1H 2014 Results

1

Financial Results

1H 2014

Magnit at a Glance

Magnit at a Glance

1 959Cities & Towns

№1Russian Food RetailChain by Revenueand Number of Stores

8 618Total Numberof Stores

3 189thous.sq.m.Selling Space

24DCs

5 697Trucks

Multi-format Business ModelComprising Convenience, Hypermarkets,“Magnit Family” Stores & Drogeries

№2 $28bn >6%

As of 30.06.2014 Source: Company, Bloomberg, IFRS accounts for 1H2014 2

№2Retailer in Europein MarketCapitalization $28bn Market

Capitalization >6% Share in RussianGrocery Sector

Shareholder Structure as of 1H2014

54,6%Free-float

38,7%Sergey Galitskiy, CEO

3,3%Other

3,4%Lavreno Ltd. (Cyprus)0,1%

Magnit at a Glance

Key Metrics

349,0bn ($10,0bn) Revenue1H2014

5,61%

NetMargin

10,47%

EBITDAMargin

0,9

Net debt/LTM EBITDA

1,31%

DividendYield*

36%

PayoutRatio*

P=

3*As of FY2013Source: IFRS accounts for 1H2014, Company’s Estimates

Guidance for 2014New Stores

1 100 ConvenienceStores 80 Hyper-

markets 300-350 Drogeries

26-29%

RUR SalesGrowth

10,6-10,9%

EBITDAMargin

$1,7-1,8bn

Capex

Magnit at a Glance

Strategy

Growth

Multi-format OrganicStore Growth

GeographicScope

Density of StoreCoverage

4

Value Efficiency

LowPrices

HighQuality

Assortment CostManagement

VerticalIntegration

Centralization

47

47%53%

Magnit at a Glance

Russian Food Retail Market

Market Composition by Format

7,3% FoodInflation $311bn Market

SizeFY 2013

% ModernRetailPenetration

Non-Modern Modern47%53%Discounters

22%

Supermarkets

14%

Hypermarkets

11%Traditional Stores

34%

Kiosks, Pavilions

8%

Open Markets

10%

5

Non-Modern Modern

Source: Sberbank CIB Estimates for FY2013

Magnit at a Glance

Magnit vs Peers

Numberof Stores

Selling Spacethous. sq.m.

RevenueRUR bn

Market CapUS$ bn

Market Share%

8 093

4 544

1 799

Magnit

XS

Dixy

3 011

2 223

617

579,7

532,7

180,5

26,5

4,6

1,6

6

5

2

6Source: As of 2013; Companies, Infoline, Bloomberg, Magnit’s Estimates;

94

87

79

72

Okey

Lenta

Auchan

Metro

489

508

740

564

139,5

144,3

300,0

183,2

3,2

n/a

n/a

n/a

1

1

2

2

Operational Overview

Geographical Coverage

1 959 Cities& Towns

7 FederalDistricts

North Caucasus

Southern Volga North West

Urals SiberiaCentral

778Drogeries

7 614Convenience Stores

169Hypermarkets

57Magnit Family

24Distribution Centers 1 5 7 6 1 2 2

51 211 170 221 68 45

12

2 15 12 19 2 5 2

6 51 27 54 10 19

2

322

1 452 1 931 2 446 658 658

147

7Source: Company, as of June 30, 2014

Caucasus West


Logistics System

8 618Total Numberof Stores

707thous.sq.m.Warehousing Space

24DCs

5 697Trucks

7

6

Central

Volga

2589

2548

273,346

147,883

Centralization Ratio%

Convenience Stores

1H2014 Future Targets


5

2

1

1

2

Southern

Urals

North Caucasus

North West

Siberia

1779

759

329

450

164

111,832

92,782

34,503

21,060

26,064

Magnit

Outsourced

89

11

92

8

Convenience Stores

Magnit

Outsourced

71

29

80

20

Hypermarkets


Suppliers

5000DomesticSuppliers

9Source: Company, as of December 31, 2013

4000Local Suppliers

1000Federal Suppliers

Assortment

55-60% 40-45%

200 Big InternationalCorporations


Direct Import

10% InternationalDirect Import 800 Open

Contracts

10Source: Company,

Direct Import – as of FY2013; Private Label - as of June 30, 2014

12% Shareof Revenue627 PL

SKUsM 86% FoodItems

Private Label


Employees

229 272 Employees 0ForeignWorkers

161 438 42 144 17 034 8 656

Average Weighted Number of Employees – 197 251


27 376AverageMonthlySalary 10% Wage Rate

IncreaseP=

161 438In-storePersonnel

42 144People Engagedin Distribution

17 034People in RegionalBranches

8 656People Employedby Head Office

1000 employees


Competitive AttributesLocation Quality

(of Products)Assortment Reliability AtmospherePrices

5 000 People —MinimumPopulation

Sales Catchment Area

12

35% of FamilyBudgetSpent on Food

5 000 Population

(1 500–1 600 Families)

4 000-9 500MonthlyFamily FoodBudget

P=Overlap “Good”Cannibalization

Magnit #1

Magnit #2

500m

Competitor #1 Competitor #2

Competitor #3

500m

Source: Company’s Estimates

Convenience Store


Convenience Store

458 sq.m.Total

320 sq.m.Selling Space

89% Food

Format Description Key Operational Statistics OpeningSize of the Store Average Ticket Payback

Sales Mix

Traffictickets/sq.m./day

217,1P=$6,2

2,9

3 years

If Leased

If Owned

4-6 years


89% Food

11% Non-food

29% Owned

71% Leased

Store Ownership Structure

Sales Densitysales/sq.m./year

LFL 1H2014-1H2013,%

214 746P=$6 743

7,23 AverageTicket, RUR

1,90 Traffic

9,26 Sales

2,9Cost of New Storeper sq.m. of Total Space

Time to Maturity

6 months

Owned $1 100-2 800 Leased $250-500

4-6 years

Hypermarket


HypermarketFormat Description Key Operational StatisticsSize of the Store Average Ticket


566,7P=$16,2

1,3

7 058 sq.m.Total

2 985 sq.m.Selling Space

OpeningPayback

6-9 years

Cost of New Storeper sq.m. of Total Space

Owned $1 700-2900Leased $700-900

S: up to 3 000M: 3 000-6 000L: over 6 000


81% Food

19% Non-food

85% Owned

15% Leased


Sales MixSales Densitysales/sq.m./year

LFL 1H2014-1H2013,%

248 649P=$7 807

1,3


5,55 Traffic

12,28 Sales

Leased $700-900

8-15 months

Time to Maturity

L: over 6 000

Magnit Family


Magnit Family

2 297 sq.m.Total

1 176 sq.m.Selling Space

85% Food


Sales Mix


396,8P=$11,3

2,3

6-9 years


Owned $2 000-2 600Leased $800-1 400


85% Food

15% Non-food

40% Owned

60% Leased



LFL 1H2014 -1H2013,%

330 110P=$10 365

2,3Leased $800-1 400

8-15 months


9,96 Traffic

18,22 Sales

Time to Maturity

Drogerie


Drogerie

314 sq.m.Total

236 sq.m.Selling Space

100% Non-food


Sales Mix


243,3P=$7,0

1,0

3 years

If Leased

If Owned

4-6 years


100% Non-food

28% Owned

72% Leased



LFL 1H2014 – 1H2013,%

74 532P=$2 340


45,11 Traffic

49,54 Sales

1,0


Time to Maturity

6 months

Owned $800-2 500Leased $200-450

4-6 years

Sizeof the Store

sq.m.

AverageTicket

TrafficTickets/sq.m./day

DensitySales/

sq.m./year

SalesMix

LFL 1H2014-1H2013

%

Store Owner-ship Structure

PaybackYears

Cost of New Store

per sq.m.of Total Space

Timeto Maturity

Months

• Total• Selling Space

• Food• Non-food

• Av.ticket• Traffic/ Sales

• Owned• Leased

29%71%


Format Summary

458320

Owned $1 100-2 800

Leased $ 250-500

2,9P.217,1$6,2

P.214 746$6 743

89%11%

Conveniencestore

63 (if leased)

4-6 (if owned)

7,23

1,90

9,26

Owned

28%72%

40%60%

85%15%

21Source: Company, as of June 30, 2014; * Excludes selling space designated for leases

Hypermarket

Drogerie

MagnitFamily

7 058

314

2 297

2985*

236

1 176

1,3

1,0

2,3

P.566,7$16,2

P.243,3$7,0

P.396,8$11,3

P.248 649$7 807

P.74 532$2 340

P.330 110$10 365

81%19%

100%

85%15%

8-15

6

8-15

6-9

3 (if leased)

6-9

4-6 (if owned)

6,37

3,05

7,51

5,55

45,11

9,96

12,28

49,54

18,22

Owned$1 700-2 900

Leased$ 700-900

Owned$800-2 500

Leased$200-450

Owned$2 000-2 600

Leased$800-1 400

Financial Overview

Summary P&LUSD MMUSD MMUSD MMUSD MM 1H20131H20131H20131H2013 1H20141H20141H20141H2014 1H2013 / 1H20141H2013 / 1H20141H2013 / 1H20141H2013 / 1H2014

YYYY----oooo----Y GrowthY GrowthY GrowthY Growth

Net salesNet salesNet salesNet sales 8 796,438 796,438 796,438 796,43 9 978,599 978,599 978,599 978,59 13,4%

Cost of sales (6 398,47) (7 201,70) 12,6%

Gross profitGross profitGross profitGross profit 2 397,962 397,962 397,962 397,96 2 776,892 776,892 776,892 776,89 15,8%

Gross margin, % 27,26% 27,83%

SG&A (1 518,88) (1 760,15) 15,9%

Other income/(expense) 10,86 27,32 151,5%

Source: Reviewed IFRS accounts for 1H2013 – 1H2014Please note: there may be small variations in calculation of totals, subtotals, and/or percentage change due to rounding of decimals 22

Other income/(expense)

EBITDAEBITDAEBITDAEBITDA 889,94889,94889,94889,94 1 044,881 044,881 044,881 044,88 17,4%

EBITDA margin,% 10,12% 10,47%

Depreciation & amortization (217,72) (242,70) 11,5%

EBITEBITEBITEBIT 672,22672,22672,22672,22 802,19802,19802,19802,19 19,3%

Net finance costs (72,15) (80,69) 11,8%

Profit before tax 600,07 721,50 20,2%

Taxes (131,15) (161,52) 23,2%

Effective tax rate 21,86% 22,39%

Net incomeNet incomeNet incomeNet income 468,91468,91468,91468,91 559,99559,99559,99559,99 19,4%

Net margin, % 5,33% 5,61%

Financial Overview

Revenue & CostsRevenue DynamicsUSD mn

Net Income DynamicsUSD mn

Margin DynamicsSG&A Expense Structure

+29,8%

8,8% 10,6%

+13,4%+38,0%

+19,4%

LFLLFL

Sales Growth, USD

Sales Growth, USD

6 7768 796 9 979

1H2012 1H2013 1H2014

340

469560

1H2012 1H2013 1H2014

23Source: IFRS accounts for 1H2012 – 1H2014

25,6

27,3 27,8

9,9 10,1 10,5

5,0 5,3 5,6

0

5

10

15

20

25

30

1H2012 1H2013 1H2014

Margin DynamicsSG&A Expense Structure

Revenue — 9 979 USD mnGrossMargin

EBIDTAMargin

NetMargin

%

20%

2 002 USD mn

1,88 (0,38) ― Packaging & Raw Materials

1,77 (0,36) ― Repair & Maintenance

55,18 (11,07) ― Payroll & Related Taxes

2,09 (0,42)― Taxes, Other than Income Tax

12,08 (2,42) ― Deprecation & Amortization

20,67 (4,15) ― Rent & Utilities

6,33 (1,26) ― Other

in SG&A,% in Revenue, %

25,6127,26

27,83-0,11 -0,01 -0,031,77 0,26 0,34

15

17

19

21

23

25

27

29

31

33

GM1H2012

Trading Margin Transport Losses GM1H2013

Trading Margin Transport Losses GM1H2014

Financial Overview

Gross Margin Bridge% of Sales

+165 b.p.+57 b.p.


EBITDA Margin Bridge% of Sales

+22 b.p. +35 b.p.

9,90 10,12 10,47-1,00-0,35 -0,05 -0,03

-0,19 -0,241,65

0,57 0,21

0

2

4

6

8

10

12

14

EBIDTA1H2012

GrossMargin

Salaries Rent & Utilites Repair & Maintenance

Other EBIDTA1H2013

GrossMargin

Rent & Utilites Advertising Other EBIDTA1H2014

Financial Overview

Free Cash Flow

Working Capital Analysis

The Average Days Payable to Suppliers is 36 Days.

Inventory Management Days is 44 Days

USD mn

1H2013

1H2014-8787

901755

103

-130

-63 -100-666

-158

17

14

-75


Working Capital: -120 mn USD as of 30.06.2014

Adjusted for loss from disposal of PPE, provision for doubtful receivables, foreign exchange gain, finance costs, gain on disposal of subsidiary and investment income

Calculated as additions + transfers of PP&E during the respective period

Does not include cash flow from financing activities

1 056

945

364

-64

-87-111

-581

-245

-183

87

AdjustedEBIDTA

Change inWorking capital

Net InterestExpense

TaxesPaid

OCF Capex Other Cash Flowfrom

InvestingActivities

FCF Payment of Dividents

Other Cash Flowfrom

FinancingActivities

CF

Financial Overview

Balance SheetUSD MMUSD MMUSD MMUSD MM 2012201220122012 2013201320132013 1H20141H20141H20141H2014

ASSETS ASSETS ASSETS ASSETS

Property plant and equipment 5 226,8 5 962,8 6 144,5

Other non-current assets 130,0 176,1 169,5

Cash and cash equivalents 410,0 181,2 110,9

Inventories 1 350,7 1 713,9 1 769,4

Trade and other receivables 19,2 19,3 16,0

Advances paid 88,1 96,9 70,5

Taxes receivable 1,0 0,9 2,5

Source: Audited IFRS accounts for FY2012 – 1H2014Please note: there may be small variations in calculation of totals, subtotals, and/or percentage change due to rounding of decimals 26

Short-term financial assets 28,9 35,1 41,9

Prepaid expenses 6,0 7,7 6,5

TOTAL ASSETS TOTAL ASSETS TOTAL ASSETS TOTAL ASSETS 7 260,7 7 260,7 7 260,7 7 260,7 8 193,9 8 193,9 8 193,9 8 193,9 8 331,7 8 331,7 8 331,7 8 331,7

EQUITY AND LIABILITIES EQUITY AND LIABILITIES EQUITY AND LIABILITIES EQUITY AND LIABILITIES

Equity 3 267,3 3 854,7 4 070,1

Long-term debt 1 259,2 1 144,0 1 618,4

Other long-term liabilities 202,8 258,6 270,5

Trade and other payables 1 413,1 1 471,8 1 489,9

Short-term debt 827,1 1 109,7 394,8

Dividends payable - - -

Other current liabilities 291,2 355,1 488,0

TOTAL EQUITY AND LIABILITIESTOTAL EQUITY AND LIABILITIESTOTAL EQUITY AND LIABILITIESTOTAL EQUITY AND LIABILITIES 7 260,7 7 260,7 7 260,7 7 260,7 8 193,9 8 193,9 8 193,9 8 193,9 8 331,7 8 331,7 8 331,7 8 331,7

Financial Overview

Capex Analysis

Construction in Progress & Buildings

Machinery & Equipment

Other Assets Land Acquisition of Subsidiaries

906 362 258 68 53

FY2013¹

$1,647 bn

FY2014 (plan)

$1,775 bn

27¹CAPEX for 1H2014 amounts to $581 mnSource: Company, as of December 31, 2013; Company’s Estimates

$1,775 bn

Hyper Markets Trucks Distribution Centres

Convenience Stores

Acquisition & Construction of Conv.Stores

Buy-out of Leased Conv.Stores

Greenhouses Land for HyperMarkets

Store Renovation

Maintenance Drogeries

80 400 4 1 100 350

700 85 240 220 140 60 100 50 50 30 100

Financial Overview

Debt Burden

11,7

13,012,2

4

6

8

10

12

14

Debt Level DynamicsUSD mn

Credit Metrics Credit Profile

EBIDTA / Finance Expenses The Company Hasan Impeccable Credit History

Collaboration with

the Largest Banks

Low Debt Burden:Net Debt / EBITDA Ratio of 0,9

2 0862 254

2 013

1 676

2 0731 902

1 110

1 2591 144

1 618

Net DebtShort-term DebtLong-term Debt%

28Source: IFRS accounts for FY2012 – 1H2014

0

2

2012 2013 1H2014

1,11

0,9

0

0,5

1

1,5

2

2012 2013 1H2014

Net Debt / LTM EBITDA

No Currency Risk: No Currency Risk: No Currency Risk: No Currency Risk: 100%of Debt is Rub DenominatedMatching Revenue Structure

No Interest Rate Risk:No Interest Rate Risk:No Interest Rate Risk:No Interest Rate Risk:Interest Payments are Madeat Fixed Rates

827395

2012 2013 1H2014

39,6%49,2%

19,6%

80% 80% 80% 80% of Debt is Long-term

Approximately 38%38%38%38%of LT Debt is Rub Bonds

1H 2014 Results

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