4 TH QUARTER OF 2015 EARNINGS RELEASE. Net Cash of R$4.8 billion and market share gain in the quarter

Transcription

1 Net Cash of R$4.8 billion and market share gain in the quarter Net Sales of $5.5 billion, with market share gain in the total market and recovery in sales compared to the second and third quarters as a result of increased competitiveness and more attractive offers 4Q15 Adjusted EBITDA of R$204 million, and Adjusted EBITDA Margin of 3.7%. Bricks and Mortar Adjusted EBITDA Margin a of 5,7%; Renegotiation of financial partnership for issue of credit cards under the Casas Bahia banner, with upfront capture of R$704 million. Solid cash position of R$5.6 billion, with the company better prepared to face an economic scenario of greater uncertainties. Adjusted EBITDA of R$1.1 billion, and Adjusted EBITDA Margin of 5.7%. Bricks and Mortar Adjusted EBITDA Margin a of 6.6% Important adjustments to the cost structure throughout 2015, resulting in better dilution of costs in 4Q15 compared to previous quarters. Efficient treasury management, mitigating the 22.4% hike in Selic during the period. Investments in technology to streamline credit approval and collections processes, reducing portfolio risk in a scenario of higher delinquency. Adjusted Net Income of R$113 million. Highlights R$ million (a) 4Q15 4Q Gross Sales 6,197 7, % 21,818 25, % Net Sales 5,461 6, % 19,268 22, % Gross Profit 1,645 2, % 6,173 7, % Gross Margin - % 30.1% 34.4% -430 bps 32.0% 32.4% -40 bps EBITDA (1) % 925 2, % EBITDA Margin - % 2.3% 12.0% -970 bps 4.8% 10.0% -520 bps Net Income (177) % % Net Margin - % -3.2% 5.6% -880 bps 0.0% 4.1% -410 bps Adjusted EBITDA (2) % 1,091 2, % Adjusted EBITDA Margin - % 3.7% 12.4% -870 bps 5.7% 10.2% -450 bps Adjusted Net Income (3) (125) % % Ajusted Net Margin - % -2.3% 5.8% -810 bps 0.6% 4.3% -370 bps (1) EBITDA = Earnings before interest, taxes, depreciation and amortization. (2) EBITDA excluding Other Operating Income and Expense (Note 22 to the Financial Statements) (3) Net Income excluding Other Operating Income and Expenses (Note 22 to the Financial Statements) b a Bricks and Mortar Adjusted Margem EBITDA = Adjusted Margem EBITDA less Equity Income. b Totals and percentages may not add up in all tables presented in this document due to rounding. 1

2 Message from Management In a year of major challenges facing Brazil, especially the durable goods industry, we worked in a highly focused and disciplined manner to make the necessary adjustments and continue implementing the strategic plan, thus consolidating our market leadership and strengthening our competitive advantages. We accelerated our initiatives to drive operating efficiency, such as optimization of the logistics network and back office synergies among the group companies, in addition to rapidly implementing a structural adjustment plan, which involved optimization of processes and rationalization of expenses. Among the cost-cutting measures are the revision of our store portfolio, with the closure of 39 unprofitable stores, revision of the logistics network, adjustment to the headcount with the reduction of approximately 13,000 positions, and renegotiation of rental agreements. Despite the adverse scenario, we are continuing our strategy of investing in projects aimed at strengthening company s competitive advantages, obtaining sustainable market share gains and meeting the needs of an increasingly demanding and dynamic consumer. We ended the year with 176 stores renovated for the new telephone category, with better assortment, services and layout, 121 stores under the new concept of the furniture category, offering better product design, customized furniture, specialized service and better store layout, and 81 banner conversions to adapt to the company s positioning to customers needs. 27 new stores were opened in We took a step forward in capturing synergies with group companies and concluded the implementation of Click & Collect across all Via Varejo stores, including the sale of Via Varejo products through the websites of CNova, an associated company listed on the Nasdaq and Euronext Paris. We also invested heavily in information technology and logistics, with improvements in the credit approval and collection, logistics route planning and back office areas, among others. Investments totaled R$372 million, in line with the amount in previous years. Underlining our commitment to further strengthening our brands, we entered into an agreement with the Rede Globo de Televisão for the 2016 Brazilian soccer league package and a new agreement with Bradesco for the sale of co-branded credit cards under the Casas Bahia banner. Both agreements are aimed at increasingly giving us a greater competitive advantage and our customers with the best offers and payment conditions. Ethics, sustainability and corporate responsibility remain the backbone of Via Varejo s business strategy. In 2015, the following initiatives are worth mentioning: Revision of the Code of Ethics, restructuring of the ombudsman and continuous training of the company s employees on the subject. Increase in the number of employees with disabilities to 1,957, continued structuring of polices and processes that mitigate social and environmental risks and strengthening our culture of compliance, in addition to initiatives and partnerships focused on culture strengthening and inequality reduction, through initiatives organized by the Via Varejo Foundation. Thanks to the dedication and motivation of our employees, we reached the end of 2015 with better prepared for the future, with solid cash generation and capital structure. For the tenth consecutive time, we ranked first in the Top of Mind survey in the furniture and electronics and home appliances segment (Datafolha Institute) and in the Most Beloved Brands survey (O Estado de S. Paulo). The year 2016 poses numerous challenges and opportunities, and we will remain fully focused on the customer, on discipline and on operating excellence to ensure sustainable growth and strengthen the Company s competitive advantages. We thank our employees, suppliers, customers and shareholders for their engagement and commitment throughout The Management 2

3 Net Sales Performance R$ million 4Q15 4Q Net Sales ,7% ,0% Same-Store Sales Revenue ,2% ,4% Net Sales totaled R$5.5 billion, a decline of 14.7% from 4Q14, or 13.9% after excluding the effects of the closure of 51 stores since 2Q14 to comply with Brazil s antitrust authority CADE c. On a samestore basis, Net Sales contracted 15.2%. Via Varejo intensified its sales strategy by improving price competitiveness and strengthening promotions, leading it to post its best sales performance since 2Q15 even in a scenario of continued decline in consumption and consumer confidence. As a result, Via Varejo gained market share in the quarter. Sale of services, such as warranties and insurance, increased 5.2% from 4Q14, with a higher penetration due to initiatives such as training programs for sales teams, telemetry, pricing policies and sales campaigns. Also in 4Q15, the Company signed a new agreement with Bradesco, extending the term of the original agreement and including benefits that should drive sales and profitability of the financial products under the Casas Bahia banner. The Crescer Mais Project already has 121 stores with the new concept of the furniture category, 176 new telephone category and 81 banner conversions. Conclusion of the Click & Collect (online sales with in-store pickup) rollout at all stores using Via Varejo inventory. Thanks to improved sales performance in 4Q15, Via Varejo closes the year with a 15.0% drop in Net Sales, which is an important improvement from the last two quarters (2Q15 and 3Q15), when sales went down 22.2%. In the coming quarters, Via Varejo will continue to focus on operational excellence by boosting productivity at stores, reducing distribution costs and strengthening its commercial strategy, all of which will leave it better prepared to recover sales and increase its market share. c In compliance with the Performance Commitment Agreement signed with Brazil's antitrust agency (CADE) after the Pontofrio and Casas Bahia association, the Company has closed 51 stores during 2014 and

4 Operating Performance 4 TH QUARTER OF 2015 Operating Performance R$ million 4Q15 4Q Net Sales 5,461 6, % 19,268 22, % Gross Profit 1,645 2, % 6,173 7, % Gross Margin - % 30.1% 34.4% -430 bps 32.0% 32.4% -40 bps Selling Expenses (1,202) (1,274) -5.7% (4,440) (4,557) -2.6% General and Administrative Expenses (132) (152) -13.2% (502) (531) -5.5% Equity Income (123) 5 N/A (198) 3 N/A Other Operating Income (Expenses) (79) (23) N/A (166) (40) N/A Total Operating Expenses (1,536) (1,443) 6.4% (5,306) (5,125) 3.5% % of Net Sales Revenue 28.1% 22.5% -560 bps 27.5% 22.6% -490 bps Total of Adjusted Operating Expenses (1) (1,457) (1,420) 2.6% (5,140) (5,085) 1.1% % of Net Sales Revenue 26.7% 22.2% -450 bps 26.7% 22.4% -430 bps Depreciation (Logistic) % % EBITDA % 925 2, % EBITDA Margin - % 2.3% 12.0% -970 bps 4.8% 10.0% -520 bps Adjusted EBITDA (2) % 1,091 2, % Adjusted EBITDA Margin - % 3.7% 12.4% -870 bps 5.7% 10.2% -450 bps (1) Excludes Other Operating Income and Expense (2) EBITDA excluding Other Operating Income and Expense In 4Q15, Adjusted EBITDA was R$204 million. Adjusted EBITDA Margin reached 3.7%. Bricks and Mortar Adjusted EBITDA Margin d reached 5.7%. In 2015, Adjusted EBITDA amounted to R$1.09 billion, for EBITDA margin of 5.7%, down 450 basis points from Bricks and Mortar Adjusted EBITDA Margin d of 6.6% in With the rapid decline in domestic consumption during 2015, the Company implemented a series of efficiency measures to mitigate the impact of the drop in sales on its profitability. The Company's investments in driving competitiveness were offset by the reduction in SG&A, improving the SG&A as percentage of sales presented in last quarters. EBITDA in 4Q15 was the result of the following factors: Gross Profit of 30.1% o Higher share of services in total sales and higher operating efficiency enabled the Company to intensify its pricing policy and strengthen promotions, which helped increase its competitiveness and accelerate market share gains; o Gross Margin in 4Q14 was driven by the positive effect of tax credits, as explained in the Earnings Release for the period. In Adjusted Operating Expenses, SG&A reduction of 6.5%. o Adjustments made during the course of the year, such as the closure of 39 underperforming stores, adjustment of headcount with reduction of around 13,000 jobs, optimization of logistics network and the space in the distribution centers, renegotiation of rental agreements and other services and expenses, contributed to the better dilution of fixed costs in 4Q15 over the previous two quarters; o Note the reduction of 13.2% in General and Administrative Expenses in the quarter, despite the inflation rate (IPCA) of 10.67%.in the year. o Equity Income decreased, impacting by 240 bps of total expenses; d Bricks and Mortar Adjusted Margem EBITDA = Adjusted Margem EBITDA less Equity Income. 4

5 Financial Performance R$ million 4Q15 4Q Financial Revenue % % Financial Expenses (343) (293) 17.1% (962) (1,036) -7.1% Cost of the Discount of Payment Book Receivables (78) (90) -13.3% (324) (341) -5.0% Cost of the Discount of Credit Card Receivables (186) (135) 37.8% (363) (446) -18.6% Other (79) (68) 16.2% (275) (249) 10.4% Net Financial Income (Expense) (283) (205) 38.0% (627) (679) -7.7% % of Net Sales Revenue 5.2% 3.2% -200 bps 3.3% 3.0% -30 bps Thanks to efficient treasury management and a solid financial structure, the Company could mitigate the impacts of the interest rate hike in While CDI increased 22.4% e in 2015, Net Financial Result came to 3.3% of Net Sales, increasing 30 bps. (+8.7%). Nominal Net Financial Result improved 7.7% in the year. Net Financial Result in 4Q15 was composed primarily of the following items: Financial Revenue totaled R$60 million, compared to R$88 million in 4Q14. Income reduction is mainly due to the strategy of reducing discounts on receivables, which resulted in lower average cash during the period; Cost of Discounting of Payment Book Receivables amounted to R$78 million, corresponding to 1.43% of Net Sales, down 13.3% from 4Q14, mainly due to the drop in Net Sales; Cost of Sales of Credit Card Receivables came to R$186 million, corresponding to 3.4% of Net Sales, an increase of 37.8% from 4Q14, mainly due to the strategy of discounting receivables during the year. This strategy helped reduce the cost of sales of credit card receivables in the year by 18.6%, despite the increase in the CDI rate during the period. e Source: Cetip 5

6 Net Income R$ million 4Q15 4Q EBITDA % 925 2, % Depreciation (Logistic) (16) (9) 77.8% (58) (40) 45.0% Depreciation and Amortization (41) (36) 13.9% (173) (139) 24.5% Net Financial Income (Expense) (283) (205) 38.0% (627) (679) -7.7% Income before Income Tax (215) % 67 1, % Income Tax 38 (165) % (64) (474) -86.5% Net Income (177) % % Net Margin - % 3.2% 5.6% -240 bps 0.0% 4.1% -410 bps Other Operating Income and Expense (79) (23) N/A (166) (40) N/A Income Tax on Other Operating Income and Expense 27 8 N/A N/A Adjusted Net Income (1) (125) % % Ajusted Net Margin - % -2.3% 5.8% -810 bps 0.6% 4.3% -370 bps (1) Net Income excluding Other Operating Income and Expenses In 4Q15, the Company posted Net Loss of R$177 million, due to the worsening in Equity Income, the lower dilution of fixed expenses, the increase in Financial Expenses in the period due to the concentration of the sale of the credit card receivable and Other Operating Expenses, mainly due to expenses with restructuring. In 2015, Adjusted Net Income was R$113 million, with margin of 0.6% of Net Sales. Bricks and Mortar Adjusted Net Income f reached R$311 million, with margin of 1.6% of Net Sales. Indebtedness R$ million Loans and Financing Short Term (370) (49) Debentures Short Term - (620) Loans and Financing Long Term (415) (161) Total Debt (785) (830) Cash and Cash Equivalents 5,580 4,448 Net Cash (Debt) 4,795 3,618 Net Cash / EBITDA (last 12 months) #N/D 5.18x x - Payment Book (CDCI) Short Term (2,309) (2,740) Payment Book (CDCI) Long Term (165) (136) Total Payment Book (CDCI) (2,474) (2,876) Net Cash (Debt) with CDCI 2, Net Cash (Debt) with CDCI / EBITDA (last 12 months) 2.51x 0.33x In 2015, the cash balance at the end of the year was R$5.6 billion. Net Cash, including payment book operations (CDCI), totaled R$2.3 billion, an increase of R$1.6 billion from Market delinquency rate worsened compared to 2014, according to Serasa Experian. In this scenario, Via Varejo invested in systems and implementation of a series of improvements in the credit and collections policies to mitigate the heightened risk and provide greater protection to the new crops of credit. f Bricks and Mortar Adjusted Net Income = Adjusted Net Income less Equity Income. 6

7 Capital Expenditure In 4Q15, Via Varejo s Capital Expenditure totaled R$103 million, broken down as follows: R$ million 4Q15 4Q New Stores Stores Renovations and Conversions Infrastructure Fleet and Logistic Technology Intangible Assets Others Non Cash Effect Leasing Total (1) Softw are leasings, non cash effect In the year, 27 Casas Bahia stores were opened. During the year, 158 stores under the new mobile concept, 121 stores under the new furniture concept and 75 banner conversions were carried out. 7

8 Balance Sheet Assets R$ million Current Assets Cash and Cash Equivalents Accounts Receivable Credit cards Payment Book Other Allowance for doubtful accounts (240) (224) Inventories Recoverable Taxes Amounts Receivable from Related Parties Noncurrent Assets Held for Sale 7 14 Expenses in Advance and Other Accounts Receivable Noncurrent Assets Long-Term Assets Accounts Receivable Payment Book Allowance for doubtful accounts (13) (10) Recoverable Taxes Deferred Income Tax and Social Contribution Amounts Receivable from Related Parties Judicial Deposits Expenses in Advance and Other Accounts Receivable Investments Property and Equipment Intangible Assets TOTAL ASSETS Liabilities and Shareholders' Equity R$ million Current Liabilities Taxes and Social Contribution Payable Suppliers Suppliers ('Forfait') Loans and Financing Payment Book (CDCI) Debentures Fiscal Obligations Dividends Debt with Related Parties Advanced revenue Other Long-Term Liabilities Loans and Financing Payment Book (CDCI) Deferred Income Tax and Social Contribution 27 3 Provision for lawsuits Advanced revenue Shareholders' Equity Capital Capital Reserves Profit Reserves Cumulative translation adjustments (49) 4 LIABILITIES AND SHAREHOLDERS' EQUITY

9 Income Statement R$ million 4Q15 4Q Gross Sales 6,197 7, % 21,818 25, % Net Sales 5,461 6, % 19,268 22, % Cost of Goods Sold (3,816) (4,199) -9.1% (13,095) (15,319) -14.5% Depreciation (Logistic) (16) (9) 77.8% (58) (40) 45.0% Gross Profit 1,645 2, % 6,173 7, % Selling Expenses (1,202) (1,274) -5.7% (4,440) (4,557) -2.6% General and Administrative Expenses (132) (152) -13.2% (502) (531) -5.5% Equity Income (123) 5 N/A (198) 3 N/A Other Operating Income (Expenses) (79) (23) N/A (166) (40) N/A Total Operating Expenses (1,536) (1,443) 6.4% (5,306) (5,125) 3.5% Depreciation and Amortization (41) (36) 13.9% (173) (139) 24.5% Earnings before Interest and Taxes - EBIT % 694 2, % Financial Revenue % % Financial Expenses (343) (293) 17.1% (962) (1,036) -7.1% Net Financial Income (Expense) (283) (205) 38.0% (627) (679) -7.7% Income before Income Tax (215) % 67 1, % Income Tax 38 (165) % (64) (474) -86.5% Net Income (177) % % Earnings before Interest, Taxes, Depreciation, Amortization-EBITDA % 925 2, % % of Net Sales Revenue 4Q15 4Q Gross Profit 30.1% 34.4% -430 bps 32.0% 32.4% -40 bps Selling Expenses -22.0% -19.9% -210 bps -23.0% -20.1% -290 bps General and Administrative Expenses -2.4% -2.4% 0 bps -2.6% -2.3% -30 bps Equity Income -2.3% 0.1% -240 bps -1.0% 0.0% -100 bps Other Operating Income (Expenses) -1.4% -0.4% -100 bps -0.9% -0.2% -70 bps Total Operating Expenses -28.1% -22.5% -560 bps -27.5% -22.6% -490 bps Depreciation and Amortization -0.8% -0.6% -20 bps -0.9% -0.6% -30 bps Earnings before Interest and Taxes - EBIT 1.2% 11.3% bps 3.6% 9.2% -560 bps Net Financial Income (Expense) -5.2% -3.2% -200 bps -3.3% -3.0% -30 bps Income before Income Tax -3.9% 8.1% bps 0.3% 6.2% -590 bps Income Tax 0.7% -2.6% 330 bps -0.3% -2.1% 180 bps Net Income -3.2% 5.6% -880 bps 0.0% 4.1% -410 bps EBITDA 2.3% 12.0% -970 bps 4.8% 10.0% -520 bps 9

10 Cash Flow from Operating Activities R$ million Net Income for the period Adjustment for Reconciliation of Net Income Deferred Income Tax (14) 187 Depreciation and Amortization Interests and Exchange Variation Equity Income 198 (3) Provision for lawsuits Gain (loss) with fixed and intangible assets 18 (5) Gain (loss) with subsidiaries - (20) Share-Based Compensation 9 1 Allowance for doubtful accounts Provision for Obsolescence and Retail Loss Deferred Revenue (99) (45) Other Asset (Increase) Decreases Accounts Receivable (116) (657) Inventories 344 (716) Taxes recoverable (194) (343) Other Assets (10) 41 Net Related Parties Judicial Deposits (76) (37) Financial Investments - 24 Dividends received from subsidiaries (1.635) Liability Increase (Decrease) Suppliers Payroll and Charges Lawsuits (242) (77) Deferred Revenue Income tax paid (76) (230) Other Liabilities (195) Net Cash Generated from (Used in) Operating Activities Cash Flow fom Investment Activities R$ million Acquisition of fixed and intangible assets (352) (576) Sale of Property and Equipment Acquisition of investments from subsidiaries - (96) Company Liquidation - 19 Net Cash Generated from (used in) Investment Activities (340) (617) Cash Flow from Financing Activities R$ million Proceeds from borrowings Repayments of borrowings (5.098) (5.346) Payment of interest (409) (377) Financial leasing payments - - Dividends Payment (223) - Net Cash Generated from (used in) Financing Activities (1.113) (699) Cash and Cash Equivalents at the Beginning of the Year Cash and Cash Equivalents at the End of the Year Change in Cash and Cash Equivalent

11 Breakdown of Gross Sales by Format R$ million 4Q15 % 4Q14 % 2015 % 2014 % Pontofrio 1, % 1, % -29.9% 4, % 5, % -23.7% Casas Bahia 5, % 5, % -9.8% 17, % 19, % -12.9% Breakdown of Net Sales by Format R$ million 4Q15 % 4Q14 % 2015 % 2014 % Pontofrio 1, % 1, % -30.6% 3, % 5, % -23.5% Casas Bahia 4, % 4, % -10.0% 15, % 17, % -12.6% Sales Composition % of Net Sales Revenue 4Q15 4Q Cash 31.0% 26.2% 480 bps 27.2% 26.2% 100 bps Cards 56.1% 59.8% -370 bps 59.3% 59.5% -20 bps Payment Book 12.9% 14.0% -110 bps 13.5% 14.3% -80 bps Stores per Format - Quarter Casas Bahia Conversions Opened Closed Street Shopping Total Sales Area ('000 m 2 ) Total Area ('000 m 2 ) 1, ,268 Pontofrio Conversions Opened Closed Street 185 (38) Shopping 116 (7) Total (45) Sales Area ('000 m 2 ) 197 (30) Total Area ('000 m 2 ) 265 (42) Consolidated (Total) Conversions Opened Closed Street Shopping Total 1, ,014 - Sales Area ('000 m 2 ) 1, ,100 Total Area ('000 m 2 ) 1, ,490 Stores per Format - YoY Consolidated (Total) Conversions Opened Closed Street Shopping Total 1, ,014 Sales Area ('000 m 2 ) 1, ,100 Total Area ('000 m 2 ) 1, ,490 11

12 The Company ended the quarter with 53,451 employees, 46,978 of whom were employees based on the full-time equivalent (FTE) criterion g. Ownership Structure The capital stock of Via Varejo is composed of 1,291 million shares, of which 656 million are common shares and 635 million are preferred shares. GPA is the controlling shareholder, holding 43.3% of its total capital and 62.6% of its common stock. Free float corresponds to 29.2% of all the shares issued by Via Varejo. Free float 29.2% 43.3% GPA Klein Family 27.4% g Including Bartira and VVLOG employees, the Company ended the quarter with 55,346 employees, 48,781 of whom were under the FTE criteria 12

13 4Q15 Earnings Conference Call and Webcast Wednesday, February 24, :00 a.m. (Brasília) 9:00 a.m. (New York) 2:00 p.m. (London) Conference call in Portuguese (original language) +55 (11) Conference call in English (simultaneous translation) +1 (646) Webcast: Replay +55 (11) Code for audio: Via Varejo The statements contained in this release relating to the Company's business prospects, projected operating and financial results and growth potential are merely forecasts and were based on the Management's expectations for the Company's future. These expectations are highly dependent on changes in the market and on the performance of the Brazilian economy, the industry and international markets and therefore are subject to change. CONTACTS Investor Relations Telephone: +55 (11) Fax: +55 (11) Website: 13