Grupo Elektra Announces Record EBITDA Of Ps. 1.1 Billion For 2Q05,
Up 17% - Revenues up 18% to Ps. 7.6 Billion for 2Q05 - MEXICO CITY,
July 25 /PRNewswire-FirstCall/ -- Grupo Elektra, S.A. de C.V. (BMV:
ELEKTRA*; NYSE: EKT; Latibex: XEKT), Latin America's leading
specialty retailer, consumer finance and banking and financial
services company, reported today its financial results for the
second quarter of 2005. Highlights * The collection rate of Banco
Azteca continues at the same excellent historic level that defines
Grupo Elektra's standard, approximately 97% as of June 30, 2005. *
On June 1, Circulo de Credito, S.A. de C.V. received authorization
from the Ministry of Finance to start operations as the new credit
information bureau for individuals in Mexico. Financial Highlights:
Millions of Pesos of constant purchasing power as of June 30, 2005.
Change Change 2Q04 2Q05 $ % 6M04 6M05 $ % Consolidated Revenues
6,456 7,645 1,190 18.4% 12,117 14,831 2,714 22.4% Gross Profit
2,835 3,441 605 21.4% 5,280 6,715 1,435 27.2% EBITDA 990 1,159 170
17.1% 1,853 2,186 333 18.0% Net Income 262 352 89 34.0% 846 870 24
2.9% EPS (pesos per share) (1) 1.10 1.44 0.33 30.1% 3.56 3.55
(0.00)(0.1%) EPS (US$ per ADR) * 0.41 0.53 0.12 30.1% 1.32 1.32
(0.00)(0.1%) (1) Calculation based on 244,876,000 Elektra*
(61,219,000 GDSs equivalent) weighted average at June 30, 2005 and
237,716,000 Elektra*(59,429,000 GDSs equivalent) weighted average
outstanding at June 30, 2004. *Ps. 10.77 per US$ Javier Sarro, CEO
of Grupo Elektra said, "Our second quarter financial results were
consistent with the outlook we provided for 2005. We are very
enthusiastic that the overall business expansion translated into
solid earnings growth and further improvements in profitability and
bottom line." Carlos Septien, Banco Azteca's CEO said, "We are
delighted with Banco Azteca's strong financial results, which
exceeded our expectations. Banco Azteca represents an optimal
alternative to grant reliable consumer credit for millions of
families who have been able to increase their purchasing power and
improve their quality of life though access to high quality
products and services. Likewise, we are transforming the Mexican
banking system with our unique products and services, and
principally, the savings culture in a large under attended segment
of the population." Financial Division Banco Azteca For 2Q05, Banco
Azteca reported net income of Ps. 122.0 million, 28.4% higher than
the net income of Ps. 95.0 million for 2Q04. As of June 30, 2005,
the estimated capitalization index of Banco Azteca was 11.3%, flat
when compared with the index of June 2004. The capitalization index
exceeds the 8.0% minimum required by Mexican regulators. Gross
Credit Portfolio Banco Azteca's total gross credit portfolio
increased 76.9%, reaching Ps. 13.0 billion from Ps. 7.4 billion at
the end of 2Q04. The average term of the credit portfolio at the
end of the 2Q05, was 54 weeks. At the end of 2Q05, we had a total
of 4.5 million active accounts, representing a 38.7% increase from
2Q04. The collection rate of Banco Azteca continues at the same
excellent historic level that defines Grupo Elektra's standard,
approximately 97% as of June 30, 2005. Savings Accounts and Term
Deposits Net deposits increased 74.5% to Ps. 22.5 billion in 2Q05
from Ps. 12.9 billion in 2Q04, and the total number of accounts
rose to 6.8 million. Afore Azteca For 2Q05, Afore Azteca reported a
net income of Ps. 1.0 million from a net income of Ps. 5.0 million
for 2Q04. As of June 30, 2005, Siefore Azteca reached Ps. 4.2
billion in net assets under management, and yielded an 8.67%
return. Seguros Azteca For the fifth consecutive quarter, Seguros
Azteca recorded a positive net income; this time of Ps. 37.0
million, from a net income of Ps. 7.0 million in 2Q04. Circulo de
Credito On June 1, Circulo de Credito, S.A. de C.V. received
authorization from the Ministry of Finance to start operations as
the new credit information bureau for individuals in Mexico. Grupo
Elektra partnered with Banco Afirme, S.A., Coppel, S.A. de C.V.,
Grupo Chedraui, S.A. de C.V., and two other private investors to
create Circulo de Credito. Each partner of the new credit bureau
has 18% equity stake with the exception of the two private
investors who each has a 14% equity stake. The new credit bureau
primarily intends to obtain, manage and send information on the
credit history of individuals. Commercial Division Commercial
division revenues decreased 1.0%, due primarily to lower
merchandise revenues that result from the closing of certain stores
that did not reach our profitability standards. However, Latin
American operations continued to show favorable results. Total Debt
and Net Debt At the end of 2Q05, the commercial division's total
debt with cost was Ps. 3.6 billion, 8.5% lower compared with Ps.
3.9 billion at the end of 2Q04. Net debt at the commercial division
decreased to a negative amount of Ps. 576.3 million in 2Q05 from
Ps. 1.1 billion in 2Q04. Consolidated Financial Results
Consolidated Revenues Consolidated revenues increased 18.4% to Ps.
7.6 billion in 2Q05 from Ps. 6.5 billion in 2Q04. EBITDA
Consolidated EBITDA reached Ps. 1.1 billion, a 17.1% increase from
Ps. 989.9 million in 2Q04. During the quarter, the growth in
operating expenses was offset by higher consolidated revenues and a
110 basis points higher consolidated gross margin, from 43.9% in
2Q04 to 45.0% in 2Q05. Consolidated EBITDA margin reached 15.2%, 10
basis points lower than the 15.3% reported in 2Q04. Operating
Expenses During the quarter, operating expenses grew 24.8% to Ps.
2.6 billion in 2Q05 from Ps. 2.1 billion in 2Q04. The increase in
operating expenses was mainly the result of hiring and training of
employees; door-to-door sales initiatives; increased operations
from 137 net new stores; and higher advertising expenses from our
new business units. Comprehensive Cost of Financing The commercial
division comprehensive cost of financing for 2Q05 was Ps. 609.3
million, 59.9% higher when compared with the Ps. 381.1 million in
2Q04. The difference in the cost of financing is explained by: * A
Ps. 330.5 million loss in equity swaps operations explained by the
impact of the implementation of Mexican accounting Bulletin C-10 on
the Company's position in equity swaps. Bulletin C-10, "Derivative
Financial Instruments and Coverage Operations" of Mexican GAAP
states that realized and unrealized gains and losses on interest
rate swaps and options, on foreign exchange options and forward
contracts, are recognized in the income statement of the period and
are included in the comprehensive cost of financing; and * An
increase in FX losses of Ps. 147.3 million in the period. These
were partially offset by: * A Ps. 159.8 million decrease in
interest expense resulting from a lower level of debt with cost
this quarter largely due to the four years in advance redemption of
the full amount of the 12% US$275 million Senior Notes due in 2008;
* A Ps. 5.1 million increase in interest income; and * A Ps. 3.4
million increase in monetary gains. On a proforma basis, excluding
the Ps. 330.5 million loss in equity swaps operations, the
comprehensive cost of financing in 2Q05 was Ps. 278.7 million, 7.0%
lower compared with the proforma Ps. 299.7 million of 2Q04.
Operating Profit During the quarter, operating income increased
11.7% despite a 30.8% growth in depreciation and amortization. The
rise in D&A results from increased fixed assets in both the
commercial and the financial divisions. Net Income Our positive
operating performance, coupled with a Ps. 276.3 million gain from
our equity participation in Comunicaciones Avanzadas, partially
offset by the increase in the comprehensive cost of financing, led
to a net income of Ps. 351.5 million in 2Q05, 34.0% higher than the
Ps. 262.3 million net income of 2Q04. On a proforma basis,
excluding the Ps. 330.5 million loss in equity swaps operations in
the comprehensive cost of financing in 2Q05, net income for 2Q05
was Ps. 682.1 million, 98.5% higher when compared with the proforma
Ps. 343.7 million of 2Q04. CAPEX Capital expenditures in the first
half of 2005 were Ps. 593.3 million, principally due to our
expansion and the purchases of communications equipment. Cash and
Cash Equivalents Total cash and cash equivalents rose 89.0% to Ps.
17.9 billion in 2Q05 from Ps. 9.5 billion in 2Q04, comprised of a
48.8% increase to Ps. 4.2 billion from the commercial division and
a 106.1% growth to Ps. 13.7 billion from the financial division in
line with the increase in customer deposits. Consolidated Gross
Loan Portfolio Total consolidated gross loan portfolio increased
75.6% to Ps. 13.6 billion in 2Q05 from Ps. 7.8 billion at the end
of 2Q04. Collection rate for the credit portfolio remained at 97%.
Equity Consolidated equity grew 10.4% to Ps. 7.9 billion in 2Q05
from Ps. 7.2 billion in 2Q04. Company Profile: Grupo Elektra is
Latin America's leading specialty retailer, consumer finance and
banking services company. Grupo Elektra sells retail goods and
services through its Elektra, Salinas y Rocha, Bodega de Remates
and Elektricity stores and over the Internet. The Group operates
more than 1,000 stores in Mexico, Guatemala, Honduras and Peru.
Grupo Elektra also sells and markets its consumer finance, banking
and financial products and services through approximately 1,400
Banco Azteca branches located within its stores, as a stand-alone,
and in other channels in Mexico and Panama. Banking and financial
services include loans, electronic money transfer services,
extended warranties, demand deposits, pension-fund management,
insurance, and credit information services. Except for historical
information, the matters discussed in this press release are
forward-looking statements and are subject to certain risks and
uncertainties that could cause actual results to differ materially
from those projected. Risks that may affect Grupo Elektra are
identified in its Form 20- F and other filings with the US
Securities and Exchange Commission. As used in this press release,
EBITDA is operating income (loss) before interest expense, taxes,
depreciation and amortization, and adjusted by eliminating monetary
(loss) gain included in our revenues and cost, respectively. In
accordance with Regulation G, issued by the U.S. Securities and
Exchange Commission, reconciliation between net income and EBITDA
is provided in the notes provided in our financial statements.
EBITDA is presented because of the following reasons: * Our
management uses EBITDA as a measure of performance business
allowing us to compare ourselves with our peers' multiples, ratios
and margins derived from EBITDA. It also serves to evaluate and
compensate certain employees. * We believe EBITDA is one of the
tools that we can use to measure our cash-flow generation, because
it excludes some non-cash items as monetary gains or losses,
depreciation and amortization, etc. * EBITDA is also a measure
contained in certain financial covenants of our debt, and
consequently we are required to calculate it in order to verify
compliance with such covenants. * We are aware that EBITDA has
material limitations associated with its use, (i.e., EBITDA, as
defined by us, excludes items such as Discontinued operations, and
includes the Allowance for doubtful accounts, which contains or
does not contain, respectively, portions of cash). However, our
management compensates these material limitations with the use of
our consolidated financial statements and its notes. * We believe
that EBITDA is used by certain investors as one measure of a
company's historical ability to service its debt. EBITDA should not
be considered in isolation or as a substitute for the consolidated
income statements or the consolidated statements of changes in
financial position prepared in accordance with Mexican GAAP (PCGA)
or as a measure of profitability or liquidity. EBITDA is not (a) a
measure determined under PCGA or U.S. GAAP, (b) an alternative to
PCGA or U.S. GAAP operating income (loss) or net income (loss), (c)
a measure of liquidity or cash flows as determined under PCGA or
U.S. GAAP or (d) a measure provided in order to smooth earnings.
EBITDA does not represent discretionary funds. EBITDA, as
calculated by us, may not be comparable to similarly titled
measures reported by other companies. Contacts: Esteban Galindez,
CFA, Director of Finance and I.R. Grupo Elektra S.A. de C.V. Tel.
+52 (55) 1720-7819 Fax. +52 (55) 1720-7822 Bruno Rangel Director of
Investor Relations Grupo Salinas Tel. +52 (55) 1720 9167 Fax +52
(55) 1720 0831 DATASOURCE: Grupo Elektra, S.A. de C.V. CONTACT:
Esteban Galindez, CFA, Director of Finance and I.R. of Grupo
Elektra S.A. de C.V., +52-55-1720-7819, Fax: +52-55-1720-7822, ; or
Bruno Rangel, Director of Investor Relations of Grupo Salinas,
+52-55-1720-9167, or Fax: +52-55-1720-0831, Web site:
http://www.grupoelektra.com.mx/
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