Edgar Filing: GRUPO CASA SABA SA DE CV

Quarterly Earnings Report July 27, 2009
2Q09

Sales and Operating Income Increased 8.90% and 2.75%, Respectively

Financial Highlights:
(All figures are expressed in millions of Mexican pesos of purchasing power as of June 2009. Comparisons are made with the same period of 2008, unless otherwise stated. Figures may vary due to rounding practices).

Sales for the quarter totaled $7,579.09 million, an increase of 8.90%
Gross income rose 12.42% to reach $832.64 million
The gross margin for the quarter grew to 10.99% compared to 10.64% in 2Q08
Quarterly operating expenses as a percentage of sales were 7.73%
Operating income increased 2.75% versus 2Q08
The operating margin for the quarter was 3.26%
Operating income plus depreciation and amortization for the period was $269.88 million, an increase of 4.17% versus 2Q08
Net profit for the quarter was $147.03 million
Cash and cash equivalents at the end of the quarter was $199.15 million

Mexico City, Mexico, July 27, 2009. Grupo Casa Saba (“Saba”, “GCS”, “the Company” or “the Group”), one of the leading Mexican distributors of pharmaceutical products, health and 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 2009.

QUARTERLY EARNINGS

NET SALES

During the second quarter of 2009, GCS’s sales were $7,579.09 million, an increase of 8.90%.

SALES BY DIVISION

PRIVATE PHARMA

Sales in our Private Pharma division rose 10.85% during the second quarter of 2009, as a result of the consolidation of investments that were made within the sector. This includes the acquisition of Drogasmil Medicamento e Perfumeria, S.A., in Brazil in May 2008 as well as the growth in our retail sales division in Mexico. In addition our commercial strategies also had a positive effect on our sales.

Sales for this division reached $6,457.01 million versus $5,825.07 million in 2Q08 and represented 85.20% of the Group’s total sales.

GOVERNMENT PHARMA

Sales in our Government Pharma division increased 5.63% to $288.41 million compared to $273.04 million in the second quarter of 2008. This was mainly due to an increase in our participation in the bidding processes of the Instituto Mexicano del Seguro Social (IMSS), the Instituto de Seguridad Social del Estado de México y Municipios (ISSEMYM) and the National Center for the Prevention and Control of HIV/AIDS (CENSIDA by its Spanish acronym).

As a percentage of total sales, this division went from representing 3.92% in 2Q08 to 3.81% during the second quarter of 2009.

HEALTH, BEAUTY, CONSUMER GOODS, GENERAL MERCHANDISE AND OTHER

Sales in our Health, Beauty, Consumer Goods, General Merchandise and Other division reached $653.26 million, an increase of 1.93% versus the $640.89 million registered during the second quarter of 2008. This was due to commercial agreements that enabled us to increase promotions and discounts which, in turn, increased our sales.

This division represented 8.61% of GCS’s total sales in 2Q09, a decrease compared to the same period of the previous year when it accounted for 9.21%. This decline was due to the significant increase in the participation of the Private Pharma division as a percentage of total sales.

PUBLICATIONS

Publication sales decreased 18.15% during the quarter, primarily as a result of lower unit sales. This decrease in units was mainly due to the fact that Citem stopped distributing some publications that no longer met our minimal profitability requirements.

This division’s participation as a percentage of total sales went from 3.17% in 2Q08 to 2.38% in the second quarter of 2009.

There were marginal changes in the sales mix during the quarter. Private Pharma sales represented 85.20% of total sales (compared to 83.70% during the second quarter of 2008), while Government Pharma accounted for 3.81% (versus 3.92% during the second quarter of 2008). Health, Beauty, Consumer Goods, General Merchandise and Other represented 8.61% (compared to 9.21% in the second quarter of 2008) and Publications made up the remaining 2.38% (versus 3.17% during the second quarter of 2008).

                                            Division                               % of sales
                                              Private Pharma                             85.20%
                                          Government Pharma                          3.81%
                                Health, Beauty, Consumer Goods,
                                  General Merchandise and Other             8.61%
                                                Publications                                2.38%

                                                   TOTAL                                   100.00%

GROSS INCOME

During the second quarter of the year, Grupo Casa Saba’s gross income increased 12.42% versus the same period of the previous year to reach $832.64 million. The company’s gross margin improved 0.35%, from 10.64% in 2Q08 to 10.99% during the current period. This was the result of the higher sales derived from recent investments in our Private Pharma division.

OPERATING EXPENSES

Operating expenses reached $585.52 million, an increase of 17.07% compared to the second quarter of 2008. This was due to the investments that were made in the Private Pharma division. Operating expenses represented 7.73% of our total sales in 2Q09 compared to 7.19% during the same period of the previous year.

OPERATING INCOME

Operating income increased 2.75%, as a result of the growth in sales which offset the increase in operating expenses. The operating margin was 3.26%, 0.20% lower than the 3.46% margin registered in the second quarter of 2008.

OPERATING INCOME PLUS DEPRECIATION AND AMORTIZATION

Operating income plus depreciation and amortization for 2Q09 was $269.88 million, an increase of 4.17% compared to the second quarter of 2008. Depreciation and amortization for the period was $22.76 million, 22.51% higher than in the second quarter of 2008.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents at the end of the second quarter of 2009 was $199.15 million.

COMPREHENSIVE COST OF FINANCING

During the period, GCS’s comprehensive cost of financing (CCF) rose to $58.63 million. This was primarily due to an increase in the amount of interest income paid.

These interest payments are related to the long-term credit that was obtained as a result of the acquisition in Brazil as well as the interest that was generated from the utilization of short-term credits for our operations in both Mexico and Brazil.

OTHER EXPENSES (INCOME)

During the second quarter of 2009, the Company registered an income of $2.26 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 rose to $43.72 million, $55.04 million of which were related to income tax payments and ($11.32) million were attributed to deferred income tax.

NET INCOME

GCS’s net income for the second quarter was $147.03 million, a decrease of 30.02% compared to the second quarter of 2008.

The net margin for the period was 1.94%, a decline from the 3.02% net margin registered during the second quarter of 2008.

WORKING CAPITAL

During the second quarter of 2009, our accounts receivable days increased by 7.2 days from 2Q08 to reach 67.8 days. In addition, our accounts payable days rose by 4.0 days versus 2Q08, to reach 52.0 days. Finally, our inventory days were 55.0 days, an increase of 1.1 days compared to the same period of the previous year.

The 265.4 million shares issued by Grupo Casa Saba are listed on the Mexican Stock Exchange and its ADRs on 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:
Patrik Zielinski               Jesús Martínez Rojas
+52 (55) 5284-6623                                       +52 (55) 5644-1247
pzielinski@casasaba.com                           jesus@irandpr.com

Sandra Yatsko
+52 (55) 5284-6698
syatsko@casasaba.com

GRUPO CASA SABA S.A.B. DE C.V. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET In thousands of Mexican Pesos as of June 2009 I T E M June 09 June 08 Variation TOTAL ASSETS

13,772,511

11,843,043

1,929,468

CURRENT ASSETS

10,793,644

9,352,930

1,440,714

CASH AND CASH EQUIVALENTS

199,154

315,426

(116,271)

ACCOUNTS RECEIVABLE (NET)

5,710,606

4,686,617

1,023,989

INTERCOMPANY

OTHER ACCOUNTS RECEIVABLE (NET)

636,270

484,135

152,135

INVENTORIES

4,121,181

3,726,718

394,463

OTHER CURRENT ASSETS

126,432

140,035

(13,602)

LONG TERM

ACCOUNTS RECEIVABLE

INVESTMENTS IN EQUITY SHARES AND

UNCONSOLIDATED SUBSIDIARIES

OTHER INVESTMENTS

NET PROPERY, PLANT AND EQUIPMENT

1,357,001

1,283,670

73,330

PROPERTY

1,355,491

1,318,796

36,695

MACHINERY AND EQUIPMENT

494,165

471,993

22,172

OTHER EQUIPMENT

662,793

612,843

49,950

ACCUMULATED DEPRECIATION

1,155,448

1,119,962

35,486

BUILDINGS IN PROCESS

DEFERRED ASSETS (NET)

1,321,157

770,949

550,207

OTHER ASSETS

300,709

435,494

(134,784)

TOTAL LIABILITIES

6,708,576

5,463,788

1,244,787

CURRENT LIABILITIES

5,129,581

4,270,540

859,041

ACCOUNTS PAYABLE

3,911,710

3,348,109

563,601

BANK DEBT

1,047,614

573,174

474,440

DEBT SECURITIES

ACCRUED TAXES

10,149

(10,149)

OTHER CURRENT LIABILITIES

170,257

339,108

(168,851)

LONG TERM LIABILITIES

1,102,472

670,000

432,472

BANK DEBT

1,102,472

670,000

432,472

DEBT SECURITIES

OTHER DEBT

DEFERRED LIABILITIES

OTHER LIABILITIES

476,522

523,248

(46,726)

SHAREHOLDER'S EQUITY

7,063,935

6,379,254

684,681

MINORITY STOCKHOLDER'S EQUITY

MAJORITY STOCKHOLDER'S EQUITY

7,063,935

6,379,254

684,681

PAID-IN CAPITAL

1,993,875

CAPITAL STOCK

167,903

RESTATEMENT IN CAPITAL STOCK

956,094

PREMIUM ON STOCK SOLD

869,878

RESERVE FOR RESTATEMENT ON SHAREHOLDER'S EQUITY

CAPITAL INCREASE (DECREASE)

5,070,060

4,385,379

684,681

CUMMULATIVE RESULTS AND EQUITY RESERVE

6,318,361

5,582,095

736,266

RESERVE FOR SHARES REPURCHASE

1,062,200

OVERAGE (DEFICIT) ON RESTATEMENT ON STOCKHOLDER'S EQUITY

(2,639,077)

(2,660,625)

21,547

NET INCOME

328,577

401,709

(73,132)

GRUPO CASA SABA, S.A.B. DE C.V. Figures are expressed in thousands of Mexican pesos as of June 2009

Jan-June

Variation

Apr - June

Variation

Income Statement

2008

% of sales

2009

% of sales

2008

% of sales

2009

% of sales

NET SALES

13,893,449

100.00%

15,005,389

100.00%

1,111,940

8.00%

6,959,418

100.00%

7,579,089

100.00%

619,671

8.90%

COST OF SALES

12,498,720

89.96%

13,343,111

88.92%

844,390

6.76%

6,218,780

89.36%

6,746,455

89.01%

527,674

8.49%

Gross Profit

1,394,729

10.04%

1,662,279

11.08%

267,550

19.18%

740,638

10.64%

832,635

10.99%

91,997

12.42%

Operating Expenses

Sales Expenses

338,816

2.44%

453,422

3.02%

114,606

33.83%

185,510

2.67%

234,861

3.10%

49,351

26.60%

Administrative Expenses

555,458

4.00%

689,076

4.59%

133,618

24.06%

314,627

4.52%

350,654

4.63%

36,026

11.45%

OPERATING EXPENSES

894,274

6.44%

1,142,499

7.61%

248,224

27.76%

500,137

7.19%

585,515

7.73%

85,377

17.07%

Operating Income

500,454

3.60%

519,780

3.46%

19,326

3.86%

240,500

3.46%

247,120

3.26%

6,619

2.75%

COMPREHENSIVE COST OF FINANCING

Interest Paid

53,621

0.39%

121,685

0.81%

68,064

126.93%

47,114

0.68%

60,064

0.79%

12,949

27.49%

Interest (Earned)

-1,443

(0.01%)

-2,572

(0.02%)

-1,129

78.22%

-908

(0.01%)

-1,339

(0.02%)

-430

47.38%

Exchange Loss (Gain)

1,279

0.01%

2,110

0.01%

831

65.02%

1,457

0.02%

-95

(0.00%)

-1,551

n.c

Monetary Position (gain)

0.00%

Comprehensive Cost of Financing

53,457

0.38%

121,223

0.81%

67,767

126.77%

47,663

0.68%

58,630

0.77%

10,968

23.01%

OTHER EXPENSES (INCOME), net

-23,660

(0.17%)

-27,355

(0.18%)

-3,695

15.62%

-21,166

(0.30%)

-2,262

(0.03%)

18,904

(89.31%)

NET INCOME BEFORE TAXES

470,658

3.39%

425,912

2.84%

-44,746

(9.51%)

214,004

3.08%

190,752

2.52%

-23,253

(10.87%)

PROVISIONS FOR:

Income Tax

140,276

1.01%

108,655

0.72%

-31,621

(22.54%)

39,576

0.57%

55,041

0.73%

15,465

39.08%

Asset Tax

0.00%

Deferred Income Tax

-71,327

(0.51%)

-11,320

(0.08%)

60,007

(84.13%)

-35,664

(0.51%)

-11,320

(0.15%)

24,344

(68.26%)

Profit sharing due

0.00%

Deferred Profit sharing due

0.00%

Total taxes

68,950

0.50%

97,335

0.65%

28,386

41.17%

3,913

0.06%

43,721

0.58%

39,809

1017.47%

Net Income Before Extraordinary Items

401,709

2.89%

328,577

2.19%

-73,132

(18.21%)

210,092

3.02%

147,030

1.94%

-63,061

(30.02%)

Extraordinary Items (Income)

0.00%

Net Income

401,709

2.89%

328,577

2.19%

-73,132

-18.21%

210,092

3.02%

147,030

1.94%

-63,061

-30.02%

Depreciation and Amortization

35,498

0.26%

42,046

0.28%

6,548

18.45%

18,579

0.27%

22,761

0.30%

4,183

22.51%

Operating income plus Depreciation and Amortization

535,952

3.86%

561,826

3.74%

25,874

4.83%

259,079

3.72%

269,881

3.56%

10,802

4.17%

Minority Interest

3,771

0.03%

3,771

0.00%

2,332

0.03%

2,332

0.00%