magnit 9 m2015

INVESTOR PRESENTATION

9M 2015 OPERATIONAL RESULTS published on October 23, 2015

Magnit at a Glance

Magnit at a Glance

As of September 30, 2015

Source: Company, Thomson Reuters, * - as of FY2014 2

2 297 Cities & Towns

№1 Russian Food Retail

Chain by Revenue

and Number of Stores

11 388 Total Number

of Stores

4 155 thous.sq.m.

Selling Space

29 DCs

5 908 Trucks

Multi-format Business Model

Comprising Convenience, Hypermarkets,

“Magnit Family” & Drogerie Stores

№1 Retailer in Europe

in Market

Capitalization $23bn Market

Capitalization >6% Share in Russian

Grocery Sector ⃰

Shareholder Structure as of 1H2015

55,8% Free-float

36,5% Sergey Galitskiy, CEO

3,2% Other

4,5% Lavreno Ltd. (Cyprus) 0,1%

Magnit at a Glance

Key Metrics

3

Source: Company, as of September 30, 2015,

Company’s Estimates

* as of June 30, 2015

New Stores

690bn 27,2 % Revenue

9M 2015

6,26 %

Net

Margin

10,88%

EBITDA

Margin

0,9*

Net debt/

LTM EBITDA

1 350 Convenience

Stores 90 Hyper-

markets 950 Drogerie

Stores

26-28%

RUB Sales

Growth

10,5-11,3%

EBITDA

Margin

RUB 65bn

Capex

P = Revenue growth

Y-o-Y

Guidance for 2015

Magnit at a Glance

Strategy

4

Growth

Value Efficiency

Multi-format Organic

Store Growth

Geographic

Scope

Density of Store

Coverage

Low

Prices

High

Quality

Assortment Cost

Management

Vertical

Integration

Centralization

53

53% 47%

Discounters

25%

Supermarkets

15%

Hypermarkets

13%

Traditional Stores

31%

Kiosks, Pavilions

6%

Open Markets

10%

Magnit at a Glance

Russian Food Retail Market

5

Market Composition by Format

$320bn Market

Size

FY 2014 % Modern

Retail

Penetration

Non-Modern Modern

Source: Sberbank CIB Estimates for FY2014

Magnit at a Glance

Magnit vs Peers

6

Source: As of FY 2014; Companies, Infoline, Bloomberg, Magnit’s Estimates

Number

of Stores

Selling Space

thous. sq.m.

Revenue

RUB bn

Market Cap

US$ bn

Market Share

%

9 711

5 483

2 195

108

132

85

80

Magnit

X5

Dixy

Okey

Lenta

Auchan

Metro

3 591

2 572

747

552

701

789

619

763,5

633,9

229,0

152,0

194,0

338,0

210,0

21,5

3,3

0,8

1,2

2,9

6

5

2

1

2

3

2

Not public

Not public

1 807 Drogerie Stores 75 388 440 511 183 156

54

9 246 Convenience Stores

208 Hypermarkets

127 Magnit Family

29 Distribution Centers

5 34 24 42 8 9 5

7 59 35 61 13 27

6

347

1 602 2 467 2 806 895 829

300

Operational Overview

Geographical Coverage

7 Source: Company, as of September 30, 2015

2 297 Cities

& Towns

7 Federal

Regions

North

Caucasus

Southern Volga North

West

Urals Siberia Central

1 6 9 7 2 2 2


Logistics System


11 388 Total Number

of Stores

1 078 thous.sq.m.

Warehousing Space

29 DCs

5 908 Trucks

9

7

6

2

1

2

2

Central

Volga

Southern

Urals

North Caucasus

North West

Siberia

3667

2976

2229

1198

363

630

325

405,002

221,236

207,195

94,357

40,799

73,601

35,438

Centralization Ratio

%

Magnit

Outsourced

90

10

92

8

Convenience Stores

9M2015 Future Targets

Magnit

Outsourced

72

28

80

20

Hypermarkets


Suppliers

9 Source: Company, as of December 31, 2014

5000 Domestic

Suppliers

4000 Local Suppliers

1000 Federal Suppliers

Assortment

55-60% 40-45%


Direct Import

10

Source: Company,

Direct Import - as of FY2014,

Private Label – as of September 30, 2015

11 % Share

of Revenue 585 PL

SKUs M 84% Food

Items

Private Label

10 % International

Direct Import 860 Open

Contracts


Employees

11

Source: Company,

as of September 30, 2015

*as of June 30, 2015

262 432 Employees

28 617 Average

Monthly

Salary* 4% Wage Rate

Increase* P =

189 361 In-store

Personnel

39 561 People Engaged

in Distribution

22 304 People in Regional

Branches

8 991 People Employed

by Head Office

1000 employees

Average Weighted Number of Employees – 231 373

2 215 Other


Competitive Attributes

12

43-45 % of Family

Budget

Spent on Food

Location Quality

(of Products)

Assortment Reliability Atmosphere Prices

5 000 People —

Minimum

Population

(1 500–1 600 Families)

4 000-9 500 Monthly

Family Food

Budget P =

Overlap “Good”

Cannibalization

Magnit #1

Magnit #2

500m

Competitor #1 Competitor #2

Competitor #3

500m

Sales Catchment Area

Source: Company’s Estimates

Convenience Store


Convenience Store


455 sq.m.

Total

324 sq.m.

Selling Space

89% Food

11% Non-food

26% Owned

74% Leased

Format Description Key Operational Statistics Opening

Size of the Store Average Ticket Payback

Store Ownership Structure

Sales Mix

Traffic

tickets/sq.m./day

Sales Density

sales/sq.m./year

LFL 9M2015 –9M2014,%

241,8 P = $4,1

238 077 P = $6 196

10,06 Average

Ticket, RUB

-0,74 Traffic

9,24 Sales

2,7

3 years

If Leased

If Owned

Cost of New Store

per sq.m. of Total Space, thousand RUB

Time to Maturity

6 months

4-6 years

Owned 42-108

Leased 10-19

Hypermarket


Hypermarket


80% Food

20% Non-food

78% Owned

22% Leased

Format Description Key Operational Statistics

Size of the Store Average Ticket


Sales Mix

Traffic

tickets/sq.m./day

Sales Density

sales/sq.m./year

LFL 9M2015 – 9M2014,%

608,7 P = $10,3

275 073 P = $7 159

1,2

6 684 sq.m.

Total

2 908 sq.m.

Selling Space

8,04 Average

Ticket, RUB

-2,46 Traffic

5,38 Sales

Opening

Payback

6-9 years

Cost of New Store


Owned 65-111

Leased 31-35

8-15 months

Time to Maturity

S: up to 3 000

M: 3 000-6 000

L: over 6 000

Magnit Family


Magnit Family


2 193 sq.m.

Total

1 101 sq.m.

Selling Space

85% Food

15% Non-food

36% Owned

64% Leased




Sales Mix

Traffic

tickets/sq.m./day

Sales Density

sales/sq.m./year

LFL 9M2015 – 9M2014,%

439,7 P = $7,4

371 659 P = $9 673

2,1

6-9 years

Cost of New Store


Owned 81-108

Leased 31-54

8-15 months

7,18 Average

Ticket, RUB

-2,24 Traffic

4,78 Sales

Time to Maturity

Drogerie Store


Drogerie Store


299 sq.m.

Total

229 sq.m.

Selling Space

100% Non-food

14% Owned

86% Leased




Sales Mix

Traffic

tickets/sq.m./day

Sales Density

sales/sq.m./year

LFL 9M2015 – 9M2014,%

277,6 P = $4,7

104 643 P = $2 724

13,35 Average

Ticket, RUB

8,99 Traffic

23,54 Sales

1,1

3 years

If Leased

If Owned

Cost of New Store


Time to Maturity

6 months

Owned 31-96

Leased 12-19

4-6 years

Size

of the Store sq.m.

Average

Ticket

Traffic

Tickets/ sq.m./day

Density

Sales/ sq.m./year

Sales

Mix

LFL 9M2015-

9M2014 %

Store Owner-

ship Structure

Payback Years

Cost of New

Store per sq.m.

of Total Space

Time

to Maturity Months

• Total

• Selling Space

• Food

• Non-food

• Av.ticket

• Traffic/ Sales

• Owned

• Leased

14%

86%

36%

64%

78%

22%

26%

74%


Format Summary

21 Source: Company, as of September 30, 2015; * Excludes selling space designated for leases

Hypermarket

Drogerie

Store

Magnit

Family

455

6 684

299

2 193

324

2908*

229

1 101

Owned

RUB 42-108k

Leased

RUB 10-19k 2,7

1,2

1,1

2,1

P.241,8

$4,1

P.608,7

$10,3

P.277,6

$4,7

P.439,7

$7,4

P.238 077

$6 196

P.275 073

$7 159

P.104 643

$2 724

P.371 659

$9 673

80%

20%

100%

85%

15%

89%

11% Convenience

store

6

8-15

6

8-15

3 (if leased)

6-9

3 (if leased)

6-9

4-6 (if owned)

4-6 (if owned)

10,06

8,04

13,35

7,18

-0,74

-2,46

8,99

-2,24

9,24

5,38

23,54

4,78

Owned

RUB 65-111k

Leased

RUB 31-35k

Owned

RUB 31-96k

Leased

RUB 12-19k

Owned

RUB 81-108k

Leased

RUB 31-54k

Financial Overview

Summary P&L

SG&A is presented net of Depreciation & Amortization (except for Depreciation of production fixed assets which was included in the Cost of sales) Source: Company Please note: there may be small variations in calculation of totals, subtotals, and/or percentage change due to rounding of decimals 22

RUB MN 1H2014 1H2015 1H2014 / 1H2015

Y-o-Y Growth

Net sales 349,047.11 454,808.63 30.3%

Cost of sales (251,912.59) (327,748.22) 30.1%

Gross profit 97,134.52 127,060.41 30.8%

Gross margin, % 27.83% 27.94%

SG&A (61,569.24) (79,406.25) 29.0%

Other income, net 955.52 937.45 -1.9%

EBITDA 36,549.60 48,627.66 33.0%

EBITDA margin,% 10.47% 10.69%

Depreciation & Amortization (8,489.36) (10,033.63) 18.2%

EBIT 28,060.24 38,594.03 37.5%

Net finance costs (2,822.41) (5,865.82) 107.8%

Profit before tax 25,237.83 32,728.21 29.7%

Taxes (5,649.76) (7,462.55) 32.1%

Effective tax rate 22.39% 22.80%

Net income 19,588.07 25,265.66 29.0%

Net margin, % 5.61% 5.56%

20%

89 404 RUB mn

15

20

25

1H2013 1H2014 1H2015

273 349

455

1H2013 1H2014 1H2015

Financial Overview

Revenue & Costs

23 Source: Company

27,3 27,8 27,9

10,1 10,5 10,7

5,3 5,6 5,6

0

5

10

15

20

25

30

1H2013 1H2014 1H2015

Revenue Dynamics RUB bn

Net Income Dynamics RUB bn

Margin Dynamics SG&A Expense Structure

Revenue — 455 RUB bn

Gross

Margin

EBITDA

Margin

Net

Margin

%

+27,9%

10,6% 11,5%

+30,3%

+33,8%

+29,0%

LFL LFL

Sales Growth, RUB

Sales Growth, RUB

1,90 (0,37) ― Packaging & Raw Materials

1,69 (0,33) ― Repair & Maintenance

53,31 (10,48) ― Payroll & Related Taxes

1,65 (0,33) ― Taxes, Other than Income Tax

11,18 (2,20) ― Deprecation & Amortization

22,55 (4,44) ― Rent & Utilities

4,70 (0,92) ― Other

in SG&A,% in Revenue, %

3,02 (0,59) ― Advertising

27,26 27,83 27,94 -0,03 -0,42 -0,11 0,26

0,34 0,64

15

17

19

21

23

25

27

29

31

33

GM1H2013

Trading Margin Transport Losses GM1H2014

Trading Margin Transport Losses GM1H2015

Financial Overview

Gross Margin Bridge

24 Source: Company

EBITDA Margin Bridge

% of Sales

% of Sales

+57 b.p. +11 b.p.

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

10,12 10,47 10,69 -0,19 -0,24

-0,29 -0,22

0,57 0,21 0,11 0,59 0,03

0

2

4

6

8

10

12

EBITDA1H2013

GrossMargin

Rent & Utilites Advertising Other EBITDA1H2014

GrossMargin

Payroll & Taxes Rent & Utilites Advertising Other EBITDA1H2015

36 952

32 904

12 593

-2 202

-3 057 -3 927

-20 337

-8 427

-6 368

2 936

26

Financial Overview

Free Cash Flow

25 Source: Company

Working Capital Analysis

The Average Days Payable to

Suppliers is 36 Days.

Inventory Management Days is 47 Days

Working Capital: RUB 7 171 mn as of

30.06.2015

RUB mn

1H 2014

1H 2015

Adjusted for loss from disposal of PPE, provision

for doubtful receivables, foreign exchange loss,

gain on disposal of subsidiary Calculated as additions

+ transfers of PP&E

during the respective

period

Does not include cash flow from

financing activities

49 065

36 337

11 552

-5 776

-2 238 -5 735

-4 755 -24 434

-351 -19 300

1 972

AdjustedEBITDA

Change inWorking capital

Net InterestPaid

TaxesPaid

OCF Capex Other CashFlow

from InvestingActivities

FCF Payment ofDividents

Other CashFlow

from FinancingActivities

CF

Financial Overview

Balance Sheet

Source: IFRS accounts for FY2013, FY2014, Company Please note: there may be small variations in calculation of totals, subtotals, and/or percentage change due to rounding of decimals 26

RUB MN 2013 2014 1H2015

ASSETS

Property plant and equipment 195,158.25 232,968.80 247,425.33

Other non-current assets 5,762.40 6,043.82 6,344.84

Cash and cash equivalents 5,931.13 17,691.54 11,915.01

Inventories 56,095.41 81,475.66 86,930.23

Trade and other receivables 631.53 813.26 731.37

Advances paid 3,171.05 4,849.30 3,175.85

Taxes receivable 27.99 69.38 162.03

Short-term financial assets 1,150.64 475.18 387.48

Prepaid expenses 252.15 242.53 257.18

Income tax receivable – 131.86 –

TOTAL ASSETS 268,180.55 344,761.33 357,329.32

EQUITY AND LIABILITIES

Equity 126,162.14 143,651.62 156,255.11

Long-term debt 37,441.50 44,410.14 39,428.44

Other long-term liabilities 8,462.32 10,617.70 11,641.24

Trade and other payables 48,170.71 66,794.61 64,503.32

Short-term debt 36,319.76 51,256.67 58,477.16

Dividends payable 0.03 14,372.03 7,600.33

Other current liabilities 11,624.09 13,658.56 19,423.72

TOTAL EQUITY AND LIABILITIES 268,180.55 344,761.33 357,329.32

Financial Overview

Capex Analysis

27 ¹ CAPEX for 1H2015 amounts to RUB 24 434 mn

Source: Company, as of December 31, 2014; Company’s Estimates

Construction in Progress

& Buildings

Machinery &

Equipment

Other Assets Land

36 297 11 553 5 156 2 930

FY 2014¹

RUB 56 bn

FY 2015 (plan)

RUB 65 bn

RUB 500 mn

Hypermarkets Distribution

Centres

Convenience

Stores

Acquisition &

Construction of

Conv.Stores

Buy-out of

Leased

Conv.Stores

Greenhouses Land for

HyperMarkets

Store

Renovation

Maintenance Drogerie Stores

90 5 1 350 950

25 000 9 000 8 000 5 000 2 000 4 000 5 000 2 000 1 000 4 000

73 761

95 667 97 905

67 830

77 975 85 991

36 320

51 257

58 477

37 441

44 410 39 428

2013 2014 1H2015

Net Debt

Short-term Debt

Long-term Debt

%

Financial Overview

Debt Burden

28 Source: IFRS accounts for FY2013, FY2014, Company

13,0 12,9

8,0

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

2013 2014 1H2015

1 0,9 0,9

0

0,5

1

1,5

2

2013 2014 1H2015

Debt Level Dynamics RUB mn

Credit Metrics Credit Profile

EBITDA / Finance Expenses

Net Debt / LTM EBITDA

The Company Has

an Impeccable Credit History

Collaboration with

the Largest Banks

Low Debt Burden:

Net Debt / LTM EBITDA Ratio of 0,9

No Currency Risk: 100%

of Debt is Rub Denominated

Matching Revenue Structure

No Interest Rate Risk:

Interest Payments are Made

at Fixed Rates

49,2% 53,6%

59,7%

40% of Debt is Long-term

Approximately 26%

of LT Debt is Rub Bonds

Contact Information

Contact Information

29

Timothy Post

Head of Investor Relations

+7 (961) 511-7678

[email protected]

http://ir.magnit.com

15/2 Solnechnaya Street

Krasnodar, 350072

Russian Federation

magnit 9 m2015

Presentations & Public Speaking