Alfa-Bank - Alfa Group

Vitaliy PodolskiyCFO of X5 Retail Group N.V.“Strong financial results of the Group in 2006 maintain our confidence in successfulrealization of our further investment plans and in our ability to attract necessary capitalfor the execution of these plans.”Key Long-Term Goalsof X5 Retail Group N.V.:PricingNet sales($ in million)YOY Growth = 49.6%3,551■ Preserve and strengthen its position as the leading Russian chain in eachformat and on the food retail market as a whole in order to provideshareholders with the best return on investment in this industry;Group N.V. has clearprinciples guiding its pricing,X5Retailwhich are aimed at giving customersaccess to high-quality products atreasonable prices. In addition to constantlyinvesting in prices, the Company bringsthis into reality also by means of large volumesof purchases and using advantagesprovided by the Company managed distributioncenters: direct deliveries of goodssignificantly reduce product on costs andallow stores to maintain attractive prices.Direct deliveries of large shipments ofgoods also significantly reduce productprices and allow stores to maintain attractiveprice levels.Customers who choose X5 Retail Group’sstores know that they will always find notonly reasonable prices that correspond tothe level of quality and service, but alsointeresting special offers that differentiatethe Group’s stores from its competitors.The stores regularly conduct promotionsand have widespread customer loyalty programs,and offer private label products atthe most attractive prices on the market.20052006Note: Above figures are pro-forma for Pyaterochka, Perekrestok and Merkado supermarketchains for the full years 2005 and 2006Gross profit($ in million)EBITDA($ in million)2,374604226YOY Growth = 63.8%Note: Above figures are pro-forma for Pyaterochka, Perekrestok and Merkado supermarketchains for the full years 2005 and 2006YOY Growth = 31.0%990295(% margin)Gross ProfitGross ProfitMargin(% margin)EBITDAEBITDAMargin■ Support the multi-format concept and focus on three main formats:discounters, supermarkets and hypermarkets;■ Active expansion using organic growth as the primary engine ofdevelopment, while also relying on mergers and acquisitions;■ Develop partnership relations with other market companies, includingdevelopers, financial institutions, suppliers and other partners, to promotenew products and services for customers;■ Complete the integration of the two chains and create an organizationalplatform for rapid and effective Company growth;■ Create an in-house supply chain, including distribution centers andtransportation center, that will guarantee X5 Retail Group N.V. a stablecompetitive advantage;■ Provide the Company’s primary business divisions with the most modern andeffective IT systems;■ Become the best employer on the market by building effective HR processesfor recruiting, training and motivating personnel.Note: Above figures are pro-forma for Pyaterochka, Perekrestok and Merkado supermarketchains for the full years 2005 and 200664 / ALFA GROUP / ANNUAL REPORT 2006ALFA GROUP / ANNUAL REPORT 2006 / 65