Page 125 - RusRPTNov22

reported earlier. The growth was 1pp ahead of that in 1H22, reflecting still high y/y food inflation and price investments. The growth also came on the back of 12.4% increase in blended LFL sales (+8% ticket; +4% traffic) and 7% y/y increase in selling space (+1% q/q).
● This led to a 12% y/y increase in IAS-17 adj. EBITDA (to Rb48bn; 7.4% margin). The adj. EBITDA growth lagged revenue due to investments in prices, with the focus in 2H22 shifting to growth of LFL sales and X5’s market share, including active expansion of hard discounter format Chizhik.
● Net income (IAS-17) grew y/y to Rb15.9 bn (2.5% margin), as a result.
● Net debt/EBITDA (IAS-17) stood at 0.9x vs 1.5x a year ago.
● For 9M22, FCF (IAS-17) stood at Rb79.5bn, up 59% y/y, CapEx at
2.2% top-line (vs 4% in 9M21) due to prioritization of spending.
● Goals for 2022: accelerated revenue growth, focus on cost
optimization and FCF management, CapEx decline in absolute terms.
X5 reported 3Q22 operating results on October 17. The revenue growth remained decent, supported by price investments and inflation.
● Total net sales grew 19.5% y/y (to Rb647bn), which suggests a 1pp q/q acceleration in growth thanks to investments in prices and, we believe, a minor impact of M&A, and despite slower inflation (15.6% y/y in 3Q22 vs 19.5% in 2Q22).
● o This growth came on the back of 12.4% increase in blended LFL sales (+8% ticket – slowed 3pp q/q; +4% traffic – accelerated 3pp q/q) and a 7% y/y increase in selling space (+1% q/q).
● o In 3Q22 X5 accelerated store openings vs 2Q22: 163 new Chizhik in 3Q22 (64 in 2Q22) and 337 new Pyaterochka gross (285 in 2Q22).
● Pyaterochka (c80% X5 revenue) kept driving growth with revenue +20%, LFL sales +13.7%, selling space +7% y/y.
● Chizhik discounters kept expanding fast, growing revenue 43% q/q (+111% q/q selling space expansion), up c10x y/y; accounted for 1.5% X5 total revenue in 3Q22.
● Digital business (2% revenue) also remained among fastest growing segments: revenue +38% y/y (to Rb15 bn).
FAS allows X5 group to acquire 70% stakes in two Siberian chains, but with prescriptions.
Back in August, X5 Group announced that it would form a "strategic alliance" with the Krasny Yar and Slata groups, which are among the leading food retailers in Eastern Siberia. X5 intended to take a 70% stake in both businesses. Yesterday, Russia's Federal Antimonopoly Service approved the deal, but with some prescriptions.
First, there will be limits to markups (5-10%) for some socially important food items for both Krasny Yar and Slata. Thus, both chains will join X5 Group's voluntary price caps. Second, the FAS has demanded that X5 and the two
125 RUSSIA Country Report November 2022 www.intellinews.com