Quarterly
Earnings Report 2Q10 July 28, 2010
Operating Income and Net Income Increased by 9.05% and 12.93%, Respectively
Financial Highlights:
(All figures are expressed in millions of Mexican pesos of purchasing power as of June 2010. Comparisons are made with the same period of 2009, unless otherwise stated. Figures may vary due to rounding practices).
- Net sales for the second quarter of 2010 grew 0.11% to reach $7,587.32 million
- Gross income for the quarter rose 0.74% compared to the same period of 2009
- The gross margin for the quarter was 11.05%
- Quarterly operating expenses declined 2.77% versus the second quarter of the previous year
- Operating income increased 9.05% to the same period of 2009
- The quarterly operating margin was 3.55%
- Operating income plus depreciation and amortization rose 5.26% versus 2Q09 to reach $284.08 million
- GCS’s net profit for the quarter was $166.03 million, an increase of 12.93% compared to the second quarter of 2009
- Cash and cash equivalents at the end of the second quarter of 2010 was $470.58 million
Mexico City, Mexico, July 28, 2010. 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 2010.
QUARTERLY EARNINGS
NET
SALES
During the second quarter of 2010, GCS’s sales reached $7,587.32 million, a slight increase of 0.11%.
SALES
BY DIVISION
PRIVATE PHARMA
Quarterly sales in our main division, Private Pharma, decreased 0.87% versus 2Q09. This decrease was primarily the result of the higher level of sales reported by this division during the second quarter of 2009 due to the outbreak of the AH1N1 virus, which affected various states within the country during the months of April and May of that year and which had a positive effect on our sales.
As a result, Private Pharma represented 84.36% of the Group’s total sales, 84 basis points lower than the participation that it had in 2Q09.
GOVERNMENT PHARMA
Sales in our Government Pharma division declined 6.72% compared to the second quarter of 2009, primarily as a result of lower sales to PEMEX and ISSEMYM. It is worth mentioning that, in the case of PEMEX, the decrease was related to a reduction in subrogation contracts while that of ISSEMYM was related to a decline in demand on behalf of this institution.
As a result, this division went from representing 3.81% of total sales in 2Q09 to 3.55% during the same period of 2010.
HEALTH,
BEAUTY, CONSUMER GOODS, GENERAL MERCHANDISE AND OTHER
Sales in our Health, Beauty, Consumer Goods, General Merchandise and Other division rose 2.93% compared to the second quarter of 2009. This increase was the result of an increase in offers and promotions that stimulated the demand for these products in the marketplace.
This division represented 8.86% of GCS’s total sales in 2Q10, 24 b.p. higher than in 2Q09, when it accounted for 8.62%.
PUBLICATIONS
During the quarter sales from Citem, our Publication distribution division, increased 35.97% compared to 2Q09. This growth was due to an increase in sales of specialty titles related to the World Cup that took place in South Africa as well as the recuperation of various publishers.
The significant growth reported by this division enabled it to increase its participation as a percentage of the Group’s total sales, from 2.38% in 2Q09 to 3.23% in the second quarter of 2010.
Division
%
of Sales
Private
Pharma 84.36%
Government Pharma
3.55%
Health,
Beauty, Consumer Goods,
General Merchandise and Other 8.86%
Publications
3.23%
TOTAL 100.00%
GROSS INCOME
During the second quarter of the year, Grupo Casa Saba’s gross income grew 0.74% versus the same period of the previous year to reach $838.75 million pesos. This increase was primarily due to a reduction in the cost of sales of the merchandise sold as a percentage of net sales. As such, the company’s gross margin was 11.05%, 6 basis points higher than the 10.99% margin reported in 2Q09.
OPERATING EXPENSES
GCS maintained strict control over its costs and expenses during the quarter. As a result, the Group’s operating expenses reached $569.28 million in 2Q10, a decline of 2.77% compared to the second quarter of 2009.
Operating expenses as a percentage of total sales decreased 23 b.p., from 7.73% in 2Q09 to 7.50% during the second quarter of 2010, due to the reduction in operating expenses and the increase in sales.
OPERATING INCOME
Quarterly operating income was $269.47 million, 9.05% higher than the $247.12 million reported in 2Q09. The growth was the result of higher sales and lower operating costs.
Consequently, the operating margin for the period was 3.55%, 29 basis points higher than the 3.26% margin registered during the second quarter of 2009.
OPERATING INCOME PLUS DEPRECIATION AND
AMORTIZATION
Operating income plus depreciation and amortization for 2Q10 was $284.08 million pesos, an increase of 5.26% compared to 2Q09. Depreciation and amortization for the period was $14.61 million, 35.81% lower than it was during the second quarter of 2009.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the end of the second quarter of 2010 was $470.58 million, an increase of 136.29% compared to the same period of 2009.
COMPREHENSIVE COST OF FINANCING
During the quarter, GCS’s comprehensive cost of financing (CCF) reached $79.46 million, 35.53% higher than the CCF reported during 2Q09. This was primarily due to an increase in the amount of interest paid.
OTHER EXPENSES (INCOME)
During the second quarter of 2010, the Company reported an income of $13.87 million in other expenses (income), 513.28% higher than the income reported during the same period of 2009. It is worth mentioning that the expenses (income) from this line item were derived from activities that are distinct from the company’s everyday business operations.
TAX PROVISIONS
Tax provisions were $37.84 million during the second quarter of 2010, 13.44% less than the $43.72 million reported during 2Q09. All of the provisions this quarter were related entirely to income tax payments.
NET INCOME
GCS’s net income for the second quarter was $166.03 million pesos, an increase of 12.93% compared to the same quarter of 2009. This was primarily due to the decrease in operating expenses as well as the decline in the Company’s tax provisions during the period.
Consequently, the net margin for the period was 2.19%, 25 basis points higher than the 1.94% net margin registered during the second quarter of the previous year.
.
WORKING CAPITAL
During the second quarter of 2010, our accounts receivable days increased by 10.1 days from 2Q09 to reach 77.9 days. In addition, our accounts payable days declined 1.70 days versus 2Q09, to reach 50.3 days. Finally, our inventory days were 61.0 days, 6.0 more days than we had during the same period of 2009.
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 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.
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
Grupo 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:
Sandra Yatsko Jesús
Martínez Rojas
+52 (55) 5284-6672 +52
(55) 5644-1247
syatsko@casasaba.com jesus@irandpr.com
GRUPO CASA SABA S.A.B. DE C.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
In thousands of Mexican Pesos
I T E M
June 10
June 09
Variation
TOTAL ASSETS
16,427,307
13,772,511
2,654,797
CURRENT ASSETS
13,477,064
10,793,644
2,683,420
CASH AND
CASH EQUIVALENTS
470,583
199,154
271,429
ACCOUNTS
RECEIVABLE (NET)
6,568,693
5,710,606
858,087
OTHER
ACCOUNTS RECEIVABLE (NET)
1,761,802
636,270
1,125,532
INVENTORIES
4,570,687
4,121,181
449,506
OTHER
CURRENT ASSETS
105,299
126,432
(21,134)
NET PROPERTY, PLANT AND EQUIPMENT
1,341,994
1,357,001
(15,006)
PROPERTY
1,360,808
1,355,491
5,318
MACHINERY
AND EQUIPMENT
455,584
494,165
(38,581)
OTHER
EQUIPMENT
682,145
662,793
19,352
ACCUMULATED
DEPRECIATION
1,156,543
1,155,448
1,094
DEFERRED
ASSETS (NET)
1,342,006
1,321,157
20,850
OTHER
ASSETS
266,243
300,709
(34,467)
TOTAL
LIABILITIES
9,257,431
6,708,576
2,548,855
CURRENT
LIABILITIES
7,357,058
5,129,581
2,227,477
ACCOUNTS
PAYABLE
4,028,494
3,911,710
116,784
BANK DEBT
2,186,884
1,047,614
1,139,270
OTHER CURRENT LIABILITIES
1,141,680
170,257
971,423
LONG
TERM LIABILITIES
1,310,707
1,102,472
208,235
BANK DEBT
1,310,707
1,102,472
208,235
OTHER
LIABILITIES
589,667
476,522
113,144
SHAREHOLDER'S
EQUITY
7,169,876
7,063,935
105,941
PAID-IN
CAPITAL
1,993,875
1,993,875
-
CAPITAL
STOCK
167,903
167,903
-
RESTATEMENT
IN CAPITAL STOCK
956,094
956,094
-
PREMIUM ON
STOCK SOLD
869,878
869,878
-
CAPITAL
INCREASE (DECREASE)
5,176,002
5,070,060
105,941
CUMMULATIVE
RESULTS AND EQUITY RESERVE
3,701,499
3,679,284
22,215
RESERVE
FOR SHARES REPURCHASE
1,062,200
1,062,200
-
NET INCOME
412,303
328,577
83,726
GRUPO CASA SABA, S.A.B. DE C.V.
Figures are expressed in thousands of Mexican pesos of purchasing power as of June 2010
Jan-June
Jan-June
Variation
Apr - June
Apr - June
Variation
Income Statement
2009
% of sales
2010
% of sales
$
%
2009
% of sales
2010
% of sales
$
%
NET SALES
15,005,389
100.00%
15,327,757
100.00%
322,367
2.15%
7,579,089
100.00%
7,587,329
100.00%
8,240
0.11%
COST OF SALES
13,343,111
88.92%
13,596,916
88.71%
253,805
1.90%
6,746,455
89.01%
6,748,572
88.95%
2,117
0.03%
Gross Profit
1,662,279
11.08%
1,730,840
11.29%
68,562
4.12%
832,635
10.99%
838,757
11.05%
6,123
0.74%
Operating Expenses
Sales Expenses
453,422
3.02%
445,987
2.91%
-7,435
(1.64%)
234,861
3.10%
226,758
2.99%
-8,103
(3.45%)
Administrative Expenses
689,076
4.59%
697,132
4.55%
8,055
1.17%
350,654
4.63%
342,528
4.51%
-8,126
(2.32%)
Operating Expenses
1,142,499
7.61%
1,143,119
7.46%
620
0.05%
585,515
7.73%
569,286
7.50%
-16,229
(2.77%)
Operating Income
519,780
3.46%
587,722
3.83%
67,942
13.07%
247,120
3.26%
269,472
3.55%
22,352
9.05%
COMPREHENSIVE COST OF FINANCING
Interest Paid
121,685
0.81%
138,818
0.91%
17,133
14.08%
60,064
0.79%
81,532
1.07%
21,468
35.74%
Interest (Earned)
-2,572
(0.02%)
-4,252
(0.03%)
-1,680
65.31%
-1,339
(0.02%)
-2,388
(0.03%)
-1,049
78.37%
Exchange Loss (Gain)
2,110
0.01%
-173
0.00%
-2,284
(108.22%)
-95
0.00%
319
0.00%
414
(437.14%)
Monetary Position (gain)
0
0.00%
0
0.00%
0
0.00%
0
0.00%
0
0.00%
0
0.00%
Comprehensive Cost of Financing
121,223
0.81%
134,392
0.88%
13,169
10.86%
58,630
0.77%
79,463
1.05%
20,832
35.53%
OTHER EXPENSES (INCOME), net
-27,355
(0.18%)
-21,149
(0.14%)
6,207
(22.69%)
-2,262
(0.03%)
-13,873
(0.18%)
-11,611
513.28%
NET INCOME BEFORE TAXES
425,912
2.84%
474,478
3.10%
48,566
11.40%
190,752
2.52%
203,882
2.69%
13,130
6.88%
PROVISIONS FOR:
Income Tax
108,655
0.72%
62,176
0.41%
-46,480
(42.78%)
55,041
0.73%
37,845
0.50%
-17,196
(31.24%)
Asset Tax
0
0.00%
0
0.00%
0
0.00%
0
0.00%
0
0.00%
0
0.00%
Deferred Income Tax
-11,320
(0.08%)
0
0.00%
11,320
(100.00%)
-11,320
(0.15%)
0
0.00%
11,320
(100.00%)
Profit sharing due
0
0.00%
0
0.00%
0
0.00%
0
0.00%
0
0.00%
0
0.00%
Deferred Profit sharing due
0
0.00%
0
0.00%
0
0.00%
0
0.00%
0
0.00%
0
0.00%
Total
taxes
97,335
0.65%
62,176
0.41%
-35,160
(36.12%)
43,721
0.58%
37,845
0.50%
-5,876
(13.44%)
Net Income Before Extraordinary Items
328,577
2.19%
412,303
2.69%
83,726
25.48%
147,030
1.94%
166,037
2.19%
19,007
12.93%
Extraordinary Items (Income)
0
0.00%
0
0.00%
0
0.00%
0
0.00%
0
0.00%
0
0.00%
Net Income
328,577
2.19%
412,303
2.69%
83,726
25.48%
147,030
1.94%
166,037
2.19%
19,007
12.93%
Depreciation and Amortization
42,046
0.28%
35,466
0.23%
(6,580)
(15.65%)
22,761
0.30%
14,611
0.19%
(8,150)
(35.81%)
Operating income plus Depreciation and Amortization
561,826
3.74%
623,188
4.07%
61,362
10.92%
269,881
3.56%
284,083
3.74%
14,202
5.26%
Minority Interest
1,439
-3,321
-0.02%
-4,760
-330.77%
-3,423
-0.05%
-3,423
0.00%