Slide 1: Winning Customers With The Power Of 5
X5 Winning Customers With The Power Of 5 Investor Presentation March 2009 p. 1
Slide 2: Disclaimer
Disclaimer This presentation does not constitute or form part of and should not be construed as an advertisement of securities, an offer or invitation to sell or issue or the solicitation of an offer to buy or acquire or subscribe for securities of X5 Retail Group N.V. or any of its subsidiaries or
Slide 3: Agenda
Agenda I. Source of Strength in Russian Retail • Leadership in Russian Retail • Track Record of Operating Performance • Retail Environment and Consumer Trends • Government Support • Power of 5 Go-To-Market Strategy • 2009 Preliminary Guidance II. Q3&9M 2008 Financial Performance & Liquidity Update I
Slide 4: An Unrivaled Leader in Russian Retail
X5 Retail Group… … an Unrivaled Leader in Russian Retail… • 2008 pro-forma(1) net sales - USD 8,844 mln # Company FY 2007 % in % in Total Sales Top-10 Market • 1,101 company-managed store in Russia and (USD mln) Ukraine(2) 1. X5 + Karusel (1) 6,151 24.6% 3.2% • 607 stores operated by X5’s franchisee
Slide 5: Strong Track Record of Operating Performance
With Strong Track Record… … of Operating Performance… LFL Gross Margin Based on RUR- % of net sales denominated gross sales (2) (1) (1) (2) 22% 26.7% 26.4% 25.7% 20%(1) (1) 15% 2006 2007 2008 2006 2007 9M 2008 Number Of Stores Net Selling Space 1 000Thousand square meters 1 200 46 900 232 800 1 000
Slide 6: 2008 Operating Performance Was Strong Across Formats & Regions
2008 Operating Performance… … Was Strong Across Formats & Regions… 2008 LFL Performance by Format (1) • Positive traffic and basket growth in excess of Based on RUR- denominated gross sales Basket Traffic inflation 23% 23% 22% 20% 16% • Karusel hypermarkets’ performance affected 18% 17% 16% 17% by 3
Slide 7: Market Environment Is Changing
Market Environment… … Is Changing… Russian Population Sees Financial Crisis • Almost two thirds of consumers 4% (irrespective of income level) believe there is a financial crisis 28% • More than half of respondents believe that the financial crisis will impact them negatively 68% • People are mostly
Slide 8: New Challenges for Retail Sector
New Challenges for Retail Sector… … Should Result in… Trading Down by Consumers… …However…. • On the back of… • Impact on food retail will be limited as… • slower income growth… • …people will continue buying staples… • …food represents mainly non-discretionary • …higher unemployment… purchasing Fin
Slide 9: State Policies Support Retail Market
State Policies Support Retail Market Providing Short-Term Liquidity and Long-Term Sector Stimulus RF Government has designated Retail as a strategic sector to ensure a well-functioning supply chain and efficient market for servicing consumer needs • Financial assistance to large Russian retailers on
Slide 10: X5 - Source of Strength In Russian Retail
X5 - Source of Strength In Russian Retail Purchasing Price Leadership Power X5 Winning Customers With The Power of 5! Scale & Assortment/ Distribution Private Label Advantages Multi-Format Presence in Key Regions p. 10
Slide 11: X5's Multi-Format Diversification
X5’s Multi-Format Diversification… ... Enables Quick Reaction to Changes in Consumer Spending Soft Discount FY 2008 Net Retail Sales Break Down by Format (1) Stores 19% As at 31 Dec 2008 Hypermarkets • 848 stores Soft • Total net selling space – 419,207 sq. m. Discounters • Sales per sq.m. – USD 14,
Slide 12: Power of 5 - Pyaterochka
Power of 5 - Pyaterochka X5’s Soft Discounters – Positioned for Trading-Down Trends Value Proposition Strengths • High brand recognition • Price leadership • Basic assortment at lowest price on the market • Convenient location • Low cost operations • Cheap & quick expansion potential • Attractive as
Slide 13: Power of 5 - Perekrestok
Power of 5 - Perekrestok X5’s Supermarkets – Best Value for Money Value Proposition Strengths • High brand recognition • Quality & Convenience • The most attractive price in supermarkets • Efficient promotions, strong customer response • The best supermarket in promotions • Strong loyalty program •
Slide 14: Power of 5 - Karusel
Power of 5 - Karusel X5’s Hypermarkets – Better Alternative to Open-Air Markets Value Proposition Strengths • Premium locations • Everything under one roof • Two formats – compact & full-size • Basic assortment at lowest price available in the market • Low price • Supplemental services and attractio
Slide 15: X5 Has Strong Competitive Positions
X5 Has Strong Competitive Positions… ... In the Most Defensive Markets/Big Cities St. Petersburg & Moscow & the region North-West 28% Hypermarkets 10% Hypermarkets • More than 80% of X5’s sales are generated in 64% Discounters 49% Discounters Moscow & St. Petersburg, where consumers 8% Supermarkets
Slide 16: Big Cities Are the Most Resilient in the Changing Market
Big Cities… … Are the Most Resilient in the Changing Market Environment • 68% of respondents have not changed their PRICE pricing preferences We will buy more expensive 2.9 products • 72% of respondent plan to buy the same We will continue to buy the quantity of food items same products 68.3 • 51% o
Slide 17: X5's Purchasing Power
X5’s Purchasing Power Sector Leadership Leads to Stronger Pricing Advantage over Competition Leadership in Price • Purchasing power further grows with market leadership • Inflation in X5 stores is always well below average inflation in Russia • Suppliers need and want to do business with X5 due to…
Slide 18: Supply Chain Efficiency
Supply Chain Efficiency… … Is Supported by Developed Logistics Infrastructure St. Petersburg - • Total area of 19 DCs operated by X5 4 DCs at 31 December 2008 was (44.5 ths. sq. m.) Key appr. 191 thousand sq.m. priority area Nizhniy Novgorod - Moscow - 6 DCs St. Petersburg 1 DC (109.1 ths. sq. m.) •
Slide 19: Assortment & Private Label
Assortment & Private Label Rationalization of Assortment & Private Label Development Should Enhance Appeal to Consumers and Support Margins… • Financial crisis triggers rationalization of supplier base…. • …category leaders will have priority • Focusing on food (90% of total Group’s sales today) and
Slide 20: Preliminary Outlook for 2009
Preliminary Outlook for 2009 2008 2009E Sales Growth (in RUR) 41% >25% (1) Capital Expenditures ~USD 1,000 Up to RUR 14 bln mln (USD 500 mln at RUR/USD of 28) 2009 Preliminary CapEx Breakdown Key Rules for Expansion in 2009 • Higher returns and shortest possible 18% 69% paybacks required • Priority
Slide 21: Agenda
Agenda I. Source of Strength in Russian Retail • Leadership in Russian Retail • Track Record of Operating Performance • Retail Environment and Consumer Trends • Government Support • Power of 5 Go-To-Market Strategy • 2009 Preliminary Guidance II. Financial Performance & Liquidity Update III. Long-Te
Slide 22: Q3 & 9M 2008 Financial Overview
Q3 & 9M 2008 Financial Overview • Solid Revenue Growth • Higher Profitability before FX Revaluation Effects • Strong Cash Generation from Operations • Financial Position Provides Room for Maneuver and Deleveraging p. 22
Slide 23: Q3 2008 Financial Review
Q3 2008 Financial Review (1) Solid Financial Results Net Sales EBITDA Net Sales, USD mln EBITDA, USD mln 2,190 EBITDA Margin, % + 48% 1,481 + 62% 8.7% 8.0% 191 118 Q3 2007 Q3 2008 Q3 2007 Q3 2008 Gross Profit Adjusted Net Profit excl. FX Revaluation (2) Gross Profit, USD mln Adjusted Net Profit, USD
Slide 24: Q3 & 9M 2008 P&L Highlights
Q3 & 9M 2008 P&L Highlights (1) % change, % change, USD mln Q3 2008 Q3 2007 9M 2008 9M 2007 y-o-y y-o-y Net Sales 2,190.3 1,480.6 48% 6,516.1 4,171.3 56% incl. Retail 2,177.0 1,470.2 48% 6,478.7 4,144.3 56% Gross Profit 558.8 382.9 46% 1,673.7 1,083.4 54% Gross Margin, % 25.5% 25.9% 25.7% 26.0% EBIT
Slide 25: 9M 2008 Cash Flow Highlights
9M 2008 Cash Flow Highlights (1) Strong Cash Generation from Operations For the nine months For the nine months USD mln % change ended 30-Sep- 08 ended 30-Sep-07 Net Cash from Operating Activities, incl. 259.8 95.7 171% Net Cash from Operating Activities before Changes in Working Capital 554.7 354.1
Slide 26: 9M 2008 Balance Sheet Highlights
9M 2008 Balance Sheet Highlights (1) % change USD mln 30-Sep-08 30-Jun-08 31-Dec-07 vs 31-Dec-07 Non-Current Assets, incl. 7,592.8 7,881.8 5,688.4 33% PP&E & investment property 3,693.4 3,708.4 2,119.6 74% Goodwill 3,230.7 3,477.6 2,955.6 9% Current Assets, incl. 1,212.5 1,533.7 861.2 41% Cash 224.2
Slide 27: Year-End Liquidity Update
Year-End Liquidity Update(1) Debt Maturity Profile, USD (as at 31.12.08) Debt Currency Profile (as at 31.12.08) Denominated in RUR Denominated in USD RUR; USD LT; 1,421 mln 1 200 37% 53% 1 000 800 581 mln 1,088 mln 600 400 200 mln 200 381 mln 334 mln 51 mln 0 Within 1 Year In 2 Years over 2 Years US
Slide 28: Financial Position
Financial Position Liquidity Position FX Exposure • USD 581 mln of short-term debt maturing within • No material FX risk in operations 12 months • FX risk on short-term USD debt hedged by purchased dollars in Q4 2008 (USD 115 mln) • Year-end cash balance of approximately USD • FX risk mainly arises
Slide 29: Agenda
Agenda I. Source of Strength in Russian Retail • Leadership in Russian Retail • Track Record of Operating Performance • Retail Environment and Consumer Trends • Government Support • Power of 5 Go-To-Market Strategy • 2009 Preliminary Guidance II. Q3&9M 2008 Financial Performance & Liquidity Update I
Slide 30: Long-Term View
Long-Term View We Should Not Forget that… • Russian retail market remains very fragmented and immature… • …offering unique opportunities to strongest players… • …on the back of… – long-term potential for income and spending growth… –…organic expansion… –…and market consolidation p. 30