OREANDA-NEWS. June 1, 2012. OJSC Pharmacy Chain 36.6 [RTS:APTK;MICEX:RU14APTK1007] — the leading Russian pharmaceutical retailer announces 2011 financial results prepared in accordance with the International Financial Reporting Standards (IFRS), audited by Deloitte.

Sales

Consolidated sales from ongoing operations increased by 6% and reached RUR 21 594 mln.

Gross[1] sales in the pharmacy segment grew by 9% y-o-y in 2011, significant average ticket growth of 23% have compensated for consumer traffic decline.

Net[2] sales in the retail pharmacy segment increased by 1% and reached RUR 14 417mln. As of the end of 2011 Pharmacy Chain 36.6 operated 1005 pharmacies, 10 stand-alone optical outlets and 21 additional optical departments within pharmacies.

During 2011 54 stores were opened organically and 38 stores were closed, thus as of the end of 2011 Pharmacy Chain 36.6 operated 803 like-for-like[3] stores. Gross sales in l-f-l stores in 2011 grew up by 11%.

Profit

The Company’s consolidated EBITDA increased by 25% and reached RUR 2 238 mln.

Consolidated gross profit increased by 14% in 2011 and reached RUR 9 674 mln.

Gross profit of the retail pharmacy segment grew by 13% in 2011 and reached RUR 4 993 mln. The gross profit margin in the retail segment in 2011 improved as a percentage of sales by 4 points from 31% to 35%. The margin improved mainly due to the product mix change focusing on health and beauty and private label products development.

EBITDA in the retail pharmacy segment in 2011 increased to RUR 293 mln. versus RUR 70 mln. in 2010. Selling, general and administrative expenses increased in 2011 by 6% and reached RUR 5 012 mln. SG&A growth in 2011 was caused mainly by a considerable tax pressure on wages and salaries due to an increase of social tax rates since 2011.

Consolidated Net profit before loss on early loan repayment[4] reached RUR 200 mln. compared to the net loss of RUR 391 mln. in 2010; Consolidated Net loss before minority interest improved in 2011 by 26% and reached RUR 288 mln.

Financial debt and investments

Company’s Net Debt (deducting the remaining monetary funds) equaled to RUR 8 383 mln.

As of the end of 2011 consolidated financial debt reached RUR 9 553 mln. which is a slight increase of 2% versus the beginning of the year data. Whereas the retail pharmacy debt equaled to RUR 9 070 mln. and Veropharm’s debt reached RUR 483 mln.

Consolidated finance costs in 2011 increased by 24% and reached RUR 1 559 mln. Commission for the early loan repayment equaled to RUR 489 mln. Foreign exchange currency gain in 2011 equaled to RUR 239 mln.

Consolidated investments in fixed and intangible assets in 2011 reached RUR 912 mln, out of which retail investments in opening new pharmacies and re-branding equaled to RUR 241 mln. Veropharm investments reached RUR 669 mln.

VEROPHARM

For the latest update on 2011 performance please refer to the official press-release of the company as of May 24th, 2012.

ELC

Early Learning Center revenue consolidated by the Group (which is 50% of the total revenue) increased in 2011 by 27% and reached RUR 282 mln. In 2010 year 7 new ELC stores were opened in Moscow, sales of these stores result in significant revenue growth in 2011 year.

Net profit in 2011increased by 6% and equaled to RUR 24 mln.

As of the end of 2011, the unit operated 19 stores.

Andrei Slivchenko, Chief Executive Officer “MC ‘Pharmacy Chain 36,6’”:

“In 2011 Company refinanced all debts denominated in US-dollars, which allowed us to decrease the exposure to foreign currency risk and decrease the average interest rates on the main borrowings. In February 2012 ‘The National Rating Agency’ assigned to OSC “Pharmacy Chain 36.6” an individual credit rating ‘A’ which insures a high creditworthiness of the Company.

Despite the increased tax burden as a result of changes in Russian tax legislation Company’s EBITDA increased by 25%. Significant growth was achieved mainly due to a strategic change in assortment portfolio aiming at the Private label products development and increasing its share in pharmacy sales. In 2011 sales of Private label products reached RUR 1.9 bln. this represented share of 13% in overall pharmacy sales.

The key Company’s objectives for 2012 are: launching a new brand of pharmacy ‘Leko’ aiming at the ‘economy’ market segment and increase of ’36.6’ pharmacies efficiency in order to attract more customers and improve pharmacies returns.

Also we continue developing our private label products, in 2012 The Group’s goal is to increase the share of private label products in total retail sales up to 20%”.

[1] In accordance with the provisions of the Tax Code, from 1 January 2011, changes restricting utilisation of the special tax regime (Imputed Earnings Tax) for pharmaceutical organizations have taken effect. Thus all regional retail companies of the Group Pharmacy Chain 36.6 have switched to a common tax regime, effecting an exclusion of VAT from the Gross Sales. In order to provide comparable datas of sales performance of the retail pharmacy segment in 2011 versus 2010, hereinafter Sales figures are given in Gross Sales including VAT.

[2] Net sales – equal to Gross sales excluding VAT.

[3] Like-for-like stores are defined as stores:

Opened or acquired 24 months prior to the presented reporting period, and

Not closed in the presented reporting period.

Not stood by unattended time for more than 2 weeks in the reporting period due to any reason

[4] In course of credit portfolio optimization and replacement of debts denominated in US Dollars the Company has refinance its debt due to Consortium of investors utilising 5 year credit line with a limit of RUR 4 150 bln which was opened by the Moscow bank of Sberbank in June 2011.