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Q2-2010 / 1HY-2010 TRADING UPDATE PRESENTATION FOR INVESTORS AND ANALYSTS. August 2010. IMPORTANT NOTICE ( Disclaimer ).

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Q2 2010 1hy 2010 trading update presentation for investors and analysts

Q2-2010 / 1HY-2010TRADING UPDATE

PRESENTATION FOR INVESTORS AND ANALYSTS

August 2010


Important notice disclaimer
IMPORTANT NOTICE (Disclaimer)

This presentation has been prepared by OAO Protek (the "Company"). By attending the meeting where the presentation is made, or by reading the presentation slides, you agree to the following limitations and notifications.

This presentation is strictly confidential to the recipient, may not be distributed to the press or any other person, and may not be reproduced in any form, in whole or in part. Failure to comply with this restriction may constitute a violation of applicable securities laws.

This presentation does not constitute or form part of an offer, solicitation, or invitation to subscribe for, underwrite or otherwise acquire, and should not be construed as an advertisement for, any securities of the Company or any of its subsidiaries in any jurisdiction or an inducement to enter into investment activity in any jurisdiction. Neither this presentation nor any part thereof, nor the fact of its distribution, shall form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever.

The information contained in this presentation has not been independently verified. The information in this presentation is subject to verification, completion and change without notice and the Company is not under any obligation to update or keep current the information contained herein. Accordingly, no representation, warranty or undertaking, express or implied, is made by the Company, directors, officers or employees as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. The Company, directors, officers, employees, affiliates, advisers or representatives shall have no liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with the presentation.

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Some of the information in the presentation is still in draft form and will only be finalised at the time of the Offering. The information and opinions contained in this presentation are provided as at the date of this presentation and are subject to change without notice.


Agenda
Agenda

  • Overview of the market Q2-2010 and 1HY-2010

    • Vadim Muzyaev, President, Protek Group

  • Overview of operational indicators and business

    • Vadim Muzyaev, President, Protek Group

    • Timofei Prokopov, CFO, Protek Group

  • Questions and Answers

Details of the conference-call:

Protek Analyst & Investor Conference Call : Mon, August 9-th, 14.00 UK time / 17.00 Moscow time

PARTICIPANT DIAL-IN NUMBERS:

International: +44 (0)20 8817 9301

Russia Freephone: 81080026174011

Local UK: 0845 634 0041

Password: Protek


Russian pharmaceutical market in q 2 2010

16%

107.7

92.6

2Q-2010

2Q-2009

1,108

1,012

2Q-2010

2Q-2009

Russian Pharmaceutical Market in Q2-2010

  • In Q2-2010the Russian pharmaceutical market has grown by 16%* comparing to Q2-2009 (in rouble terms) and has reached ~ RUR 108 billion.*

  • In terms of packages the market has grownby 10%*, the sales volume reached 1,108 billion* packages in Q2-2010.

  • The commercial segment of the market – strategic segment for the Protek Group – in rouble termshas grown by 7%* comparing to Q2-2009

  • The revival of the market in Q2-2010 is a consequence of an increase in consumer demand

Dynamics of the market, RUR, bln.*

Dynamics in packages, mln.*

10%

* Source: Data from DSM Group for the Ready-Made Medicines market, excluding the parapharmaceuticals segment


Russian pharmaceutical market in 1 hy 2010
Russian Pharmaceutical Market in1HY-2010

277

263

1HY-2009

1HY-2010

Hospitals

12 %

11%

10 %

FRP

Commercial

3.6 %

17%

72%

Commercial

Hospitals

FRP

  • In 1HY-2010 the Russian pharmaceutical market has grown by 5% comparing to 1HY-2009 (in rouble terms) and has reached RUR 277 billion (DSM report)

  • In 1HY-2010in terms of packages the market has grown by 4.0%*, the sales volume has reached 2,226 million packages*

  • The commercial segment – the strategic segment for the Group– in 1HY-2010 has grown by 3.6 % in rouble terms comparing to last year

  • In 1HY-2010 comparing to1HY-2009the market is showing positive results both in volume and in rouble terms. The main reason behind the positive dynamics of volume is a revival of consumer demand. The market dynamics deterrents in rouble terms were: minimal inflation on medicines and stabilisation of price markup after the changes in legislation and regulations on price markup control for Life Essential Medicines

Dynamics of the market, RUR, bln.

Dynamics in packages, mln.*

4.0%

2,226

5%

2,145

1HY-2009

1HY-2010

Source: DSM report, 1HY-2010

Source: DSM report, 1HY-2010

Market structure in 1HY-2010

Dynamics across segments

Source: DSM report, 1HY-2010

* Commercial segment does include parapharmaceuticals

Data from DSM Group for the Ready-Made Medicines market, excluding the parapharmaceuticals segment

Source: DSM report, 1HY-2010

4


Group performance in q2 2010

10.0%

16%

23,202

45,460

41,323

20,000

4%

1HY-2009

1HY-2010

Q2-2009

Q2-2010

Production

5%

Retail

11%

Distribution

84%

Group Performance in Q2-2010

Consolidated sales dynamics,

Q2-2010, RUR, mln.

Consolidated sales dynamics,

1HY-2010, RUR, mln.

  • Consolidated revenue of the Group in Q2-2010 has increased by 16% and reached RUR 23,202mln.

  • Consolidated revenue of the Group in1HY-2010has increasedby 10% and reached RUR 45,460mln.

  • The dynamics of sales growth of the Group in 1HY-2010is well ahead of the 5% market growth in 1HY-2010.

  • In1HY-2010 the Distribution segment was ~84% of the consolidated Group revenue,Retail ~11% and Production ~5% respectively

Business segments share in sales,

1HY-2010, %*

Consolidated sales dynamics,

RUR, mln.

18%

23%

Source: Protek Group IFRS accounts for 2007-2009,

unaudited management accounts Q2-2010

  • Calculated on the basis of revenue for each segment

  • (excludes unallocated revenues and eliminations)


Performance of the distribution segment in q2 2010

21,054

17,869

2Q-2009

2Q-2010

232

+22.4%

189

Q2-2009

Q2-2010

Performance of the Distribution Segment in Q2-2010

Sales Dynamics in Q2-2010, RUR, mln.

  • In Q2-2010 the highest growth within the Group was demonstrated by the Distribution segment – 17.8 %, which has achieved the segment sales ofRUR 21,054 mln. comparing to RUR 17,869 mln. inQ2-2009

  • The volume of sales in terms of packages has increased by22.4% and reached 232million packages comparing to189million packages in Q2-2009

  • The key drivers of the growth in Q2-2010:increase in state-financed sales, large volume of sales on the commercial market, stocking of pharmacies which was delayed in1Q-2010until the changes in legislation and regulations on price mark-up control for Life Essential Medicines came into effect

+17.8%

Source: Protek Group unaudited management accounts

Dynamics in packages in Q2-2010, mln.

Source: Company data


Performance of distribution segment in 1hy 2010
Performance of Distribution Segment in 1HY-2010

41,108

36,868

1HY-2009

1HY-2010

444

+12.0%

397

1HY-2009

1HY-2010

Sales Dynamics in 1HY-2010, RUR, mln.

  • 1HY-2010shows a stable growth of sales by 11.7%, reaching RUR 41,108 mln., comparing to RUR 36,868 mln. in1HY-2009

  • The volume sales in terms of packages has increased by 12.0% and reached 444million packages comparing to397million packages in 1HY-2009

  • The key indicators in1HY-2010:number of customers has increased by~8% and has exceeded 16,000 customerscomparing to 14,870 in1HY-2009, number of items in the product range has increased by~4% and is now about 15,000 comparing to 14,360 in1HY-2009

  • The key factors of the growth in 1HY-2010: increase in sales on the state-financed market, growth of the clientbase, increase in efficiency of the product range

+11.7%

Source: Protek Group unaudited management accounts

Dynamics in packages in 1HY-2010, mln.

Source: Company data

7


Performance of retail segment in q2 2010

2,824

2,680

2Q-2009

2Q-2010

1.2%

0.1%

# tickets, %

Dynamics of a sum

Dynamics of sales, %

on an average ticket, %

-0.76%

Performance of Retail Segment in Q2-2010

Sales Dynamics in Q2-2010, RUR, mln.

  • Dynamics across pharmacies in Q2-2010:

    • Organically opened 19 pharmacies, 3 pharmacies shut down

    • 2 chains (15 pharmacies ) were acquired in April and May 2010

    • Total number of pharmacies by June 30th,2010: 609*

  • Sales growth in Retail (Rigla) has increased by 5.4 % and has reached RUR 2,824 mln. comparing to RUR 2,680mln. in Q2-2009. The dynamics of sales in Retail exceeds the dynamics of the commercial market growth, which in Q2-2010 was ~ 3.6%.

  • The growth of sales in Like-for-Like pharmacies was at 0.1%, which is greater than growth of the previous quarter which was negative 4.3%.

  • Like-for-Like pharmacies have broken the trend with number of tickets decrease: in Q2-2010 L-f-L decrease in number of tickets became less than 1%, whereas in the previous quarter L-f-L tickets have shown negative 11.3 %.

+5.4%

Source: Protek Group unaudited management accounts

Performance of Life-For-Like pharmacies inQ2-2010, %

Source: Protek Group unaudited management accounts

* incl. Zhivika chain


Performance of retail segment in 1 hy 2010
Performance of Retail Segment in1HY-2010

5,646

5,592

1HY-2009

1HY-2010

3.6%

Sales dynamics, %

# tickets, %

Dynamics of a sum

on an average ticket

-1.9%

-5.3%

Sales Dynamics in 1HY-2010, RUR, mln.

  • Dynamics across pharmacies in 1HY-2010:

    • 25 pharmacies were organically opened, 8 pharmacies shut down

    • 2 chains (15 pharmacies) were acquired

  • The sales dynamics of Retail in1HY-2010demonstrates a positive trend which correlates with market growth. The sales in Retail have grown by 1.0% to reach RUR 5,646 mln. comparing to RUR 5,592 mln in1HY-2009

  • The sum on an average ticket in Retail has grown by 3% in 1HY-2009and has reached 262 roubles

  • Like-for-Like pharmacies sales in1HY-2010 came to minus 2%, which is caused by the negative dynamics of minus 4.3% in 1Q-2010

  • The main initiatives in Retail in 1HY-2010, aimed at increasing revenue and traffic: repositioning in terms of prices, adopting multi-format system, development of pharmacies and discount chains, increase of own private label products share (22 products by June 30-th, 2010, share in sales 0.6%), improvement in pharmacies’ staff productivity

+1.0%

Source: Protek Group unaudited management accounts

Performance of Life-For-Like pharmacies in1HY-2010, %

Source: Protek Group unaudited management accounts

9


Performance of production segment in q 2 2010
Performance of Production Segment in Q2-2010

5.24

34.9 %

3.88

Q2-2009

Q2-2010

Q2-2010 Sales dynamics, RUR, mln.

1,307

  • In Q2-2010 the sales in the Production segment have increased by more than 56.8% and came to RUR1,307 mln. comparing to RUR 834 mln. in Q2-2009

  • Volume growth (in terms of packages) has reached34.9% - and became 5.24 million packages, comparing to 3.88 million packages in Q2-2009

  • The share of own brands in the sales has increased from 14% to 22% and has exceeded RUR 181 mln. (+98% increase over Q2-2009)

  • The number of own brand products has reached 22 items (by the end of Q2-2010)

  • The most successful out of the promoted own brands: Eralfon, Amelotex, Neurox, Kompligam, Flamax

56.8 %

834

22 %

14 %

Q2-2009

Q2-2010

Sotex own brands, %

Source: Protek Group unaudited management accounts

Q2-2010 Dynamics in packages, mln.

Source: Company data

10


Performance of production segment in 1 hy 2010

2,458

50.8%

1,630

22

14

1HY-2009

1HY-2010

Sotex own brands, %

10.67

48.0 %

7.21

1HY-2009

1HY-2010

Performance of Production Segment in1HY-2010

1HY-2010 Sales dynamics, RUR, mln.

  • In1HY-2010 the sales in the Production segment have increased by50.8% and reached RUR 2,458 mln. comparing to RUR 1,630 mln. in 1HY-2009

  • Volume growth (in terms of packages) was48% - reached 10.67 mln. packages comparing to 7.21mln. in 1HY-2009

  • The share of own brands in revenue has increased from14% to 22% and has exceeded RUR 339 mln. (+93% increase by 1HY-2009)

  • The growth factors: increase in the sales of own brands on the state-financed market, increase in the sales of licensed drugs, targeted promotion of own brands

Source: Protek Group unaudited management accounts

1HY-2010 Dynamics in packages, mln.

Source: Company data


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