EuroBusiness Media (EBM): Belvédère, a French wine and spirits company with the No. 1 market share for vodka in Poland, just reported 2004 full year earnings. Jacques Rouvroy, welcome. You are the CEO of Belvédère. What are your comments on the company's performance in 2004? It is surprising to notice that you forecast 30% growth in operating profit and now you are reporting 100% growth in operating profit. What is going on?
Jacques Rouvroy (JR): Well, it is no surprise for us in-house, because we knew we could reach that goal. Early on in the year last year, we had a target of €400 million sales; we reached €460 million, which was well over our target. We had a target of 150 million bottles of vodka; we reached 166 million bottles. And as for the wine industry, we were targeting 15 million bottles, and we are well over 16 million. So this increase in volume obviously had a positive impact on our operating result.
EBM: We noticed that despite strong operating profit growth, your net profit decreased. Why is that?
JR: Well, it is due to nonrecurrent situations. First, the sale of the Belvédère stock owned by Belvédère to CL Financial of Trinidad and Tobago, which took place two years ago. This led us to an exceptional profit of €2.5 million -- we don't have that this year. And also a fiscal tax adjustment by the Ministry of the Treasury in Poland which is nonrecurrent.
EBM: Last year your profit was negatively impacted by restructuring costs in Bulgaria and Lithuania. What is the situation in those countries today?
JR: Things are getting a lot better now, especially in Bulgaria where we have now returned into the black, coming from a loss. The European Bank for Reconstruction and Development (EBRD), has just participated in an increase of capital for €2 million, namely 12.2% of the Belvédère Bulgaria equity, so we are quite happy with that. That shows their interest to accompany us in the development of the wine project in Bulgaria. This equity increase of capital will be completed by a medium-term loan for seven years of €7 million, namely a total of €9 million, the loan being paid back after year four, at a rate of 1.75%, which is quite reasonable.
EBM: What is outlook for your business in 2005?
JR: It looks pretty good. Especially if we succeed with the privatization which is upcoming of Polmos Bialystok in the northeast of Poland. That would put us in the situation where we would double up the size and triple the estimated net result for 2005.
EBM: You are planning to launch your luxury vodka Sobieski in the United States. What is the prospect for this new product launch?
JR: We are coming back on the U.S. market under a joint venture agreement with TodHunter International, a 69% owned subsidiary company of CL Financial of Trinidad and Tobago. We have decided together to embark on the launch of Sobieski, an upscale vodka. It is a new project with a new look for the bottle, a whole new design specially geared to the U.S. market. And we are going to position this vodka at a retail price of $40 retail, which is unseen.
EBM: You are currently in the midst of a capital increase. What is your planned use for the funds you will raise?
JR: We will be raising this money in two ways. First off, in December last year, through the OBSAR -- which is sort of a debenture with a warrant attached -- for €35 million, completed by an increase of capital which just ended this week for €35 million, making a total of €70 million. This will put us in a position to finance the acquisition of Polmos Bialystok -- if we are successful in our acquisition. If we do not succeed, obviously we will use the money in another way. First off to reduce our debt, the working capital requirement which is fairly high in Poland. And also by investing in the U.S. market where we now have this major project which we have embarked on with CL Financial.
EBM: And finally, now that the first quarter is over, what does business look like at the beginning of the year, in particular regarding your market share in Poland?
JR: From 26% market share at the end of December 2003, we ended 2004 with a 30% market share. At the end of March, I can tell you now we were up to 33% market share, which is pretty good given that the general economic situation was not so good in the early part of this year. But as far as Belvédère is concerned, we are quite happy with the way sales have been developing, and we will be posting in a fortnight's time -- around mid May -- the first quarter results, which are well over what we were expecting.
EBM: Jacques Rouvroy, CEO of Belvédère, thank you very much.
JR: Thank you.
