INTERVIEW - UK Salford Capital Partners Sees 2009 Revenue in Serbia Falling to 353 Mln Euro

In Serbia, Salford Capital Partners controls 100% of water bottler Knjaz Milos, 80% of dairy producer Imlek, 81.8% of Mlekara Subotica dairy producer,  and 63.7% of confectionery maker Bambi-Banat. The four companies are listed on the Belgrade Stock Exchange (BELEX).

“Our plan, because we are a fund, was to sell our companies in 2008 or 2009. But we gave up on this idea because of the crisis and because the performance of the companies worsened as a result of the plunge of the dinar,” the fund’s managing director in Serbia, Slobodan Petrovic, told SeeNews in an interview.

“On the other hand, the overall valuations of the companies dropped. So we decided not to sell and to wait until the market stabilises,” Petrovic added. Salford employs close to 4,500 people in Serbia, data from the country’s business registry showed.

KNJAZ MILOS

The Knjaz Milos brand has a share of some 40% of the mineral water market in Serbia, while the Aqua Viva table water holds a share of 18-19 percent of the market of bottled spring water. The company’s energy drink Guarana has a share of about 65% of the energy drink market in Serbia. Last month Knjaz Milos bought juice brand Moc Prirode from Belgrade-based juice producer Agroekonomik.

“As a market leader, we are striving to retain our current market share in the mineral water segment,” Petrovic said, adding the company is trying to increase its share of the market of bottled spring water.

“Our aim is to be a market leader. The market leader in bottled spring water is Rosa, which holds about 23%.”

Knjaz Milos, located in the central town of Arandjelovac, sells about 40 million litres of bottled spring water yearly and more than 100 million litres of mineral water.

“Serbian company Vlasinka was the first company to sell bottled water under the Rosa brand in the 1990s, but it wasn’t until several years ago that bottled water had a boom with consumers. Aqua Viva appeared on the market in the late 1990s but it wasn’t until we bought it and re-branded, and re-marketed it that it took off.”

Knjaz Milos plans about 65 million euro in revenue this year, down from some 70 million euro last year. The company hopes to post 70 million euro in revenue next year.

“We are not sure we are going to post a net profit this year, because of the dinar's exchange rate. It may happen that we are going to break even,” he said and added the company broke even in 2008, also due to the fluctuations in the dinar's exchange rate.

“Our sales of Knjaz Milos mineral water dropped this year as a result of the crisis, especially in cafes and restaurants, but also because people switched to tap water to save money,” Petrovic said without elaborating. 

The Serbian dinar lost about one-fifth of its value since the latter part of 2008, central bank data showed.

Salford bought Knjaz Milos from the Serbian government for 110 million euro in 2004. The fund paid 15 million euro in severance packages to 1,000 people that were laid-off and invested 50 million euro in new technologies and equipment in the company, Petrovic said.

In 2005, Coca-Cola HBC bought Serbian company Vlasinka, which bottles mineral water under the Rosa brand.

BAMBI-BANAT

The Bambi-Banat confectionery producer, based in Pozarevac in eastern Serbia, plans about 63 million euro in revenue this year, down from 66 million euro in 2008.

“Last year the net profit was low, and it is too early to make forecasts for this year,” Petrovic said.

Bambi-Banat plans an annual output of close to 24,000 tonnes this year, up from 22,000 tonnes last year.

“As a result of the crisis, the sale of our cheaper biscuit brand, the Zlatni Pek, grew 70% in sales this year,” Petrovic said and added that the rise had no effect on the sales of Bambi-Banat’s pricier signature biscuit Plazma.

Bambi-Banat last traded on Thursday, when its shares fell 6.94% to 8,502 dinars, BELEX data showed.

DAIRY UNITS

Salford’s dairy business in Serbia comprises the country’s largest dairy producer Imlek and second-ranking Mlekara Subotica, which hold a combined share of 37% of the country's dairy market.

“We expect close to 190 million euro in Imlek revenue this year, down from 211 million last year. Our output will be more or less the same but, again, because of the dinar's exchange rate our revenue will drop,” Petrovic said.

The annual output of Imlek, based in the Belgrade suburb of Padinska Skela, is about 250 million litres of milk.

“We expect Imlek’s 2009 net profit to total 2.0% of revenue, same as last year.”

Mlekara Subotica, which produces about 60 million litres of milk a year, is likely to post about 35 million euro in revenue this year, down from almost 40 million euro last year.

Imlek shares closed 3.11% lower at 1,713 dinars on Friday.

($=0.6756 euro)