2008 BMV: GFAMSA Monterrey, México. July 24, 2008 Grupo Famsa S.A.B. de C.V. (BMV: GFAMSA) As of January 1, 2008, the effect of inflation is no longer recognized for financial reporting purposes under new Mexican Financial Reporting Standards. However, it is required that financial results of previous periods be presented considering the effects of inflation up to December 31, 2007. This means that for periods prior to January 1, 2008, figures must be shown in constant pesos of December 31, 2007. In order to ease the transition to nominal accounting, the Letter from the CEO refers to the 2Q07 figures as they were presented in June 2007 (constant pesos of June 30, 2007). Mr. Humberto Garza Valdéz, Chief Executive Officer, Grupo Famsa S.A.B. de C.V., reports on the company s second quarter 2008 results. Letter from the CEO Mr. Humberto Garza Valdéz, Grupo Famsa s Chief Executive Officer, stated: Grupo Famsa continues strengthening its position in the market through the disciplined development of a complementary business portfolio based on consumer credit. Famsa Mexico, Banco Ahorro Famsa, and Famsa USA are the three business units through which we provide a comprehensive and differentiated value offer to our customers. The continued drive to grow each one of the businesses and especially the unique composition of our portfolio has played an important role in allowing us to overcome the challenges posed by the current macro environment. For instance, besides increasing our retail area, each one of the 3 Famsa Mexico stores opened during the second quarter also reinforces our banking network. Furthermore, the rapid implementation of Banco Ahorro Famsa branches within our existing stores has accelerated the bankarization of thousands of Mexican families at the same time it provides more efficient financing alternatives for the company and enhances Famsa Mexico s value proposition. Finally, the efforts carried out to strengthen our commercial and banking operation in Mexico also contributed to achieve the 12.0% Famsa USA second quarter sales growth by leveraging brand recognition, expertise and Famsa Mexico s distribution network. Summary of Consolidated Financial Results (millions of Mexican pesos) 2008 2007 (1) % Var (2) 2008 2007 (1) % Var (2) Net sales 3,710 3,406 8.9 7,048 6,337 11.2 Cost of Sales 1,905 1,841 3.5 3,636 3,428 6.1 Gross Income 1,805 1,565 15.3 3,412 2,909 17.3 Operating Expenses 1,455 1,226 18.7 2,803 2,302 21.8 Operating Income 350 339 3.3 609 607 0.3 EBITDA 435 413 5.5 789 749 5.4 Net Income 108 97 12.0 219 253-13.4 Gross Margin (%) 48.6% 45.9% 48.4% 45.9% EBITDA Margin (%) 11.7% 12.1% 11.2% 11.8% Net Margin (%) 2.9% 2.8% 3.1% 4.0% (1) Millions of constant Mexican pesos of June 30, 2007 (2) Variance calculated in thousands of Mexican Pesos, as in financial statements Investor Relations: 1 of 9
Operating Results by Business Unit Store and Banking Branch Openings 1. Stores Second Quarter Last 12 Months Total Stores 5 36 410 Famsa Mexico 3 23 359 Famsa USA 2 13 51 Banking Branches 83 222 267 2. Retail Area (square meters) Second Quarter Last 12 Months Total Stores 11,170 60,098 526,964 Famsa Mexico 6,127 36,152 406,824 Famsa USA 5,043 23,946 120,140 Famsa Mexico In Mexico, consumer confidence has steadily decreased for a longer period than expected. Under these circumstances, Famsa Mexico continues the implementation of specific initiatives to compensate the effects of the current slowdown in consumption. Our efforts focus on traffic generation through advertising, promotions and the work done by our Gran Crédito team visiting thousands of potential customers homes. In addition, we have enhanced our personal loan offering through Famsa Mexico in order to provide greater convenience to current customers who require a cash credit. Lastly, we continue carrying out a frequent and detailed tracking of internal customer service indicators at the sales floor to guarantee a superior shopping experience. Famsa USA Famsa USA continues delivering solid results despite the challenges from the current consumption environment in the United States. Our retail network reached 51 stores during the second quarter with the opening of 2 new locations in California. Furthermore, the Edelstein s integration process concluded successfully and our Chicago store continues achieving positive results. On the other hand, Famsa USA has recently benefited from a significant increase in digital TV demand due to the signal transition scheduled to take place nationwide on February 17, 2009. A large number of consumers have opted to purchase a new digital TV rather than purchasing the signal converter necessary for conventional TVs to function. This increase in Electronics has compensated for the recent slowdown we have observed in Furniture and White Goods. Investor Relations: 2 of 9
Banco Ahorro Famsa Banco Ahorro Famsa increased its footprint with the opening of 83 banking branches within Famsa Mexico stores during the last quarter. This means that we have successfully covered all the stores where a full-format banking branch was viable given their size and location. Even so, the 267 branches that make up the current network will continue growing with each new Famsa Mexico store. Furthermore, we will continue evaluating different banking branch formats in order to leverage the rest of our locations. The efforts carried out by our team to reach the required profitability in Banco Ahorro Famsa are rapidly being translated into tangible results. By the end of the second quarter, our bank had more than 218 thousand savings accounts with a balance greater than $931 million pesos. In addition, we reached more than 62 thousand personal loan accounts with an outstanding balance of roughly $315 million pesos. Moreover, major progress is being achieved to establish the fundamental processes through which we will be able to capture the synergies between Famsa Mexico and Banco Ahorro Famsa. First, we completed a pilot emission of $200 million pesos in bank debt through financial intermediaries. Additionally, we successfully carried out a pilot migration of $630 million pesos in consumer credit accounts from our commercial business to the bank. 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) Millions of constant Mexican pesos of June 30, 2007 (4) Variance calculated in thousands of Mexican Pesos, as in financial statements 2008 2007 (3) % Var (4) 2008 2007 (3) % Var (4) Grupo Famsa (1) 3,710 3,406 8.9 7,048 6,337 11.2 Famsa Mexico (2) 2,895 2,687 7.8 5,421 5,074 6.8 Famsa USA 789 704 12.0 1,583 1,214 30.4 Other 268 262 2.3 504 507-0.5 Intercompany -242-247 -2.2-460 -458 0.6 Same Store Sales (percentage) 2008 2007 2008 2007 Grupo Famsa 2.1 2.7 2.0 5.0 Famsa Mexico 2.1 1.0 1.0 4.3 Famsa USA 2.4 19.3 6.5 16.3 Net Sales Grupo Famsa s consolidated net sales reached $3,710 million pesos during the second quarter, increasing 8.9% when compared to 2Q07. Famsa Mexico increased its quarterly sales 7.8% to $2,895 million pesos. On the other hand, Famsa USA sales grew to $789 million pesos during the second quarter, representing an increase of 12.0% over the previous comparable period. The consolidated net sales of stores with more than twelve months of operation (Same Store Sales) increased 2.1%, in nominal terms, during the quarter. Famsa Mexico s same store sales grew 2.1% through 2Q08. Furthermore, we have maintained the implementation of Investor Relations: 3 of 9
initiatives focused at increasing store traffic and operating more efficiently to overcome the effects of a challenging environment caused by a sustained decrease in consumer confidence. Despite facing a high 2Q07 comparable close to 20%, Famsa USA achieved 2.4% same store sales growth during the current period. Cost of Sales The Cost of Sales reached $1,905 million pesos during the second quarter. However, it decreased 270 basis points as a percentage of net sales, from 54.1% in 2Q07 to 51.4% in 2Q08. The increase in credit sales as well as Famsa USA s growth continue contributing significantly to reduce the cost-to-sales relationship. Operating Income before Depreciation and Amortization (EBITDA) (millions of Mexican Pesos) 2008 2007 (3) % Var (4) 2008 2007 (3) % Var (4) Grupo Famsa (1) 435 413 5.5 789 749 5.4 Famsa Mexico (2) 341 322 5.8 604 599 0.8 Famsa USA 64 70-8.2 133 104 28.6 Other 15 4 274.0 20 13 52.8 Intercompany 15 17-8.8 32 33-3.2 EBITDA Margin (percentage) (1) Includes EBITDA from other non-retail businesses (2) Includes Banco Ahorro Famsa (3) Millions of constant Mexican pesos of June 30, 2007 (4) Variance calculated in thousands of Mexican Pesos, as in financial statements 2008 2007 2008 2007 Grupo Famsa (1) 11.7 12.1 11.2 11.8 Famsa Mexico (2) 11.8 12.0 11.1 11.8 Famsa USA 8.1 9.9 8.4 8.5 Operating Expenses Operating Expenses reached $1,455 million pesos at the end of the second quarter 2008. Over the last 12 months, expenses increased 18.7% mainly due to the implementation of 222 Banco Ahorro Famsa branches, as well as the 12.9% consolidated retail area growth which includes our incursion to the Chicago market. The additional operating expenses directly associated with our banking operation are estimated to sum approximately $250 million through 2008. During the second quarter, we also recognized an additional expense for doubtful accounts from Banco Ahorro Famsa based on Banking Commission standards. Grupo Famsa s EBITDA would have achieved double digit growth on a like-to-like basis. Lastly, we continue working towards identifying and capturing potential Operating Expense savings in order to compensate the effects of the current environment. Comprehensive Financing Expense The Comprehensive Financing Expense grew 36.2% when compared to 2Q07, reaching $229 million pesos. This increase is driven mainly by a higher amount of interests resulting from Investor Relations: 4 of 9
a 27.6% growth in our consolidated Net Debt. In addition, we recorded a $30 million pesos noncash exchange-rate loss during this quarter. Net Income Net Income reached $108 million pesos during the second quarter, representing a 12.0% increase versus the previous year s comparable period. The quarterly net margin grew 10 basis points from 2.8% in 2Q07 to 2.9% in 2Q08. Main Balance Sheet Accounts (millions of Mexican pesos) 2008 2007 (1) % Var (2) Trade Accounts Receivable 10,882 8,311 30.9 Inventories 2,551 2,327 9.7 Net Debt 6,094 4,774 27.6 Stockholder s Equity 6,620 6,118 8.2. (1) Millions of constant Mexican pesos of June 30, 2007 (2) Variance calculated in thousands of Mexican Pesos, as in financial statements Trade Accounts Receivable The Trade Accounts Receivable balance grew 30.9% over the last twelve months to $10,882 million pesos. Most of the increase is driven by the 16.3% cumulative credit sales growth. However, other elements such as the Edelstein s transaction, personal loans, and Banco Ahorro Famsa s growth have an effect on the balance without having the same impact on sales. In addition, write-offs represented 4.5% of credit sales mainly due to Famsa USA s growing share of total sales. Inventories Inventories increased 9.7% when compared to 2007. Our retail area grew almost 13% over the last year, and each new store requires exhibition inventory. Nevertheless, we maintain a constant effort focused at keeping minimum inventory levels without affecting our service standards. Net Debt Net Debt reached $6,904 million pesos by the end of the second quarter 2008. The funds from the additional debt have been used mainly to finance the working capital needs (mainly receivables, inventory and capital expenditures for new stores) that our growth plan requires. Stockholder s Equity Stockholder s Equity increased 8.2% to $6,620 million pesos. Grupo Famsa maintains a firm commitment to continue strengthening its competitive position through disciplined growth and the value creation resulting from unique synergies between its business units. Investor Relations: 5 of 9
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