X5 Misses Third Quarter Earnings Estimates as Finance Costs Rise

X5 Retail Group NV (FIVE), Russia’s largest food retailer by sales, reported third-quarter profit that missed analyst estimates as finance costs grew.

Net income for the three months through September was $12.1 million, versus a $2.1 million loss a year earlier, Moscow-based X5 said today in a statement. That compared to an average estimate of $33 million, according to seven analysts surveyed by Bloomberg.

X5, part-owned by billionaire Mikhail Fridman’s Alfa Group, has suffered a slowdown in sales growth after years of expansion driven by store openings and rising consumer spending in Russia. Third-quarter sales were little changed in dollar terms year-on- year at $3.62 billion, while the nine-month figure was also unchanged at $11.5 billion.

The company has been without a chief executive since Andrei Gusev quit suddenly in July. Board member Stephan DuCharme has been at the helm on a temporary basis. The shares have fallen 24 percent this year, while main competitor OAO Magnit (MGNT) is up 70 percent.

The third-quarter margin for earnings before interest, taxes, depreciation and amortization was 6.1 percent, missing analyst estimates of 6.2 percent.

Third-quarter finance costs at X5 rose by almost 25 percent as short-term debt and interest rates increased. The average effective interest rate for January through September was 8.5 percent versus 7.7 percent a year earlier as the company converted dollar debt into rubles, it reported.

X5 trails Krasnodar, Russia-based Magnit in terms of profitability and market value. Magnit is valued $16.7 billion in London compared with X5’s $4.7 billion. X5 remains Russia’s biggest retailer by sales.

X5 sales grew 8.2 percent in ruble terms for the nine months through September, the company said. Russia’s food retail market is set to grow 12 percent this year, VTB Capital reported in September.

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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