Third Quarter 2011 BMV: GFAMSA

Transcription

1 Third Quarter 2011 BMV: GFAMSA Monterrey, Mexico. October 27, 2011 Grupo Famsa, S.A.B. de C.V. (BMV: GFAMSA) Report from the Chief Executive Officer on Grupo Famsa, S.A.B. de C.V. s third quarter 2011 (3Q11) results with figures as of September 30, 2011 Summary of Consolidated Financial Results (millions of Mexican pesos) Third Quarter (1) January - September (1) % Var. (2) % Var. (2) Net Sales 3,699 3, % 10,966 10, % Cost of Sales -1,764-1, % -5,246-5, % Gross Income 1,934 1, % 5,719 5, % Operating Expenses -1,587-1, % -4,747-4, % Operating Income % % EBITDA % 1,257 1, % Net Income % % Gross Margin 52.3% 52.8% 52.2% 51.2% EBITDA Margin 11.7% 13.1% 11.5% 11.0% Net Margin -2.2% 5.3% 0.1% 5.2% (1) Nominal figures (2) Calculated from the consolidated financial statements Third Quarter 2011 Highlights 4 We maintain our estimated range for 2011 Mexico EBITDA between Ps$1,900 and Ps$2,000 million 4 Pressured by Famsa USA s unexpected losses, Famsa s 2011 consolidated EBITDA is now estimated between Ps$1,700 and Ps$1,850 million MX 4 Famsa Mexico s same-store sales (SSS) grew 5.0% in 3Q11, resulting in an accumulated SSS increase of 7.7% for 2011; within guidance 4 To enhance our customers shopping experience, we are rolling out the Evolución project after months of preparation 4 Banco Ahorro Famsa continues to post a solid capitalization index (>12%), stable growth in deposits and a declining cost of funding 4 The recent increase in NPL ratio (IMOR) largely reflects an administrative change which is unrelated to GFAMSA s capacity to collect outstanding loans USA 4 Pressured by challenging external conditions, Famsa USA s SSS decreased 13.4% during 3Q11 4 Famsa USA strengthened its value proposition by introducing personal loans at its Texas stores since August Investor Relations: 1 de 12

2 LETTER FROM THE CEO Humberto Garza Valdéz, Grupo Famsa s Chief Executive Officer, stated: We achieved significant progress this quarter with the implementation of initiatives to drive the productivity of our store network and stimulate demand in durable goods categories amid challenging conditions for consumption. The conversion of 50 stores with limited Clothing displays to Furniture and the successful reactivation of the Electronics category reflect some of the structural retail changes we continue to implement in Mexico. Additionally, the nationwide rollout of the Evolución project marks the beginning of a comprehensive process to transform the way we serve our customers. At the same time, Famsa USA is redoubling its efforts to offset the market s sudden deterioration, focusing on increasing sales by diversifying assortment and further reducing expenses. Nonetheless, the unexpected losses posted by Famsa USA have pressured our consolidated results such that we are projecting a new guidance range between Ps$1,700 and Ps$1,850 million for Grupo Famsa s 2011 consolidated EBITDA. Famsa Mexico Throughout the year, Famsa Mexico was able to reactivate and drive the growth in sales of durable goods categories such as Furniture, Computers and Motorcycles, by introducing new models, setting up specialized displays and launching attractive promotions. This quarter, the Electronics category grew (+18%) for the first time since 2008, reflecting the aforementioned retailing adjustments implemented in previous quarters. Moreover, the recently concluded conversion of 50 stores with limited Clothing displays to Furniture will boost the Furniture category with more than 17,000 additional square meters of exhibition space. Lastly, September saw the nationwide rollout of the Evolución project which is aimed at creating an unparalleled shopping experience by simplifying administrative processes and achieving the highest motivation from our sales team. Banco Ahorro Famsa (BAF) Banco Ahorro Famsa s capitalization index remains within a stable range (>12%), while its cost of funding continues to decrease and its deposit base to increase. Bank deposits, which have grown consistently since 2007, reached Ps$9,698 million and their average interest rate fell to 5.3% during the third quarter. Lastly, the NPL ratio (CNBV: Indice de Morosidad, IMOR) increased to approximately 14% since July, largely reflecting an administrative change that is not related to Grupo Famsa s capacity to collect outstanding loans. Banco Ahorro Famsa continues to make progress with the development of its commercial loan portfolio, complementing its traditional consumer financing business by supporting, among others, Micro, Small and Medium-sized Enterprises (SME). The balance of Micro and SME loans totaled Ps$257 million as of September 30, 2011, growing more than 245% year-over-year. Famsa USA The gradual indications of recovery that Hispanic consumers demonstrated during 4Q10 and 1Q11 have changed unexpectedly. The abrupt decline in consumer confidence as a result of the increased economic uncertainty is currently one of the main obstacles for consumption, especially for durable goods demand. As of August 2011, Famsa USA enhanced its value proposition with the introduction of personal loans in Texas. These loans are regulated by the state and represent a valued source of short-term liquidity for our customers, allowing them to satisfy a large variety of immediate needs. Furthermore, Famsa USA plans additional reductions in several operating expenses in an estimated range of US$5 to US$6 million during 2012 to offset the recent top-line decline. Investor Relations: 2 de 12

3 RETAIL STORES AND BANKING BRANCH NETWORK Total 3Q11 Total 3Q10 % Var. Stores % Famsa Mexico % Famsa USA % Banking Branches (1) % Retail Area (Square meters) Total 3Q11 Total 3Q10 % Var. Stores 534, , % Famsa Mexico 417, , % Famsa USA 117, , % Openings and Closures of Retail Stores and Banking Branches (Year to date) Total 3Q11 (1) Total Openings Closures 2010 Stores Famsa Mexico Famsa USA Banking Branches (2) (1) 6 of 7 closures during 3Q11 correspond to the conversion process of 6 mattress stores into banking branches (2) Most banking branches are located within Famsa México stores Investor Relations: 3 de 12

4 ANALYSIS OF THE FINANCIAL RESULTS Net Sales (Millions of Mexican pesos) Third Quarter January September % Var. (3) % Var. (3) Grupo Famsa (1) 3,699 3, % 10,966 10, % Famsa Mexico (2) 2,982 2, % 8,751 8, % Famsa USA % 2,130 2, % Other % % Intercompany % % Same Store Sales Third Quarter (1) Includes sales of non-retail businesses (2) Includes Banco Ahorro Famsa (3) Calculated from the consolidated financial statements (4) Calculated in US Dollars, excluding foreign exchange effects January September Grupo Famsa -0.4% -0.6% 4.6% 0.2% Famsa Mexico 5.0% 0.7% 7.7% 5.4% Famsa USA (4) -13.4% -9.2% -6.8% -17.0% Net Sales Accumulated net sales as of September 30, 2011 totaled Ps$10,966 million, 4.2% above those of the first nine months of Famsa Mexico continues to post an accumulated sales growth in excess of 8%, while Famsa USA posted an 11.1% year-over-year decline for the first three quarters. Moreover, third quarter consolidated net sales grew 1.0% to Ps$3,699 million. The 5.6% quarterly growth in Famsa Mexico s sales was offset by a 14.2% decline in the sales of Famsa USA. Excluding foreign exchange rate effects, Famsa USA s quarterly sales declined 12.8%, affected by unfavorable market conditions. Famsa Mexico s accumulated same store sales grew 7.7%, in line with our 2011 guidance s range of 7% to 12%. However, sales of Clothing, Communications and Appliances pressured Famsa Mexico s revenue growth during the third quarter. Additionally, high unemployment levels and gasoline prices, combined with a steep decline in consumer confidence, resulted in a 13.4% reduction in Famsa USA s third quarter same store sales. Cost of Sales and Gross Income The accumulated consolidated cost of sales as of September 30, 2011 was Ps$5,246 million, 2.2% above the previous year. Accumulated gross income for the first nine months of 2011 was Ps$5,719 million, an amount that is 6.2% above that of 2010 and translates into a 96 basis point expansion in gross margin. This year s growth in gross income and gross margin has been largely driven by the increased share of Personal Loans and Furniture in Famsa Mexico s sales mix. During 3Q11, consolidated gross income remained virtually unchanged compared to However, gross margin contracted from 52.8% in 3Q10 to 52.3% in 3Q11. Promotions and discounts aimed at stimulating demand pressured quarterly gross margin slightly, especially for Famsa USA. Investor Relations: 4 de 12

5 Operating Income before Depreciation and Amortization (EBITDA) (Millions of Mexican pesos) Third Quarter January - September % Var. (3) % Var. (3) Grupo Famsa (1) % 1,257 1, % Famsa Mexico (2) % 1,329 1, % Famsa USA % % Other % % Intercompany % % EBITDA Margin (% EBITDA / Sales) Third Quarter (1) Includes EBITDA from non-retail businesses (2) Includes Banco Ahorro Famsa (3) Calculated from the consolidated financial statements January - September Grupo Famsa (1) 11.7% 13.1% 11.5% 11.0% Famsa Mexico (2) 16.1% 17.0% 15.2% 15.0% Famsa USA -9.9% -2.4% -6.2% -4.2% EBITDA and Operating Expenses The accumulated consolidated EBITDA for the nine months ended September 30, 2011 totaled Ps$1,257 million, 8.7% above that of Despite the 10.2% decline in consolidated EBITDA for third quarter 2011, the solid results of the first quarter boost the accumulated consolidated operating income before depreciation and amortization. It is important to note that our 2011 EBITDA guidance range for Mexico remains between Ps$1,900 and Ps$2,000 million. In other words, the expected EBITDA generation from our Mexican operations could be sufficient to reach the low range of our original 2011 consolidated EBITDA guidance (Ps$1,950 million). However, Famsa USA s unexpected losses result in a new 2011 consolidated EBITDA guidance range that is between Ps$1,700 and Ps$1,850 million. Consolidated operating expenses for third quarter 2011 remained relatively stable compared to those of the previous year, reflecting our continuous efforts directed at strict expense control and reaching greater operating efficiency. During the third quarter, consolidated operating expenses grew only 2.4%, or Ps$37 million, year-over-year to Ps$1,587 million. As a result of our aggressive plan to adjust Famsa USA s operations to the prevailing market conditions, savings of more than US$17 million have been achieved in operating expenses (payroll, advertising, rents, etc.) since the beginning of the financial crisis. Moreover, special initiatives are being implemented to obtain additional savings estimated at US$5 to US$6 million during Investor Relations: 5 de 12

6 Comprehensive Financing Expense (Millions of Mexican pesos) Third Quarter January - September % Var. (1) % Var. (1) Comp. Financing Expense, Net % % Interest Expense % % Interest Income % % Exchange Gain (Loss), Net ,338% ,348% (1) Calculated from the consolidated financial statements The comprehensive financing expense for 3Q11 grew 47.0% to Ps$441 million, pressured by an Exchange Loss of Ps$135 million. Even though Grupo Famsa and Subsidiaries dollar-denominated assets are greater than its dollar-denominated liabilities, an Exchange loss was booked in the Income Statement as a result of the peso s recent depreciation. On the contrary, a gain was recognized on the Company s Stockholder s Equity from Famsa USA s conversion. It is noteworthy that neither the Exchange Loss nor the Transalation Adjustment affect cash flow. Interest expense for the third quarter increased 1.1% year-over-year. Accumulated interest expense as of September 30, 2011 was 11.8% above the previous year, reflecting the growth in the balance of consolidated financing and the 11% interest rate on senior notes amounting to US$200 million issued in July Net Income Accumulated net income as of September 30, 2011 decreased from Ps$552 million in 2010 to Ps$11 million in However, this decline in net income results from a tax credit reduction when compared to 2010 and the exchange loss of Ps$90 million posted in The accumulated net income for the first nine months of 2011, excluding the effects of the fiscal credit and exchange loss, was Ps$64 million, compared to Ps$31 million in Investor Relations: 6 de 12

7 Main Balance Sheet Accounts (Millions of Mexican pesos) September 30, % Var. (1) Trade Accounts Receivable 18,012 15, % Consumer loans Mexico 13,153 11, % Commercial loans Mexico (BAF) 1, % Consumer loans USA 3,333 3, % Inventory 1,980 2, % Net Debt 4,784 3, % Bank Deposits 9,698 8, % Stockholders Equity 9,100 8, % (1) Calculated from the consolidated financial statements Trade Accounts Receivable As of September 30, 2011, accounts receivable totaled Ps$18,012 million, 19.7% above those as of September 30, In the interest of disclosure, starting 2Q11, the balance of accounts receivable is presented separating Mexican commercial loans and consumer loans in Mexico and the United States. The Consumer loans Mexico heading corresponds to the balance of accounts receivable from the sale of products and issuance of personal loans through the Famsa Mexico store network. The vast majority of this balance is managed through Banco Ahorro Famsa. Famsa Mexico s accumulated credit sales growth and strong personal loan origination are among the main factors that drove the 17.8% growth in this line-item. The commercial loans issued by Banco Ahorro Famsa to Micro, Small and Medium Enterprises, as well as to other financial institutions, make up the Commercial loans Mexico (BAF) balance of accounts receivable. BAF s recent rollout of initiatives directed at developing its commercial loan portfolio resulted in a 98.0% annual growth in this heading. The final heading, Consumer loans USA, corresponds to the balance of accounts receivable resulting from the credit sales at our Famsa USA stores. The growth of 7% reflected as of September 30, 2011 translates into a 2.3% decrease in dollar terms. Inventory The balance of inventory as of September 30, 2011 was Ps$1,980 million, 6.3% below that as of September 30, Bank Deposits and Net Debt As of September 30, 2011, bank deposits totaled Ps$9,698 million, 13.5% above those of the previous year. It is important to note that approximately 92% of the aforementioned amount corresponds to savings with a term commitment. In addition, Banco Ahorro Famsa s average cost of funding declined to 5.3% during the third quarter of Bank deposits continue to offer an optimum source of funding for the credits extended to our Mexican customers. Net debt was Ps$4,784 million as of September 30, 2011, 46.2% greater than that posted at the close of 3Q10, driven by the difference in the cash balances for both periods. Gross debt remained fairly stable, increasing 3.1% year-over-year. Stockholders Equity The balance of stockholders equity as of September 30, 2011 was Ps$9,100 million, 2.7% above that of the previous year. Investor Relations: 7 de 12

8 CONSOLIDATED FINANCIAL STATEMENTS Grupo Famsa, S.A.B. de C.V. and Subsidiaries Consolidated Balance Sheet as of September 30 Thousands of Mexican Pesos CURRENT ASSETS: Cash and cash equivalents Ps 1,068, % Ps 2,405, % Restricted cash 201, % 228, % Consumer loans Mexico 13,152, % 11,160, % Commercial loans Mexico 1,526, % 770, % Consumer loans USA 3,332, % 3,113, % Taxes recoverable 1,194, % 1,103, % Other accounts receivable 813, % 572, % Inventories 1,979, % 2,112, % Total current assets 23,269, % 21,467, % PROPERTY, LEASEHOLD IMPROVEMENTS AND FURNITURE AND EQUIPMENT 2,556, % 2,557, % GOODWILL 241, % 241, % DEFERRED CHARGES 58, % 75, % OTHER ASSETS 64, % 95, % DEFERRED INCOME TAX 1,109, % 1,069, % DEFERRED EMPLOYEES' PROFIT SHARING 53, % 45, % Total assets Ps 27,353, % Ps 25,551, % LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES WITH FINANCIAL COST: Interest-bearing demand deposits and time-deposits Ps 9,697, % Ps 8,541, % Bank debt 606, % 587, % Commercial paper 1,471, % 2,562, % 11,776, % 11,691, % CURRENT LIABILITIES WITHOUT FINANCIAL COST: Suppliers 1,534, % 1,367, % Accounts payable and accrued expenses 928, % 736, % Income tax payable 121, % 207, % 2,584, % 2,310, % Total current liabilities 14,361, % 14,002, % LONG-TERM LIABILITIES: Bank debt 14, % 8, % Commercial paper 3,759, % 2,519, % Estimated liability for labor benefits 117, % 160, % Total long-term liabilities 3,891, % 2,689, % Total liabilities 18,252, % 16,691, % STOCKHOLDERS' EQUITY: Capital stock 2,472, % 2,472, % Additional paid-in capital 3,068, % 3,068, % Retained earnings 3,185, % 2,479, % Stock Repurchase Reserve 110, % 110, % Net income 10, % 551, % Cumulative translation adjustment 229, % 157, % Total majority interest 9,077, % 8,840, % Minority interest 23, % 20, % Total stockholders' equity 9,100, % 8,860, % Total liabilities and stockholders' equity Ps 27,353, % Ps 25,551, % Investor Relations: 8 de 12

9 Grupo Famsa, S.A.B. de C.V. and Subsidiaries Consolidated Income Statement from January 1 to September 30 Thousands of Mexican Pesos Net sales Ps 10,965, % Ps 10,522, % Cost of sales (5,246,313) -47.8% (5,135,307) -48.8% Gross margin 5,719, % 5,387, % Operating expenses (4,747,387) -43.3% (4,532,984) -43.1% Operating income 971, % 854, % Comprehensive financing expense, net (972,272) -8.9% (794,928) -7.6% (320) -0.0% 59, % Other expenses, net (23,278) -0.2% (31,714) -0.3% (Loss) income before income tax (23,598) -0.2% 27, % Income tax 36, % 526, % Consolidated net income 12, % 554, % Net income corresponding to minority interest 2, % 2, % Net income corresponding to majority interest Ps 10, % Ps 551, % Investor Relations: 9 de 12

10 Grupo Famsa, S.A.B. de C.V. and Subsidiaries Consolidated Income Statement from July 1 to September 30 Thousands of Mexican Pesos Net sales Ps 3,698, % Ps 3,662, % Cost of sales (1,764,239) -47.7% (1,727,831) -47.2% Gross margin 1,934, % 1,934, % Operating expenses (1,586,983) -42.9% (1,549,669) -42.3% Operating income 347, % 385, % Comprehensive financing expense, net (440,740) -11.9% (299,919) -8.2% (93,255) -2.5% 85, % Other expenses, net (331) -0.0% (23,930) -0.7% (Loss) income before income tax (93,586) -2.5% 61, % Income tax 12, % 135, % Consolidated net (loss) income (81,382) -2.2% 197, % Net income corresponding to minority interest % 1, % Net (loss) income corresponding to majority interest Ps (81,971) -2.2% Ps 195, % Investor Relations: 10 de 12

11 Grupo Famsa, S.A.B. de C.V. and Subsidiaries Consolidated Cash Flow Statement from January 1 to September 30 Thousands of Mexican Pesos Operations (Loss) income before income tax Ps (23,598) Ps 27,439 Items relating to investing activities: Depreciation and amortization 284, ,312 Allowance for doudtful accounts 973, ,494 Gain on sale of property, plant and equipment (2,106) (1,646) Estimated liability for labor benefits 8,354 21,740 Deferred employees profit sharing (5,560) (9,246) Interest gain (1,009) (1,745) Items relating to financing activities: Interest expense 883, ,484 Accounts receivable (2,413,363) (1,646,631) Inventories 222,009 (25,733) Other accounts receivable, deferred charges and other assets (233,060) (634,478) Suppliers (539,941) (361,636) Other accounts payable and accrued expenses 85,150 (235,335) Income tax paid (16,340) (191,231) Net cash flow provided by operating activities (777,036) (1,233,212) Investment Acquisition of property, plant and equipment (249,043) (87,760) Sale of plant and equipment 3,818 3,864 Interest collected 1,009 1,745 Net cash flow used in investing activities (244,216) (82,151) Resources to be (provided by) used in financing activities (1,021,252) (1,315,363) Financing Interest paid (924,839) (723,684) New short-term debt and bank loans 2,726,126 4,236,967 Payments of short-term debt and bank loans (1,844,620) (2,363,554) Bank customers' deposits 790,597 1,165,024 Net cash flow from financing activities 747,264 2,314,753 (Decrease) increase in net cash and cash equivalent (273,988) 999,390 Adjustments to cash flow as a result of changes in exchange rates 429,493 (71,412) Cash and cash equivalent at beginning of period 1,114,459 1,706,086 Cash and cash equivalent at end of period Ps 1,269,964 Ps 2,634,064 Cash and cash equivalent Ps 1,068,615 Ps 2,405,455 Restricted cash 201, ,609 Ps 1,269,964 Ps 2,634,064 Investor Relations: 11 de 12

12 This report contains, or may be deemed to contain, forward-looking statements. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The future results of Grupo Famsa, S.A.B. de C.V. and its subsidiaries may differ from the results expressed in, or implied by, the forward-looking statements set out herein, possibly to a material degree. Investor Relations: 12 de 12