First Quarter 2009 BMV: GFAMSA

Transcription

1 First Quarter 2009 BMV: GFAMSA Monterrey, Mexico April 29, Grupo Famsa S.A.B. de C.V. (BMV: GFAMSA) Mr. Humberto Garza Valdéz, Chief Executive Officer, Grupo Famsa S.A.B. de C.V., reports on the company s first quarter 2009 results. Summary of Consolidated Financial Results (millions of Mexican pesos) First Quarter (1) % Var (2) Net Sales 3,377 3, Cost of Sales -1,683-1, Gross Income 1,694 1, Operating Expenses -1,601-1, EBITDA Net Income Gross Margin 50.2% 48.2% EBITDA Margin 6.4% 10.6% Net Margin 1.6% 3.3% (1) Nominal figures (2) Variance calculated from financial statements Letter from the CEO Mr. Humberto Garza Valdéz, Grupo Famsa s Chief Executive Officer, stated: In line with our expectations for this quarter, the economic downturn continued to significantly pressure consumption both in Mexico and the United States. However, the implementation of several initiatives from our comprehensive plan to fight the economic crisis has advanced faster than we originally anticipated. As stated in Grupo Famsa s fourth quarter 2008 results presentation, our plan consists of precise and simultaneous efforts that address three fundamental fronts: 1. Finance, 2. Demand, and 3. Operation. Up to date, Finance has had the most compelling progress of all fronts. During the first quarter 2009, we liquidated Ps$2,339 million in Commercial Paper and conventional Bank Debt. Furthermore, Banco Ahorro Famsa s total funding increased more than 73% in the same period. By the end of March, Bank Deposits as a percentage of Grupo Famsa s total consolidated net funding went from 36% to 58%. Through the development of Banco Ahorro Famsa s operations, we have effectively mitigated our exposure to credit market volatility and are in a position to decrease our cost of funding considerably, allowing us to enhance our retail business by offering more attractive credit conditions to our customers. Regarding the Demand front, we have implemented multiple efforts inside and especially outside our stores in order to stimulate consumption. The integration of our retail and banking platforms reinforce the shopping experience, while diverse marketing efforts involving new and existing customers are intended to increase store traffic. Lastly, starting the last week of December 2008, we implemented an aggressive optimization plan to adjust our operating capacity to the prevailing market conditions. Progress has been such that even despite our growth, some of the main Operating Expense line items have reached levels that are below their 12-month comparable. Relación con Inversionistas: 1 de 10

2 I. Operating Results by Business Unit Store and Banking Branch Openings 1. Stores Closures 1Q09 Openings 1Q09 Net 1Q09 Total Stores Famsa Mexico Famsa USA Banking branches Retail Area (square meters) 1Q09 Total Stores ,451 Famsa Mexico -3, ,568 Famsa USA 2, ,883 Famsa Mexico Famsa Mexico continues implementing initiatives directed at stimulating demand, reinforcing the shopping experience and adjusting its operating capacity to prevailing market conditions. Contact with new and existing customers has not only taken place within our stores; through the door-to-door efforts of our Gran Credito team we obtained approximately 130 thousand new credit applications. Additionally, 980 thousand Direct Mail letters were sent out and 275 thousand effective Telemarketing phone calls were made. Finally, 170 thousand Select customers (close to liquidation) received a special sales pitch from our cashiers during their payment transaction. Moreover, progress in the integration of our banking and retail platforms enhances our customer s shopping experience. Customer Service quality continues being reinforced now that Banco Ahorro Famsa s promoters at most of our stores are responsible for the credit related activities and our sales team focuses on retailing. In addition, the number of customers that make use of their authorized line of credit through the Private-Label Credit Card issued by our bank increased from 190 thousand to 251 thousand during the first quarter. Positive results have also been accomplished from the strict cost control and reduction program we implemented recently to adjust our operating capacity to the generalized slowdown in consumption. For instance, efforts involving Payroll, one of the main Operating Expense line items, have resulted in 14% savings compared to 4Q08 and even 0.4% savings versus 1Q08 despite having added 90 banking branches and 13 new stores in the last 12 months. Lastly, we recently began optimizing our store network s productivity through a selective store closure process. Some of our older, smaller stores operate less than one kilometer away from some of our newer, full-format stores that offer a wider variety of products and a more appealing ambiance. Consequently, we can achieve greater operating leverage by implementing a detailed store closure plan that is designed to consolidate the sales and collection of the older unit into the newer store. During the first quarter, we closed 5 stores with these characteristics in the two cities with the most Famsa locations: Mexico City and Monterrey. Relación con Inversionistas: 2 de 10

3 Banco Ahorro Famsa Banco Ahorro Famsa s development process has maintained extraordinary progress. The bank s credit and savings customer base increased from 0.84 million to 1.37 million during the first quarter Furthermore, total Funding grew from Ps$3,550 million to Ps$6,148 million in the comparable period. The described growth in Funding, as well as the successful integration of our banking and retail platforms drove the share of customer credits financed through Banco Ahorro Famsa as a percentage of Total Credits from 28% in 4Q08 to 55% in 1Q09. Our bank s receivables reached Ps$6,999 million and the non-performing loans ratio (CNBV: indice de morosidad) has remained among the lowest of all comparable Mexican banks. By the end of the first quarter, Bank Deposits made up more than 58% of Grupo Famsa s total net consolidated funding. The fundamental Banco Ahorro Famsa objective of ensuring an optimal source of funding for the millions of credits issued to Famsa Mexico customers is close to being accomplished. The diverse financing options that make up our Bank Deposit base (Deposits, CDs and Promissory Notes) mitigate Grupo Famsa s exposure to conventional credit markets and have already started to reduce the company s cost of funding. Now that we have established a sizeable Bank Deposit base we seek to reduce its cost (1Q09 est avg rate: 9.5%) and extend its maturity (1Q09 est avg maturity: 117 days) in order to align our financing with the credits issued out to customers. For this reason, we launched a new product called InverCEDE Famsa the last week of February. This is a CD that pays an annualized interest rate of 10% with a 10 month maturity, and is guaranteed by the Mexican government ( IPAB for up to 400 thousand UDIS, aprox. Ps$1.5 million). The public s response to this product has exceeded our expectations; Ps$430 million were deposited in March alone, and the cumulative balance before the end of April was Ps$1,000 million. We are rapidly decreasing our average cost of funding by using InverCEDE Famsa to replace more than 50% of our Bank s funding that pays an annual interest rate higher than the 10% we are currently offering. Famsa USA Famsa USA continued limiting the effects of the economic recession by leveraging its diversification and by implementing multiple retail efforts. As in the past months, operating results in Texas and Electronics continue to outperform the rest of the states and the other product categories. Moreover, similar to Famsa Mexico, we have focused our efforts towards stimulating demand and adjusting our operating capacity to the prevailing market conditions. Cross-product promotions that started during 2008 with Digital Televisions now include other attractive Electronics products such as Camcorders, X-Box, PlayStation and Laptops. We have also developed special promotions to motivate repurchases from Select customers with good Famsa history and that are close to liquidation. In addition, new ways of attracting customer visits to our stores are being implemented. For instance, through a joint event with the Mexican Consulate, Mexican Hispanics had the opportunity to apply for a Mexican passport and/or Consular ID at our Anaheim, California store on a given date. Furthermore, we implemented a special tax rebate check promotion through which customers could get up to 10% more by using it to pay for their Famsa USA store purchases. The comprehensive effort to adjust Grupo Famsa s operating capacity applies to every business unit, including Famsa USA. Just as in Famsa Mexico, we have achieved meaningful progress in the implementation of a strict cost reduction and control program. Despite infrastructure growth in the last twelve months, Payroll is only 1% higher than its 1Q08 level, and savings from other line items such as Travel Expenses, Fuel, and Office Supplies have reached savings between 20% and 35% each. Lastly, we also began optimizing the productivity of our store network through a selective store closure process that is similar to the one being implemented by Famsa Mexico. The closure process for two of our South California locations that are less than a mile away from full-format stores is underway. Relación con Inversionistas: 3 de 10

4 II. Financial Results by Business Unit Net Sales (millions of Mexican pesos) (1) Includes sales of other non-retail businesses (2) Includes Banco Ahorro Famsa (3) Variance calculated from financial statements First Quarter % Var (3) Grupo Famsa (1) 3,377 3, Famsa Mexico (2) 2,240 2, Famsa USA 1, Other Intercompany Same Store Sales (percentage) First Quarter Grupo Famsa Famsa Mexico Famsa USA Net Sales During the first quarter, consolidated Net Sales decreased 1.2% to Ps$3,377 million. Famsa Mexico s sales were Ps$2,240 million; 11.6% less than 1Q08. On the other hand, Famsa USA achieved 43.1% quarterly sales growth, reaching Ps$1,136 million. On a dollar basis, Famsa USA s sales grew 3.6%. Consolidated net sales at our stores with more than twelve months of operation (Same Store Sales) decreased -12.4% during the first quarter. Same stores sales decreased -6.6% at Famsa USA, and suffered a -15.8% contraction at Famsa Mexico. Even in the midst of the financial crisis and despite facing an exceptionally high comparable from 1Q08, Famsa USA was able to limit the pressure over its same store productivity. Overall, the sustained deterioration of market conditions, and to a lesser degree, a more conservative view adopted towards the issuance of credit, affected our consolidated sales volume. Cost of Sales and Gross Income Our consolidated Cost of Sales reached Ps$1,683 million during the first quarter, which represents a -2.7% decrease versus last year s quarterly figure. Consequently, the Gross Margin expanded approximately 200 basis points to 50.2%. Therefore, Gross Income totaled Ps$1,694 million; 5.4% higher than 1Q08. Credit sales, including the issuance of personal loans, as well as Famsa USA s growth, continue contributing significantly to Gross Margin expansion. Relación con Inversionistas: 4 de 10

5 Operating Income before Depreciation and Amortization (EBITDA) (millions of Mexican Pesos) First Quarter % Var (3) Grupo Famsa (1) Famsa Mexico (2) Famsa USA Other Intercompany EBITDA Margin (percentage) (1) Includes EBITDA from other non-retail businesses (2) Includes Banco Ahorro Famsa (3) Variance calculated from financial statements First Quarter Grupo Famsa (1) Famsa Mexico (2) Famsa USA Operating Expenses Operating Expenses reached Ps$1,601 million during the first quarter; 18.7% higher than 1Q08. The increase was mainly due to the roll-out of 90 Banco Ahorro Famsa banking branches in the last twelve months and the opening of 20 new stores that include the incursion into Chicago, Austin and the Rio Grande Valley in Texas. In addition, incremental reserves for uncollectible accounts given the prevailing market conditions, and to a lesser degree, exchange rate pressure also contributed to the growth in Operating Expenses. Comprehensive Financing Expense The Comprehensive Financing Expense increased 6.6% during the first quarter, totaling Ps$214 million. The 58.9% increase in paid interests due to higher debt and the global increase in cost of funding, was offset by an exchange-rate profit of Ps$65 million obtained from the organic, net long US dollar position Grupo Famsa maintains through Famsa USA. As mentioned in a recent press release, Grupo Famsa has no exposure to derivatives, and its Treasury maintains a disciplined investment policy that involves exclusively fixed income securities. Net Income Net Income reached Ps$54 million, which represents a -50.6% decrease when compared to 1Q08. Relación con Inversionistas: 5 de 10

6 Main Balance Sheet Accounts (millions of Mexican pesos) First Quarter % Var (1) Trade Accounts Receivable 12,764 10, Inventories 2,277 2, Net Debt 3,830 6, Bank Deposits 5, Stockholder s Equity 7,375 6, (1) Variance calculated from financial statements Trade Accounts Receivable The Trade Accounts Receivable balance reached Ps$12,764 million, increasing 26.2% compared to The weakening MXN/USD exchange rate had an impact of approximately Ps$922 million over Receivables growth. Additionally, other elements such as the issuance of personal loans, and Banco Ahorro Famsa s development have an effect on the balance without having the same impact on sales. On the other hand, uncollectible accounts represented 6.4% of credit sales, reflecting increasing pressure on employment in the United States and Mexico as well as Famsa USA s growing share of total sales. Inventory Inventory balance decreased 5.1% when compared to 2008 despite our retail area growth in the past twelve months. We have implemented specific initiatives directed at optimizing inventory levels without affecting our service standards. Net Debt and Bank Deposits In line with our plans to transform Grupo Famsa s financial structure, Net Debt decreased 36.9% when compared to Simultaneously, as a result of the progress being made in the implementation of Banco Ahorro Famsa, Bank Deposits increased from Ps$597 million in 1Q08 to Ps$5,328 million in 1Q09. We expect this trend in Bank Deposit growth and Net Debt reduction to continue through 2009 as our bank advances in becoming Grupo Famsa s financial arm. It is important to note that, up to date, Grupo Famsa has been successful at financing its capital needs by maintaining a close relationship with multiple sources of funding. Moreover, we have successfully concluded the refinancing process of Ps$2,400 million in Commercial Paper with maturities between December 2008 and March Stockholder s Equity Stockholder s Equity increased 12.4%, to Ps$7,375 million. Relación con Inversionistas: 6 de 10

7 III. Estados Financieros Consolidados Relación con Inversionistas: 7 de 10

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10 Este reporte puede contener ciertas declaraciones acerca del desempeño de Grupo Famsa, S.A.B. de C.V. y sus subsidiarias (en conjunto, FAMSA) en el futuro. Estas declaraciones sobre expectativas reflejan la opinión de la administración con respecto al desempeño de la compañía, las condiciones del entorno y otros aspectos, utilizando información actualmente disponible. Los resultados de FAMSA están sujetos a eventos futuros e inciertos que podrían tener un impacto material en el desempeño de la compañía. Relación con Inversionistas: 10 de 10