Belarus’s leading supermarket chain Eurotorg Holding reports strong results 2018, mulls second attempt at an IPO in 2019

Belarus’s leading supermarket chain Eurotorg Holding reports strong results 2018, mulls second attempt at an IPO in 2019
Retail is developing quickly in Belarus as a middle class starts to emerge. Leading supermarket chain Eurotorg reported strong 2018 results and is mulling a second attempt at an IPO in 2018
By Ben Aris in Berlin February 13, 2019

The largest food retailer in Belarus, Eurotorg (aka Euroopt) released its unaudited operating results for the last quarter of 2018 and full year ended 31 December 2018 in a press release on February 11.

Retail is developing quickly in Belarus as a middle class starts to emerge. Eurotorg attempted to IPO in 2018, but called off the float at the last minute due to poor market conditions. bne IntelliNews sources close to the company say the chain is contemplating a second attempt in 2019 if market conditions improve.

In 4Q18 net retail sales increased by 14.6% year-on-year to BYN1,087mn ($503mn), with net retail sales in dollar terms increased by 7.3% y/y to $511mn. In the full year 2018 net retail sales increased by 14.2% y/y to BYN4,074mn ($1,89bn), with net retail sales in dollar terms increasing by 8.3% y/y to $2bn.

As of 31 December 2018, the company operated 862 stores with total selling space of 337,500 sqm.

The company also operated 762 grocery stores with total selling space of 320,100 sqm. In 4Q18 Eurotorg added 85 net new grocery stores with 14,200 sqm of selling space. In 2018 the Company added 262 net new grocery stores with 41,700 sqm of selling space.

In 4Q18 the company further expanded its regional presence, entering 46 new localities across Belarus (297 localities covered as of 31 December 2018). In 2018 Eurotorg entered 154 new localities across Belarus.

Positive like-for-like (LFL) sales growth of 2.8% in 2018 was driven primarily by growth of the LFL average ticket (5.6%), which was partly offset by a moderate decrease in LFL traffic (-2.6%). 

LFL sales decreased by -3.4% in 4Q18. Negative LFL traffic of -8.2% was partly compensated by consistent growth of 5.2% in the LFL average ticket, in line with food inflation (5.1%). Some of the decrease in LFL traffic was due to the conversion of soft discounter stores under the Brusnichka banner back into Euroopt stores, which put some pressure on customer traffic but is expected to have a positive impact on gross margin performance.

As of 31 December 2018, the Company operated 100 pharmacies under the Magia brand with total selling space of 17.300 sqm. In 4Q18 net retail sales of the pharmacy business reached BYN13.3mn ($6.2mn).

On a combined basis, the Company’s two online grocery services ( and generated 1mn orders and revenue of BYN53.9mn ($25.3mn) in 4Q18. The expansion of the e-commerce businesses continued to accelerate, with online sales growth of 34.2% y/y in 4Q18. Online grocery retail accounted for 5% of total net retail sales during the quarter.

Strategic highlights for 4Q18

  • Eurotorg continued its expansion with 118 new stores added in 4Q18.
  • In 4Q18 the Company opened 85 grocery stores, bringing the total number of grocery stores to 762 as of 31 December 2018. The key focus remained on developing smaller formats: the average selling space of grocery stores opened in 4Q18 was 167 sqm. Almost all of the new added stores (82 out of 85) were opened in leased premises, in line with the Company’s strategy of asset-light expansion.
  • The Magia pharmacy chain also accelerated its growth, with 33 new stores openings in 4Q18. The total number of Magia stores stood at 100 as of 31 December 2018.
  • In line with its strategic focus on deleveraging Eurotorg significantly reduced its net debt by $37mn in 4Q18 (from $538mn as of 30 September 2018 to $501mn as of 31 December 2018) resulting in overall net debt decrease of $103mn in FY 2018 (from $604mn as of 31 December 2017 to $501mn as of 31 December 2018).
  • In 4Q18 S&P Global Ratings and Fitch Ratings confirmed positive trends in Eurotorg’s credit profile following the Company’s strong results and improved credit metrics in 1H 2018. Fitch upgraded Eurotorg’s Long-Term Issuer Default Rating to ‘B’ from ‘B-’, with Stable outlook. S&P Global Ratings raised the outlook on Eurotorg’s long- and short-term credit ratings to Positive and affirmed the Company’s long-term credit rating at ‘B-’.

Eurotorg CEO Andrei Zubkou said: “The fourth quarter of 2018 capped off another strong year of operational growth for Eurotorg. In 2018 net retail sales rose by 14.2% in BYN terms and reached the $2bn mark.

“We continued our store expansion programme, rolling out more than 360 grocery and pharmacy stores and entering over 150 new localities in Belarus in 2018. As of the end of the year Eurotorg operated a total of 862 stores, an increase of more than 70% year-on-year. 

“Our online and pharmacy businesses are demonstrating robust growth. In the fourth quarter of the year our e-commerce businesses, E-dostavka and Gipermall, accounted for 5% of total net retail sales, putting Eurotorg among the leading companies in Central and Eastern Europe on this indicator. We are continuing to invest in developing our capabilities in this highly promising and fast-growing area. Our pharmacy chain, Magia, reached a landmark of 100 stores as of the end of the year, and in less than one year has become the third largest player on the pharmacy market in Belarus.

“In 2018 we achieved significant results in our strategic objective of reducing both our overall leverage and the share of foreign-currency debt in the total debt portfolio. Net debt decreased by $103mn during the year and stood at $501mn as of 31 December 2018. The share of local-currency debt in the loan portfolio has more than doubled, and stood at 37% at the end of the year. We were pleased that our strong operational track record and continued deleveraging resulted in positive actions from two major international credit ratings agencies.

“Looking forward, we expect that 2019 will be another year of healthy growth. The Company’s financial position remains strong and sustainable, with positive cash flow allowing us to maintain strong growth rates and further decrease our leverage. We will continue to pursue our capex-light strategy by focusing on smaller-format stores in both urban and rural areas, while continuing to diversify our business with the further development of e-commerce and pharmacy offerings.”