OREANDA-NEWS  On 16 December JSC “The Seventh Continent” (further referred to as the Company) announced 9M and 3Q 2008 unaudited financial results prepared in accordance with International Financial Reporting Standards (IFRS).

The Company’s 9M 2008 net sales increased 34% and reached USD 1 186.8 mn. compared to USD 888.3 mn. in 9M 2007, 3Q 2008 net sales grew 34% and reached USD 395.5 mn. compared to USD 295.3 in 3Q 2007. Food and non-food sales accounted for 95% of total revenues, marketing rental and other revenues comprised 5% of total revenues for 9M 2008 period.

The Company’s gross profit for 9M 2008[1] reached USD 344.6 mn. and gross profit margin totaled 29.0%. 3Q 2008 gross profit reached USD 117.1 mn. with gross profit margin of 29.6%. Some decline in the gross profit margin compareв to last year is mainly driven by expansion of the hypermarket operations including 3 new hypermarkets opened during the 1H 2008. The gross profit margin in the 3Q 2008 improved to 29.6% compared to 28.7% in the 1H 2008.

9M 2008 selling, general and administrative expenses amounted USD 260.8 mn. and grew 34% YoY. 9M 2008 S,G&A expenses as percent of sales reached 22.0%. 3Q 2008 selling, general and administrative expenses amounted USD 88.0 mn. and grew 31% compared to 3Q 2007. 3Q 2008  S,G&A expenses as percent of sales improved to 22.2% compared with 22.8% in 3Q 2007. The major improvement in commercial expenses came from decline in labour costs and operational lease expenses.

The Company’s EBITDA reached USD 105.2 mn. for 9M 2008, with EBITDA margin of 8.9%. 3Q 2008 EBITDA stood for USD 38.4 mn. and EBITDA margin of 9.7%. EBITDA excluding the financial result of the JSC “Finservice Bank” reached USD 112.7 mn. for 9M 2008 and USD 40.1 mn. for 3Q 2008 with EBITDA margin of 9.5% and 10.1% respectively.

Net income for the 9M 2008 reached USD 51.3 mn. and USD 8.9 mn. for the 3Q 2008, with net income margin of 4.3% and 2.3% respectively. Net income excluding the results of JSC “Finservice Bank” amounted USD 58.4 and USD 11.3 mn. for 9M and 3Q 2008, with net income margin reaching 4.9% and 2.9%. Some decline in net income margin compared to last year resulted from increase in interest expenses and loss on the exchange rate reevaluation reported in the other non-operating expense item.

9M 2008 operating and financial income from banking activities stood for USD 36.8 mn., while operating and financial expenses from banking activities amounted USD 44.6 mn.[2]  3Q 2008 operating and financial income from banking activities stood for USD 7.2 mn., while operating and financial expenses from banking activities amounted USD 9.1 mn.

As of 30 September 2008 the Company’s total assets stood at USD 1 442.4 mn., including USD 364.6 mn. of current assets and USD 1 077.8 mn. of non-current assets. Total liabilities reached USD 786.1 mn. and shareholders’ equity stood at USD 656.3 mn. Due to change in its share in the charter capital of JSC “Finservice Bank” the Company no longer fully consolidates the financial results of the Bank in its balance. The Company’s balance includes only proportion of the net assets of the Bank, owned by the Company proportionally to ownership of charter capital.
Net sales of the JSC “The Seventh Continent” in the 9M 2008 increased 34% and reached USD 1 186.8 mn., 3Q sales increased 34% and reached USD 395.5 mn.

[1] 9M 2008 / 2007 gross profit figure is presented including the reclassification of the accounting of the Cost of goods sold in the period. In the reported period the cost of labour involved in own production in the stores is included into the Cost of goods sold, for the previous periods it was included into the S,G&A expense. The reclassification does not affect the operational profit.

[2] Total of operational and financial income and expenses for JSC “Finservice Bank” are reported in the Profit and Loss Statement separately from the rest of operations in the lines “Operating income and financial income from banking activities” and “Operating expense and financial expense from banking activities” respectively.

[1] Total of operational and financial income and expenses for JSC “Finservice Bank” are reported in the Profit and Loss Statement separately from the rest of operations in the lines “Operating income and financial income from banking activities” and “Operating expense and financial expense from banking activities” respectively.