Page 7 - BELRptOct18

and nearly 40% of all fruit and nuts nationwide – and believe that this is becoming even more important,” Zubkov says.
Another key driver has been Eurotorg’s extensive and steadily growing portfolio of private labels, which are higher-margin for the company but offer consumers high-quality produce at lower prices than branded goods. “We are also improving our own production, and offering more own products in smaller-format stores,” Zubkov says.
“Our ability to anticipate and fulfil changing customer tastes due to our strategy and scale means we are rewarded with customer loyalty, which translates into the robust financial and operational performance seen in our 1H 2018 results. Net retail sales saw double-digit growth of 11.5% in BYN y/y in 1H 2018, driven by both active expansion of the grocery retail chain and strong like-for-like sales performance -- a growth of 5.9% y/y,” Zubkov adds.
But it has not been plain sailing. Eurotorg has run up a considerable debt with the local banks that threatened to get too big. However, the company managed to refinance this with a $350mn five-year Eurobonds in October 2017 – Belarus’s first corporate Eurobond issues – and has been working to reduce the debt since then.
“The Company reduced its net debt to $576mn as of 30 June 2018, and further improved its debt portfolio by increasing the share of local-currency funding (from 18% as of 31 December 2017 to 23% as of 30 June 2018) and reducing borrowing costs (the average interest rate decreased by 0.2 pp year-to-date),” says Zubkov.
As the result the company’s net debt/EBITDA LTM ratio has decreased to 3.0x as of 30 June 2018 (vs 3.2x as of 31 December 2017), helped by the solid growth of earnings and its strong free cash flow generation.
“We continue to monitor funding opportunities in financial markets. In August, for example, we signed an €20mn loan agreement with the EBRD, which helped further reduce our borrowing costs and extend our debt repayment schedule. In addition, the loan agreement again underscores Eurotorg’s strong standing as a high-quality borrower with a robust strategy, efficient business model and significant potential for future growth. The EBRD is a long-standing partner of Eurotorg, and we will also be working with them on a comprehensive plan to improve corporate governance,” says Zubkov.
2.2 Lukashenko’s erratic HR decisions
Belarusian President Alexander Lukashenko appointed former industry minister Vitaly Vovk as his aide and inspector for the Vitebsk region on September 18 - literally a couple of weeks after Lukashenko fired him for ignoring the president's orders.
In August, authoritarian Lukashenko demanded that Vovk be fired "right away". The ex-minister was under pressure, specifically, due to the fact that he ignored Lukashenko's order "to get the roof [at the plant in Orsha] repaired". "Who had the right to cancel my decisions? Why did you fail to do what I told
7 BELARUS Country Report October 2018 www.intellinews.com