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In Q1 2009 OJSC “Pharmacy Chain 36.6” reports consolidated EBITDA of 212 million rubles on back of improved retail unit results

02.07.2009

JULY 2, 2009, MOSCOW – OJSC Pharmacy Chain 36.6 [RTS:APTK; MICEX:RU14APTK1007] the leading Russian pharmaceutical retailer announces unaudited Q1 2009 financial results prepared in accordance with the International Financial Reporting Standards (IFRS).

Group highlights of Q1 2009

Retail unit EBITDA improved by more than 300 million rubles versus Q1 2008;

  • Group revenue from ongoing operations1decreased by 10.9% tî RUR 5 864.0 mln;
  • Gross profit from ongoing operations1 increased by 5.4% to RUR 2 080.7 mln, 35.5 % of consolidated revenues;
  • Consolidated EBITDA from ongoing operations1 reached RUR 211.8 mln from RUR -59.1 mln in Q1 2008;
  • Underlying Net loss from ongoing operations1 (excluding foreign exchange effect) decreased from RUR 614.2 mln in Q1 2008 to RUR 320.3 mln in Q1 2009, a 47.9% improvement;
  • The retail unit organically opened 7 and closed 50 stores in Q1 2009.
 period ends
Q1, mln RURQ1, mln USD
20092008ch, %20092008ch, %
Revenue5 864.06 744.42-13.1%172.8278.02-37.8%
Retail4 792.55 582.6-14.2%141.2230.1-38.6%
Veropharm912.8842.48.4%26.934.7-22.5%
other158.7319.4-50.33%4.713.2-64.4%
Gross profit2 080.72 058.221.1%61.384.82-27.7%
Retail1 450.51 409.82.9%42.758.1-26.5%
% of sales30.3%25.3%19.8%30.2%25.2%19.8%
Veropharm18.725.034%55.483.751%
% îf sales64.7%62.9%2.9%64.7%62.8%3.0%
other39.9118.8-66.43%1.24.9-75.5%
EBITDA211.8-19.52-1186.2%6.2-0.82-875.0%
Retail38.3-270.6-114.2%1.1-11.2-109.8%
% of sales0.8%-4.8%-116.5%0.8%-4.9%-116.0%
Veropharm196.1222.1-11.7%5.89.2-37.0%
% of sales21.5%26.4%-18.5%21.6%26.5%-18.7%
other-22.629.0-177.93%-0.71.2-158.3%
Net profit-648.5-588.3210.2%-19.1-24.22-21.1%
Retail-756.34-761.55-0,7%-22,3-31,4-29,0%
Veropharm130.6153.4-14.9%3.86.3-39.7%
other-22.819.8-215.23%-0.60.9-166.7%

 

Commenting on Q1 2009 results Jere Calmes, President of OAO Pharmacy Chain 36.6 and CEO of the Management Company, said:

“Our Q1 2009 results underscore the operational improvements made across the Group’s pharmaceutical retail chain, especially in the Moscow-Central Business Unit, and the solid performance of our manufacturing unit, Veropharm. Nevertheless, our current operating environment remains severely strained and we continue to work with our Board of Directors to raise the required funding to complete our turnaround.”

Retail unit

Revenue

As compared to the relative period the year before, in Q1 2009 sales of the retail unit decreased by 14.2% in ruble terms from RUR 5 582.6 mln to RUR 4 792.5 mln driven by the closure of non-performing stores and a drop in like for like sales.

Like-for-like sales1 in Q1 2009 versus Q1 2008 decreased by 8% in ruble terms (by 35% in dollar terms) driven by partial stock outs and a decline in customer traffic. L-f-L average check in Q1 2009 compared with Q1 2008 increased by 17% in ruble terms (decreased by 17% in dollar terms); traffic decreased by 21%.

Gross margin

The retail operations posted a gross margin increase from 25.3% in Q1 2008 to 30.3% in Q1 2009 due to the continuing improvements in private label penetration, centralized purchasing and pricing management.

 

 Retail unit
Q1, mln RURQ1, mln. USD
20092008ch, %20092008ch, %
Sales4 792.55 582.6-14.2%141.2230.1-38.6%
Gross profit1 450.51 409.82.9%42.758.1-26.5%
% of sales30.3%25.3% 30.3%25.3% 


Selling, general and administrative expenses

Selling, general and administrative expenses dropped by 16.1% in ruble terms from RUR 1 794.5 mln in Q1 2008 to RUR 1 507.9 mln in Q1 2009 due to closure of non-performing stores, reduced headcount and decreased expenses for logistics.

As a percentage of sales, SG&A decreased from 32.1% in Q1 2008 to 31.5% in Q1 2009.

 

 Retail unit
Q1, mln RURQ1, mln USD
20092008ch, %20092008ch, %
SG&A1 507.91 794.5-16.0%44.474.0-40.0%
% of sales31.5%32.1% 31.5%32.1% 



Q1 2009 store level performance of like-for-like stores demonstrated the following results:

 

RUR, mlnQ1 2009Q1 2008ch, %
MoscowRegionsTotalMoscowRegionsTotalMoscowRegionsTotal
Net Sales1 404,51 748,83 153,31 419,22 025,83 444,9-1,0%-13,7%-8,5%
Gross profit485,2458,6943,8431,0488,7919,712,6%-6,2%2,6%
%34,6%26,2%29,9%30,4%24,1%26,7%   
Store level expenses340,8257,4598,2354,7273,8628,5-3,9%-6,0%-4,8%
%24,3%14,7%19,0%25,0%13,5%18,2%   
Rent151,789,2240,9138,182,4220,59,8%8,3%9,3%
Personnel150,8133,0283,8144,5138,7283,24,4%-4,1%0,2%
Other38,335,273,572,152,7124,8-46,9%-33,2%41,1%
Store level
operating profit		144,4201,2345,676,3214,9291,289,3%-6,4%18,7%
%10,3%11,5%11,0%5,4%10,6%8,5%   
Nr comparable stores189430619189430619   


Store level operating profit in Like-for-like stores increased by 18.7% from RUR 291.2 mln in Q1 2008 to RUR 345.6 mln in Q1 2009 due primarily to the recovery of the Moscow – Central Business unit.

Trade accounts payable

At the end of Q1 2009 trade accounts payable reached RUR 5 645.7 mln (USD 166.0 mln) as compared with RUR 4 969.8 mln (USD 211.3 mln) in the similar period last year and RUR 5 667.2 mln (USD 192.9 mln) at the end of 2008 as extended payment terms from manufacturers and suppliers were negotiated and working capital was used to meet financial debt obligations.

Inventory  

Inventory average days turnover decreased to 57 days at the end of Q1 2009 from 70 days at the end of Q1 2008. Inventory has been reduced by 30.9% to RUR 2 319.4 mln (USD 68.2 mln) at the end of Q1 2009 compared with RUR 3 357.2 mln (USD 142.8 mln) at the end of Q1 2008. The reduction resulted primarily from a dedicated program aimed at reducing slow-moving goods in the Company’s assortment. 

Other businesses

Veropharm

For the latest update on Q1 2009 performance please refer to the official press-release of the company as of May 27th, 2009.

ELC

Early Learning Center revenue consolidated by the Group (which is 50% of the total revenue) reached RUR 28.8 mln (USD 0.8 mln), a 31% growth in Q1 2009 versus Q1 2008 in ruble terms driven primarily by organic store openings and a 21.9% increase in L-f-L sales. 

As of the end of Q1 2009, the unit operated 9 stores.

Group financial debt

Group Financial Debt in rubles at the end of Q1 2009 increased to RUR 4 838.3 mln (USD 142.2 mln) from RUR 4 389.2 mln (USD 149.4 mln) at the end of 2008 due to a drop in ruble exchange rate to the dollar and increased debt of Veropharm by RUR 142.2 mln (USD 4.2 mln). At the end of Q1 2009 the Retail unit debt stood at RUR 4 068.3 mln (USD 119.6 mln) with 44.8% denominated in dollars and Veropharm debt stood at RUR 770.0 mln (USD 22.6 mln) with 28.1% denominated in dollars. 98.8% of the Group’s debt is short-term.

Group financial costs and foreign exchange revaluation

Despite a significant decrease of the Group’s financial debt in 2008, in Q1 2009 financial costs grew by 12.5% and reached RUR 301.1 mln driven by a drop in the ruble dollar exchange rate, dollar-based costs associated with the Group’s Glazar JV, and increased interest rates. In dollar terms, the Group’s financial costs decreased by 19.1 % to USD 8.9 mln. Group Q1 2009 foreign currency exchange loss amounted to RUR 328.3 mln (USD 9.7 mln) compared with RUR 2.8 mln (USD 0.1 mln) gain in Q1 2008.

Investments

In Q1 2009 the Group reduced total investments to RUR 24.8 mln in order to conserve cash.

Group net profit

Net loss from ongoing operations1 increased by 4.1% from RUR 623.0 mln (USD 25.7 mln) in Q1 2008 to RUR 648.5 mln (USD 19.1 mln) in Q1 2009.

Underlying Net loss from ongoing operations1 (excluding foreign exchange effect) decreased from RUR 614.2 mln in Q1 2008 to RUR 320.3 mln in Q1 2009, a 47.9% improvement.

1 Ongoing operations results exclude operating results of EMC which was sold in May 2008.
2 Including operating results of EMC
3 Significant worsening of Other Revenue, Other Gross Profit, Other EBITDA and Other Net profit by 50.3%, 66.4%, 177.9% and 215.2% accordingly in Q1 2009 versus Q1 2008 is mainly due to the fact that the Company no longer consolidates the operation of the European Medical Center.
4 Including RUR 100.8 mln minority interest in Veropharm.
5 Including RUR 73.6 mln minority interest in Veropharm.
6 The L-F-L reporting is executed for a selection of comparable stores, which are:

  • opened or acquired 24 months from the current reporting period, and
  • neither rebranded nor reformatted or somehow significantly changed during last 24 months, and
  • not closed in the current reporting period.

As of the end of Q1 2009 the company operates 619 comparable stores which make 66% of sales and 62% of traffic in the retail unit.

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Press-release

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