Institutional Presentation November 2017

Transcription

1 Institutional Presentation November 2017

2 DISCLAIMER This presentation may include declarations about Springs Global s expectations regarding future events or results. All declarations based upon future expectations, rather than historical facts, are subject to various risks and uncertainties. These risks and uncertainties include factors related to the following: the Company s business strategy, the international and the Brazilian economies, technology, financial strategy, developments in the textile and retail sectors, market conditions, among others. To obtain further information on factors that may give rise to results different from those forecasted by Springs Global, please consult the reports filed with the Brazilian Comissão de Valores Mobiliários (CVM, equivalent to U.S. SEC ). 2

3 AGENDA COMPANY OVERVIEW OUR BUSINESS COMPETITIVE ADVANTAGES OPPORTUNITES FINANCIALS 3

4 EXECUTIVE SUMMARY Leading company in the home textile market, operating in Brazil, Argentina, USA and Canada Traditional and leading brands that embrace different market segments Controlling shareholders are reference in the textile sector, with 40 years of experience Integrated supply chain Retail operations in Brazil, with a national presence Established and recognized franchise model Opportunity to asset light growth, through franchise expansion and operational leverage Listed in the B3 highest standard for Corporate Governance, Novo Mercado : SGPS3 4 4

5 STRATEGIC OBJECTIVES Focus on the Americas Consolidate the leadership position in the America s home textile market Enhance the value of our brands Leverage and enhance its proprietary brand portfolio, reinforcing the commitment to customer satisfaction Enhance relationship with wholesale clients Promote and develop relationships with multi-brand clients Development of mono-brand retail channel Expand distribution through the mono-brand channels, leveraging primarily on the franchise business model Integration of Retail-Industry Integrate the industrial and retail operations, positioning ourselves as a benchmark in the areas of innovation and management 5 5

6 SHAREHOLDER STRUCTURE Companhia de Tecidos Norte de Minas (CTNM) Leblon Equities 19.0% 1 Board members and officers 0.26% Controlling shareholders 52.92% Free float 46.8% Springs Global Position as of 09/30/ Position as of March , according to letter received by the Company informing significant ownership 6 6

7 HISTORY 1967 Foundation of Companhia de Tecidos Norte de Minas - Coteminas 1975 Start of operations of the first textile plant in Montes Claros, MG 1990 s Entering the consumer products segment, through the acquisition the Santista and Artex brands Strong sales growth, including exports 2006 Creation of Springs Global as a result of a joint venture between Coteminas, with operations in South America, and Springs Industries, with operations in North America 2009 Entering the retail market in Brazil, through the acquisition of MMartan store chain Expansion of MMartan stores, from 57 to Launch of a second retail chain under the brand name Artex, with only owned stores 2015 Start of Artex franchises 7 7

8 3Q17 LTM 1 CONSOLIDADED RESULTS In R$ million , , ** EBITDA margin (%) Total 11.0% South America - Wholesale 14.0%* South America - Retail 0.7% North America - Wholesale 9.3% 0 Net revenue EBITDA 2 EBITDA * Includes Intercompany revenue of R$ 69.1 million in 3Q17 LTM ** Includes non-allocated expenses of R$ 4.1 million in 3Q17 LTM 1 Last twelve months ended at September 30, In recurring terms, excluding non-recurring result of R$ 7.2 million in 4Q16 8 8

9 2017 GUIDANCE M17 in R$ million Guidance Actual Net revenue South America - Wholesale* 1,250-1, South America - Retail North America - Wholesale Total net revenue 2,360-2,730 1,625.4 EBIT EBITDA CAPEX * Including intercompany revenue of R$ 62.3 million in the 2017 guidance and of R$ 55.1 million in 9M17 Assumptions Exchange rate - average PIB Brazil 0.8% 0.0% 1H17 yoy Store conversions 20 5 New stores

10 AGENDA COMPANY OVERVIEW OUR BUSINESS COMPETITIVE ADVANTAGES OPPORTUNITIES FINANCIALS 10

11 WE HAVE A PORTFOLIO OF BRANDS WITH VALUE PROPOSITION FOR DIFFERENT MARKET SEGMENTS... BRAZIL ARGENTINA USA/CANADA 11 11

12 ...THAT ARE LEADERS IN THE MARKETS WE OPERATE #1 Brazil e Argentina One of the major players in the USA and Canada Location of Retail stores Plants Warehouse and distribution centers LEGENDAS Stores LOJAS Artex mmartan

13 CONSERVATIVE APPROACH RELATED TO CREDIT CONCESSION TO BRAZILIAN CLIENTS HAS LIMITED, IN SOME LEVEL, OUR SALES IN % Market share in the Brazilian bedding, bath and tabletop market 1 80% 60% 40% 20% 0% Springs Global A B C Others Imports 1 Considering revenues from main companies which are estimated to represent 80% of total market 2 Revenue for South America Wholesale Source: Companies financial statements and MDIC 13 13

14 COLLECTION CYCLE The substitution of imported products with domestic ones is a good opportunity to reduce the operational cycle, finished goods inventories and exchange rate risk. Creation cycle Assortment plan (structure of collection) Sourcing cycle Research workshop and trips/ Business fairs / Product development (Creation) Quotation + Sample analysis Demand planning and negotiation with suppliers Imports Beginning of the Operational Cycle Placement of Orders for Imports Development and approval of pre-production samples Shipping Production Customs and Quality control Placement of Orders for National Store delivery National Production planning Production Store delivery 14 Launch of the Collection 14

15 PORTFOLIO OF PRODUCTS BUILT FROM CONSUMER PERSPECTIVE Assortment Plan: Definition of the collection structure: Variety of products per category Main attributes for each product Pricing Analysis of historic sales: Creative direction targeting for better commercial results Definition of the quantity of SKUs More frequent collections 15 15

16 PRODUCT DEVELOPMENT: INSPIRATION TRENDS RESEARCH (definition of themes) Research Bureau CREATIVE PATH VALIDATION/ ASSORTMENT PLAN COLLECTION DEVELOPMENT Equipe de criação Business fairs and trips 16 16

17 PRODUCT DEVELOPMENT: TRANSPIRATION VALUE VALIDATION: ATTRIBUTE X PRICE DELIVERY OF TECNICAL SHEETS FOR QUOTATION COLLECTION APPROVAL AT THE PLANTS 17 17

18 INTEGRATED SUPPLY CHAIN RAW MATERIAL SPINNING WEAVING FINISHING AND SEWING DISTRIBUTION CHANNELS CONSUMER System enables measuring demand at the point of sale Daily control panels for at all stages of the supply chain Inventory and production management Inventory and order suggestion for the store managers Weekly delivery to stores 18 18

19 VALUE ADDED ALONG THE SUPPLY CHAIN Average prices (R$/kg) in 2Q % Capital + Energy + Labor +67% Capital + Energy + Inputs + Labor +Creation +Brand 6.1 Source: CEPEA Cotton Spinning and weaving Intermediate products Finishing and sewing Bedding, tabletop and bath 19

20 RELATIONSHIP WITH MULTI-BRAND CUSTOMERS Supply chain efficiency Approximately 4,000 multi-brand customers Excellence of service at the POS Training focused on product, collections, sales, decoration / display Team of shelf stockers in the main specialized department stores and self-services chains 20 20

21 LEADERSHIP IN ESPECIALIZED RETAIL Number of Retail Stores Q17 Owned MMartan Franchise MMartan Owned Artex Franchise Artex 21 21

22 EXPERIENCE IN THE POINTS OF SALE Accessibility (quantity and location of points of sale) Layout Visual merchandising (VM) Service level Product availability 22 22

23 COMMUNICATION WITH CONSUMERS TV Ads Magazines and catalogs Traditional media Visual Merchandising (VM) Social networks Events Customer Service CRM actions: Marketing, SMS and calls Events Catalogs Magazines Anúncios Advertisements 23 23

24 COMMUNICATION WITH FRANCHISES Direct relationship, through regional managers Communication channel to multiply best practices Daily performance reports Suggestion of weekly orders according to promotions and ideal inventory level Management and CRM systems Training portal Campaign videos 24 24

25 AGENDA COMPANY OVERVIEW OUR BUSINESS COMPETITIVE ADVANTAGES OPPORTUNITIES FINANCIALS 25

26 EXPERIENCE: COMPETITIVE ADVANTAGES Loyalty from end user to our brands Retail presence enables more proximity to end users Greater assertiveness in the collection planning Lower mark down Assisted consultancy to multi-brand clients Franchise network Established franchise model of excellence National presence Expertise in design and bedding, bath and tabletop products 26 26

27 SUPPLY: COMPETITIVE ADVANTAGES Fully integrated: more efficient, lower conversion cost Market leader economy of scale Installed capacity: able to grow production significantly, with low capex Technology: plants with high automatization and flexibility levels Management: experienced personnel, controlling system at all stages of production, franchise management system and CRM Competitive energy cost

28 AGENDA COMPANY OVERVIEW OUR BUSINESS COMPETITIVE ADVANTAGES OPPORTUNITIES FINANCIALS 28

29 OPPORTUNITIES Sales expansion of decorative textile products, increasing the utilization rate of existing plants New franchise stores and conversion of owned stores to franchises Expansion of e-commerce sales Financial deleverage Better cash generation from operations Reduction of cost of debt, due to lower interest rates Monetization of non operational assets 29 29

30 CONTINUOUS LEVERAGE REDUCTION Net debt/ltm EBITDA 1 4.9x 4.3x 3.8x 3.6x 3.6x 3.3x Q17 1 In recurring terms, excluding non-recurring results of R$ 17.1 million in 2015 and R$ 7.2 million in 4Q

31 CONVERSION OF OWNED STORES TO FRANCHISES Conversion target: To have less than 50 owned stores Current: 71 owned stores Seven conversions in the last 12 months Definition according to store size 31 31

32 EFFECTS OF THE CONVERSION OF OWNED STORES INTO FRANCHISES 32 32

33 INCREASE OF THE NUMBER OF STORES IN RETAIL Greater growth opportunity in Artex network, through franchises Artex MMartan Owned MMartan Franchise MMartan Owned Artex Franchise Artex 33 33

34 FRANCHISEES ATRACTED BY STRONG BRANDS, MANAGEMENT SYSTEM OF EXCELLENCE AND ATTRACTIVE FINANCIAL RETURNS Investment Artex MMartan Store size m m 2 Franchise fee R$ k R$ k Refurbishing cost R$ k R$ k Initial inventory R$ k R$ k Working capital, including initial inventory Franchise Economics R$ k R$ k Payback months months COMMERCIAL CONDITIONS Weekly orders Products and royalties payments on term Publicity: franchesee have to invest 2% of its revenues Royalties of 20% over purchases Publicity funding fee: Free 34 34

35 READY TO TAKE OFF STRUCTURE ALREADY READY TO GROW IN RETAIL People: Experienced managers in textile and retail industries Systems: Proprietary retail management system, franchise and customer relationship management (CRM) Supply: Production capacity and distribution centers Consolidated franchise model of excellence Strong and well-known brands High quality products 35 35

36 AGENDA COMPANY OVERVIEW OUR BUSINESS COMPETITIVE ADVANTAGES OPPORTUNITIES FINANCIALS 36

37 FINANCIAL PERFORMANCE- CONSOLIDADED In R$ million Revenue and Gross margin (%) EBITDA and EBITDA margin (%) 1 2,500 2, , , % 33% % 12.3% 15% 13% 2,000 1, % 26.8% 26.4% 26.9% 26.3% 27.1% 31% 29% 27% 25% % % 11.0% % 11% 9% 7% 1, % 21% 19% 17% % 3% 1% Q17 LTM 3Q15 3Q16 3Q17 15% Q17 LTM 3Q15 3Q16 3Q17-1% Revenue Gross margin EBITDA EBITDA margin 2016/ % p.p % p.p. 3Q17/3Q16-7.8% p.p % p.p. 1 Adjusted EBITDA and adjusted EBITDA margin for 2015, 2016, and 3Q17 LTM 37 37

38 FINANCIAL PERFORMANCE SOUTH AMERICA - WHOLESALE In R$ million 1,400 Revenue Gross profit and Gross margin (%) 40% 1,200 1, , , % 31.4% 35% 1, % % % 27.1% 30% 25% 20% % % 5% Q17 LTM 3Q15 3Q16 3Q Q17 LTM 3Q15 3Q16 3Q17 0% Revenue Gross profit Gross margin 2016/ % - 6.6% p.p. 3Q17/3Q % + 5.4% p.p

39 FINANCIAL PERFORMANCE SOUTH AMERICA - RETAIL In R$ million 300 Revenue Gross profit and Gross margin (%) % % % 51.9% % 51.6% 50.9% 55% 50% 45% % % 30% 25% Q17 LTM 3Q15 3Q16 3Q Q17 LTM 3Q15 3Q16 3Q17 20% Revenue Gross profit Gross margin 2016/ % + 7.7% p.p. 3Q17/3Q % - 0.6% p.p

40 FINANCIAL PERFORMANCE NORTH AMERICA - WHOLESALE In R$ million 1,200 Revenue Gross profit and Gross margin (%) % 1, % % 20% % 16.8% 16.4% 18% % 15.5% 16% % 12% Q17 LTM 3Q15 3Q16 3Q Q17 LTM 3Q15 3Q16 3Q17 10% Revenue Gross profit Gross margin 2016/ % % p.p. 3Q17/3Q % % p.p

41 SPRINGS GLOBAL BM&FBOVESPA: SGPS3