Edgar Filing: GRUPO CASA SABA SA DE CV

Quarterly Earnings Report 4Q11 February 27, 2012

The Distribution and Retail Divisions Improve their Performance and Profitability

Financial Highlights:
(All figures are expressed in millions of Mexican pesos. Comparisons are made with respect the same period of 2010, unless otherwise stated. Figures may vary due to rounding practices).

The Group’s net sales for the quarter reached $11,499.91 million pesos
Gross income for the period was $2,468.62 million; the gross margin for the quarter was 21.47%
Fourth quarter operating expenses reached $1,949.63 million pesos and represented 16.95% of the Company’s total sales.
Quarterly operating income was $519.00 million, resulting in an operating margin of 4.51% for the period
Fourth quarter operating income plus depreciation and amortization was $635.31 million, or 5.52% of sales
The Group’s net profit for the quarter was $170.35 million
As of December 31, 2011, GCS’s net debt totaled $9,952.66 million pesos
GCS closed the quarter with 26 Distribution Centers and over 1,500 pharmacies in operation across Latin America

Mexico City, Mexico, February 27, 2012. Grupo Casa Saba (SAB) (“Saba”, “GCS”, “the Company” or “the Group”), one of the leading Mexican distributors of pharmaceutical products, health and beauty aids, personal care and consumer goods, general merchandise, publications and other products and one of the most important pharmacy chains in Latin America, announces its consolidated financial and operating results for the fourth quarter of 2011

QUARTERLY EARNINGS

In the fourth quarter of 2011 an intense level of competition prevailed in the distribution and sales of pharmaceutical, health, beauty and consumer products both in Mexico and the Latin American countries where we operate. As part of our operative strategy, we continued to emphasize improving the level of our logistic efficiency as well as cost and expense controls, which generated positive results in almost all of our divisions. In terms of sales, we focused on improving the availability of the products that are the most sought after by our clients at the distribution and retail levels as well as our customer service on the sales floor. In terms of growth, new pharmacy openings in Latin America and Mexico enabled us to strengthen our presence and our brand recognition in the markets where we operate.

We closed the fourth quarter of 2011 with a total of 26 distribution centers and more than 1,500 pharmacies in operation throughout Latin America.

We will continue to improve our logistic and commercial operations in order to position our pharmacies’ brands as leaders in the markets where we operate; offering our clients competitive prices as well as excellent service levels and integral health, beauty and consumer goods solutions. In our distribution division, we will continue to focus on service by offering our clients the best product catalog along with a high level of logistical and delivery services.

NET SALES

During the fourth quarter of 2011, net sales reached $11,499.91 million, an increase of 0.38% compared to the $11,456.40 million reported during the same period of 2010. This was the result of the improved performance of our Retail and Government Pharma divisions as well as the sale of Health, Beauty and Consumer goods products

SALES BY DIVISION

DISTRIBUTION DIVISION

During the fourth quarter of the year, our Distribution division generated 60.44% of the Group’s total sales, a 1.38% decrease versus 4Q10.

PRIVATE PHARMA

Private Pharma sales decreased 5.92% during the fourth quarter of 2011, from $5,900.81 million in 4Q10 to $5,551.37 million in 4Q11. As a result, this division represented 48.27% of the Group’s total sales.

During the period, the Private Pharma division was affected by lower sales to some special and institutional clients, as well as stricter credit policies that we expect will have a positive effect on our profitability level.

GOVERNMENT PHARMA

Quarterly sales in our Government Pharma division grew 60.14% to reach $349.70 million compared to $218.38 million in the fourth quarter of 2010. This growth was due to the increase in sales to various Health institutions, including PEMEX, IMSS, ISSSTE, the Metro and other state institutions.

In terms of total sales, this division’s participation went from 1.91% in 4Q10 to 3.04% in the fourth quarter of 2011.

HEALTH, BEAUTY, CONSUMER GOODS, GENERAL MERCHANDISE AND OTHER

Sales in our Health, Beauty, Consumer Goods, General Merchandise and Other division grew by 17.94% compared to the fourth quarter of 2010 to reach $868.77 million pesos. This growth was the result of a higher penetration of exclusive brands, such as Nature Made, as well as the launching of other exclusive brands, such as Curél.

During the quarter, this division represented 7.55% of GCS’s total sales, 112 basis points higher than in 4Q10, when this division generated 6.43% of the Company’s net sales.

PUBLICATIONS

CITEM, GCS’s publication distribution division, generated $181.71 million pesos in sales, a 6.01% decrease compared to the fourth quarter of 2010. This was due to an adjustment in the number of publications delivered by various publishers and the fact that some of the special publications geared towards the holiday season that were sold in 4Q10 were not released this year.

Consequently, this division’s participation as a percentage of total sales went from 1.69% in the fourth quarter of 2010 to 1.58% in 4Q11.

RETAIL PHARMACY

In 4Q11, the Retail Pharmacy division reported sales of $4,548.37 million, 3.20% higher than the $4,407.24 million registered during the same period of 2010.

This division’s participation as a percentage of the Group’s total sales was 39.56% versus 38.47% in 4Q10.

Sales from this division were generated by the more than 1,500 pharmacies that we had in operation at the end of 4Q11 of which: 23.16% were in Chile, 58.78% were located in Mexico, 12.36% in Peru and 5.70% were in Brazil.

As a result, the sales mix for the fourth quarter of 2011 was as follows

                                               Division                               % of sales
                                         Retail Pharmacy             39.56%
                                         Total Distribution                      60.44%
                   Private Pharma 48.27%
                                         Government Pharma                           3.04%
                                         Health, Beauty, Consumer Goods,
                                         General Merchandise and Other          7.55%
                                         Publications           1.58%
                                         TOTAL       100.00%

GROSS INCOME

During the fourth quarter of the year, Grupo Casa Saba’s gross income was $2,468.62 million pesos, 21.04% higher than the $2,039.47 million registered during the same period of 2010. This increase was primarily due to the improved performance of our Retail Pharmacy division in practically all of the countries, where we directed our efforts at improving our customer service, product availability and commercial offers. Our distribution division also contributed to the increase due to an improved sales mix.

As a result, the company’s gross margin was 21.47%, higher than the gross margin of 17.80% registered in 4Q10.

OPERATING EXPENSES

GCS’s 4Q11 operating expenses reached $1,949.63 million, a decrease of 4.35% compared to the fourth quarter of 2010. This increase was the result of the strict cost control measures that were implemented in both the Distribution and Retail Pharmacy divisions throughout the course of 2011.

As a percentage of total sales, operating expenses represented 16.95% of GCS’s total sales in 4Q11 compared to 17.79% during the same period of the previous year.

OPERATING INCOME

Quarterly operating income for 4Q11 was $519.00 million, greater than the $1.24 million reported in 4Q10. This increase was the result of higher gross income as well as the reduction in expenses.

As a result, the operating margin for the period was 4.51%.

OPERATING INCOME PLUS DEPRECIATION AND AMORTIZATION

Operating income plus depreciation and amortization for 4Q11 was $635.31 million, an increase compared to the $139.79 million reported during the fourth quarter of 2010.

The fourth quarter 2011 operating income plus depreciation and amortization margin was 5.52%.

NET DEBT

As of December 31, 2011, GCS’s net debt totaled $9,952.66 million pesos.

COMPREHENSIVE COST OF FINANCING (CCF)

The Group’s CCF reached $269.79 million, 52.92% higher than the CCF reported during 4Q10. This was primarily due to the increase in interest payments and an exchange rate loss in 4Q11 versus an exchange rate gain in 4Q10.

OTHER EXPENSES (INCOME)

During the fourth quarter of 2011, the Company reported an income in the Other Expenses (Income) line item of $28.37 million compared to an expense of $302.49 million registered during the same period of the previous year.

It is important to mention that the results listed in this line item are derived from activities outside of the company’s normal business operations and, as a result, they are not necessarily recurrent.

TAX PROVISIONS

Tax provisions for the fourth quarter of 2011 were $107.23 million pesos, which is not comparable with the ($42.78) million reported in 4Q10. Of these, $231.36 million were related to income tax payments and ($124.13) million were attributed to deferred income tax.

NET INCOME

GCS registered a net income of $170.35 million in the fourth quarter of 2011 versus a loss of $434.90 million during the fourth quarter of 2010.

Consequently, the net margin for 4Q11 was 1.48%.

The 265.4 million shares issued by Grupo Casa Saba are listed on the Mexican Stock Exchange and its ADRs on the New York Stock Exchange, both under the symbol “SAB”. One ADR equals 10 ordinary shares.

Grupo Casa Saba was founded in 1892 and is one of the leading distributors of pharmaceutical products, beauty, personal care and consumer goods, general merchandise, publications and other goods in Mexico. With more than 115 years of experience, the Company distributes to the majority of pharmacies, chains, self-service and convenience stores, as well as other specialized national chains. With the acquisition of FASA in October of 2010 the company now has retail pharmacy outlets located in Mexico, Chile, Brazil and Peru.

As a precautionary note to investors, except for the historic information contained herein, certain topics discussed in this document constitute forward-looking statements. Such topics imply risks and uncertainties, including the economic conditions in Mexico and those countries in which Grupo Casa Saba operates, directly or indirectly, including the United States of America, Brazil, Chile and Peru, as well as variations in the value of the Mexican peso as compared with the currencies of the previously-mentioned countries.

Contacts:
GRUPO CASA SABA                                   IR Communications:
Sandra Yatsko               Jesús Martínez Rojas
+52 (55) 5284-6672                                        +52 (55) 5644-1247
syatsko@casasaba.com                              jesus@irandpr.com

GRUPO CASA SABA S.A.B. DE C.V. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET In thousands of Mexican Pesos I T E M

December 11

December 10

Difference

TOTAL ASSETS

32,929,665

31,235,103

1,694,562

CURRENT ASSETS

20,648,508

18,711,358

1,937,151

CASH AND CASH EQUIVALENTS

2,417,353

1,290,466

1,126,888

ACCOUNTS RECEIVABLE (NET)

6,634,782

6,938,303

(303,521)

OTHER ACCOUNTS RECEIVABLE (NET)

2,297,764

1,434,792

862,972

INVENTORIES

9,174,170

8,857,279

316,891

OTHER CURRENT ASSETS

124,439

190,518

(66,079)

LONG TERM

55,168

51,177

3,991

INVESTMENTS IN SHARES OF SUBSIDIARIES AND

ASSOCIATED COMPANIES

55,168

51,177

3,991

PROPERTY MACHINARY AND EQUIPMENT

3,488,109

3,726,889

(238,780)

PROPERTY

1,777,439

1,776,360

1,080

MACHINERY AND EQUIPMENT

2,306,022

362,730

1,943,291

OTHER EQUIPMENT

4,354,560

6,130,099

(1,775,539)

ACCUMULATED DEPRECIATION

4,949,912

4,546,185

403,727

CONSTRUCTION IN PROGRESS

3,886

(3,886)

DEFERRED ASSETS (NET)

4,109,235

8,513,021

(4,403,786)

OTHER ASSETS

4,628,644

232,658

4,395,986

TOTAL LIABILITIES

25,471,137

24,152,255

1,318,882

CURRENT LIABILITIES

16,088,285

21,609,455

(5,521,170)

ACCOUNTS PAYABLE

10,010,574

9,604,770

405,804

BANK DEBT

2,864,294

9,207,682

(6,343,388)

OTHER CURRENT LIABILITIES

3,213,417

2,797,003

416,414

LONG TERM LIABILITIES

9,505,715

2,289,346

7,216,369

BANK DEBT

9,505,715

2,289,346

7,216,369

OTHER LIABILITIES

(122,863)

253,454

(376,317)

SHAREHOLDERS' EQUITY

7,458,527

7,082,848

375,679

MINORITY INTEREST

124,256

115,184

9,072

MAJORITY INTEREST

7,334,271

6,967,664

366,607

PAID-IN CAPITAL

1,993,875

CAPITAL STOCK

167,903

RESTATEMENT IN CAPITAL STOCK

956,094

PREMIUM ON STOCK SOLD

869,878

CAPITAL INCREASE (DECREASE)

5,464,653

5,088,973

375,679

CUMULATIVE RESULTS AND EQUITY RESERVE

3,916,090

3,756,703

159,387

RESERVE FOR SHARE REPURCHASE

1,062,200

NET INCOME

486,363

270,070

216,292

GRUPO CASA SABA, S.A.B. DE C.V. in thousands of Mexican Pesos as of December 2011

Jan-Dec

Difference

Oct-Dec

Difference

Income Statement

2010

% of sales

2011

% of sales

2010

% of sales

2011

% of sales

NET SALES

34,244,182

100.00%

48,374,083

100.00%

14,129,901

41.26%

11,456,396

100.00%

11,499,912

100.00%

43,516

0.38%

COST OF SALES

29,614,296

86.48%

39,219,206

81.07%

9,604,910

32.43%

9,416,931

82.20%

9,031,290

78.53%

-385,642

(4.10%)

Gross Profit

4,629,885

13.52%

9,154,877

18.93%

4,524,991

97.73%

2,039,465

17.80%

2,468,623

21.47%

429,158

21.04%

OPERATING EXPENSES

Sales Expenses

1,242,468

3.63%

1,248,902

2.58%

6,434

0.52%

568,350

4.96%

445,885

3.88%

-122,465

(21.55%)

Administrative Expenses

2,541,429

7.42%

6,242,041

12.90%

3,700,612

145.61%

1,469,877

12.83%

1,503,741

13.08%

33,864

2.30%

Operating Expenses

3,783,897

11.05%

7,490,943

15.49%

3,707,046

97.97%

2,038,227

17.79%

1,949,626

16.95%

-88,601

(4.35%)

Operating Income

845,988

2.47%

1,663,934

3.44%

817,945

96.69%

1,238

0.01%

518,996

4.51%

517,759

COMPREHENSIVE COST OF FINANCING

Interest Paid

493,430

1.44%

1,046,022

2.16%

552,592

111.99%

207,703

1.81%

266,485

2.32%

58,782

28.30%

Interest (Earned)

-12,167

(0.04%)

-70,689

(0.15%)

-58,523

481.01%

-5,893

(0.05%)

-13,610

(0.12%)

-7,717

130.95%

Exchange Loss (Gain)

-218,237

(0.64%)

66,830

0.14%

285,067

-25,383

(0.22%)

7,515

0.07%

32,898

Monetary Position (gain)

0.00%

9,401

0.02%

9,401

0.00%

9,401

0.08%

9,401

Comprehensive Cost of Financing

263,026

0.77%

1,051,565

2.17%

788,538

299.79%

176,427

1.54%

269,791

2.35%

93,364

52.92%

OTHER EXPENSES (INCOME), net

258,764

0.76%

-95,612

(0.20%)

-354,376

302,488

2.64%

-28,368

(0.25%)

-330,856

INCOME BEFORE TAXES

324,198

0.95%

707,981

1.46%

383,783

118.38%

-477,677

(4.17%)

277,573

2.41%

755,250

PROVISIONS FOR:

Income Tax

378,708

1.11%

506,679

1.05%

127,971

33.79%

279,986

2.44%

231,355

2.01%

-48,631

(17.37%)

Asset Tax

13,517

0.04%

0.00%

-13,517

0.00%

13,517

0.12%

0.00%

-13,517

0.00%

Deferred Income Tax

-338,097

(0.99%)

-285,061

(0.59%)

53,036

(15.69%)

-336,284

(2.94%)

-124,128

(1.08%)

212,156

(63.09%)

Profit sharing due

0.00%

Deferred Profit sharing due

0.00%

Total taxes

54,128

0.16%

221,618

0.46%

167,490

309.43%

-42,781

(0.37%)

107,227

0.93%

150,008

Income Before Extraordinary Items

270,070

0.79%

486,363

1.01%

216,293

80.09%

-434,896

(3.80%)

170,347

1.48%

605,243

Extraordinary Items (Income)

0.00%

Net Income

270,070

0.79%

486,363

1.01%

216,292

80.09%

-434,896

-3.80%

170,347

1.48%

605,243

Depreciation and Amortization

191,140

0.56%

463,763

0.96%

272,623

142.63%

138,557

1.21%

116,315

1.01%

(22,242)

(16.05%)

Operating Income plus Depreciation and Amortization

1,037,129

3.03%

2,127,697

4.40%

1,090,568

105.15%

139,794

1.22%

635,311

5.52%

495,517

354.46%

Net Income corresponding to Minority Interest

-15,328

5,052

-13,263

1,326