Shares of Russian dairy and juice concern Wimm-Bill-Dann (NYSE:WBD) continued their inexorable march upward on Friday, driven by news that the company's profitability under generally accepted accounting principles has revived.

Some investors might be put off by the numbers Wimm posted, because they differ from the usual U.S. practice of parsing results in a "this quarter this year" vs. "this quarter last year" layout. Rather, Wimm takes the long view and reports its profits and cash flow results from a "so far this year" vs. "by this time last year" format -- in this case, giving the first-nine-months results for both 2005 and 2004. As for what those results showed, here's a quick rundown:

  • Sales up 18%
  • Gross profit up 17%
  • Operating profit up 26%
  • Net profit up 15%

And for you free cash flow lovers out there...

  • Cash generated from operations up 40%
  • Free cash flow is still negative, but improved from a $7.4 million outflow in the first three quarters of 2004 to a $1.4 million outflow year to date. (Read about how we calculate free cash flow for Wimm, which acts as a "serial acquirer," here.)

If you tuned in for Wimm's earnings last quarter, you'll recall that the cash flow news was both better and worse than what we saw last week. Better, because the company reported positive rather than negative free cash flow three months ago. Worse, because although it was positive, H1 2005's free cash flow was still down 31% from H1 2004.

Noting this trend, and attributing it to the company's continued move to consolidate smaller dairy, juice, and baby food producers throughout the former Soviet Union, I warned that "these expenses may continue for some time." Judging from Friday's results, that does seem to be proving true. Examining the company's cash flow statement, we can see that Wimm's expansion and investment program continues unabated. Year over year, it invested 11% more in property, plant and equipment, and more than doubled its expenditures on acquiring smaller operators from the former Soviet Union.

In the long term, these moves will continue to expand the company's already considerable market dominance in the region, but in the short term, I suspect they may lay the groundwork for additional investor trepidation as this year's capital expenditures become next year's profit-curdling depreciation and amortization charges. Foolish investors shouldn't be deterred by that prospect, but it is something to bear in mind, if for no other reason than because of the share price pullbacks and buying opportunities it may present to us.

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Fool contributor Rich Smith does not own shares in Wimm-Bill-Dann.