Quarterly Earnings Report Octubre 28, 2013
3Q13
Financial Highlights:
(All figures are expressed in millions of Mexican pesos. Comparisons are made with the same period of 2013, unless otherwise stated. Figures may vary slightly due to rounding).
- The Group's net sales for the third quarter reached $10,635.0 million pesos
- Gross income for the period was $1,898.3 million; the gross margin for the quarter was 17.9%
- Operating expenses reached $1,792.7 million pesos and represented 16.9% of the Company's total sales
- Quarterly operating income was $105.7 million, resulting in an operating margin of 1.0% for the period
- Third quarter EBITDA was $200.5 million, or 1.9% of total sales
- As of September 30, 2013, GCS’s net debt totaled $9,464.9 million
- GCS closed the quarter with 22 Distribution Centers and 1,383 pharmacies in operation across Latin America
Mexico City, Mexico, October 28, 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 third quarter of 2013.
QUARTERLY EARNINGS
As of the end of the third quarter, the competition in the distribution and marketing of pharmaceutical products, health and beauty aids, and consumer goods segments prevailed in Mexico as well as in Chile, mainly due to a larger number of participants in the markets in which we operate. Our operating strategy continues to focus on improving logistics efficiency levels, controlling costs and expenses, in addition to offering competitive prices and generating positive results in practically all our divisions. At the sales level, we are continuing to focus on improving the availability of the products that our customers most demand both at the wholesale and retail pharmacy chain networks. With regards to growth, we continue to implement our strategy, which has enabled us to strengthen our presence in the markets in which we already operate, as well as improving the recognition of our brands.
NET SALES
Net sales for the quarter totaled $10,635.0 million, equivalent to a decrease of 3.5% when compared to $11,024.0 million in 3Q2012.
SALES BY DIVISON
DISTRIBUTION DIVISIONPHARMA, HEALTH, BEAUTY AND CONSUMER GOODS
Sales from our Pharma, Health, Beauty and Consumer Goods divisions totaled $4,685.0 million. When compared to the same quarter of last year, there was a 14.7% decrease, which resulted mainly due to the disincorporation of Citem Publications during the second quarter this year. In addition, sales were negatively affected due to the adverse weather conditions that were experienced throughout the majority of the Mexican territory.
In terms of total sales, this divisions underwent a decrease in participation from 49.8% in 3Q2012 in comparison to the 44.0% in the 3Q2013.GOVERNMENT PHARMA
Quarterly sales in our Government Pharma division totaled $114.8 million. This division registered a 15.6% decrease in sales compared to the third quarter of 2012, as the result of the deferral on the date of tenders.
In terms of total sales, this division passed from 1.2% in 3Q2012 to 1.1% in the 3Q2013.RETAIL PHARMACY
During the third quarter of the current year, sales from our Retail Pharmacy division reached $5,835.3 million. Compared to the same quarter last year, there was an 8.2% increase. The increase was mainly achieved due to the correct implementation of our growth strategy, focused on the markets in which we already operate. This division’s percentage attribution to the Group’s overall sales rose to 54.9%, versus 48.9% in the 3Q2012.
As a result, the sales mix for the third quarter of 2013 was as follows:
Division % of Sales
Retail Pharmacy 54.9%
Total Distribution 45.1%
Pharma, Health & Beauty 44.0%
Government Pharma 1.1%
TOTAL 100.0%
GROSS INCOME
During the third quarter of 2013, gross income reached $1,898.3 million pesos, an amount 4.5% lower than the gross income reached in the third quarter of 2012. This was mainly due a decrease in sales in our distribution and government areas.
OPERATING EXPENSES
Operating expenses in the third quarter of 2013 resulted in $1,792.7 million. This represents an increase of $97.6 million pesos, or 5.7%, compared to the same period of the previous year. This increase was mainly a result of the expenses that were incurred due to the opening of 60 new pharmacies in this quarter.
As a percentage of total sales, operating expenses represented 16.9% during the third quarter of 2013 compared to 15.4% during the same period of 2012.OPERATING INCOME
Quarterly operating income for 3Q2013 was $105.7 million, an amount 63.9% lower than the $293.0 million reported in 3Q2012. This decrease in operating income was the result of the decline in sales due the disincorporation of companies in previous quarters.
Operating income margin for the 3Q2013 was 1.0%, versus 2.7% in 3Q2012.EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTIZATION (EBITDA)
EBITDA for 3Q2013 was $200.5 million, a lower amount compared to the $394.9 million reported in the third quarter of 2012.
EBITDA margin for the third quarter of 2013 was 1.9%.
COMPREHENSIVE COST OF FINANCING (CCF)
The Group’s CCF reached $196.8 million in 3Q2013, 28.3% lower than the CCF reported during 3Q2012.
This decrease was primarily due to the anticipated payments of our long-term debt.
NET DEBT
The Company’s net debt at the end of 3Q2013 was $9,464.9 million pesos. There was a decrease of 0.1% with respect to last year.
OTHER EXPENSES (INCOME)
During the third quarter of the year, other expenses totaled $32.3 million. This represents an increase of $30.8 million compared to the same period last year. This was mainly due to the restructuring of extraordinary expenses done by one the Group’s subsidiaries.
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 third quarter of 2013 resulted in a positive balance of $6.8 million in tax deductions. In comparison, at the end of 3Q2012, this item totaled $124.8 million pesos. This change was mainly due to the variation of the accumulated results during the current fiscal year.
NET INCOME (LOSS)
In the third quarter, 2013 GCS recorded a net loss of $116.6 million, an amount 8.1% lower compared to the amount recorded during the same period of the previous year. This change was mainly due the decrease in sales previously mentioned and expenses made for new pharmacies’ openings.
Analysis Coverage: Through the Bolsa Mexicana de Valores program, Independent Analyst, Grupo Casa Saba counts with the coverage of Morningstar.
The 328.5 million shares issued by Grupo Casa Saba are listed on the Mexican Stock Exchange under the symbol “SAB”.
Grupo Casa Saba was founded in 1892 and is one of the leading distributors of pharmaceutical products, beauty, personal care and consumer goods, general merchandise, publications and other goods in Mexico. With more than 115 years of experience, the Company distributes to the majority of pharmacies, chains, self-service and convenience stores, as well as other specialized national chains. With the acquisition of FASA in October of 2010 the company now has retail pharmacy outlets located in Mexico, Chile and Brazil.
As a precautionary note to investors, except for the historic information contained herein, certain topics discussed in this document constitute forward-looking statements. Such topics imply risks and uncertainties, including the economic conditions in Mexico and those countries in which Grupo Casa Saba operates, directly or indirectly, including the United States of America, Brazil and Chile, as well as variations in the value of the Mexican peso as compared with the currencies of the previously-mentioned countries.
Contacts:
GRUPO CASA SABA Grayling
Harish Dadoo Jesús Martínez Rojas
GRUPO CASA SABA, S.A.B. DE C.V. in thousands of Mexican Pesos as of September 2013
Jan-Sept
Jan-SeptVariationJuly-SeptJuly-SeptVariationIncome Statement2012% of sales2013% of sales$%2012% of sales2013% of sales$%NET SALES35,312,479100.00%32,495,149100.00%(2,817,330)(7.98%)11,023,991100.00%10,635,046100.00%(388,945)(3.53%)COST OF SALES28,937,55981.95%26,875,99882.71%(2,061,561)(7.12%)9,035,99181.97%8,736,71582.15%(299,276)(3.31%)Gross Profit6,374,92018.05%5,619,15017.29%(755,770)(11.86%)1,988,00018.03%1,898,33117.85%(89,669)(4.51%)OPERATING EXPENSES Sales Expenses858,0792.43%553,7411.70%(304,338)(35.47%)195,8281.78%176,5721.66%(19,256)(9.83%)Administrative Expenses4,614,01013.07%4,536,04613.96%(77,963)(1.69%)1,499,20513.60%1,616,09515.20%116,8917.80%Operating Expenses5,472,08915.50%5,089,78715.66%(382,301)(6.99%)1,695,03315.38%1,792,66716.86%97,6355.76%Operating Income902,8312.56%529,3631.63%(373,468)(41.37%)292,9672.66%105,6640.99%(187,303)(63.93%)COMPREHENSIVE COST OF FINANCING790,8992.24%691,7392.13%(99,160)(12.54%);325,4912.95%222,1832.09%(103,308)(31.74%)Interest (Earned)(106,407)(0.30%)(102,241)(0.31%)4,166(3.91%)(63,767)(0.58%)(38,300)(0.36%)25,467(39.94%)Exchange Loss (Gain)(31,424)(0.09%)(33,286)(0.10%)(1,862)5.93%12,7160.12%12,8990.12%1831.44%Monetary Position (gain)-0.00%-0.00%-0.00%-0.00%-0.00%-0.00%Comprehensive Cost of Financing653,0681.85%556,2111.71%(96,857)(14.83%)274,4402.49%196,7821.85%(77,658)(28.30%)OTHER EXPENSES (INCOME), net(592,126)(1.68%)96,0660.30%688,192NC1,5230.01%32,2800.30%30,7572019.19%NET INCOME BEFORE TAXES841,8902.38%(122,914)(0.38%)(964,803)(114.60%)17,0040.15%(123,398)(1.16%)(140,402)NCPROVISIONS FOR: Income Tax298,5170.85%78,1560.24%(220,361)(73.82%)94,6520.86%(4,597)(0.04%)(99,249)NCAsset Tax-0.00%-0.00%-0.00%-0.00%-0.00%-0.00%Deferred Income Tax30,1710.09%(22,301)(0.07%)(52,472)NC30,1710.27%(2,201)(0.02%)(32,372)NCProfit 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 taxes328,6880.93%55,8550.17%(272,833)(83.01%)124,8231.13%(6,799)(0.06%)(131,622)NCNet Income Before Extraordinary Items513,2021.45%(178,768)(0.55%)(691,970)NC(107,819)(0.98%)(116,599)(1.10%)(8,780)8.14%Extraordinary Items (Income)-0.00%-0.00%-0.00%-0.00%-0.00%-0.00%Net Income513,2021.45%(178,768)(0.55%)(691,970)NC(107,819)(0.98%)(116,599)(1.10%)(8,780)8.14%Depreciation and Amortization321,4270.91%261,8210.81%(59,606)(18.54%)101,9010.92%94,8550.89%(7,046)(6.91%)Operating Income plus Depreciation and Amortization1,224,2583.47%791,1842.43%(433,074)(35.37%)394,8683.58%200,5191.89%(194,349)(49.22%)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 September 2013
ACCOUNT / SUBACCOUNTQUARTER CURRENT YEARCLOSE PRIOR YEARAMOUNTAMOUNTTOTAL ASSETS28,815,09432,501,016CURRENT ASSETS17,859,30621,231,243CASH AND CASH EQUIVALENTS1,020,5201,068,257CLIENTS (NET)5,990,0087,599,268CLIENTS7,523,4149,018,164ALLOWANCE FOR DOUBTFUL ACCOUNTS-1,533,406-1,418,897OTHER ACCOUNTS RECEIVABLES (NET)3,733,2754,665,028INVENTORIES7,103,5217,885,983OTHER CURRENT ASSETS11,98212,707LONG TERM50,51336,986INVESTMENTS IN SHARES OF SUBSIDIARIES AND ASSOCIATED COMPANIES50,51336,986PROPERTY MACHINARY AND EQUIPMENT NET3,026,1213,040,769PROPERTY2,238,2292,471,561MACHINERY AND EQUIPMENT2,401,4361,604,994OTHER EQUIPMENT1,886,6642,555,423ACCUMULATED DEPRECIATION-3,508,892-3,622,213CONSTRUCTION IN PROGRESS8,68431,003INTANGIBLE ASSETS (NET)6,566,2766,990,394GOODWILL2,474,9112,809,508BRANDS2,611,0242,719,238RIGHTS AND LICENSING1,465,2541,445,315OTHER INTANGIBLE ASSETS15,08716,332OTHER NON CURRENT ASSETS1,312,8781,201,624ADVANCE PAYMENTS43,89523,881DEFERRED CHARGES (NET) OTHERS1,268,9831,177,743TOTAL LIABILITIES23,374,32126,020,026CURRENT LIABILITIES14,296,59314,302,646BANK CREDITS2,773,5842,487,022SUPPLIERS10,853,24711,311,565TAXES PAYABLE669,762504,060OTHER CURRENT LIABILITIES1,786,2733,358,890EMPLOYEE BENEFITS280,710200,771OTHER CURRENT LIABILITIES1,505,5633,158,119NON CURRENT LIABILITIES7,711,8688,161,309BANK CREDITS7,711,8688,161,309OTHER LIABILITIES-420,413197,182SHAREHOLDERS' EQUITY5,440,7756,480,990CONTRIBUTED CAPITAL2,593,8722,503,875CAPITAL STOCK PAID (NOMINAL)767,902677,903CAPITAL STOCK PAID UPDATE956,093956,094PREMIUM ON STOCK SOLD869,877869,878CAPITAL INCREASE (DECREASE)2,846,9033,977,115ACCUMULATED PROFIT AND LEGAL RESERVE1,963,4713,059,885RESERVE FOR STOCK REPURCHASE1,062,2001,062,200PROFIT-178,768-144,970