X5 Corporate Center · RUS:X5
X5 Corporate Center — X5 Retail Group — Q3 2008 Earnings Presentation
29 slides from X5 Corporate Center's earnings presentation, Dec 1, 2008
Slide 1: Winning Customers With The Power Of 5: 2008 Third Quarter Performance
X5 Winning Customers With The Power Of 5 2008 Third Quarter Performance 2009 Business Outlook Presentation and Conference Call for Investors and Analysts Moscow, 1 December 2008 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: Today's Agenda
Today’s Agenda 1. Introduction – Anna Kareva, IR Director 2. Source of Strength in Russian Retail - Lev Khasis, CEO 3. Q&A Session 4. Q3 2008 Financial Performance & Liquidity Update – Evgeny Kornilov, CFO 5. Q&A Session p. 3
Slide 4: Today's Agenda
Today’s Agenda 1. Introduction – Anna Kareva, IR Director 2. Source of Strength in Russian Retail - Lev Khasis, CEO • Retail Environment and Consumer Trends • Power of 5 Go-To-Market Strategy • Strong Positions in the Most Resilient Regions • Purchasing Power & Assortment • 2009 Preliminary Guidance
Slide 5: Q3 2008 Operating Performance
Q3 2008 Operating Performance… … Was Strong Across Formats & Regions… Q3 2008 LFL Performance by Format* • Positive traffic and basket growth well in Based on RUR- denominated gross sales Basket Traffic excess of inflation 23% 22% 21% 18% 14% • No sign of trading down yet 21% 18% 18% 16% 17% 4% • Ka
Slide 6: Market Environment
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 one third of respondents believe that the crisis will impact them negatively 68% • People are mostly conc
Slide 7: 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 8: 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 9: 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. 9
Slide 10: X5's Multi-Format Diversification
X5’s Multi-Format Diversification… ... Enables Quick Reaction to Changes in Consumer Spending Soft Discount 9M 2008 Net Retail Sales Break Down by Format (1) Stores 19% As at 30 Sep 2008 Hypermarkets • 794 stores Soft • Total net selling space – 404,320 sq. m. Discounters • Sales per sq.m. – USD 14,
Slide 11: 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 12: 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 13: 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 14: Strong Competitive Positions in the Most Defensive Markets
Strong Competitive Positions… ... In the Most Defensive Markets • More than 80% of X5’s sales are generated in Moscow & St. Petersburg, where consumers are unlikely to St. Petersburg significantly cut spending on food Pskov Veliky Novgorod • Regional sales (18% of total) are mainly generated in big
Slide 15: Big Cities Are the Most Resilient
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 16: X5's Purchasing Power Is Stronger than Ever
X5’s Purchasing Power… …Is Stronger than Ever…. • Purchasing power further grows with market leadership • Suppliers need and want to do business with X5 due to… • increasing volumes • guaranteed payment • Enhanced opportunity to balance margin and cash flow (payment terms) • Expected increase in eff
Slide 17: Supply Chain Efficiency
Supply Chain Efficiency… … Is Supported by Developed Logistics Infrastructure • Total DCs area operated by X5 St. Petersburg 4 DCs (41.3 th.sq.m.) at 30 September 2008 was Nizhniy KeyNovgorod appr. 199 thousand sq.m. 1 DC (13.5 th. sq.m.) priority Moscow - 6 DCs (123.7 th.sq.m.) area St. Petersburg
Slide 18: 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 19: Preliminary Outlook for 2009
Preliminary Outlook for 2009 2008E 2009E Sales Growth (in RUR) ~40% >25%* LFL Sales Growth (in RUR) ~20% 15-17%* Capital Expenditures ~USD 1,000 Up to USD 500 mln mln 2009 Preliminary CapEx Breakdown Key Rules for Expansion in 2009 • Higher returns and shortest possible 18% 69% paybacks required • P
Slide 20: Today's Agenda
Today’s Agenda 1. Introduction – Anna Kareva, IR Director 2. Source of Strength in Russian Retail - Lev Khasis, CEO 3. Q&A Session 4. Q3 2008 Financial Performance & Liquidity Update – Evgeny Kornilov, CFO 5. Q&A Session p. 20
Slide 21: Today's Agenda
Today’s Agenda 1. Introduction – Anna Kareva, IR Director 2. Source of Strength in Russian Retail - Lev Khasis, CEO 3. Q&A Session 4. Q3 2008 Financial Performance & Liquidity Update – Evgeny Kornilov, CFO 5. Q&A Session p. 21
Slide 22: Q3 Financial Overview & Liquidity Update
Q3 Financial Overview & Liquidity Update • 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* 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** Gross Profit, USD mln Adjusted Net Profit, USD mln
Slide 24: Q3 & 9M 2008 P&L Highlights
Q3 & 9M 2008 P&L Highlights* % 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% EBITDA
Slide 25: 9M 2008 Cash Flow Highlights
9M 2008 Cash Flow Highlights* 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 5
Slide 26: 9M 2008 Balance Sheet Highlights
9M 2008 Balance Sheet Highlights* % 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 37
Slide 27: Debt Maturity & Currency Profile
Debt Maturity & Currency Profile Debt Maturity Profile Debt Currency Profile 58% Total Debt, USD mln 1,163 42% 706 398 USD RUR Within 1 Year 1-2 Years 2-3 Years • Approximately 70% of X5’s debt is long-term, represented mainly by RUR 9 bln bonds with put option in July 2010 and USD 1.1 billion syndi
Slide 28: Financial Position
Financial Position Liquidity Position FX Exposure • USD 706 mln of short-term debt maturing by • No material FX risk in operations 30 September 2009 • FX risk mainly arises on USD 1.1 bln syndicated • The Company will use strong cash-flow generation loan maturing in December 2010, however: in Q4 200
Slide 29: Today's Agenda
Today’s Agenda 1. Introduction – Anna Kareva, IR Director 2. Source of Strength in Russian Retail - Lev Khasis, CEO 3. Q&A Session 4. Q3 2008 Financial Performance & Liquidity Update – Evgeny Kornilov, CFO 5. Q&A Session p. 29