Magnit capex could exceed plan in 2012
MOSCOW. Aug 24 (Interfax) - The Russian retailer Magnit's capital expenditures this year could exceed the company's established plan.
"In 2012 we are now running roughly to $1.5 billion, and might do a little more. It's possible it could be $1.7 billion," Magnit CFO Khachatur Pombukhchan said during a conference call. "At this point, $1.5 billion looks like the more realistic figure," he said.
The current capex forecast for this year is $1.1-$1.4 billion, the company's website says.
The company's 2012 store-opening plans remain the same. "We confirm our opening plans. If there is even a small adjustment, it will only be at the end of the year. For now we understand full well that we will get to the announced figures," Pombukhchan said. Magnit plans to open up to 800 convenience stores, 50-55 hypermarkets, and 550 cosmetics stores in 2012.
The capex forecast for next year also remains the same at around $1.8 billion, he said.
Earlier, Magnit's General Director Sergei Galitsky offered a tentative estimate that the retail might open from 600 to 800 convenience stores this year, 40-60 hypermarkets, roughly 25 Magnit Family stores (these have from 1,000 to 2,000 square meters of floor space), 500 cosmetics stores or more, and also 3 or 4 distribution centers.
In next year's capex is included spending on the construction of a hothouse complex in Krasnodar Territory, Pombukhchan said. "I don't think that we will spend more than $50 million on hothouses next year," he said.
Total investment in the project will be about EUR 350 million, Galitsky said during a meeting with Kuban Governor Alexander Tkachev. The investment is reckoned for a period of three to four years, Pombukhchan said.
Magnit has already put EUR 150-170 million into the complex. By the end of this year, the retailer could be using 50-60 hectares of land, which would represent roughly half of the complex's design capacity, the CFO said. The complex will get to full capacity by 2015-2016.
Magnit is already harvesting cucumbers and tomatoes from 40 hectares, and plans to expand the complex's land area to 120 hectares over the next two years, Galitsky said not long ago.
"Naturally, we expect no change to our main business. We are developing hothouses on the principle that in Russia it's not possible to buy some vegetables of good quality - cucumbers and tomatoes. We need to develop this, so as to meet the needs of our customers," Pombukhchan said during the conference call. He estimated that once the complex is fully up and running, Magnit will be able itself to provide 70% of the product supplied to its stores.
"It is quite hard to estimate, because it is not possible for us today to offer our buyers all the vegetable product they require," he said. "We think that we will cover 70%, probably," he said.
Magnit is Russia's biggest retail network. During H1 2012 the company added a net 413 stores, including 262 convenience stores, eight hypermarkets, two "Magnit Family" stores and 141 cosmetics stores, and increased its selling space by 31.42% in comparison to H1 2011 from 1,612.85 thousand sq. m. to 2,119.53 thousand sq. m. The total store base as of June 30, 2012 reached 5,722 stores, including 5,268 convenience stores, 98 hypermarkets, five "Magnit Family" stores, and 351 cosmetics stores.
Convenience stores, which generate the bulk of Magnit's revenue, boosted sales 16.95% year-on-year in H1 to $5.596 billion, followed by hypermarkets, up 60.83% to $1.084 billion, Magnit Family - $26.03 million ($7.43 million a year previously), cosmetics - $65.3 million ($1.99 million) and wholesale business - $4.41 million ($2.18 million).
