Earlier I wrote about the economics of the milk racket. So now that you understand the milk business better, are you ready for a milk investment?
It’s in Russia, a country where milk consumption is growing as the standard of living improves, and its name is Wimm Bill Dann Foods (WBD).
The company was founded in 1992, it’s headquartered in Russia, and it has annual revenues of $2.4 billion. It has 34% of the dairy market in Russia and 20% of the fruit drink market. Additionally, 7% of revenues come from outside Russia.
Most important is that the company is well managed by Russian and non-Russian managers, who know how to grow a business by simple acquisition. Since 2000, the company has grown revenues every year. 2008 growth was 16%.
This year, as business was hit by both the global recession and the devaluation of the ruble, sales were down 29% in the first quarter and 27% in the second. But the company cut costs and as a result, second quarter earnings grew 48% from the year before, while the after-tax profit margin soared to an unheard-of (for a milk company) 9.4%.
Finally, the stock has been strong, suggesting that investors who are looking beyond the present see continued growth for the company. In fact, third quarter earnings will be released tomorrow morning, November 24, before the market opens. If the market likes the numbers and the stock trades up on good volume, I think you can buy it.