Company presentation February 2018ir.eurotorg.by/file/Eurotorg_Company_presentation_JPM_GEM.pdf ·...

Minsk, Belarus

Confidential

Company presentationEUROTORG – the largest retail chain in Belarus

February 2018

Disclaimer (1/2)

2

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THIS PRESENTATION IS STRICTLY CONFIDENTIAL TO THE RECIPIENT, MAY NOT BE DISTRIBUTED TO THE PRESS OR ANY OTHER PERSON, AND MAY NOT BE

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MEANS THIS DOCUMENT AND ANY ORAL PRESENTATION MADE, ANY QUESTION AND ANSWER SESSION CONDUCTED AND ANY OTHER INFORMATION DISCUSSED

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3

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THIS PRESENTATION NOR ANY COPY HEREOF MAY BE SENT, TAKEN OR DISTRIBUTED IN THE UNITED STATES OR TO ANY U.S. PERSON (AS SUCH TERM IS DEFINED IN

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BELOW) ARE PROVIDED AS AT THE DATE OF THIS PRESENTATION AND ARE SUBJECT TO CHANGE WITHOUT NOTICE. MATTERS DISCUSSED IN THIS PRESENTATION

MAY CONSTITUTE FORWARD-LOOKING STATEMENTS.

FORWARD-LOOKING STATEMENTS INCLUDE STATEMENTS CONCERNING PLANS, OBJECTIVES, GOALS, STRATEGIES, FUTURE EVENTS OR PERFORMANCE, AND

UNDERLYING ASSUMPTIONS AND OTHER STATEMENTS, WHICH ARE OTHER THAN STATEMENTS OF HISTORICAL FACTS. THE WORDS “BELIEVE”, “EXPECT”,

“ANTICIPATE”, “INTENDS”, “PLAN”, “ESTIMATE”, “AIM”, “FORECAST”, “PROJECT”, “WILL”, “MAY”, “MIGHT”, “SHOULD”, “COULD” AND SIMILAR EXPRESSIONS (OR THEIR

NEGATIVE) IDENTIFY CERTAIN OF THESE FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS INCLUDE STATEMENTS REGARDING: STRATEGIES,

OUTLOOK AND GROWTH PROSPECTS; FUTURE PLANS AND POTENTIAL FOR FUTURE GROWTH; LIQUIDITY, CAPITAL RESOURCES AND CAPITAL EXPENDITURES;

GROWTH IN DEMAND FOR PRODUCTS; ECONOMIC OUTLOOK AND INDUSTRY TRENDS; DEVELOPMENTS OF MARKETS; THE IMPACT OF REGULATORY INITIATIVES; AND

THE STRENGTH OF COMPETITORS. THE FORWARD-LOOKING STATEMENTS IN THIS PRESENTATION ARE BASED UPON VARIOUS ASSUMPTIONS, MANY OF WHICH ARE

BASED, IN TURN, UPON FURTHER ASSUMPTIONS, INCLUDING WITHOUT LIMITATION, MANAGEMENT’S EXAMINATION OF HISTORICAL OPERATING TRENDS, DATA

CONTAINED IN THE COMPANY’S RECORDS AND OTHER DATA AVAILABLE FROM THIRD PARTIES. THESE ASSUMPTIONS ARE INHERENTLY SUBJECT TO SIGNIFICANT

UNCERTAINTIES AND CONTINGENCIES WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT AND ARE BEYOND ITS CONTROL AND IT MAY NOT ACHIEVE OR

ACCOMPLISH THESE EXPECTATIONS, BELIEFS OR PROJECTIONS. IN ADDITION, IMPORTANT FACTORS THAT, IN THE VIEW OF THE COMPANY, COULD CAUSE ACTUAL

RESULTS TO DIFFER MATERIALLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS INCLUDE THE ACHIEVEMENT OF THE ANTICIPATED LEVELS OF

PROFITABILITY, GROWTH, COST AND ITS RECENT ACQUISITIONS, THE IMPACT OF COMPETITIVE PRICING AND THE IMPACT OF GENERAL BUSINESS AND GLOBAL

ECONOMIC CONDITIONS. PAST PERFORMANCE SHOULD NOT BE TAKEN AS AN INDICATION OR GUARANTEE OF FUTURE RESULTS, AND NO REPRESENTATION OR

WARRANTY, EXPRESS OR IMPLIED, IS MADE REGARDING FUTURE PERFORMANCE. THESE FORWARD LOOKING STATEMENTS SPEAK ONLY AS AT THE DATE AS OF

WHICH THEY ARE MADE, AND NONE OF THE COMPANY, THE ADVISERS OR ANY OF THEIR RESPECTIVE MEMBERS, DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR

ADVISERS INTEND OR HAVE ANY DUTY OR OBLIGATION TO SUPPLEMENT, AMEND, UPDATE OR REVISE ANY OF THE FORWARD-LOOKING STATEMENTS CONTAINED IN

THIS PRESENTATION, OR TO REFLECT ANY CHANGE IN THE COMPANY’S EXPECTATIONS WITH REGARD THERETO OR ANY CHANGE IN EVENTS, CONDITIONS, OR

CIRCUMSTANCES ON WHICH ANY SUCH STATEMENTS ARE BASED OR TO UPDATE OR TO KEEP CURRENT ANY OTHER INFORMATION CONTAINED IN THIS

PRESENTATION.

Team presenting today

4

Andrei Matsiavin

Chief Investment Officer,

Member of the Board of Directors

Andrei Zubkou

Chief Executive Officer

Alesia Sapunova

Chief Financial Officer

• Over 3 years of experience in retail industry and over 10 years of experience in finance and management

• Joined Eurotorg in 2014

• Over 16 years of experience

in retail industry


• Over 20 years of experience

in retail industry


Table of content

5

Overview of Eurotorg

Belarus economy overview

Eurotorg investment case

Appendix

7

11

14

35

4Q 2017 and FY2017 update 30

Overview of Eurotorg

Eurotorg at a glance

500

Stores1

19%

Market share1

5.3x

Larger than #23

6

Different formats:

from small convenience

stores to hypermarkets2

>20%

Of households are daily

customers5

100%

National coverage4

B- / B-

Fitch / S&P

Source: Company data, Consolidated Group IFRS results

1. As of 31.12.2017 or in 2017. 2. Eurotorg operates two banners "Euroopt" and "Brusnichka" 3. By food retail sales in 2017, compared to the second largest player in Belarus. 4. Eurotorg is present in all 7 regions of Belarus. 5. As of 2017,

calculated as average customer traffic per day divided by number of households as of 31.12.2017. 6. LTM revenue H1 2017 of BYN 3,777 mn, converted to USD based on National Bank of Belarus average USD/BYN exchange rate of 1

USD = 1.93 BYN. 7. As of 30.06.2017 or in H1 2017

7

USD 2.0 bn

Revenue LTM6

9.6%

EBITDA margin7

Key partner

For national food

producers

The largest

Private company in

Belarus4

> 2.5 mn

Active loyalty cards2

0.9 mn

Customers daily (>20%

of households)3

8Source: Company data, National Statistical Committee

1. In 2017. 2. In December 2017. 3. As of 2017, calculated as average customer traffic per day divided by number of households as of 31.12.2017. 4. Eurotorg is the largest private company (by

number of employees) in Belarus in 2017

Essential role in ensuring

national food security

Strong brand awareness

Track record of crisis resilience

108 out of 129

Territory units of Belarus

covered1

~50%

cities and towns w/o

modern retail

competitors1

Eurotorg plays essential role in ensuring food security and affordability for Belarus

population on a national scale

Co-existence

of wholesale

and retail

operations

Source: Company data, publicly available reports

1. Lenta is one of the largest Russian food retailers. 2. Eurotorg was assigned corporate credit ratings of «B-» (Fitch) and «B-» (S&P), in line with Belarus sovereign rating at that moment. Later S&P

(6 October 2017) and Fitch (26 January 2018) raised Belarus’s sovereign credit rating to «B». 3. Eurotorg is the largest private company (by number of employees) in Belarus in 2017

9

The largest private company in Belarus3

National retail champion with 500 stores

1993 1997 2008

Business was

founded

Opening of the 1st

store in Minsk

Focus on

retail

operations

Start of

audited IFRS

accounts

preparation

2016

1 2

2012

Eurotorg

attracted 1st

international

financing – a

long-term

loan from

EBRD

Launch of

wholesale

sections in

hypermarkets

Partnership

agreement with

Lenta1 signed

2010

Eurotorg

became the

1st food

retailer with a

presence in all

regions of

Belarus

Rapid expansion

Roll-out of 450+ stores

Pioneering modern food retail formats in Belarus

Enhanced corporate governance and recognition by international institutions

3

2017

Corporate credit ratings

from Fitch and S&P in line

with Belarus sovereign

rating, achieved2

Successful debut on

international capital

markets with USD 350 mn

Eurobond placement

“Brusnichka” banner launch

Eurotorg’s story

Wholesale

champion

IR web site

ir.eurotorg.by

launch

2018

http://ir.eurotorg.by/

Belarus economy overview

Belarus GDP and GDP per capita vs peers, 2017

25%

18%

17%

18%

7%

15%

Minerals

Chemical products

Food products

Machinery and transportation

Metals

Others

29%

15%

13%

23%

10%

10%

156

104

64 56 53 5339 39

15

Ka

zakhsta

n

Ukra

ine

Be

laru

s(2

022

)

Bu

lga

ria

Cro

atia

Be

laru

s(2

017

)

Se

rbia

Azerb

aija

n

Georg

ia

• Belarus population (as of Jan 2018) is 9.5 mn

• GDP nominal USD 52.8 bn1, GDP per capita USD (PPP) 18.6 thsd1 in 2017

• Foreign trade turnover of USD 63 bn2 in 2017

• Current credit rating (S&P/F/M): B(Stab.) / B(Stab.) / Caa1(Stab.)

• Belarus banking system is well capitalised

• Belarus is ranked #38 (ahead of Turkey ranked #60) in “Ease of doing business”

report by World Bank

• Belarus has been working on rapprochement with Western nations. This is clearly

displayed in the lifting and easing of sanctions throughout 2016-2017

• Significant political stability and maturing political process

• Relations with the EU have been improving and the dialogue with respect to various

initiatives concerning trade, economic and humanitarian cooperation, are ongoing

• In 2017 Belarus made two Eurobond placements totaling USD 1.4 bn at 7.125%

(5.5 year tenor) and 7.625% (10 year tenor) coupons

• Another placement of USD 600 mn at 6.2% (12 year tenor) coupon was made in

21 February, 2018

35,3%

22,9%

13,2%

9,7%

7,8%

5,8%5,3%

Services

Industry

Net taxes on products

Trade

Agriculture, forestry and fishing

Transport

Construction

Export and import structures, 2017

Exports Imports

GDP composition by economic sector, 2017

Belarus is a sizeable and diversified economy focused on foreign

policy development

x.xx.x - GDP per capita (PPP), USD thsd

- GDP nominal, USD bn

26.1 24.122.6 18.6 17.415.1 10.68.7 21.6

Source: National Statistical Committee, Ministry of Finance Source: National Statistical Committee, Ministry of Finance

Source: IMFSource: National Statistical Committee, Ministry of Finance, World Bank

1. On preliminary basis 2. IMF estimates 3. Includes data on trade of goods

11

Belarus is a sizeable and diversified economy

5%10%15%20%25%30%35%40%45%

16.0

3.2

011

20.0

4.2

012

26.0

5.2

013

01.0

7.2

014

06.0

8.2

015

10.0

9.2

016

16.1

0.2

017

1,0

1,2

1,4

1,6

1,8

2,0

2,2

2,4

01.0

1.2

015

03.0

8.2

015

04.0

3.2

016

04.1

0.2

016

05.0

6.2

017

103%88%

81%68%

45% 42% 37%26% 21% 16%

Eg

ypt

Ukra

ine

Cro

atia

Se

rbia

Georg

ia

Be

laru

s

Azerb

aija

n

Bu

lga

ria

Ka

zakhsta

n

Russia

5,5%

1,7%1,0%

1,7%

(3,8%)

(2,6%)

2,4%3,0%

2011 2012 2013 2014 2015 2016 2017E 2018F

External debt decreased over the last years

while foreign reserve assets were resilient

34,0 33,8

39,6 40,0 38,3 37,5 39,6

7,9 8,1 6,7 5,1 4,2 4,97,3

2011 2012 2013 2014 2015 2016 2017 Q3

Gross external debt, USD bn

Foreign reserve assets, USD bn

- USD 0.4 bn

GDP growth is back Belarus public debt is at comfortable level

Local currency volatility decreased

Real GDP growth, % y-o-y Public debt, as a % of GDP in 2017

108,7%

21,8%16,5% 16,2% 12,0% 10,6%

4,6%

2011 2012 2013 2014 2015 2016 2017

21,9%

13,7% 12,9%7,1% 6,7% 4,6% 2,5%

Egypt

Ukra

ine

Aze

rbaija

n

Kazakhsta

n

Geo

rgia

Bela

rus

Russia

Belarus CPI slowed and stabilized in line with

peers in 2017

Belarus CPI for Dec 2011 - Dec 2017 and

comparison with peers’ CPI in Dec 2017, % y-o-y

1

+ USD 2.2 bn

Refinancing rate has been showing a

downward trend

BYN / USD exchange rate dynamics2

1.97

Refinancing rate, %

Exchange rate

stabilized

Source: National Statistical Committee, JP Morgan Source: S&P - Sovereign Risk lndicators (6 July 2017)

Source: National Bank

1. Includes total debt of the General Government, Central Bank,

deposit organisations and other sectors (data as of December 31 of

each year)

Source: National Statistical Committee, Ministry of Finance (IMF)

Source: National Bank as of 15 February 2018

2. Denominated values


12

Continued

downward trend

10.5%

15.0

2.2

018

15.0

2.2

018

ХХ - Sovereign rating (S&P)

B- B- BB BBB- BB+BB BBB- BB+

Belarus economy has stabilised and is set to grow

BBB-

~2 years

14


The largest and

fastest-growing food retailer…

… on one of the most

attractive markets in Europe with

structural barriers to entry for

international players…

… employing a well-diversified

business model, appealing value

proposition and dominant position on

the market…

… with clearly formulated growth

strategy supported by well-invested

asset base…

… delivering strong operational and

financial results…

… supported by prudent

financial policy and strong balance

sheet…

1

2

3

4

5

6

• Revenue (LTM H1 2017) ~USD 2.0 bn1

• Belarusian food retail market share (2017) ~19.0% vs 14.4% in 2014

• 100% national coverage2

• 5.3x times larger than #2 player / #2+#3+…+#9 – altogether still smaller than Eurotorg3

• One of the highest market growth rates in Europe – CAGR of 23% (`11-17 in local currency)4

• Strong food spending growth outlook – CAGR of 9.5% (’16-20E in USD)5

• Modern retail penetration accounts for ~45%6 and selling space provision per capita is 0.6 sqm, which is much lower than in other European countries in 20167

• Strong barriers to entry for international players supported by local legislation and market structure

• Operates “Euroopt” and “Brusnichka” banners with 6 key formats: from convenience stores to hypermarkets

• The only nation-wide logistics system in the country

• Dominant market position with strong customer loyalty

• Potential to grow organically capturing the market share with limited capital investments

• Well-invested and “young” chain: ~77% stores have been opened since 1 January 2013

• Potential for economic efficiency improvements on the back of gross margin appreciation and increased

productivity

• Eurotorg’s average customer traffic density in its stores is 1.2x-2.6x higher than average customer traffic

densities of Magnit8 and X58 in the same formats

• EBITDA margin resilience and strong cash flow generation despite challenging macro conditions

• Robust cash conversion rate of 76% (LTM H1 2017)9

• Eurotorg is focused on deleveraging driven by debt repayment and strong organic EBITDA growth

• Commitment to maintain adequate liquidity position

… managed by proven management

team, and supported by the founders in

business development

7 • Shareholders of the Company have been significantly involved in business development since it was founded

• High standards of business transparency (incl. audited IFRS reports since 2008)

• Key top managers have been with the Company for a long time

• Track record of direct financing from EBRD and leading Russian banks highlighting quality and

transparency of the Company

1. Consolidated Group IFRS results. LTM revenue of BYN 3,777 mn,

converted to USD based on National Bank of Belarus average

USD/BYN exchange rate of 1 USD = 1.93 BYN

2. Eurotorg is present in all 7 regions of Belarus

3. In 2017, by market share

4. According to National Statistic Committee

5. According to Planet retail

6. Company data

7. According to GFK Geomarketing retailers

8.The largest Russian food retailers

9. Cash conversion is calculated as

free cash flow / EBITDA

19,0%

3,6%

17,9%

14,4% 16,7% 18,5% 19,0%

23,2%26,0%

29,0% 29,5%

2014 2015 2016 2017

36

53

47

74

Eurotorg is the only nation-wide retail chain with 100% penetration into regions

Eurotorg is the largest food retailer in Belarus

Market share1 of Top-9 players, 2017, %

Eurotorg’s market share on the food retail market reached ~19%; share of

top-5 players still below European levels

Market shares1 of Top-5 players

Number of stores of the largest

market players, as of 01.01.2018

Eurotorg 500

#4

#2

#5

#3

#4 #5#3#2Eurotorg

X5.3

#2 Combined market share

of #2+ #3…+ #9Eurotorg

8,8% 9,3% 10,5%

Source: National Statistic Committee, Company data

1. By food retail revenue

Source: National Statistic Committee, Company data, Planet Retail


In Belarus In Europe (2016)

65,6%

62,0%

55,0%

50,5%

46,7%

40,5%

29,5%

Germany

France

UK

Czech

Hungary

Poland

Belarus

15

Diameter of the circle corresponds to ~50 km

Number of cities and towns covered by the largest market players,

as of 01.01.2018

10,5%


1 The largest and fastest-growing food retailer…

7212

226 13

71

143

Eurotorg #5#4#2 #3

Undisputable penetration into

cities and towns of Belarus

71 out of 143

cities and towns w/o modern

retail competitors

16

1 The largest and fastest-growing food retailer (cont’d) …

Eurotorg is strongly ahead of its competitors by geographical coverage…

Belarus territory units coverage of the largest market players,

as of 01.01.2018


#4#2 #3 #5Eurotorg

Territory units covered by both Eurotorg and modern format competitors

Territory units where Eurotorg is the one and only modern format player

Territory units where Eurotorg has no presence

… with unique position across smaller cities and towns

… being the one and only modern format player in 35 territory units…

Modern format penetration into territory units in Belarus

Selling space of the largest Belarusian market players in Minsk and

outside Minsk, as of 01.01.2018


71

#4Eurotorg #2 #3

29

278

#5

64 52

22% 45% 19% 79% 69%Share of total

selling space in Minsk

1 964557 1 257 635 697Average selling space

per store

Total selling space

108

1122

613

Retail turnover in Belarus demonstrated strong growth in local currency in 2011-2017 which is expected to continue in 2018-2020

Strong barriers to entry for international players

Retail turnover (incl. VAT)

Source: National Statistical Committee of the Republic of

Belarus

Source: Planet Retail, Infoline, National Statistical Committee of the Republic of Belarus, GFK Geomarketing

17Source: Company data

Local regulation and structure of the market create substantial barriers to entry for international retailers

Access to

real estate

Ability to

replicate

business

model in

Belarus

Limited availability of modern selling space for rent, particularly modern selling space suitable for large supermarkets and hypermarkets

Construction process is highly regulated and sufficient expertise in local market is required to ensure timely and cost-efficient project execution

Elimination of sourcing power and “own brand” advantages available at the home markets

Regulation on the assortment: substantial part of SKUs across majority of categories are required to be of domestic origin

Import duties on certain product categories (e.g. from EU) substantially decrease import’s feasibility

Entry of international player to the market will require substantial time and investments to build relationship with local suppliers (and ensure

good pricing) and develop logistics systems in the country

Acquisition

of local

players

Lack of sizeable targets with well-developed retail chain, logistics infrastructure and appropriate financial reporting standards

Substantial geographical overlap between large players (mostly focused on Minsk and a few large regional cities) limits potential merits of the

consolidation

Source: Planet retail

Food spending CAGR 2016-2020E (in USD)

UK

France

9,5%

9,1%

4,2%

4,2%

3,7%

3,3%

2,4%

2,4%

0,9%

0,9%

0,0%

(1,5%)

Germany

Italy

Spain

Norway

Turkey

Poland

Lithuania

Latvia

Russia

Belarus

Modernformatspenetration in foodretail, %,2016

UK

USA

89%

85%

85%

80%

79%

66%

66%

53%

45%

40%

Germany

Poland

France

China

Brazil

Russia

Belarus

Turkey

Selling space per capita in 2016, sqm

Germany

Norway

1,4

1,3

1,2

1,1

1,1

1,1

1,0

1,0

0,9

0,7

0,7

0,6

France

Lithuania

Spain

UK

Italy

Latvia

Turkey

Belarus

Poland

Russia

2… on one of the most attractive markets in Europe with structural barriers to

entry for international players …

2011 2012 20172013

11.3

2014 20162015

20.2

26.831.8

34.736.9

39.2

BYN bn

18

Format E mini Brusnichka E+ E++ E+++ E++++ TOTAL

Number of stores1

Average selling

space1, sqm

Average number

of SKUs

Selling space

owned1, %

Sales as % of

total sales2, %

Photos of

the format

Key highlights

Multi-format chain – from small convenience stores to hypermarkets

8% 43%18% 58% 100%61%

10% 21% 17% 29% 6%

Convenience

stores

Located in close

proximity to

residential areas

Convenience

stores

Located in dense

residential areas and

near main road traffic

junctions

Urban

supermarkets

Located close to

large neighborhoods

within city

boundaries

Compact

hypermarkets

Located in cities

with population

over 50 thousand

people

Hypermarkets

Located within circular

city roads, close to

transport hubs

~3,650

140

~7,050

436

~12,000

992

~25,700

2,642

~43,000

5,465320

155 137 116 54 35 3

500

557

~3,000 ~6,950

13%

Convenience

Stores

Soft discounter,

focus on the low

and medium price

product segments

Source: Company data

1. As of 31.12.2017. 2. In 4Q 2017

3 … employing a well-diversified business model…

17%

Eurotorg’s average price of the

basic product range is significantly

lower vs competitors

Appealing value proposition and strong positions on the market

Price leadership

Focused assortment

Attractive loyalty card

program

Balanced real

estate strategy

Strong brand with

outstanding customer

traffic

Source: Company information

1. According to the National Academy of Science research, 2016. 2. The largest Russian food retailers. 3. For 4Q 2017. 4. As of 31.12.2017 5. In 2017

The average price of the basic food (including alcohol and tobacco) and non-food products is significantly lower vs competitors1

Consistently recognized as the retailer with the lowest prices across the country

The “focused assortment“ store business model implies offering of limited range of products of the highest demand

Focus on high turnover products supports freshness of the products and low level of shrinkages

The number of active loyalty cards is more than 2.54 mn

~74%5 of all purchases are made using loyalty cards (in money terms)

43% of total selling space is owned by the Company4

Development of convenience stores and supermarkets is based on leased space model

Eurotorg’s average customer traffic in convenience stores (E mini, E+ and Brusnichka) is 2.3x and 2.6x times higher than average

customer traffics of Magnit2 and X52 in the same format respectively3

Strong traffic is further supported by targeted marketing activities

Price leadership Outstanding customer traffic across all formats Loyalty card program

Source: Company data, publicly available reports, for 4Q 2017 Source: Company dataSource: National Academy of Science research, 2016

19

>2.54 mn

Active loyalty cards

~74%5 of purchases

Were made using loyalty cards

(in money terms)

14-20% hypermarkets

14-29% supermarkets

Eurotorg’s average customer traffic in its stores in 2017

Q4 is significantly higher than average customer traffics

of Magnit2 and X52 in the same formats

2.3-2.6x convenience stores

1.7xhypermarkets

1.2-1.5x supermarkets

3 … and appealing value proposition and dominant position on the market …

33%

11% 9% 8% 7%

Eurotorg Gippo Rublevskiy Prostore Korona

83%

7% 5% 2%

Eurotorg Gippo Almi Dobronom

20

Source: Company information, Nielsen Shopper Trends 2016-2017 Minsk, Nielsen Shopper Trends 2016-2017 Gomel

Eurotorg enjoys one of the highest Store

Equity Index (SEI) in Europe1

SEI of European leaders and Eurotorg’s SEI in

Minsk and Gomel, Nielsen 2016

Kaufland (Slovakia)

Albert Heijn (Netherlands)

Mercadona (Spain)

Lidl (Slovakia)

Pingo Doce (Portugal)

ICA (Sweden)

Migros (Switzerland)

Eurotorg (Gomel)

REMA 1000 (Norway)

Biedronka (Poland)

Kaufland (Bulgaria)

Eurotorg (Minsk)

5,4

4,6

4,6

3,8

3,5

3,5

3,5

3,2

3,1

3,1

3,1

3,0

Source: Nielsen

1. Nielsen Store Equity Index ranks retail brands for familiarity,

connection and loyalty

Key competitors

In Minsk (Belarus capital)

Penetr

atio

n

Consumer’s loyalty

25

4

3

In Gomel (regional city)

Penetr

atio

n

Consumer’s loyalty

12

3

Eurotorg has a strong market position both in Minsk and regions

Top-5 “lowest prices” retailers according to the survey results (by share of consumers who mentioned the

retailer as a chain with the lowest prices), 2016, %

In Minsk (Belarus capital) In Gomel (regional city)

Eurotorg has strong positions on the market with unparalleled customer loyalty and value-for-

money image

# # - position on the Belarus market in 2016 by market share

#5#1 #4 #9 #2 #5#1 #3 >#10

3 … and appealing value proposition and dominant position on the market (cont’d) …

Supply chain Supplier partnership

3 modern distribution centres and 2 warehouses

with total 90.5 k sqm storage space


2. Eurotorg is present in all 7 regions of Belarus. 3. As of 31.12.2017

21

Sales structure, H1 2017, % of retail sales

(incl. VAT)

Suppliers structure, H1 2017, %

of purchase volume (ex. VAT)

By country of origin By product mix

Own truck fleet

Centralisation

~80%Capacity utilisation

~60% ~175Vehicles

Balanced real estate strategy

The only retailer in Belarus with fully integrated nation-wide logistics system

Eurotorg’s presence and logistics support strong relationships with

suppliers

Total selling space owned3120 k sqm

Selling space / total space owned343% / 51%

Formats of stores6

Penetration into regions2100%

Key statistics

Development strategy focused on the roll-out of smaller format stores on a

leased basis

Sustainable relationships with landlords due to Eurotorg prudent rent payment

policy and long-standing cooperations

Low price / low cost execution

Limited share of imported goods

Low concentration of suppliers

Strong sourcing power supported by Eurotorg scale and favourable payment

terms

Strong relationships with largest Belarus producers

Price leader in Minsk

Balanced approach to pricing strategy to ensure sustainable profitability

Well-developed loyalty programme

Nationwide customer outreach campaigns

10,8% 11,2% 11,8% 12,7% 12,7%

Source: Company data, publicly available reports4. (EBITDA + rent expenses) / revenue

Solid EBITDAR4 margin (H1 2017) achieved


1. Eurotorg owns 2 distribution centres and leases one distribution centre and 2 warehouses

(Dixy)

4 … and supported by well-executed operations …

Top-1021%

#10-2011%Other

68%

Private label11%

Own-produced products

10%

Other79%

Belarus74%

Other26%

Increasing market share driven by organic growth initiatives with EBITDA and profitability growth due to vertical integration and increased productivity

22

Potential to

grow the gross

margin and to

improve

productivity will

drive EBITDA

growth

Potential to

grow

organically

capturing the

market share

with limited

capital

investments

Market composition by format and market share1 of Top-10 players, 2017, %

Modern format – 45%Non-modern format – 55%

Eurotorg – 19.0%

#2 – 3,6%

#3 – 2.4%

#4 – 2.3%#5 – 2.1%

#6-10 – 8.6%

Other players – 62.4%


Attractive low price model and strong brand awareness

will enable Eurotorg to grow organically capturing the

market share

Fundamentals for modern retail format development and

general economy growth

Balanced real estate strategy with focus on moderate roll-

out of convenience (E-mini and E+ formats) stores on

rented selling space

Gross profit initiatives

Better supplier terms supported by shorter payment cycle

and enhanced by Eurotorg’s sourcing power

Further development of partnership relations with its

suppliers and facilitation of competition between them

Focus on increasing a share of sales of private label

products, non-food products and own-produced products

SG&A costs optimisations

Potential to increase personnel productivity through

personnel trainings and operations optimisations

Opportunities for further efficiency gains due to natural

proximity of stores and operational leverage (i.e. sourcing

power)

Gross profit as % of revenue vs trade payables days, 2016

Magnit, 27.5%

Dixy, 26.7%

X5, 24.2%

O’KEY, 22.9%

Eurotorg (2016), 23.3%

LENTA, 22.1%

Eurotorg (H1 2017), 26.6%

20,0%

22,0%

24,0%

26,0%

28,0%

30,0%

35 45 55 65 75 85

Gro

ss p

rofit m

arg

inTrade payables days

Eurotorg’s sales structure, H1 2017, % of retail sales (incl. VAT)



4 … and supported by well-executed operations (cont’d) …

10% own-produced products

11% private label products

8% non-food products

67 121 203

298

438 453 500

160

221

257

97

182

6,6% 7,4% 7,1% 5,5%

9,6%

22,3% 23,0% 23,3% 22,4%26,6%

2014 2015 2016 H1 2016 H1 2017

EBITDA (BYN mn) EBITDA margin (%) Gross profit margin (%)

55103

129

192

251271 278

2011 2012 2013 2014 2015 2016 2017

Eurotorg achieved strong financial results with resilient margins …

Selling space and number of stores, eop, k sqm / stores

… and outperformed Russian retail peers

Selling space, k sqm

Number of stores

Integration of 80+ stores,

acquired in Nov-Dec 2015


23

EBITDA, EBITDA margin and Gross profit margin

Source: Consolidated Group IFRS results

5 … delivering strong operational and financial results

29,0% 27,0%21,3%

12,0%

(9,4%)

(23,3%)

27,7%22,9% 25,7%

18,6%

7,4%

16,6%

EBITDA and revenue growth CAGR 2014-2016, in local currency, %


EBITDA growth CAGR Revenue growth CAGR

(Dixy)

30,9% 29,9%

21,2% 19,6% 18,8%

8,9%

Source: Companies disclosure

Selling space growth CAGR 2011-2017, %

(Dixy)

24

5 … delivering strong operational and financial results (cont’d)…

48 34

31

31

60 63

72 56

3 7 7

7

(9) (22)

(34)

(18)

2014 2015 2016 H1 2017

Inventory days Payable days

Receivable days Cash conversion cycle (negative)

Investment in trade payables resulted in better terms

from suppliers increasing gross profit margin significantly

Cash generated from operating activities, BYN mn

Capex profile, in BYN mn


Net working capital includes: inventories (retail and wholesale only), trade receivables and trade payables

Working capital dynamics

Free cash flow generation, in BYN mn


Inventory days: inventories (retail and wholesale only) * 365 / COGS; Payable days: trade payables * 365 /

COGS; Receivable days: trade receivables * 365 / revenue; Cash conversion cycle: inventory days + receivable

days – payable days


Free cash flow is calculated as net cash from operating activities minus capex plus proceeds from disposals.

Cash conversion is calculated as free cash flow / EBITDA

297

121200

347389 418

2014 2015 2016 LTM

Net cash from operating activities

326

186

76 52

2014 2015 2016 LTM

262

121

(104)

229

328 383

2014 2015 2016 LTM

% Cash conversion

n.m. 103% 127%

% Capex as % of revenue

6.2% 2.1%13.5%

(243)

(XX) NWC BYN mn

Strong cash flow generation supported by high profitability and limited capex requirements

(122)

1.4%76%

(6.7%) (3.2%)

% NWC as % of revenue

Significant new stores

openings

1. LTM metric - the figure for 2016 less the figure for H1 2016 plus the figure for H1 2017

2. Working capital figures are divided by LTM revenue or LTM COGS

1

1 1

2


openings


openings


openings

BYN 121 mn

investment in

working capital

Capex BYN 121 mn

investment

in working

capital


Capex is calculated as acquisition of PP&E plus acquisition of intangible assets

25

6 … supported by conservative financial policy…

Focus on deleveraging

Dividend policy

Balanced debt structure

Adequate liquidity and

timely debt servicing

• Focus on deleveraging and enhancing interest coverage metrics driven by debt repayment and strong

organic EBITDA growth

• Strong cash flow generation supported by limited capex requirements thanks to well-invested and

“young” (~77% stores have been opened since 1 January 2013) retail chain and store roll-out strategy

focused on leased space model

• No material dividend distributions since August 2014 with strengthened free cash flow directed at pro-

active debt management

• Prudent financial policy with respect to shareholder distributions (general restricted payments thresholds

of 3.5x Net Debt / EBITDA prior to 1 January 2019 and 3.0x Net Debt / EBITDA after 1 January 2019 in

the proposed issuance)

• Opportunistic diversification of the debt portfolio currency mix towards BYN

• Smooth debt maturity profile with proactive refinancing of short-term borrowings

• Commitment to maintain adequate liquidity position

• Conservative use of financing with relatively low payables level

• Track record of orderly debt servicing – no payments suspended through the recent economic crisis or

before


Eurotorg is committed to maintaining sustainable and prudent financial policy

26

6 … strong balance sheet and well-balanced debt portfolio…

Net debt and net debt / EBITDA

Source: Consolidated Group IFRS results, National Bank of Belarus

Ratios are calculated in reported currency (BYN). Net debt is calculated as the sum of short-term and long-

term loans (including obligations under finance leases) minus cash and cash equivalents. 1. Converted to

USD based on National Bank of Belarus end of period USD/BYN exchange rate

4,8x5,6x

4,7x

3,6x

2014 2015 2016 H1 2017

Net debt / EBITDA xxx Net debt1, USD mn

648 668 618 634

EBITDA / Interest and financial lease expenses

3,3x

2,1x 1,9x

2,5x

2014 2015 2016 H1 2017

EBITDA / Interest and financial lease expenses

xx Interest and financial lease expenses1, USD mn

41 66 69 71

Focus on deleveraging…

… and comfortable interest coverage

2

2

Source: Consolidated Group IFRS results, National Bank of Belarus

Ratios are calculated in reported currency (BYN). 1. Based on National Bank of Belarus USD/BYN exchange

rate: due to hyperinflation, 2014 figures converted based on end of period exchange rate; 2015, 2016 and H1

2017 figures converted based on average exchange rates

2. LTM metric - the figure (i.e. EBITDA or interest and financial lease expenses) for 2016 less the figure for H1 2016 plus the figure for H1 2017. Net debt is as of H1 2017

Eurobond placement significantly improved maturity schedule…

… and optimized debt structure

157114 99 110 114

19

20222018 2019H2 2017-2018 20212020

Debt maturity by year as of 2018, USD mn

Source: Company data. Debt includes banks debt, bonds and loans.

aft

er

Eu

rob

on

ds,

as o

f 31 D

ecem

ber

2017

befo

re E

uro

bo

nd

s,

as o

f 30 J

un

e 2

017

38 3790 123 18

100

250

2018

190

2019

1

2020 2021 20232022

373

Total H2 2017-2020: USD 369 mn

Total 2018-2020: USD 77 mn

Debt maturity 2018-2023: 3,1 years

Debt maturity 2018-2023: 4,4 years

By type of debt By type of interest payment

By lender By currency

43%

57%

13%

15%

12%

51%

8%

Sberbank

BelVeb

Belarusbank

Alfa-bank

Other

Eurobonds

74%

22%

3%

1%

USD

BYN

EUR

RUB

33%

67%

Floating

Fixed

Source: Company data. Debt includes banks debt, bonds and loans on February, 2018. Increase by June 31, 2017

Secured

Unsecured

Unsecured

increased: +37 pp

Fixed

increased: +7 pp

BYN

increased: +4 pp

Eurobond

maturity

Application of the 8.75% 2022 Eurobonds Proceeds

27

Eurobonds Cash Proceeds Use, m USD

345

40

121

91

45

17

513

Net Eurobonds

Proceeds BANK BELVEB

BELAGROPROMBANKBPS-SBERBANK ALFA-BANK

8

BELGAZPROMBANK

BANK VTB BANK MOSCOW-

MINSK

4

OTHER DEPOSIT ACCOUNT

Eurotorg debuted on international capital markets with USD 350 mn Eurobond issuance in October 2017

The Eurobond placement had a number of positive impacts on Eurotorg financial standing, including:

Debt maturity extension: current average debt maturity is 4.4x years vs 3.1x prior to Eurobonds issuance

Decrease of the average interest rate by 1.8 pp:

• Out of which 1.1 pp - due to the Eurobond placement;

• Out of which 0.7 pp - due to the successful refinancing of the remaining loan portfolio;

The interest rate decreased most significantly in the loans with Bank BelVEB (-3.7 pp), Belgazprombank (-2.5 pp), Paritetbank (-2.0 pp)

Increase of the proportion of unsecured debt from 20% (June 2017) to 57% (February 2018)

The Company converted a sizeable portion of loans into local currency: the share of loans nominated in BYN increased from 18% (June 2017) to 22% (February 2018)

Diversification of funding sources: the share of the largest lender (Sberbank) was decreased from 39% (June 2017) to 13% (February 2018)

Source: Company data.

28

7… managed by proven management team, and supported by the founders

in business development

49,75%49,75%

0,50%

Litinvest

ltd.

(Sergey

Litvin)

49.75%

Curgil

Ventures

ltd.

(Vladimir

Vasilko)

49.75%

Storass

ltd.

(Andrei

Zubkou)

0.5%

Eurotorg LLC

Legal structure:

Philip

Artemenko

Retail Sales

Director

Andrei

Zubkou

CEO

Alexander Litvin

Chairman of the

Board of

Directors

Management

Alesya

Sapunova

CFO

Vladimir Vasilko Sergey Litvin

Andrei Matsiavin

Member of the

Board of Directors,

Chief Investment

Officer

Vladimir Vasilko

Member of the

Board of Directors

Sergey Litvin

Member of the

Board of

Directors

Shareholders

Board of Directors

Andrei Zubkou

Andrei Zubkou

Sergey Litvin

Vladimir Vasilko


Ownership structure, %: Management structure of Eurotorg, LLC:

Evgeny

Zhygimont

First Deputy

CEO

Alexander

Shuliak

Commercial

Director

Igor

Vorobyov

Head of

Marketing

Vladlen

Atroshkin

Operations

Director

4Q 2017 and FY2017 update

30

Key achievements in 2017

Operating highlights Strategic highlights

Net retail sales1 increased by 5.5% year-on-year and

reached BYN 3.57 bn (net retail sales in USD terms

increased by 8.6% y-o-y and amounted to USD 1.85 bn2).

Like-for-like sales showed moderate growth of 1.1% in

2017, with a 7.5% decrease in LFL traffic offset by a 9.3%increase in the LFL average ticket.

In 4Q 2017 LFL sales improved and showed 3,9% growth,

with a 2,9% decrease in LFL traffic offset by a 7,0%increase in the LFL average ticket.

As of 31 December 2017, the Company operated 500

stores with 278.5 ths sqm of total selling space.

In 2017 Eurotorg added 47 new stores with 7.8 ths sqm of

selling space3.

In 2017 the Company further expanded its regional

presence, entering 20 new cities and towns across Belarus

(143 covered as of 31 December 2017 vs. 123 as of 31

December 2016).

In line with the Company’s mid-term strategy of developing

smaller format stores using leased space, the average

selling space of stores opened by the Company in FY 2017

was 231 sqm, 92% of which were in leased premises.

In August 2017 Eurotorg introduced the soft discounter

segment to Belarus with the launch of a new store format

under the Brusnichka brand. This new format is best

tailored to customers’ current needs and will strengthen the

Company’s existing “limited assortment” model with a long-

term view to maintaining its position as the market leader.

In 2017 the Company continued to run its one-of-a-kind

nationwide lottery game “Udacha v pridachu” and launched

a new “Bonsticks” marketing campaign to further strengthen

customer loyalty and brand awareness.

The share of purchases with loyalty cards increased by 2.6

pp y-o-y in 2017 up to 73.7% of retail sales. The number of

active cards increased by 9.5% y-o-y to 2.47 mn in

December 2017.

Source: management accounts

1. Numbers here are preliminary and have not been reviewed or audited by the Company’s auditor. 2. Retail sales represent revenue from stores operating under the Euroopt and Brusnichka banners, net of VAT. This number differs

from consolidated IFRS revenue, which also includes proceeds from wholesale, lease, and subsidiaries (Status Bank and others), and other revenue. In 2016 net retail sales of the grocery stores represented 93% of consolidated IFRS

revenue. 3. Revenue of BYN 3.57 bn, converted to USD based on National Bank of Belarus average USD/BYN exchange rate of 1 USD = 1.9318 BYN

54

82

95

140

2011

29

2012 20162013

15

121

2014 2015 2017

67

203

298

438453

500

47

31

Retail chain expansion: asset-light approach to new store openings in new

geographies mostly on rented space

Key facts Regional expansion throughout Belarus

Number of stores and net openings, e-o-p

Net openings in the period

Number of stores, e-o-p

Territory units where Eurotorg has no presence

Territory units within Eurotorg’s footpint as of 01.01.2017

Territory units where Eurotorg entered in 2017

territory units within Eurotorg’s

footpint as of 01.01.2018

territory units where

Eurotorg entered in 2017

108

+12

592 sqm

Leased selling space of

newly opened stores, %

Owned selling space of

newly opened stores, %50% 61%

80%

50% 40%20%

2011-2013 2014-2016 2017

Average selling space

of newly opened stores, sqm

545 sqm 231 sqm

xx

Breakdown of selling space of newly opened stores and

average selling space of newly opened stores, % and sqm

12

34

4Q 2016 4Q 2017

453

500

3,1x

increase in net openings

in 2017 over 2016



Y-o-y

92%89%90%66%79%78%76%

хх % of open leased stores

10.6%

4.5%7.0%

11.4%

2.8%

6.5%

11.3%

7.5%6,9% 5,7%2,0%

7,4%

32

Operating highlights

Eurotorg increased its retail sales by +5.5% y-o-y in 2017 … … with LFL sales showed significant improvement by year-end …

… still maintaining sales density growth … … far ahead of Russian market leaders by traffic density

Net retail sales, BYN mn (%)

4Q

’16

3Q

’16

1Q

’16

2Q

’16

4Q

’17

1Q

’17

2Q

’17

3Q

’17

784 852 863 883 838 901 881 949

Net retail sales, BYN mn Growth rate, y-o-y, %

Source: Company’s management accounts

Net retail sales per sqm per month, USD (%)

561544

2016 2017

3.1%

579571

4Q 20174Q 2016

1.4%

Convenience stores Supermarkets Hypermarkets

Traffic per sqm per month, 4Q 2017

69

76

85

176Eurotorg

X5

Dixy

Magnit

48

52

62

64

77Eurotorg

Dixy

Lenta

X5

Magnit

22

31

31

38

53

Dixy

Eurotorg

X5

Magnit

Lenta

Y-o-y

LFL average ticket, %

-2.7%-5.8%-9.7%

-6.0%-1.8%

-9.3% -8.0%-2.9%

LFL traffic, %

LFL performance, %

1Q ’16 2Q ‘16 3Q ‘16 4Q ‘16 1Q ‘17 2Q ‘17 3Q ‘17 4Q ‘17

LFL sales, %

4.6%

0.0%

-1.6% -1.1%

4.0%

0.9%

3.9%

0.6%

Y-o-y

Source: Companies’ disclosure

3 383 3 568

1 701 1 847

20172016

5.5%

8.6%

BYN mn USD mn

33

Brusnichka profile

Brusnichka snapshot Outstanding operating results

soft discounter

more aggressive price positioning, characterised by a limited

range of high-turnover products in the low and medium price

segments, a lack of price promotions, and strong price-leadership

communication

a lower number of SKUs (3.0 ths in Brusnichka vs. 7.0 ths in E+)

target store size of 300-350 sqm

Segment

Positioning

SKU

Store size

New format rapid start

Brusnichka stores’ openings per month in 2017

137

15

49

35

80

112

62

26

188

Oct

2017

Sep

2017

Jul

2017

Aug

2017

1

1

Nov

2017

10

Dec

2017

In August-December 2017, Eurotorg launched 137 Brusnichka stores

with total selling space of 43.9 ths sqm. 125 out of 137 stores were

opened in place of existing Euroopt stores.

1.8x higher than Company’s

average sales density

Newly opened Brusnichka stores

Former Euroopt stores

Number of Brusnichka stores, e-o-p

Photos of Brusnichka

2.2x higher than Company’s

average traffic density

+68.2%net retail sales growth

y-o-y in 4Q 2017

The launch of Brusnichka has had a positive impact on Eurotorg’s overall

performance demonstrating multiply higher sales and traffic density

and strong net retail sales growth in 4Q 2017



Appendix

Key financial indicators in 2014-H1 2017 Key highlights


1. Operating income plus D&A. 2. Calculated as inventories (retail and wholesale only) plus trade receivables minus trade payables. 3. For 1H 2017 NWC as % of LTM revenue. 4. For LTM revenue, EBITDA or interest and financial

lease expenses are shown (the figure for 2016 less the figure for H1 2016 plus the figure for H1 2017). 5. Net debt is calculated as the sum of short-term and long-term loans (including obligations under finance leases) minus cash and

cash equivalents. 6. Acquisition of PP&E plus acquisition of intangible assets. 7. Free cash flow is calculated as net cash from operating activities minus capex plus proceeds from disposals

Top-line

growth

Debt profile

Strong

margins

Working

capital

development

Strong

cash flow

generation

• Top line growth over the last years is driven by

successful stores roll-out and average ticket growth

• Growing gross margin is driven by economies of scale

and general efficiency gains, favourable payment terms

(decreasing payables days), greater sourcing power and

product mix optimisation

• The Company managed to control SG&A actively

focusing on personnel operational efficiency, business

processes optimizations and pro-active negotiations with

landlords

• Despite recent economic shocks these initiatives resulted

in Eurotorg’s EBITDA margin resilience in 2014-2016 and

significant increase to 9.6% in H1 2017

• Eurotorg is committed to maintaining sustainable and

prudent financial policy and is focused on deleveraging

driven by debt repayment and strong organic EBITDA

growth and enhancing interest coverage metrics

• Track record of orderly and timely debt servicing – no

payments suspended through the recent economic crisis

or before

• Effective working capital management to achieve optimal

yet sustainable working capital levels

• In H1 2017, Eurotorg invested in trade payables and

received better terms from suppliers increasing gross

profit margin significantly

• Strong operating and free cash flow to be further

supported by Eurotorg’s plans to focus on more capex

light strategy rolling-out convenience stores on leased

selling space

• Potential for value extraction via leasebacks of owned

selling space

35

Financial performance overview

P&

LL

eve

rag

e a

nd

ca

sh

flo

w

BYN mn 2014 2015 2016 H1 2016 H1 2017

Net stores openings 95 140 15 7

Revenue 2,408 2,987 3,639 1,759 1,898

% growth 24.0% 21.8% 7.9%

Gross profit 537 687 849 393 505

% of revenue 22.3% 23.0% 23.3% 22.4% 26.6%

Selling and distribution expenses (402) (524) (656) (323) (356)

O/w rental expenses (36) (62) (86) (43) (42)

% of revenue (1.5%) (2.1%) (2.4%) (2.4%) (2.2%)

EBITDA1 160 221 257 97 182

% margin 6.6% 7.4% 7.1% 5.5% 9.6%

Operating profit 126 167 184 62 141

% margin 5.2% 5.6% 5.0% 3.5% 7.4%

Net finance costs (incl. FX exchange loss) (177) (590) (233) (185) (75)

Gain on net non-monetary position 82 0 0 0 0

Income tax expense (benefit) (12) 99 7 19 (7)

Loss from discontinued operations (6) (10) 0 0 0

Profit (loss) for the period 13 (335) (43) (104) 59

% margin 0.5% (11.2%) (1.2%) (5.9%) 3.1%

Net working capital2 (44) (127) (243) (122)

% of revenue3,4 (1.8%) (4.2%) (6.7%) (3.2%)

Net debt5 768 1,240 1,211 1,226

Net debt5 / EBITDA1,4 4.8x 5.6x 4.7x 3.6x

Interest and financial lease expenses (48) (104) (136) (65) (66)

EBITDA1,4 / Interest and financial lease expenses4 3.3x 2.1x 1.9x 2.5x

Capex6 (326) (186) (76) (36) (12)

Proceeds from sale of PP&E 22 68 15 3 5

Net cash from operating activities 200 347 389 171 79

Free cash flow7 (104) 229 328 138 72


1. Loss before tax (reported) plus exchange loss plus allowance for impairment 36

EBITDA to profit before tax reconciliation

EBITDA to profit before tax reconciliation

For 2016, BYN mn

257,4 (73,9)

183,5 (121,9)

(14,5)(11,2)

(7,0)(5,1)

(73.2)

0.1

(49,4)

73.25,1 29,0

EBITDA D&A Operatingprofit

Interestexpense

Expensesunder

finance lease

Bankcomission

FX trade Allowancefor impairment

Exchange loss Interestincome

Lossbefore tax(reported)

Exchange loss Allowancefor

impairment

Adjustedprofit

before tax

Adjustments for non cash

expenses


expenses


expenses


expenses

• Negative net profit in 2016 was driven

by a few non-cash expenses

1

• Belarus banking sector consists of 27 active banks: 5 state-owned, 14

controlled by foreign investors and 8 controlled by private local capital1

• The NPL ratio of Belarus is relatively low

• Stricter rules for classification and provisioning of impaired assets,

introduced by the National Bank in 2016, coupled with unfavorable

economic conditions led to an increase in NPLs (mainly in the public sector)

• The average refinancing rate has been showing a downward trend: from 34.5%

in 2012 to 21.2% as of 2016 year-end. Since mid-April 2017, the refinancing

rate decreased even further to 10.5% as of February 14th, 2018

• Banks have increased regulatory capital ratio and tier 1 capital by 3.5 pp and

3.2 pp respectively since the end of 2013

24,7%

20,8%

15,5%17,4%

18,7% 18,6% 19,0%

18,8%

14,6%

10,5%

11,5%13,0% 13,0%

13,7%

2011 2012 2013 2014 2015 2016 2017 Q3

Adequacy of the regulatory capital, % Capital adequacy ratio / Tier I capital, %54

9%

24%

64%

3%

44%

33%

20%

3%

Total: USD 15.3 bn Total: USD 18.3 bn

+3.5%

+3.2%

Key parameters of the banking sector

Banking sector capital adequacy ratios increasedDeposits by customer type as

of 2016

Loans by borrower type as

of 2016

A range of measures were implemented by the regulator in order to

improve the governance and to protect banks


4. As per Basel Ill, regulatory capital consists of Tier I and Tier II, capital previously subject to regulatory

restrictions excluded; off-balance reserves for doubtful losses deemed as necessary; trust property assets;

previously issued senior loans; subordinated loans.

5. Capital Adequacy Ratio (Basel II) / Tier I Capital (Basel Ill) since 01.02.2016

Individuals

Non-bank Financial

Institutions

Private Sector

Public Sector

Source: National Statistical Committee, National Bank1. Excluding banks in process of liquidation. 2. Converted with USD/BYN exchange rates of the National Bank as of December 31st of each year. 3. Share of assets from groups III, IV and V to gross assets (Problem assets and non-performing loans according to classification of Bank Loans as per National Bank of the Republic Belarus )


37

Belarus banking system is well capitalised

1. Excluding banks in process of liquidation.

2011 2012 2013 2014 2015 2016

Total assets, USD bn2 56.1 38.5 44.5 47.1 39.7 32.4

Deposits / liabilities 38% 45% 44% 45% 47% 47%

NPL1 0.6% 0.7% 1.3% 0.9% 1.9% 4.0%

Problem assets3 4.2% 5.5% 4.4% 4.4% 6.8% 12.8%

Return on total assets 1.6% 1.8% 1.9% 1.7% 1.0% 1.3%

Return on the regulatory capital 14.9% 12.7% 13.8% 13.1% 8.4% 10.8%

In tems of GDP per capita, Belarus is close to BB rated countires Belarus public debt is at comfortable levels

Belarus enjoys positive budget balance… … and sustainable level of current account

Source: S&P - Sovereign Risk lndicators (14 December 2017), Ministry of Finance, National Statistical

Committee, IMF

5,95,4

3,5

Median BB Belarus Median B

42%46%

61%

Belarus Median BB Median B

1,0%

(3,0%)

(4,0%)

Belarus Median BB Median B

(4,2%)

(2,5%)

(2,0%)

Median B Median BB Belarus


Committee, IMF


Committee, IMF


Committee, IMF

Belarus scores well on key credit metrics vs its peers

38

GDP per capita (nominal), USD thsd, 2017

Budget balance, as a % of GDP in 2017

Public debt, as a % of GDP in 2017

Current account, as a % of GDP in 2017

Contact details

39

Andrei Matsiavin

Eurotorg, Chief Investment Officer

+375 44 500 65 45

[email protected]

Investor Relations

Denis Denisov

EM, Moscow

[email protected]

+7 985 410 3544

Peter Morley

EM, London

[email protected]

+44 7927 186 645

International Media

mailto:[email protected]

mailto:[email protected]

Company presentation February 2018ir.eurotorg.by/file/Eurotorg_Company_presentation_JPM_GEM.pdf ·...

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