Company presentation February 2018ir.eurotorg.by/file/Eurotorg_Company_presentation_JPM_GEM.pdf ·...
Transcript of Company presentation February 2018ir.eurotorg.by/file/Eurotorg_Company_presentation_JPM_GEM.pdf ·...
Minsk, Belarus
Confidential
Company presentationEUROTORG – the largest retail chain in Belarus
February 2018
Disclaimer (1/2)
2
BY ATTENDING ANY MEETING WHERE THIS PRESENTATION (AS DEFINED BELOW) IS MADE, OR BY READING ANY PART OF THIS PRESENTATION, YOU ACKNOWLEDGE
AND AGREE TO BE BOUND BY THE FOLLOWING:
THIS PRESENTATION IS STRICTLY CONFIDENTIAL TO THE RECIPIENT, MAY NOT BE DISTRIBUTED TO THE PRESS OR ANY OTHER PERSON, AND MAY NOT BE
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MEANS THIS DOCUMENT AND ANY ORAL PRESENTATION MADE, ANY QUESTION AND ANSWER SESSION CONDUCTED AND ANY OTHER INFORMATION DISCUSSED
ORALLY DURING ANY INVESTOR MEETING OF THE KIND REFERRED TO BELOW, INCLUDING WITHOUT LIMITATION ANY INFORMATION RELATING TO ANY PLANNED OR
CONTEMPLATED TRANSACTION (A “TRANSACTION”) INVOLVING LLC EUROTORG AND ITS AFFILIATES (THE “COMPANY”).
THE MATERIALS COMPRISING THIS PRESENTATION HAVE BEEN PREPARED BY THE COMPANY SOLELY FOR USE BY THE COMPANY’S MANAGEMENT AT INVESTOR
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THE CONTENTS OF THIS PRESENTATION HAVE NOT BEEN INDEPENDENTLY VERIFIED BY OR ON BEHALF OF THE COMPANY OR ANY OF ITS ADVISERS (THE
“ADVISERS”), OR BY ANY OTHER INDEPENDENT THIRD PARTY. NO REPRESENTATION, WARRANTY OR UNDERTAKING, EXPRESS OR IMPLIED, IS MADE BY ANY OF THE
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THIS PRESENTATION AND INFORMATION CONTAINED THEREIN DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THE SECURITIES OF THE COMPANY IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION, EXEMPTION FROM REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY JURISDICTION. 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 DOES NOT CONSTITUTE A RECOMMENDATION REGARDING THE SECURITIES OF THE COMPANY.
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MEMBER STATE, THE “PROSPECTUS DIRECTIVE”), THIS PRESENTATION IS ADDRESSED SOLELY TO QUALIFIED INVESTORS (WITHIN THE MEANING OF ARTICLE 2(1)(E)
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SHOULD NOT ACT OR RELY ON THIS DOCUMENT OR ANY OF ITS CONTENTS.
Disclaimer (2/2)
3
THIS PRESENTATION AND THE INFORMATION CONTAINED HEREIN ARE NOT AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES AND ANY SECURITIES
REFERRED TO IN THIS PRESENTATION HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE “SECURITIES ACT”). NEITHER
THIS PRESENTATION NOR ANY COPY HEREOF MAY BE SENT, TAKEN OR DISTRIBUTED IN THE UNITED STATES OR TO ANY U.S. PERSON (AS SUCH TERM IS DEFINED IN
REGULATION S UNDER THE SECURITIES ACT) EXCEPT TO PERSONS THAT ARE QUALIFIED INSTITUTIONAL BUYERS (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) WHO ARE ALSO QUALIFIED PURCHASERS (AS DEFINED IN SECTION 2(A)(51) OF THE U.S. INVESTMENT COMPANY ACT OF 1940).
THIS PRESENTATION AND INFORMATION CONTAINED THEREIN IS NOT AN OFFER, OR AN INVITATION TO MAKE OFFERS, SELL, PURCHASE, EXCHANGE OR TRANSFER
ANY SECURITIES IN THE REPUBLIC OF BELARUS TO OR FOR THE BENEFIT OF ANY BELARUSIAN PERSON OR ENTITY, AND DOES NOT CONSTITUTE AN ADVERTISEMENT
OR OFFERING OF ANY SECURITIES IN THE REPUBLIC OF BELARUS WITHIN THE MEANING OF BELARUSIAN LAWS. INFORMATION CONTAINED HEREIN IS NOT INTENDED
FOR ANY PERSONS IN THE REPUBLIC OF BELARUS, UNLESS AND TO THE EXTENT THEY ARE OTHERWISE PERMITTED TO ACCESS SUCH INFORMATION UNDER
BELARUSIAN LAW. THE SECURITIES HAVE NOT BEEN AND WILL NOT BE REGISTERED OR ADMITTED FOR PLACEMENT AND CIRCULATION IN BELARUS AND ARE NOT
INTENDED FOR "PLACEMENT" OR "CIRCULATION" IN BELARUS (EACH AS DEFINED IN LAW NO. 231-Z “ON THE SECURITIES MARKET” DATED 5 JANUARY 2015, AS
AMENDED) UNLESS AND TO THE EXTENT OTHERWISE PERMITTED UNDER BELARUSIAN LAW.
THIS PRESENTATION IS NOT DIRECTED AT, OR INTENDED FOR DISTRIBUTION TO OR USE BY, ANY PERSON OR ENTITY THAT IS A CITIZEN OR RESIDENT OR LOCATED
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SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.
THE INFORMATION AND OPINIONS CONTAINED IN THIS PRESENTATION (INCLUDING WITHOUT LIMITATION ANY FORWARD-LOOKING STATEMENTS AS REFERRED TO
BELOW) ARE PROVIDED AS AT THE DATE OF THIS PRESENTATION AND ARE SUBJECT TO CHANGE WITHOUT NOTICE. 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”, “PLAN”, “ESTIMATE”, “AIM”, “FORECAST”, “PROJECT”, “WILL”, “MAY”, “MIGHT”, “SHOULD”, “COULD” AND SIMILAR EXPRESSIONS (OR THEIR
NEGATIVE) IDENTIFY CERTAIN OF THESE 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 IMPACT OF COMPETITIVE PRICING 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. THESE FORWARD LOOKING STATEMENTS SPEAK ONLY AS AT THE DATE AS OF
WHICH THEY ARE MADE, AND NONE OF THE COMPANY, THE ADVISERS OR ANY OF THEIR RESPECTIVE MEMBERS, DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR
ADVISERS 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 REFLECT ANY CHANGE IN THE COMPANY’S EXPECTATIONS WITH REGARD THERETO OR ANY CHANGE IN EVENTS, CONDITIONS, OR
CIRCUMSTANCES ON WHICH ANY SUCH STATEMENTS ARE BASED OR TO UPDATE OR TO KEEP CURRENT ANY OTHER INFORMATION CONTAINED IN THIS
PRESENTATION.
Team presenting today
4
Andrei Matsiavin
Chief Investment Officer,
Member of the Board of Directors
Andrei Zubkou
Chief Executive Officer
Alesia Sapunova
Chief Financial Officer
• Over 3 years of experience in retail industry and over 10 years of experience in finance and management
• Joined Eurotorg in 2014
• Over 16 years of experience
in retail industry
• Joined Eurotorg in 2002
• Over 20 years of experience
in retail industry
• Joined Eurotorg in 2007
Table of content
5
Overview of Eurotorg
Belarus economy overview
Eurotorg investment case
Appendix
7
11
14
35
4Q 2017 and FY2017 update 30
Overview of Eurotorg
Eurotorg at a glance
500
Stores1
19%
Market share1
5.3x
Larger than #23
6
Different formats:
from small convenience
stores to hypermarkets2
>20%
Of households are daily
customers5
100%
National coverage4
B- / B-
Fitch / S&P
Source: Company data, Consolidated Group IFRS results
1. As of 31.12.2017 or in 2017. 2. Eurotorg operates two banners "Euroopt" and "Brusnichka" 3. By food retail sales in 2017, compared to the second largest player in Belarus. 4. Eurotorg is present in all 7 regions of Belarus. 5. As of 2017,
calculated as average customer traffic per day divided by number of households as of 31.12.2017. 6. LTM revenue H1 2017 of BYN 3,777 mn, converted to USD based on National Bank of Belarus average USD/BYN exchange rate of 1
USD = 1.93 BYN. 7. As of 30.06.2017 or in H1 2017
7
USD 2.0 bn
Revenue LTM6
9.6%
EBITDA margin7
Key partner
For national food
producers
The largest
Private company in
Belarus4
> 2.5 mn
Active loyalty cards2
0.9 mn
Customers daily (>20%
of households)3
8Source: Company data, National Statistical Committee
1. In 2017. 2. In December 2017. 3. As of 2017, calculated as average customer traffic per day divided by number of households as of 31.12.2017. 4. Eurotorg is the largest private company (by
number of employees) in Belarus in 2017
Essential role in ensuring
national food security
Strong brand awareness
Track record of crisis resilience
108 out of 129
Territory units of Belarus
covered1
~50%
cities and towns w/o
modern retail
competitors1
Eurotorg plays essential role in ensuring food security and affordability for Belarus
population on a national scale
Co-existence
of wholesale
and retail
operations
Source: Company data, publicly available reports
1. Lenta is one of the largest Russian food retailers. 2. Eurotorg was assigned corporate credit ratings of «B-» (Fitch) and «B-» (S&P), in line with Belarus sovereign rating at that moment. Later S&P
(6 October 2017) and Fitch (26 January 2018) raised Belarus’s sovereign credit rating to «B». 3. Eurotorg is the largest private company (by number of employees) in Belarus in 2017
9
The largest private company in Belarus3
National retail champion with 500 stores
1993 1997 2008
Business was
founded
Opening of the 1st
store in Minsk
Focus on
retail
operations
Start of
audited IFRS
accounts
preparation
2016
1 2
2012
Eurotorg
attracted 1st
international
financing – a
long-term
loan from
EBRD
Launch of
wholesale
sections in
hypermarkets
Partnership
agreement with
Lenta1 signed
2010
Eurotorg
became the
1st food
retailer with a
presence in all
regions of
Belarus
Rapid expansion
Roll-out of 450+ stores
Pioneering modern food retail formats in Belarus
Enhanced corporate governance and recognition by international institutions
3
2017
Corporate credit ratings
from Fitch and S&P in line
with Belarus sovereign
rating, achieved2
Successful debut on
international capital
markets with USD 350 mn
Eurobond placement
“Brusnichka” banner launch
Eurotorg’s story
Wholesale
champion
IR web site
ir.eurotorg.by
launch
2018
Belarus economy overview
Belarus GDP and GDP per capita vs peers, 2017
25%
18%
17%
18%
7%
15%
Minerals
Chemical products
Food products
Machinery and transportation
Metals
Others
29%
15%
13%
23%
10%
10%
156
104
64 56 53 5339 39
15
Ka
zakhsta
n
Ukra
ine
Be
laru
s(2
022
)
Bu
lga
ria
Cro
atia
Be
laru
s(2
017
)
Se
rbia
Azerb
aija
n
Georg
ia
• Belarus population (as of Jan 2018) is 9.5 mn
• GDP nominal USD 52.8 bn1, GDP per capita USD (PPP) 18.6 thsd1 in 2017
• Foreign trade turnover of USD 63 bn2 in 2017
• Current credit rating (S&P/F/M): B(Stab.) / B(Stab.) / Caa1(Stab.)
• Belarus banking system is well capitalised
• Belarus is ranked #38 (ahead of Turkey ranked #60) in “Ease of doing business”
report by World Bank
• Belarus has been working on rapprochement with Western nations. This is clearly
displayed in the lifting and easing of sanctions throughout 2016-2017
• Significant political stability and maturing political process
• Relations with the EU have been improving and the dialogue with respect to various
initiatives concerning trade, economic and humanitarian cooperation, are ongoing
• In 2017 Belarus made two Eurobond placements totaling USD 1.4 bn at 7.125%
(5.5 year tenor) and 7.625% (10 year tenor) coupons
• Another placement of USD 600 mn at 6.2% (12 year tenor) coupon was made in
21 February, 2018
35,3%
22,9%
13,2%
9,7%
7,8%
5,8%5,3%
Services
Industry
Net taxes on products
Trade
Agriculture, forestry and fishing
Transport
Construction
Export and import structures, 2017
Exports Imports
GDP composition by economic sector, 2017
Belarus is a sizeable and diversified economy focused on foreign
policy development
x.xx.x - GDP per capita (PPP), USD thsd
- GDP nominal, USD bn
26.1 24.122.6 18.6 17.415.1 10.68.7 21.6
Source: National Statistical Committee, Ministry of Finance Source: National Statistical Committee, Ministry of Finance
Source: IMFSource: National Statistical Committee, Ministry of Finance, World Bank
1. On preliminary basis 2. IMF estimates 3. Includes data on trade of goods
11
Belarus is a sizeable and diversified economy
5%10%15%20%25%30%35%40%45%
16.0
3.2
011
20.0
4.2
012
26.0
5.2
013
01.0
7.2
014
06.0
8.2
015
10.0
9.2
016
16.1
0.2
017
1,0
1,2
1,4
1,6
1,8
2,0
2,2
2,4
01.0
1.2
015
03.0
8.2
015
04.0
3.2
016
04.1
0.2
016
05.0
6.2
017
103%88%
81%68%
45% 42% 37%26% 21% 16%
Eg
ypt
Ukra
ine
Cro
atia
Se
rbia
Georg
ia
Be
laru
s
Azerb
aija
n
Bu
lga
ria
Ka
zakhsta
n
Russia
5,5%
1,7%1,0%
1,7%
(3,8%)
(2,6%)
2,4%3,0%
2011 2012 2013 2014 2015 2016 2017E 2018F
External debt decreased over the last years
while foreign reserve assets were resilient
34,0 33,8
39,6 40,0 38,3 37,5 39,6
7,9 8,1 6,7 5,1 4,2 4,97,3
2011 2012 2013 2014 2015 2016 2017 Q3
Gross external debt, USD bn
Foreign reserve assets, USD bn
- USD 0.4 bn
GDP growth is back Belarus public debt is at comfortable level
Local currency volatility decreased
Real GDP growth, % y-o-y Public debt, as a % of GDP in 2017
108,7%
21,8%16,5% 16,2% 12,0% 10,6%
4,6%
2011 2012 2013 2014 2015 2016 2017
21,9%
13,7% 12,9%7,1% 6,7% 4,6% 2,5%
Egypt
Ukra
ine
Aze
rbaija
n
Kazakhsta
n
Geo
rgia
Bela
rus
Russia
Belarus CPI slowed and stabilized in line with
peers in 2017
Belarus CPI for Dec 2011 - Dec 2017 and
comparison with peers’ CPI in Dec 2017, % y-o-y
1
+ USD 2.2 bn
Refinancing rate has been showing a
downward trend
BYN / USD exchange rate dynamics2
1.97
Refinancing rate, %
Exchange rate
stabilized
Source: National Statistical Committee, JP Morgan Source: S&P - Sovereign Risk lndicators (6 July 2017)
Source: National Bank
1. Includes total debt of the General Government, Central Bank,
deposit organisations and other sectors (data as of December 31 of
each year)
Source: National Statistical Committee, Ministry of Finance (IMF)
Source: National Bank as of 15 February 2018
2. Denominated values
Source: National Bank
12
Continued
downward trend
10.5%
15.0
2.2
018
15.0
2.2
018
ХХ - Sovereign rating (S&P)
B- B- BB BBB- BB+BB BBB- BB+
Belarus economy has stabilised and is set to grow
BBB-
~2 years
Eurotorg investment case
14
Eurotorg investment case
The largest and
fastest-growing food retailer…
… on one of the most
attractive markets in Europe with
structural barriers to entry for
international players…
… employing a well-diversified
business model, appealing value
proposition and dominant position on
the market…
… with clearly formulated growth
strategy supported by well-invested
asset base…
… delivering strong operational and
financial results…
… supported by prudent
financial policy and strong balance
sheet…
1
2
3
4
5
6
• Revenue (LTM H1 2017) ~USD 2.0 bn1
• Belarusian food retail market share (2017) ~19.0% vs 14.4% in 2014
• 100% national coverage2
• 5.3x times larger than #2 player / #2+#3+…+#9 – altogether still smaller than Eurotorg3
• One of the highest market growth rates in Europe – CAGR of 23% (`11-17 in local currency)4
• Strong food spending growth outlook – CAGR of 9.5% (’16-20E in USD)5
• Modern retail penetration accounts for ~45%6 and selling space provision per capita is 0.6 sqm, which is much lower than in other European countries in 20167
• Strong barriers to entry for international players supported by local legislation and market structure
• Operates “Euroopt” and “Brusnichka” banners with 6 key formats: from convenience stores to hypermarkets
• The only nation-wide logistics system in the country
• Dominant market position with strong customer loyalty
• Potential to grow organically capturing the market share with limited capital investments
• Well-invested and “young” chain: ~77% stores have been opened since 1 January 2013
• Potential for economic efficiency improvements on the back of gross margin appreciation and increased
productivity
• Eurotorg’s average customer traffic density in its stores is 1.2x-2.6x higher than average customer traffic
densities of Magnit8 and X58 in the same formats
• EBITDA margin resilience and strong cash flow generation despite challenging macro conditions
• Robust cash conversion rate of 76% (LTM H1 2017)9
• Eurotorg is focused on deleveraging driven by debt repayment and strong organic EBITDA growth
• Commitment to maintain adequate liquidity position
… managed by proven management
team, and supported by the founders in
business development
7 • Shareholders of the Company have been significantly involved in business development since it was founded
• High standards of business transparency (incl. audited IFRS reports since 2008)
• Key top managers have been with the Company for a long time
• Track record of direct financing from EBRD and leading Russian banks highlighting quality and
transparency of the Company
1. Consolidated Group IFRS results. LTM revenue of BYN 3,777 mn,
converted to USD based on National Bank of Belarus average
USD/BYN exchange rate of 1 USD = 1.93 BYN
2. Eurotorg is present in all 7 regions of Belarus
3. In 2017, by market share
4. According to National Statistic Committee
5. According to Planet retail
6. Company data
7. According to GFK Geomarketing retailers
8.The largest Russian food retailers
9. Cash conversion is calculated as
free cash flow / EBITDA
19,0%
3,6%
17,9%
14,4% 16,7% 18,5% 19,0%
23,2%26,0%
29,0% 29,5%
2014 2015 2016 2017
36
53
47
74
Eurotorg is the only nation-wide retail chain with 100% penetration into regions
Eurotorg is the largest food retailer in Belarus
Market share1 of Top-9 players, 2017, %
Eurotorg’s market share on the food retail market reached ~19%; share of
top-5 players still below European levels
Market shares1 of Top-5 players
Number of stores of the largest
market players, as of 01.01.2018
Eurotorg 500
#4
#2
#5
#3
#4 #5#3#2Eurotorg
X5.3
#2 Combined market share
of #2+ #3…+ #9Eurotorg
8,8% 9,3% 10,5%
Source: National Statistic Committee, Company data
1. By food retail revenue
Source: National Statistic Committee, Company data, Planet Retail
1. By food retail revenue
In Belarus In Europe (2016)
65,6%
62,0%
55,0%
50,5%
46,7%
40,5%
29,5%
Germany
France
UK
Czech
Hungary
Poland
Belarus
15
Diameter of the circle corresponds to ~50 km
Number of cities and towns covered by the largest market players,
as of 01.01.2018
10,5%
Source: National Statistic Committee, Company data
1 The largest and fastest-growing food retailer…
7212
226 13
71
143
Eurotorg #5#4#2 #3
Undisputable penetration into
cities and towns of Belarus
71 out of 143
cities and towns w/o modern
retail competitors
16
1 The largest and fastest-growing food retailer (cont’d) …
Eurotorg is strongly ahead of its competitors by geographical coverage…
Belarus territory units coverage of the largest market players,
as of 01.01.2018
Source: National Statistic Committee, Company data
#4#2 #3 #5Eurotorg
Territory units covered by both Eurotorg and modern format competitors
Territory units where Eurotorg is the one and only modern format player
Territory units where Eurotorg has no presence
… with unique position across smaller cities and towns
… being the one and only modern format player in 35 territory units…
Modern format penetration into territory units in Belarus
Selling space of the largest Belarusian market players in Minsk and
outside Minsk, as of 01.01.2018
Source: National Statistic Committee, Company data
71
#4Eurotorg #2 #3
29
278
#5
64 52
22% 45% 19% 79% 69%Share of total
selling space in Minsk
1 964557 1 257 635 697Average selling space
per store
Total selling space
108
1122
613
Retail turnover in Belarus demonstrated strong growth in local currency in 2011-2017 which is expected to continue in 2018-2020
Strong barriers to entry for international players
Retail turnover (incl. VAT)
Source: National Statistical Committee of the Republic of
Belarus
Source: Planet Retail, Infoline, National Statistical Committee of the Republic of Belarus, GFK Geomarketing
17Source: Company data
Local regulation and structure of the market create substantial barriers to entry for international retailers
Access to
real estate
Ability to
replicate
business
model in
Belarus
Limited availability of modern selling space for rent, particularly modern selling space suitable for large supermarkets and hypermarkets
Construction process is highly regulated and sufficient expertise in local market is required to ensure timely and cost-efficient project execution
Elimination of sourcing power and “own brand” advantages available at the home markets
Regulation on the assortment: substantial part of SKUs across majority of categories are required to be of domestic origin
Import duties on certain product categories (e.g. from EU) substantially decrease import’s feasibility
Entry of international player to the market will require substantial time and investments to build relationship with local suppliers (and ensure
good pricing) and develop logistics systems in the country
Acquisition
of local
players
Lack of sizeable targets with well-developed retail chain, logistics infrastructure and appropriate financial reporting standards
Substantial geographical overlap between large players (mostly focused on Minsk and a few large regional cities) limits potential merits of the
consolidation
Source: Planet retail
Food spending CAGR 2016-2020E (in USD)
UK
France
9,5%
9,1%
4,2%
4,2%
3,7%
3,3%
2,4%
2,4%
0,9%
0,9%
0,0%
(1,5%)
Germany
Italy
Spain
Norway
Turkey
Poland
Lithuania
Latvia
Russia
Belarus
Modernformatspenetration in foodretail, %,2016
UK
USA
89%
85%
85%
80%
79%
66%
66%
53%
45%
40%
Germany
Poland
France
China
Brazil
Russia
Belarus
Turkey
Selling space per capita in 2016, sqm
Germany
Norway
1,4
1,3
1,2
1,1
1,1
1,1
1,0
1,0
0,9
0,7
0,7
0,6
France
Lithuania
Spain
UK
Italy
Latvia
Turkey
Belarus
Poland
Russia
2… on one of the most attractive markets in Europe with structural barriers to
entry for international players …
2011 2012 20172013
11.3
2014 20162015
20.2
26.831.8
34.736.9
39.2
BYN bn
18
Format E mini Brusnichka E+ E++ E+++ E++++ TOTAL
Number of stores1
Average selling
space1, sqm
Average number
of SKUs
Selling space
owned1, %
Sales as % of
total sales2, %
Photos of
the format
Key highlights
Multi-format chain – from small convenience stores to hypermarkets
8% 43%18% 58% 100%61%
10% 21% 17% 29% 6%
Convenience
stores
Located in close
proximity to
residential areas
Convenience
stores
Located in dense
residential areas and
near main road traffic
junctions
Urban
supermarkets
Located close to
large neighborhoods
within city
boundaries
Compact
hypermarkets
Located in cities
with population
over 50 thousand
people
Hypermarkets
Located within circular
city roads, close to
transport hubs
~3,650
140
~7,050
436
~12,000
992
~25,700
2,642
~43,000
5,465320
155 137 116 54 35 3
500
557
~3,000 ~6,950
13%
Convenience
Stores
Soft discounter,
focus on the low
and medium price
product segments
Source: Company data
1. As of 31.12.2017. 2. In 4Q 2017
3 … employing a well-diversified business model…
17%
Eurotorg’s average price of the
basic product range is significantly
lower vs competitors
Appealing value proposition and strong positions on the market
Price leadership
Focused assortment
Attractive loyalty card
program
Balanced real
estate strategy
Strong brand with
outstanding customer
traffic
Source: Company information
1. According to the National Academy of Science research, 2016. 2. The largest Russian food retailers. 3. For 4Q 2017. 4. As of 31.12.2017 5. In 2017
The average price of the basic food (including alcohol and tobacco) and non-food products is significantly lower vs competitors1
Consistently recognized as the retailer with the lowest prices across the country
The “focused assortment“ store business model implies offering of limited range of products of the highest demand
Focus on high turnover products supports freshness of the products and low level of shrinkages
The number of active loyalty cards is more than 2.54 mn
~74%5 of all purchases are made using loyalty cards (in money terms)
43% of total selling space is owned by the Company4
Development of convenience stores and supermarkets is based on leased space model
Eurotorg’s average customer traffic in convenience stores (E mini, E+ and Brusnichka) is 2.3x and 2.6x times higher than average
customer traffics of Magnit2 and X52 in the same format respectively3
Strong traffic is further supported by targeted marketing activities
Price leadership Outstanding customer traffic across all formats Loyalty card program
Source: Company data, publicly available reports, for 4Q 2017 Source: Company dataSource: National Academy of Science research, 2016
19
>2.54 mn
Active loyalty cards
~74%5 of purchases
Were made using loyalty cards
(in money terms)
14-20% hypermarkets
14-29% supermarkets
Eurotorg’s average customer traffic in its stores in 2017
Q4 is significantly higher than average customer traffics
of Magnit2 and X52 in the same formats
2.3-2.6x convenience stores
1.7xhypermarkets
1.2-1.5x supermarkets
3 … and appealing value proposition and dominant position on the market …
33%
11% 9% 8% 7%
Eurotorg Gippo Rublevskiy Prostore Korona
83%
7% 5% 2%
Eurotorg Gippo Almi Dobronom
20
Source: Company information, Nielsen Shopper Trends 2016-2017 Minsk, Nielsen Shopper Trends 2016-2017 Gomel
Eurotorg enjoys one of the highest Store
Equity Index (SEI) in Europe1
SEI of European leaders and Eurotorg’s SEI in
Minsk and Gomel, Nielsen 2016
Kaufland (Slovakia)
Albert Heijn (Netherlands)
Mercadona (Spain)
Lidl (Slovakia)
Pingo Doce (Portugal)
ICA (Sweden)
Migros (Switzerland)
Eurotorg (Gomel)
REMA 1000 (Norway)
Biedronka (Poland)
Kaufland (Bulgaria)
Eurotorg (Minsk)
5,4
4,6
4,6
3,8
3,5
3,5
3,5
3,2
3,1
3,1
3,1
3,0
Source: Nielsen
1. Nielsen Store Equity Index ranks retail brands for familiarity,
connection and loyalty
Key competitors
In Minsk (Belarus capital)
Penetr
atio
n
Consumer’s loyalty
25
4
3
In Gomel (regional city)
Penetr
atio
n
Consumer’s loyalty
12
3
Eurotorg has a strong market position both in Minsk and regions
Top-5 “lowest prices” retailers according to the survey results (by share of consumers who mentioned the
retailer as a chain with the lowest prices), 2016, %
In Minsk (Belarus capital) In Gomel (regional city)
Eurotorg has strong positions on the market with unparalleled customer loyalty and value-for-
money image
# # - position on the Belarus market in 2016 by market share
#5#1 #4 #9 #2 #5#1 #3 >#10
3 … and appealing value proposition and dominant position on the market (cont’d) …
Supply chain Supplier partnership
3 modern distribution centres and 2 warehouses
with total 90.5 k sqm storage space
Source: Company data
2. Eurotorg is present in all 7 regions of Belarus. 3. As of 31.12.2017
21
Sales structure, H1 2017, % of retail sales
(incl. VAT)
Suppliers structure, H1 2017, %
of purchase volume (ex. VAT)
By country of origin By product mix
Own truck fleet
Centralisation
~80%Capacity utilisation
~60% ~175Vehicles
Balanced real estate strategy
The only retailer in Belarus with fully integrated nation-wide logistics system
Eurotorg’s presence and logistics support strong relationships with
suppliers
Total selling space owned3120 k sqm
Selling space / total space owned343% / 51%
Formats of stores6
Penetration into regions2100%
Key statistics
Development strategy focused on the roll-out of smaller format stores on a
leased basis
Sustainable relationships with landlords due to Eurotorg prudent rent payment
policy and long-standing cooperations
Low price / low cost execution
Limited share of imported goods
Low concentration of suppliers
Strong sourcing power supported by Eurotorg scale and favourable payment
terms
Strong relationships with largest Belarus producers
Price leader in Minsk
Balanced approach to pricing strategy to ensure sustainable profitability
Well-developed loyalty programme
Nationwide customer outreach campaigns
10,8% 11,2% 11,8% 12,7% 12,7%
Source: Company data, publicly available reports4. (EBITDA + rent expenses) / revenue
Solid EBITDAR4 margin (H1 2017) achieved
Source: Company data
1. Eurotorg owns 2 distribution centres and leases one distribution centre and 2 warehouses
(Dixy)
4 … and supported by well-executed operations …
Top-1021%
#10-2011%Other
68%
Private label11%
Own-produced products
10%
Other79%
Belarus74%
Other26%
Increasing market share driven by organic growth initiatives with EBITDA and profitability growth due to vertical integration and increased productivity
22
Potential to
grow the gross
margin and to
improve
productivity will
drive EBITDA
growth
Potential to
grow
organically
capturing the
market share
with limited
capital
investments
Market composition by format and market share1 of Top-10 players, 2017, %
Modern format – 45%Non-modern format – 55%
Eurotorg – 19.0%
#2 – 3,6%
#3 – 2.4%
#4 – 2.3%#5 – 2.1%
#6-10 – 8.6%
Other players – 62.4%
Source: Company data, publicly available reports
Attractive low price model and strong brand awareness
will enable Eurotorg to grow organically capturing the
market share
Fundamentals for modern retail format development and
general economy growth
Balanced real estate strategy with focus on moderate roll-
out of convenience (E-mini and E+ formats) stores on
rented selling space
Gross profit initiatives
Better supplier terms supported by shorter payment cycle
and enhanced by Eurotorg’s sourcing power
Further development of partnership relations with its
suppliers and facilitation of competition between them
Focus on increasing a share of sales of private label
products, non-food products and own-produced products
SG&A costs optimisations
Potential to increase personnel productivity through
personnel trainings and operations optimisations
Opportunities for further efficiency gains due to natural
proximity of stores and operational leverage (i.e. sourcing
power)
Gross profit as % of revenue vs trade payables days, 2016
Magnit, 27.5%
Dixy, 26.7%
X5, 24.2%
O’KEY, 22.9%
Eurotorg (2016), 23.3%
LENTA, 22.1%
Eurotorg (H1 2017), 26.6%
20,0%
22,0%
24,0%
26,0%
28,0%
30,0%
35 45 55 65 75 85
Gro
ss p
rofit m
arg
inTrade payables days
Eurotorg’s sales structure, H1 2017, % of retail sales (incl. VAT)
Source: National Statistic Committee, Company data
1. By food retail revenue
4 … and supported by well-executed operations (cont’d) …
10% own-produced products
11% private label products
8% non-food products
67 121 203
298
438 453 500
160
221
257
97
182
6,6% 7,4% 7,1% 5,5%
9,6%
22,3% 23,0% 23,3% 22,4%26,6%
2014 2015 2016 H1 2016 H1 2017
EBITDA (BYN mn) EBITDA margin (%) Gross profit margin (%)
55103
129
192
251271 278
2011 2012 2013 2014 2015 2016 2017
Eurotorg achieved strong financial results with resilient margins …
Selling space and number of stores, eop, k sqm / stores
… and outperformed Russian retail peers
Selling space, k sqm
Number of stores
Integration of 80+ stores,
acquired in Nov-Dec 2015
Source: Company data
23
EBITDA, EBITDA margin and Gross profit margin
Source: Consolidated Group IFRS results
5 … delivering strong operational and financial results
29,0% 27,0%21,3%
12,0%
(9,4%)
(23,3%)
27,7%22,9% 25,7%
18,6%
7,4%
16,6%
EBITDA and revenue growth CAGR 2014-2016, in local currency, %
Source: Company data, publicly available reports
EBITDA growth CAGR Revenue growth CAGR
(Dixy)
30,9% 29,9%
21,2% 19,6% 18,8%
8,9%
Source: Companies disclosure
Selling space growth CAGR 2011-2017, %
(Dixy)
24
5 … delivering strong operational and financial results (cont’d)…
48 34
31
31
60 63
72 56
3 7 7
7
(9) (22)
(34)
(18)
2014 2015 2016 H1 2017
Inventory days Payable days
Receivable days Cash conversion cycle (negative)
Investment in trade payables resulted in better terms
from suppliers increasing gross profit margin significantly
Cash generated from operating activities, BYN mn
Capex profile, in BYN mn
Source: Consolidated Group IFRS results
Net working capital includes: inventories (retail and wholesale only), trade receivables and trade payables
Working capital dynamics
Free cash flow generation, in BYN mn
Source: Consolidated Group IFRS results
Inventory days: inventories (retail and wholesale only) * 365 / COGS; Payable days: trade payables * 365 /
COGS; Receivable days: trade receivables * 365 / revenue; Cash conversion cycle: inventory days + receivable
days – payable days
Source: Consolidated Group IFRS results
Free cash flow is calculated as net cash from operating activities minus capex plus proceeds from disposals.
Cash conversion is calculated as free cash flow / EBITDA
297
121200
347389 418
2014 2015 2016 LTM
Net cash from operating activities
326
186
76 52
2014 2015 2016 LTM
262
121
(104)
229
328 383
2014 2015 2016 LTM
% Cash conversion
n.m. 103% 127%
% Capex as % of revenue
6.2% 2.1%13.5%
(243)
(XX) NWC BYN mn
Strong cash flow generation supported by high profitability and limited capex requirements
(122)
1.4%76%
(6.7%) (3.2%)
% NWC as % of revenue
Significant new stores
openings
1. LTM metric - the figure for 2016 less the figure for H1 2016 plus the figure for H1 2017
2. Working capital figures are divided by LTM revenue or LTM COGS
1
1 1
2
Significant new stores
openings
Significant new stores
openings
Significant new stores
openings
BYN 121 mn
investment in
working capital
Capex BYN 121 mn
investment
in working
capital
Source: Consolidated Group IFRS results
Capex is calculated as acquisition of PP&E plus acquisition of intangible assets
25
6 … supported by conservative financial policy…
Focus on deleveraging
Dividend policy
Balanced debt structure
Adequate liquidity and
timely debt servicing
• Focus on deleveraging and enhancing interest coverage metrics driven by debt repayment and strong
organic EBITDA growth
• Strong cash flow generation supported by limited capex requirements thanks to well-invested and
“young” (~77% stores have been opened since 1 January 2013) retail chain and store roll-out strategy
focused on leased space model
• No material dividend distributions since August 2014 with strengthened free cash flow directed at pro-
active debt management
• Prudent financial policy with respect to shareholder distributions (general restricted payments thresholds
of 3.5x Net Debt / EBITDA prior to 1 January 2019 and 3.0x Net Debt / EBITDA after 1 January 2019 in
the proposed issuance)
• Opportunistic diversification of the debt portfolio currency mix towards BYN
• Smooth debt maturity profile with proactive refinancing of short-term borrowings
• Commitment to maintain adequate liquidity position
• Conservative use of financing with relatively low payables level
• Track record of orderly debt servicing – no payments suspended through the recent economic crisis or
before
Source: Company data
Eurotorg is committed to maintaining sustainable and prudent financial policy
26
6 … strong balance sheet and well-balanced debt portfolio…
Net debt and net debt / EBITDA
Source: Consolidated Group IFRS results, National Bank of Belarus
Ratios are calculated in reported currency (BYN). Net debt is calculated as the sum of short-term and long-
term loans (including obligations under finance leases) minus cash and cash equivalents. 1. Converted to
USD based on National Bank of Belarus end of period USD/BYN exchange rate
4,8x5,6x
4,7x
3,6x
2014 2015 2016 H1 2017
Net debt / EBITDA xxx Net debt1, USD mn
648 668 618 634
EBITDA / Interest and financial lease expenses
3,3x
2,1x 1,9x
2,5x
2014 2015 2016 H1 2017
EBITDA / Interest and financial lease expenses
xx Interest and financial lease expenses1, USD mn
41 66 69 71
Focus on deleveraging…
… and comfortable interest coverage
2
2
Source: Consolidated Group IFRS results, National Bank of Belarus
Ratios are calculated in reported currency (BYN). 1. Based on National Bank of Belarus USD/BYN exchange
rate: due to hyperinflation, 2014 figures converted based on end of period exchange rate; 2015, 2016 and H1
2017 figures converted based on average exchange rates
2. LTM metric - the figure (i.e. EBITDA or interest and financial lease expenses) for 2016 less the figure for H1 2016 plus the figure for H1 2017. Net debt is as of H1 2017
Eurobond placement significantly improved maturity schedule…
… and optimized debt structure
157114 99 110 114
19
20222018 2019H2 2017-2018 20212020
Debt maturity by year as of 2018, USD mn
Source: Company data. Debt includes banks debt, bonds and loans.
aft
er
Eu
rob
on
ds,
as o
f 31 D
ecem
ber
2017
befo
re E
uro
bo
nd
s,
as o
f 30 J
un
e 2
017
38 3790 123 18
100
250
2018
190
2019
1
2020 2021 20232022
373
Total H2 2017-2020: USD 369 mn
Total 2018-2020: USD 77 mn
Debt maturity 2018-2023: 3,1 years
Debt maturity 2018-2023: 4,4 years
By type of debt By type of interest payment
By lender By currency
43%
57%
13%
15%
12%
51%
8%
Sberbank
BelVeb
Belarusbank
Alfa-bank
Other
Eurobonds
74%
22%
3%
1%
USD
BYN
EUR
RUB
33%
67%
Floating
Fixed
Source: Company data. Debt includes banks debt, bonds and loans on February, 2018. Increase by June 31, 2017
Secured
Unsecured
Unsecured
increased: +37 pp
Fixed
increased: +7 pp
BYN
increased: +4 pp
Eurobond
maturity
Application of the 8.75% 2022 Eurobonds Proceeds
27
Eurobonds Cash Proceeds Use, m USD
345
40
121
91
45
17
513
Net Eurobonds
Proceeds BANK BELVEB
BELAGROPROMBANKBPS-SBERBANK ALFA-BANK
8
BELGAZPROMBANK
BANK VTB BANK MOSCOW-
MINSK
4
OTHER DEPOSIT ACCOUNT
Eurotorg debuted on international capital markets with USD 350 mn Eurobond issuance in October 2017
The Eurobond placement had a number of positive impacts on Eurotorg financial standing, including:
Debt maturity extension: current average debt maturity is 4.4x years vs 3.1x prior to Eurobonds issuance
Decrease of the average interest rate by 1.8 pp:
• Out of which 1.1 pp - due to the Eurobond placement;
• Out of which 0.7 pp - due to the successful refinancing of the remaining loan portfolio;
The interest rate decreased most significantly in the loans with Bank BelVEB (-3.7 pp), Belgazprombank (-2.5 pp), Paritetbank (-2.0 pp)
Increase of the proportion of unsecured debt from 20% (June 2017) to 57% (February 2018)
The Company converted a sizeable portion of loans into local currency: the share of loans nominated in BYN increased from 18% (June 2017) to 22% (February 2018)
Diversification of funding sources: the share of the largest lender (Sberbank) was decreased from 39% (June 2017) to 13% (February 2018)
Source: Company data.
28
7… managed by proven management team, and supported by the founders
in business development
49,75%49,75%
0,50%
Litinvest
ltd.
(Sergey
Litvin)
49.75%
Curgil
Ventures
ltd.
(Vladimir
Vasilko)
49.75%
Storass
ltd.
(Andrei
Zubkou)
0.5%
Eurotorg LLC
Legal structure:
Philip
Artemenko
Retail Sales
Director
Andrei
Zubkou
CEO
Alexander Litvin
Chairman of the
Board of
Directors
Management
Alesya
Sapunova
CFO
Vladimir Vasilko Sergey Litvin
Andrei Matsiavin
Member of the
Board of Directors,
Chief Investment
Officer
Vladimir Vasilko
Member of the
Board of Directors
Sergey Litvin
Member of the
Board of
Directors
Shareholders
Board of Directors
Andrei Zubkou
Andrei Zubkou
Sergey Litvin
Vladimir Vasilko
Source: Company data
Ownership structure, %: Management structure of Eurotorg, LLC:
Evgeny
Zhygimont
First Deputy
CEO
Alexander
Shuliak
Commercial
Director
Igor
Vorobyov
Head of
Marketing
Vladlen
Atroshkin
Operations
Director
4Q 2017 and FY2017 update
30
Key achievements in 2017
Operating highlights Strategic highlights
Net retail sales1 increased by 5.5% year-on-year and
reached BYN 3.57 bn (net retail sales in USD terms
increased by 8.6% y-o-y and amounted to USD 1.85 bn2).
Like-for-like sales showed moderate growth of 1.1% in
2017, with a 7.5% decrease in LFL traffic offset by a 9.3%increase in the LFL average ticket.
In 4Q 2017 LFL sales improved and showed 3,9% growth,
with a 2,9% decrease in LFL traffic offset by a 7,0%increase in the LFL average ticket.
As of 31 December 2017, the Company operated 500
stores with 278.5 ths sqm of total selling space.
In 2017 Eurotorg added 47 new stores with 7.8 ths sqm of
selling space3.
In 2017 the Company further expanded its regional
presence, entering 20 new cities and towns across Belarus
(143 covered as of 31 December 2017 vs. 123 as of 31
December 2016).
In line with the Company’s mid-term strategy of developing
smaller format stores using leased space, the average
selling space of stores opened by the Company in FY 2017
was 231 sqm, 92% of which were in leased premises.
In August 2017 Eurotorg introduced the soft discounter
segment to Belarus with the launch of a new store format
under the Brusnichka brand. This new format is best
tailored to customers’ current needs and will strengthen the
Company’s existing “limited assortment” model with a long-
term view to maintaining its position as the market leader.
In 2017 the Company continued to run its one-of-a-kind
nationwide lottery game “Udacha v pridachu” and launched
a new “Bonsticks” marketing campaign to further strengthen
customer loyalty and brand awareness.
The share of purchases with loyalty cards increased by 2.6
pp y-o-y in 2017 up to 73.7% of retail sales. The number of
active cards increased by 9.5% y-o-y to 2.47 mn in
December 2017.
Source: management accounts
1. Numbers here are preliminary and have not been reviewed or audited by the Company’s auditor. 2. Retail sales represent revenue from stores operating under the Euroopt and Brusnichka banners, net of VAT. This number differs
from consolidated IFRS revenue, which also includes proceeds from wholesale, lease, and subsidiaries (Status Bank and others), and other revenue. In 2016 net retail sales of the grocery stores represented 93% of consolidated IFRS
revenue. 3. Revenue of BYN 3.57 bn, converted to USD based on National Bank of Belarus average USD/BYN exchange rate of 1 USD = 1.9318 BYN
54
82
95
140
2011
29
2012 20162013
15
121
2014 2015 2017
67
203
298
438453
500
47
31
Retail chain expansion: asset-light approach to new store openings in new
geographies mostly on rented space
Key facts Regional expansion throughout Belarus
Number of stores and net openings, e-o-p
Net openings in the period
Number of stores, e-o-p
Territory units where Eurotorg has no presence
Territory units within Eurotorg’s footpint as of 01.01.2017
Territory units where Eurotorg entered in 2017
territory units within Eurotorg’s
footpint as of 01.01.2018
territory units where
Eurotorg entered in 2017
108
+12
592 sqm
Leased selling space of
newly opened stores, %
Owned selling space of
newly opened stores, %50% 61%
80%
50% 40%20%
2011-2013 2014-2016 2017
Average selling space
of newly opened stores, sqm
545 sqm 231 sqm
xx
Breakdown of selling space of newly opened stores and
average selling space of newly opened stores, % and sqm
12
34
4Q 2016 4Q 2017
453
500
3,1x
increase in net openings
in 2017 over 2016
Source: Company data
Source: Company data
Y-o-y
92%89%90%66%79%78%76%
хх % of open leased stores
10.6%
4.5%7.0%
11.4%
2.8%
6.5%
11.3%
7.5%6,9% 5,7%2,0%
7,4%
32
Operating highlights
Eurotorg increased its retail sales by +5.5% y-o-y in 2017 … … with LFL sales showed significant improvement by year-end …
… still maintaining sales density growth … … far ahead of Russian market leaders by traffic density
Net retail sales, BYN mn (%)
4Q
’16
3Q
’16
1Q
’16
2Q
’16
4Q
’17
1Q
’17
2Q
’17
3Q
’17
784 852 863 883 838 901 881 949
Net retail sales, BYN mn Growth rate, y-o-y, %
Source: Company’s management accounts
Net retail sales per sqm per month, USD (%)
561544
2016 2017
3.1%
579571
4Q 20174Q 2016
1.4%
Convenience stores Supermarkets Hypermarkets
Traffic per sqm per month, 4Q 2017
69
76
85
176Eurotorg
X5
Dixy
Magnit
48
52
62
64
77Eurotorg
Dixy
Lenta
X5
Magnit
22
31
31
38
53
Dixy
Eurotorg
X5
Magnit
Lenta
Y-o-y
LFL average ticket, %
-2.7%-5.8%-9.7%
-6.0%-1.8%
-9.3% -8.0%-2.9%
LFL traffic, %
LFL performance, %
1Q ’16 2Q ‘16 3Q ‘16 4Q ‘16 1Q ‘17 2Q ‘17 3Q ‘17 4Q ‘17
LFL sales, %
4.6%
0.0%
-1.6% -1.1%
4.0%
0.9%
3.9%
0.6%
Y-o-y
Source: Companies’ disclosure
3 383 3 568
1 701 1 847
20172016
5.5%
8.6%
BYN mn USD mn
33
Brusnichka profile
Brusnichka snapshot Outstanding operating results
soft discounter
more aggressive price positioning, characterised by a limited
range of high-turnover products in the low and medium price
segments, a lack of price promotions, and strong price-leadership
communication
a lower number of SKUs (3.0 ths in Brusnichka vs. 7.0 ths in E+)
target store size of 300-350 sqm
Segment
Positioning
SKU
Store size
New format rapid start
Brusnichka stores’ openings per month in 2017
137
15
49
35
80
112
62
26
188
Oct
2017
Sep
2017
Jul
2017
Aug
2017
1
1
Nov
2017
10
Dec
2017
In August-December 2017, Eurotorg launched 137 Brusnichka stores
with total selling space of 43.9 ths sqm. 125 out of 137 stores were
opened in place of existing Euroopt stores.
1.8x higher than Company’s
average sales density
Newly opened Brusnichka stores
Former Euroopt stores
Number of Brusnichka stores, e-o-p
Photos of Brusnichka
2.2x higher than Company’s
average traffic density
+68.2%net retail sales growth
y-o-y in 4Q 2017
The launch of Brusnichka has had a positive impact on Eurotorg’s overall
performance demonstrating multiply higher sales and traffic density
and strong net retail sales growth in 4Q 2017
Source: Companies’ disclosure
Source: Companies’ disclosure
Appendix
Key financial indicators in 2014-H1 2017 Key highlights
Source: Consolidated Group IFRS results
1. Operating income plus D&A. 2. Calculated as inventories (retail and wholesale only) plus trade receivables minus trade payables. 3. For 1H 2017 NWC as % of LTM revenue. 4. For LTM revenue, EBITDA or interest and financial
lease expenses are shown (the figure for 2016 less the figure for H1 2016 plus the figure for H1 2017). 5. Net debt is calculated as the sum of short-term and long-term loans (including obligations under finance leases) minus cash and
cash equivalents. 6. Acquisition of PP&E plus acquisition of intangible assets. 7. Free cash flow is calculated as net cash from operating activities minus capex plus proceeds from disposals
Top-line
growth
Debt profile
Strong
margins
Working
capital
development
Strong
cash flow
generation
• Top line growth over the last years is driven by
successful stores roll-out and average ticket growth
• Growing gross margin is driven by economies of scale
and general efficiency gains, favourable payment terms
(decreasing payables days), greater sourcing power and
product mix optimisation
• The Company managed to control SG&A actively
focusing on personnel operational efficiency, business
processes optimizations and pro-active negotiations with
landlords
• Despite recent economic shocks these initiatives resulted
in Eurotorg’s EBITDA margin resilience in 2014-2016 and
significant increase to 9.6% in H1 2017
• Eurotorg is committed to maintaining sustainable and
prudent financial policy and is focused on deleveraging
driven by debt repayment and strong organic EBITDA
growth and enhancing interest coverage metrics
• Track record of orderly and timely debt servicing – no
payments suspended through the recent economic crisis
or before
• Effective working capital management to achieve optimal
yet sustainable working capital levels
• In H1 2017, Eurotorg invested in trade payables and
received better terms from suppliers increasing gross
profit margin significantly
• Strong operating and free cash flow to be further
supported by Eurotorg’s plans to focus on more capex
light strategy rolling-out convenience stores on leased
selling space
• Potential for value extraction via leasebacks of owned
selling space
35
Financial performance overview
P&
LL
eve
rag
e a
nd
ca
sh
flo
w
BYN mn 2014 2015 2016 H1 2016 H1 2017
Net stores openings 95 140 15 7
Revenue 2,408 2,987 3,639 1,759 1,898
% growth 24.0% 21.8% 7.9%
Gross profit 537 687 849 393 505
% of revenue 22.3% 23.0% 23.3% 22.4% 26.6%
Selling and distribution expenses (402) (524) (656) (323) (356)
O/w rental expenses (36) (62) (86) (43) (42)
% of revenue (1.5%) (2.1%) (2.4%) (2.4%) (2.2%)
EBITDA1 160 221 257 97 182
% margin 6.6% 7.4% 7.1% 5.5% 9.6%
Operating profit 126 167 184 62 141
% margin 5.2% 5.6% 5.0% 3.5% 7.4%
Net finance costs (incl. FX exchange loss) (177) (590) (233) (185) (75)
Gain on net non-monetary position 82 0 0 0 0
Income tax expense (benefit) (12) 99 7 19 (7)
Loss from discontinued operations (6) (10) 0 0 0
Profit (loss) for the period 13 (335) (43) (104) 59
% margin 0.5% (11.2%) (1.2%) (5.9%) 3.1%
Net working capital2 (44) (127) (243) (122)
% of revenue3,4 (1.8%) (4.2%) (6.7%) (3.2%)
Net debt5 768 1,240 1,211 1,226
Net debt5 / EBITDA1,4 4.8x 5.6x 4.7x 3.6x
Interest and financial lease expenses (48) (104) (136) (65) (66)
EBITDA1,4 / Interest and financial lease expenses4 3.3x 2.1x 1.9x 2.5x
Capex6 (326) (186) (76) (36) (12)
Proceeds from sale of PP&E 22 68 15 3 5
Net cash from operating activities 200 347 389 171 79
Free cash flow7 (104) 229 328 138 72
Source: Consolidated Group IFRS results
1. Loss before tax (reported) plus exchange loss plus allowance for impairment 36
EBITDA to profit before tax reconciliation
EBITDA to profit before tax reconciliation
For 2016, BYN mn
257,4 (73,9)
183,5 (121,9)
(14,5)(11,2)
(7,0)(5,1)
(73.2)
0.1
(49,4)
73.25,1 29,0
EBITDA D&A Operatingprofit
Interestexpense
Expensesunder
finance lease
Bankcomission
FX trade Allowancefor impairment
Exchange loss Interestincome
Lossbefore tax(reported)
Exchange loss Allowancefor
impairment
Adjustedprofit
before tax
Adjustments for non cash
expenses
Adjustments for non cash
expenses
Adjustments for non cash
expenses
Adjustments for non cash
expenses
• Negative net profit in 2016 was driven
by a few non-cash expenses
1
• Belarus banking sector consists of 27 active banks: 5 state-owned, 14
controlled by foreign investors and 8 controlled by private local capital1
• The NPL ratio of Belarus is relatively low
• Stricter rules for classification and provisioning of impaired assets,
introduced by the National Bank in 2016, coupled with unfavorable
economic conditions led to an increase in NPLs (mainly in the public sector)
• The average refinancing rate has been showing a downward trend: from 34.5%
in 2012 to 21.2% as of 2016 year-end. Since mid-April 2017, the refinancing
rate decreased even further to 10.5% as of February 14th, 2018
• Banks have increased regulatory capital ratio and tier 1 capital by 3.5 pp and
3.2 pp respectively since the end of 2013
24,7%
20,8%
15,5%17,4%
18,7% 18,6% 19,0%
18,8%
14,6%
10,5%
11,5%13,0% 13,0%
13,7%
2011 2012 2013 2014 2015 2016 2017 Q3
Adequacy of the regulatory capital, % Capital adequacy ratio / Tier I capital, %54
9%
24%
64%
3%
44%
33%
20%
3%
Total: USD 15.3 bn Total: USD 18.3 bn
+3.5%
+3.2%
Key parameters of the banking sector
Banking sector capital adequacy ratios increasedDeposits by customer type as
of 2016
Loans by borrower type as
of 2016
A range of measures were implemented by the regulator in order to
improve the governance and to protect banks
Source: National Bank
4. As per Basel Ill, regulatory capital consists of Tier I and Tier II, capital previously subject to regulatory
restrictions excluded; off-balance reserves for doubtful losses deemed as necessary; trust property assets;
previously issued senior loans; subordinated loans.
5. Capital Adequacy Ratio (Basel II) / Tier I Capital (Basel Ill) since 01.02.2016
Individuals
Non-bank Financial
Institutions
Private Sector
Public Sector
Source: National Statistical Committee, National Bank1. Excluding banks in process of liquidation. 2. Converted with USD/BYN exchange rates of the National Bank as of December 31st of each year. 3. Share of assets from groups III, IV and V to gross assets (Problem assets and non-performing loans according to classification of Bank Loans as per National Bank of the Republic Belarus )
Source: National Bank
37
Belarus banking system is well capitalised
1. Excluding banks in process of liquidation.
2011 2012 2013 2014 2015 2016
Total assets, USD bn2 56.1 38.5 44.5 47.1 39.7 32.4
Deposits / liabilities 38% 45% 44% 45% 47% 47%
NPL1 0.6% 0.7% 1.3% 0.9% 1.9% 4.0%
Problem assets3 4.2% 5.5% 4.4% 4.4% 6.8% 12.8%
Return on total assets 1.6% 1.8% 1.9% 1.7% 1.0% 1.3%
Return on the regulatory capital 14.9% 12.7% 13.8% 13.1% 8.4% 10.8%
In tems of GDP per capita, Belarus is close to BB rated countires Belarus public debt is at comfortable levels
Belarus enjoys positive budget balance… … and sustainable level of current account
Source: S&P - Sovereign Risk lndicators (14 December 2017), Ministry of Finance, National Statistical
Committee, IMF
5,95,4
3,5
Median BB Belarus Median B
42%46%
61%
Belarus Median BB Median B
1,0%
(3,0%)
(4,0%)
Belarus Median BB Median B
(4,2%)
(2,5%)
(2,0%)
Median B Median BB Belarus
Source: S&P - Sovereign Risk lndicators (14 December 2017), Ministry of Finance, National Statistical
Committee, IMF
Source: S&P - Sovereign Risk lndicators (14 December 2017), Ministry of Finance, National Statistical
Committee, IMF
Source: S&P - Sovereign Risk lndicators (14 December 2017), Ministry of Finance, National Statistical
Committee, IMF
Belarus scores well on key credit metrics vs its peers
38
GDP per capita (nominal), USD thsd, 2017
Budget balance, as a % of GDP in 2017
Public debt, as a % of GDP in 2017
Current account, as a % of GDP in 2017
Contact details
39
Andrei Matsiavin
Eurotorg, Chief Investment Officer
+375 44 500 65 45
Investor Relations
Denis Denisov
EM, Moscow
+7 985 410 3544
Peter Morley
EM, London
+44 7927 186 645
International Media