Making alcohol and spirits in Eastern Europe and selling to Poland, Russia, and Eastern Europe should be a slam dunk of a business model. Right? Apparently not. Central European Distribution Corporation (NASDAQ: CEDC) is getting crushed after its earnings report. The Polish vodka maker also faces a debt problem.
The company posted a wider loss and the blame is in part due to soft sales in Russia. Soft vodka sales in Russia? It almost sounds like a joke. Unfortunately, it is no joke.
For its latest and fourth quarter, the loss from continuing operations was $456 million. That comes to -$6.29 EPS. If you exclude one-time and abnormal items, the non-GAAP earnings would have been $0.11 EPS.
Where the story gets interesting is that sales were up about 22% to $280.1 million, but that is on discounting for a competitive market and with higher costs than expected.
It also looks as though the company does not have enough cash on hand to meet a $300 million debt payment due next year, so it may have to consider an offer for a larger stake from its largest shareholder or it may have to use other capital raising alternatives.
Shares were down almost 30% at one point earlier this morning and the stock is now down 19.9% at $4.34 against a 52-week range of $3.08 to $14.65. To put things in context, the new post-drop market cap is only $308 million.
This is a situation where a long slow bleed could come, or the largest shareholder could potentially wrestle much more control.
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