Russia’s largest retailer by sales, X5 Retail Group, has posted a net loss of US$2.15bn after the group registered a goodwill impairment charge in the fourth-quarter.
EBITDA increased 47% during the 12-month period, rising to $803.2m, on sales which rose 45% to $8.89bn.
However, the bottom line was hit by a $2.26bn non-cash goodwill impairment charge related to the company’s 2006 merger of Perekrestok and Pyaterochka. X5 posted a net profit of $155m in 2007.
The group said the charge, which fell in the fourth-quarter, was triggered by the change in X5’s share price. However, X5 emphasised that it does not affect the strategic value of X5’s assets, is not indicative of its cash flow generation and does not have an impact on bank credit arrangements.
As a result of the charge, X5 registered a fourth-quarter net loss of $2.28bn, down from a net profit of $95.2m in the comparable period of the previous year.
Nevertheless, Q4 EBITDA rose 19% on the year to $225.2m. Fourth-quarter sales rose 20% to $2.376bn.
CFO Evgeny Kornilov said that X5 was able to post a robust fourth quarter because the group had adapted quickly to the changing economic landscape.
“In 2008, X5 again delivered robust growth in sales and EBITDA, our key indicator of profitability. Our strong finish in the fourth quarter 2008 was driven by X5’s rapid and effective response to changes in the financial and economic situation as we scaled back CapEx and used healthy cash generation to improve short-term liquidity,” Kornilov said.
“We entered 2009 with a solid financial position, and during the year we expect this to strengthen further through cash flow management, cost control, disciplined investment and deleveraging.”
Looking to the coming year, X5 said that it expected to grow sales and attract customers by increasing its focus on delivering value. The company reiterated its forecast of 25% sales growth in rouble terms.
“In 2009, we will work to further enhance X5’s value proposition to win customers and drive increases in sales and market share, while building financial strength. Our ultimate goal is long-term outperformance, and we believe focused execution of X5’s multi-format strategy offers our shareholders the best opportunities for durable, profitable growth,” CEO Lev Khasis said.