Quarterly Earnings Report February 27, 2013
4Q12
Financial Highlights:
(All figures are expressed in millions of Mexican pesos. Comparisons are made with the same period of 2011, unless otherwise stated. Figures may vary slightly due to rounding).
- The Group’s net sales for the quarter reached $11,376.8 million pesos
- Gross income for the period was $2,190.8 million; the gross margin for the quarter was 19.26%
- Operating expenses reached $1,860.5 million pesos and represented 16.35% of the Company’s total sales
- Quarterly operating income was $330.2 million, resulting in an operating margin of 2.9% for the period
- Third quarter EBITDA was $434.5 million, or 3.8% of total sales
- As of December 31, 2012, GCS’s net debt totaled $9,580.0 million
- GCS closed the quarter with 24 Distribution Centers and over 1,379 pharmacies in operation across Latin America
Mexico City, Mexico, February 27, 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 publications and one of the most important pharmacy chains in Latin America, announced its consolidated financial and operating results for the fourth quarter of 2012.
QUARTERLY EARNINGS
In the fourth quarter of 2012, 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. 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.
NET SALES
Net sales for the quarter totaled $11,376.8 million, an increase of 17.3% compared to $9,694.0 million in 4Q2011.
SALES BY DIVISON
DISTRIBUTION DIVISIONPHARMA, HEALTH, BEAUTY AND CONSUMER GOODS
Sales from our Pharma, Health, Beauty and Consumer Goods division decrease 3.1% versus the 4Q2011, totaling $6,202.0 million. In terms of total sales, this division’s percentage went from 66.0% in 4Q2011 to 54.5% in the 4Q2012.
GOVERNMENT PHARMA
Quarterly sales in our Government Pharma division grew 76.0% compared to the fourth 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 3.6% in 4Q2011 and 5.4% in the 4Q2012.RETAIL PHARMACY
During the fourth quarter of the year, sales from our Retail Pharmacy division increased by $1,795.0 million pesos to reach $2,764 or 64.9%, due mainly by the fact sales in Brazil are accounted in this item unlike in 2011 and by the good performance showed in Farmacias Ahumada. Part of these effects was compensated by the disincorporation of Peru in the third quarter of the year and lower institutional sales in our Farmacias ABC chain.
This division’s percentage of the Group’s overall sales rose to 40.1% vs. 28.5% in the 4Q2011.
As a result, the sales mix for the second quarter of 2012 was as follows:
Division % of Sales
Retail Pharmacy 40.1%
Total Distribution 40.1%
Pharma, Health & Beauty 54.5%
Government Pharma 5.4%
TOTAL 100.0%
GROSS INCOME
During the fourth quarter of 2012, gross income reached $2,190.8 million pesos, amount 7.9% higher than the gross income reached in the fourth quarter of 2011. This resulted from sales increment and better commercial conditions with suppliers.
OPERATING EXPENSES
Operating expenses in the fourth quarter of 2012 increase by $83.4 million pesos, or 4.7%, compared to the same period of the previous year. This increase was mainly by the decisions taken by company to apply reserves significant more rigorous in regards of their collections.
As a percentage of total sales, operating expenses represented 16.3% during the fourth quarter of 2012 compared to 18.3% during the same period of 2011.
OPERATING INCOME
Quarterly operating income for 4Q2012 was $330.2 million, an amount 30.3% higher than the $253.3 million reported in 4Q2011. This increase in operating income was the result of a better operating expenses control.
Operating income margin for the 4Q2012 was 2.9%, versus 2.6% in 4Q2011.
OPERATING INCOME PLUS DEPRECIATION AND AMORTIZATION (EBITDA)
EBITDA for 4Q2012 was $434.5 million, a higher amount compared to the $353.6 million reported in the fourth quarter of 2011.
EBITDA margin for the fourth quarter of 2012 was 3.8%.
COMPREHENSIVE COST OF FINANCING (CCF)
The Group’s CCF reached $201.3 million in 4Q2012, 22.0% lower than the CCF reported during 4Q2011.
This decrease was primarily due to minor interest payments.
NET DEBT
The Company’s net debt at the end of 4Q2012 was reduced to $9,580.0 million pesos. This resulted mainly because the resources derived from the capital increase of $510 million pesos made in the year, was used to pay for liabilities with cost.
OTHER EXPENSES (INCOME)
During the fourth quarter of the year, other expenses totaled $720.7 million.
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.
The company, throughout 2012 and after adopting IFRS, has been analyzing in detail its account receivable portfolio. The company has decided to apply significantly more stringent reserve criteria regarding its collection. The full year results reflect a substantial non-recurring receivable writedown.
TAX PROVISIONS
Tax provisions for the fourth quarter of 2012 were $66.3 million, an amount lower than the $198.0 million reported in 4Q2011.
NET INCOME (LOSS)
In the fourth quarter 2012 GCS recorded a net loss of $658.1 million, while in the same period last year a net loss of $810.3 million was registered.
Analysis Coverage: We do not currently have analyst coverage from a brokerage firm or from a credit institution.
The 265.4 million shares issued by Grupo Casa Saba are listed on the Mexican Stock Exchange, and its ADRs are listed on the New York Stock Exchange, both under the symbol “SAB”. One ADR equals 10 ordinary shares.
Grupo Casa Saba was founded in 1892 and is one of the leading distributors of pharmaceutical products, beauty, personal care and consumer goods, general merchandise, publications and other goods in Mexico. With more than 115 years of experience, the Company distributes to the majority of pharmacies, chains, self-service and convenience stores, as well as other specialized national chains. With the acquisition of FASA in October of 2010 the company now has retail pharmacy outlets located in Mexico, Chile and Brazil.
As a precautionary note to investors, except for the historic information contained herein, certain topics discussed in this document constitute forward-looking statements. Such topics imply risks and uncertainties, including the economic conditions in Mexico and those countries in which Grupo Casa Saba operates, directly or indirectly, including the United States of America, Brazil and Chile, as well as variations in the value of the Mexican peso as compared with the currencies of the previously-mentioned countries.
Contacts:
GRUPO CASA SABA Grayling
Harish Dadoo González Jesús Martínez Rojas
GRUPO CASA SABA, S.A.B. DE C.V. in thousands of Mexican Pesos as of December 2011
Jan-Dec
Jan-DecVariationOct-DecOct-DecVariationIncome Statement2011% of sales2012% of sales$%2011% of sales2012% of sales$%NET SALES46,568,226100.00%46,689,355100.00%121,1290.26%9,694,056100.00%11,376,876100.00%1,682,82017.36%COST OF SALES37,851,51481.28%38,123,58281.65%272,0680.72%7,663,59879.05%9,186,02380.74%1,522,42619.87%Gross Profit8,716,71218.72%8,565,77318.35%(150,939)(1.73%)2,030,45820.95%2,190,85319.26%160,3957.90%OPERATING EXPENSES Sales Expenses1,452,6573.12%1,309,1082.80%(143,550)(9.88%)649,6406.70%451,0293.96%(198,611)(30.57%)Administrative Expenses5,865,73312.60%6,023,53612.90%157,8042.69%1,127,43311.63%1,409,52612.39%282,09425.02%Operating Expenses7,318,39015.72%7,332,64415.71%14,2540.19%1,777,07318.33%1,860,55516.35%83,4824.70%Operating Income1,398,3223.00%1,233,1292.64%(165,193)(11.81%)253,3852.61%330,2972.90%76,91230.35%COMPREHENSIVE COST OF FINANCING Interest Paid1,028,5582.21%1,006,8002.16%(21,757)(2.12%)249,0212.57%215,9011.90%(33,119)(13.30%)Interest (Earned)(57,031)(0.12%)(176,252)(0.38%)(119,221)209.05%480.00%(69,845)(0.61%)(69,893)NCExchange Loss (Gain)68,5320.15%23,9170.05%(44,615)(65.10%)9,2160.10%55,3410.49%46,125500.46%Monetary Position (gain)-0.00%-0.00%-0.00%-0.00%-0.00%-0.00%Comprehensive Cost of Financing1,040,0592.23%854,4651.83%(185,594)(17.84%)258,2852.66%201,3971.77%(56,888)(22.03%)OTHER EXPENSES (INCOME), net529,3771.14%128,5800.28%(400,797)(75.71%)596,6216.15%720,7066.33%124,08520.80%NET INCOME BEFORE TAXES(171,114)(0.37%)250,0840.54%421,198NC(601,521)(6.21%)(591,806)(5.20%)9,715(1.62%)PROVISIONS FOR: Income Tax735,6501.58%364,8820.78%(370,767)(50.40%)460,3254.75%66,3660.58%(393,960)(85.58%)Asset Tax9,0370.02%-0.00%(9,037)0.00%9,0370.09%-0.00%(9,037)0.00%Deferred Income Tax(432,252)(0.93%)30,1710.06%462,423NC(271,319)(2.80%)-0.00%271,319NCProfit 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 taxes312,4340.67%395,0530.85%82,61926.44%198,0432.04%66,3660.58%(131,677)(66.49%)Net Income Before Extraordinary Items(483,548)(1.04%)(144,970)(0.31%)338,579(70.02%)(799,564)(8.25%)(658,171)(5.79%)141,393(17.68%)Extraordinary Items (Income)10,7500.02%-0.00%(10,750)NC10,7500.11%-0.00%(10,750)NCNet Income (Loss)(494,298)(1.06%)(144,970)(0.31%)349,329(70.67%)(810,314)(8.36%)(658,171)(5.79%)152,143(18.78%)Depreciation and Amortization447,6690.96%425,6540.91%(22,016)(4.92%)100,2211.03%104,2270.92%4,0064.00%Operating Income plus Depreciation and Amortization1,845,9913.96%1,658,7823.55%(187,209)(10.14%)353,6063.65%434,5243.82%80,91822.88%
GRUPO CASA SABA, S.A.B. DE C.V.
BALANCE SHEET
Figures are expressed in Mexican pesos as of December 2012
QUARTER CURRENT YEARCLOSE PRIOR YEARSTART PRIOR YEARAMOUNTAMOUNTAMOUNTTOTAL ASSETS32,501,01631,702,34332,313,878CURRENT ASSETS21,231,24319,183,12719,199,379CASH AND CASH EQUIVALENTS1,068,2572,279,2581,290,466CLIENTS (NET)7,599,2685,778,0096,758,242CLIENTS9,018,1647,174,2007,816,040ALLOWANCE FOR DOUBTFUL ACCOUNTS(1,418,897)(1,396,191)(1,057,798)OTHER ACCOUNTS RECEIVABLES (NET)4,665,0282,183,8312,005,460INVENTORIES7,885,9838,814,9269,075,998OTHER CURRENT ASSETS12,707127,10369,213LONG TERM36,98655,18051,177INVESTMENTS IN SHARES OF SUBSIDIARIES AND ASSOCIATED COMPANIES36,98655,18051,177PROPERTY MACHINARY AND EQUIPMENT NET3,040,7693,018,8972,144,197PROPERTY2,471,5612,355,3892,341,262MACHINERY AND EQUIPMENT1,604,9942,276,943362,730OTHER EQUIPMENT2,555,4231,994,9383,869,497ACCUMULATED DEPRECIATION(3,622,213)(3,608,905)(4,433,178)CONSTRUCTION IN PROGRESS31,0035323,886INTANGIBLE ASSETS (NET)6,990,3948,212,5106,775,784GOODWILL2,809,5083,995,2363,943,617BRANDS2,719,2382,650,393-RIGHTS AND LICENSING1,445,3151,562,7912,813,067OTHER INTANGIBLE ASSETS16,3324,09019,100OTHER NON CURRENT ASSETS1,201,6241,232,6294,143,341ADVANCE PAYMENTS23,88133,51226,163DEFERRED CHARGES (NET)--341,333OTHERS1,177,7431,199,1173,775,845TOTAL LIABILITIES26,020,02624,385,16625,083,830CURRENT LIABILITIES18,955,96212,693,30719,729,843BANK CREDITS7,140,3382,839,4899,220,381SUPPLIERS11,311,5659,153,1759,840,772TAXES PAYABLE504,060700,643668,690OTHER CURRENT LIABILITIES3,358,8902,270,0942,518,347EMPLOYEE BENEFITS200,771161,417(79,472)OTHER CURRENT LIABILITIES3,158,1192,108,6772,597,819NON CURRENT LIABILITIES3,507,9939,505,7152,289,346BANK CREDITS3,507,9939,505,7152,289,346OTHER LIABILITIES197,182(83,950)546,294SHAREHOLDERS' EQUITY6,480,9907,317,1777,230,048CONTRIBUTED CAPITAL2,503,8751,993,8751,993,548CAPITAL STOCK PAID (NOMINAL)677,903167,903167,903CAPITAL STOCK PAID UPDATE956,094956,094956,094PREMIUM ON STOCK SOLD869,878869,878869,551CAPITAL INCREASE (DECREASE)3,977,1155,323,3025,236,500ACCUMULATED PROFIT AND LEGAL RESERVE3,059,8854,231,0013,904,134RESERVE FOR STOCK REPURCHASE1,062,2001,062,2001,062,296PROFIT (LOSS)(144,970)30,101270,070