Sinergiya : Synergy announces its 1H2014 financial results: gross profit shows a 6% increase and amounts to RUB 4,864 million

Synergy Open Joint Stock Company ("Synergy", "Synergy Group", the "Group" or the "Company"), Russian alcohol market leader, is disclosing its audited 1H2014 IFRS consolidated financial statements.

Key financial figures and major corporate events

·         The distribution portfolio has been enhanced with global brands in rum (Ron Barcelo) and liquor categories (Amarula);

·         The Company has started operations in the wine category introducing to the market such brands as Croix de Vignes, Pierre Fontaine, Gran Castillo, Fleur du Cap etc from the leading production countries, including France, Italy, and Spain.

Chairman of the Board of Synergy Aleksandr Mechetin comments on the financial results, "Despite significant growth of the excise duty, Synergy maintains its leadership in 1H2014 and has improved a number of its profitability indicators, improved its revenue and gross profit, adapted its business to the changing environment. This means that diversification, focusing on increase in operational efficiency, improvement of distribution quality and upgrading of brand portfolio to premium class have been proper and timely measures."

Company's application and development of resources has proven efficient: the largest distribution platform of Russia, upgrade of the unique portfolio of own brands, enhancing the portfolio with new strategic categories and global brands, best market expertise, innovation technologies, and, the last but not the least, a consistent team of challenge oriented professionals.

In 1H2014, gross profit increases by 6%, net revenue by 2%, alcohol segment gross profit by 10%. The increase is due to Group's pricing policy, continuing premium upgrade of own and import brand portfolio, and increase in premium import and export share in the general revenue structure. E.g., import has grown by 28% during the half year, and export by 20% in volume. Note the success of Synergy's portfolio flagman Beluga, super premium brand winning more and more foreign markets with 35% growth of export sales in 1H2014.

The reporting period shows a 6% decrease in EBITDA and a 34% decrease in net profit due to objective market factors: increase in excise duty, inflation, drop of consumer purchasing power, expansion of illegal market.

Finally, Russian Government's decision to freeze the excise rate for two years will most probably result in incremental shift of the generally negative trend to the positive side, which, to some degree, will provide for consumers' gradual adaptation to the new prices for alcohol products and improvement of the competitive environment."

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