profitable growth & long-term leadership · p. 2 disclaimer this presentation does not...

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Profitable Growth &Long-Term Leadership

September 2009Investor Presentation

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DisclaimerDisclaimer

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 any depositary receipts representing such securities in any jurisdiction or an invitation or inducement to engage in investment activity in relation thereto. In particular, this presentation does not constitute an advertisement or an offer of securities in the Russian Federation.

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.

No representation, warranty or undertaking, express or implied, is given by or on behalf of X5 Retail Group N.V. or any of its directors, officers, employees, shareholders, affiliates, advisers, representatives or any other person as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein or any other material discussed at the presentation. Neither X5 Retail Group N.V. nor any of its directors, officers, employees, shareholders, affiliates, advisors, representatives or any other person shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or any other material discussed at the presentation or their contents or otherwise arising in connection with the presentation.

This presentation includes statements that are, or may be deemed to be, “forward-looking statements”, with respect to the financial condition, results, operations and businesses of X5 Retail Group N.V. These forward-looking statements can be identified by the fact that they do not only relate to historical or current events. Forward-looking statements often use words such as”anticipate”, “target”, “expect”, “estimate”, “intend”, “expected”, “plan”, “goal” believe”, or other words of similar meaning.

By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, a number of which are beyond X5 Retail Group N.V’s control. As a result, X5 Retail Group N.V’s actual future results may differ materially from the plans, goals and expectations set out in these forward-looking statements. X5 Retail Group N.V. assumes no responsibility to update any of the forward looking statements contained in this presentation.

This presentation is not for distribution in, nor does it constitute an offer of securities for sale, or the solicitation of an offer to subscribe for securities in Australia, Canada, Japan or in any jurisdiction where such distribution, offer or solicitation is unlawful. Neither the presentation nor any copy of it may be taken or transmitted into the United States of America, its territories or possessions, or distributed, directly or indirectly, in the United States of America, its territories or possessions or to, or viewed by any U.S. person as defined in Regulation S under the USSecurities Act 1933 (the "Securities Act”). Any failure to comply with these restrictions may constitute a violation of United States, Australian, Canadian or Japanese securities laws. The distribution of this presentation in certain jurisdictions may be restricted by law and persons into whose possession this document or any other document or other information referred to herein comes should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities law of any such jurisdiction.

For Russian law purposes, the securities mentioned in this presentation (the "Securities") represent foreign securities. It is not permitted to place or publicly circulate the Securities on the territory of the Russian Federation at present. No prospectus for the issue of the Securities has been or is intended to be registered with the Federal Service for Financial Markets of the Russian Federation. The information provided in this presentation is not intended to advertise or facilitate the offer of the Securities in the territory of the Russian Federation. This presentation does not represent an offer to acquire the Securities or an invitation to make offers to acquire the Securities.

The information and opinions contained in this document are provided as at the date of this presentation and are subject to change without notice. Some of the information is still in draft form and neither X5 Retail Group N.V. nor any other party is under any duty to update or inform recipients of this presentation of any changes to such information or opinions. In particular, it should be noted that some of the financial information relating to X5 Retail Group N.V. and its subsidiaries contained in this document has not been audited and in some cases is based on management information and estimates.

Neither X5 Retail Group N.V. nor any of its agents, employees or advisors intend or have any duty or obligation to supplement, amend, update or revise any of the statements contained in this presentation.

p. 3

AgendaAgenda

I. X5 Retail Group – Profitable Growth and Long-Term Leadership

II. Q2 & H1 Financial Review

Appendices

p. 4

X5 X5 -- #1 Russia#1 Russia’’s Retailers Retailer

• 2008 pro-forma(1) net sales - USD 8,892 mln; growth on 2007 of 45% on pro-forma, 57% - on consolidation basis

• Market position: # 1

• #1 position in Moscow and St. Petersburg

• Leading positions in 5 other cities with population of ≥ 500,000 people

• Presence in 42 cities of European Russia andthe Urals

• 1,164 company-managed stores in Russia and Ukraine(2)

• Three complementary formats:

Discounter (900 stores)

Supermarket (211 stores)

Hypermarket (53 stores)

• Over 935 thousand sq. m. of net selling space(2)

• Approximately 1 billion check-out transactions per year

• Over 61,000 employees

(1) Including Karusel on pro-forma basis from 1 January 2008; (2) As at 30 June 2009; (3) Including Karusel on consolidation basis from 1 July 2008; (4) Based on estimated gross sales; total market size – USD 252 bln

X5 Retail Group todayX5 Retail Group today

# Company FY 2008 Net Retail

Sales(USD mln)

% in Top-10

% in Total Market (4)

1. X5(1) 8,844 26.1% 4.0%

2. Magnit 5,326 15.7% 2.4%

3. Metro 5,077 15.0% 2.3%

4. Auchan 4,983 14.7% 2.2%

5. Lenta 2,040 6.0% 0.9%

6. Dixy 1,923 5.7% 0.9%

7. Kopeyka 1,890 5.6% 0.9%

9. Seventh Continent

1,549 4.6% 0.7%

8. Viktoria 1,228 3.6% 0.6%

10. O’Key 1,053 3.1% 0.5%

Total 33,913 100.0% 15.3%

# Company FY 2008 Net Retail

Sales(USD mln)

% in Top-10

% in Total Market (4)

1. X5(1) 8,844 26.1% 4.0%

2. Magnit 5,326 15.7% 2.4%

3. Metro 5,077 15.0% 2.3%

4. Auchan 4,983 14.7% 2.2%

5. Lenta 2,040 6.0% 0.9%

6. Dixy 1,923 5.7% 0.9%

7. Kopeyka 1,890 5.6% 0.9%

9. Seventh Continent

1,549 4.6% 0.7%

8. Viktoria 1,228 3.6% 0.6%

10. O’Key 1,053 3.1% 0.5%

Total 33,913 100.0% 15.3%

Russia’s leading food retailers

p. 5

X5X5’’s Strategic s Strategic PrioritiesPriorities

Profitable Growth & Long-Term Leadership

Operational Excellence

FinancialDiscipline

•Build multi-format success

•Strengthen value propositions

•Drive LFL and top line growth

Customer Focus

p. 6

Net selling space: from 4,000 to 10,000 sq.m.Assortment: 30,000 – 50,000 SKUsPricing policy: Lowest price in the market on

basic assortment, super offers for card holders on the rest

Format strengths: Wide choice at low price, ideal place for w/e & family shopping

X5 MultiX5 Multi--Format ApproachFormat Approach

SoftDiscounters

Supermarkets

Hypermarkets

X5 Operates Stores for Every Lifestyle and Family BudgetX5 Operates Stores for Every Lifestyle and Family Budget

Net selling space: from 800 to 1,500 sq.m.Assortment: 8,000 – 15,000 SKUsPricing policy: Best price in supermarketsFormat strengths: Wide choice, focus on

fresh

Net selling space: from 300 to 800 sq.m.Average assortment: 3,000 SKUsPricing policy: Lowest price in the market

on 100% of assortmentFormat strengths: Price and convenience

211 stores

28% of sales

53 stores

19% of sales

900 stores

53% of sales

p. 7

47%49%

23% 17%

26% 31%

5% 3%

November 2008 May 2009

Surely not

Most likely not

Most likely yes

Surely yes

Consumer ConfidenceConsumer Confidence……..

……Was Substantially Affected by the Economic CrisisWas Substantially Affected by the Economic Crisis

Source: (1) Rosstat; (2) Nielsen, Shopper Trends 2009, 25 August 2009, 500 respondents in Moscow, Samara, Yekaterinburg, Novosibirsk, Rostov-on-Don, Nizhny Novgorod and Samara

...Forcing Trading Down Behavior How has your family income changed over the last 3 months?

On the Back of Declining Incomes …

-45%

-35%

-25%

-15%

-5%

5%

Q1'03 Q1'04 Q1'05 Q1'06 Q1'07 Q1'08 Q1'09

Consumer Confidence at Lowest Level Since ‘99Rosstat’s Consumer Confidence Index(1)

(2) (2)

Q2’09

• Russian consumer confidence index (CCI) dropped to -35% in Q1 2009

• It is the lowest level of CCI since Q4 1999

• In Q2 09 the index marginally recovered, but it is too early to call it a trend

21%32%

44%

35%

18% 9%

14% 22%

1%1%

November 2008 May 2009

Noticeably increased

Slightly increased

Has not changed

Slightly decreased

Noticeably decreased

Are you more thrifty when buying FMCG products now than 3 months ago?

p. 8

11% 7% 8%2%

-7% -2%-1%-1%

Moscow St.Petersburg

Regions TOTAL

Traffic Basket

New Trading EnvironmentNew Trading Environment……

Supermarkets’ H1 ‘09 LFL PerformanceBased on RUR-denominated gross sales

2%

6% 7% 7%

-1%-5%

1%7%


Regions TOTAL

Traffic BasketHypermarkets’ H1 ‘09 LFL Performance

+ 8% + 8% + 2%

Based on RUR-denominated gross sales

…… was Reflected in X5was Reflected in X5’’s Hs H 1 2009 Operating Results1 2009 Operating Results

+ 6%

+ 10% + 9%

- 8%

+ 6%

12%

12%

5% 9%14%3%

9%

10%


Regions TOTAL

Traffic BasketDiscounters’ H1 ‘09 LFL Performance

+ 24%

+ 8%

+ 24%


+ 18%

7% 5%

9%

6%7%

3%2%2%


Regions TOTAL

Traffic Basket

X5’s H1 ’09 LFL Performance by Region

+ 16%

+ 8%+ 5%

+ 12%


p. 9

X5X5’’s Competitive Positions Competitive Position

X5X5’’s LFL Performance is Stable s LFL Performance is Stable vsvs Competition Thanks to MultiCompetition Thanks to Multi--Format ApproachFormat Approach

X5 LFL Performance vs Competition

19%

14%

8%

7%

2%

9%

-4%

5%

15% 11%13%

15%

-5%

0%

5%

10%

15%

20%

25%

Q4 2008 Q1 2009 Q2 2009

MagnitSeventh ContinentDixyX5

LFL Sales Growth(1)

(1)

(1)

(1) Based on analysts’ estimates as the companies report their LFL on cumulative basis, i.e. for H1, 9m and FY

p. 10

Executing for LongExecuting for Long--Term MultiTerm Multi--Format SuccessFormat Success

SoftDiscounters

Supermarkets

Hypermarkets

FineFine--Tuning of FormatsTuning of Formats’’ Value Proposition to Match LongValue Proposition to Match Long--Term Leadership GoalTerm Leadership Goal

• Best price in the market on 100% of assortment• Assortment optimization towards lower price points• Private label development • Category management• Format standardization: simpler layout and more

efficient shelf space utilization• Availability improvement

• Assortment correction:– Improvement in fresh quality and choice– Improvement in ready meal offers

• Service improvement• Private label development• Category management• Further loyalty program development• Availability improvement

• Focus on communications• Assortment correction: improvement in ready meal

and non-food offers• Private label development• Category management• Step-up in promotions, focus on seasonal events• Personalized loyalty program• Availability improvement

• Price leadership• Close to customers’ homes

(convenience)• Right balance between

EDLC/EDLP and service

Cle

ar D

istin

ctio

n be

twee

n Fo

rmat

s’Va

lue

Prop

ositi

ons

• Best in fresh

• Best in service

• Focus on Club members

• Everything under one roof at low price

• Focus on card holders• Strong brand awareness &

loyalty

Lower-income &price-focused customers

Middle & upper class

Weekend and family shopping

p. 11

Evolving X5Evolving X5’’s Private Label Concepts Private Label Concept

Aligning Private Label Strategy to Enhance MultiAligning Private Label Strategy to Enhance Multi--Format Leverage and MarginsFormat Leverage and MarginsLow Price Segment

Price LeadersMedium Price Segment

Margin BuildersPremium Segment

Margin Builders

“Red Price”Single Brand

UNDE

RDE

VELO

PMEN

T

Single Brand

• Food• Household items• Non-food

• Alcohol• Beverages• Confectionary

MultipleBrands

• Fish• Alcohol• Baby care• Chemistry

Single Brand

UNDE

R DE

VELO

PMEN

T

• Food• Fresh• Household items• Non-food

Current: 500 SKUTarget 2011:1,500 SKU

Current: 1,000 SKUTarget 2011: 3,000 SKU

Current: 0 SKUTarget 2011: 700 SKU

p. 12


Customer Focus

FinancialDiscipline


•Build supply chain advantages

•Drive efficiency and margins

•Ensure support for long-term growth


p. 13

Supply ChainManagement

Efficiency

BusinessProcesses

Improvement

In-StoreLabour

Productivity


X5X5’’s Strategic Efficiency Programs Strategic Efficiency Program

IT Systems Integration

AssetEfficiency

p. 14

Logistics DevelopmentLogistics Development……

…… Has Been the CompanyHas Been the Company’’s Focus since 2007s Focus since 2007……DC locations as at30 June 2009

22 multifunctional DCsacross the European part of Russia and the Urals

First non-food DC opened in Q3

Fleet of 500 trucks under management

Current supplycentralization level is 59%

227.722Totalv7.01Privolzhsky

vv8.11Southvvv9.61Sredne-Volzhskyvvv10.72Centralno-Chernozemnyvvv18.25Uralsvvv17.51Volgo-Vyatsky

vvvv44.54North-Westvvvv112.17Central

FrozenFreshFruit &

VegDry000 sq. m.# of DCsRegion

227.722Totalv7.01Privolzhsky

vv8.11Southvvv9.61Sredne-Volzhskyvvv10.72Centralno-Chernozemnyvvv18.25Uralsvvv17.51Volgo-Vyatsky

vvvv44.54North-Westvvvv112.17Central

FrozenFreshFruit &

VegDry000 sq. m.# of DCsRegion

p. 15

• Warehouse Management System (WMS)

–Control over movement & storage

–Transaction processing

• Voice picking

• Fleet utilization• Transportation

Management System (TMS)

–Route optimization

–Demurrage reduction

–Fuel cost savings

• Railway shipments over large distances

• In-store process improvement

–Delivery management

–Personnel education

–Stock optimization

–Optimization of warehouse space

• Assortment rationalization

• Partnerships with suppliers

–Scale leverage–Promotions–Packaging–Category

management–Private label

• Improved planning & order taking

• Optimization of DC coverage & planning:

–# of DCs–Locations–Functionality–Utilization

• Right balance between operational efficiencies and logistics costs

• Target supply centralization level of over 80%

Supply Chain EfficiencySupply Chain Efficiency

…… Now We are Bringing It to a New LevelNow We are Bringing It to a New Level……

… to Create a Fully Integrated & Efficient Supply Chain

Areas of

Purchasing/Sourcing

Efficient Transportation

EfficientIn-Store

Logistics

Warehouse Productivity

OptimalDC Network

Structure

Focus

p. 16

Transformation of X5Transformation of X5’’s IT Systemss IT Systems……

…… Supporting CompanySupporting Company--Wide Efficiency and Scalable Growth with Integrated ERP PlatformWide Efficiency and Scalable Growth with Integrated ERP Platform

Suppliers

Own Logistics

Stores

HR Management

Payroll & Compensation

Analysis, Planning & Reporting

Non-CommercialPurchasing

Real EstateManagement

SAP for Retail

SAP for HR

SAP for Enterprise Management

In-Store:

• Unified IT platform at supermarkets and hypermarkets, different platform at discounters

Logistics:

• Several warehouse management systems (WMS)

Head office:

• 1C for finance and HR, a number of database management systems, Excel

Current Status

In-Store:• Unified IT platform across formats, scalable

and fully compatible with SAPLogistics:• Single WMS, complemented by voice picking,

fully compatible with SAP (Exceed)• Transportation management system (Oracle),

fully compatible with SAP Head office:• SAP for HR, SAP for EM

2012 IT Infrastructure

2012 ITInfrastructure

p. 17

Transformation of X5Transformation of X5’’s IT Systemss IT Systems

RoadmapRoadmap

2008 2009 2010

Q1 Q2 Q3 Q4

SAPFor Retail

Launch in apilot region Roll-out

Blueprint, development & testing

Launch in apilot region Roll-out

Blueprint, development & testing

Roll-out

Blueprint,development &

testing

SAPFor HR

SAPFor EM

TMS

In-Store ITUnification

WMS Roll-out to all existing and new DCs

IT platform replacement at soft discounters (back office and POS)

Launch in a pilot region Roll-out

2011

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Pilot launch

Launch in a pilot DC

Blueprint, equipment

testing

p. 18

Business Processes ImprovementBusiness Processes Improvement

Areas ofLegal Structure

OptimizationFocus

Regional Branches’Processes Standardization

Transformation into aligned, efficient and agile organization:

•Single operating company

– Stores

– Logistics

•Reduced # of real estate companies

•Reduced # of financial companies

•Holding structure optimization

Standardization and simplification of business processes across formats:

• In-store operations

•Logistics

•Offices

•Document flow

•Human Resources

– Headcount (manning tables)

– Incentive management (KPIs)

•Shared Services Center functionality enhancement

p. 19

• Performance management

–KPIsadjustment in line with key targets and best practices

• Efficient & flexible motivation

• Education of both store management and floor staff

• Development of new manuals and their testing

• Merchandising• Category

management• Pricing/monitoring• Ordering• Customer servicing• Delivery handling• In-store warehouse

management• Inventory

management

InIn--Store Store LabourLabour ProductivityProductivity……

Areas of

In-Store andCore Processes

Store PersonnelManagement

PersonnelEducationWorkplaceWorking

Hours Management

Focus

Targeted Improvement of In-Store Labour Productivity is 10-12%

• Efficient planning of shifts based on:

– customer traffic

– deliveries from suppliers and DCs

…… Can be Substantially Enhanced throughCan be Substantially Enhanced through Improving Efficiency ofImproving Efficiency of……

• Optimization of workplace, including:

– Selling and backofficespace

– In-store warehouse

– Individual workplaces

– Cash desks

p. 20

Focus on Efficient Asset EmploymentFocus on Efficient Asset Employment

Areas ofEnergy Efficiency

Focus

Improved Leasing Terms

Stage I: Diagnosis & “Quick Wins” (2009)• Audit & optimization:

–energy consumption meters–tariff structure–energy consumption per store/DC/office

• Adjustment of requirements to new stores/DCs• Energy saving lighting• Staff education and incentives

Stage II (2009 - 2011)

• Best industry practice analysis • Own KPIs development • Analysis and potential application of existing

energy saving equipment/technologies• Further staff education and incentives adjustment

New Lease Contracts

• Capitalizing on current macro environment to obtain better rental terms and lock in landlords for longer periods

Existing Lease Contract Renegotiation

• More than 50% of existing contracts have been renegotiated

• >USD 10 million of annualized savings achieved

Sublease Management Improvement

• Sublease agreement standardization

• Sublease area utilization improvement

p. 21

Strategic Efficiency ProgramStrategic Efficiency Program……

……will Impact Every Area of X5will Impact Every Area of X5’’s Businesss Business

SalesGrowth

CostSavings

WorkingCapital

Improvement

Efficient Supply Chain Management

IT Systems Integration

Business Processes Improvement

Labour Productivity Improvement

Efficient Asset Employment

Support of Long-Term

Scalable ExpansionProject

p. 22

Strategic Efficiency ProgramStrategic Efficiency Program

RoadmapRoadmap

IT SystemsIntegration

2008 2009 2010

Q1 Q2 Q3 Q4

Supply Chain Management Roll-out

Asset Efficiency

LabourProductivity

2011

Business Processes

Project Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Analysis and strategy

adjustment“Quick Wins”

Please see page 16 for detailed roadmap

Support Functions

Core Processes

Analysis and strategy

development

Testing inpilot stores Roll-out

Analysis and “Quick Wins”

Long-term strategy development Roll-out

Roll-out

p. 23

X5X5’’s Strategic Efficiency Programs Strategic Efficiency Program……..

……is Multiis Multi--Year but We Are Already Delivering ResultsYear but We Are Already Delivering Results

19.1% 19.2%

18.3% 18.0% 18.1% 18.0%

17.0% 17.2% 17.0%

Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09

SG&A(1) as % of Sales

(1) Excluding Depreciation and Amortization

p. 24


Customer Focus



Financial Discipline

• Cash generation

• Disciplined growth

• Liquidity management

p. 25

Financial DisciplineFinancial Discipline

Cash GenerationFrom Operations

DisciplinedGrowth

Liquidity Management Areas of

Focus

• Ensure sustainable operational performance

• Capture cost saving opportunities

• Optimize gross margin / EBITDA balance for each format

• Efficiently manage working capital

• Focus on discounters, primarily rented

• Capitalize on lower construction/repair and rental costs

• Look for outstanding hypermarket and supermarket locations

• Deliver substantially better returns vs pre-crisis

• Optimize debt structure with focus on maturity profile improvement

• Ensure sufficient access to credit facilities to finance operations and investment activities

p. 26

AgendaAgenda



Appendices

p. 27

Q2 2008 Q2 2009

Q2 2008 Q2 2009Q2 2008 Q2 2009

Q2&H1 2009 Top Line GrowthQ2&H1 2009 Top Line Growth……

(1) Consolidated sales figures include acquired Karusel’s business in Q2&H1 2009 and exclude it in Q2&H1 2008. (2) Pro-forma sales figures include acquired Karusel’s business in both Q2&H1 2008 and Q2&H1 2009.

Net Sales, consolidation (1)

+ 7%

-8%

Net Sales, pro-forma (2)

Q2 2008 Q2 2009

+26%

Net Sales, consolidation (1)

Net Sales, pro-forma (2)

USD mln

USD mln

RUR mln

RUR mln

…… Was Solid Despite Tougher MacroWas Solid Despite Tougher Macro--Economic EnvironmentEconomic Environment

+ 46%

H1 2008 H1 2009

+ 46%

68,202

131,548

90,177

H1 2008 H1 2009

+27%

131,548103,578

68,20254,120

+ 6%

2,111

H1 2008 H1 2009

3,9783,766

H1 2008 H1 2009

3,9784,326

2,111

-8%

46,8541,980

2,287

p. 28

3.0%

Q2 2008 Q2 2009

Net Profit, USD mlnNet Margin, %

Q2&H1 2009 Financial PerformanceQ2&H1 2009 Financial Performance

EBITDA Margin Supported by Strong Cost ControlsEBITDA Margin Supported by Strong Cost Controls

Net Profit

EBITDA & EBITDA Margin

Gross Profit

Net Sales

H1 2008 H1 2009

H1 2008 H1 2009

-10%

(1) All P&L numbers are provided on pro-forma basis, i.e. including Karusel results both in Q2&H1 2008 and Q2&H1 2009

H1 2008 H1 2009

+87%

USD mln

H1 2008 H1 2009

- 8%

-12%

Q2 2008 Q2 2009

Q2 2008 Q2 2009

Gross Profit, USD mlnGross Margin, %

Q2 2008 Q2 2009

EBITDA, USD mlnEBITDA Margin, %

521596

26.1% 24.7% 25.8% 24.6%

9791,115-13%

2,1112,287

- 8% 3,9784,3269.2% 8.7%

184211-13%

347388

9.0% 8.7%

130

7048

153

6.2%

3.5% 1.2%

-68%

p. 29

Q2&H1 200Q2&H1 20099 P&L HighlightsP&L Highlights

(1) All P&L numbers are provided on pro-forma basis, i.e. including Karusel results both in Q2&H1 2008 and Q2&H1 2009

Q2 2009 Q2 2008 % changeUSD

% changeRUR H1 2009 H1 2008 % change

USD% change

RUR

2,111.2 2,287.2 (8%) 26% 3,978.1 4,325.8 (8%) 27%

incl. Retail 2,099.6 2,274.2 (8%) 26% 3,959.0 4,301.6 (8%) 27%

520.8 596.0 (13%) 19% 979.0 1,114.9 (12%) 21%

Gross Margin, % 24.7% 26.1% 24.6% 25.8%

SG&A (excl. D&A) (358.0) (414.0) (14%) 18% (678.2) (780.0) (13%) 20%

% of revenue 17.0% 18.1% 17.0% 18.0%

184.3 210.8 (13%) 19% 347.0 387.5 (10%) 24%

EBITDA Margin, % 8.7% 9.2% 8.7% 9.0%

129.1 142.7 (10%) 23% 246.0 265.8 (7%) 28%

Operating Margin, % 6.1% 6.2% 6.2% 6.1%

Net FX Result 86.0 2.4 3425% 6538% (77.8) 44.9 n/a n/a

Profit before Tax 174.6 110.2 59% 125% 89.8 237.7 (62%) (48%)

Income Tax Expense (44.2) (40.6) 9% 53% (41.5) (84.8) (51%) (32%)

130.4 69.6 87% 167% 48.3 152.9 (68%) (56%)

Net Margin, % 6.2% 3.0% 1.2% 3.5%

Net Profit

EBITDA

Operating Profit

USD mln

Net Sales

Gross Profit

p. 30

Key Q2&H1 2009 P&L DevelopmentsKey Q2&H1 2009 P&L Developments

• Q2 2009 gross margin declined 140 bp year-on-year, resulting in H1 2009 gross margin decline of 120 bp year-on-year to 24.6%. The decline is attributable to continuous investment in prices across formats, including change in Pyaterochka’s pricing policy to offer lowest price in the market on 100% of assortment; a managed reduction in Karusel’s gross margin, and the impact of trading down trends (change of product mix in favour of staples)

• SG&A declined as % of revenue by 150 bp year-on-year in Q2 2009 and by 120 bp in H1 2009 (from 20.8% in H1 2008 to 19.6% in H1 2009) as a result of strong cost controls and first results on the efficiency program implementation

• Q2 2009 EBITDA margin totaled 8.7% - a 50 bp decline year-on-year and stable quarter-on-quarter (8.7% for H1 2009) as most of decline in gross margin was compensated by cost saving on SG&A level

• USD 78 million FX loss reported for H1 2009 is a result of RUR depreciation in Q1 2009followed by partial RUR recovery in Q2 2009. FX loss is primarily non-cash, resulting from long-term U.S. dollar-denominated debt revaluation

• H1 2009 net profit totaled USD 48 mln

p. 31

Q2&H1 2009 Cash Flow HighlightsQ2&H1 2009 Cash Flow Highlights

Strong Cash Generation from Operations Offset by Working CapitalStrong Cash Generation from Operations Offset by Working Capital SeasonalitySeasonality

USD mln Q2 2009 Q2 2008% change

USD

Net Cash Flows from Operating Activities 77.9 77.8 0%

Net Cash from Operating Activitiesbefore Changes in Working Capital 210.2 200.2 5%

Change in Working Capital (56.1) (9.1) 514%

Net Interest and Income Tax Paid (76.2) (113.2) (33%)

Net Cash Used in Investing Activities (55.8) (1,074.6) (95%)

Net Cash (Used in/Generated fromFinancing Activities 23.9 1,221.6 (98%)

Effect of Exchange Rate Changes onCash 17.3 5.7 201%

Net Increase/(Decrease) in Cash 63.2 230.6 (73%)

% changeRUR

41%

44%

774%

(9%)

(93%)

(97%)

n/a

(67%)

(1) Consolidated sales figures include acquired Karusel’s business in Q2&H1 2009 and exclude it in Q2&H1 2008.

H1 2009 H1 2008% change

USD

39.5 112.1 (65%)

380.1 369.8 3%

(182.9) (69.6) 163%

(157.8) (188.1) (16%)

(99.0) (1,226.7) (92%)

(61.4) 1,299.8 n/a

(11.0) 12.3 n/a

(132.0) 197.5 n/a

% changeRUR

(51%)

42%

263%

16%

(89%)

(107%)

8,577%

(181%)

p. 32

Within 1 Year 1.5 Years over 1.5 Years

Denominated in RUR Denominated in USD

Liquidity UpdateLiquidity Update

Debt Maturity Profile as at 30.06.09

USD mln

272

1,396

2951,091

305

$

RURRUR RUR

In H1 X5:

• Completely eliminated its short-term FX exposure by repaying short-term USD-denominated debt

• Placed 7-year RUR 8 bln corporate bonds with a put option in 2 years. Proceeds were used for repayment of short-term obligations, which decreased from USD 441 mln as at 31 March 2009 to USD 272 mln as at 30 June 2009.

• As at 30 June 2009 X5 had access to RUR-denominated credit facilities of over RUR 23 bln (USD 700 mln), out of which RUR 15 bln (appr. USD 484 mln) are available undrawn credit lines.

USD mln 30-Jun-09 % in total 31-Mar-09 % in total 31-Dec-08 % in total

Total Debt 1,962.4 1,863.9 2,059.4Short-Term Debt 272.1 14% 440.7 24% 578.4 28%Long-Term Debt 1,690.3 86% 1,423.2 76% 1,481.0 72%

Net Debt 1,817.6 1,782.2 1,782.60Denominated in USD 1,061.8 58% 1,081.5 61% 1,170.0 66%Denominated in RUR 755.8 42% 700.7 39% 612.6 34%

FX, EoP 31.3 34 29.4

Net Debt/EBITDA 2.38x 2.26x 2.22x

p. 33

AgendaAgenda



Appendices

p. 34

X5X5’’s Regional Coverages Regional Coverage

X5 Existing Operations as at 30 June 2009

30%

41%

29%

Supermarkets

Discounters

Hypermarkets

8%

64%

28%

Supermarkets

Discounters

Hypermarkets

39%

51%

10%

Supermarkets

Discounters

Hypermarkets

55%8%37%

SupermarketsDiscounters

Hypermarkets

37%24%

39% Supermarkets

DiscountersHypermarkets

25%13%

62% Supermarkets

DiscountersHypermarkets

86%

14%

Discounters

Hypermarkets

North-West region Moscow & the region

Volgo-Vyatsky region

Centralno-Chernozemnyregion

South region

Sredne-Volzhsky region

Urals region

72%

3%25%

Privolzhsky region

Supermarkets

Hypermarkets

Discounters

1%

18%

29%

52%

H1 2009 Net Retail Sales by Region

• As at 30 June, X5 was present in 42 cities of European Russia and the Urals

• In addition to Moscow and St. Petersburg, a leading position secured in 5 large regional cities: Nizhny Novgorod, Lipetsk, Samara, Chelyabinsk and Perm

Moscow

St. Petersburg

Russian RegionsUkraine

Sales breakdown: Sales breakdown:

Sales breakdown:

Sales breakdown:

Sales breakdown:

Sales breakdown:

Sales breakdown:

Sales breakdown:

p. 35

2 947

4 464

848674

FY 2007 FY 2008

Net Retail Sales, USD mln# of Stores

1 945

2 702

179 207

FY 2007 FY 2008

Net Retail Sales, USD mln# of Stores

Soft Discounters Store Count & Sales

+ 51%

Supermarkets Store Count & Sales

+ 39%

FY 2007X5

FY 2007Karusel

FY 2008X5+Karusel

Hypermarkets Store Count & Sales

+ 38%Net Retail Sales, USD mln# of Stores

15

4622

393

8251 678

2008 O2008 Operationalperational PerformancePerformance

5% 6% 4% 5%

18% 17%15% 17%

SoftDiscounters

Supermarkets Hypermarkets TOTAL

Traffic Basket

+ 23% + 23%+ 19%

+ 22%


2008 LFL Performance by Format

p. 36

2008 P&L Highlights2008 P&L Highlights

(1) All P&L numbers are provided on pro-forma basis, i.e. including Karusel results from 1 January 2007 and 2008, respectively. (2) Adjusted operating profit and adjusted net profit/(loss) are defined as operating profit and net profit/(loss) before non-cash goodwill impairment charge.

(1) FY 2008 FY 2007 % changey-o-y

8,892.4 6,151.5 45%

incl. Retail 8,843.8 6,109.6 45%

2,278.5 1,610.7 41%

Gross Margin, % 25.6% 26.2%

803.2 547.6 47%

EBITDA Margin, % 9.0% 8.9%

552.5 370.7 49%

Adjusted Operating Margin, % 6.2% 6.0%

(2,257.0) - n/a

(1,704.5) 370.7 n/a

Operating Margin, % n/a 6.0%

111.5 155.7 -28%

Adjusted Net Margin, % 1.3% 2.5%

(2,145.5) 155.7 n/a

Net Margin, % n/a 2.5%

Net (Loss)/Profit

Adjusted Operating Profit (2)

Impairment of Goodwill

Operating (Loss)/Profit

Adjusted Net (Loss)/Profit (2)

USD mln

Net Sales

Gross Profit

EBITDA

p. 37

2008 Cash Flow & Debt Position 2008 Cash Flow & Debt Position

(1) Cash Flow & Balance Sheet numbers are provided on consolidation basis, i.e. including Karusel from 30 June 2008 (excluding Karusel in 2007)

(1)

Net Cash from Operating Activities 629.3 427.5 47%Net Cash from Operating Activities before Changes in Working Capital 774.3 491.3 58%Change in Working Capital 243.9 139.8 75%Net Interest and Income Tax Paid (388.9) (203.6) 91%

Net Cash Used in Investing Activities (1,656.0) (898.8) 84%

Acquisition of Karusel (658.9) - n/aNet Cash from Financing Activities 1,194.2 470.0 154%

Effect of Exchange Rate Changes on Cash (70.2) 12.8 n/a

Net Increase in Cash 97.3 11.5 746%

% changey-o-yUSD mln FY 2008 FY 2007

Total Debt 2,059.4 1,718.4 20%Short-Term Debt 578.4 253.7 128%Long-Term Debt 1,481.0 1,464.7 1%

Net Debt 1,782.6 1,538.9 16%

% changey-o-yUSD mln FY 2008 FY 2007

Net Debt/EBITDA 2.2x 3.2x

p. 38

• Continued gross margin investment in customer value proposition

• Cost control reinforcement

• Pursuing every opportunity to compensate for gross margin investment through increased operational efficiencies and savings at SG&A level

2009 Sales Growth & 2009 Sales Growth & CapExCapEx OutlookOutlook

2008 2009E

69%

13%

18%

New stores LogisticsMaintenance & IT

2009 Approximate CapEx Breakdown

Sales Growth (in RUR) 41% >25%

Capital Expenditures ~USD 1,000 mln

Up to RUR 14 bln

Margins: Focus on Customers and Efficiency

p. 39

47.9%

23.1%

1.9%

27.0%

0.1%

Alfa Group

Founders of Pyaterochka

X5 Management

Free Float

Treasury Shares

X5 Share Capital StructureX5 Share Capital Structure

Total number of shares – 67,893,218

Equivalent of 271,572,872 GDRs

p. 40

Contact informationContact information

IR Department Contact DetailsIR Department Contact Details

Anna KarevaIR Director

X5 Retail Group N.V.28 bldg., 4, Sr. Kalitnikovskaya, Moscow, Russia

Tel.: +7 (495) 792 3511Mob.: +7 (903) 624 3234

E-mail: [email protected]: www.X5.ru

Maria KorotaevaIR Manager

X5 Retail Group N.V.28 bldg., 4, Sr. Kalitnikovskaya, Moscow, Russia

Tel.: +7 (495) 980 2729 ext. 22-450Mob.: +7 (926) 275 7841

E-mail: [email protected]: www.X5.ru

profitable growth & long-term leadership · p. 2 disclaimer this presentation does not...

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