first quarter 2011 bmv: gfamsa - investor...

Relación con Inversionistas: 1 de 11 [email protected] +52(81) 8389-9078 www.grupofamsa.com

First Quarter 2011 BMV: GFAMSA

Monterrey, Mexico. April 28, 2011 – Grupo Famsa S.A.B. de C.V. (BMV: GFAMSA) Report from the Chief Executive Officer on Grupo Famsa S.A.B. de C.V.’s first quarter 2011 (1Q11) results with figures as of March 31, 2011. Summary of Consolidated Financial Results (millions of Mexican pesos)

First Quarter (1) 2011 2010 % Var (2)

Net Sales 3,615 3,214 12.5%Cost of Sales -1,705 -1,640 3.9%Gross Income 1,910 1,574 21.4%Operating Expenses -1,545 -1,442 7.1%Operating Income 366 131 178.5%EBITDA 468 243 92.8%Net Income 77 50 53.6% Gross Margin 52.8% 49.0%EBITDA Margin 12.9% 7.5%Net Margin 2.1% 1.6% (1) Nominal figures (2) Calculated from the consolidated financial statements Letter from the CEO Humberto Garza Valdéz, Grupo Famsa’s Chief Executive Officer, stated: Strong operating results from our Mexican operations, Famsa USA’s progressive recovery, and a favorable base for comparison with first quarter 2010, resulted in a 92.8% increase in consolidated EBITDA. Famsa México’s same store sales grew by double-digit for the first time since the beginning of the economic crisis, rising 14.6% year-over-year in 1Q11. We continued the implementation of initiatives directed at reactivating demand in durable goods categories. The “Festival del Crédito” was one of the promotions launched successfully to build upon the recent redesign of our furniture category and promote sales on credit. Robust demand for personal loans also enhanced the productivity of our Mexican store network.

In addition, Banco Ahorro Famsa maintained its capitalization index at approximately

13%. The balance of Banco Ahorro Famsa’s bank deposits reached Ps$9,160 million even as our bank maintains its strategy to continue lowering average interest rate on deposits. Also, its non-performing loan index improved consistently during the first quarter of 2011 compared to 1Q10.

Famsa USA’s same store sales continued to improve, rising for the second consecutive

quarter; growing 5.6% in 1Q11 compared to the same period of 2010. The increasing recovery of Hispanic consumers in some of our main markets, and the upswing in furniture demand continued to drive Famsa USA’s sales after a long period of contraction.


I. Operating Results by Business Unit Famsa México

The combination of an increasing recovery in core categories’ sales and solid personal loan origination resulted in Famsa México exceeding the upper range of same store sales growth estimated for 2011 (2011 guidance: 7%-12% SSS).

After enhancing assortment and display in a number of core categories during 2010,

and backed by the successful integration of Banco Ahorro Famsa, in 1Q11 we reinforced the rollout of marketing campaigns focusing on credit sales. Such initiatives included “Festival del Crédito”, designed to promote Famsa’s credit offering by facilitating the application process and granting attractive discounts for the purchase of select durable goods.

Famsa México’s furniture, computer and motorcycle categories continued to head the

list of fastest growing products, reflecting the introduction of new models, the set-up of more attractive displays and the launching of promotions. Kurazai, our proprietary motorcycle brand, consolidated its position as one of Mexico’s top-4 motorcycle brands in terms of unit sales. The number of motorcycles sold during the first three months of 2011 is equivalent to six months of 2010 motorcycle sales.

Lastly, in first quarter 2010, we also consolidated three small mattress-specialized

locations into full-format stores and closed one discount outlet, all in the Monterrey metropolitan area. Banco Ahorro Famsa Banco Ahorro Famsa reinforced its market position by maintaining a solid capitalization index, improving the non-performing loan index (CNVB: Indice de Morosidad, IMOR) of its credit portfolio, and growing its deposit base even as average cost of funding continued decreasing. The strength of our banking unit continued to be reflected in its capitalization index (ICAP) of approximately 13%. Furthermore, the non-performing loan index maintained a level of approximately 9.2% during 1Q11, significantly better than the 11.6% monthly average posted in 2010. Moreover, total bank deposits, which now represent more than 71% of Grupo Famsa’s consolidated net financing, grew consistently at a quarterly rate of 2.8% to Ps$9,160 million, while its average interest rate decreased to 5.9% during the first quarter.

In addition, Banco Ahorro Famsa is making significant progress in the development of

its commercial loan portfolio, supporting Micro, Small and Medium businesses; complementing our traditional consumer financing business. Famsa USA

For the second consecutive quarter, Famsa USA posted positive year-over-year growth in same store sales: 5.6%. This result is consistent with our same store sales growth estimate for 2011 (2011 guidance: 6%-11% SSS).

In line with our expectations, the recovery of Hispanic consumers is becoming

increasingly evident, especially in the state of Texas. Moreover, with regard to our different product categories, furniture maintained a higher growth rate compared to our other products. More favorable market conditions, combined with initiatives specifically directed at increasing store traffic, are driving the gradual increase in Famsa USA’s sales. Finally, two of the three store closures that Famsa USA had planned for 2011 were carried out during the first quarter.


II. Retail Stores and Banking Branch Network Retail Stores and Banking Branches

Total 1Q11 Total

1Q10 % Var

Stores 404 407 -0.7% Famsa México 355 356 -0.3% Famsa USA 49 51 -3.9%

Banking Branches 283 278 1.8% Retail Area (Square meters)

Total 1Q11 Total

1Q10 % Var

Stores 534,486 539,534 -0.9% Famsa México 417,214 416,493 0.2% Famsa USA 117,272 123,041 -4.7%

Openings and Closures of Retail Stores and Banking Branches (Year to date)

(1) Most banking branches are located within Famsa México stores

Total 1Q11 Openings

1Q11 Closures 1Q11 Total

4Q10 Stores 404 0 6 410

Famsa México 355 0 4 359

Famsa USA 49 0 2 51

Banking Branches(1) 283 0 1 284


III. Financial Results by Business Unit Net Sales (Millions of Mexican pesos)

Same Store Sales

(1) Includes sales of other non-retail businesses (2) Includes Banco Ahorro Famsa (3) Calculated from the consolidated financial statements (4) Calculated in US Dollars, excluding foreign exchange effects Net Sales

Grupo Famsa’s consolidated net sales grew 12.5% year-over-year during the first quarter, reaching Ps$3,615 million. The 15.4% growth in Famsa México’s sales drove our consolidated results. In addition, Famsa USA posted a 6.4% increase in U.S. Dollar-denominated net sales during the first quarter (1.0% Peso-denominated growth). It is noteworthy that 1Q11 was the second consecutive quarter in which Famsa USA posted an increase in U.S. Dollar-denominated sales, reflecting a recovery in some of our most important U.S. markets, such as Texas.

At the close of the first quarter, consolidated same store sales grew 12.9%. Famsa

México was able to surpass the upper growth limit estimated for 2011, reflecting the recovery in core categories’ sales and solid demand for personal loans. On the other hand, Famsa USA’s same store sales grew 5.6% during the first quarter, consistent with its growth estimates for full-year 2011. Cost of Sales and Gross Income

Grupo Famsa’s consolidated cost of sales increased 3.9% during the fist quarter to Ps$1,705 million. However, first quarter gross income grew 21.4% reaching Ps$1,910 million, and gross margin expanded 3.8 percentage points compared to first quarter 2010.

The increase in gross margin from 49.0% in 1Q10 to 52.8% in 1Q11 was driven to a

large extent by the growth of furniture and personal loans in Famsa México’s sales mix.

First Quarter 2011 2010 % Var(3)

Grupo Famsa (1) 3,615 3,214 12.5% Famsa México (2) 2,817 2,441 15.4% Famsa USA 766 759 1.0% Other 235 200 17.8% Intercompany(4) -203 -185 9.5%

First Quarter 2011 2010

Grupo Famsa 12.9% -2.3% Famsa México 14.6% 6.8% Famsa USA(1) 5.6% -24.3%


Operating Income before Depreciation and Amortization (EBITDA) (Millions of Mexican pesos)

EBITDA Margin (% EBITDA / Sales)

(1) Includes EBITDA from other non-retail businesses (2) Includes Banco Ahorro Famsa (3) Calculated from the consolidated financial statements EBITDA and Operating Expenses

Our consolidated EBITDA grew 92.8% in first quarter 2011 to Ps$468 million. The

12.5% rise in consolidated net sales, the 3.8 percentage point expansion in consolidated gross margin, and the favorable base for comparison with first quarter 2010 drove consolidated EBITDA growth.

Consolidated operating expenses for first quarter 2011 totaled Ps$1,545 million, 7.1%

above the previous year. However, operating expenses as a percentage of sales fell from 44.9% in 1Q10 to 42.7% in 1Q11, reflecting enhanced operating leverage. Comprehensive Financing Expense (Millions of Mexican pesos)

Grupo Famsa’s comprehensive financing expense as of March 31, 2011 totaled Ps$256

million, decreasing 16.6% year-over-year. Interest expense grew 12.2% compared to the first quarter of 2010, however interest expense declined from Ps$298 million in 4Q10 to Ps$285 million in 1Q11.

Moreover, the foreign exchange loss of Ps$52 million recorded for 1Q10 became a

Ps$29 million foreign exchange gain in the first quarter of 2011, reflecting the reduction in Grupo Famsa’s net long U.S. Dollar position maintained through Famsa USA’s operations.


Grupo Famsa (1) 468 243 92.8% Famsa México (2) 482 287 67.8% Famsa USA -27 -54 49.3% Other -19 -33 41.0% Intercompany 32 41 -22.8%

First Quarter 2011 2010

Grupo Famsa (1) 12.9% 7.5% Famsa México (2) 17.1% 11.8% Famsa USA -3.5% -7.1%


Comp. Financing Expense, net -256 -306 -16.6% Interest Expense -285 -254 12.2% Interest Income 0.4 0.5 -13.9% Exchange gain (loss), net 29 -52 156.1%


Net Income Our consolidated net income as of March 31, 2011 increased 53.6%; from Ps$50 million

in 1Q10 to Ps$77 million in 1Q11. It is important to note that income before income-tax for this first quarter was Ps$106 million, compared to a loss of Ps$174 million posted for 1Q10.


Main Balance Sheet Accounts (Million Mexican pesos)

March 31, 2011 2010 % Var(1)

Trade Accounts Receivable 16,230 13,759 18.0% Banco Ahorro Famsa 13,315 9,931 34.1% Famsa 2,915 3,828 -23.8%

Inventory 1,987 2,077 -4.3% Net Debt 3,722 2,492 49.4% Bank Deposits 9,160 7,590 20.7% Stockholders’ Equity 9,018 8,318 8.4% (1) Calculated from the consolidated financial statements Trade Accounts Receivable

As of March 31, 2011, the balance of Grupo Famsa’s trade accounts receivable was

Ps$16,230 million, 18.0% above the previous year. This expansion largely reflects the growth of Banco Ahorro Famsa’s accounts receivable, driven by the integration of Famsa México’s existing credit portfolio, the rise in personal loans and the development of its commercial loan portfolio (e.g. MiPYMEs). It is noteworthy that the commercial loan portfolio now represents more than 7% of Banco Ahorro Famsa’s Ps$13,315 million trade accounts receivable balance. In contrast, as a result of the successful integration of Famsa México’s accounts receivable into Banco Ahorro Famsa, the balance of Famsa’s trade accounts receivable decreased 23.8% year-over-year.

Inventory The balance of inventory as of March 31, 2011 was Ps$1,987 million, 4.3% below that

of the previous year.

Bank Deposits and Net Debt As of March 31, 2011, bank deposits totaled Ps$9,160 million, increasing 20.7% year-

over-year. Approximately 92% of the aforementioned amount corresponds to savings with term commitment. Furthermore, during the first quarter, Banco Ahorro Famsa’s average cost of funding fell below 6% for the first time. Bank deposits continue to offer an optimum source of financing for the credits extended to Grupo Famsa’s Mexican customers, mitigating the Company’s exposure to conventional credit market volatility and contributing significantly to reducing Grupo Famsa’s consolidated cost of funding.

Net debt was Ps$3,722 million at the close of March 2011, 49.4% above the previous

year. It is important to note that on March 25, 2011 Grupo Famsa successfully concluded the issuance of unsecured peso-denominated commercial paper (“Certificados Bursátiles Quirografarios”) maturing in 2014 to refinance short-term indebtedness. This long-term funding reinforces the Company’s financial position by extending the average life of its consolidated debt. As of the end of the first qaurter, approximately 70% of Grupo Famsa’s consolidated debt becomes payable as of 2014.

Stockholders’ Equity The balance of stockholders’ equity grew 8.4% to Ps$9,018 million as of March 31,

2011.


IV. Consolidated Financial Statements

Grupo Famsa, S.A.B. de C.V. and Subsidiaries Consolidated Balance Sheet as of March 31

Thousands of Mexican Pesos ASSETS 2011 2010

CURRENT ASSETS:Cash and cash equivalents Ps 1,291,193 5.1% Ps 935,719 4.2%Restricted cash 178,030 0.7% 308,604 1.4%Trade accounts receivable 2,915,375 11.4% 3,827,685 17.3%Trade accounts receivable financial sector 13,314,727 52.1% 9,931,191 44.9%Taxes recoverable 1,257,923 4.9% 657,339 3.0%Other accounts receivable 591,271 2.3% 639,152 2.9%Inventories 1,987,279 7.8% 2,077,338 9.4%Total current assets 21,535,798 84.2% 18,377,028 83.1%

PROPERTY, LEASEHOLD IMPROVEMENTSAND FURNITURE AND EQUIPMENT 2,515,104 9.8% 2,657,185 12.0%

GOODWILL 241,096 0.9% 241,096 1.1%

DEFERRED CHARGES 65,401 0.3% 95,038 0.4%

OTHER ASSETS 59,974 0.2% 94,975 0.4%

DEFERRED INCOME TAX 1,093,663 4.3% 609,602 2.8%DEFERRED EMPLOYEES'PROFIT SHARING 53,142 0.2% 36,628 0.2%Total assets Ps 25,564,178 100.0% Ps 22,111,552 100.0%

LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT LIABILITIES WITH FINANCIAL COST:Interest-bearing demand deposits and time-deposits Ps 9,160,447 35.8% Ps 7,590,303 34.3%Bank debt 349,995 1.4% 974,906 4.4%Commercial paper 1,266,336 5.0% 1,443,173 6.5%

10,776,778 42.2% 10,008,382 45.3%CURRENT LIABILITIES WITHOUT FINANCIAL COST:Suppliers 1,306,769 5.1% 1,699,016 7.7%Accounts payable and accrued expenses 737,891 2.9% 837,782 3.8%Income tax payable 183,359 0.7% 85,687 0.4%

2,228,019 8.7% 2,622,485 11.9%Total current liabilities 13,004,797 50.9% 12,630,867 57.1%LONG-TERM LIABILITIES:Bank debt 15,641 0.1% 9,279 0.0%Commercial paper 3,381,680 13.2% 1,000,000 4.5%Estimated liability for labor benefits 143,832 0.6% 153,296 0.7%Total long-term liabilities 3,541,153 13.9% 1,162,575 5.3%Total liabilities 16,545,950 64.7% 13,793,442 62.4%STOCKHOLDERS' EQUITY:Capital stock 2,472,600 9.7% 2,472,600 11.2%Additional paid-in capital 3,068,488 12.0% 3,068,488 13.9%Retained earnings 3,185,307 12.5% 2,479,682 11.2%Stock Repurchase Reserve 110,000 0.4% 110,000 0.5%Net income 77,339 0.3% 50,338 0.2%Cumulative translation adjustment 82,833 0.3% 119,201 0.5%Total majority interest 8,996,567 35.2% 8,300,309 37.5%Minority interest 21,661 0.1% 17,801 0.1%Total stockholders' equity 9,018,228 35.3% 8,318,110 37.6%Total liabilities and stockholders' equity Ps 25,564,178 100.0% Ps 22,111,552 100.0%


Grupo Famsa, S.A.B. de C.V. and Subsidiaries Consolidated Income Statement from January 1 to March 31

Thousands of Mexican Pesos 2011 2010

Net sales Ps 3,615,036 100.0% Ps 3,213,862 100.0%

Cost of sales (1,704,612) -47.2% (1,640,135) -51.0%

Gross margin 1,910,424 52.8% 1,573,727 49.0%

Operating expenses (1,544,682) -42.7% (1,442,409) -44.9%

Operating income 365,742 10.1% 131,318 4.1%

Comprehensive financing expense, net (255,576) -7.1% (306,313) -9.5%

110,166 3.0% (174,995) -5.4%

Other (expenses) income, net (4,530) -0.1% 1,189 0.0%

Income (loss) before income tax 105,636 2.9% (173,806) -5.4%

Income tax (27,702) -0.8% 224,681 7.0%

Consolidated net income 77,934 2.2% 50,875 1.6%

Net income corresponding to minority interest 595 0.0% 537 0.0%

Net income corresponding to majority interest Ps 77,339 2.1% Ps 50,338 1.6%


Grupo Famsa, S.A.B. de C.V. and Subsidiaries Consolidated Cash Flow Statement from January 1 to March 31

Thousands of Mexican Pesos

Operations 2011 2010

Income (loss) before income tax Ps 105,636 Ps (173,806)

Items relating to investing activities:Depreciation and amortization 102,084 111,269Allowance for doudtful accounts 297,698 216,849Gain on sale of property, plant and equipment (488) (293)Estimated liability for labor benefits 4,200 10,650Deferred employees profit sharing (4,886) (511)Interest gain (418) (485)

Items relating to financing activities:Interest expense 285,384 254,412

Accounts receivable 44,620 155,375Inventories 206,883 33,413Other accounts receivable, deferred charges and other assets (62,090) (185,468)Suppliers (756,966) (29,374)Other accounts payable and accrued expenses (61,956) (61,098)Income tax paid (3,374) (154,665)

Net cash flow provided by operating activities 156,327 176,268

Investment

Acquisition of property, plant and equipment (56,960) (26,303)Sale of plant and equipment 1,087 1,184Interest collected 418 485

Net cash flow used in investing activities (55,455) (24,634)

Resources to be (provided by) used in financing activities 100,872 151,634

FinancingInterest paid (346,405) (252,041)New short-term debt and bank loans 2,266,336 926,103Payments of short-term debt and bank loans (1,845,407) (1,347,702)Bank customers' deposits 253,149 213,534

Net cash flow from financing activities 327,673 (460,106)

Increase (decrease) in net cash and cash equivalent 428,545 (308,472)Adjustments to cash flow as a result of changes in exchange rates (73,781) (153,291)Cash and cash equivalent at beginning of period 1,114,459 1,706,086

Cash and cash equivalent at end of period Ps 1,469,223 Ps 1,244,323

Cash and cash equivalent Ps 1,291,193 Ps 935,719Restricted cash 178,030 308,604

Ps 1,469,223 Ps 1,244,323


This report contains, or may be deemed to contain forward-looking statements. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The future results of Grupo Famsa, S.A.B. de C.V. and its subsidiaries may vary from the results expressed in, or implied by, the forward-looking statements made to you, possibly to a material degree.

first quarter 2011 bmv: gfamsa - investor...

Documents