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Amtel-Vredestein NV Retail Strategy Conference Call for Analysts and Investors 18April 2006

Opening Remarks

John Rose, Investor Relations Consultant, Amtel-Vredestein NV

I.Forward-Looking Statement

Good afternoon. Thank you for joining the Amtel-Vredestein Retail Strategy Conference Call for Analysts and Investors. Before webegin, weare required toread our disclaimer regarding forward looking statements. This Retail Strategy Conference Call for Analysts and Investors may contain forward looking statements regarding future events orthe future financial performance ofAmtel-Vredestein NVand its subsidiaries. These statements are not guarantees offuture performance, which issubject torisks, uncertainties and assumptions that cannot bepredicted with certainty. Accordingly, actual outcomes and results may differ materially from those expressed inthe forward looking statements. Amtel-Vredestein NVdoes not intend toupdate these statements toreflect actual results.

II. Agenda

Iwould now like toturn the call over toAmtel-Vredestein CEO, Alexei Gurin, tosummarise our retail business, the expanding tyre market, the opportunities for Amtel-Vredestein, our strategy for capitalising onthese opportunities, our goals and the investment required toachieve these goals, and our projections for financial results.

Retail Strategy

Alexei Gurin, Chief Executive Officer, Amtel Vredestein NV

I. ASignificant Milestone

Thank you, John. Hello, ladies and gentlemen. Asmost ofyou will know, Amtel Vredestein has announced that its new AVTOretail subsidiary has delivered onits promise toexpand its network ofretail service centres to100stores bythe first quarter of2006. Infact, with 104stores our retail network AVTOisnow the number one multi brand tyre service centre chain inRussia. This isavery significant milestone. Itismanagement?s opinion that our current momentum, together with our strategy, will virtually ensure our position asadominant force inthe tyre reseller and auto supplier service space.

II. The Russian Retail Sector

1. Overview

Before wespeak specifically about our business, allow metosay afew words about the Russian retail sector ingeneral and the automotive market inparticular. The retail industry isone ofthe fastest growing sectors inthe Russian economy. Retail growth has surpassed Russia?s GDP growth and forecasts indicate that this trend will continue. Experts estimate that the Russian retail market has grown to$193billion in2004. Retail turnover inMoscow alone isapproaching $50billion. Russia's retail sector isconsidered the most attractive market for retail development inthe world. ATKearney, the management consulting company, ranked Russia number one inits 2004Global Retail Development Index among the top 30emerging markets worldwide. ATKearney pointed toits 142million people, its estimated $280billion inannual consumer spending and tremendous growth trends asjustifications for this ranking.

2. Automotive Market

Russia isthe largest car market inCentral and Eastern Europe and isexperiencing rapid growth inautomotive sales. Inrecent years, foreign brands have been increasing their share ofoverall sales inRussia, with a61% increase insales in2005to567,000 units. Foreign brands? share ofsales isforecasted toincrease from 38% ofthe total new car market in2005toover 50%, with estimated sales ofaround 900,000units, by2010.

3. Tyre Retail Segment

High quality, more expensive cars translate into higher quality, more expensive tyres and other aftermarket sales and services. These are our customers. The tyre retail segment isprimarily comprised ofsingle unit resellers and small chains. Many operate aspart offranchise systems bymajor tyre companies, including Bridgestone, Michelin, Pirelli, Conti, Goodyear and others. Overall, itisafast growing but highly fragmented market that iscertainly ripe for consolidation. This isanoutstanding opportunity for Amtel Vredestein.

III. Strategic Rationale

Amtel Vredestein's rationale for entering the retail business istwofold. First, itisabusiness with tremendous upside for afirst mover who consolidates the market and wins substantial market share inthe fast growing segments. Ultimately, this business could bespun off and/or floated onthe public markets.

Second, itprovides many synergies with our core tyre manufacturing and distribution business. Itprovides direct access toconsumers atacritical point ofsale, where most tyre purchase decisions are made. While the AVTOunits are all multi brand stores, selling tyres from all major manufacturers, the stores will showcase Amtel Vredestein brands through product displays, point ofsale merchandising and salesperson training. Overall, the business has higher margins than the tyre business and offsets the seasonality ofour core business.

IV. Our Strategy

1. Rebranding

Now that wehave reached the first level ofconsolidation, our next step will betorebrand our stores. Our strategy istodevelop two tiers: premium and value for money. InMoscow and StPetersburg, the mix ofpremium tovalue segment will be60:40. Inthe regions, the mix will be20:80. Weplan toexpand across Russia, Ukraine, Kazakhstan and possibly the Baltic countries. Todate, wehave acquired stores inMoscow, StPetersburg, Perm, Nizhny Novgorod, Kaluga, Volgograd, Samara, Rostov and Ivanovo.

2. Building aNetwork

Wehave acomprehensive plan for integrating these stores into acohesive business network with new corporate standards, systems and accountability. Wewill focus onour main retail activities and outsource logistics, including warehousing and distribution. Wehave assembled astrong team ofexperienced retail professionals who operate AVTObusiness asafully owned subsidiary inaseparate administrative facility.

3. Objectives

Our goals will continue tobeaggressive. Our first goal was toexceed 100stores, the size atwhich webelieve critical mass isachieved. Itisvery important tounderstand that this has already been accomplished, aspromised, inthe first quarter. Itisour intention toreach 200outlets bythe end of2006orearly 2007, primarily through acquisition. In200708, wewill grow primarily through construction ofnew stores and ultimately byfranchising, once the brands have been established. Weplan todominate this market and achieve anaverage market share of30%, with market share inthe premium segment of40%. Wewill introduce avariety ofcomplementary products and services toour stores, including afull range ofaccessories, replacement parts, fluids and soon, aswell asservice and maintenance ofexhaust systems, brakes, oil changes and soon.

4. Investment

Clearly, this strategy requires significant investment. Wehave invested $68.7million todate, ofwhich approximately $20million isinvested inreal estate. Weplan tospend $5060million inthe second half of2006, early 2007, toacquire and rebrand anadditional 100outlets. Weplan anew CLN this year tofinance this expansion, aswell asareduced cost ofcurrent debt. Weare weighing other options toreduce the amount ofdebt required for our growth, including apossible sale and leaseback ofreal estate wehave acquired. Another option isareal estate investment trust, which would free upadditional working capital. Wemight also consider equity participation byapartner inthe AVTObusiness. All ofthese options would require the approval ofour supervisory board and nofinal decision has been reached.

V.Financial Projections

Itisimportant tonote that through our consolidation ofthese retail outlets wehave already built abusiness that has anet present value which issignificantly higher than the cost ofacquisition and integration ofthe underlying assets. Our projections for the financial results in2006and beyond continue toberevised and will bereported with our first quarter results. The exact timing ofclosing future outlet purchases and construction schedules for new outlets are difficult toaccurately predict atthis time. However, based onour business model, weproject sales onapro forma basis of$70100million in2006, with average gross margins of2529%. Wealso project average annual sales per square metre ofapproximately RUR 80,000120,000. Todate, wehave acquired approximately 32,000square metres. These figures should give our shareholders considerable comfort aswemove forward with our expansion programme. Thank you very much for listening. Weare ready torespond toyour questions.

Questions and Answers

Bob Kommers, UBS

Good afternoon, gentlemen. You mentioned that you expect retail sales ofaround $70100million in2006. Iwas just wondering how that translates interms ofaverage sales per store.

Alexei Gurin

The question was clear, but Iwould like toremind you that the sales of$70100million are onapro forma basis. Dividing this figure by104stores, the average sales per store isbetween $800,000and $1million. Before acquisitions, the combined sales ofall stores were $83million.

Bob Kommers

That isclear. Also, did you say that you expect agross margin inthe retail activities of2529%?

Alexei Gurin

Yes, that iscorrect. The margins are 3234% inMoscow, around 30% inStPetersburg and 2526% inthe regions. Weexpect the margins inthe regions toincrease, based onthe synergy effects weare achieving through our consolidated sourcing and logistics.

Greg Rybalov, Smith Management

Hello, gentlemen. Could you give some revenue and EBITDA guidance for the near future? Also, what were the figures for the past year?

Alexei Gurin

Doyou mean for the whole company orthe retail business?

Greg Rybalov

For the whole company.

Alexei Gurin

Wehave not yet published the numbers. Weintend topublish our results on28April*, asrequired bythe London Stock Exchange. Atthat time, you will have your answer.

Greg Rybalov

Can you give usthe margin expectations for the overall business?

Alexei Gurin

First ofall, our gross margins have increased significantly since wedisposed ofKrasnoyarsk inVolgograd. Onapro forma basis, the increase ingross margins ofcontinuing operations isaround 20% compared tothe overall operations last year, including discontinued operations.

Greg Rybalov

Isitthe same for EBITDA margins?

Alexei Gurin

Itispretty much the same, but donot forget that weshut down truck tyre manufacturing inVoronezh. Weonly started toreduce overheads after weclosed truck tyre manufacturing. Wecannot cut all overhead costs atonce. Itisaprocess that takes time. The results will bereflected incharges that wetake in2005and the first half of2006. The process isongoing. Also, with the new Voronezh IIproject coming innext year, overall overheads and overhead allocations inVoronezh will beexactly inline with other manufacturing facilities within the Group. Atthe moment, overheads atVoronezh are higher than the average overheads inour manufacturing facilities elsewhere. That iswhy the results are slightly less compatible.

Greg Rybalov

Isee. Soyou will take charges inthe first half ofthis year regarding headcount reductions? How will that compare tolast year?

Alexei Gurin

These charges will bemore in2005, but some ofthe charges not asignificant amount will beinthe first quarter of2006. Wewill show those charges asaseparate line item.

Greg Rybalov

Okay. Can you give usguidance onthe expected EBITDA margins, excluding the charges, going forward? What sort ofEBITDA doyou expect for the whole company in2006?

Alexei Gurin

Unfortunately, wecannot give you the projections. Ican only tell you that the overall EBITDA margin will behigher than in2005. Moreover, our cash flow issignificantly better than our cash flow in2005 asyou can imagine, given that wehave sold our cash negative businesses.

Ron Smith, Alfa Bank

Good evening, gentlemen. Could you elaborate onthe rebranding ofyour individual stores interms ofwhat itmight cost per store and what isactually involved? How intensive isthis process going tobe?

Alexei Gurin

Wedonot expect rebranding costs tobeasignificant expense. First ofall, rebranding costs are included inthe $60million investment in2006and early 2007that Imentioned inmypresentation. Weestimate that itwill bearound $34million.

Ron Smith

Isitjust hanging asign onthe side ofthe building oristhere something more involved? How does itfit with your advertising campaign?

Alexei Gurin

Something more isinvolved, definitely. Itisnot just changing signs; itisalso changing how the stores are configured inside. Weare currently inthe process ofcompleting our brand book. The brand book will beready bythe end ofJune. Assoon asitisready, wewill start our rebranding process. Itismuch more than just signage.

Svegtlan Sukahanovs, Alfa Bank

Good evening, gentlemen. Ihave two follow upquestions, ifImay. The first question isonthe current level ofnet debt. The second question isabout brand recognition. You gave some very impressive figures inthe conference call inNovember oflast year and Iwanted tosee ifyou had any more recent figures; from March orApril, for example.

Alexei Gurin

Onnet debt, wehave not yet reported the figures. Ifyou donot mind, let meget back toyou with the figures. Weestimate net debt tobeinthe ballpark of$450460million. Ican provide you with the precise number indue course. Your second question was onbrand recognition?

Svegtlan Sukahanovs

Yes. Inthe last conference call you gave some quite impressive figures: 70% brand recognition for the AMTEL brand inMoscow and 60% inthe regions, and less impressive figures for VREDESTEIN. Ijust wondered ifyou had more recent figures onbrand recognition.

Alexei Gurin

Unfortunately, wehave not seen the most recent figures, simply because our summer promotion programme isongoing. Weare going tomeasure those results bythe end ofMay. Apparently, wewill get them bythe end ofJune. Interms ofthe figures you quoted, weachieved 75% AMTEL brand recognition inMoscow, StPetersburg and other major cities, and 70% across the regions. The respective figures for the VREDESTEIN brand were 30% inMoscow and StPetersburg and practically zero inthe regions, because wedid not advertise inthe regions aspart ofour winter programme. However, weare doing that atthe moment. The numbers you are looking for will beready bythe end ofJune.

Veronika Lyssogorskaya, ING

Good evening, gentlemen. Ijust wanted toclarify: you said that you shut down the truck tyre production inVoronezh. Isthat right?

Alexei Gurin

That isright. Wedid that inthe second half oflast year.

Veronika Lyssogorskaya

How many ofyour 104stores are inMoscow?

Alexei Gurin

34.

Veronika Lyssogorskaya

Ialso have aquestion regarding your marketing budget. What was your overall advertising budget in2005?

Alexei Gurin

Our overall advertising budget in2005was $8million inRussia and €10million inEurope. The €10million inEurope isthe marketing budget tosupport the VREDESTEIN brand inEurope. The numbers are approximately the same orslightly higher for this year. Ithink itis$8.5million. Weare not only supporting the brand, weare also building the brand including national television advertising.

Veronika Lyssogorskaya

How does that compare tothe marketing budgets ofyour competitors, such asMichelin?

Alexei Gurin

Some ofour competitors, Michelin and Goodyear, are spending alittle bit more but weare inline. Ithink weare number three ornumber four interms ofinternational tyre manufacturers? spending onadvertising and promotion inRussia.

John Rose

Thank you, everyone, for joining the Amtel-Vredestein Retail Strategy Conference Call. Thank you and goodnight.

*Amtel-Vredestein isplanning topublish the financial results ofFY2005, 1Q06onMay 16, 2006asitwas previously announced inthe press-release dated 30January 2006. This Full Transcript was produced byUbiqus Reporting (+44(0) 2072690370)

20.04.2006
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