1Q 2011 Results

1Q 2011 Results 1Q 2011 Results

2

DisclaimerDisclaimer

The materials contained in this presentation (“Presentation”) have been prepared solely for the use in this Presentation and have not been independently verified. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. None of OJSC “Magnit” (“the Company”), nor any shareholder of the Company, nor any of its or their affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this Presentation or its contents or otherwise arising in connection with the Presentation.

No part of this Presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever.

This Presentation is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction.

Matters discussed in this Presentation may constitute forward-looking statements. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The words “believe,”“expect,” “anticipate,” “intends,” “estimate,” “forecast,” “project,” “will,” “may,” “should” and similar expressions identify forward-looking statements. Forward-looking statements include statements regarding: strategies, outlook and growth prospects; future plans and potential for future growth; liquidity, capital resources and capital expenditures; growth in demand for products; economic outlook and industry trends; developments of markets; the impact of regulatory initiatives; and the strength of competitors.

The forward-looking statements in this Presentation are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management’s examination of historical operating trends, data contained in the Company’s records and other data available from third parties. These assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond its control and it may not achieve or accomplish these expectations, beliefs or projections. In addition, important factors that, in the view of the Company, could cause actual results to differ materially from those discussed in the forward-looking statements include the achievement of the anticipated levels of profitability, growth, cost and its recent acquisitions, the timely development of new projects, the impact of competitive pricing, the ability to obtain necessary regulatory approvals, and the impact of general business and global economic conditions. Past performance should not be taken as an indication or guarantee of future results, and no representation or warranty, express or implied, is made regarding future performance.

Neither the Company, nor any of its agents, employees or advisors intend or have any duty or obligation to supplement, amend, update or revise any of the forward-looking statements contained in this Presentation or to update or to keep current any other information contained in this Presentation. The information and opinions contained in this document are provided as at the date of this Presentation and are subject to change without notice.

By reviewing this Presentation and/or accepting a copy of this document, you acknowledge and agree to be bound by the foregoing.

3

Table of ContentsTable of Contents

1.1. IntroductionIntroduction

2.2. Business OverviewBusiness Overview

-- Convenience FormatConvenience Format

-- Hypermarket FormatHypermarket Format-- General OverviewGeneral Overview

3.3. Financial OverviewFinancial Overview

4.4. Summary ConclusionsSummary Conclusions

4

Our HistoryOur History

� Foundation of wholesale business by Mr. Galitskiy

� Tander becomesone of the major distributors of household products and cosmetics in Russia

� Decision to expand into food retail market

1994 1994 –– 19981998

Early years:wholesale distribution

� Firstconvenience store opened in Krasnodar

� Experiments with format

� Stores merged into Magnit discounter retail chain

1998 1998 –– 19991999

Entrance into

food retail

� Rapid regionalroll-out: 1,500 stores by the end of 2005

� Adoption of IFRS

� Strict financial control

� Performance-linked compensation

2001 2001 –– 20052005

Extensive roll-out

to capturemarket share

� Leading food retailer inRussia by number ofstores

� IPO in 2006

� Independent director elected to the Board

� Audit Committee established

� Corporate governance rules established to comply with best practice

� SPO – 2008, 2009

� 24 hypermarkets openedin 2007-2009

� 636 convenience stores opened in 2009 (the total store base is 3,228 as of December 31, 2009)

2006 2006 –– 2009 crisis2009 crisis

Continued growth with focus on

margin expansion and multi-format

� Acceleration of growth –800 convenience stores and 27 hypermarkets added in 2010

� Large investment programme for 2011: plan to make Capital expenditures of about $1.5 bn

� Plan to open up to 800 convenience stores and up to 55 hypermarkets during 2011

� Ongoing efficiency improvement

20102010--20112011

Strong performer

compared to peers

5

Magnit TodayMagnit Today

4,14% 2,81% 4,93% 6,78%9,19%

20,15%13,91%

18,84%

-10%-5%0%5%

10%15%20%25%

FY2007-FY2006

FY2008-FY2007

FY2009-FY2008

1Q2010-1Q2009

1H2010-1H2009

9M2010-9M2009

FY2010-FY2009

1Q2011-1Q2010

� Leading market position with broad geographic coverage

� Focus on cities and towns with population under 500,000 people

� Strong platform for rapid hypermarket operations expansion

� Efficient logistics system

� Sophisticated IT systems

� Experienced management team

� Strong financial performance

Number of Stores, eop

Financial Performance

7 7775 3545 348

22,4%

21,7%23,5%

7,5%8,1%

9,5%4,3%3,5% 5,1%

1 000

3 000

5 000

7 000

2008 2009 2010

0%

5%

10%

15%

20%

25%

Sales Gross Margin EBITDA Margin NI Margin

($MM) (%)

Source: CompanySource: Company, IFRS accounts

Source: Company

’02-’10 CAGR: 35%

Sales, Lfl Growth, Rub terms

3 204

4 004 4 132

2 197

3 228

4 189

2 5682 194

4 055

2 582

18931500

1014610368

0600

1 2001 8002 4003 0003 6004 2004 800

2002 2003 2004 2005 2006 2007 2008 2009 2010 1Q2011

Convenience Stores Hypermarkets

6

Further expansionof convenience

store operations

StrategyStrategy

Hypermarketroll-out

Efficiency and profitability

improvements

7

Medium term plans� High level growth of convenience store operations� Plan to add up to 800 convenience stores in 2011� Acquisition of land plots and premises to secure pipeline for future stores

Store opening decision factors

� Proximity to existing distribution centres� Ability to find suitable retail space� Level of modern format penetration and consumer disposable income

Further Expansion of Convenience Store OperationsFurther Expansion of Convenience Store Operations

Further penetration in existing regions

� Areas with low modern format penetration� Expansion into towns with population as low as 5,000 people� Expansion into new locations within regions where Magnit is already present

Further expansion of convenience

store operations

Hypermarketroll-out

Efficiency improvement

Adjusting format to customers’ needs

� Flexible SKU matrix adjustable to consumer disposable income � Gradual shift to larger convenience store size to improve store attractiveness� Promotion of one-stop shopping concept for everyday needs

8

Strong operational platform

� Strong brand name recognition and customer awareness generated by a large regional network of convenience stores

� Economies of scale in purchasing and efficient logistics system capable of supporting both formats in existing and new locations

� Existing retail expertise strengthened by a team of hypermarket specialists brought in to manage execution risks

� Increase of the number of owned stores

Target locations

� Low or limited competition from other hypermarkets or modern retail formats� Relatively low prices of land plots for hypermarket construction in towns with population of

50,000 and more� Benefiting from strong growth of disposable income and consumer spendings in the Russian

regions

Hypermarkets Roll-OutHypermarkets Roll-Out

Roll-out plan

� Locations are chosen on the basis of competition from other hypermarkets in the area, the strongest growth of disposable income of the population and minimum negative impact on existing convenience stores

� In small towns hypermarkets will be located in central locations which will give advantage of targeting consumers who do not own cars

� Hypermarkets total selling space (1) will vary from 2,000 to 12,500 sq. m. depending on availability of land plots


store operations

Hypermarketroll-out


Note (1) Including selling space designated for leases to third parties

9

� Further growth of the share of high margin products, including fresh food products, ready-made meals and private label

� Fresh food products and ready-made meals are expected to motivate customers to shop at our stores more frequently

Efficiency and Profitability ImprovementEfficiency and Profitability Improvement

Achievesynergies

� Synergies arising from operation of neighbouring hypermarkets and convenience stores, allowing to increase the effect of economies of scale


store operations

Hypermarketroll-out


Increase the share of products

distributed through own logistics

system

� Efficient utilisation of in-house logistics system– Increase in the share of goods distributed through the company’s distribution centres from

approximately 81% of cost of goods sold in 1Q 2011 up to 90-92%* in the long term– Reduction of third party logistics costs

Improve the product mix

Increasepurchasing power

� Increasing the penetration of convenience store operations in areas of presence with relatively low market share, which is expected to result in greater purchasing or negotiating power vis-à-vis local suppliers and landlords

Optimiselabor productivity

� Investing in various technologies that have significant potential for productivity increases� Measures to improve retention rates for employees and management, that will reduce costs

associated with losing experienced employees and recruiting and training new ones* for convenience stores

Business OverviewBusiness Overview

11

A Shift to Multi FormatA Shift to Multi Format

HypermarketConvenience Store

Number of stores 4,132 (1) as of 31 March 2011 57 as of 31 March 2011

Average store size� Total space – 467 sq. m.� Selling space – 316 sq. m.

� Total space: 7,386 sq. m.� Magnit selling space (2): 3,175 sq. m.

Product range� 3,134 SKUs on average� Private label – 14.00% of retail sales

� 13,019 SKUs depending on format� Private label – 7.90% of retail sales

Positioning (format)� Walking distance from home� Ground floor stores or freestanding� Open 12 hrs/7 days

� All hypermarkets are built in convenient locations� All easily accessed by public transport

Target group � People living within 500 metres from the store� People living within 15 minutes by car / 30 minutes

by public transport from the store. Effective radius –7 km

Ownership � 34.7% owned / 65.3% leased as of 31 March 2011 � 89.5% owned / 10.5% leased

Note: (1) Including 4 drogerie stores (2) Excludes selling space designated for leases

Convenience FormatConvenience Format

13

Format DescriptionFormat Description

145

207

160

696

185

837

184

012

1967

85

53416283

74775801 6 480

0

2000

4000

6000

8000

0

50 000

100 000

150 000

200 000

2006 2007 2008 2009 2010Rub USD

Format Highlights

� Low prices

� Convenient locations

� Carefully selected product mix

� Standardised exterior and car parking

� Functional interior design

� Attention to customers

� Increasing customer convenience

� Main target group: all consumers living within 500 m radius

Geographical Breakdown (% of total stores)

Number of Convenience stores (1)

6101 014

1 5001 893

2 1942 568

3 204

4 004 4 132

3680

1 000

2 000

3 000

4 000

2002 2003 2004 2005 2006 2007 2008 2009 2010 1Q2011

Operating Statistics

sales / sq. m. / year

Source: Company

Source: Company (1) Number for 2010 includes 4 drogerie stores

Source: Company

Southern26%

Volga31%

Central24%

North-Caucasian

6%

North-West6%

Urals6%

Siberian1%

14

Typical Store Opening ProcessTypical Store Opening Process

� Considerable experience of store openings

� Acquisitions and construction are preferred in existing markets with already high penetration

� Key store opening criterion is payback period of not more than 3 years if leased; 4 – 6 years if owned

� Average total cost of a new convenience store is US$800 – 2,500 per sq. m. (excl. VAT)

� New stores reach their average traffic and sales target within 6 months from opening

� Rationalisation of store portfolio

Identification of a property or a land plot

Feasibility report and opening budget prepared

Approval by the regional director and branch director

MOU signed with landlord

Legal due diligence

Technical due diligence

Approval by Committee on Store Openings

Lease agreement or SPA signed

Repair and maintenance

Purchasing and installation of equipment

Personnel hiring and training

Sublet agreements signed

Store opened

W

1

W

2

W

3

W

4

W

1

W

2

W

3

W

4

W

1

W

2

W

3

W

4

Month 1 Month 2 Month 3

15

Store Opening DynamicsStore Opening Dynamics

2003 2004 2005 2006 2007 2008 2009 2010 1Q 2011

Southern 387 550 684 783 888 1,005 1,153 1,076 1,092

North-Caucasian 260 264

Central 100 224 379 461 545 638 802 952 981

Volga 114 214 368 536 628 743 950 1,235 1,276

North-West 9 26 61 84 88 115 160 215 229

Urals 8 29 45 67 139 245 262

Siberian 21 28

Total 610 1,014 1,500 1,893 2,194 2,568 3,204 4,004 4,132

New openings 259 438 550 513 409 452 702 865 146

Closings 17 34 64 120 108 78 66 65 18

Net openings 242 404 486 393 301 374 636 800 128

� 18 convenience stores were closed as of March 31, 2011– 8 due to poor performance– 7 were relocated to better locations– 3 were shut due to disagreements with landlords

16

Store Ownership StructureStore Ownership Structure

34,7%

65,3%

Owned Leased

Store Ownership Structure

Source: Company as of 31 March 2011

� As of 31 March 2011 the company owned 1,432 convenience stores and leased 2,700

� Store ownership is gained on the basis of the following documents:

– Sale-purchase agreements

– Lease agreements with redemption rights

– Construction share holding agreements

– Investment contracts

89,5%10,5%

Owned Leased

Convenience stores Hypermarkets

17

88,3% 87,7% 87,2% 89,0%

11,7% 12,3% 12,8% 11,0%

0%

20%

40%

60%

80%

100%

2008 2009 2010 1Q2011

Food Non Food

Key Operating StatisticsKey Operating Statistics

Sales Mix

Traffic

3,3 3,1 3,1 3,1

0,0

2,0

4,0

6,0

2008 2009 2010 1Q2011

Average Floor Size

299 306 314 316

458 470 469 467

0

200

400

600

2008 2009 2010 1Q2011Selling Space Total Space

Source: Company

Source: Company

Source: Company

Source: Company

(tickets / sq. m. / day)

(sq. m.)

07-10 $ CAGR: 11,5%

149 158 169 188

6,05,0 5,6

6,4

0

50

100

150

200

2008 2009 2010 1Q20110,0

2,0

4,0

6,0

8,0

RUB US $

Average Ticket

18

Lfl Sales AnalysisLfl Sales Analysis

Source: Company

Average Ticket, Lfl

21,7%

5,8% 5,8%

13,9%

0%

10%

20%

30%

2008 2009 2010 1Q2011

RUB terms

Traffic, Lfl

-2,32% -1,52%

2,95%

5,95%

-3,0%

-1,0%

1,0%

3,0%

5,0%

7,0%

2008 2009 2010 1Q2011Sales, Lfl

18,8%

4,1%

8,9%

20,7%

0%

5%

10%

15%

20%

25%

30%

2008 2009 2010 1Q2011

RUB terms

Source: Company

Note: LFL analysis is based on the result of convenience stores that had been operating for not less than six months and have achieved a mature level of sales

Lfl Sales AnalysisLfl Sales Analysis

19

Note: LFL analysis is based on the result of convenience stores that had been operating for not less than six months and have achieved a mature level of sales

Hypermarket FormatHypermarket Format

21

Format DescriptionFormat Description

Source: Company

44%

26%

12%

18%

50 - 100 100 - 250 250 - 500 >500

Format Highlights

� 3 principal hypermarket sub-formats

– Small: selling space (1) of up to 3,000 sq. m.

– Medium: selling space (1) of3,000 – 5,000 sq. m.

– Large: selling space (1) of over 5,000 sq. m.

� The decision with regards to hypermarket format principally depends on the following factors:

– Consumer disposable budget of the region

– 5-7 year budget forecast

– Percentage of the budget, attributable to hypermarket

– Population of the region

– Competition

Number of hypermarkets and selling space

Breakdown by sub-format (2) Breakdown by population, ths

(2) Based on selling space

58%35%

7%

small medium large

(1) Excluding rental space

22

Key Operating StatisticsKey Operating Statistics

5,26%

8,50%9,76%

4,59%

15,53%13,48%

0%

3%

6%

9%

12%

15%

18%

FY10-FY09* 1Q11-1Q10*

Average ticket, RUR Traffic Sales, RUR

77% 78% 76% 77%

23% 22% 24% 23%

0%

20%

40%

60%

80%

100%

2008 2009 2010 1Q2011

Food Non-food

tickets/sq. m./day

0,81 1,11

0

0,5

1

1,5

2008 2009 2010 1Q2011

LFL Analysis Sales Mix

Traffic Average Ticket

* Based on 14 hypermarkets opened by May 1, 2009

528

521527

519

21

1617 18

510

520

530

2008 2009 2010 1Q2011

RUR USD

23

Geographical CoverageGeographical Coverage

North-Western

2 hypermarket

229 convenience stores

1 distribution center

Central

10 hypermarkets


4 distribution centers

Volga

12 hypermarkets

1,276 convenience stores


Southern

28 hypermarkets

1,092 convenience stores


North-Caucasian

4 hypermarkets


Urals

1 hypermarket


1 distribution centerSiberian


1,239 locations in 1,239 locations in 7 federal districts7 federal districts

24

Typical Store Opening ProcessTypical Store Opening Process

M

1

M

2

M

3

M

4

M

5

M

6

M

7

M

8

M

9

M

10

M

11

M

12

M

13

M

14

M

15

M

16

M

17

M

18

Identification

Land plot audit

Land plot approval

SPA signed

Ownership right received

Construction permit

Building design

Construction

Financing

Interior design / equipment

Licences approval

Hypermarket launch

Ownership rights received

� Key store opening criterion is payback period from 5 to 8 years

� Average total cost of a new hypermarket varies between US$1,500 – 3,500 per sq. m. depending on format (excl. VAT)

� Expected store maturity pattern: 8 - 15 months from opening

General OverviewGeneral Overview

26

Priorities

� Price

� Location

� Assortment

� Comfort

Key Features

� Shopping habits formed in Soviet time

� Conservative shoppers

� Most are low income

Key Focus Areas

� Increased offering of Private Label products to reduce prices foressential goods

Pensioners (60+ Years Old)

Priorities

� Assortment

� Location

� Comfort

� Price

Key Features

� More open to western lifestyles and oriented towards modern retail formats

Key Focus Areas

� Offering product categories appealing to young audience

Youth (Up to 30 Years Old)

Target AudienceTarget Audience

Priorities

� Location

� Assortment

� Price

� Comfort

Key Features

� Time is of greater value than forother groups

� Growing car ownership

� High level of responsibility for quality of purchased food and family budget

Key Focus Areas

� Increased share of fresh dairy,semi-prepared products andready meals

� Ensure quick shopping, avoid bottlenecks in rush hour

� One stop shopping: ATMs, pharmacies, payment of mobile phone bills, etc

� Building more parking spaces at the stores

Families (30 – 60 Years Old)64% 12%

24%

Shopping Motivation

Convenience Stores

� Daily fresh shopping

� First need products

Hypermarkets

� Weekly shopping

27

Mark-up for a given product

Overall necessity of a product

Target audience for a product

Purchasing frequency of a product

Share in consumer basket

Target weighted average mark-up for the Group

Competition in the area

Geographical location(urban / rural matrix)

Mark-Up Criteria

� Price assessment for convenience stores is based on an every day product basket (bread, milk, etc…)

� Hypermarket pricing model focuses on SKUs needed on a weekly basis

� Each product category is assigneda certain mark-up

� Revised every 4 months

� Weighted average mark-up is established at the Group levelbased on the monitoring of competitors’prices for 200 key SKUs

� Mark-up monitored on a daily basis using the powerful MIS

� Revised on a bi-weekly basis

� Can be changed within several hours

Mark-Up Adjustments

Seasonality

Centralised matrix-basedpricing system

Pricing ModelPricing Model

28

Suppliers, Purchasing and Private LabelSuppliers, Purchasing and Private Label

Share of Private Label Products in Revenue(%)

551700 700

530 614 621508

8,2%

10,9%12,1% 12,1% 12,3% 12,7% 13,3%

0

200

400

600

800

2005 2006 2007 2008 2009 2010 1Q20110%

3%

6%

9%

12%

15%

Number of Items Share in Retail Sales

Magnit is the largest buyer for many domestic and international FMCG producers� Weekly Assortment Committee approves the assortment

and suppliers� Direct purchasing and delivery contracts� Economies of scale and wide geographical presence

enable low prices and favorable contract terms– Volume discounts– Compensation of external and internal logistics costs– Average credit term in 2010 was 40 days – Contract term is typically 1-year– Often can be unilaterally terminated by Magnit with

no penalties� Supplier bonuses criteria is based on

– Meeting sales targets– Store promotions– Loyalty

Private label products are designed to replace the cheapest SKUs to maximise returns on each metre of shelving space

� 621 private label SKUs

� Private label products accounted for 14.00% (convenience format)/7.90%(hypermarket) share of retail revenue in 1Q 2011

� Approximately 90% of private label products are food

� Share of non-food products in private label is expected to increase

Source: Company

29

2006-2010 IT Systems Update2006-2010 IT Systems Update

� Transport management system

– Optimal route planning

– All cars are equipped with GPS locating systems

� Warehouse management systems

– Introduction of WiFi operated data collection terminals

– Warehouses are customised to work with hypermarket product traffic

� Oracle IT platform introduced to convenience store format

� New price management system introduced to both formats

� Electronic document traffic system with suppliers

� Introduction of Corporate Information System based on 1C platform

Cas

hier

s

Internet

Database Server

Store Director

Mail Server

ADSL / GPRS

Database Server (cluster)

Distribution CentresTasks Processor (robot)

Main OfficeStores

30

Logistics SystemLogistics System

As of March 31, 2011 approximately 81% of COGS vs. 57% in 2005 were distributed through the company’s distribution centers and the long-term target is to increase this share up to 90-92% for convenience stores and up to 80% for hypermarkets.

At the moment Company’s logistics system includes:� Automated stock replenishment system� 11 distribution centers with approximately

240 942 sq. m. capacity � Fleet of 2,997 vehicles

CityFederalDistrict Effective Space sq. m.

Number of Serviced Stores

Bataysk Southern 17,407 412

Kropotkin Southern 30,048 465

Slavyansk-on-Kuban Southern 20,496 299

Engels Volga 19,495 537

Togliatti Volga 18,724 627

Tver Central 13,136 180

Oryol Central 14,326 305

Tambov Central 26,733 336

Ivanovo Central 43,365 443

Veliky Novgorod North-Western 21 060 175

Chelyabinsk Urals 16,152 410

Total 240 942 4 189

DC Processed Goods Source: Company

Target20102010

17%

83%

Outsourced

Owned92%

8%

Outsourced

Owned80%

20%

Outsourced

Owned

35%

65%

Target

Convenience stores Hypermarkets

Owned

Outsourced

Source: Company

31

Well trained dedicated personnelWell trained dedicated personnel

59 13575 745

90 998

16 50313 100 13 714

20 000

40 000

60 000

80 000

100 000

2008 2009 2010

0

5 000

10 000

15 000

20 000

in R

UR

Average headcount Average monthly salary

Average number of employees vs. average salary, 2008-2010

� The average number of employees* in the Group amounted to 117,121 as of March 31, 2011:

• 83,488 in-store personnel,• 23,573 people engaged in distribution,• 6,925 people in regional branches,• 3,135 people employed by head office

� The average age of our employees is approximately 25 years

� The gross average monthly salary in 2010 was RUR 16,503 of which approximately 75% was basic salary

� Special performance-linked bonuses and incentives help to motivate the employees at all levels

� Key members of the Management hold Company’s shares

� Performance monitoring and evaluation on a regular basis

� Career development programs for all levels to ensure

• Lower staff turnover

• Increased motivation

• Higher productivity

� Personnel training

• 174 classrooms for trainings at all levels• Regular meetings and seminars between mid-level managers to

exchange best practices• Coaching for top-management

� Strong corporate culture aimed at development of loyalty of employees

• The Company publishes a corporate newspaper every two months• Team building events to ensure integrity of the team

Source: Audited IFRS Financial Statements

* Total number of employees as of March 31, 2011 is 131,857

Financial OverviewFinancial Overview

33

Summary P&LSummary P&L

In US$ MM 2009 2010 FY10 / FY09Y-o-Y Growth

Net sales 5 354,5 7,777.4 45.25%

Cost of sales (4,097.2) (6,036.9) 47.34%

Gross profit 1257.3 1740.5 38.44%

Gross margin, % 23.48% 22.38%

SG&A (760.3) (1,127.1) 48.25%

Other income/(expense) 12.5 18.2

EBITDA 509.5 631.6 23.96%

EBITDA margin,% 9.52% 8.12%

Depreciation & amortization (103.1) (150.4) 45.86%

EBIT 406.4 481.2 18.40%

Net finance costs (51.7) (32.6)

Profit before tax 354.7 448.6

Taxes (79.5) (114.9)

Effective tax rate 22.43% 25.61%

Net income 275.2 333.7 21.28%

Net margin, % 5.14% 4.29%

Source: IFRS accounts

34

Gross Margin Bridge / SG&A Expense StructureGross Margin Bridge / SG&A Expense Structure

Gross Margin Bridge

* As % of SalesSource: Company, IFRS accounts

SG&A Expense Structure16.43%* 16.12%*

1,7%

11,8% 11,9%

20,4% 20,8%

54,4% 53,9%

1,9%2,2% 1,8%2,6% 2,5%7,0% 7,2%

2010 2009payroll and related taxes

rent and utilities

depreciation&amortization

other expenses

taxes, other than income tax

packaging and raw materials

repair and maintanance

21,68%

1,85%

0,20%

(0,25%)

23,48%

0,42%

(1,25%) (0,27%)

22,38%

10%

12%

14%

16%

18%

20%

22%

24%

GM 2008 TradingMargin %

Transport Losses GM 2009 TradingMargin %

Transport Losses GM 2010

35

EBITDA BridgeEBITDA Bridge

EBITDA Bridge

As % of Sales

Source: Company, IFRS accounts

8,12%

(0,05%)(0,25%)(1,10%)

9,52%

0,13%0,06%0,08%

(0,06%)1,80%

7,51%

2%

4%

6%

8%

10%

12%

EBITDA2008

GM Bankservices

Rent andutilities

Foreignexchanfe

gain

Other EBITDA 2009 GM Salaries Advertising EBITDA 2010

36

Balance SheetBalance Sheet

In US$ MM 2009 2010

ASSETS

Property plant and equipment 1,638.5 2,651.1

Other non-current assets 28.5 61.0

Cash and cash equivalents 371.0 132.6

Inventories 415.2 659.8

Trade and other receivables 11.4 20.6

Advances paid 48.4 69.2

Taxes receivable 4.4 54.7

Other current assets 11.1 40.0

TOTAL ASSETS 2,528.5 3,689.0

EQUITY AND LIABILITIES

Equity 1,424.8 1,722.7

Long-term debt 152.3 810.3

Other long-term liabilities 27.3 66.4

Trade accounts payable 572.3 770.1

Short-term debt 266.6 196.8

Other current liabilities 85.2 122.7

TOTAL EQUITY AND LIABILITIES 2,528.5 3,689.0


37

2010 Capex (1) Analysis2010 Capex (1) Analysis

US’ mn

Notes (1) Capex calculated as additions + transfers of PP&E in each period


Total 2010: Total 2010: $$ 11,189.42 ,189.42 mnmn

733 mn 61%

212 mn 18%

43 mn 4% 201 mn

17%Other assets

Construction in progress & Buildings

Machinery and equipment

Land

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Cash Flow StatementCash Flow Statement

In US$ MM 2009 2010

OPERATING ACTIVITIES:

Operating cash flows before movements in working capital 508.7 634.1

Net cash generated from operating activities 376.2 428.7

INVESTING ACTIVITIES:

Net Cash used in investing activities (448.1) (1,230.0)

FINANCING ACTIVITIES:

Net cash generated from financing activities 339.2 565.2

Effect of foreign exchange rates on cash and cash equivalents (11.3) (2.3)

Net increase/decrease in cash and cash equivalents 256.0 (238.4)

Cash and cash equivalents, end of the year 371.0 132.6


39

46,4

40

20

30

40

2009 2010

Working Capital AnalysisWorking Capital Analysis

Inventory Management Days (2)

32,4 32,1

10

14

18

22

26

30

34

2009 2010

Trade Accounts Payable Days (3)

Source: Company

Source: Company, IFRS accounts

Working Capital (1)

(173,7)

(77,5)

(200)

(160)

(120)

(80)

(40)

-

2009 2010

Source: Company

0,09

1,38

0,0

0,5

1,0

1,5

2009 2010

Net Debt (4)/ EBITDA, USD

Notes: (1) Current assets (less C&CE and short-term investments) – current liabilities (less short-term debt)(2) 2009-2010: 360 / (Cost of sales/year average inventory)(3) 2009-2010: 360 / (Cost of sales/year average trade accounts payable)(4) Net debt = long / short-term bonds and borrowings + finance lease liabilities – cash and cash equivalents

Summary ConclusionsSummary Conclusions

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Summary ConclusionsSummary Conclusions

Leading Russian retailer: broadest geographic coverage with 4,189 stores (as of 31 March 2011) in more than 1,239 cities in seven out of eighth federal districts in Russia

Further organic growth of store operations: continued roll-out of established business model in existing markets and selective expansion into new geographic areas

Expanding hypermarket operations: leveraging strong existing platform (operations, logistics, brand, scale) to develop a leading hypermarket chain in the European part of Russia

Additional measures to improve profitability: enhancing product mix, shifting to direct import contracts, increasing private label and increasing distribution through own logistics system to achieve margin improvements and cost savings

Strong foothold in Russia’s cities and towns with p opulation under 500,000 people: first mover advantage (first retailer in many locations to establish a modern format); low competition from other chains outside of Russia’s large cities

Financing of expansion program: implementation of the Company’s mid-term strategy will be executed through a mix of operating cashflow and debt (bank loans and bonds)

1Q 2011 Results

Retail

Transcript of 1Q 2011 Results