Retailer X5 cut profit by 73.8% in 4Q, no dividend planned for 22 years

(Report and presentation details added)

MOSCOW, March 17 (Reuters) – One of Russia’s largest grocery retailers, X5, posted IFRS 16 net income in the fourth quarter of 2022, down 73.8% to 2.1 billion rubles year-on-year, the company said.

Its net profit in 2002 increased by 5.7% to 45.2 billion rubles. The margin on this indicator fell by 20 basis points to 1.7%.

X5 revenue in the fourth quarter of 2022 increased by 16.1% to 705.2 billion rubles, on an annual basis – by 18.2% to 2.6 trillion rubles.

Adjusted EBITDA at the same time fell by 0.9% to 66.8 billion rubles in the fourth quarter, for the year it showed an increase of 12.7% to 305.5 billion rubles.

The profitability on this indicator for the quarter fell by 163 basis points to 9.5%, for the year – by 56 basis points to 11.7%.

The company has announced that it is not waiving dividend payments in the future, but for 2022 it considers the best option for itself to be refusing to pay dividends.

“Given the current market conditions, remaining regulatory restrictions and in line with last year’s profit distribution, the Supervisory Board will recommend to the General Meeting of Shareholders not to pay dividend based on the results for 2022. This is due to a variety of factors, including the need to focus more on supporting customers and suppliers to maintain a stable supply chain and ensure product availability on store shelves.

The company said it remained committed to the long-term goal of distributing the company’s profits to shareholders, but would refrain from making payments “as long as current uncertainty and regulatory constraints prevail.”

FOCUS ON THE FAST GROWING SEGMENT

The company estimates its share in the grocery retail market at 13.2%, and increased the number of stores in 2022 by 11.5% to 21,323.

“Despite external factors that will continue to weigh on the company in 2023, including continued inflation and supply chain instability, we believe that X5’s regional expansion strategy, investments in more affordable retail formats and the continued growth of our online business have created a strong foundation to maintain good results and high growth this year,” quotes the company’s statement quoted by its CEO Igor Shekhterman.

X5 net retail revenue up 16.3% in Q4 2022 driven by 8.3% floorspace growth and 7.9% LFL sales growth, while X5 digital division sales up 35.8% year-on-year .

Revenues of Chizhik discounters increased 12 times in annual terms – to almost 36 billion rubles in 2022, to 35.9 billion rubles, for the quarter – 8 times to 15.2 billion rubles. Piaterochka still accounts for most of the revenue; this indicator for the network increased in the fourth quarter by 14.1% to 560.4 billion roubles, and on an annual basis by 18.3% to 2.1 trillion roubles.

“Given the current macroeconomic situation and the dynamics of real disposable income in Russia, the development of Chizhik, as well as the Pyaterochka chain of stores, will remain key priorities for the company in 2023,” the report reads.

According to her presentation, the company plans to open more than 3,000 Chizhik stores over the next three years. At the end of 2022, the group had 517 such stores.

The revenue of the company’s digital businesses (express delivery, Vprok.ru, 5Post and Mnogo Salos) increased by 46.6% year-on-year to 70.4 billion rubles and accounted for 2.7% of consolidated revenue for 2022.

X5 reduced capital expenditures in 2022 to 81.6 billion rubles from 97.9 billion rubles in 2021, with the largest share – 38% – accounted for the opening of new stores.

The company emphasizes that it prioritizes projects with the highest profitability, with a steady decrease in the share of capital expenditures in revenues.

In 2022, the company significantly increased cash and cash equivalents in its portfolio – to 43.3 billion rubles from 26.1 billion rubles, according to its presentation.

The net debt/EBITDA ratio in accordance with IFRS 16 was 2.58 times as at December 31, 2022. (Olga Popova)