Edgar Filing: GRUPO CASA SABA, S.A.B. DE C.V.

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 DIVISION

PHARMA, 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

Variation

July-Sept

Variation

Income Statement

2012

% of sales

2013

% of sales

2012

% of sales

2013

% of sales

NET SALES

35,312,479

100.00%

32,495,149

100.00%

(2,817,330)

(7.98%)

11,023,991

100.00%

10,635,046

100.00%

(388,945)

(3.53%)

COST OF SALES

28,937,559

81.95%

26,875,998

82.71%

(2,061,561)

(7.12%)

9,035,991

81.97%

8,736,715

82.15%

(299,276)

(3.31%)

Gross Profit

6,374,920

18.05%

5,619,150

17.29%

(755,770)

(11.86%)

1,988,000

18.03%

1,898,331

17.85%

(89,669)

(4.51%)

OPERATING EXPENSES Sales Expenses

858,079

2.43%

553,741

1.70%

(304,338)

(35.47%)

195,828

1.78%

176,572

1.66%

(19,256)

(9.83%)

Administrative Expenses

4,614,010

13.07%

4,536,046

13.96%

(77,963)

(1.69%)

1,499,205

13.60%

1,616,095

15.20%

116,891

7.80%

Operating Expenses

5,472,089

15.50%

5,089,787

15.66%

(382,301)

(6.99%)

1,695,033

15.38%

1,792,667

16.86%

97,635

5.76%

Operating Income

902,831

2.56%

529,363

1.63%

(373,468)

(41.37%)

292,967

2.66%

105,664

0.99%

(187,303)

(63.93%)

COMPREHENSIVE COST OF FINANCING

790,899

2.24%

691,739

2.13%

(99,160)

(12.54%)

;

325,491

2.95%

222,183

2.09%

(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%

12,716

0.12%

12,899

0.12%

183

1.44%

Monetary Position (gain)

0.00%

Comprehensive Cost of Financing

653,068

1.85%

556,211

1.71%

(96,857)

(14.83%)

274,440

2.49%

196,782

1.85%

(77,658)

(28.30%)

OTHER EXPENSES (INCOME), net

(592,126)

(1.68%)

96,066

0.30%

688,192

1,523

0.01%

32,280

0.30%

30,757

2019.19%

NET INCOME BEFORE TAXES

841,890

2.38%

(122,914)

(0.38%)

(964,803)

(114.60%)

17,004

0.15%

(123,398)

(1.16%)

(140,402)

PROVISIONS FOR: Income Tax

298,517

0.85%

78,156

0.24%

(220,361)

(73.82%)

94,652

0.86%

(4,597)

(0.04%)

(99,249)

Asset Tax

0.00%

Deferred Income Tax

30,171

0.09%

(22,301)

(0.07%)

(52,472)

30,171

0.27%

(2,201)

(0.02%)

(32,372)

Profit sharing due

0.00%

Deferred Profit sharing due

0.00%

Total taxes

328,688

0.93%

55,855

0.17%

(272,833)

(83.01%)

124,823

1.13%

(6,799)

(0.06%)

(131,622)

Net Income Before Extraordinary Items

513,202

1.45%

(178,768)

(0.55%)

(691,970)

(107,819)

(0.98%)

(116,599)

(1.10%)

(8,780)

8.14%

Extraordinary Items (Income)

0.00%

Net Income

513,202

1.45%

(178,768)

(0.55%)

(691,970)

(107,819)

(0.98%)

(116,599)

(1.10%)

(8,780)

8.14%

Depreciation and Amortization

321,427

0.91%

261,821

0.81%

(59,606)

(18.54%)

101,901

0.92%

94,855

0.89%

(7,046)

(6.91%)

Operating Income plus Depreciation and Amortization

1,224,258

3.47%

791,184

2.43%

(433,074)

(35.37%)

394,868

3.58%

200,519

1.89%

(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 / SUBACCOUNT

QUARTER CURRENT YEAR

CLOSE PRIOR YEAR

AMOUNT

TOTAL ASSETS

28,815,094

32,501,016

CURRENT ASSETS

17,859,306

21,231,243

CASH AND CASH EQUIVALENTS

1,020,520

1,068,257

CLIENTS (NET)

5,990,008

7,599,268

CLIENTS

7,523,414

9,018,164

ALLOWANCE FOR DOUBTFUL ACCOUNTS

-1,533,406

-1,418,897

OTHER ACCOUNTS RECEIVABLES (NET)

3,733,275

4,665,028

INVENTORIES

7,103,521

7,885,983

OTHER CURRENT ASSETS

11,982

12,707

LONG TERM

50,513

36,986

INVESTMENTS IN SHARES OF SUBSIDIARIES AND ASSOCIATED COMPANIES

50,513

36,986

PROPERTY MACHINARY AND EQUIPMENT NET

3,026,121

3,040,769

PROPERTY

2,238,229

2,471,561

MACHINERY AND EQUIPMENT

2,401,436

1,604,994

OTHER EQUIPMENT

1,886,664

2,555,423

ACCUMULATED DEPRECIATION

-3,508,892

-3,622,213

CONSTRUCTION IN PROGRESS

8,684

31,003

INTANGIBLE ASSETS (NET)

6,566,276

6,990,394

GOODWILL

2,474,911

2,809,508

BRANDS

2,611,024

2,719,238

RIGHTS AND LICENSING

1,465,254

1,445,315

OTHER INTANGIBLE ASSETS

15,087

16,332

OTHER NON CURRENT ASSETS

1,312,878

1,201,624

ADVANCE PAYMENTS

43,895

23,881

DEFERRED CHARGES (NET) OTHERS

1,268,983

1,177,743

TOTAL LIABILITIES

23,374,321

26,020,026

CURRENT LIABILITIES

14,296,593

14,302,646

BANK CREDITS

2,773,584

2,487,022

SUPPLIERS

10,853,247

11,311,565

TAXES PAYABLE

669,762

504,060

OTHER CURRENT LIABILITIES

1,786,273

3,358,890

EMPLOYEE BENEFITS

280,710

200,771

OTHER CURRENT LIABILITIES

1,505,563

3,158,119

NON CURRENT LIABILITIES

7,711,868

8,161,309

BANK CREDITS

7,711,868

8,161,309

OTHER LIABILITIES

-420,413

197,182

SHAREHOLDERS' EQUITY

5,440,775

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)

2,846,903

3,977,115

ACCUMULATED PROFIT AND LEGAL RESERVE

1,963,471

3,059,885

RESERVE FOR STOCK REPURCHASE

1,062,200

PROFIT

-178,768

-144,970