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CORRECTED-(OFFICIAL)-Russian retailer Lenta remains cautious after tough H2
February 16, 2017 / 9:55 AM / in 8 months

CORRECTED-(OFFICIAL)-Russian retailer Lenta remains cautious after tough H2

(Company corrects H2 adjusted EBITDA, paragraph 5)

* 2016 net profit up 9 pct

* H2 net profit fell 6 pct

* Private consumption still sluggish

* Capex up 73 pct on new stores, Kesko deal

MOSCOW, Feb 16 (Reuters) - Russian food retailer Lenta reported a 9 percent rise in annual net profit on Thursday but warned a slower second half pointed to further margin pressure in 2017 as consumers’ budgets remain tight.

Despite signs of a recovery in the Russian economy due to a rise in oil prices, private consumption, the biggest driver, has yet to pick up.

Lenta reported a 9 percent rise in net profit to 11.2 billion roubles ($196 million) but noted its second-half performance fell by 6 percent to 6.9 billion roubles.

“Continued deterioration in consumers’ purchasing power combined with increasing price sensitivity and promo orientation is putting additional pressure on retailers,” the company said.

Adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) rose 13 percent to 31.8 billion roubles and were up 11 percent in the second half to 18.1 billion.

Its 2016 core profit margin slipped to 10.4 percent from 11.1 percent as it cut prices to attract customers while investing in new stores.

Capital expenditure jumped by 73 percent to 54.3 billion roubles as Lenta opened 51 hypermarkets and 17 supermarkets and acquired Kesko’s Russian food retail business.

Lenta is holding a strategy day in London on Thursday where it will provide store opening and capital expenditure guidance for 2017 and new strategic goals.

At least one top shareholder, U.S. private equity fund TPG, is considering reducing its stake in the company, sources told Reuters this week.

$1 = 57.1300 roubles Reporting by Maria Kiselyova; editing by Jason Neely

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