ADRs in Focus: Wimm-Bill-Dann Foods shares slide
NEW YORK—Shares of Wimm-Bill-Dann Foods OJSC trading on U.S. exchanges slipped Thursday after an analyst downgraded the Russian milk processor, citing concerns about new Russian legislation.
The company's ADRs fell $6.40, or 5.5 percent, to $111.03 in afternoon trading. ADR stands for American Depositary Receipt, which is a security designed to allow U.S. investors to trade shares of companies based overseas.
Citi Investment Research analyst Marat Ibragimov cut his rating to "Hold" from "Buy" and his price target to $135 from $130. The new target implies he expects the stock to rise about 11 percent from Wednesday's $117.43 close.
The new rating comes after the Moscow-based company said earlier this month its first-quarter profit rose 30 percent on growth in its dairy, beverage and baby-food businesses.
Despite the results, Ibragimov said he remains cautious on Wimm-Bill-Dann's finances in the short term due to new legislation signed by Russian President Dmitry Medvedev that, in effect, prohibits dairy producers from writing "milk" on products made of dried milk.
In November 2002, Wimm-Bill-Dann acquired control of a dried milk plant in Buryn, Ukraine.
While it's impossible to tell what the law's impact will be, in the end dairy producers' margins will likely come under pressure, Ibragimov said.
In the long term, the new law may be a good chance for large producers with "strong brands to expand their market presence," the analyst added.
The Bank of New York Emerging Markets ADR Index -- which includes shares of companies based in Russia, Mexico, Brazil and more -- rose 0.12 points to 358.91. The Bank of New York Composite ADR Index slipped 0.31 points to 172.31 as the U.S. markets rose in afternoon trading.
