Magnit net profit climbs 31% in Q2 - consensus forecast
MOSCOW. Aug 24 (Interfax) - Russian retailer Magnit achieved a rise in net profit in the second quarter and was able to improve its profit margin compared to a record low indicator in the first quarter of 2011, analysts say.
According to a consensus forecast based on evaluations from 13 investment companies and banks polled by Interfax, Magnit net profit to International Financial Reporting Standards climbed 31% to $88 million after a drop of 5.5% in the previous quarter.
Anticipated revenue growth for the second quarter matches indicators disclosed by the company earlier. Analysts say revenue grew 60% year-on-year to $2.9 billion.
Magnit EBITDA went up 55% to $197 million. The EBITDA margin was 6.8% compared to 7% in the second quarter of 2010.
Magnit achieved an improved profit margin compared to a fall to 6.3% in the first quarter.
The retailer shifted its policy of cutting prices to partially placing the burden of growing end prices on the consumer, Uralsib said. An increase in the social tax and higher fuel expenses had a negative impact on Magnit's profit margin in the first quarter but in the second quarter, Magnit was able to level out these expenses by increasing revenue.
In addition, large scale hypermarket expansion led to a surge in personnel expenses in the first quarter caused but this should not be partly compensated by revenue from the new stores Troika Dialog analysts said.
The gross profit margin continued to go down in the second quarter (one percentage point down from the first quarter to 21.9%), Renaissance Capital analysts forecast. They expect a slight (2%) drop in net profit in ruble terms to 1.97 billion rubles from 2.01 billion in the second quarter of 2010. This is due to a drop in the operating profit margin and a rise in interest rate spending.
Magnit recently reduced its revenue and EBITDA margin forecast for 2011. "The company continues to concentrate on a strategy of aggressive development and attraction of customers. The forecast for revenue growth in 2011 is 46%-48% in ruble terms and the EBITDA margin will not exceed 7.5% in 2011" the retailer said in a press release. It had previously forecast a 49% climb in revenue and an EBITDA margin of 8%.
Magnit management will comment on its financial indicators on Wednesday and what they say will have an impact on the outlook, Investcafe said. Reduced forecasts can be attributed to the retailer's aggressive expansion. It plans to open a large number of new hypermarkets at the end of the year. "This means that spending on personnel will continue to climb at a rather fast rate and this will put pressure on the second half profit margin. Thus, even an EBITDA margin of 7.5% will not be easy," analysts say.
Magnit releases its Q2 financial report to IFRS on Wednesday, August 24.
Magnit results forecast for Q2, $ mln
| Revenue | EBITDA | EBITDA margin,% | Net profit | |
| Bank of America Merrill Lynch | 2 904 | 194 | 6.7 | 97 |
| Citi | 2 905 | 196 | 6.7 | 78 |
| Deutsche Bank | 2 926 | 199 | 6.8 | 71 |
| Goldman Sachs | 2 912 | 198 | 6.8 | 92 |
| Morgan Stanley | 2 905 | 194 | 6.7 | 76 |
| UBS | 2 904.4 | 203.3 | 7 | 96 |
| UniCredit | 2 905 | 192 | 6.6 | 80 |
| Alfa Bank | 2 904.4 | 199 | 6.8 | 83.8 |
| VTB Capital | 2 912 | 202 | 6.9 | 107 |
| Metropol | 2 817 | 202 | 7.2 | 107 |
| Renaissance Capital | 2 847 | 178 | 6.3 | 68.7 |
| Troika Dialog | 2 908.4 | 203.6 | 7 | 102.6 |
| Uralsib | 2 911 | 200 | 6.9 | 84 |
| Consensus | 2 897 | 197 | 6.8 | 88 |
| Q2 2010 | 1 808 | 127 | 7 | 67 |
| Change | 60.2 | 55.1 | -0.2 p.p. | 31.3 |
Magnit is Russia's largest retailer by store numbers. It was managing 4,547 stores at the end of July 2011 (4,435 convenience stores, 69 hypermarkets and 43 drugstores).
Net profit to IFRS went up 21.3% in 2010 to $333.7 million, revenue grew 45.2% to $7.77 billion and EBITDA was up 24% to $631.5 million.
