When You Can't Sell Vodka in Poland & Russia (CEDC)

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.