Russian Retail Leader Magnit Surprises With Margin Expansion

PJSC Magnit reported an unexpected widening of its profit margin in the second quarter as Russia’s largest retailer defied the country’s economic slowdown.

Earnings before interest, taxes, depreciation and amortization rose to 12 percent of sales from 11.7 percent a year earlier, the Krasnodar-based company said Wednesday. That was the highest level since last year’s third quarter and beat some analysts’ estimates for a narrowing of profitability.

Magnit’s margin may have benefited from squeezing better terms from suppliers and a recent strengthening of the ruble against the dollar. The company declined to comment on the reasons for its performance ahead of a conference call planned for Thursday.

“Being the country’s biggest retailer they probably managed to achieve better terms with suppliers,” said Marat Ibragimov, an analyst at BCS Financial Group, who had expected the Ebitda margin to narrow to 10.8 percent.

Magnit rose as much as 2.8 percent to $56.07 in London trading, the highest intraday level since June 29.

The margin may have been assisted by a 5 percent gain in the ruble against the dollar in the second quarter, helping Magnit pay less for imported goods, according to Ibragimov.

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