CEDC: A Little Hard to Swallow

Why, Central European Distribution (Nasdaq: CEDC), why?

I'm a big fan of your company, but why did you release an earnings report without including the results for the fourth quarter? I mean, I expect this to some extent from non-U.S. companies such as ChinaYuchai (NYSE: CYD) or Philippine Long Distance (NYSE: PHI), but not from you.

Luckily for me, the numbers I got by comparing the announced full-year results with the prior nine months' results seem to sync up with the commentary that company execs made about earnings on their call. Sales rose about 29%, based in part on double-digit export growth, and the gross margin leapt from 13.4% to 21.9%. The company also reaped considerable operating leverage in the quarter, and the operating margin improved from 6.3% to 11.4%.

Remember, this improvement wasn't exactly organic. The company has made major acquisitions (Polmos Bialystok and Bols) and is now in the distillation business as well as the distribution business. Given the structural differences in the two businesses, this combination should allow the company to approach the margins seen by companies such as Constellation Brands (NYSE: STZ) or Diageo (NYSE: DEO).

The change has come at a cost -- the share count is 43% higher than a year ago, and the company now has nearly as much debt as equity. The good news, though, is that the company got a reasonably good deal on the debt, and the business is stable and recurrent, which should help with the payback. While I suppose it's possible that CEDC could lose share in Poland (it has about one-third of the market now), it's hard not to like the basic fundamentals of selling vodka and other spirits in this market.

All of that said, the company did miss estimates this quarter, and the stock was a little pricey to begin with. So as much as I like the idea of buying into the largest producer, distributor, and importer of alcohol in Poland, I'm not willing to pay an unlimited amount for the privilege. Should the stock sell off a bit, I'd be happy to reconsider this one.

In the meantime, though, perhaps someone from the company could let me know why the heck it excluded fourth-quarter details from this earnings release.

Raise a glass and toast further Foolishness:

• Constellation's Growth Going Flat?
• Best International Stock: Diageo
• Acquisitions Raise CEDC's Spirits

Diageo is a Motley Fool Income Investor recommendation. If you like getting paid to invest, try Income Investor out free for 30 days, and let Mathew Emmert guide you toward the market's best dividend-payers.

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).