Magnit FY2014 Financial Results

Magnit at a Glance

Magnit at a Glance

As of December 31, 2014 Source: Company, Bloomberg, IFRS accounts for FY2014 2

2 108Cities & Towns

№1Russian Food RetailChain by Revenueand Number of Stores

9 711Total Numberof Stores

3 591thous.sq.m.Selling Space

27DCs

5 938Trucks

Multi-format Business ModelComprising Convenience, Hypermarkets,“Magnit Family” & Drogerie Stores

№3Retailer in Europein MarketCapitalization $21bn Market

Capitalization >6% Share in RussianGrocery Sector

Shareholder Structure54,6%Free-float

37,6%Sergey Galitskiy, CEO

3,3%Other

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

Magnit at a Glance

Key Metrics

3Source: IFRS accounts for FY2014, Company’s Estimates

Guidance for 2015New Stores

764bn ($20bn)RevenueFY2014

6,25%

NetMargin

11,25%

EBITDAMargin

0,9

Net debt/LTM EBITDA

1 200 ConvenienceStores 90 Hyper-

markets 800 DrogerieStores

26-32%

RUB SalesGrowth

9,5-11,0%

EBITDAMargin

RUB 65bn

Capex

P=

Magnit at a Glance

Strategy

4

Growth

Value Efficiency

Multi-format OrganicStore Growth

GeographicScope

Density of StoreCoverage

LowPrices

HighQuality

Assortment CostManagement

VerticalIntegration

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 MarketSizeFY 2014

% ModernRetailPenetration

Non-Modern Modern

Source: Sberbank CIB Estimates for FY2014

Magnit at a Glance

Magnit vs Peers

6*As of FY 2013Source: Companies, Infoline, Bloomberg, Magnit’s Estimates

Numberof Stores, eop 2014

Selling Spacethous. sq.m., eop 2014

RevenueRUB bn, eop 2014

Market CapUS$ bn, eop 2014

Market Share%, eop 2014

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

287,4

183,2

21,5

3,3

0,8

1,2

2,9

6

5

2

1

2

2

2

Not public

Not public

*

*

*

*

1 080Drogerie Stores

8 344Convenience Stores

190Hypermarkets

97Magnit Family

27Distribution Centers1 6 8 6 2 2 2

57 270 245 312 98 76

22

3 28 19 34 3 7 3

7 55 32 58 12 22

4

330

1 523 2 170 2 614 757 731

219

Operational Overview

Geographical Coverage

7Source: Company, as of December 31, 2014

2 108 Cities& Towns

7 FederalRegions

North Caucasus

Southern Volga North West

Urals SiberiaCentral


Logistics System


9 711Total Numberof Stores

909thous.sq.m.Warehousing Space

27DCs

5 938Trucks

8

6

6

2

1

2

2

Central

Volga

Southern

Urals

North Caucasus

North West

Siberia

3000

2698

1980

936

343

520

234

357,506

147,883

178,328

92,782

34,503

71,860

26,064

Centralization Ratio%

Magnit

Outsourced

90

10

92

8

Convenience Stores

FY2014 Future Targets

Magnit

Outsourced

71

29

80

20

Hypermarkets


Suppliers


5000DomesticSuppliers

4000Local Suppliers

1000Federal Suppliers

Assortment

55-60% 40-45%


Direct Import


11% Shareof Revenue605

PLSKUsM 88% Food

Items

Private Label

10% InternationalDirect Import 860

OpenContracts


Employees


257 551 Employees

28 143AverageMonthlySalary 9% Wage Rate

IncreaseP=

184 680In-storePersonnel

45 081People Engagedin Distribution

18 229People in RegionalBranches

9 561People Employedby Head Office

1000 employees

Average Weighted Number of Employees – 207 853


Competitive Attributes

12

40% of FamilyBudgetSpent on Food

Location Quality(of Products)

Assortment Reliability AtmospherePrices

5 000 People —MinimumPopulation

(1 500–1 600 Families)

4 000-9 500MonthlyFamily FoodBudget

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


459 sq.m.Total

320 sq.m.Selling Space

91% Food

9% Non-food

28% Owned

72% Leased

Format Description Key Operational Statistics OpeningSize of the Store Average Ticket Payback

Store Ownership Structure

Sales Mix

Traffictickets/sq.m./day

Sales Densitysales/sq.m./year

LFL FY2014 - FY2013,%

225,1P=$5,9

238 077P=$6 196

9,81 AverageTicket, RUR

3,68 Traffic

13,85 Sales

2,8

3 years

If Leased

If Owned

Cost of New Storeper sq.m. of Total Space

Time to Maturity

6 months

Owned $1 100-2 800 Leased $250-500

4-6 years

Hypermarket


Hypermarket


82% Food

18% Non-food

81% Owned

19% Leased

Format Description Key Operational StatisticsSize of the Store Average Ticket


Sales Mix



LFL FY2014 - FY2013,%

587,8P=$15,3

275 073P=$7 159

1,2

6 872 sq.m.Total

2 943 sq.m.Selling Space


5,63 Traffic

14,05 Sales

OpeningPayback

6-9 years


Owned $1700-2900Leased $800-900

8-15 months

Time to Maturity

S: up to 3 000

M: 3 000-6 000

L: over 6 000

Magnit Family


Magnit Family


2 240 sq.m.Total

1 124 sq.m.Selling Space

87% Food

13% Non-food

39% Owned

61% Leased



Sales Mix



LFL FY2014 - FY2013,%

419,0P=$10,9

371 659P=$9 673

2,1

6-9 years


Owned $2 100-2 800Leased $800-1 400

8-15 months


8,87 Traffic

18,97 Sales

Time to Maturity

Drogerie Store


Drogerie Store


306 sq.m.Total

231 sq.m.Selling Space

100% Non-food

23% Owned

77% Leased



Sales Mix



LFL FY2014 – FY2013,%

251,8P=$6,6

104 643P=$2 724


35,69 Traffic

40,79 Sales

1,0

3 years

If Leased

If Owned


Time to Maturity

6 months

Owned $800-2 500Leased $300-500

4-6 years

Sizeof the Store

sq.m.

AverageTicket

TrafficTickets/sq.m./day

DensitySales/

sq.m./year

SalesMix

LFL FY2014-FY2013

%

Store Owner-ship Structure

PaybackYears

Cost of New Store

per sq.m.of Total Space

Timeto Maturity

Months

• Total• Selling Space

• Food• Non-food

• Av.ticket• Traffic/ Sales

• Owned• Leased

23%

77%

39%61%

81%

19%

28%

72%


Format Summary

21Source: Company, as of December 31, 2014; * Excludes selling space designated for leases

Hypermarket

DrogerieStore

MagnitFamily

459

6 872

306

2 240

320

2943*

231

1 124

Owned $1 100-2 800

Leased $ 250-500

2,8

1,2

1,0

2,1

P.225,1$5,9

P.587,8$15,3

P.251,8$6,6

P.419,0$10,9

P.238 077$6 196

P.275 073$7 159

P.104 643$2 724

P.371 659$9 673

82%18%

100%

87%13%

91%9%

Conveniencestore

6

8-15

6

8-15

3 (if leased)

6-9

3 (if leased)

6-9

4-6 (if owned)

4-6 (if owned)

9,81

7,98

3,76

9,28

3,68

5,63

35,69

8,87

13,85

14,05

40,79

18,97

Owned$1 700-2 900

Leased$ 800-900

Owned$800-2 500

Leased$300-500

Owned$2 100-2 800

Leased$800-1 400

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: Audited IFRS accounts for 2013 – 2014Please note: there may be small variations in calculation of totals, subtotals, and/or percentage change due to rounding of decimals 22

RUB MMRUB MMRUB MMRUB MM 2013201320132013 20142014201420142014 / 20132014 / 20132014 / 20132014 / 2013

YYYY----oooo----Y GrowthY GrowthY GrowthY Growth

Net salesNet salesNet salesNet sales 579,694.88579,694.88579,694.88579,694.88 763,527.25763,527.25763,527.25763,527.25 31.7%

Cost of sales (414,431.89) (543,006.69) 31.0%

Gross profitGross profitGross profitGross profit 165,262.99165,262.99165,262.99165,262.99 220,520.56220,520.56220,520.56220,520.56 33.4%

Gross margin, % 28.51% 28.88%

SG&A (101,729.77) (134,169.75) 31.9%

Other income/(expense) 1,178.76 (501.27) -142.5%

EBITDAEBITDAEBITDAEBITDA 64,721.2364,721.2364,721.2364,721.23 85,909.6785,909.6785,909.6785,909.67 32.7%

EBITDA margin,% 11.16% 11.25%

Depreciation & Amortization (14,184.35) (17,609.67) 24.1%

EBITEBITEBITEBIT 50,536.8850,536.8850,536.8850,536.88 68,300.0068,300.0068,300.0068,300.00 35.1%

Net finance costs (4,782.83) (6,273.47) 31.2%

Profit before tax 45,754.05 62,026.53 35.6%

Taxes (10,133.67) (14,340.69) 41.5%

Effective tax rate 22.15% 23.12%

Net incomeNet incomeNet incomeNet income 35,620.3835,620.3835,620.3835,620.38 47,685.8447,685.8447,685.8447,685.84 33.9%

Net margin, % 6.14% 6.25%

Financial Overview

Revenue & Costs

23Source: IFRS accounts for FY2012–2014

26,5

28,5 28,9

10,6 11,2 11,3

5,6 6,1 6,3

0

5

10

15

20

25

30

35

2012 2013 2014

Revenue DynamicsRUB bn

Net Income DynamicsRUB bn

Margin DynamicsSG&A Expense Structure

Revenue — 764 RUB bnGrossMargin

EBIDTAMargin

NetMargin

%

+29,2%

7,5% 14,5%

+31,7%+41,8%

+33,9%

LFLLFL

Sales Growth, RUB

Sales Growth, RUB

449580

764

2012 2013 2014

25

36

48

2012 2013 2014

1,84 (0,37) ― Packaging & Raw Materials

2,23 (0,44) ― Repair & Maintenance

55,01 (10,93) ― Payroll & Related Taxes

1,93 (0,38)― Taxes, Other than Income Tax

11,57 (2,30) ― Deprecation & Amortization

20,62 (4,10) ― Rent & Utilities

4,51 (0,90) ― Other

in SG&A,% in Revenue, %

2,29 (0,46) ― Advertising

20%

151 719 RUB mn

26,53

28,51 28,88-0,081,85 0,08 0,05 0,13 0,32

15

17

19

21

23

25

27

29

31

33

GM2012

Trading Margin Transport Losses GM2013

Trading Margin Transport Losses GM2014

Financial Overview

Gross Margin Bridge

24Source: IFRS accounts for FY2012 – 2014

EBITDA Margin Bridge

% of Sales

% of Sales

+198 b.p.+37 b.p.

+60 b.p. +9 b.p.

10,5611,16 11,25

-1,01-0,35 -0,01

-0,11 -0,28 -0,181,97

0,37 0,29

0

2

4

6

8

10

12

14

EBIDTA2012

GrossMargin

Salaries Rent & Utilites Other EBIDTA2013

GrossMargin

Salaries Rent & Utilites Advertising Other EBIDTA2014

Financial Overview

Free Cash Flow

25Source: IFRS accounts for FY2013–2014

Working Capital Analysis

The Average Days Payable to Suppliers is 38 Days.

Inventory Management Days is 46 Days

Working Capital: RUB 6 927 mn as of 31.12.2014

RUB mn

2013

2014

Adjusted for loss from disposal of PPE, provision for doubtful receivables, foreign exchange gain, finance costs, gain on disposal of subsidiary and investment income

Calculated as additions + transfers of PP&E during the respective period

Does not include cash flow from financing activities

88 999

60 711

5 617

11 760

-9 330-6 433

-12 525

-55 936

-15 82521 968

842

AdjustedEBIDTA

Change inWorking capital

Net InterestPaid

TaxesPaid

OCF Capex Other CashFlow

from InvestingActivities

FCF Payment ofDividents

Other CashFlow

from FinancingActivities

CF

65 358

44 624

-7 608 -6 521

-8 163-4 550

-8 021

-52 488 256-9 545 10 632

Financial Overview

Balance Sheet

Source: Audited IFRS accounts for FY2012 - 2014Please note: there may be small variations in calculation of totals, subtotals, and/or percentage change due to rounding of decimals 26

RUB MMRUB MMRUB MMRUB MM 2012201220122012 2013201320132013 2014201420142014

ASSETS ASSETS ASSETS ASSETS

Property plant and equipment 158,752.58 195,158.25 232,968.80

Other non-current assets 3,948.69 5,762.40 6,043.82

Cash and cash equivalents 12,452.61 5,931.13 17,691.54

Inventories 41,025.62 56,095.41 81,475.66

Trade and other receivables 584.02 631.53 813.26

Advances paid 2,677.20 3,171.05 4,849.30

Taxes receivable 28.94 27.99 69.38

Short-term financial assets 876.66 1,150.64 475.18

Prepaid expenses 181.94 252.15 242.53

Income tax recoverable – – 131.86

TOTAL ASSETS TOTAL ASSETS TOTAL ASSETS TOTAL ASSETS 220220220220,,,,528.26528.26528.26528.26 268268268268,,,,180.55180.55180.55180.55 344,761.33344,761.33344,761.33344,761.33

EQUITY AND LIABILITIES EQUITY AND LIABILITIES EQUITY AND LIABILITIES EQUITY AND LIABILITIES

Equity 99,235.71 126,162.14 143,651.62

Long-term debt 38,246.72 37,441.50 44,410.14

Other long-term liabilities 6,159.09 8,462.32 10,617.70

Trade and other payables 42,920.57 48,170.71 66,794.61

Short-term debt 25,121.90 36,319.76 51,256.67

Dividends payable 0.54 0.03 14,372.03

Other current liabilities 8,843.73 11,624.09 13,658.56

TOTAL EQUITY AND LIABILITIESTOTAL EQUITY AND LIABILITIESTOTAL EQUITY AND LIABILITIESTOTAL EQUITY AND LIABILITIES 220220220220,,,,528.26528.26528.26528.26 268268268268,,,,180.55180.55180.55180.55 344,761.33344,761.33344,761.33344,761.33

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 1 200 800

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

Financial Overview

Capex Analysis

27Source: 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 2014

₽ 56 bn

FY 2015 (plan)

₽ 65 bn

RUB 500 mn

63 369

73 761

95 667

50 916

67 830

77 975

25 122

36 320

51 257

38 247

37 441

44 410

2012 2013 2014

Net DebtShort-term DebtLong-term Debt%

Financial Overview

Debt Burden

28Source: IFRS accounts for FY 2012 - 2014

11,7

13,0 12,9

0

2

4

6

8

10

12

14

2012 2013 2014

1,11

0,9

0

0,5

1

1,5

2

2012 2013 2014

Debt Level DynamicsRUB mn

Credit Metrics Credit Profile

EBIDTA / Finance Expenses

Net Debt / LTM EBITDA

The Company Hasan Impeccable Credit History

Collaboration with

the Largest Banks

Low Debt Burden:Net Debt / EBITDA Ratio of 0,9

No Currency Risk: No Currency Risk: No Currency Risk: No Currency Risk: 100%of Debt is Rub DenominatedMatching Revenue Structure

No Interest Rate Risk:No Interest Rate Risk:No Interest Rate Risk:No Interest Rate Risk:Interest Payments are Madeat Fixed Rates

39,6%49,2%

53,6%

46% 46% 46% 46% of Debt is Long-term

Approximately 35%35%35%35%of LT Debt is Rub Bonds

Contact Information

Contact Information

29

Timothy PostHead of Investor Relations

+7 (961) [email protected]://ir.magnit.com

15/2 Solnechnaya StreetKrasnodar, 350072Russian Federation