OREANDA-NEWS. September 19, 2011. OJSC Pharmacy Chain 36.6 [RTS:APTK; MICEX:RU14APTK1007], the leading Russian pharmaceutical retailer, announces unaudited sales and operational results for Q2 and H1 2011 according to the management accounts.

Group sales[1]

Group’s consolidated Net[2] sales reached RUR 5 464.7 mln  in Q2 2011 versus RUR 5 212.3 mln in Q2 2010, a 4.8% increase in ruble terms y-o-y;

Pharmacy Retail Net Sales increased by 7.4% in Q2 2011 in ruble terms and reached RUR 3 554.4 mln versus RUR 3 309.5 mln in Q2 2010;

Net Sales of finished goods of the production unit Veropharm increased by 0.3% in Q2 2011 in ruble terms and reached RUR 1 714.8 mln versus RUR 1 710.3 mln in Q2 2010;

Non-core business Net sales increased by 11.8% in Q2 2011 in ruble terms and reached RUR 217.1 mln versus RUR 194.1 mln in Q2 2010;

Group’s consolidated Net sales reached RUR 10 810.8 mln in H1 2011 versus RUR 9 749.4 mln in H1 2010, a 10.9% increase in ruble terms y-o-y;

Pharmacy Retail Net Sales increased by 8.0% in H1 2011 in ruble terms and reached RUR 7 264.6 mln versus RUR 6 725.6 mln in H1 2010;

Net Sales of finished goods of the production unit Veropharm increased by 18.0% in H1 2011 in ruble terms and reached RUR 3 154.8 mln versus RUR 2 673.2 mln in H1 2010;

Non-core business Net sales increased by 15.9% in H1 2011 in ruble terms and reached RUR 422.4 mln versus RUR 364.5 mln in H1 2010;

Early Learning Center revenue consolidated by the Group (which is 50% of the total revenue) reached RUR 113.7 mln in H1 2011, a 40.1% increase in ruble terms versus H1 2010 (RUR 81.2 mln). As of the end of Q2 2011 Pharmacy Chain 36.6 operated 19 ELC stores.

In Q2 2011 growth in Net sales of the Group is mainly due to Retal Net Sales increase (+8%);

In H1 2011 the most significant growth is demonstrated bythe production unit Veropharm (+18%).

Valeria Solok, Chief Executive Officer of the Management Company “Pharmacy Chain 36.6”:

Q2 2011 results confirm the positive trend started in H2 2010. The strategy accepted in the previous year, the aim of which is the Company’s profitability and operational efficiency improvement, has proved its substantiality. As a result – the Company continues the strengthening its position on the Russian pharmaceutical market and in spite of the complex market conditions demonstrates confident increase of the main operational factors.

Retail

In accordance with the provisions of the Tax Code, From 1 January 2011, changes restricting utilisation of the special tax regime — Imputed Earnings Tax (IET) 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 statistics of sales performance of retail segment in Q2 and H1 2011 versus Q2 and H1 2010, hereinafter in this part of the press-release Sales figures and Average check data are given in Gross Sales including VAT.

Sales

Pharmacy Retail Gross Sales (including VAT) increased by 13.4% in Q2 2011 in ruble terms and reached RUR 3 922.5 mln versus RUR 3 458.3 mln in Q2 2010;

In Q2 2011 average check across the network (including VAT) stood at RUR 309.2, in Moscow – RUR 409.8, an increase of 27.8% and 21.2% respectively in ruble terms versus Q2 2010;

Pharmacy Retail Gross sales (including VAT) increased by 14.6% in H1 2011 in ruble terms and reached RUR 8 054.4 mln versus RUR 7 027.4 mln in H1 2010;

In H1 2011 average check across the network (including VAT) increased by 24.8%in ruble terms and reached RUR 304.1, versus RUR 243.8mln in H1 2010;

Retail Sales growth rate (Gross) significantly exceeds the market growth rate in ruble terms (In H1 2011 commercial market segment increased by 11.8%, In Q2 2011 increased by 10.4% — agreed to DSM Group).

As of the end of H1 2011 Pharmacy Chain 36.6 operated 983 stores in 29 regions of Russia.

During Q2 2011 7 stores were opened organically and 14 were closed;

During H1 2011 13 stores were opened organically and 19 were closedd;

During H1 2011 32 stores were rebranded;

As of the end of H1 2011 Pharmacy Chain 36.6 operated10 stand-alone optical outlets and 19 additional optical departments within pharmacies.

Like-for-like sales in comparable stores[3]

As of the end of Q2 2011 Pharmacy Chain 36.6 operates 828 comparable stores.

In H1 2011 L-F-L sales (gross, including VAT) growth reached 17.2% versus H1 2010;

In Q2 2011 L-F-L sales (gross, including VAT) growth reached 15.1% versus Q2 2010;

In Q2 2011 L-F-L average check stood at RUR 309 (including VAT), a 27.7% increase in ruble terms y-o-y;

Sales per trading sq.m. (including VAT)

In Q2 2011 sales per trading sq.m. in L-F-L stores increased by 19% in ruble terms and reached RUR 61 460 thousand versus RUR 54 479 thousand in Q2 2010

Consumer traffic

In H1 2011 consumer month-to-month traffic correlates with the market trend: there is a substitute increase of high-income customers share (with an average check level more than 500 rubles), and a partial outflow of the low-income customers (with an average check level below 200 rubles). The above trend was influenced by customers’ flows redistribution between market retail players (due to increase of a number of discounters). The traffic negative dynamic in H1 2011 reached 5.9% versus H1 2010. A slight traffic fall in H1 2011 was completely compensated by an increase in average check level (In H1 2011 24.8% growth versus H1 2010) – growth in retail gross sales in H1 2011 equalled to 14.6% and 17.2% in ruble terms for all stores in Like-for-Like respectively.

Private label

In Q2 2011 the private label sales in L- F- L stores reached RUR 413 mln (gross sales, including VAT), which represents a more than 50 % growth in ruble terms versus Q2 2010;

In Q2 2011 a share of private label sales in the total gross turnover (including VAT) reached 10,68% (compared to 8,48% in Q2 2010);

Number of SKUs increased by 43.55% from 884 at the end of Q2 2010 to 1269 by the end of Q2 2011. Pharmaceuticals constitute the major part of private label goods assortment; a share of OTC drugs, vitamins and supplements equals to 9% of the private label goods turnover.

In H1 2011 the private label sales in L- F- L stores reached RUR 775 mln (gross sales, including VAT), which represents a more than 69.02 % growth in rouble compared to H1 2010;

In H1 2011 a share of private label sales in the total gross turnover (including VAT) reached 11,57% (compared to 8,23% in H1 2010).

In 2011 the Company plans a consistent growth of private label SKUs number (up to 1600 SKUs) as well as a private label goods share increase both in the total turnover (up to 13.3%) and within every product category and subcategory and in every geographical region. The Company anticipates that favourable market environment demand for the private label goods together with the launch of new products will contribute significantly to the retail profitability in the current year.

[1] Hereinafter – these financial indicators may vary from the consolidated financial reporting prepared in accordance with IFRS.

[2] Net sales – Sales excluding VAT.

[3] Comparable stores are defined as stores:

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

Not closed in the presented reporting period.