
translation
reserve
18,234
Retained
earnings
Total
41,869,720
46,949,367
-
-
-
-
(263,110)
(263,110)
85,442
736,164
4,239,807
18,234
41,606,610
46,686,257
-
-
-
-
15,508,249
15,508,249
Foreign currency translation differences
-
-
-
415,353
-
415,353
Total other comprehensive income
-
-
-
415,353
-
415,353
-
-
-
415,353
15,508,249
15,923,602
-
-
-
-
(8,530,140)
(8,530,140)
Balance at 1 January 2008 (restated)
Profit for the year (restated)
Transactions with owners, recorded directly
in equity
Dividends to equity holders
Redemption of shares
(464)
(35)
(68,091)
-
-
(68,590)
Total transactions with owners
(464)
(35)
(68,091)
-
(8,530,140)
(8,598,730)
Balance at 31 December 2008 (restated)
84,978
736,129
4,171,716
433,587
48,584,719
54,011,129
Balance at 1 January 2009 (restated)
84,978
736,129
4,171,716
433,587
48,584,719
54,011,129
-
-
-
-
23,372,269
23,372,269
Foreign currency translation differences
-
-
-
257,818
-
257,818
Total other comprehensive income
-
-
-
257,818
-
257,818
-
-
-
257,818
23,372,269
23,630,087
Dividends to equity holders
-
-
-
-
(13,959,903)
(13,959,903)
Total transactions with owners
-
-
-
-
(13,959,903)
(13,959,903)
Balance at 31 December 2009
84,978
736,129
4,171,716
691,405
57,997,085
63,681,313
Profit for the year
Transactions with owners, recorded directly
in equity
The consolidated statement of changes in equity is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements
set out on pages 60 to 81.
Baltika Breweries
57
Consolidated Statement of Cash Flows for the year ended 31 December 2009
’000 RUR
Note
2009
2008 (restated)
23,372,269
15,508,249
4,615,461
OPERATING ACTIVITIES
Profit for the year
Adjustments for:
Depreciation
12
4,447,579
Amortisation
13
196,730
180,436
Gain on disposal of property, plant and equipment and intangible assets
7
(72,217)
(82,546)
Share of loss/(profit) of equity accounted investees
14
29,734
(47,370)
Interest expense
10
190,319
573,336
Interest income
10
(466,342)
(253,209)
Income tax expense
11
5,729,920
4,707,119
33,427,992
25,201,476
Operating profit before changes in working capital and provisions
Decrease in inventories
3,221,273
202,700
Increase in trade and other receivables
(551,052)
(2,321,940)
Increase in trade and other payables
2,621,163
3,720,693
Cash flows from operations before income taxes and interest paid
38,719,376
26,802,929
Income taxes paid
(4,688,122)
(4,978,598)
Interest paid
Cash flows from operating activities
(261,011)
(528,448)
33,770,243
21,295,883
95,898
193,363
386,600
279,006
INVESTING ACTIVITIES
Proceeds from disposal of property, plant and equipment and intangible
assets
Interest received
Dividends received
Acquisition of property, plant and equipment and intangible assets
Acquisition of subsidiary, net of cash acquired
27,300
18,564
(3,792,763)
(8,744,468)
-
(2,182,556)
15
-
Loans to related parties
(2,189,360)
-
Acquisition of bank promissory notes
(6,782,197)
(3,232,271)
Sales of investment securities
Proceeds from sale of bank promissory notes
Cash flows utilised by investing activities
-
5,542,365
(12,254,507)
(8,125,997)
The consolidated statement of cash flows is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements set out
on pages 60 to 81.
58
Annual Report 2009
Consolidated Statement of Cash Flows for the year ended 31 December 2009
’000 RUR
Note
2009
2008 (restated)
FINANCING ACTIVITIES
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Redemption of shares
Cash flows utilised by financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of the year
19
52,172
29,798,605
(7,539,049)
(33,855,575)
(13,979,751)
(8,609,718)
-
(1,520,105)
(21,466,628)
(14,186,793)
49,108
(1,016,907)
1,691,594
2,708,501
1,740,702
1,691,594
The consolidated statement of cash flows is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements set out
on pages 60 to 81.
Baltika Breweries
59
Notes to the Consolidated Financial Statements for the year ended 31 December 2009
1. BACKGROUND
(a) Russian business environment
The Russian Federation has been experiencing political and economic change that
has affected, and may continue to affect, the activities of enterprises operating in this
environment. Consequently, operations in the Russian Federation involve risks that typically do not exist in other markets. In addition, the recent contraction in the capital and
credit markets and its impact on the Russian economy have further increased the level
of economic uncertainty in the environment. These consolidated financial statements
reflect management’s assessment of the impact of the Russian business environment
on the operations and the financial position of the Group. The future business environment may differ from management’s assessment.
(b) Organisation and operations
OAO Baltika Breweries (the “Company”) is an open joint stock company as defined
by the Civil Code of the Russian Federation and was registered on 21 July 1992, and,
through a controlling interest in ten companies and ten branches (together referred to
as the “Group”), produces and distributes beer, soft drinks and mineral water.
The Company’s registered office is situated at 6 Verkhny pereulok, 3, St. Petersburg,
194292, Russia.
The remainder of the ordinary and preference shares are
widely held.
As at 31 December 2009 the Group consisted of twelve
production plants: Baltika-Saint-Petersburg, Baltika-Tula,
Baltika-Rostov,
Baltika-Samara,
Baltika-Khabarovsk,
Baltika-Vena, Baltika-Chelyabinsk, Baltika-Pikra, BaltikaYaroslavl, Baltika-Voronezh, Baltika-Novosibirsk and Baltika-Baku and ten subsidiaries: OOO Universalopttorg, OOO
Terminal Podolsk, OOO Baltika-Ukraine, OOO Baltika, Baltika S.R.L., Baltika-Almaty LLP, OOO Baltika-Bel, Baltika
Deutschland GmbH, LLC Baltika-Baku and OJSC BakuPivo. The Group’s subsidiary, OOO Baltika-Moscow, was
liquidated in December 2008.
Most of the Group's customers are located in Russia. The
Group's raw materials are readily available and the Group is
not dependent on a single supplier or only a few suppliers.
Related party transactions are detailed in note 28.
As at 31 December 2009 Baltic Beverages Holding AB owned and controlled 93.5%
of the Company’s ordinary shares and 31.9% of the Company’s preference shares.
2. BASIS OF PREPARATION
(a) Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standard (“IFRSs”).
(b) Basis of measurement
The consolidated financial statements are prepared on the historical cost basis except
that property, plant and equipment was revalued to determine deemed cost as part of
the adoption of IFRSs; and the carrying amounts of assets, liabilities and equity items
in existence at 31 December 2002 include adjustments for the effects of hyperinflation,
which were calculated using conversion factors derived from the Russian Federation
Consumer Price Index published by the Russian Statistics Agency, GosKomStat. Russia
ceased to be hyperinflationary for IFRS purposes as at 1 January 2003.
(c) Functional and presentation currency
The national currency of the Russian Federation is the Russian Rouble (“RUR”), which
is the Company’s functional currency, the functional currency of the majority of the
Company’s subsidiaries and the currency in which these consolidated financial statements are presented.
(d) Use of judgements, estimates and assumptions
The preparation of consolidated financial statements in conformity with IFRSs requires
management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and
expenses. Actual results may differ from those estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the estimates are revised
and in any future periods affected.
Information about critical judgments in applying accounting policies that have the most
significant effect on the amounts recognised in the consolidated financial statements is
included in the following notes:
Note 13 – Intangible assets; and
Note 17 – Inventories.
60
Annual Report 2009
(e) Changes in accounting policies and
presentation
With effect from 1 January 2009 the Group changed its
accounting policies in the following areas:
accounting for borrowing costs;
determination and presentation of operating segments;
accounting for advertising materials; and
presentation of financial statements.
(i) Accounting for borrowing costs
In respect of borrowing costs relating to qualifying assets
for which the commencement date for capitalisation is on
or after 1 January 2009, the Group capitalises borrowing
costs directly attributable to the acquisition, construction
or production of a qualifying asset as part of the cost of
that asset. Previously the Group immediately recognised all
borrowing costs as an expense. This change in accounting
policy was due to the adoption of IAS 23 Borrowing Costs
(2007) in accordance with the transitional provisions of such
standard; comparative figures have not been restated. The
change in accounting policy had no material impact on
earnings per share.
The Group has capitalised borrowing costs with respect
to property, plant and equipment under construction (see
note 3(e)(i)).
(ii) Determination and presentation of operating
segments
As at 1 January 2009 the Group determines and presents
operating segments based on the information that internally is
provided to the Management Board, which is the Group’s chief
operating decision maker. This change in accounting policy is
due to the adoption of International Financial Reporting Standard 8 Operating Segments. The Group has early-adopted the
amendment to IFRS 8 introduced by Improvements to IFRS
April 2009. The new accounting policy in respect of operating
segments disclosures is presented as follows.
Comparative segment information has been re-presented in
conformity with the transitional requirements of such standard. Since the change in accounting policy only impacts
presentation and disclosure aspects, there is no impact on
earnings per share.
An operating segment is a component of the Group that
engages in business activities from which it may earn
revenues and incur expenses, including revenues and
expenses that relate to transactions with any of the Group’s
other components. An operating segment’s operating
results are reviewed regularly by the Management Board to
make decisions about resources to be allocated to the segment and assess its performance, and for which discrete
financial information is available.
Segment results that are reported to the Management
Board include items directly attributable to a segment as
well as those that can be allocated on a reasonable basis.
(iii) Accounting for advertising materials
Since 1 January 2009 the Group has recognised expenditure in respect of advertising materials as distribution
expenses when it has a right to access those materials. Previously advertising materials
were recorded as inventory until given away to customers. This change in accounting
policy was due to the adoption of revised IAS 38 Intangible Assets (2008).
Comparative information has been re-presented so that it also is in conformity with the
revised accounting policy: advertising materials in the amount of RUR 346,198 thousand were written off and deferred income tax in the amount of RUR 83,088 thousand
was recognised as an adjustment to retained earnings as at 1 January 2008. The effect
on the consolidated statement of financial position as at 31 December 2008 was a
decrease in inventory of RUR 332,652 thousand, a decrease in deferred tax liabilities of
RUR 66,530 thousand and a decrease in the retained earnings of RUR 266,122 thousand. The effect on comprehensive income was to reduce profit for the year by RUR
3,012 thousand for the year ended 31 December 2008.
Earnings per share has been restated for the year ended 31 December 2008 accordingly.
(iv) Presentation of financial statements
The Group applies revised IAS 1 Presentation of Financial Statements (2007), which
became effective as at 1 January 2009. The revised standard requires a presentation
of all owner changes in equity to be presented in the statement of changes in equity,
whereas all non-owner changes in equity are presented in the consolidated statement of
comprehensive income.
Comparative information has been re-presented so that it also is in conformity with the
revised standard. Since the change in accounting policy only impacts presentation
aspects, there is no impact on earnings per share.
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been consistently applied to all periods presented in these consolidated
financial statements, and have been applied consistently
by Group entities, except as explained in note 2(e), which
addresses changes in accounting policies.
of losses exceeds its interest in an equity accounted investee, the carrying amount of
that interest (including any long-term investments) is reduced to nil and the recognition
of further losses is discontinued, except to the extent that the Group has an obligation
or has made payments on behalf of the investee.
Certain comparative amounts have been reclassified to
conform with the current year’s presentation of which the
significant one relates to the reclassification of administrative expenses in the amount of RUR 311,199 thousand and
distribution expenses in the amount of RUR 619,803 thousand to cost of sales.
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial
statements. Unrealised gains arising from transactions with equity accounted investees
are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to
the extent that there is no evidence of impairment.
Management believes that such presentation is more
appropriate.
(b) Foreign currencies
(i) Foreign currency transactions
(a) Basis of consolidation
(i) Subsidiaries
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary
assets and liabilities denominated in foreign currencies at the reporting date are
retranslated to the functional currency at the exchange rate at that date. The foreign
currency gain or loss on monetary items is the difference between amortised cost in
the functional currency at the beginning of the period, adjusted for effective interest
and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the reporting period. Non-monetary assets
and liabilities denominated in foreign currencies that are measured at fair value are
retranslated to the functional currency at the exchange rate at the date that the fair
value was determined. Foreign currency differences arising in retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments which are recognised in other comprehensive income.
Non-monetary items that are measured in terms of historical cost in a foreign currency
are translated using the exchange rate at the date of the transaction.
Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control
commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group.
(ii) Associates (equity accounted investees)
Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when
the Group holds between 20% and 50% of the voting power
of another entity. Investments in associates are accounted
for using the equity method and are recognised initially at
cost. The Group’s investment includes goodwill identified
on acquisition, net of any accumulated impairment losses.
The consolidated financial statements include the Group’s
share of the income and expenses and equity movements
of equity accounted investees, after adjustments to align
the accounting policies with those of the Group, from the
date that significant influence commences until the date
that significant influence ceases. When the Group’s share
(iii) Transactions eliminated on consolidation
(ii) Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to RUR at the exchange rate at the reporting date. The income and expenses of foreign operations are translated to RUR at
exchange rates at the dates of the transactions.
Foreign currency differences are recognised directly in other comprehensive income.
Since 1 January 2004, the Group’s date of transition to IFRSs, such differences have
been recognised in the foreign currency translation reserve. When a foreign operation
Baltika Breweries
61
is disposed of, in part or in full, the relevant amount in the foreign currency translation
reserve is transferred to profit or loss as part of the profit or loss on disposal.
Foreign exchange gains and losses arising from a monetary item received from or payable to a foreign operation, the settlement of which is neither planned nor likely in the
foreseeable future, are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and are presented within
equity in the foreign currency translation reserve.
(c) Financial instruments
(i) Non-derivative financial instruments
(ii) Non-derivative financial liabilities
The Group initially recognises debt securities issued and
subordinated liabilities on the date that they are originated.
All other financial liabilities are recognised initially on the
trade date at which the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.
Non-derivative financial instruments comprise investments in equity and debt securities,
trade and other receivables, cash and cash equivalents, loans and borrowings, and trade
and other payables.
Financial assets and liabilities are offset and the net amount
presented in the statement of financial position when, and
only when, the Group has a legal right to offset the amounts
and intends either to settle on a net basis or to realise the
asset and settle the liability simultaneously.
The Group initially recognises loans and receivables and deposits on the date that they
are originated. All other financial assets are recognised initially on the trade date at which
the Group becomes a party to the contractual provisions of the instrument.
The Group has the following non-derivative financial liabilities: loans and borrowings and trade and other payables.
The Group derecognises a financial asset when the contractual rights to the cash flows
from the asset expire, or it transfers the rights to receive the contractual cash flows on
the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets
that is created or retained by the Group is recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the
amounts and intends either to settle on a net basis or to realise the asset and settle the
liability simultaneously.
The Group has the following non-derivative financial assets: held-to-maturity financial
assets, loans and receivables and available-for-sale financial assets.
Held-to-maturity financial assets
If the Group has the positive intent and ability to hold to maturity debt securities that are
quoted in an active market, then such financial assets are classified as held-to-maturity.
Held-to-maturity financial assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition held-to-maturity financial assets
are measured at amortised cost using the effective interest method, less any impairment
losses. Any sale or reclassification of a more than insignificant amount of held-to-maturity
investments not close to their maturity would result in the reclassification of all held-to-maturity investments as available-for-sale, and prevent the Group from classifying investment
securities as held-to-maturity for the current and the following two financial years.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are
not quoted in an active market. Such assets are recognised initially at fair value plus any
directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Loans and receivables comprise trade and other receivables.
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. Bank overdrafts that are repayable on demand and form an
integral part of the Group’s cash management are included as a component of cash and
cash equivalents for the purpose of the statement of cash flows.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale and that are not classified in any of the previous categories.
The Group’s investments in equity securities and certain debt securities are classified
as available-for-sale financial assets. Such assets are recognised initially at fair value
plus any directly attributable transaction costs. Subsequent to initial recognition, they
are measured at fair value and changes therein, other than impairment losses (see
note 3(i)(i)) and foreign currency differences on available-for-sale equity instruments
(see note 3(b)(i)), are recognised in other comprehensive income and presented within
equity in the fair value reserve. When an investment is derecognised or impaired, the
cumulative gain or loss in other comprehensive income is transferred to profit or loss.
Other
Other non-derivative financial instruments are measured at amortised cost using the
effective interest method, less any impairment losses. Investments in equity securities
that are not quoted on a stock exchange are principally valued using valuation techniques such as discounted cash flow analysis, option pricing models and comparisons to
other transactions and instruments that are substantially the same. Where fair value cannot be reliably measured, investments are stated at cost less impairment losses.
62
Annual Report 2009
Such financial liabilities are recognised initially at fair value
plus any directly attributable transaction costs. Subsequent
to initial recognition these financial liabilities are measured
at amortised cost using the effective interest method.
(d) Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of ordinary shares and
share options are recognised as a deduction from equity,
net of any tax effects.
Preference share capital
Preference share capital is classified as equity if it is nonredeemable, or redeemable only at the Company’s option,
and any dividends are discretionary. Dividends thereon are
recognised as distributions within equity upon approval by
the Company’s shareholders.
Repurchase of share capital
When share capital recognised as equity is repurchased,
the amount of the consideration paid, which includes
directly attributable costs, is net of any tax effects, and
is recognised as a deduction from equity. Repurchased
shares are classified as treasury shares and are presented
as a deduction from total equity. When treasury shares are
sold or reissued subsequently, the amount received is recognized as an increase in equity, and the resulting surplus
or deficit on the transaction is transferred from/to additional
paid-in capital.
(e) Property, plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at
cost less impairment losses and, except for land, accumulated depreciation. The cost of property, plant and equipment at 1 January 2004, the date of transition to IFRSs, was
determined by reference to its fair value at that date.
Cost includes expenditures that are directly attributable to
the acquisition of the asset. The cost of self-constructed
assets includes the cost of materials and direct labour,
any other costs directly attributable to bringing the asset to
a working condition for its intended use, and the costs of
dismantling and removing the items and restoring the site
on which they are located, and capitalised borrowing costs
(see note 2(e)(i)). Purchased software that is integral to the
functionality of the related equipment is capitalised as part
of that equipment.
When parts of an item of property, plant and equipment have
different useful lives, they are accounted for as separate
items (major components) of property, plant and equipment.
Gains and losses on disposal of an item of property, plant
and equipment are determined by comparing the proceeds from disposal with the carrying amount of property,
plant and equipment, and are recognised net within “other
income” in profit or loss.
(ii) Subsequent costs
The cost of replacing part of an item of property, plant and
equipment is recognised in the carrying amount of the item
if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can
be measured reliably. The carrying amount of the replaced
part is derecognized. The costs of the day-to-day servicing
of property, plant and equipment are recognised in profit or
loss as incurred.
(iii) Depreciation
(iii) Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including
expenditure on internally generated goodwill and brands is recognised in profit or loss
as incurred.
(iv) Amortisation
Amortisation is calculated over the cost of the asset, or other amount substituted for
cost, less its residual value.
Amortisation is recognised in profit or loss on a straight-line basis over the estimated
useful lives of intangible assets, other than goodwill, from the date that they are available for use since this most closely reflects the expected pattern of consumption of
future economic benefits embodied in the asset. The estimated useful lives of other
intangible assets, which comprise trademarks, software and licences, for the current
and comparative period vary between 1 to 10 years.
Depreciation is calculated over the depreciable amount,
which is the cost of an asset, or other amount substituted for
cost, less its residual value.
(g) Leased assets
Depreciation is recognised in profit or loss and allocated to
cost of converting materials to finished goods on a straightline basis over the estimated useful lives of each part of
an item of property, plant and equipment, since this most
closely reflects the expected pattern of consumption of the
future economic benefits embodied in the asset. Leased
assets are depreciated over the shorter of the lease term
and their useful lives unless it is reasonably certain that the
Group will obtain ownership by the end of the lease term.
Land is not depreciated.
Other leases are operating leases and the leased assets are not recognised on the
Group’s statement of financial position.
The estimated useful lives for the current and comparative
periods are as follows:
Buildings
Machinery and equipment
Kegs
20–40 years
3–20 years
10 years
Depreciation methods, useful lives and residual values are
reviewed at each reporting date.
(f) Intangible assets
(i) Goodwill
Goodwill (negative goodwill) that arises on the acquisition of
subsidiaries is included in intangible assets.
Acquisitions of subsidiaries on or after
1 January 2004
For acquisitions on or after 1 January 2004, goodwill represents the excess of the cost of the acquisition over the
Group’s interest in the net fair value of identifiable assets,
liabilities and contingent liabilities of the acquiree. When
the excess is negative (negative goodwill), it is recognised
immediately in profit or loss.
Acquisitions of minority interests
Goodwill arising on the acquisition of a minority interest in
a subsidiary represents the excess of the cost of the additional investment over the carrying amount of the net assets
acquired at the date of exchange.
Subsequent measurement
Goodwill is measured at cost less accumulated impairment
losses. In respect of equity accounted investees, the carrying
amount of goodwill is included in the carrying amount of the
investment, and an impairment loss on such an investment is
not allocated to any asset, including goodwill, that forms part
of the carrying amount of the equity accounted investee.
(ii) Other intangible assets
Intangible assets that are acquired by the Group, which
have finite useful lives, are measured at cost less accumulated amortisation and accumulated impairment losses.
Leases in terms of which the Group assumes substantially all the risks and rewards of
ownership are classified as finance leases. Upon initial recognition the leased asset is
measured at an amount equal to the lower of its fair value and the present value of the
minimum lease payments. Subsequent to initial recognition, the asset is accounted for
in accordance with the accounting policy applicable to that asset.
(h) Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of
inventories is based on the weighted average principle and includes expenditure
incurred in acquiring the inventories, production or conversion costs and other costs
incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of overheads based on normal operating capacity.
Net realisable value is the estimated selling price in the ordinary course of business,
less the estimated costs of completion and selling expenses.
(i) Impairment
(i) Financial assets
A financial asset is assessed at each reporting date to determine whether there is any
objective evidence that it is impaired. A financial asset is impaired if objective evidence
indicates that a loss event has occurred after the initial recognition of the asset, and
that the loss event had a negative effect on the estimated future cash flows of that
asset that can be estimated reliably.
Objective evidence that financial assets (including equity securities) are impaired
can include default or delinquency by a debtor, restructuring of an amount due to the
Group on terms that the Group would not consider otherwise, indications that a debtor
or issuer will enter bankruptcy, the disappearance of an active market for a security. In
addition, for an investment in an equity security, a significant or prolonged decline in its
fair value below its cost is objective evidence of impairment.
The Group considers evidence of impairment for receivables and held-to-maturity
investment securities at both a specific asset and collective level. All individually significant receivables and held-to-maturity investment securities are assessed for specific impairment. All individually significant receivables and held-to-maturity investment
securities found not to be specifically impaired are then collectively assessed for any
impairment that has been incurred but not yet identified. Receivables and held-to-maturity investment securities that are not individually significant are collectively assessed
for impairment by grouping together receivables and held-to-maturity investment securities with similar risk characteristics.
In assessing collective impairment the Group uses historical trends of the probability
of default, timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that
the actual losses are likely to be greater or less than suggested by historical trends.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the
estimated future cash flows discounted at the asset’s original effective interest rate.
Losses are recognised in profit or loss and reflected in an allowance account against
receivables. Interest on the impaired asset continues to be recognised through the
Baltika Breweries
63
unwinding of the discount. When a subsequent event causes the amount of impairment
loss to decrease, the decrease in impairment loss is reversed through profit or loss.
Impairment losses on available-for-sale investment securities are recognised by transferring the cumulative loss that has been recognised in other comprehensive income,
and presented in the fair value reserve in equity, to profit or loss. The cumulative loss
that is removed from other comprehensive income and recognised in profit or loss is
the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously recognised in
profit or loss. Changes in impairment provisions attributable to time value are reflected
as a component of interest income.
If, in a subsequent period, the fair value of an impaired available-for-sale debt security
increases and the increase can be related objectively to an event occurring after the
impairment loss was recognised in profit or loss, then the impairment loss is reversed,
with the amount of the reversal recognised in profit or loss. However, any subsequent
recovery in the fair value of an impaired available-for-sale equity security is recognised
in other comprehensive income.
(ii) Non-financial assets
The carrying amounts of the Group’s non-financial assets, other than inventories and
deferred tax assets, are reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, then the asset’s recoverable amount
is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet
available for use, recoverable amount is estimated each year at the same time.
The recoverable amount of an asset or cash-generating unit is the greater of its value
in use and its fair value less costs to sell. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested
individually are grouped together into the smallest group of assets that generates cash
inflows from continuing use that are largely independent of the cash inflows of other
assets or groups of assets (the “cash-generating unit”). The goodwill acquired in a
business acquisition, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination.
The Group’s corporate assets do not generate separate cash inflows. If there is an
indication that a corporate asset may be impaired, then the recoverable amount is
determined for the cash generating unit to which the corporate asset belongs.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in profit or
loss. Impairment losses recognised in respect of cash-generating units are allocated first
to reduce the carrying amount of any goodwill allocated to the units and then to reduce
the carrying amount of the other assets in the unit (group of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets,
impairment losses recognised in prior periods are assessed at each reporting date for
any indications that the loss has decreased or no longer exists. An impairment loss is
reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying
amount does not exceed the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been recognised.
Goodwill that forms part of the carrying amount of an investment in an equity accounted
investee is not recognised separately, and therefore is not tested for impairment separately. Instead, the entire amount of the investment in an equity accounted investee
is tested for impairment as a single asset when there is objective evidence that the
investment in an equity accounted investee may be impaired.
(j) Employee benefits
(i) Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity
pays fixed contributions into a separate entity and will have no legal or constructive
obligation to pay further amounts. Obligations for contributions to defined contribution
pension plans, including Russia’s State pension fund, are recognised as an employee
benefit expense in profit or loss in the periods during which services are rendered by
employees. Prepaid contributions are recognised as an asset to the extent that a cash
refund or a reduction in future payments is available. Contributions to a defined contribution plan that are due more than 12 months after the end of the period in which the
employees render the service are discounted to their present value.
(ii) Short-term benefits
64
Annual Report 2009
Short-term employee benefit obligations are measured on
an undiscounted basis and are expensed as the related
service is provided.
A liability is recognised for the amount expected to be paid
under short-term cash bonus or profit-sharing plans if the
Group has a present legal or constructive obligation to
pay this amount as a result of past service provided by the
employee, and the obligation can be estimated reliably.
(k) Provisions
A provision is recognised if, as a result of a past event,
the Group has a present legal or constructive obligation
that can be estimated reliably, and it is probable that an
outflow of economic benefits will be required to settle the
obligation. Provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and
the risks specific to the liability. The unwinding of the discount is recognised as finance cost.
(l) Revenue
Revenue from the sale of goods in the course of ordinary
activities is measured at the fair value of the consideration
received or receivable, net of returns, excise taxes, trade
discounts and volume rebates. Revenue is recognised when
persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards
of ownership have been transferred to the buyer, recovery
of the consideration is probable, the associated costs and
possible return of goods can be estimated reliably, and there
is no continuing management involvement with the goods,
and the amount of revenue can be measured reliably. If it is
probable that discounts will be granted and the amount can
be measured reliably, then the discount is recognised as a
reduction of revenue as the sales are recognised.
The timing of the transfers of risks and rewards varies depending on the individual terms of the contract of sale. For certain
sales, transfer usually occurs when the goods are received
at the customer’s warehouse; for other sales, transfer occurs
when the goods are dispatched from the Group’s premises.
(m) Other expenses
(i) Lease payments
Payments made under operating leases are recognised in
profit or loss on a straight-line basis over the term of the lease.
Lease incentives received are recognised as an integral part
of the total lease expense, over the term of the lease.
(ii) Social expenditure
To the extent that the Group’s contributions to social programs benefit the community at large and are not restricted
to the Group’s employees, they are recognised in profit or
loss as incurred.
(n) Finance income and finance costs
Finance income comprises interest income on funds
invested (including available-for-sale financial assets), dividend income, gains on the disposal of available-for-sale
financial assets and foreign currency gains. Interest income
is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is recognised in
profit or loss on the date that the Group’s right to receive
payment is established, which in the case of quoted securities is the ex-dividend date.
Finance costs comprise interest expense on borrowings,
unwinding of the discount on provisions, losses on the disposal of available-for-sale financial assets, foreign currency
losses and impairment losses recognized on financial assets.
Borrowing costs that are not directly attributable to the acqui-
sition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.
Foreign currency gains and losses are reported on a gross
basis.
(o) Income tax
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except
to the extent that it relates to a business combination, or items
recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the
taxable income or loss for the year, using tax rates enacted
or substantively enacted at the reporting date, and any
adjustment to tax payable in respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for
taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets
or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or
loss, and differences relating to investments in subsidiaries
and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In
addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected
to be applied to the temporary differences when they
reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets
and liabilities are offset if there is a legally enforceable right
to offset current tax assets and liabilities, and they relate to
income taxes levied by the same tax authority on the same
taxable entity, or on different tax entities, but they intend to
settle current tax liabilities and assets on a net basis or their
tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax
credits and deductible temporary differences, to the extent that
it is probable that future taxable profits will be available against
which they can be utilised. Deferred tax assets are reviewed at
each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realised.
(p) Earnings per share
The Group presents basic and diluted earnings per share
(“EPS”) data for its ordinary shares. Basic EPS is calculated by
dividing the profit or loss attributable to ordinary shareholders
of the Company by the weighted average number of ordinary
shares outstanding during the period, adjusted for own shares
held. Diluted EPS is determined by adjusting the profit or loss
attributable to ordinary shareholders and the weighted average
number of ordinary shares outstanding, adjusted for own shares
held, for the effects of all dilutive potential ordinary shares.
(q) Segment reporting
An operating segment is a component of the Group that
engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses
that relate to transactions with any of the Group’s other
components. All operating segments’ operating results are
reviewed regularly by the Group’s Management Board to
make decisions about resources to be allocated to the segment and assess its performance, and for which discrete
financial information is available (see note 2(e)(ii)).
(r) New Standards and Interpretations not yet
adopted
A number of new Standards, amendments to Standards and
Interpretations are not yet effective as at 31 December 2009,
and have not been applied in preparing these consolidated financial statements. Of these
pronouncements, potentially the following will have an impact on the Group’s operations.
The Group plans to adopt these pronouncements when they become effective.
Revised IAS 24 Related Party Disclosures (2009) introduces an exemption from the
basic disclosure requirements in relation to related party disclosures and outstanding balances, including commitments, for government-related entities. Additionally,
the standard has been revised to simplify some of the presentation guidance that
was previously non-reciprocal. The revised standard is to be applied retrospectively for annual periods beginning on or after 1 January 2011. The Group has not
yet determined the potential effect of the amendment.
Amendment to IFRS 2 Share-based Payment – Group Cash-settled Share-based
Payment Transactions which clarifies that the entity receiving goods or services in a
share-based payment transaction that is settled by any other entity in the group or
any shareholder of such an entity in cash or other assets is required to recognise
the goods or services received in its consolidated financial statements. Amendment will come into effect on 1 January 2010. The Group has not yet determined
the potential effect of the amendment.
Revised IFRS 3 Business Combinations (2008) and amended IAS 27 (2008) Consolidated and Separate Financial Statements came into effect on 1 July 2009
(i.e. they become mandatory for the Group’s 2010 consolidated financial statements). The revisions address, among other things, accounting for step acquisitions, require acquisition-related costs to be recognised as expenses and remove
the exception for changes in contingent consideration to be accounted by adjusting goodwill. The revisions also address how non-controlling interests in subsidiaries should be measured upon acquisition and require the effects of transactions
with non-controlling interests to be recognised directly in equity. The Group has not
yet determined the potential effect of the revised standard.
IFRS 9 Financial Instruments will be effective for annual periods beginning on or
after 1 January 2013. The new standard is to be issued in several phases and is
intended to replace International Financial Reporting Standard IAS 39 Financial
Instruments: Recognition and Measurement once the project is completed by the
end of 2010. The first phase of IFRS 9 was issued in November 2009 and relates
to the recognition and measurement of financial assets. The Group recognises that
the new standard introduces many changes to the accounting for financial instruments and is likely to have a significant impact on Group’s consolidated financial
statements. The impact of these changes will be analysed during the course of the
project as further phases of the standard are issued.
IFRIC 17 Distributions of Non-cash Assets to Owners addresses the accounting for noncash dividend distributions to owners. The interpretation clarifies when and how a noncash dividend should be recognised and how the difference between the dividend paid
and the carrying amount of the net assets distributed should be recognised. IFRIC 17
became effective for annual periods beginning on or after 1 July 2009. The Group has
not yet determined the potential effect of the interpretation.
IFRIC 18 Transfers of Assets from Customers applies to accounting for transfers of
items of property, plant and equipment by entities that receive such transfers from
their customers. The interpretation clarifies the recognition and measurement of items
received, how the resulting credit, as well as the transfer of cash from customers
should be accounted for. IFRIC 18 applies prospectively to transfers of assets from
customers received on or after 1 July 2009. The Group has not yet determined the
potential effect of the interpretation.
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments provides guidance
on accounting for debt for equity swaps by the debtor. The interpretation clarifies that
an entity’s equity instruments qualify as “consideration paid” in accordance with paragraph 41 of International Financial Reporting Standards IAS 39 Financial Instruments:
Recognition and Measurement. Additionally, the interpretation clarifies how to account
for the initial measurement of own equity instruments issued to extinguish a financial liability and how to account for the difference between the carrying amount of the financial liability extinguished and the initial measurement amount of the equity instruments
issued. IFRIC 19 is applicable for annual periods beginning on or after 1 July 2010. The
Group has not yet determined the potential effect of the interpretation.
Various Improvements to IFRSs have been dealt with on a standard-by-standard
basis. All amendments, which result in accounting changes for presentation, recognition or measurement purposes, will come into effect not earlier than 1 January
2010. The Group has not yet analysed the likely impact of the improvements on its
financial position or performance.
Baltika Breweries
65
4. DETERMINATION OF FAIR VALUES
A number of the Group’s accounting policies and disclosures require the determination
of fair value, for both financial and non-financial assets and liabilities. Fair values have
been determined for measurement and/or disclosure purposes based on the following
methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
(a) Property, plant and equipment
(c) Inventories
The fair value of inventories acquired in a business combination is determined based on its estimated selling price in
the ordinary course of business less the estimated costs of
completion and sale, and a reasonable profit margin based
on the effort required to complete and sell the inventories.
The fair value of property, plant and equipment recognised as a result of a business
combination is based on market values. The market value of property is the estimated
amount for which a property could be exchanged on the date of valuation between
a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably and willingly. The fair value of
items of plant, equipment, fixtures and fittings is based on market approach and cost
approaches using quoted market prices for similar items when available.
(d) Investments in equity and debt securities
When no quoted market prices are available, the fair value of property, plant and equipment is primarily determined using depreciated replacement cost. This method considers the cost to reproduce or replace the property, plant and equipment, adjusted for
physical, functional or economical depreciation, and obsolescence.
(e) Trade and other receivables
(b) Intangible assets
The fair value of patents and trademarks acquired in a business combination is based
on the discounted estimated royalty payments that have been avoided as a result of
the patent or trademark being owned.
The fair value of other intangible assets is based on the discounted cash flows expected
to be derived from the use and eventual sale of the assets.
The fair value of held-to-maturity investments and available-for-sale financial assets is determined by reference to
their quoted bid price at the reporting date. The fair value
of held-to-maturity investments is determined for disclosure
purposes only.
The fair value of trade and other receivables is estimated
as the present value of future cash flows, discounted at the
market rate of interest at the reporting date. This fair value is
determined for disclosure purposes.
(f) Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is
calculated based on the present value of future principal
and interest cash flows, discounted at the market rate of
interest at the reporting date.
5. SEGMENT REPORTING
The Group is engaged in the production and distribution of beer, soft drinks and mineral water and has identified these operations as a single reportable segment.
The Group identified the segment in accordance with the criteria set in IFRS 8 Operating Segments and based on the way the operations of the Group are regularly reviewed
by the chief operating decision maker to analyze performance and allocate resources
within the Group.
The Group’s chief operating decision maker has been determined as the Management
Board.
The segment represents the Group’s business of production and distribution of beer,
soft drinks and mineral water in Russia, Azerbaijan and other countries. Currently the
Group’s operations in Azerbaijan and other countries make an insignificant contribution
to the financial results of the Group.
Within the segment all business components demonstrate
similar economic characteristics:
the products and customers;
the business processes are integrated and uniform: the
Group manages its operations centrally. Purchasing,
logistics, finance, HR and IT functions are centralized;
the Group’s activities are mainly limited to Russia which
has a uniform regulatory environment.
The Management Board assesses the performance of the
operating segment based on adjusted earnings before
interest, tax, depreciation and amortization (EBITDA); measures for sales and other information are consistent with that
in the consolidated financial statements.
The accounting policies used for the segment are the same
as accounting policies applied for the consolidated financial statements as described in note 3.
The segment information for the year ended 31 December 2009 is as follows:
’000 RUR
2009
2008
Revenue
93,648,747
92,482,283
EBITDA (including share of (loss) / profit of equity accounted investee
(net of income tax) RUR (29,374) thousand (2008: RUR 47,370 thousand ))
34,261,825
27,069,845
66
Annual Report 2009
A reconciliation of EBITDA to profit for the year is as follows:
’000 RUR
2009
2008
EBITDA (including share of (loss) / profit of equity accounted investee
(net of income tax))
34,261,825
27,069,845
Depreciation and amortisation
(4,644,309)
(4,795,897)
Finance income
1,834,591
1,619,812
(2,349,918)
(3,678,392)
29,102,189
20,215,368
Income tax
(5,729,920)
(4,707,119)
Profit for the year
23,372,269
15,508,249
Finance costs
6. FINANCIAL RISK MANAGEMENT
(a) Overview
The Group has exposures to the following risks from the
use of financial instruments:
Credit risk
Liquidity risk
Market risk
This note presents information about Group’s exposure to
each of the above risks, the Group’s objectives, policies and
processes for measuring and managing risk and the Group’s
management of capital. Further quantitative disclosures are
included throughout these consolidated financial statements.
Risk management framework
The Board of Directors has overall responsibility for the
establishment and oversight of the Group’s risk management framework. The Board has established an Audit Committee which is responsible for developing and monitoring
the Group’s risk management policies. The Audit Committee
reports regularly to the Board of Directors on its activities.
The Group’s risk management systems are established to
identify and analyse the risks faced by the Group, to set
appropriate risk limits and controls, and to monitor risks and
adherence to limits. Risk management systems are reviewed
regularly to reflect changes in market conditions and the
Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all
employees understand their roles and obligations.
The Group’s Audit Committee oversees how management
monitors compliance with the Group’s risk management system and procedures and reviews the adequacy of the risk
management framework in relation to the risks faced by the
Group. The Audit Committee is assisted in its oversight role
by Internal Audit. Internal Audit undertakes both regular and
ad hoc reviews of risk management controls and procedures,
the results of which are reported to the Audit Committee.
(b) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations and arises principally from the Group’s
receivables from customers and investment securities.
(i) Trade and other receivables
The Group’s exposure to credit risk is influenced mainly by
the individual characteristics of each customer. However, the
management of the Group also considers the demographics
of the Group’s customer base, including the default risk of the
industry in which customers operate, as these factors may have an influence on credit
risk, particularly in the currently deteriorating economic circumstances. Substantially all of
Group’s customers are located in the Russian Federation. Approximately 14.9% (2008:
14.5%) of the Group’s revenue is attributable to sales transactions with a single customer.
Management has established a credit policy under which each new customer is analysed individually for creditworthiness before the Group’s standard payment and delivery terms and conditions are offered. The Group’s review includes background checks
on new customers. Purchase limits are established for each customer, and represent
the maximum open amount without requiring approval from the Credit Committee;
these limits are reviewed monthly. Customers that fail to meet the Group’s benchmark
creditworthiness may transact with the Group only on a prepayment basis.
About 69% of the Group’s customers have been transacting with the Group for more
than 2 years, and losses have occurred infrequently. In monitoring customer credit risk,
customers are grouped according to their credit characteristics, including whether
they are an individual or legal entity, whether they are a wholesale or retail customers,
geographic location, maturity, and existence of any previous financial difficulties. Trade
receivables relate mainly to the Group’s wholesale customers. The Group requires collateral in respect of trade receivables. Credit evaluations are performed on all customers, other than related parties, requiring credit over a certain amount.
The Group establishes an allowance for impairment that represents its estimate of
incurred losses in respect of trade and other receivables and investments. The main
components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of
similar assets in respect of losses that have been incurred but not yet identified. The
collective loss allowance is determined based on historical data of payment statistics
for similar financial assets.
(ii) Investments
The Group limits its exposure to credit risk by only investing in liquid securities in accordance with Group’s deposit policy and only with counterparties that are in the top 50 rated
banks of Russian Federation according to the size of total assets. In order to determine the
amounts to be deposited with each bank the Group studies the financial statements of the
bank and bank credit ratings. The status of the banks is reconsidered every 6 months.
(c) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another
financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under
both normal and stressed conditions, without incurring unacceptable losses or risking
damage to the Group’s reputation.
Typically, the Group ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 35 days, including the servicing of financial obligations; this
excludes the potential impact of extreme circumstances that cannot be reasonably predicted, such as instability of financial system and the impact of monopolists and changes
in statutory regulations. In addition the Group maintains the following lines of credit:
USD 176,425 thousand multicurrency unsecured credit facility. Interest would be
payable for EURO/USD/RUR at the rate of LIBOR/EURIBOR/Cost of funds for the
lender+0.75%;
Baltika Breweries
67
USD 143,460 thousand multicurrency unsecured credit facility. Interest would be
payable for EURO/USD/RUR at the rate of LIBOR/EURIBOR/Mosprime+0.375%;
USD 81,915 thousand multicurrency unsecured credit/overdraft facility. Interest
would be determined as each tranche is drawn down.
(d) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates
and interest rates will affect the Group’s income or the value of its holdings of financial
instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.
(i) Currency risk
The Group is exposed to currency risk on purchases and borrowings that are denominated in a currency other than the respective functional currencies of the Group entities, primarily the Russian Rouble (RUR). The currencies in which these transactions
are primarily denominated are USD and EURO.
rowings management uses its judgment to decide whether it
believes that a fixed or variable rate would be more favorable
to the Group over the expected period until maturity.
(iii) Other market risk
Material investments are managed on an individual basis
and are approved by the Board of Directors.
The primary goal of the Group’s investment strategy is to
maximise investment returns.
The Group does not enter into commodity contracts other
than to meet the Group’s expected usage and sale requirements; such contracts are not settled net.
(e) Capital management
(ii) Interest rate risk
The Group’s policy is to maintain a strong capital base so as to
maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the level of dividends to ordinary shareholders.
Changes in interest rates impact primarily loans and borrowings by changing either their
fair value (fixed rate debt) or their future cash flows (variable rate debt). Management
does not have a formal policy of determining how much of the Group’s exposure should
be subject to fixed or variable rates. However, at the time of raising new loans or bor-
The Board of Directors seeks to maintain a balance between
the higher returns that might be possible with higher levels
of borrowings and the advantages and security afforded by
a sound capital position.
The Group’s debt to capital ratio at the end of the year was as follows:
’000 RUR
2009
Total liabilities
Less: cash and cash equivalents
2008
15,957,254
20,624,045
1,740,702
1,691,594
Net debt
14,216,552
18,932,451
Total equity
63,681,313
54,011,129
0.22
0.35
2009
’000 RUR
2008
’000 RUR
Debt to capital ratio at 31 December
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
7. OTHER INCOME
Gain on disposal of property, plant and equipment and intangible assets
Other expenses
72,217
82,546
-
(4,059)
72,217
78,487
8. ADMINISTRATIVE EXPENSES
2009
’000 RUR
2008 (restated)
’000 RUR
Wages and salaries
825,486
722,636
Depreciation and amortisation
484,592
455,320
Information technology and communications
170,580
188,031
Payroll taxes
105,673
105,965
Other payroll expenses
105,064
171,521
94,432
201,554
Facilities
Charity
Other administrative expenses
68
Annual Report 2009
35,244
50,547
707,650
706,579
2,528,721
2,602,153
9. PERSONNEL COSTS
Wages and salaries
2009
’000 RUR
2008
’000 RUR
5,976,138
5,956,992
Contributions to state pension fund
760,122
803,800
Other payroll taxes
268,957
288,156
Other payroll expenses
575,089
504,836
7,580,306
7,553,784
2009
’000 RUR
2008
’000 RUR
93,068
137,798
10. FINANCE INCOME AND FINANCE COSTS
Recognised in profit or loss
Interest income on unimpaired held-to-maturity investments
Interest income on loans and receivables
1,188
-
372,086
115,411
Foreign exchange gain
1,368,249
1,366,603
Finance income
1,834,591
1,619,812
Interest income on bank deposits
Interest expense on financial liabilities measured at amortised cost
190,319
573,336
Foreign exchange loss
2,159,599
3,105,056
Finance costs recognised in profit or loss
2,349,918
3,678,392
Total interest income on financial assets
466,342
253,209
Total interest expense on financial liabilities
190,319
573,336
The above financial income and costs include the following in respect of assets/(liabilities)
not at fair value through profit and loss:
Recognised in other comprehensive income
Foreign currency translation differences for foreign operations
257,818
415,353
Finance income recognised in other comprehensive income, net of tax
257,818
415,353
2009
’000 RUR
2008
’000 RUR
5,498,430
4,734,655
11. INCOME TAX EXPENSE
Current tax expense
Current year
Deferred tax expense
Origination and reversal of temporary differences
Total income tax expense
231,490
(27,536)
5,729,920
4,707,119
The Group’s applicable tax rate is the corporate income tax rate of 20% for Russian companies (2008: 24%). With effect from 1 January 2009, the income
tax rate for Russian companies was reduced to 20%.
2009
’000 RUR
%
2008
’000 RUR
%
29,102,189
100
20,215,368
100
Income tax at applicable tax rate
5,820,438
20.0
4,851,688
24.0
353,281
1.2
557,832
2.8
-
-
(277,425)
(1.4)
(496,860)
(1.7)
(340,979)
(1.7)
53,061
0.2
(83,997)
(0.4)
5,729,920
19.7
4,707,119
23.3
Non-deductible expenses
Reduction in tax rate
Effects of tax concessions
Other
Baltika Breweries
69
12. PROPERTY, PLANT AND EQUIPMENT
Land and
buildings
’000 RUR
Machinery and
equipment
Construction
in progress
Kegs
Total
Cost/Deemed cost
At 1 January 2008
9,961,904
36,231,977
1,567,399
6,544,660
54,305,940
Additions
811,428
5,029,809
416,877
1,993,180
8,251,294
Acquisitions through business combinations
109,263
297,886
670
3,101
410,920
(7,974)
(308,753)
(7,416)
-
(324,143)
862,959
2,462,801
302,561
(3,646,021)
(17,700)
18,494
56,324
113
1,108
76,039
11,756,074
43,770,044
2,280,204
4,896,028
62,702,350
Additions
391,620
2,609,742
-
420,069
3,421,431
Disposals
(11,796)
(199,545)
(19,524)
(1,358)
(232,223)
2,654,700
441,446
(10,258)
(3,088,393)
(2,505)
34,468
(19,323)
(493)
11,430
26,082
14,825,066
46,602,364
2,249,929
2,237,776
65,915,135
(1,001,969)
(13,327,579)
(610,011)
-
(14,939,559)
(322,457)
(4,101,108)
(191,896)
-
(4,615,461)
Disposals
1,977
204,789
6,560
-
213,326
Transfers
(8,347)
8,347
-
-
-
-
(3,908)
-
-
(3,908)
(1,330,796)
(17,219,459)
(795,347)
-
(19,345,602)
(449,605)
(3,965,845)
(198,641)
-
(4,614,091)
2,887
187,045
18,610
-
208,542
(334,275)
351,138
(16,863)
-
-
(78)
13,161
23
-
13,106
(2,111,867)
(20,633,960)
(992,218)
-
(23,738,045)
Disposals
Transfers
Effect of movements in exchange rates
At 31 December 2008
Transfers
At 31 December 2009
Depreciation and impairment losses
At 1 January 2008
Depreciation for the year
At 31 December 2008
Depreciation for the year
Disposals
Transfers
At 31 December 2009
Carrying amounts
At 1 January 2008
8,959,935
22,904,398
957,388
6,544,660
39,366,381
At 31 December 2008
10,425,278
26,550,585
1,484,857
4,896,028
43,356,748
At 31 December 2009
12,713,199
25,968,404
1,257,711
2,237,776
42,177,090
Depreciation expense of RUR 2,526,958 thousand has been included in cost of goods sold (2008: RUR 2,655,720 thousand), RUR 1,600,430 thousand
in distribution expenses (2008: RUR 1,660,394 thousand), RUR 320,191 thousand in administrative expense (2008: RUR 299,347 thousand) and RUR
166,512 thousand in cost of inventories as at 31 December 2009 (2008: Nil).
As a result of the change in accounting policy with respect to the treatment of borrowing costs, at 31 December 2009 capitalised borrowing costs related
to the construction of buildings amounted to RUR 3,318 thousand (2008: Nil).
70
Annual Report 2009
13. INTANGIBLE ASSETS
’000 RUR
Trademarks
Software and
licences
11,598,819
-
400,087
-
-
248,487
248,487
1,638,615
45,004
56
1,683,675
Goodwill
Total
Cost
At 1 January 2008
Additions
Acquisitions through business combinations
Transfers
At 31 December 2008
11,998,906
-
-
17,700
17,700
277,246
7,608
13
284,867
13,514,680
52,612
666,343
14,233,635
Additions
-
-
253,141
253,141
Transfers
-
-
2,505
2,505
145,976
5,167
350
151,493
13,660,656
57,779
922,339
14,640,774
At 31 December 2009
Amortisation
At 1 January 2008
-
-
(261,942)
(261,942)
Amortisation for the year
-
(1,252)
(179,184)
(180,436)
-
(63)
(3)
(66)
At 31 December 2008
-
(1,315)
(441,129)
(442,444)
Amortisation for the year
-
(6,054)
(190,676)
(196,730)
-
139
61
200
At 31 December 2009
-
(7,230)
(631,744)
(638,974)
Carrying amounts
At 1 January 2008
11,598,819
-
138,145
11,736,964
At 31 December 2008
13,514,680
51,297
225,214
13,791,191
At 31 December 2009
13,660,656
50,549
290,595
14,001,800
Amortisation expense of RUR 12,589 thousand has been included in cost of goods sold (2008: RUR 7,246 thousand), RUR 19,740 thousand in distribution expenses (2008: RUR 17,217 thousand) and RUR 164,401 thousand in administrative expense (2008: RUR 155,973 thousand).
(a) Impairment testing of goodwill
For the purposes of impairment testing, goodwill is considered at the Group level and has not been allocated to
individual plants. This represents the lowest level within the
Group at which the goodwill is monitored for internal management purposes.
The recoverable amount of the Group’s plants was based
on their value in use and was determined by discounting
the future cash flows generated from their continuing use.
The calculation of the value in use was based on the following key assumptions:
Cash flows were projected based on actual operating
results and the five-year business plan. Cash flows for a
further 5-year period were extrapolated using a declining growth rate of 5% – nil.
In the first year of business plan revenue was projected
using declining rate of growth, that reflect current difficult business conditions. The anticipated annual production growth included in the cash flow projections
was between 5% and 11% for the years 2011 to 2014
and reflects an expectation of a recovery in the economy at the end of 2010.
An after-tax discount rate of 14.5% was applied in determining the recoverable
amount of the plants. The discount rate was estimated based on an industry average weighted average cost of capital, which was based on an average industry
debt to total capital ratio of 16.55% at a market interest rate of 6.89%.
The values assigned to the key assumptions represent management’s assessment of
future trends in the beer production industry and are based on both external sources
and internal sources.
Although no impairment loss was recognised in respect of goodwill the determination
of recoverable amount is sensitive to the rate at which the Group achieves its planned
growth in production.
In determining a value in use of RUR 180,090,000 thousand (compared to a carrying amount of RUR 56,178,890 thousand) management has assumed that production
volume will reach 36,384 thousand hectolitres in the first year of the business plan and
52,700 thousand hectolitres by the tenth year.
If actual production were to be below estimated production by 44% in 2010 and subsequent years, the value in use would approximate the carrying amounts of the plants
and goodwill.
Baltika Breweries
71
14. EQUITY ACCOUNTED INVESTEES
The Group has the following investment in an equity accounted investee:
Malterie Soufflet Saint Petersburg (“Soufflet”)
Country
Ownership/Voting
Russia
30%
This company produces malt.
The Group’s share of losses in its equity accounted investee for the year ended 31 December 2009 was RUR 29,734 thousand (2008: profit RUR 47,370
thousand). The Group’s share of post-acquisition total recognised gains and losses in associates as at 31 December 2009 was RUR 232,255 thousand
(31 December 2008: RUR 279,108 thousand).
15. OTHER INVESTMENTS
2009
’000 RUR
2008
’000 RUR
9,781
9,796
6,860,751
-
2,190,548
-
Non-current
Available-for-sale investments:
Measured at cost
Current
Investments held-to-maturity:
Promissory notes and bank deposits
Loans to related parties
9,051,299
Available-for-sale investments stated at cost comprise unquoted equity securities in the
brewery and banking industries. There is no market for these investments and there have
not been any recent transactions that provide evidence of fair value. However, management believes it unlikely that the fair value at the end of the reporting period would differ
significantly from their carrying amount.
The Group’s exposure to credit, currency and interest rate
risks related to other investments are disclosed in note 24.
16. DEFERRED TAX ASSETS AND LIABILITIES
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Assets
’000 RUR
2009
Property, plant and
equipment
Intangible assets
2007
(restated)
2009
Net
2008
(restated)
2007
(restated)
2009
2008
(restated)
2007
(restated)
(1,989,837)
-
-
-
(2,557,771)
(2,074,779)
(1,989,837)
(2,557,771)
(2,074,779)
15,281
10,789
7,890
(10,102)
(11,285)
-
5,179
(496)
7,890
-
-
-
(17,459)
(21,676)
(15,192)
(17,459)
(21,676)
(15,192)
Investments
Inventories
Liabilities
2008
(restated)
33,157
124,131
68,329
(15,246)
-
-
17,911
124,131
68,329
Trade and other
receivables
186,752
262,324
294,852
-
-
-
186,752
262,324
294,852
Trade and other
payables
733,716
323,372
202,498
-
-
-
733,716
323,372
202,498
Net tax assets/
(liabilities)
968,906
720,616
573,569
(2,600,578)
(2,107,740)
(2,005,029)
(1,631,672)
(1,387,124)
(1,431,460)
During the year ended 31 December 2009 RUR 231,490 thousand (2008: RUR 27,536
thousand) of the movement in the net deferred tax liability was recognized in the income
statement and RUR 13,058 thousand (2008: RUR 830 thousand), relating to foreign
exchange differences, was recognized directly in other comprehensive income. During
72
Annual Report 2009
the year ended 31 December 2008 RUR 15,970 thousand of
the movement in the net deferred tax liability was acquired
through business combination.
17. INVENTORIES
2009
’000 RUR
Raw materials and consumables
2008 (restated)
’000 RUR
2007 (restated)
’000 RUR
3,328,168
5,784,681
Work in progress
288,884
553,718
560,136
Finished goods and goods for resale
679,001
1,012,415
1,269,531
4,296,053
7,350,814
7,451,192
178,636
253,860
147,335
Write-down of inventories in the current year
5,621,525
In 2009 raw materials, consumables and changes in finished goods and work in progress recognised as cost of sales amounted to RUR 30,616,587
thousand (2008: RUR 37,569,015 thousand).
18. TRADE AND OTHER RECEIVABLES
Trade receivables
2009
’000 RUR
2008
’000 RUR
6,872,638
4,409,860
VAT receivable
165,512
321,637
Advances to suppliers
720,358
2,074,737
Other receivables
Accumulated impairment losses on receivables
384,979
816,705
8,143,487
7,622,939
(81,394)
(111,898)
8,062,093
7,511,041
The Group’s exposure to credit risk and currency risk related to trade and other receivables is disclosed in note 24.
19. CASH AND CASH EQUIVALENTS
Bank balances
2009
’000 RUR
2008
’000 RUR
288,368
1,553,939
Bank deposits and bank promissory notes
1,452,334
137,655
Cash and cash equivalents in the statement of financial position and in the statement of
cash flows
1,740,702
1,691,594
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in note 24.
20. EQUITY
(a) Share capital and additional paid-in capital
Number of shares unless otherwise stated
Ordinary shares
2009
Ordinary shares
2008
Preference shares
2009
Preference shares
2008
Authorised shares
Par value
On issue at beginning of the year
Redemption
On issue at end of the year, fully paid
RUR 1
RUR 1
RUR 1
RUR 1
151,714,594
151,721,708
12,326,570
12,394,003
-
(7,114)
-
(67,433)
151,714,594
151,714,594
12,326,570
12,326,570
Baltika Breweries
73
The holders of ordinary shares are entitled to receive dividends as declared from time
to time and are entitled to one vote per share at meetings of the Company.
ter all shareholders, ordinary and preference, participate
equally in the distribution of the remaining assets.
Preference shares have no right of conversion or redemption, but are entitled to an
annual dividend equal to the nominal value of the shares multiplied by the interest rate
of the Savings Bank of the Russian Federation, plus 10%. If the dividend is not paid,
preference shares carry the right to vote until the following Annual Shareholders’ Meeting. However, the dividend is not cumulative. The preference shares also carry the
right to vote in respect of issues that influence the interests of preference shareholders,
including reorganisation and liquidation of the Company.
(b) Dividends
In the event of liquidation, preference shareholders first receive any declared unpaid
dividends and the par value of the preference shares (“liquidation value”). Thereaf-
In accordance with Russian legislation, distributable
reserves are limited to the balance of accumulated retained
earnings as recorded in the Company’s statutory financial
statements, prepared in accordance with Russian Accounting Principles. As at 31 December 2009 the Company
had retained earnings, including profit for the current year
of RUR 34,906,210 thousand (31 December 2008: RUR
25,321,399 thousand).
The following table details the dividends declared by the Company for the years ended 31 December 2009 and 31 December 2008:
RUR per share
’000 RUR
Year ended 31 December 2008
Preference shares
Dividends for 2007
52
640,981
52
7,889,159
85.1
1,048,991
85.1
12,910,912
Ordinary shares
Dividends for 2007
Year ended 31 December 2009
Preference shares
Dividends for 2008
Ordinary shares
Dividends for 2008
The shareholders’ meeting held on 2 April 2009 approved dividends amounting to RUR 13,959,903 thousand.
21. EARNINGS PER SHARE
The calculation of earnings per share is based upon the profit for the year attributable to ordinary shares and the weighted average number of ordinary
shares outstanding during the year, calculated as shown below. The Company has no dilutive potential ordinary shares.
Weighted average number of ordinary shares
Number of shares unless otherwise stated
Issued shares at 1 January
2009
2008
151,714,594
151,721,708
Effect of redemption of shares
Weighted average number of shares for the for the year ended 31 December
-
(6,939)
151,714,594
151,714,769
Profit attributable to ordinary shareholders
2009
’000 RUR
2008 (restated)
’000 RUR
Profit for the year attributable to shareholders of the Company
23,372,269
15,508,249
Preference dividends recognised during the year
(1,048,991)
(640,981)
Profit attributable to ordinary shares
22,323,278
14,867,268
74
Annual Report 2009
22. LOANS AND BORROWINGS
This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings. For more information about the Group’s
exposure to interest rate, foreign currency and liquidity risks, see note 24.
2009
’000 RUR
2008
’000 RUR
-
176,304
-
176,304
Secured bank loans
Current liabilities
Unsecured bank loans
-
4,116,537
Unsecured loan from Carlsberg Breweries A/S
-
1,097,628
-
1,852,639
Unsecured loans from other companies
Current portion of secured bank loans
181,572
496,033
181,572
7,562,837
(a) Terms and debt repayment schedule
Terms and conditions of outstanding loans were as follows:
31 December 2009
’000 RUR
Currency
Nominal
interest rate
Year of
maturity
USD
LIBOR
+0.75%
2009-2010
USD
LIBOR
+0.65%
USD
LIBOR
+0.375%
EURO
EURIBOR
+0.375%
RUR
EURO
Secured bank loan
Unsecured bank loan
Unsecured bank loan
Unsecured bank loan
Unsecured loan from Carlsberg
Breweries A/S
Unsecured loans from other
companies
Face
value
31 December 2008
Carrying
amount
Face value
Carrying
amount
181,572
181,572
672,337
672,337
2009
-
-
22,714
22,714
2009
-
-
1,777,439
1,777,439
2009
-
-
2,316,384
2,316,384
11.33%
2009
-
-
1,097,628
1,097,628
EURIBOR
+0.75%
2009
-
-
1,852,639
1,852,639
181,572
181,572
7,739,141
7,739,141
The bank loan is fully secured by the guarantee of the Company’s parent company, Baltic Beverages Holding AB.
23. TRADE AND OTHER PAYABLES
2009
’000 RUR
2008
’000 RUR
Trade payables
5,214,709
5,645,034
Taxes payable
4,214,958
3,326,583
Accrued salaries, wages and benefits
1,276,828
1,359,334
114,655
134,503
Dividends payable
Payables to equity accounted investee
Other payables and provisions
There are actual and potential claims to the Group from
its suppliers that allege the Group has not fulfilled contract terms. The information usually required by IAS 37
Provisions, Contingent Liabilities and Contingent Assets in
respect of these claims is not disclosed on the grounds that
42,902
106,718
2,534,529
434,430
13,398,581
11,006,602
it can be expected to prejudice seriously the position of the Group in actual and potential disputes.
The Group’s exposure to currency and liquidity risk related to trade and other payables
is disclosed in note 24.
Baltika Breweries
75
24. FINANCIAL INSTRUMENTS
(a) Credit risk
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:
Carrying amount
Trade and other receivables
Available-for-sale financial assets
2009
’000 RUR
2008
’000 RUR
7,341,735
5,436,304
9,781
9,796
Held-to-maturity investments
9,051,299
-
1,740,702
1,691,594
18,143,517
7,137,694
The maximum exposure to credit risk for trade receivables at the reporting date by type of customer was:
Carrying amount
2009
’000 RUR
2008
’000 RUR
Wholesale customers
5,752,447
3,669,764
Retail customers
1,120,191
740,096
6,872,638
4,409,860
Accumulated impairment losses on receivables
(81,394)
(111,898)
6,791,244
4,297,962
The Group’s most significant customer, a domestic wholesaler, accounts for RUR 998,900 thousand of the trade receivables carrying amount as at
31 December 2009 (2008: RUR 858,434 thousand).
Substantially all the Group’s receivables relate to sales to customers in Russia.
Impairment losses
The ageing of trade receivables at the reporting date was:
Gross
2009
’000 RUR
Current
Past due 0 – 90 days
Past due more than 90 days
Impairment
2009
’000 RUR
Gross
2008
’000 RUR
Impairment
2008
’000 RUR
6,680,914
-
4,203,372
-
110,330
-
78,501
-
81,394
81,394
127,987
111,898
6,872,638
81,394
4,409,860
111,898
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
2009
’000 RUR
Balance at beginning of the year
Impairment loss (reversed)/recognised
Amounts written off against trade receivables
Balance at end of the year
Based on historic default rates the Group believes that no general impairment allowance is necessary in respect of trade receivables not past due and past due by up to
90 days. 94% of the balance, which includes the amount owed by the Group’s most
significant customer (see above), relates to customers that have a good track record
with the Group. The total impairment loss 31 December 2009 of RUR 81,394 thousand
relates to collective loss established for overdue receivables. Of the total impairment
loss as at 31 December 2008 of RUR 111,898 thousand, RUR 73,269 thousand relates
to claims from the Group’s most significant customer.
76
Annual Report 2009
111,898
2008
’000 RUR
106,128
(8,501)
49,453
(22,003)
(43,683)
81,394
111,898
The allowance account in respect of trade receivables is
used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible; at
that point the amount is considered irrecoverable and written off against the financial asset directly.
(b) Liquidity risk
The following are the contractual maturities of financial liabilities, including estimated interest payments. It is not expected that the cash flows included in
the maturity analysis could occur significantly earlier, or at significantly different amounts.
31 December 2009
’000 RUR
Carrying
amount
Contractual
cash flows
0-6 months
6-12 months
1-2 years
More than 5
years
2-5 years
Non-derivative financial liabilities
Secured bank loans
31 December 2008
’000 RUR
181,572
182,674
182,674
-
-
-
13,398,581
13,398,581
13,398,581
-
-
-
-
13,580,153
13,581,255
13,581,255
-
-
-
-
Carrying
amount
Contractual
cash flows
0-6 months
6-12 months
1-2 years
-
More than 5
years
2-5 years
Non-derivative financial liabilities
Secured bank loans
672,337
690,334
257,541
253,889
178,904
-
-
4,116,537
4,174,388
4,174,388
-
-
-
-
Unsecured loan from Carlsberg Breweries A/S
1,097,628
1,194,029
61,683
1,132,346
-
-
-
1,852,639
1,857,370
1,857,370
-
-
-
-
11,006,602
11,006,602
11,006,602
-
-
-
-
18,745,743
18,922,723
17,357,584
1,386,235
178,904
-
-
(c) Currency risk
Exposure to currency risk
The Group’s exposure to foreign currency risk was as follows based on notional amounts:
Eurodenominated
2009
USDdenominated
2009
Eurodenominated
2008
USDdenominated
2008
267,362
429,560
6,696
2,705
Current assets
11,428
29,234
738,816
2,797,109
15,789
-
Secured bank loans
-
(181,572)
-
(496,033)
-
-
(2,316,384)
(1,800,153)
-
-
(1,852,639)
-
(576,325)
(109,563)
(676,238)
(93,556)
Held-to-maturity investments
Trade receivables
Current liabilities
Trade payables
Secured bank loans
-
-
-
(176,304)
Gross balance sheet exposure
189,708
2,535,208
(4,571,203)
(2,133,781)
Net Group exposure from commitments and anticipated transactions
(75,139)
-
(248,355)
(2,262)
Net exposure
114,569
2,535,208
(4,819,558)
(2,136,043)
The following exchange rates applied during the year and as at the end of the year:
Average rate
Reporting date spot rate
RUR 1 equals
2009
2008
2009
2008
USD
0.0315
0.0402
0.0331
0.0340
EURO
0.0227
0.0275
0.0230
0.0241
Sensitivity analysis
A 20% strengthening of the RUR, as indicated below,
against the following currencies at 31 December would
have increased (decreased) equity and profit or loss by the
amounts shown below. This analysis is based on foreign
currency exchange rate variances that the Group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in
particular interest rates, remain constant. The analysis is performed on the same basis
for 2008.
Baltika Breweries
77
’000 RUR
Equity
Profit or loss
2009
USD (20% strengthening)
(507,042)
(507,042)
EUR (20% strengthening)
(22,914)
(22,914)
USD (20% strengthening)
427,209
427,209
EUR (20% strengthening)
963,911
963,911
2008
A weakening of the RUR against the above currencies at 31 December would have had the equal but opposite effect on the above currencies to the
amounts shown above, on the basis that all other variables remain constant.
(d) Interest rate risk
Profile
At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:
’000 RUR
Fixed rate instruments
Financial assets
Carrying amount
2009
2008
10,503,633
137,655
-
(7,044,090)
10,503,633
(6,906,435)
(181,572)
(695,051)
Financial liabilities
Variable rate instruments
Financial liabilities
Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore a change in interest rates at the
reporting date would not affect profit or loss.
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the reporting date would have increased (decreased) profit and loss and equity by the amounts shown below.
This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2008.
Profit or loss and equity
100 bp
100 bp
increase
decrease
2009
’000 RUR
(1,816)
(1,816)
Cash flow sensitivity
(1,816)
(1,816)
(6,951)
(6,951)
Cash flow sensitivity
(6,951)
(6,951)
2008
’000 RUR
(e) Fair values
The basis for determining fair value is disclosed in note 4. The fair value of unquoted equity instruments is discussed in note 15. In other cases management believes that the fair value of the Group’s financial assets and liabilities approximates their carrying amounts.
25. OPERATING LEASES
Non-cancellable operating lease rentals are payable as follows:
’000 RUR
Less than one year
Between one and five years
More than five years
The Group leases a number of land plots and buildings under operating leases. Lessors for these leases are state authorities and third parties. The leases of land plots are
typically run for 25-49 years. Leases of buildings are typically run for 11 months with an
option to renew the lease after that date. The Group has no contingent rent arrangements or subleases.
78
Annual Report 2009
2009
2008
222,589
264,539
59,137
95,814
239,070
249,362
520,796
609,715
During the year ended 31 December 2009 an amount of
RUR 287,110 thousand was recognised as an expense
in profit or loss in respect of operating leases (2008: RUR
315,972 thousand).
26. CAPITAL COMMITMENTS
As at 31 December 2009 the Group had the following commitments relating to property, plant and equipment (31 December 2008: RUR 879,574 thousand):
2009
’000 RUR
Project
Baltika-St. Petersburg plant
129,569
Baltika-Rostov plant
47,971
Baltika-Baku plant
41,226
Baltika-Novosibirsk plant
22,835
Baltika-Samara plant
21,060
Baltika-Yaroslavl plant
16,072
Baltika-Tula plant
10,746
Baltika-Khabarovsk plant
2,798
Baltika-Voronezh plant
2,391
Baltika-Chelyabinsk plant
1,857
Baltika-Pikra plant
1,548
Total
298,073
27. CONTINGENCIES
Taxation contingencies in the Russian Federation
The taxation system in the Russian Federation is relatively
new and is characterised by frequent changes in legislation, official pronouncements and court decisions, which
are often unclear, contradictory and subject to varying
interpretation by different tax authorities. Taxes are subject to review and investigation by a number of authorities,
which have the authority to impose severe fines, penalties
and interest charges. A tax period remains open for review
by the tax authorities during the three subsequent calendar
years; however, under certain circumstances a tax period
may remain open longer. Recent events within the Russian Federation suggest that the
tax authorities are taking a more assertive position in their interpretation and enforcement of tax legislation.
These circumstances may create tax risks in the Russian Federation that are substantially more significant than in other countries. Management believes that it has provided
adequately for all tax liabilities based on its interpretations of applicable Russian tax legislation, official pronouncements and court decisions. However, the interpretations of the
relevant authorities could differ and the effect on these consolidated financial statements,
if the authorities were successful in enforcing their interpretations, could be significant.
28. RELATED PARTY TRANSACTIONS
(a) Control relationships
The Company’s parent company is Baltic Beverages Holding AB (refer note 1(b)). The Company’s ultimate parent
company is Carlsberg A/S and the Company’s ultimate
controlling party is Carlsberg Foundation. Carlsberg A/S
produces consolidated financial statements that are available for public use.
As at 31 December 2007 Baltic Beverages Holding AB
was owned by Pripps Ringnes AB (50%) and Oy Hartwall
AB (50%). The parent company of Pripps Ringnes AB was
Carlsberg Breweries A/S. The ultimate parent company of Oy Hartwall AB was Scottish
& Newcastle Plc.
On 25 January 2008 the Boards of Sunrise Acquisitions Limited (a company jointly
owned by Carlsberg Breweries A/S and Heineken N.V.), and Scottish & Newcastle Plc
announced that they had reached agreement on the terms of a recommended acquisition of Scottish & Newcastle Plc. On 28 April 2008 the transaction became effective.
According to the terms of the acquisition Scottish & Newcastle Plc’s share of Baltic
Beverages Holding AB, as well as the French, Greek, Chinese and Vietnamese operations, were transferred to Carlsberg Breweries A/S, which is a subsidiary of Carlsberg
A/S, the Company’s ultimate parent Company.
Baltika Breweries
79
(b) Management remuneration
Key management received the following remuneration during the year, which is included in personnel costs (see note 8):
’000 RUR
Salaries and bonuses
Contributions to State pension fund
Contributions to defined contribution plan
Termination benefits
2009
2008
427,026
329,634
12,719
10,253
9,989
7,360
-
4,151
449,734
351,398
(c) Transactions with other related parties
The Group’s other related party transactions are disclosed below. Transactions with Scottish & Newcastle Plc and its operations which were transferred
to Heineken N.V. as a result of acquisition of Scottish & Newcastle Plc by Sunrise Acquisitions Limited are disclosed for the period 1 January 2008 to the
date of acquisition.
(i) Revenue
Transaction value
2009
’000 RUR
Transaction value
2008
Outstanding balance
2009
Outstanding balance
2008
Sale of goods:
Fellow subsidiaries
Scottish & Newcastle Plc
49,912
23,074
21,813
26,955
-
2,531
-
-
62,767
68,017
-
-
-
177
-
-
Royalties received
Fellow subsidiaries
Interest received:
591
-
591
-
Parent company
597
-
597
-
24,361
78,372
9,214
27,195
Services provided:
Equity accounted investee
Other income
Parent company
79,237
-
-
-
217,465
172,171
32,215
54,150
(ii) Expenses
Transaction value
2009
’000 RUR
Transaction value
2008
Outstanding balance
2009
Outstanding balance
2008
Purchase of goods:
Equity accounted investee
571,736
962,130
42,902
106,718
13,971
2,245
33,062
(25,660)
Fellow subsidiaries
18,380
17,058
7,012
1,908
-
288
-
-
39,430
26,045
-
-
178
276
-
-
-
840
-
-
630,571
610,331
291,756
252,061
18,803
18,285
3,626
1,525
-
26,212
-
-
101,556
29,931
-
26,628
-
8,510
-
8,510
150,766
20,681
162,688
20,681
-
74,905
-
73,472
1,545,391
1,797,737
541,046
465,843
Services received:
Fellow subsidiaries
Royalties paid:
Fellow subsidiaries
Finance costs:
Fellow subsidiaries
Other expenses:
Parent company
80
Annual Report 2009
During the year ended 31 December 2009 the Group’s
purchases of malt from Soufflet, an associate of the Group,
amounted to RUR 571,736 thousand (excluding VAT) or
17.1% of the total value of malt purchases and own production and 41,926 tons or 12.6% of the total volume of
malt purchases and own production. During the year
ended 31 December 2008 the Group’s purchases of malt
from Soufflet amounted to RUR 962,130 thousand (excluding VAT) or 14.7% of the
total value of malt purchases and own production and 58,266 tons or 14% of the total
volume of malt purchases and own production.
All outstanding balances with related parties are to be settled in cash within two months
of the reporting date. None of the balances are secured.
(iii) Loans
Amount loaned
2009
’000 RUR
Amount loaned
2008
Outstanding balance
2009
Outstanding balance
2008
Loans received:
-
2,009,294
-
1,071,000
Fellow subsidiaries
-
3,033,888
-
1,844,129
Loans given:
1,089,360
-
1,089,360
-
Parent company
1,100,000
-
1,100,000
-
2,189,360
5,043,182
2,189,360
2,915,129
The loans to Carlsberg Breweries A/S and to the parent company bear interest at 6.6% per annum and are due in January 2010.
(d) Pricing policies
Sales to and purchases from related parties are made on terms that prevail in arm’s length transactions. For the year ended 31 December 2009, the
Group recognized no impairment of receivables owed by related parties (2008: Nil).
29. SUBSIDIARIES
Name
Nature of business
Country of incorporation
Ownership/ voting
2009
Ownership/ voting
2008
OOO Baltika-Ukraine
Distribution of Baltika beer
Ukraine
100%
100%
Baltika S.R.L.
Moldova
100%
100%
Baltika-Almaty LLP
Kazakhstan
100%
100%
OOO Baltika
Kirgizia
100%
100%
OOO Baltika-Bel
Belorussia
100%
100%
OOO Terminal Podolsk
Warehouse
Russia
100%
100%
OOO Universalopttorg
Warehouse
Russia
100%
100%
Baltika Deutschland GmbH
Germany
100%
100%
Baltika-Baku LLC
Beer Production
Azerbaijan
100%
100%
Baku Pivo JSC
Beer Production
Azerbaijan
91%
91%
30. EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE
On 19 February 2010, the Board of Directors recommended
dividends of RUR 20,997,269 thousand, and the recommendation will be considered by the Company’s sharehold-
ers at the annual shareholders’ meeting to be held on 8 April 2010. Dividend payments
will be made between 27 April and 31 December 2010.
Baltika Breweries
81
82
Parties to the agreement
Baltika Breweries (Licenser) and Independent
Distillers (Aust) Pty Ltd. (Licensee)
Baltika Breweries (Licenser) and Carlsberg
Breweries A/S (Licensee)
Baltika Breweries (Executor) and
JSC Vympel Telecommunications (Customer)
JSC Vympel Telecommunications (Customer)
Baltika Breweries (Customer) and
Baltika-Ukraina LLC (Executor)
Baltika Breweries (Seller) and Baltika-Baku LLC
(Buyer)
Baltika Breweries (Borrower) and Carlsberg
Breweries A/S (Lender)
Baltika Breweries (Customer) and Baltika-Bel
LLC (Executor)
Baltika-Almaty LLC (Executor)
Baltika Breweries (Customer) and Baltika LLC
(Executor)
Baltika Breweries (Customer) and ICS Baltika Srl
(Executor)
№
1.
2.
Annual Report 2009
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Additional agreement to the Agreement on
the provision of services (№04/08-MD) dated
January 30th, 2008
the provision of services (№07/08-KG) dated
January 30th, 2008
the provision of services (№02/08-KZ) dated
January 30th, 2008
the provision of services (№04/08-BLR) dated
January 30th, 2008
Agreement on a long-term credit line
Additional agreement to the license agreement
dated October 1st, 2007 on the usage of the
Tuborg brand
Agreement on the sale and purchase of
equipment
Agreement on the provision of services
Tuborg brand
License agreement
Type of agreement
2009 interested party transactions concluded by the Company
RUB 614,188, including VAT RUB 93,689.69
RUB 1,072,124.40, including VAT RUB
163,544.40
RUB 3,985,792.20 or Kazakhstani tenge
17,237,125.32, including VAT RUB 608,002.20
or Kazakhstani tenge 2,629,392, respectively
RUB 1,425,256.98 or BYB 128,501,292,
including VAT RUB 217,412.08 or BYB
19,601,892, respectively
The maximum amount of the credit is RUB
1,100,000,000. The interest rate for the period
from 1 to 12 months is: for USD denominated
credits – Libor + 0.75%; for EUR credits –
Euribor + 0.75%; for RUB credits – Borrower's
funding rate + 0.75%. The interest rate for a
period over 12 months is the Borrower’s funding
rate + 0.75%
4.5% from net revenue
RUB 861,000.00
RUB 3,552,866.48, including VAT
RUB 1,500, including VAT, per month
RUB 19,300, including VAT, per month
4.5% from net revenue
License payment in the amount of 5% of net
profit for selling the licensed product
Price of agreement
Shareholder Baltic Beverages
Holding AB
Holding AB
Holding AB
February 6th, 2009
Board of Directors
February 6th, 2009
Board of Directors
February 6th, 2009
Board of Directors
February 6th, 2009
Board of Directors
February 6th, 2009
Board of Directors
Holding AB, Member of the
Board, J. B. Rasmussen
Holding AB
February 6th, 2009
Board of Directors
February 6th, 2009
Board of Directors
February 6th, 2009
Board of Directors
February 6th, 2009
Board of Directors
February 6th, 2009
Board of Directors
February 6th, 2009
Board of Directors
February 6th, 2009
Board of Directors
Date and adopting body
Holding AB, President,
Member of the Board,
A. O. Artemiev
Holding AB
Member of the Board of
Directors, A. V. Izosimov
Member of the Board of
Directors, A. V. Izosimov
Holding AB
Information on interested
party (parties) to the transaction
Baltika Breweries
83
(Executor)
Baltika-Almaty LLC (Executor)
Baltika Breweries (Customer) and Carlsberg
Group Procurement AG (Seller)
Breweries A/S (Executor)
Group Procurement AG (Seller)
Baltika Breweries (Principal) and
JSC Refservice (Agent)
19.
20.
21.
22.
23.
24.
25.
Baltika Breweries (Buyer) and Feldschlossen
Getranke AG (Seller)
18.
28.
Baltika Breweries (Buyer) and Carlsberg
Breweries A/S (Seller)
17.
Baltika Breweries (Client) and
CJSC Rusagrotrans (Forwarder)
(Buyer)
16.
27.
Baltika Breweries (Licenser) and JSC Slavutich
(Licensee)
15.
Baltika Breweries (Client) and
JSC Russian Railways
Baltika Breweries (Licensee) and Carlsberg
Breweries A/S (Licenser)
14.
26.
13.
Freight forwarding agreement
Agreement on the settlement of accounts
Agency contract
Agreement on the sale and purchase of goods
for promotional events
Consulting services agreement
Consulting services agreement
Agreement on the sale and purchase of beer
Additional agreement (№2) to the Contract
(№01-08-CB) dated October 9th, 2007
equipment
(№1) dated December 20th, 2005
on the usage of the Carlsberg trademark, dated
March 22nd, 2002
Tuborg brand
EUR 420,600
Agreement price set according to current tariffs
for the expediter (traffic rates, commission and
expediter remuneration)
The accounts are performed for transportation
based on current tariffs for JSC Russian
Railways
Agreement price set according to current tariffs
for transport operator (traffic rates, commission
and agent remuneration)
RUB 745,948
GBP 15,000, excluding VAT GBP 2,700
EUR 51,000, excluding VAT EUR 9,180
RUB 9,122,100
Kazakhstani tenge 61,228,981.6, excluding VAT
RUB 4,953,050, excluding VAT RUB 891,549
Swiss francs 1,625,088
RUB 7,690,620.00
RUB 1,485,000.00
License payment in the amount of 5% of net
licensed production turnover
In accordance with the main agreement
A. N. Shokhin
April 2nd, 2009
Board of Directors
April 2nd, 2009
General Meeting of
shareholders
April 2nd, 2009
General Meeting of
shareholders
April 2nd, 2009
General Meeting of
shareholders
A. N. Shokhin
A. N. Shokhin
March 23rd, 2009
Board of Directors
March 23rd, 2009
Board of Directors
March 23rd, 2009
Board of Directors
March 23rd, 2009
Board of Directors
March 23rd, 2009
Board of Directors
March 23rd, 2009
Board of Directors
March 23rd, 2009
Board of Directors
March 10th, 2009
Board of Directors
March 10th, 2009
Board of Directors
March 10th, 2009
Board of Directors
March 10th, 2009
Board of Directors
March 10th, 2009
Board of Directors
Holding AB
Holding AB
Holding AB
Holding AB
Holding AB
A. O. Artemiev
A. O. Artemiev, Member of the
board B. Sondenskov
84
Baltika Breweries (Payer of compensation) and
Universalopttorg LLC
(Receiver of compensation)
Baltika Breweries (Licenser) and Baltika-Baku
LLC (Licensee)
Baltika Breweries (Exporter) and Baltika-Baku
LLC (Importer)
Baltika Breweries (Principal) and ICS Baltika Srl
(Agent)
Baltika Breweries (Buyer) and Carlsberg Group
Procurement AG (Seller)
Baltika Breweries (Recipient) and
Oy Sinebrychoff Ab (Investor)
Canada Inc. (Executor)
LLC (Executor)
Baltika Breweries (Buyer) and Carlsberg Group
Procurement AG (Seller)
Baltika Breweries (Seller) and Baltika-Almaty
LLC (Buyer)
Baltika Breweries (Licenser) and Baltika-Almaty
LLC (Licensee)
Baltika Breweries (Exporter) and
Ringness A.S. (Importer)
Baltika Breweries (Supplier ) and Baltika LLC
(Customer)
Baltika Breweries (Seller) and Derbes Brewery
Ltd (Buyer)
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
(Buyer)
30.
29.
Annual Report 2009
Caps supply agreement
Beer supply agreement
License agreement
Keg sales and purchase agreement
Supplemental agreement to the Contract on
the provision of services (№2009-BLR) dated
January 29th, 2009
Agreement on marketing expenses
Agency contract
Agreement on the supply of retail equipment
License agreement
Agreement on compensation for land rental
payments
Agreement on supplying equipment
RUB 7,012,939.78
RUB 10,250,000
Up to EUR 60,000
Quarterly license payments in the amount of
10% of net turnover from licensed production
RUB 8,750,000
RUB 313,180
RUB 2,184,668, excluding VAT
RUB 453,120 RUB or USD 14,160, including VAT
EUR 180,450
RUB 295,590
RUB 2,995,650
RUB 3,560,050
Quarterly license payments in the amount of
10% of net turnover from licensed production
Compensation is calculated based on the rental
rate for Universalopttorg LLC in accordance with
current normative acts of Voronezh
RUB 96,302
Holding AB,
B. Sondenskov,
President, Member of the
Board, A. O. Artemiev
Holding AB
Holding AB
Holding AB
Holding AB
Holding AB
Holding AB
Holding AB
Holding AB
Holding AB
Holding AB
A. O. Artemiev
A. O. Artemiev
Holding AB
A. O. Artemiev
July 20th, 2009
Board of Directors
June 26th, 2009
Board of Directors
June 26th, 2009
Board of Directors
June 15th, 2009
Board of Directors
June 15th, 2009
Board of Directors
June 3rd, 2009
Board of Directors
June 3rd, 2009
Board of Directors
June 3rd, 2009
Board of Directors
June 3rd, 2009
Board of Directors
April 29th, 2009
Board of Directors
April 15th, 2009
Board of Directors
April 15th, 2009
Board of Directors
April 15th, 2009
Board of Directors
April 2nd, 2009
Board of Directors
April 2nd, 2009
Board of Directors
Baltika Breweries
85
Baltika Breweries (Exporter) and Carlsberg
Deutschland GmbH (Importer)
Baltika Breweries (Exporter) and Carlsberg
Danmark (Importer)
Procurement (Shenzhen) Co., Ltd. (Executor)
Breweries A/S (Consultant)
Baltika Breweries (Executor) and Baltika-Baku
LLC (Customer)
Baltika Breweries (Lessor) and Baltic Beverages
Holding AB (Lessee)
Ltd (Buyer)
48.
49.
50.
51.
52.
53.
54.
Baltika Breweries (Executor) and Derbes
Brewery Ltd (Customer)
47.
56.
46.
Baltika Breweries (Seller) and Baltika
Deutschland GmbH (Buyer)
Baltika Breweries (Acquirer) and Carlsberg
Breweries A/S (Rightholder)
45.
55.
44.
Additional agreement to the Contract (№656)
dated December 26th, 2007, on the supply of
beer
equipment
rent (№1) for non-residential premises, dated
January 16th, 2009
Additional agreement (№1) to the Contract
(№1) dated August 1st, 2008 on the provision of
services
on the usage of the Carlsberg trademark dated
March 22nd, 2002
Tuborg brand
Agreement on the alienation of the exclusive
right
Additional agreement to the Agreement on the
provision of consulting services (№1_2008)
dated December 1st, 2008
The price of services is defined based on per
hour rates and the categories of specialists. The
overall price of the agreement cannot exceed
RUB 50,000,000
EUR 1,000,000
RUB 1,607,500
The price of services is defined on per hour
rates and the categories of specialists. The
RUB 50,000,000
Increased the contract price from RUB 391,920
to RUB 1,682,955, including VAT
The price of services is defined monthly based
on the list of provided services. The overall price
of the agreement cannot exceed USD 60,000
Up to EUR 8,706,474 (or RUB 382,259,459)
Up to EUR 370,000 (or RUB 16,244,924 )
In accordance with the main license agreement
In accordance with the main license agreement
RUB 2,757,660.00, including VAT RUB 420,660
GBP 39,357
September 10th, 2009
Board of Directors
Board of Directors
Holding AB,
Member of the Board
B. Sondenskov,
August 13th, 2009
Board of Directors
Holding AB
Holding AB,
Member of the board
B. Sondenskov,
board Artemiev A. O.
August 13th, 2009
Board of Directors
August 13th, 2009
Board of Directors
A. O. Artemiev
Holding AB,
J. B. Rasmussen,
B. Sondenskov
August 13th, 2009
Board of Directors
July 20th, 2009
Board of Directors
July 20th, 2009
Board of Directors
July 20th, 2009
Board of Directors
July 20th, 2009
Board of Directors
July 20th, 2009
Board of Directors
July 20th, 2009
Board of Directors
July 20th, 2009
Board of Directors
Holding AB,
J. B. Rasmussen
Holding AB
Holding AB
Holding AB
Holding AB,
J. B. Rasmussen
Holding AB,
J. B. Rasmussen
Holding AB,
J. B. Rasmussen
Holding AB,
J. B. Rasmussen
86
Baltika Breweries (Legal successor) and Baltic
Beverages Holding AB (Rights holder)
Derbes Brewery Ltd (Customer)
Baltika Breweries (Exporter) and Baltika
Deutschland GmbH (Importer)
Baltika Breweries (Exporter) and Baltika-Baku
LLC (Importer)
Baltika Breweries (Licensee) Carlsberg
JSC Slavutich (Supplier)
Baltika Breweries (Licensee) Carlsberg
Derbes Brewery Ltd (Executor)
Baltika Breweries (Recipient) and
Oy Sinebrychoff Ab (Investor)
Baltika Breweries (Consultant) and
Derbes Brewery Ltd (Customer)
59.
60.
61.
62.
63.
64.
65.
66.
67.
Baltika Breweries (Consultant) and
Baltika-Baku LLC (Customer)
58.
57.
Annual Report 2009
Agreement on the provision of consulting
services
Agreement on marketing expenses
License agreement
Supplemental agreement to the Appendix S
‘Additional advertising investments under the
license agreement dated March 22nd, 2002 for
2007-2009’, dated September 20th, 2007
Agreement on the supply of trade equipment
dated December 26th, 2007, on the supply of
beer
Agreement on providing rail cars for use
Agreement on the alienation of the exclusive
right
Additional agreement to the Agreement (№w/o)
dated August 25th, 2009 on consulting services
The price of services is defined separately for
each provided consulting service based on per
hour rates and the categories of specialists. The
RUB 50,000,000
EUR 112,510
The price of performed works is defined under
the process of the Customer filing an application
for conducting work and the Executor later
accepting it. The Executor’s remuneration when
attracting third parties totals 5% of the price of
work performed by third parties (subcontractors
of the Executor)
Quarterly license payments in the amount of 5%
of net profit from produced and sold licensed
production
November 13th, 2009
Board of Directors
November 13th, 2009
Board of Directors
Holding AB,
Board, A. O. Artemiev,
Member of the board
B. Sondenskov
October 15th, 2009
Board of Directors
Holding AB,
B. Sondenskov,
Holding AB
October 15th, 2009
Board of Directors
October 15th, 2009
Board of Directors
October 15th, 2009
Board of Directors
October 15th, 2009
Board of Directors
Holding AB,
J. B. Rasmussen
Holding AB,
Member of the board
B. Sondenskov
Holding AB,
J. B. Rasmussen
RUB 658,971 (USD 21,900 )
RUB 42,210,000
A. O. Artemiev
October 15th, 2009
Board of Directors
Board of Directors
Holding AB,
B. Sondenskov,
Holding AB
Board of Directors
Board of Directors
Holding AB,
J. B. Rasmussen,
B. Sondenskov
A. O. Artemiev
RUB 2,692,000
—
The price of services is defined based on the
hourly rates calculated depending on stations of
loading and unloading. The overall price of the
agreement cannot exceed RUB 50,000,000
RUB 10,000
—
Baltika Breweries
87
Ltd (Buyer)
Baltika Breweries (Seller) and Ringness A.S.
(Buyer)
Baltika Breweries (Executor) and UzCarlsberg
LLC (Customer)
Baltika Breweries (Seller) and JSC Olivaria
Brewery (Buyer)
72.
73.
74.
75.
76.
77.
78.
Baltika Breweries (Buyer) and Carlsberg
Breweries A/S (Seller)
71.
80.
(Executor)
70.
Baltika Breweries (Licenser) and Derbes
Brewery Ltd (Licensee)
69.
79.
Baltika Breweries (Payer of compensation)
and Terminal-Podolsk LLC (Receiver of
compensation)
68.
Agreement on the sale and purchase of festival
tickets
License agreement (agreement on the right to
use a product)
dated October 14th, 2008
equipment
Agreement on the provision of consulting
services
dated December 26th, 2007
Contract for the supply of production
Amendments to the Agreement on the provision
of services (№2009-KG)
dated January 28th, 2009
License agreement
Agreement on rent compensation and other
payments
EUR 8,350
USD 18,000
RUB 4,286,088.19, excluding VAT
RUB 24,647,000
RUB 277,608, excluding VAT
EUR 500,000
RUB 34,550,000
EUR 5,640, excluding VAT
—
Up to EUR 2,000,000
RUB 8,022,381.04, including VAT
Fixed license payments in the amount of EUR
90,000,000 and quarterly royalty payments in
the amount of 4.5% of net profit from production
produced and sold by the Licensee in the
respective calendar quarter, plus VAT of the
Kazakhstan Republic
In accordance with current tariffs
Holding AB,
J. B. Rasmussen
Holding AB,
J. B. Rasmussen
Holding AB,
J. B. Rasmussen
Holding AB
Holding AB,
Holding AB
Holding AB,
Member of the board
B. Sondenskov
Holding AB,
J. B. Rasmussen
Holding AB
Holding AB
December 16th, 2009
Board of Directors
December 16th, 2009
Board of Directors
December 16th, 2009
Board of Directors
December 10th, 2009
Board of Directors
December 10th, 2009
Board of Directors
December 10th, 2009
Board of Directors
December 10th, 2009
Board of Directors
December 10th, 2009
Board of Directors
December 10th, 2009
Board of Directors
December 10th, 2009
Board of Directors
December 10th, 2009
Board of Directors
December 2nd, 2009,
General Shareholders
meeting
Holding AB,
Member of the board
B. Sondenskov
Holding AB
November 13th, 2009
Board of Directors
Holding AB
Baltika Breweries (Seller) and Feldschlossen
Getranke AG (Buyer)
Ltd (Buyer)
Baltika Breweries (Borrower) and Baltic
Beverages Holding AB (Lender)
Baltika Breweries (Borrower) and Baltika-Baku
LLC (Lender)
Baltika Breweries (Party-1) and Carlsberg
Breweries A/S (Party-2)
(Executor)
LLC (Executor)
Baltika Breweries (Customer) and BaltikaUkraina LLC (Executor)
LLC (Executor)
(Executor)
81.
82.
88
83.
84.
Annual Report 2009
85.
86.
87.
88.
89.
90.
the provision of services (№07/08-KG) dated
January 30th, 2008
Agreement on the placement of monetary funds
Agreement on the provision of a multi-currency
renewable credit line
Loan agreement
supply and distribution dated February 8th, 2007
RUB 19,065,642, including VAT RUB
2,908,318.27
1,415,035.03
534,234.71
RUB 34,831,799, including VAT RUB
5,313, 325.27. The sum of the agreement
is denominated in Belarussian rubles in the
equivalent of BYB 3,248,066,112, including VAT
BYB 495,467,712
RUB 859,284.60, including VAT RUB 131,077.31
Up to EUR 25,000,000; interest rate: in rubles –
best market rate, but not less than 6.6%
annually; in dollars – best market rate, but not
less than 1.5% annually; in euro – best market
rate, but not less than 1.4% annually
Sum of the loan is RUB 300,000,000; the
interest rate is set by the creditor on a monthly
basis unilaterally for each next interest period
depending on the financial situation in the credit
market, in any case, not less than MosPrime
+ 5% for ruble denominated loans, for dollar
denominated loans – Libor (USD) + 5%, for euro
denominated loans – Libor (EURO) + 5%
Sum of the loan RUB 1,100,000,000; the interest
rate for a term up to 16 days – 6.6% annually, for
a term of one month – 8.2% annually, for a term
of three months – 11.0% annually, for a term of
six months – 11.2% annually
Up to RUB 1,123,000,000
EUR 50,000
Holding AB
Holding AB
Holding AB
December 22nd, 2009
Board of Directors
December 22nd, 2009
Board of Directors
December 22nd, 2009
Board of Directors
December 22nd, 2009
Board of Directors
December 22nd, 2009
Board of Directors
Holding AB,
J. B. Rasmussen
Holding AB
December 16th, 2009
Board of Directors
Holding AB,
December 22nd, 2009
Board of Directors
December 16th, 2009
Board of Directors
Holding AB,
J. B. Rasmussen
B. Sondenskov
Holding AB
December 16th, 2009
Board of Directors
December 16th, 2009
Board of Directors
Holding AB,
Member of the board
B. Sondenskov
Holding AB
INFORMATION FOR SHAREHOLDERS AND INVESTORS
Baltika Breweries
Company Headquarters
+7 (812) 325 9 325
3, 6th Verkhny Pereulok
St. Petersburg, Russia194292
www.baltika.ru
Shareholder Relations
+7 (812) 329 91 09
Elfimov@spb.baltika.ru
Risuliev@spb.baltika.ru
+7 (812) 251 81 38
+7 (812) 346 74 07
4-A Izmailovsky Prospekt, Office 314
St. Petersburg, Russia 190005
www.nrcreg.ru
ZAO KMPG
St. Petersburg Branch Office
+7 (812) 313 73 00
69-71 A Marata Street
Business Center ‘Renaissance Plaza’
stp@kpmg.ru
CJSC A&P Audit
+7 (812) 251 69 23
26 Rizhsky Prospekt
apaudit@quantum.ru
Registrar
CJSC Natsionalnaya Registratsionnaya
Kompaniya
St. Petersburg Branch Office
Independent Auditors
Official print medium
for information disclosure
Newspaper Izvestia
Official corporate web site
for information disclosure
www.corporate.baltika.ru
Baltika Breweries
89
CONTACT INFORMATION
Company Breweries
Baltika-St. Petersburg Brewery
+7 (812) 325 9 325
3 6th Verkhny Pereulok
Baltika-Voronezh Branch
+7 (4732) 61 98 00
109 9th Yanvarya Street
Voronezh, Russia 394027
Baltika-Novosibirsk Branch
+7 (383) 230 14 02
34 2nd Stantsionnaya Street
Novosibirsk, Russia 630041
Baltika-Pikra Branch
+7 (3912) 59 12 00
90 60 Let Oktyabrya
Krasnoyarsk, Russia 660079
Baltika-Rostov Branch
+7 (863) 250 51 02
146-A Dovatora Street
Rostov-on-Don, Russia 344090
Baltika-Samara Branch
+7 (846) 276 43 66
1 Baltiisky Proezd
Kinelsky District, Kinelsky Village
Samara Oblast, Russia 446110
Baltika-Tula Branch
+7 (4872) 39 55 35
85 Odoevskoye Shosse
Tula, Russia 300036
Baltika-Khabarovsk Branch
+7 (4212) 41 15 51
142 Voronezhskoye Shosse
Khabarovsk, Russia 680042
Baltika-Chelyabinsk Branch
+7 (351) 239 16 00
16 Ryleeva Street
Chelyabinsk, Russia 454087
Baltika-Yaroslavl Branch
+7 (4852) 58 32 03
63 Pozharskogo Street
Yaroslavl, Russia 150066
Baltika-Baku Brewery
+994 (12) 442 12 80
+994 (12) 442 20 10
2/2 Shamakhinskoye Shosse
Absheronsky District, Hyrdalan
Republic of Azerbaijan AZ0100
Baltika-Bel LLC
+375 (17) 28 9 54 69
15 Storozhevskaya Street, Office 302
Minsk, Belarus 220002
ICS Baltika Srl
+373 (22) 23 84 60
57/1 Mitropolita Benulescu-Bodoni Street, Office 418
Kishinev, Moldova MD 2005
Baltika-Almaty LLC
+7 (727) 258 59 40
153 Abaya Prospect, Office 24
Almalinsky District, Almaty, The Republic of Kazakhstan 050009
Baltika-Ukraina LLC
+380 (44) 494 18 40
94/98 Krasnoznamennaya Street, Office 4
Kiev, The Republic of Ukraine 03026
Baltika LLC
+996 (312) 30 60 82
+996 (312) 30 60 83
121/1 Shopokov Street
Bishkek, The Kyrgyz Republic 720075
Baltika Deutschland GmbH
+49 (40) 728 13 928
26 Glockengiesserwall
Hamburg, Germany 20095
+86 (10) 651 29 728
19 Tsziangomenvai, (The Citic Building, Tower A), Office 15-B
Beijing, The People’s Republic of China 100004
Company subsidiaries located abroad
Representative offices in foreign countries
Representation in China
90
Annual Report 2009
Appointments for tours of the Company’s breweries
Baltika Breweries conducts regular group tours
at the Company’s Russian breweries. During the
tours, visitors can learn about the Company’s his-
tory and its activities, as well as becoming acquainted with beer production technologies and taste the Company’s products.
Tours can be booked by telephone:
Chelyabinsk, tel.:
+7 (3512) 39 16 00
Khabarovsk, tel.:
+7 (4212) 41 15 91
Kranoyarsk, tel.:
+7 (3912) 59 13 41
Novosibirsk, tel.:
+7 (383) 230 14 11
Samara, tel.:
+7 (846) 276 43 33
St. Petersburg, tel.:
+7 (812) 329 91 39
Rostov, tel.:
+7 (863) 250 51 46
Tula, tel.:
+7 (4872) 32 99 10
Voronezh, tel.:
+7 (4732) 61 98 00
Yaroslavl, tel.:
+7 (4852) 58 32 29
Baltika Breweries invites its guests to visit the
Museum of the History of Brewing in Siberia, which
is located on the grounds of the Baltika-Pikra
Branch in Krasnoyarsk. The Museum was created
in 2005, to help celebrate the 130th anniversary of
the Krasnoyarsk Brewery and the 15th anniversary of the Pikra Brewery.
The Museum has a unique exhibition on beer brewing.
In 2009, 62,000 people visited Company breweries. For the period from
1999 to 2009, the total number of visitors amounted more than 400,000.
ASSOCIATION PARTICIPATION
Baltika is a member of the following public organizations:
The Russian Union of Industrialists and Entrepreneurs (RUIE), a public association of employers;
The Union of Russian Producers of Beer and Non-alcoholic Products (The Union of Russian Brewers);
The Community of Producers under Company Trademarks, a non-commercial partnership (RusBrand);
The St. Petersburg Association of Joint Ventures;
The non-commercial partnership 'The Market Council for Organizing an Effective System of Wholesale and Retail Power and
Capacity Trade (the NP Market Council).
DESIGN, PRINT
ARTGROOVE
Baltika Breweries
91
Annual Report 2009
Baltika Breweries

Annual Report 2009, including financial report IFRS

Transcription

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