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2Q 2016 RESULTS DISCUSSION 3Q 2016 RESULTS
2
Disclaimer
This presentation and the associated slides and discussion contain forward-looking statements. These
statements are naturally subject to uncertainty and changes in circumstances. Those forward-looking
statements may include, but are not limited to, those regarding capital employed, capital expenditure,
cash flows, costs, savings, debt, demand, depreciation, disposals, dividends, earnings, efficiency,
gearing, growth, improvements, investments, margins, performance, prices, production, productivity,
profits, reserves, returns, sales, share buy backs, special and exceptional items, strategy, synergies,
tax rates, trends, value, volumes, and the effects of Eurocash S.A. merger and acquisition activities.
These forward-looking statements are subject to risks, uncertainties and other factors, which could
cause actual results to differ materially from those expressed or implied by these forward-looking
statements. These risks, uncertainties and other factors include, but are not limited to developments in
government regulations, foreign exchange rates, crude oil and gas prices, crack spreads, political
stability, economic growth and the completion of ongoing transactions. Many of these factors are
beyond the Company's ability to control or predict. Given these and other uncertainties, you are
cautioned not to place undue reliance on any of the forward looking statements contained herein or
otherwise. The Company does not undertake any obligation to release publicly any revisions to these
forward-looking statements (which speak only as of the date hereof) to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events, except as maybe required
under applicable securities laws. Statements and data contained in this presentation and the
associated slides and discussions, which relate to the performance of Eurocash S.A. in this and
future years, represent plans, targets or projections.
3
3Q 2016 Highlights
FURTHER IMPROVEMENT OF MARKET POSITION AND MARKET SHARES
EUROCASH SALES IN POLAND GREW BY 7.6% IN 3Q AND 5.6% IN 3Q YTD
INVESTMENT IN STRATEGIC PROJECTS AFFECTING EBITDA
CASH FLOW REMAINS AT STABLE, LONG-TERM OPTIMUM LEVEL
BEER, DAIRY AND ALCOHOL DEFLATION AFFECTING LFLs
4
Macroeconomic outlook Limited impact of social programs implemented by government (500+)
No impact on Food Retail sales observed yet
500+, means 50 PLN per 1 inhabitant in Poland
Source: CSO, constant prices
15%
17%
17%
17%
20%
22%
22%
29%
31%
0% 20% 40%
Medicines
School trips
Food
Family entertainment
Additional courses for children
Holidays
Books and education
Footwear
Clothes
Main purpose of 500+ spending
Source: Ministry of Family, Labour and Social Policy
5,3%
-8,3%
4,9%
6,9%
8,7%
9,5%
10,4%
12,1%
15,8%
-10,0% -5,0% 0,0% 5,0% 10,0% 15,0% 20,0%
Total
Others
Food, beveragesand tobacco products
Newspapers, books
Other retail sale in non-specializedstores
Furniture, radio, TV, appliances
Motor vehicles, motorcycles, parts
Pharmaceuticals, cosmetics
Clothes, footwear
Retail sales dynamic, 3Q YTD 2016 YoY
5
25,9%
12,5% 9,9%
22,9%
14,1%
27,7%
12,7% 10,1%
23,0%
14,0%
0,0%
5,0%
10,0%
15,0%
20,0%
25,0%
30,0%
ALCOHOLICBEVERAGES
FOOD DAIRY BEER BEVERAGES
Q3 2015 Q3 2016
Eurocash gaining market share Faster growth of categories where Eurocash gains more market shares
Source: Own estimates based on Nielsen
Total Poland Market YoY change of sales in main categories
Total market grew by 1.7% while Eurocash sales in Poland grew by 7.6%
Eurocash market shares driven by ECD, ECF and ECS
EC C&C and ECA with stable value and growing volume market shares
Eurocash Market Shares in Total Poland Nielsen Food Categories
+1,8 -0,1 +0,2 +0,1 +0,2
3Q 2016 YoY
6%
3% 1,7%
-1% -2% -2%
1,8%
3,3%
0,2% 0,2% 0,1%
-0,1%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
ALCOHOLICBEVERAGES
CIGARETTES FOOD DAIRY BEER BEVERAGES
3Q 2016 - Market Change
3Q 2016 Eurocash Market Shares Dynamic
6
3,1%
1,4%
3,0%
4,6%
0%
1%
2%
3%
4%
5%
Small Format Hypermarkets Supermarkets Discounters
Market & Competition Discounters slowing down
FMCG market growth by channels
(YoY, Sep YTD 2016 )
Monthly Food market growth by channels (YoY)
Source: Nielsen
-15%
-10%
-5%
0%
5%
10%
15%
20%
I 15 II 15 II 15 IV 15 V 15 VI 15 VII 15 VIII 15 IX 15 X 15 XI 15 XII 15 I 16 II 16 II 16 IV 16 V 16 VI 16 VII 16 VIII 16 IX 16
Hypermarkets Supermarkets Discounters Small Format
4,1%
7,2%
Food Drug
Discounters
7
43% 48%
29% 27%
0%
10%
20%
30%
40%
50%
60%
2015 2016 2015 2016
Market & Competition Growth in discounters supported by increased no. of SKU
No. of SKU in Discounters (Sep 2016 vs. Sep 2015)
Source: ABR Sesta, Wiadomości Handlowe
Share of branded products in total assortment
2 119 2 332
0
500
1000
1500
2000
2500
2015 2016
Other
Drug & Cosmetics
Food
1 986 1 881
0
500
1000
1500
2000
2500
2015 2016
Other
Drug & Cosmetics
FoodBiedronka Lidl
+8%
+20%
+10%
-4%
-2%
-5%
Biedronka Lidl
8
Strong sales growth …supported by increased assortment and new clients
+8% +5%
Sales excluding export grew by +7.6% in 3Q and +5,6% in 3Q YTD
Excluding add. sales from M&A sales grew by +6,8% in 3Q and 4.7% in 3Q YTD
Improved position in all franchise chains
Sales development (PLN m) 3Q YoY sales growth to Franchisees
5 487 5 325 5 761 5 729
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
EC Group EC Group excl. Export
3Q 2015 3Q 2016
4,7%
7,3%
10,0%
0,0%
2,0%
4,0%
6,0%
8,0%
10,0%
12,0%
abc Delikatesy Centrum ECD Franchisees
+1003 stores
+160 stores
+6,4% LFL Fresh Project
9
99
134
524
541
1 177
1 195
1 500
105
144
538
581
1 125
1 194
1 553
0 1 000 2 000
EC FoodService
Inmedio
EC Alkohole
DelikatesyCentrum
ECDistribution
Cash&Carry
EC Serwis
3Q 2016 3Q 2015
3Q 2016 sales per distribution formats Market share growth in core business
YoY change in sales by distribution formats (PLN m)
Cigarettes +6.3% in 3Q and +6.1% in 3Q YTD
Sales impacted by top-ups transfer to PayUp
LFL at -3.6% 3Q and -2.9% YTD, impact of new
openings and deflation in alcohol, beer, dairy & fresh
Franchisees +10%, discontinued exports
Wholesale LFL +6.4% 3Q, and +4.6% YTD
Retail LFL +2.0% in 3Q and +1.3% YTD
Sales improvement mainly to independent and HoReCa
Sales growth in main categories,
Growing no. of clients and avg. ticket
Sales driven by Key Accounts,
+7% excluding export
+5% excluding export
0%
+7%
+5%
+7%
+4%
* incl. sales to Rogala
*
*
10
1,3% 2,5%
0,7%
-4,9%
0,0%
-2,7%
-2,2%
-5,0% -4,0%
-1,3%
-3,6%
-10%
-5%
0%
5%
10%
15%
Q12014
Q2 Q3 Q4 Q12015
Q2 Q3 Q4 Q12016
Q2 Q3
C&C LFL dynamics Cannibalization and price deflation still impacting LFL
LFL Cash&Carry
Deflation:
-1.6%
Deflation and cannibalization affecting C&C sales and profitability
Strong volume and market share growth in key categories
Fast expansion of abc chain supporting sales growth
New stores improving sales/cost efficiency, on-track to reach average profitability
Strategic review of recent openings in progress with objective to limit cannibalization effect
on profitability
1,4%
3,5% 3,7%
10,5%
0%
2%
4%
6%
8%
10%
12%
Beer Alcohol
3Q YTD
Stores <100sqm (Market) Cash & Carry
C&C volume growth (YoY 3Q YTD, hL)
Cannibalization:
-1.6%
11
Delikatesy Centrum LFL dynamics LFL accelerating driven by fresh project
LFL Delikatesy Centrum
Wholesale LFL +6.4%
in 3Q and +4.6% YTD
Retail LFL +2.0%
in 3Q and +1.34% YTD
New price policy and
fresh project
+6.4% +2.0%
2,6% -3,9% 2,1% -0,3% 2,7% 4,4% 6,4%
0,6% -1,2% 1,4% -0,4% 1,2% 0,8% 2,0% -5%
0%
5%
10%
15%
Q1 2015 Q2 Q3 Q4 Q1 2016 Q2 Q3
Delikatesy Centrum wholesale LFL Delikatesy Centrum retail LFL
12
7 001 7 206 7 416 7 685 7 957 7 993 8 425
1 007 1 022 1 042 1 076 1 065 1 060 1 040
4 409 4 471 4 499 4 554 4 551 4 632 4 659
0
2 000
4 000
6 000
8 000
10 000
1q 2015 2q 3q 4q 1q 2016 2q 3q
abc Delikatesy Centrum ECD Franchisees
Expansion Strong expansion of abc and ECD Franchise, closures still affecting DC
No. of stores
C&C without openings, as improvement in cost structure as a strategic goal for next quarters
abc expansion at record level
DC expansion affected by termination of tests with Orlen and closures of stores by 1 franchisee
21 openings and 41 closures in 3Q 2016
appx. 10 net openings expected in 2016
ECD Franchise chains with healthy growth driven by Lewiatan and Groszek expansion
+1003 +160 -2
13
Delikatesy Centrum as the most
recommended retail chain in Poland
-18% -14% -28%
-18% -26% -24% -24% -28% -28% -24% -37% -32% -35%
-48% -53% -59%
59% 54% 53% 39% 46% 39% 38% 41% 37% 32% 35% 28% 20% 23% 18% 13%
41 40 25 21 20 15 14 13 8 7 -3 -4 -15 -25 -35 -45
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
Detractors Promoters
NPS
Delikatesy Centrum with the highest NPS value on the market
Source: GfK Polonia
Q. How likely is it that you would recommend the chain to a friend or colleague? (0 to 10 scale)
Net Promoter Score (NPS) Promoters Detractors
Retail chains recommendation index
14
PLN m 3Q 2015 3Q 2016
% of Sales
3Q 2015
% of Sales
3Q 2016 Y/Y Change
Net sales 5 487 5 761 5,0%
Gross profit 531 570 9,7% 9,9% 7,4%
EBITDA 135 123 2,5% 2,1% -8,8%
EBIT 98 81 1,8% 1,4% -17,0%
Profit before tax 88 76 1,6% 1,3% -13,9%
Net profit 73 62 1,3% 1,1% -15,3%
3Q 2016 Financial summary Sales growth by 7.6% excluding export
Gross Margin
growth by 0.3 p.p.
and 0.1 p.p. ex M&A
Net profit with positive
impact of lower net
financial costs
EBITDA hit by higher costs:
Fresh + New Projects (-5 m)
Effects of C&C expansion
Deflation
PLN m 3Q YTD
2015
3Q YTD
2016
% of Sales 3Q
YTD 2015
% of Sales
3Q YTD 2016 Y/Y Change
Net sales 15 274 15 866 3,9%
Gross profit 1 464 1 582 9,6% 10,0% 8,1%
EBITDA 291 281 1,9% 1,8% -3,5%
EBIT 180 158 1,2% 1,0% -12,3%
Profit before tax 148 142 1,0% 0,9% -4,0%
Net profit 121 117 0,8% 0,7% -3,8%
3Q YTD 2016 Financial summary Sales growth by 5.6% excluding export
Profitability negatively affected by:
Additional costs of Fresh + New Projects (PLN 11m)
Effects of C&C expansion – cannibalization and lower efficiency
Deflation combined with increasing labor costs
16
Investment in strategic growth projects
driving costs
Development of New Projects and Fresh Project
Fresh Project – investment in quality and prices to strengthen Delikatesy Centrum market position
Costs of New Projects – development of innovative retail formats:
abc on wheels
Faktoria Win
1minute
Kontigo
Duży Ben
62
108
69
137
-14,8 -19,8 -3,9 -10,0 -40
-20
0
20
40
60
80
100
120
140
160
3q YTD 2015 3q YTD 2016 3q YTD 2015 3q YTD 2016
New Projects Fresh Project
PLN -11 m EBITDA YoY
22
48
21
57
-4,4 -5,1 -1,6 -4,0 -10
0
10
20
30
40
50
60
3q 2015 3q 2016 3q 2015 3q 2016
New Projects Fresh Project
Sales EBITDA
Cash Flow Operational CF at the level of EBITDA
Maintained efficient inventory
rotation - 18 days in 3Q 2016
OCF in 3Q at 106%
EBITDA level
Operational Cash Flow vs. EBITDA
*LTM – Last Twelve Month
Cash conversion at long-
term optimum level
Cash conversion cycle
30 30 29 32 29 28 27 28 29 29 27
24 25 24 27 20 19 17 18 20 20 18
(12) (16) (15) (13) (10) (18) (19) (20) (21) (20) (19)
(67) (72) (67) (72)
(59) (65) (62) (66) (70) (69)
(64)
-80
-60
-40
-20
0
20
40
Q12014
Q2 Q3 Q4 Q12015
Q2 Q3 Q4 Q12016
Q2 Q3
Receivables Stock Cash conversion Liabilities
413 426 448 476 481 477 466 538
717
882 978 931
561
420
130%
168% 197%
206% 194%
117% 90%
-100%
-50%
0%
50%
100%
150%
200%
250%
100
200
300
400
500
600
700
800
900
1 000
1 100
1Q '15 2Q 3Q 4Q 1Q 2016 2Q 3Q
LTM EBITDA (PLN m) LTM Operational Cash Flow (PLN m)
LTM OCF / LTM EBITDA
18
Net Debt vs. EBITDA
Net Debt / EBITDA at level of 0.5x in 3Q 2016
Net Debt* vs. 12M EBITDA in 3Q 2016
*NET DEBT - the sum of long and short term loans, borrowings and financial liabilities less cash and cash equivalents
413 426 448 476 481 477 466
821
506
273 175
240 317
231
1,99
1,19
0,61 0,37
0,50 0,66
0,50
0,0
0,5
1,0
1,5
2,0
2,5
0
200
400
600
800
1 000
1Q'15 2Q 3Q 4Q'15 1Q'16 2Q 3Q
LTM EBITDA (PLN m) NET DEBT (PLN m) NET DEBT / EBITDA
19
Main changes in law
SUNDAY BAN
Ban for trade on Sundays, potentially small entrepreneurs allowed
EC Franchisees support the idea but not in current project of law
RETAIL TAX
New project of interim retail tax: app. 1,2% for every retailer in 2017 –
official project yet to be presented
Previous version of retail tax under investigation of EU
CONTRACTUAL ADVANTAGES
Potential of NET-NET price implementation
Changes in promotional settlements with suppliers
E-RECEIPT
No paper bills, all trade evidenced by centralized IT systems
Need to exchange fiscal cash registers
ALCOHOL LICENSES
Potential limits / additional zones for alcohol licenses in big cities
3Q 2016 Financial Summary
P&L
PLN m 3Q 2016 3Q 2015 Y/Y
Change
3Q YTD
2016
3Q YTD
2015
Y/Y
Change
Sales revenues (traded goods, materials) 5 761 5 487 5% 15 866 15 274 4%
Gross profit on sales 570 531 7% 1 582 1 464 8%
Gross profitability on sales (%) 9,9% 9,7% 0,22p.p. 10,0% 9,6% 0,39p.p.
EBITDA 123 135 -9% 281 291 -3%
(EBITDA margin %) 2,1% 2,5% -0,32p.p. 1,8% 1,9% -0,13p.p.
EBIT 81 98 -17% 158 180 -12%
(EBIT margin %) 1,4% 1,8% -0,37p.p. 1,0% 1,2% -0,18p.p.
Net Income 62 73 -15% 117 121 -4%
(Net profitability %) 1,1% 1,3% -0,26p.p. 0,7% 0,8% -0,06p.p.
3Q 2016 Financial Summary
Cash Flow
PLN m 3Q 2015 3Q 2016 3Q YTD 2015 3Q YTD 2016
Net operating cash flow 271,0 130,4 831,0 273,0
Net profit (loss) before tax 88,1 75,9 148,3 142,3
Depreciation 37,4 42,2 111,1 123,1
Change in working capital 140,1 8,7 543,0 (11,5)
Other 5,3 3,3 27,8 17,9
Net investment cash flow (27,5) (31,8) (110,9) (167,3)
Net financial cash flow (245,2) (142,4) (728,8) (109,2)
Total cash flow (1,7) (43,8) (8,8) (3,5)
3Q 2016 Financial Summary
Balance Sheet
PLN m 30 SEP 2016 31 DEC 2015 Change [%] Change
Non-current assets 2 307 2 288 0,8% 19
Current assets 3 141 2 729 15,1% 413
Inventories 1 137 968 17,5% 169
Trade receivables 1 714 1 533 11,8% 181
Cash and cash
equivalents 83 86 -4,1% -4
Total Assets 5 449 5 017 8,6% 432
Equity 1 107 1 161 -4,7% -54
Liabilities 4 342 3 856 12,6% 486
Long-term financial
debt 156 159 -2,1% -3
Short-term financial
debt 158 102 55,0% 56
Trade payables 3 611 3 226 12,0% 386
Total equity and
liabilities 5 449 5 017 8,6% 432
23
For more information please contact:
Jan Domański
Investor Relations & M&A Director
Mobile: +48 507 010 095
