OREANDA-NEWS. May 26, 2011. X5 Retail Group N.V., Russia's largest retailer in terms of sales (LSE ticker: “FIVE”), announced its IFRS results for the first quarter ended 31 March 2011, reviewed by auditors.

Q1 2011 Highlights

Net sales increased 48% year-on-year in RUR terms to RUR 112,554 mln or 51% in USD terms to USD 3,845 mln;

Net sales growth in RUR terms was driven by 12% LFL sales increase, 17% from new store openings and 19% contribution from acquired Kopeyka stores;

Gross profit totaled USD 914 mln, for a gross margin of 23.8%;

EBITDA amounted to USD 281 mln, for an EBITDA margin of 7.3%;

X5 reported net profit up 23% year-on-year to USD 97 mln, for a net margin of 2.5%.

2011 Outlook

X5 outlook for 2011 is:

Gross sales to exceed RUR 500 billion (inclusive of VAT) representing top-line growth of over 40%.

The Company plans to open approx. 540 new stores this year, including over 500 discounters, 20-25 supermarkets, 5-10 hypermarkets.

Capital expenditure plan of up to RUR 35 bln exclusive of VAT (RUR 40 bln inclusive of VAT) with the following breakdown: 55% - new store openings, 12% - Kopeyka integration, 15% - maintenance and reconstruction, 7% - logistics, 11% - IT and other.

Kopeyka integration fast-tracked with approx. 650 stores to be rebranded in 2011 and most synergies from sales density increase and margin improvement to Pyaterochka level expected in 2012; full synergies to be achieved in 2013. Integration costs estimated to be RUR 5.4 bln this year, including approx. RUR 4.6 bln of CapEx and RUR 750 mln of OpEx.

X5 Retail Group CEO Andrei Gusev commented:

"X5's results this quarter reflect three major priorities: Profit margin improvement, stepped up organic growth and launch of fast-tracked integration of Kopeyka.

"Gross margin and EBITDA margin improved this quarter as we managed to pass on rising food inflation more effectively in our pricing policy while optimizing the level of reinvestment in our value propositions and negotiating better promotion terms with suppliers.

"We are focused on organic growth with plans for opening approximately 540 stores this year. Organic performance in the first quarter benefited from new stores and LFL sales at discounters and a strong recovery in supermarkets thanks to trading up by consumers.

"The accelerated integration of Kopeyka stores is progressing well, with about 200 regional stores expected to be rebranded by end of May 2011. We are confident of delivering initial synergies from 2012 through higher sales densities, better purchasing terms and administrative cost reduction."

X5 Retail Group CFO Kieran Balfe added:

"We are focused on strengthening cash generation through a combination of top-line growth, operational efficiency and working capital improvement. Our objective is to optimize operating cash flows which will help to fund our CAPEX program and gradually de-risk the balance sheet, and we expect substantial progress on these areas by the end of 2011."

"We are also intensifying cost control and productivity programs to offset upward pressure on labor, social tax, energy and real estate costs, including effects related to Kopeyka consolidation and integration in 2011. Following the decrease in payment days in Q4 2010 and in Q1 2011, we expect this to stabilize this year, supporting our efforts to improve working capital."