Quarterly Earnings Report July 26, 2013
2Q12
Financial Highlights:
(All figures are expressed in million of Mexican pesos. Comparisons are made with the same period of 2012, unless otherwise stated. Figures may vary slightly due to rounding).
- The Group's net sales for the second quarter reached $10,843.3 million pesos
- Gross income for the period was $1,832.3 million; the gross margin for the quarter was 16.9%
- Operating expenses reached $1,676.1 million pesos and represented 15.4% of the Company's total sales
- Quarterly operating income was $156.1 million, resulting in an operating margin of 1.4% for the period
- Second quarter EBITDA was $242.3 million, or 2.2% of total sales
- As of June 30, 2013, GCS's net debt totaled $9,594.9 million
- GCS closed the quarter with 22 Distribution Centers and 1,282 pharmacies in operation across Latin America
Mexico City, Mexico, July 26, 2013. Grupo Casa Saba (SAB) ("Saba", "GCS", "the Company" or "the Group"), one of the leading Mexican distributors of pharmaceutical products as well as health, beauty aids and consumer goods and one of the most important pharmacy chains in Latin America, announced its consolidated financial and operating results for the second quarter of 2013.
QUARTERLY EARNINGS
Competition in the distribution and marketing of pharmaceutical products, health and beauty aids, and consumer goods prevailed in Mexico as well as in the other Latin America countries in which we operate, mainly due a larger number of participants in the markets in which we operate. Our operating strategy has been to maintain emphasis on improving efficiency levels and controlling logistic costs and expenses, as well as offering competitive prices, generating positive results in practically all our divisions. At the sales level, we are continue to focusing on improving the availability of the most in-demand products for our clients in wholesale and in our pharma network, as well as improving the care and service of our stock sales. In regards to growth, keeping in line with our strategy, allowed us to strengthen our presence in the markets in which we already operate, as well as to improve the knowledge of the brands with which we operate.
At Grupo Casa Saba, we will continue to focus on making ongoing improvements to our logistic and commercial operations in order to offer all of our clients a wide range of products at competitive prices. In our pharmacy network, we will also strive to offer the best integrated health, beauty and consumer goods solutions.
NET
SALES
Net sales for the quarter totaled $10,843.3 million, a decrease of 11.5% compared to $12,253.18 million in 2Q2012.
SALES BY DIVISON
DISTRIBUTION DIVISION
PHARMA, HEALTH,
BEAUTY AND CONSUMER GOODS
Sales from our Pharma, Health, Beauty and Consumer Goods division totalized $5,266.8 million. Compared to the same quarter last year a 13.5% decrease was resulted mainly due the disincorporation of Citem Publications. In terms of total sales, this division's percentage decrease from 49.7% in 2Q2012 to 48.6% in the 2Q2013.
GOVERNMENT PHARMA
Quarterly sales in our Government Pharma division grew 9.99% compared to the second quarter of 2011. This growth was due to our increased participation in the bidding processes of various State and Federal health institutions. In terms of total sales, this division represented 2.78% in 2Q2011, down from to 3.02% in the 2Q2012.
RETAIL PHARMACY
During the second quarter of the year, sales from our Retail Pharmacy division reached $5,523.3 million. Compared to the same quarter last year, the decrease was of 7.8%. This was mainly due the sale of Brazil and Peru units. This division's percentage of the Group's overall sales rose to 50.9% vs 48.7% in the 2Q2012.
This division’s percentage of the Group’s overall sales rose to 48.9% vs 49.7% in the 2Q2011.
As a result, the sales mix for the second quarter of 2012 was as follows:
Division
%
of Sales
Retail Pharmacy 50.9%
Total Distribution 49.1%
Pharma, Health, Beauty
and Consumers Good 48.6%
Government Pharma
0.5%
TOTAL 100.0%
GROSS INCOME
During the second quarter of 2013, gross income reached $1,832.3 million pesos, amount 17.9% lower than the gross income reached in the second quarter of 2012. This was mainly due a decrease in sales in our distribution and government areas.
OPERATING EXPENSES
Operating expenses in the second quarter of 2013 resulted in $1,676.1 million. This represents a decrease of $290.8 million pesos, or 14.7%, compared to the same period of the previous year. This change was mainly by the management strategy to reduce expenses in all the areas of the company.
As a percentage of total sales, operating expenses represented 15.4% during the second quarter of 2013 compared to 16.0% during the same period of 2012.
OPERATING INCOME
Quarterly operating income for 2Q2013 was $156.1 million, an amount 41.3% lower than the $266.4 million reported in 2Q2012. This decrease in operating income was the result of the decline in sales due the disincorporation of companies.
Operating income margin for the 2Q2013 was 1.4%, versus 2.1% in 2Q2012.
OPERATING INCOME PLUS DEPRECIATION AND AMORTIZATION (EBITDA)
EBITDA for 2Q2013 was $242.3 million, a lower amount compared to the $377.1 million reported in the second quarter of 2012.
EBITDA margin for the second quarter of 2013 was 2.2%.
COMPREHENSIVE COST OF FINANCING (CCF)
The Group’s CCF reached $145.5 million in 2Q2013, 25.9% higher than the CCF reported during 2Q2012.
This increase was primarily due to minor gain in exchanges in this quarter.
NET DEBT
The Company’s net debt at the end of 2Q2013 was $9,594.9 million pesos. A 0.1% increase with respect of last year.
OTHER EXPENSES (INCOME)
During the second quarter of the year, other expenses totaled $60.4 million. This represents a change of $155.2 million mainly from extraordinary earning obtained from our pharma division.
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 second quarter of 2013 were $7.9 million, an amount lower than the $68.1 million reported in 2Q2012.
NET INCOME
In the second quarter 2013 GCS recorded a net loss of $57.8 million, while in the same period last year a net profit of $177.4 million was registered. This change was mainly due the decrease in sales previously mentioned.
Analysis Coverage: Through the Bolsa Mexicana de Valores program, Independent Analyst, Grupo Casa Saba counts with the coverage of Morningstar.
The 265.4 million shares issued by Grupo Casa Saba are listed on the Mexican Stock Exchange under the symbol “SAB“.
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 and Brazil.
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 and Chile, 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 Grayling:
Harish Dadoo González Jesús Martínez Rojas
GRUPO CASA SABA, S.A.B. DE C.V.
Figures are expressed in thousands of Mexican pesos as of June 2013
Jan-June
Jan-June
Variation
Apr - June
Apr - June
Variation
Income Statement
2012
% of sales
2013
% of sales
$
%
2011
% of sales
2012
% of sales
$
%
NET SALES
24,288,488
100.00%
21,860,103
100.00%
2,428,385
(10.00%)
12,253,184
100.00%
10,843,357
100.00%
1,409,827
(11.51%)
COST OF SALES
19,874,773
81.83%
18,139,284
82.98%
1,735,490
(8.73%)
10,019,697
81.77%
9,011,019
83.10%
1,008,678
(10.07%)
Gross Profit
4,413,715
18.17%
3,720,819
17.02%
692,896
(15.70%)
2,233,487
18.23%
1,832,338
16.90%
401,149
(17.96%)
OPERATING EXPENSES
Sales Expenses
662,251
2.73%
377,169
1.73%
285,082
(43.05%)
362,825
2.96%
199,773
1.84%
163,052
(44.94%)
Administrative Expenses
3,114,805
12.82%
2,919,951
13.36%
194,854
(6.26%)
1,604,225
13.09%
1,476,407
13.62%
127,819
(7.97%)
Operating Expenses
3,777,056
15.55%
3,297,120
15.08%
479,936
(12.71%)
1,967,050
16.05%
1,676,179
15.46%
290,871
(14.79%)
Operating Income
636,659
2.62%
423,699
1.94%
212,960
(33.45%)
266,437
2.17%
156,159
1.44%
110,278
(41.39%)
COMPREHENSIVE COST OF FINANCING
Interest Paid
465,408
1.92%
469,556
2.15%
4,148
0.89%
194,423
1.59%
229,211
2.11%
34,788
17.89%
Interest (Earned)
42,639
(0.18%)
63,941
(0.29%)
21,302
49.96%
8,738
(0.07%)
39,366
(0.36%)
30,628
350.50%
Exchange Loss (Gain)
44,141
(0.18%)
46,185
(0.21%)
2,045
4.63%
70,114
(0.57%)
44,337
(0.41%)
25,777
(36.76%)
Monetary Position (gain)
-
0.00%
-
(0.00%)
-
0.00%
-
0.00%
-
0.00%
-
0.00%
Comprehensive Cost of Financing
378,628
1.56%
359,429
1.64%
19,198
(5.07%)
115,571
0.94%
145,508
1.34%
29,937
25.90%
OTHER EXPENSES (INCOME), net
593,649
(2.44%)
63,786
0.29%
657,435
NC
94,737
(0.77%)
60,488
0.56%
155,225
NC
NET INCOME BEFORE TAXES
851,680
3.51%
484
0.00%
851,196
(99.94%)
245,602
2.00%
49,838
(0.46%)
295,440
(120.29%)
PROVISIONS FOR:
Income Tax
203,864
0.84%
82,753
0.38%
121,111
(59.41%)
68,159
0.56%
28,070
0.26%
40,089
(58.82%)
Asset Tax
-
0.00%
-
0.00%
-
0.00%
-
0.00%
-
0.00%
-
0.00%
Deferred Income Tax
-
0.00%
20,100
(0.09%)
20,100
NC
-
0.00%
20,100
(0.19%)
20,100
NC
Profit sharing due
-
0.00%
-
0.00%
-
0.00%
-
0.00%
-
0.00%
-
0.00%
Deferred Profit sharing due
-
0.00%
-
0.00%
-
0.00%
-
0.00%
-
0.00%
-
0.00%
Total taxes
203,864
0.84%
62,653
0.29%
141,211
(69.27%)
68,159
0.56%
7,970
0.07%
60,189
(88.31%)
Net Income Before Extraordinary Items
647,816
2.67%
62,169
(0.28%)
709,985
NC
177,443
1.45%
57,808
(0.53%)
235,251
NC
Extraordinary Items (Income)
-
0.00%
-
0.00%
-
0.00%
-
0.00%
-
0.00%
-
0.00%
Net Income
647,816
2.67%
62,169
(0.28%)
709,985
NC
177,443
1.45%
57,808
(0.53%)
235,251
NC
Depreciation and Amortization
219,526
0.90%
166,966
0.76%
52,560
(23.94%)
110,760
0.90%
86,153
0.79%
24,607
(22.22%)
Operating Income plus Depreciation and Amortization
856,185
3.53%
590,665
2.70%
265,520
(31.01%)
377,197
3.08%
242,312
2.23%
134,885
(35.76%)
Net Income corresponding to Minority Interest
GRUPO CASA SABA, S.A.B. DE C.V.
BALANCE SHEET
Figures are expressed in thousands of Mexican pesos as of June 2013
QUARTER CURRENT YEAR
CLOSE PRIOR YEAR
AMOUNT
AMOUNT
TOTAL ASSETS
29,973,971
32,501,016
CURRENT ASSETS
19,082,462
21,231,243
CASH AND CASH EQUIVALENTS
1,191,321
1,068,257
CLIENTS (NET)
6,224,807
7,599,268
CLIENTS
7,920,424
9,018,164
ALLOWANCE FOR DOUBTFUL ACCOUNTS
-1,695,617
-1,418,897
OTHER ACCOUNTS RECEIVABLES (NET)
3,898,677
4,665,028
INVENTORIES
7,754,886
7,885,983
OTHER CURRENT ASSETS
12,771
12,707
LONG TERM
25,123
36,986
INVESTMENTS IN SHARES OF SUBSIDIARIES AND
ASSOCIATED COMPANIES
25,123
36,986
PROPERTY MACHINARY AND EQUIPMENT NET
3,071,862
3,040,769
PROPERTY
2,269,173
2,471,561
MACHINERY AND EQUIPMENT
2,340,393
1,604,994
OTHER EQUIPMENT
1,724,624
2,555,423
ACCUMULATED DEPRECIATION
-3,268,718
-3,622,213
CONSTRUCTION IN PROGRESS
6,390
31,003
INTANGIBLE ASSETS (NET)
6,751,509
6,990,394
GOODWILL
2,680,666
2,809,508
BRANDS
2,611,067
2,719,238
RIGHTS AND LICENSING
1,444,811
1,445,315
OTHER INTANGIBLE ASSETS
14,965
16,332
OTHER NON CURRENT ASSETS
1,043,015
1,201,624
ADVANCE PAYMENTS
58,246
23,881
DEFERRED CHARGES (NET)
OTHERS
984,769
1,177,743
TOTAL LIABILITIES
24,453,349
26,020,026
CURRENT LIABILITIES
13,259,275
14,302,646
BANK CREDITS
1,837,094
2,487,022
SUPPLIERS
10,796,367
11,311,565
TAXES PAYABLE
625,814
504,060
OTHER CURRENT LIABILITIES
2,638,405
3,358,890
EMPLOYEE BENEFITS
280,710
200,771
OTHER CURRENT LIABILITIES
2,357,695
3,158,119
NON CURRENT LIABILITIES
8,949,182
8,161,309
BANK CREDITS
8,949,182
8,161,309
OTHER LIABILITIES
-393,513
197,182
SHAREHOLDERS' EQUITY
5,520,622
6,480,990
CONTRIBUTED CAPITAL
2,593,872
2,503,875
CAPITAL STOCK PAID (NOMINAL)
767,902
677,903
CAPITAL STOCK PAID UPDATE
956,093
956,094
PREMIUM ON STOCK SOLD
869,877
869,878
CAPITAL INCREASE (DECREASE)
2,926,750
3,977,115
ACCUMULATED PROFIT AND LEGAL RESERVE
1,926,719
3,059,885
RESERVE FOR STOCK REPURCHASE
1,062,200
1,062,200
PROFIT
-62,169
-144,970