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Quarterly Earnings Report
July 27, 2012
2Q12
Distribution Sales to Institutional Clients Declined while Chile and Mexico Demonstrated Improved Performance
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).
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The Group’s net sales for the quarter reached $12,253.1 million pesos
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Gross income for the period was 2,233.4 million; the gross margin for the quarter was 18.23%
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Operating expenses reached $1,967.0 million pesos and represented 16.05% of the Company’s total sales.
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Quarterly operating income was $266.4 million, resulting in an operating margin of 2.17% for the period
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Second quarter EBITDA was $377.1 million, or 3.08% of total sales
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The Group’s net profit for the quarter was $177.4 million
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As of June 30, 2012, GCS’s net debt totaled $9,535.2 million pesos
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GCS closed the quarter with 25 Distribution Centers and over 1,340 pharmacies in operation across Latin America
Mexico City, Mexico, July 27, 2012.
Grupo Casa Saba (SAB) (“Saba”, “GCS”, “the Company” or “the Group”)
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one of the leading Mexican distributors of pharmaceutical products as well as health, beauty aids and consumer goods and publication, and one of the most important pharmacy chains in Latin America, announces its consolidated financial and operating results for the second quarter of 2012.
QUARTERLY EARNINGS
In the second quarter of 2012, Saba faced close competition in the distribution and marketing of pharmaceutical products, health and beauty aids, and consumer goods in Mexico as well as in the other Latin America countries in which we operate. Our operating strategy maintained emphasis on improving efficiency levels and controlling logistic costs and expenses, generating positive results in practically all our divisions. At the sales level, we focused 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, opening new pharmacies in Latin America and in Mexico 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.
At Grupo Casa Saba, we will continue to focus on making ongoing improvements to our logistic and commercial operations in order to offer all of our clients a wide range of products at competitive prices. In our pharmacy network, we will also strive to offer the best integrated health, beauty and consumer goods solutions.
NET
SALES
Net sales for the quarter reached $12,253.1 million, an increase of 1.4% compared to 12,084.1 million in 2Q2011. This increase resulted from the higher performance in our distribution division.
SALES BY DIVISON
DISTRIBUTION DIVISION
PHARMA, HEALTH,
BEAUTY AND CONSUMER GOODS
Sales from our Pharma, Health, Beauty and Consumer Goods division increased 3.46% versus the 2Q2011, totaling $5,557.0 million. In terms of total sales, this division’s percentage went from 45.78% in 2Q2011 to 46.72% in the 2Q2012.
GOVERNMENT
PHARMA
Quarterly sales in our Government Pharma division grew 9.99% compared to the second 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 2.78% in 2Q2011, down from to 3.02% in the 2Q2012.
PUBLICATIONS
Sales from our Publications distribution division declined 20.59% compared to the second quarter of 2011, as a result of lower sales from various publishers and as well as a downward adjustment. In terms of total sales, this division’s percentage went from 1.67%in 2Q2011 to 1.31% in the 2Q2012.
RETAIL PHARMACY
During the second quarter of the year, sales from our Retail Pharmacy division decreased by $14.8 million pesos, or 0.2%, as a result of the divestiture of Peru, the Brazilian restructuring, and lower institutional sales in our Farmacias ABC chain. A portion of this effect was offset by the positive performance of Farmacias Ahumada in Chile, which increased its sales by 2%.
This division’s percentage of the Group’s overall sales rose to 48.9% vs 49.7% in the 2Q2011.
As a result, the sales mix for the second quarter of 2012 was as follows:
Division
%
of Sales
Retail Pharmacy 48.9%
Total Distribution 51.1%
Pharma, Health & Beauty 46.7%
Government Pharma
3.0%
Publications 1.3%
TOTAL 100.0%
GROSS INCOME
During the second quarter of 2012, gross income reached $2,233.4 million pesos, primarily due to the improved gross margins in Chile, Brazil, Mexico (Farmacias ABC) and the Pharma, Health and Beauty distribution division. The above shows our efforts to improve service, availability and commercial supply to our clients.
Compared to the second quarter of 2011, the Group’s gross income increased 4.7%. Gross income margin showed an improvement of 59 basis points in the second quarter of the year, reaching 18.23%.
OPERATING EXPENSES
Operating expenses in the second quarter of 2012 rose by $221.2 million pesos, or 12.67%, compared to the same period of the previous year. This increase was the result of the annual increase in payroll and higher expenses in both our Government Pharma division and our Chilean and Mexican (Benavides) operations, due to their larger infrastructures, as well as the increase in loss reserves.
As a percentage of total sales, operating expenses represented 16.14% during the second quarter of 2012 compared to 14.45% during the same period of 2011.
OPERATING INCOME
Quarterly operating income for 2Q2012 was $266.4 million, down from $385.8 million reported in 2Q2011. This decline in operating income was the result of a lower gross income as well as the increase in expenses.
Operating income margin for the 2Q2012 was 3.19%, versus 2.17% in 2Q2011.
OPERATING INCOME PLUS DEPRECIATION AND
AMORTIZATION (EBITDA)
EBITDA for 2Q2012 was $377.1 million, a decrease of 23.94% compared to the $495.9 million reported during the second quarter of 2011.
EBITDA margin for the second quarter of 2012 was 3.08%.
COMPREHENSIVE COST OF FINANCING
(CCF)
The Group’s CCF reached $115.5 million, 56.6% lower than the CCF reported during 2Q2011.
This decrease was primarily due to minor interest payments.
NET DEBT
The Company’s net debt at the end of 2Q2012 was $9,535.2 million pesos.
OTHER EXPENSES (INCOME)
During the second quarter of the year, other expenses totaled $94.7 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.
TAX PROVISIONS
Tax provisions for the second quarter of 2012 were $68.1 million pesos, 9.2% higher than the amount reported in 2Q2011.
NET INCOME
In the second quarter 2012 GCS recorded a net income of $177.4, an increase from the $69.0 million in the second quarter of 2011.
The net margin for 2Q2012 was 1.45%.
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 IR Communications:
Sandra Yatsko Jesús Martínez Rojas
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