Companies -> ATB-Market

Business description

ATB is one of two largest food retail chains in Ukraine by the volume of annual turnover (UAH 46.7 bln incl. VAT in Y2015) and number of stores (more than 800 as of Q4 2016). Current market share of the company among Ukrainian food retail enterprises is estimated at slightly more than 20%, the share in total Ukrainian retail turnover 4.6%.

The company works in format of discounter with relatively small average trade area per 1 store (close to 500-600 sq m), narrow assortment, but relatively low prices, higher vs. Ukrainian average sales per 1 sq m and fast inventory turnover. Business model of ATB is quite similar to European food retailer Lidl.

ATB Corporation was established in Y1993 in Dnipropetrovsk (now - Dnipro) and firstly developed itself only in Dnipropetrovsk region. In early 2000-s corporation made final decision on stores format, realized re-branding and started active expansion outside its core region, store opening dynamics since that time is represented on the following chart:

ATB Market stores number dynamics

Unlike other companies of Ukrainian food retail sector, strategy of ATB did not imply significant amounts of debt attraction. Apart from reinvested profits the company used open credit provided by its suppliers to finance its development.

Scheme works as follows: as tenor of open credit provided by suppliers exceeds inventory turnover by more than two times (assuming fast period of goods realization - inventory turnover which is the case for ATB), each new store opening provides the company with additional funds for further development. The company prefers to purchase/construct its trade premises (rental agreements are rare).

Two main conditions for proper work of the scheme: fast period of good realization (inventory turnover) and timely payments to suppliers. ATB was perfect with fulfilling of both. The company has fastest Inventory Turnover vs. other Ukrainian chains and good payment discipline to suppliers (ATB is one of the best Ukrainian food retail chain with this respect).

In addition to the right choice of financial model, format of discounter proved itself as absolutely right decision of the company owners. So, while some competitors faced a lot of problems following UAH devaluation and slump of Ukrainian population purchasing power in FYs2008-09, ATB continued its active development and only gained its market share during crisis time. Factually the company established itself as one of clear leaders of Ukrainian food retail market in crisis period of time.

During FYs2010-2013 average annual rate of ATB chain growth made 20%, as a result, in the end of Y2013 number of ATB stores grew by more than 2 times vs. Y2009 (more than 800 stores as of 31.12.13).

On the other side, as the company quite actively developed in the East of Ukraine, ATB incurred significant losses because of Donbass conflict in FYs2014-15. 152 stores and large logistic center remained on the territory not controlled by Ukraine. General manager of ATB Corporation Boris Markov estimated total loss at about UAH 7.0 bln. Taking into account EBITDA of ATB Market in Y2015 made close to UAH 3.0 bln (taking into account financial results of related companies more than UAH 4.0 bln), as the company keeps open new stores (plans for Y2016 implied opening of 100 new stores), we see that despite losses model of ATB remains robust, the company keeps its development.

Last, but not the least, ATB tries to actively develop segment of private labels. According to Boris Markov, current private label share in total turnover of the company reaches 25%. Part of realized goods are produced by related companies (notably, meat-processing factory Favorit with annual turnover of UAH 1.7 bln one of the largest meat-processing factory in Ukraine and confectionary factory Kviten), another part by non-related producers.

ATB Market is owned by three Ukrainian businessmen - Evgeniy Ermakov, Viktor Karachun and Gennadiy Butkevich.

Financial information

ATB Corporation is not public company, so its financials are not publicly available. Below we present key financial figures of ATB-Market (operating company of the group), which are present in open sources, along with estimated by us important financial ratios. Other group entities are above-mentioned meat-processor Favorit, confectionary producer Kviten and asset-holders ATB-Invest, ATB-Torgstroy, LLC Elina.
UAH M 2012 2013 2014 2015
Net Sales (VAT excl.) 21 239 28 159 32 453 38 605
EBITDA 491 467 -34 2 978
EBITDA margin, % 2.3% 1.7% -0.1% 7.7%
Net Profit 284 235 -287 2 362
Inventory Period 25
Payables Period 65

Comments to available financial information:

  • Sales in Y2015 grew by 16.5% vs. Y2014 mainly due to growth of average realization prices (and making adjustment for stores number dynamics). According to general manager of the chain, sales per 1 sq m in real terms remained on the level of previous year.
  • In general ATB-Market has one of the best sales per 1 sq m figure among Ukrainian food retailers (along with Fozzy Group), which is partially related to store format. We estimate monthly sales per 1 sq m of trade area of the chain in Y2015 in the range UAH 7.0-7.5k (excl.VAT) vs. about UAH 5.0k/sq m in Y2012, with growth by 40-45% related mainly to inflation.
  • In Q1 2016 Net Sales increased by 18%, we expect further growth in following quarters. As was already mentioned plans for Y2016 assumed opening of 100 new stores, priority Western Ukraine. Recently some news providers reported about purchase by ATB of part of Lviv-based Barvinok chain.
  • Profitability of the company in Fys2012-13 has been in line with our estimation and market information, taking into account ATB-Market pays rental fees to related asset-holding companies. According to our estimation rental payments to related companies make 2-3% of turnover, which is also close to general market conditions.
  • Historically debt burden of the company has been low. Unlike many peers the company has not been involved into development of full-scale trade centers and was concentrated only on retail business. As main source of its development, apart of reinvested income, the company used open credit provided by its suppliers.
  • Factually this scheme is quite common for Ukrainian (and, of course, not only Ukrainian) food retail chains, but among food retailers of Ukraine, ATB created almost perfect business model: with Inventory Period of 30-35 days and Payables Period (average open credit provided by suppliers) at two times more.
  • Moreover, we estimate that in last two years, as a response to crisis situation (general crisis and situation in Donbass), the company tried to focus on increase of the goods turnover (having Inventory Period period of average goods realization at below 30 days). According to our information payment discipline of ATB to its suppliers remains good. On the other side, having good market share (in some regions we see it (among food retail chains) at above 30-40%), the company has rather good market power vs. its suppliers, which provides additional comfort and margin of safety for further business operations.

As a summary we can estimate current financial standing of the company as acceptable. Business model of ATB proved itself as absolutely right, especially in crisis times, main risks for the chain are general country risk and political risk.

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