Quarterly Earnings Report February 27, 2013
4Q13
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 fourth quarter reached $9,582 million pesos
- Gross income for the period was $1,907.7 million; the gross margin for the quarter was 19.9%
- Operating expenses reached $1,897.7 million pesos and represented 19.8% of the Company's total sales
- Quarterly operating income was $10.0 million, resulting in an operating margin of 0.1% for the period
- Third quarter EBITDA was $116.0 million, or 1.2% of total sales
- As of December 31, 2013, GCS’s net debt totaled $7,921.5 million
- GCS closed the quarter with 22 Distribution Centers and 1,451 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 one of the most important pharmacy chains in Latin America, announced its consolidated financial and operating results for the fourth 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.
On December 17, 2013 Grupo Casa Saba, issue a press release reporting that, it was signed a stock purchase agreement with Pharma Equity Global Fund LLC and World Global Equity Fund LLC owned by a group of investors of American nationality, which will sell the shares of its subsidiaries operating division was signed distribution and wholesaling of pharmaceuticals.The transaction includes the assumption of all liabilities related to this business as well as the entirety of its operational and real estate assets. The closing of the transaction is subject to customary corporate and regulatory approvals for this type of transaction.
NET SALES
Net sales for the quarter totaled $9, 582.0 million, and equivalent to a decrease of 15.8% when compared to $11, 376.9 million in 4Q2012.
SALES BY DIVISON
DISTRIBUTION DIVISIONPHARMA, HEALTH, BEAUTY AND CONSUMER GOODS
Sales from our Pharma, Health, Beauty and Consumer Goods divisions totaled $3,815.2 million. When compared to the same quarter of last year, there was a 41.6% 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 division’s underwent a decrease on participation from 57.4% in 4Q2012 in comparison to the 39.8% in the 4Q2013.GOVERNMENT PHARMA
Quarterly sales in our Government Pharma division totaled $230.0 million. This division registered a 14.8% increase in sales compared to the fourth quarter of 2012, as the result of the deferral on the date of tenders.In terms of total sales, this division passed from 1.8% in 4Q2012 to 2.4% in the 4Q2013.
RETAIL PHARMACY
During the fouth quarter of the current year, sales from our Retail Pharmacy division reached $5,536.6 million. Compared to the same quarter last year, there was a 9.2% 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 57.8%, versus 40.8% in the 4Q2012.
As a result, the sales mix for the third quarter of 2013 was as follows:
Division % of Sales
Retail Pharmacy 57.8%
Total Distribution 42.2%
Pharma, Health & Beauty 39.8%
Government Pharma 2.4%
TOTAL 100.0%
GROSS INCOME
During the fourth quarter of 2013, gross income reached $1, 907.7 million pesos, and an amount 12.9% lower than the gross income reached in the fourth quarter of 2012. This was mainly due a decrease in sales in our distribution and government areas.
OPERATING EXPENSES
Operating expenses in the fourth quarter of 2013 resulted in $1,897.7 million. This represents an increase of $37.2 million pesos, or 2.0%, compared to the same period of the previous year. This increase was mainly a result of the expenses were incurred due to the opening of 68 new pharmacies in this quarter.As a percentage of total sales, operating expenses represented 19.8% during the fourth quarter of 2013 compared to 16.4% during the same period of 2012.
OPERATING INCOME
Quarterly operating income for 4Q2013 was $10.0 million, an amount 96.9% lower than the $330.3 million reported in 4Q2012. This decrease in operating income was the result of the decline in sales due the disincorporation of companies in previous quarters and declining sales in the distribution division.
Operating income margin for the 4Q2013 was 0.1%, versus 2.9% in 4Q2012.
EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTIZATION (EBITDA)
EBITDA for 4Q2013 was $116.0 million, a lower amount compared to the $434.5 million reported in the fourth quarter of 2012.
EBITDA margin for the fourth quarter of 2013 was 1.2%.COMPREHENSIVE COST OF FINANCING (CCF)
The Group’s CCF reached $247.7 million in 4Q2013, 23.0% higher than the CCF reported during 4Q2012.
This increase was due to a minor amount of interest income.NET DEBT
The Company’s net debt at the end of 4Q2013 was $7,921.5 million pesos. There was a decrease of 17.3% with respect to last year.
OTHER EXPENSES (INCOME)
During the fourth quarter of the year, other expenses totaled $1.5 million. This represents an increase of $719.2 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 fourth quarter of 2013 resulted in a payable of $69.2 million in tax deductions.
NET INCOME (LOSS)
In the fourth quarter, 2013 GCS recorded a net loss of $308.4 million, an amount 53.1% lower compared to the amount recorded during the same period of the previous year. This variation is mainly due to the extraordinary expenses recorded during the previous year.
Analysis Coverage: Through the Bolsa Mexicana de Valores program, Independent Analyst, Grupo Casa Saba counts with the coverage of Morningstar.
The 328.5 million shares issued by Grupo Casa Saba are listed on the Mexican Stock Exchange under the symbol “SAB”.
Grupo Casa Saba was founded in 1892 and is one of the leading distributors of pharmaceutical products, beauty, personal care and consumer goods, general merchandise, publications and other goods in Mexico. With more than 115 years of experience, the Company distributes to the majority of pharmacies, chains, self-service and convenience stores, as well as other specialized national chains. With the acquisition of FASA in October of 2010 the company now has retail pharmacy outlets located in Mexico, Chile and Brazil.
As a precautionary note to investors, except for the historic information contained herein, certain topics discussed in this document constitute forward-looking statements. Such topics imply risks and uncertainties, including the economic conditions in Mexico and those countries in which Grupo Casa Saba operates, directly or indirectly, including the United States of America, Brazil and Chile, as well as variations in the value of the Mexican peso as compared with the currencies of the previously-mentioned countries.
Contacts:
GRUPO CASA SABA Grayling
Harish Dadoo Jesús Martínez Rojas
GRUPO CASA SABA, S.A.B. DE C.V. in thousands of Mexican Pesos as of September 2013
Jan-Dec
Jan-DecVariationOct-DecOct-DecVariationIncome Statement2012% of sales2013% of sales$%2012% of sales2013% of sales$%NET SALES46,689,355100.00%42,077,122100.00%(4,612,233)(9.88%)11,376,876100.00%9,581,973100.00%1,794,903(15.78%)COST OF SALES38,123,58281.95%34,550,22282.11%(3,573,360)(9.37%)9,035,99180.74%7,674,22480.09%1,511,799(16.46%)Gross Profit8,565,77318.35%7,526,89917.89%(1,038,873)(12.13%)2,190,85319.26%1,907,74919.91%283,104(12.92%)OPERATING EXPENSES Sales Expenses1,309,1082.80%882,1322.10%426,976)(32.62%)451,0293.96%328,3913.43%122,638(27.19%)Administrative Expenses6,023,53612.90%6,105,38614.51%81,8501.36%1,409,52612.39%1,569,34016.38%159,81311.34%Operating Expenses7,332,64415.71%6,987,51816.61%345,126(4.71%)1,860,55516.35%1,897,73019.81%37,1752.00%Operating Income1,233,1292.64%539,3821.28%693,747(56.26%)330,2972.90%10,0190.10%320,279(96.97%)COMPREHENSIVE COST OF FINANCING1,006,8002.16%908,3422.16%98,458(9.78%);325,4911.90%216,6032.26%7020.33%Interest (Earned)176,252(0.38%)48,890(0.12%)127,362(72.26%)69,845(0.61%)53,3510.56%123,196(176.39%)Exchange Loss (Gain)23,9170.05%55,560(0.13%)79,477(332.31%)55,3410.49%22,273(0.23%)(77,614)(140.25%)Monetary Position (gain)-0.00%(3,661)(0.01%)(3,661)0.00%-0.00%-0.00%-0.00%Comprehensive Cost of Financing854,4651.83%803,8931.91%50,573(5.92%)201,3971.77%247,6812.58%46,28422.98%OTHER EXPENSES (INCOME), net128,5800.28%97,5550.23%(31,025)(24.13%)720,7066.33%1,4890.02%(719,217)(99.79%)NET INCOME BEFORE TAXES250,0840.54%362,065(0.86%)612,149(244.78%)(591,806)(5.20%)239,151(2.50%)352,654(59.59%)PROVISIONS FOR: Income Tax364,8820.78%145,2030.35%219,680(60.21%)66,3660.58%67,0470.70%6811.03%Asset Tax-0.00%-0.00%-0.00%-0.00%-0.00%-0.00%Deferred Income Tax30,1710.06%20,100(0.05%)50,271(166.62%)-0.00%2,201(0.02%)2,201NCProfit 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 taxes395,0530.85%125,1030.30%269,951(68.33%)66,3660.58%69,2480.72%2,8824.34%Net Income Before Extraordinary Items(144,970)(0.31%)487,168(1.16%)342,198236.05%658,171(5.79%)308,399(3.22%)349,772(53.14%)Extraordinary Items (Income)-0.00%-0.00%-0.00%-0.00%-0.00%-0.00%Net Income(144,970)(0.31%)487,168(1.16%)342,198236.05%658,171(5.79%)308,399(3.22%)349,772(53.14%)Depreciation and Amortization425,6540.91%367,8400.87%57,813(13.58%)104,2270.92%106,0201.11%1,7931.72%Operating Income plus Depreciation and Amortization1,658,7823.55%907,2222.16%751,560(45.31%)434,5243.82%116,0381.21%318,486(73.30%)Net Income corresponding to Minority Interest2,959-9,1460.02%6,118209.15%(10,449)-2,9270.03%13,376(128.02%)
GRUPO CASA SABA, S.A.B. DE C.V.
BALANCE SHEET
Figures are expressed in thousands of Mexican pesos as of December 2013
ACCOUNT / SUBACCOUNTQUARTER CURRENT YEARCLOSE PRIOR YEARAMOUNTAMOUNTTOTAL ASSETS28,513,58732,501,016CURRENT ASSETS17,435,81021,231,243CASH AND CASH EQUIVALENTS1,135,5361,068,257CLIENTS (NET)6,664,1657,599,268CLIENTS8,257,5759,018,164ALLOWANCE FOR DOUBTFUL ACCOUNTS-1,593,410-1,418,897OTHER ACCOUNTS RECEIVABLES (NET)2,404,3104,665,028INVENTORIES7,219,1197,885,983OTHER CURRENT ASSETS12,68012,707LONG TERM33,05236,986INVESTMENTS IN SHARES OF SUBSIDIARIES AND ASSOCIATED COMPANIES33,05236,986PROPERTY MACHINARY AND EQUIPMENT NET3,115,6173,040,769PROPERTY2,249,2212,471,561MACHINERY AND EQUIPMENT2,644,0481,604,994OTHER EQUIPMENT1,764,2142,555,423ACCUMULATED DEPRECIATION-3,554,540-3,622,213CONSTRUCTION IN PROGRESS12,67431,003INTANGIBLE ASSETS (NET)6,567,2396,990,394GOODWILL2,462,1322,809,508BRANDS2,677,6902,719,238RIGHTS AND LICENSING1,402,2521,445,315OTHER INTANGIBLE ASSETS15,16516,332OTHER NON CURRENT ASSETS1,361,8691,201,624ADVANCE PAYMENTS28,62323,881DEFERRED CHARGES (NET) OTHERS1,333,2461,177,743TOTAL LIABILITIES23,928,77626,020,026CURRENT LIABILITIES15,837,33014,302,646BANK CREDITS1,683,1232,487,022SUPPLIERS13,411,41611,311,565TAXES PAYABLE742,791504,060OTHER CURRENT LIABILITIES1,123,2013,358,890EMPLOYEE BENEFITS280,710200,771OTHER CURRENT LIABILITIES842,4913,158,119NON CURRENT LIABILITIES7,373,9378,161,309BANK CREDITS7,373,9378,161,309OTHER LIABILITIES-420,413197,182SHAREHOLDERS' EQUITY4,584,8116,480,990CONTRIBUTED CAPITAL2,593,8722,503,875CAPITAL STOCK PAID (NOMINAL)767,902677,903CAPITAL STOCK PAID UPDATE956,093956,094PREMIUM ON STOCK SOLD869,877869,878CAPITAL INCREASE (DECREASE)1,990,9393,977,115ACCUMULATED PROFIT AND LEGAL RESERVE1,415,9073,059,885RESERVE FOR STOCK REPURCHASE1,062,2001,062,200PROFIT-487,168-144,970