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Conference Call 2Q12
Important Disclaimer
Statements regarding the Company’s future business prospects and operating income projections are mere estimatesand projections and, as such, are subject to several risks and uncertainties, including, but not limited to, marketconditions, domestic and international economic performance in general and in the Company’s operating sector. Suchrisks and uncertainties cannot be controlled or sufficiently forecast by the Company’s management and may significantlyaffect its perspectives, estimates and projections. Statements regarding future perspectives, projections and estimates donot represent and may not be construed as a performance guarantee. Operating information contained herein, as well asinformation not directly derived from financial statements, has not been subject to audit or special review by theCompany's independent auditors, may involve assumptions and estimates adopted by the management and be subject tochanges.
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2Q12 Highlights
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EBITDA totaled R$ 34.6 million , increase of 22.4% and 17.4% marginEBITDA
Net Revenue increased by 31.0% in 2Q12, reaching R$199.5 millionNet Revenue
Gross Profit reached R$ 89.9 million, 36.9 % growth and 45.1% marginGross Profit
Net Profit R$25.8 million net profit, with 12.9% margin and growth of 7.2%
Opening of 13 stores in Brazil: 4 owned stores – 1 Arezzo and 3 Schutz; 9 franchises: 5 Arezzo and4 Schutz. Expansion of 4 existing stores: 2 owned and 2 franchises, adding 212 sq m.Expansion
The Company’s Gross Revenues amounted to R$258.7 million in the second quarter of 2012, a 33.4% growth when comparing with 2Q11
Company Growth
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Gross Revenues – (R$ million)
Strong growth, especially for Owned Stores that increased by 89.3% in 2Q12. The good SSS of Owned Stores and Franchises is driven by good product mix results and solid winter collection sell-through.
Gross Revenue Breakdown by Channel –Domestic Market
5¹ Other: Growth of 211.1% in 2Q12 and of 136.9% in 1H12.
Gross Revenue by channel – Domestic Market (R$ mill ion)
SSS Sell-out (owned stores) 19.2%
24.2%SSS Sell-in (franchises)
11.2%
14.5%
15.6%
19.1%
11.6%
10.4%
90.8 111.8 179.4 209.3 60.4
74.0
107.8 129.8
31.8 60.2
58.7
104.7
1.0
3.0
2.8
6.5
2Q11 2Q12 1H11 1H12
Franchise Multi-brand Owned Stores Others¹
23.1%
89.3%
348.635.3%
450.3
22.6%16.7%
78.4%
29.2%
20.4%184.0
249.0
Strong growth of 35.3% in 2Q12, specially for the Schutz brand, whose gross revenue growth stood by 62.7% in 2Q12 and by 50.2% in 1H12.
Gross Revenue Breakdown by Brand –Domestic Market
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Gross Revenues by brand – Domestic Market (R$ millio n)
¹ Other: Alexandre Birman’s and Anacapri’’s Gross Revenue: growth of 52.0% in 2Q12 and of 67.1% in 1H12.
125.9 155.3 240.3 285.6 50.4
81.9
96.5
145.0
7.7
11.8
11.8
19.8
2Q11 2Q12 1H11 1H12 Arezzo Schutz Others¹
62.7%
23.4%
35.3%
348.6
450.3
184.0
249.0
29.2%
50.2%
18.8%
The Company ended 2Q12 with 351 stores and sales area expansion of 26.0% comparing with the same period of the previous year
Distribution Channel Expansion
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Owned Stores and Franchises Expansion
Note: area given in thousand of square meter (sq m)¹ Includes 5 outlets with total area of 1,334 sq m² Domestic Market
.
.
223 248 269 301
15 25
31 50
13.3
15.8 18.0
22.6
2Q09 2Q10 2Q11 2Q12
Franchises Owned Stores Total m²
+51300
351
238273 +27
+35
26.0%
18.8%13.6%
1,551Multi Brands²
Multi Brands²
Owned Stores¹ 19
Franchises 295
878
Franchises
Owned Stores¹
6
22
1
8
Multi Brands²
Owned Stores
767
Multi Brands² 16
Owned Stores
Gross margin expansion of 1.9 p.p., due to the increased presence of Owned Stores in thechannel mix. Excluding the 1Q12 non-recurring effect EBITDA would be R$ 57.3 with 15.9% margin
Gross Profit and EBITDA
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Gross Profit (R$ million) EBITDA (R$ million)
65.7
89.9
122.2
157.1
43.2%45.1%
42.0%43.5%
2Q11 2Q12 1H11 1H12
Gross Profit Gross Margin
36.9%
28.6%
28.3 34.6
49.0 49.3
18.6%17.4% 16.9%
13.7%
2Q11 2Q12 1H11 1H12
EBITDA EBITDA Margin
22.4%0.6%
Company´s Net Income totaled R$ 25.8 million, with 12.9% margin in 2Q12. Excluding non-recurring impact in 1Q12, Net Income would have reached R$ 41.9 million with 8.1% growth
Net Income
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Net Income (R$ million)
24.0 25.8 38.8 36.6
15.8%
12.9% 13.3%
10.1%
2Q11 2Q12 1H11 1H12
Net Income Net Margin
7.2% -5.6
Cash Generation
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Net cash generated from operating activities totaled R$ 37.9 million, with a slightly stretch on the balance of accounts payable due to the greater importance of owned store channel in the sales mix.
Operating Cash Generation (R$ thousand)
Cash flows from operating activies 2Q11 2Q12Growth or
spread1H11 1H12
Growth or spread
Income before income taxes 30,345 33,695 3,350 51,666 49,331 (2,335) Depreciation and amortization 961 1,749 788 1,840 3,166 1,326 Others (4,395) (1,518) 2,877 (6,263) (5,647) 616
Decrease (increase) in current assets / liabilities 22,815 16,544 (6,271) 10,747 26,519 15,772 -
Trade accounts reveivable 42,262 22,801 (19,461) 23,896 28,795 4,899 Inventories (3,114) (108) 3,006 (18,837) (8,687) 10,150 Suppliers (13,629) (12,798) 831 8,528 6,042 (2,486) Change in other current assets and liabilities (2,704) 6,649 9,353 (2,840) 369 3,209
Change in other non current assets and liabilities (908) (928) (21) (1,171) (1,628) (457)
Tax and contributions (5,974) (11,652) (5,678) (8,340) (11,652) (3,312)
Net cash generated by operating activities 42,844 37,890 (4,955) 48,479 60,089 11,610
Arezzo&Co invested R$ 14.5 million in 2Q12, of which R$ 7.4 million in stores, including 4 openings and 2 stores expansions, and 6 other refurbishments not yet inaugurated. Corporate investments are mainly related to the new Company’s head office, in Campo Bom - RS
Capital Expenditure (CAPEX) and Indebtedness
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CAPEX (R$ million) Indebtedness (R$ million)
¹ Other: Increase of 17.2% in 2Q12 and of 6.0% in1H12 compared with the same period of the previous year.
Indebtedness 2Q11 1Q12 2Q12
Cash 199,339 166,741 205,819 -
Total indebtedness 32,276 30,844 51,117
Short term 12,547 14,059 25,548
As % of total debt 38.9% 45.6% 50.0%
Long term 19,729 16,785 25,569
As % of total debt 61.1% 54.4% 50.0%-
Net debt (167,063) (135,897) (154,702) -
EBITDA LTM 104,201 111,662 118,007
Net debt /EBITDA LTM -1.6x -1.2x -1.3x
2.1 7.4
4.3
21.0
1.2
6.8
2.5
10.3
0.2
0.3
0.5
0.5
2Q11 2Q12 1H11 1H12
Stores Corporate Others¹
3.6
14.5
7.3
31.8
304.2%
334.7%
