Edgar Filing: GRUPO CASA SABA SA DE CV

Grupo Casa Saba

Quarterly Earnings Report July 28, 2008
2Q08

Sales and Operating Income Increased 14.05% and 13.45%, Respectively

Financial Highlights:
(All figures are expressed in millions of Mexican pesos as of December 31, 2007. Comparisons are made with the same period of 2007, unless otherwise stated. Figures may vary due to rounding practices. “bp” stands for basis points)

o Sales for the quarter totaled $6,959.41 million
o Gross income increased 34.45%
o Gross margin for the quarter was 10.64%
o Quarterly operating expenses as a percentage of sales were 7.19%
o The operating margin for the quarter was 3.46%
o Net profit for the quarter reached $210.09 million
o Cash and cash equivalents at the end of the quarter was $315.42 million

Mexico City, Mexico, July 28, 2008. Grupo Casa Saba (“Saba”, “GCS”, “the Company” or “the Group”), one of the leading Mexican distributors of pharmaceutical products, beauty aids, personal care and consumer goods, general merchandise, publications and other products announces its consolidated financial and operating results for the second quarter of 2008.

QUARTERLY EARNINGS

NET SALES

During the second quarter, GCS’s sales were $6,959.41 million, an increase of 14.05%.

Sales for our Private Pharma division grew 13.62% during the second quarter of 2008, due to the consolidation of investments made within the sector over the past several months, including the most recent acquisition of Drogasmil Medicamento e Perfumeria, S.A.(1), a Brazilian pharmacy chain.

Sales in our Health, Beauty, Consumer Goods, General Merchandise and Others division rose 10.52% compared to the second quarter of 2007. This growth was primarily the result of the adquisition of new lines of consumer products that we distribute on an exclusive basis.

Sales in our Government Pharma division increased 58.91% due to a significant increase in the number of units sold, primarily to PEMEX.

Publication sales decreased 1.31% as a result of lower unit sales. This decrease was due to the fact that Citem stopped distributing some publications that that did not meet our minimal profitability requirements.

The sales mix did not change significantly this quarter. Private Pharma sales represented 83.70% of total sales (compared to 84.02% during the second quarter of 2007), while Government Pharma accounted for 3.92% (versus 2.82% during the second quarter of 2007). Health, Beauty, Consumer Goods, General Merchandise and Other represented 9.21% (compared to 9.50% in the second quarter of 2007) and Publications made up the remaining 3.17% (versus 3.66% during the second quarter of 2007).

(1) The acquisition took place on May 15, 2008.

SALES BY DIVISION

PRIVATE PHARMA

Sales in our Private Pharma division rose 13.62% during the second quarter of 2008, as a result of the consolidation of investments that were made within the sector during the past several months. This includes the most recent acquisition of Drogasmil Medicamento e Perfumeria, S.A.,(2) a Brazilian pharmacy chain.

Sales reached $5,825.07 million and represented 83.70% of the Group’s total sales.

(2)The acquisition took place on May 15, 2008.

GOVERNMENT PHARMA

Sales in our Government Pharma division grew 58.91% due to a significant increase in the number of units sold, primarily to PEMEX.

Government Pharma sales reached $273.04 million during 2Q08 and accounted for 3.92% of our total sales.

HEALTH, BEAUTY, CONSUMER GOODS, GENERAL MERCHANDISE AND OTHER

Sales in our Health, Beauty, Consumer Goods, General Merchandise and Other division increased 10.52% versus the second quarter of 2007, primarily as a result of the adquisition of new lines of exclusively distributed consumer products.

PUBLICATIONS

Publication sales decreased 1.31% as a result of lower unit sales. This decrease was due to the fact that Citem stopped distributing some publications that that no longer met our minimal profitability requirements.

This division’s participation as a percentage of total sales went from 3.66% in 2Q07 to 3.17% in the second quarter of 2008.

                                                  Division                               % of sales
                                              Private Pharma                             83.70%
                                          Government Pharma                          3.92%
                                Health, Beauty, Consumer Goods,
                                  General Merchandise and Other                  9.21%
                                                Publications                                3.17%

                                                   TOTAL                                    100.00%

GROSS INCOME

During the second quarter of the year, Grupo Casa Saba’s gross income increased 34.45% to reach $740.63 million. The company’s gross margin improved as a result of the recent investments, to reach 10.64%.

OPERATING EXPENSES

Operating expenses reached $500.13 million, an increase of 47.58% compared to the second quarter of 2007. This was due to the investments that were made over the past several months. Operating expenses represented 7.19% of our total sales.

OPERATING INCOME

Operating income continued to grow. This quarter, it rose 13.45%, to reach $240.50 million. The operating margin was 3.46%, 1 b.p. lower than the 3.47% margin registered in the second quarter of 2007.

OPERATING INCOME PLUS DEPRECIATION AND AMORTIZATION

Operating income plus depreciation and amortization for 2Q08 was $259.07 million, an increase of 9.61% compared to the second quarter of 2007. Depreciation and amortization for the period was $18.57 million, 23.81% lower than in the second quarter of 2007.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents at the end of the second quarter of 2008 was $315.42 million.

COMPREHENSIVE COST OF FINANCING

During the second quarter of 2008, GCS’s comprehensive cost of financing (CCF) was $47.66 million due to an increase in the amount of interest income paid. This interest came, in large part, from the long-term loan related to the Brazilian acquisition.

OTHER EXPENSES (INCOME)

During the second quarter of 2008, the Company registered an income of $21.16 million in other expenses (income). The expenses (income) from this line item were derived from activities that are distinct from the company’s everyday business operations.

TAX PROVISIONS

During the second quarter, tax provisions were $3.91 million. These provisions included $39.57 million in income tax and -$35.66 million in deferred income tax.

NET INCOME

GCS’s net income for the second quarter was $210.09 million, an increase of 15.92% compared to the second quarter of 2007. The net margin for the period was 3.02%, 5 b.p. higher than the net margin obtained during the second quarter of 2007.

WORKING CAPITAL

During the second quarter of 2008, our accounts receivable days were virtually the same at 60.6 days (they were 60.2 days in the second quarter of 2007). In addition, our accounts payable days increased 1.3 days compared to 2Q07, to reach 48.0 days. Finally, our inventory days were 53.9 days, 1.5 more days than in 2Q07.

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

Grupo Casa Saba is one of the leading distributors of pharmaceutical products, beauty, personal care and consumer goods, general merchandise, publications and other goods in Mexico. With 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.

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 other countries in which Casa Saba operates, as well as variations in the value of the Mexican peso as compared with the US dollar.

Contacts:
GRUPO CASA SABA                                  IR Communications:
Rodrigo Echagaray, IRO                               Jesús Martínez Rojas
+52 (55) 5284-6672                                      +52 (55) 5644-1247
rechagar@casasaba.com                             jesus@irandpr.com

Alejandro Sadurni, CFO
asadurni@casasaba.com

GRUPO CASA SABA S.A.B. DE C.V. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEET

(Figures expressed in thousands of Mexican Pesos as of December 2007)

ITEM
June 2008
June 2007
$ Change TOTAL ASSETS
11,843,043 9,466,580
2,376,463 CURRENT ASSETS
CASH AND CASH EQUIVALENTS
ACCOUNTS RECEIVABLE (NET)
INTERCOMPANY
OTHER ACCOUNTS RECEIVABLE (NET)
INVENTORIES
OTHER CURRENT ASSETS
9,352,930
315,426
4,686,617

484,135
3,726,718
140,035

7,926,065
293,880
4,082,113

260,789
3,229,160
60,123

1,426,865
21,545
604,504
-
223,346
497,558
79,911 LONG TERM
ACCOUNTS RECEIVABLE
INVESTMENTS IN EQUITY SHARES AND
UNCONSOLIDATED SUBSIDIARIES
OTHER INVESTMENTS

-
-
-
-
- NET PROPERY, PLANT AND EQUIPMENT
PROPERTY
MACHINERY AND EQUIPMENT
OTHER EQUIPMENT
ACCUMULATED DEPRECIATION
BUILDINGS IN PROCESS
DEFERRED ASSETS (NET)
OTHER ASSETS
1,283,670
1,318,796
471,993
612,843
1,119,962
--
770,949
435,494
1,184,611
1,307,049
411,388
521,180
1,055,006

171,363
184,541

99,059
11,747
60,605
91,663
64,956
-
599,586
250,953 TOTAL LIABILITIES
5,463,788
3,732,757
1,731,031 CURRENT LIABILITIES
ACCOUNTS PAYABLE
BANK DEBT
DEBT SECURITIES
ACCRUED TAXES
OTHER CURRENT LIABILITIES
LONG TERM LIABILITIES
BANK DEBT
DEBT SECURITIES
OTHER DEBT
DEFERRED LIABILITIES
OTHER LIABILITIES
4,270,540
3,348,109
573,174
-
10,149
339,108
670,000
670,000

523,248 2,993,137
2,832,341

7,034
153,761

739,621

1,277,404
515,768
573,174
-
3,114
185,347
670,000
670,000
-
-

(216,372)

SHAREHOLDER'S EQUITY

MINORITY STOCKHOLDER'S EQUITY
MAJORITY STOCKHOLDER'S EQUITY
PAID-IN CAPITAL
CAPITAL STOCK
RESTATEMENT IN CAPITAL STOCK
PREMIUM ON STOCK SOLD
RESERVE FOR RESTATEMENT ON SHAREHOLDER'S EQUITY
CAPITAL INCREASE (DECREASE)
CUMMULATIVE RESULTS AND EQUITY RESERVE
RESERVE FOR SHARES REPURCHASE
OVERAGE (DEFICIT) ON RESTATEMENT ON STOCKHOLDER'S EQUITY
NET INCOME

6,379,254

-
6,379,254
1,993,875
167,903
956,094
869,878
--
4,385,379
5,582,095
1,062,200
(2,660,625)
401,709

5,733,823

5,733,823
1,992,326
167,903
955,862
868,561

3,741,497
4,736,356
1,063,517
(2,436,164)
350,788

645,431

--
645,431
1,549
(0)
232
1,317
--
643,882
818,739
(1,317)
(224,461)
50,921

GRUPO CASA SABA, S.A.B. DE C.V.
(For June 2007 figures expressed in thousands of Mexican Pesos as of December 2007. For June 2008 figures expressed in constant Pesos)

Jan-Jun
Jan-Jun

Change

Apr-Jun
Apr-Jun

Change

Income Statement
NET SALES
COST OF SALES
Gross Profit 2007
12,114,547
10,987,145
1,127,402
% of sales
100.00%
90.69%
9.31%
2008
13,893,449
12,498,720
1,394,729
% of sales
100.00%
89.96%
10.04%
$
1,778,962
1,511,576
267,327
%
14.68%
13.76%
23.71%

2007
6,102,077
5,551,204
550,873
% of sales
100.00%
90.97%
9.03%
2008
6,959,418
6,218,780
740,638
% of sales
100.00%
89.36%
10.64%
$
857,341
667,577
189,765
%
14.05%
12.03%
34.45%

Operating Expenses
Sales Expenses
Administrative Expenses
OPERATING EXPENSES
278,374
405,762
684,136
2.30%
3.35%
5.65%
338,816
555,458
894,274
2.44%
3.89%
6.46%
60,442
149,697
210,139
21.71%
36.89%
30.72%

137,073
201,818
338,891
2.25%
3.31%
5.55%
185,510
314,627
500,137
2.67%
4.52%
7.19%
48,437
112,810
161,247
35.34%
55.90%
47.58%

Operating Income
COMPREHENSIVE COST OF FINANCING
Interest Paid
Interest (Earned)
Exchange Loss (Gain)
Monetary Position (gain)
Comprehensive Cost of Financing
443,267

-1,664
-1,340
1,907
-1,486
-2,583

3.66%

(0.01%)
(0.01%)
0.02%
(0.01%)
(0.02%)

500,454

53,621
-1,443
1,279
0
53,457

3.60%

0.39%
(0.01%)
0.01%
0.00%
0.38%

57,188

55,285
-103
-629
1,486
56,040

12.90%

(3322.58%)
7.71%
(32.96%)
(100.0%)
(2169.51%)

211,983

-4,469
690
2,176
-4,582
-6,185

3.47%

(0.07%)
0.01%
0.04%
(0.08%)
(0.10%)

240,500

47,114
-908
1,457
0
47,663

3.46%

0.68%
(0.01%)
0.02%
0.00%
0.68%

28,518

51,583
-1,598
-720
4,582
53,848

13.45%

(1154.26%)
(231.65%)
(33.07%)
(100.0%)
(870.61%)

OTHER EXPENSES (INCOME), net

NET INCOME BEFORE TAXES AND EXTRAORDINARY ITEMS

-23,241

469,091

(0.19%)

3.87%

-23,660

470,658

(0.17%)

3.39%

-419

1,567

1.80%

0.33%

-11,936

230,104

(0.20%)

3.77%

-21,166

214,004

(0.30%)

3.08%

-9,230

-16,100

77.33%

(7.00%)

PROVISIONS FOR:
Income Tax
Asset Tax
Deferred Income Tax
Profit sharing due
Deferred Profit sharing due
Total taxes
125,518
0
-7,215
0
0
118,308
1.04%
0.00%
(0.06%)
0.00%
0.00%
0.98%
140,276
0
-71,327
0
0
68,950
1.01%
0.00%
(0.51%)
0.00%
0.00%
0.50%
14,759
0
-64,112
0
0
-49,353
11.76%
0.0%
888.62%
0.0%
0.0%
(41.72%)
37,593
0
12,550
-1,282
0
48,861
0.62%
0.00%
0.21%
(0.02%)
0.00%
0.80%
39,576
0
-35,664
0
0
3,913
0.57%
0.00%
(0.51%)
0.00%
0.00%
0.06%
1,984
0
-48,214
1,282
0
-44,948
5.28%
0.00%
(384.17%)
(100.0%)
0.00%
(91.99%)

Net Income Before Extraordinary Items

Extraordinary Items (Income)
Net Income

Depreciation and Amortization
Operating Income plus Depreciation and Amortization

350,788

0
350,788

51,519
494,785

2.90%

0.00%
2 .90%

0.43%
4.08%

401,709

0
401,709

35,498
535,952

2.89%

0.00%
2.89%

0.26%
3.86%

50,921

0
50,921

(16,021)
41,167

14.52%

0.00%
14.52%

(31.10%)
8.32%

181,243

0
181,243

24,385
236,367

2.97%

0.00%
2.97%

0.40%
3.87%

210,092

0
210,092

18,579
259,079

3.02%

0.00%
3.02%

0.27%
3.72%

28,849

0
28,849

(5,806)
22,712

15.92%

0.00%
15.92%

(23.81%)
9.61%