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CEDC Sees Improvement, But Russian Standard Alliance On The Rocks

November 19, 2012

Central European Distribution Corp. (CEDC) saw net sales increase 1% organically to $191 million in the three months through September, and achieved net income of $35.8 million, reversing an $849 million loss from the same period last year. CEDC said it enjoyed growth among its domestic vodka brands in Poland during the quarter, but saw a decline in the Russian market, partly because of overstocking before a July 1 excise tax increase.

Meanwhile, CEDC’s largest shareholder, Russian Standard vodka chairman Roustam Tariko, wrote to CEDC last week that due to CEDC’s restatement of results from the previous two years (which revealed a further $59 million decline in EBITDA), he is “no longer obligated to complete the pending strategic alliance” between Russian Standard and CEDC. CEDC fired back in a November 16 letter to shareholders that Tariko’s move was in response to the CEDC board’s decision not to grant him full control over its operations and finance at a board meeting held a few days earlier. Tariko currently owns 16.4% of company stock and “a proportion of 2013 convertible notes,” CEDC says.

In June, Russian Standard pledged to inject up to $310 million into CEDC to help the group reduce debt, bringing its stake in CEDC to 28%. A month later, it added that it had been authorized by CEDC to seek additional shares of common stock on the open market and raise its stake up to 42.9%. Tariko said at that time that he intended to eventually gain control of CEDC.

 

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