Pharmacy Chain 36.6 Q3 update

Russia-based Pharmacy Chain 36.6 has reported results for the first nine months of 2008. Net retail sales reached USD642.1 million ( 34.1%) including the effect from M&A ( 8%) and organic opening activity ( 5.5%). Sales in the third quarter of 2008 decreased by 5% versus Q2 driven by both the closure of non-performing stores as well as seasonal factors. The retail operations posted a gross margin increase from 25.3% in Q1 to 26% in Q2 and further to 31.1% in the third quarter as improvements in private label penetration, centralised purchasing and pricing management took effect. The cumulative gross margin for 9M 2008 is 27.4%. In dollar terms, like-for-like sales increased by 19.6% in the third quarter and by 17.6% percent year-to-date. Commenting on the results, Jere Calmes, President, said: “We achieved some noteworthy successes over last year in our Q3 results. In the latest reporting period, we have successfully sold a portion of our closed end real estate fund which improved our Q3 net profit result and reduced our debt. In the retail unit, we were able to deliver a positive EBITDA on the back of a healthy recovery in our gross margin and a significant reduction of SG&A as a percentage of sales. However, the current business environment remains extraordinarily tenuous and operational results are being negatively impacted. The company’s management is working with the Board of Directors to find solutions for financing the business through these difficult times and will continue to focus on addressing working capital needs and streamlining operations.”

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