Second Quarter 2010 BMV: GFAMSA - investor cloudcdn.investorcloud.net/famsa/InformacionFinanciera/Report... · 2015-12-02 · Banco Ahorro Famsa’s development continues to progress

Investor Relations: 1 de 12 [email protected] +52(81) 8389-9078 www.grupofamsa.com

Second Quarter 2010

BMV: GFAMSA

Monterrey, Mexico. July 28, 2010 – Grupo Famsa S.A.B. de C.V. (BMV: GFAMSA) Mr. Humberto Garza Valdéz, Chief Executive Officer, Grupo Famsa S.A.B. de C.V., reports on the company’s second quarter 2010 (2Q10) results. Summary of Consolidated Financial Results (millions of Mexican pesos)

(1) Nominal figures (2) Calculated from consolidated financial statements (3) Operating income before depreciation and amortization Letter from the CEO

Humberto Garza Valdéz, Grupo Famsa’s Chief Executive Officer, stated: Famsa México’s recovery continues gaining strength, with this business unit posting 6.7% same-store sales growth during second quarter 2010. In addition, Famsa USA’s downward sales trend of previous quarters reached a turning point despite the economic pressures that still affect Hispanic consumption. Sales performance in Famsa USA’s most important regions, including Texas, improved significantly during 2Q10 compared to the larger decrease posted in the previous quarter. Similarly, the downward sales growth trend across Famsa USA’s main product categories, including Electronics, was reverted. However, consumption by the Hispanic population appears to be lagging behind the recent figures that indicate a gradual recovery of other sectors of the U.S. economy. Famsa México’s recovery continued being driven by the complement of personal loans to our Company’s traditional durable product offering, the successful integration of our retail and banking platforms, and innovative marketing efforts implemented not only in-store, but especially outside our stores.

Lastly, Banco Ahorro Famsa maintained solid progress that is reflected in its consistent monthly capitalization index increase since December 2009 through profit generation. Additionally, our bank’s average cost of funding has fallen to 6.3%, surpassing the 6.4% target that had originally been estimated for December 2010, while total deposits continued to grow steadily to Ps$8,000 million at the close of 2Q10. The benefit from Banco Ahorro Famsa’s lower average cost of funding is reflected in the 25% reduction of Grupo Famsa’s 2Q10 consolidated interest expense.

Second Quarter(1) January – June(1) 2010 2009 % Var(2) 2010 2009 % Var(2)

Net Sales 3,646 3,677 -0.8% 6,860 7,054 -2.8%Cost of Sales -1,767 -1,772 -0.3% -3,407 -3,455 -1.4%Gross Income 1,879 1,905 -1.4% 3,452 3,599 -4.1%Operating Expenses -1,541 -1,545 -0.3% -2,983 -3,146 -5.2%Operating Income 338 359 -6.0% 469 453 3.5%EBITDA(3) 433 477 -9.4% 675 694 -2.6%Net Income 305 58 428.7% 356 112 216.9% Gross Margin 51.5% 51.8% 50.3% 51.0% EBITDA Margin 11.9% 13.0% 9.8% 9.8% Net Margin 8.4% 1.6% 5.2% 1.6%


I. Operating Results by Business Unit Famsa Mexico

Famsa Mexico’s sales and EBITDA continue to outperform the comparable quarters of

2009. Second quarter same-store sales (SSS) grew 6.7% year-over-year, with television sales increasing more than 19% in the month of June as a result of the attractive offers launched for the World Cup. In addition, Famsa México’s EBITDA grew more than 24% during the first six months of 2010.

As a result of initiatives implemented since 2009, more and more of our Mexican customers make use of Famsa México’s personal loan offering to satisfy a complementary set of needs which are less sensitive to economic downturns. Moreover, an increasing number of customers (578 thousand) are now benefiting from the convenience of Banco Ahorro Famsa´s private-label credit card (for use at Famsa Mexico stores only). Also, direct contact with new and existing customers has been enhanced through the door-to-door efforts of our “Gran Crédito” and “Cambaceo” teams, direct mail letters and telemarketing phone calls. Banco Ahorro Famsa

Banco Ahorro Famsa’s development continues to progress at an extraordinary pace. According to data published by the Mexican National Banking Commission (Comisión Nacional Bancaria y de Valores, CNBV), the bank’s capitalization index has grown consistently from 11.85% in December 2009 to 13.44% in June 2010, without additional capital contributions.

Additionally, Banco Ahorro Famsa’s average cost of funding decreased faster than had been anticipated. The 6.3% average funding rate achieved during 2Q10 exceeded the bank’s 6.4% year-end target significantly in advance. Simultaneously, total deposits (2Q10: Ps$8,000 million) continued their steady quarterly growth rate, with an average of approximately 5.6% posted since 2Q09. Finally, as a result of the successful integration of Banco Ahorro Famsa and Famsa México’s existing credit operations, Banco Ahorro Famsa’s consolidated receivables reached a total of Ps$10,663 million in 2Q10. Non-performing loans ratio (CNBV: Indice de Morosidad, IMOR) remained stable, within the range of comparable Mexican banks (IMOR Jun-10: 11.14%).

Famsa USA Famsa USA’s sales reached a turning point after their significant decline in 1Q10 (1Q10

SSS: -24.3%), with 2Q10 same-store sales decreasing 17.1%. Texas was the state with the most significant sales growth improvement during second quarter 2010.

Revenue growth across Famsa USA’s main categories: Electronics, Furniture and

Domestic Appliances, also improved significantly compared to this year’s first quarter. Consumption by the Hispanic population appears to be lagging behind recent

indications of a gradual recovery in other sectors of the U.S. economy. However, we expect the condition of our market segment to improve gradually and Famsa USA’s sales growth to build on its progress throughout the second half of 2010.


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

Retail Area (square meters)

Openings and Closures of Retail Stores and Banking Branches (present quarter)

Total 2Q10 Openings

2Q10 Closures 2Q10 Total

1Q10 Stores 407 0 0 407

Famsa Mexico 356 0 0 356

Famsa USA 51 0 0 51

Banking Branches 280 2 0 278

Total 2Q10 Total

2Q09 % Var

Stores 407 412 -1.2%

Famsa Mexico 356 360 -1.1%

Famsa USA 51 52 -1.9%

Banking Branches 280 272

Total 2Q10 Total

2Q09 % Var

Stores 539,534 542,560 -0.6%

Famsa Mexico 416,493 418,653 -0.5%

Famsa USA 123,041 123,907 -0.7%


II. 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 consolidated financial statements (4) Calculated in US Dollars Net Sales

Grupo Famsa’s consolidated net sales fell 0.8% during the second quarter of 2010 to Ps$3,646 million. As of June 30, 2010, accumulated sales totaled Ps$6,860 million, a decline of 2.8% year-over-year. The reduction in Famsa USA’s sales volume has pressured our Company’s consolidated net sales growth.

Famsa México posted 2Q10 quarterly sales of Ps$2,797 million, 6.1% above those of

2Q09. Famsa México’s accumulated net sales as of June 30, 2010 totaled Ps$5,238 million, an increase of 7.4% year-over-year. Strong personal loan demand, diverse efforts to stimulate demand and the gradual recovery of certain durable goods categories are some of the main drivers behind Famsa México’s ongoing recovery.

Famsa USA was able to turn around the downward trend in sales growth that had been

posted over the past five quarters. Same-store sales growth improved from -24.3% during first quarter 2010 to -17.1% during 2Q10. Cost of Sales and Gross Income

Grupo Famsa’s consolidated cost of sales was Ps$1,767 million for the second quarter of 2010, 0.3% below that of the same quarter of the previous year. The gross margin contracted by approximately 30 basis points to 51.5%. As a result, gross income was Ps$1,879 million, 1.4% below that of 2Q09.

As of June 30, 2010, the accumulated gross margin was 50.3%, contracting

approximately 70 basis points year-over-year. The launch of promotions to stimulate demand, especially during the first quarter of 2010, is among the most important elements pressuring consolidated gross margin.

Second Quarter January - June 2010 2009 % Var(3) 2010 2009 % Var(3)

Grupo Famsa (1) 3,646 3,677 -0.8% 6,860 7,054 -2.8% Famsa Mexico (2) 2,797 2,637 6.1% 5,238 4,877 7.4% Famsa USA 832 1,047 -20.5% 1,591 2,183 -27.1% Other 218 198 10.5% 418 380 10.0% Intercompany -201 -204 -1.4% -387 -386 0.2%

Second Quarter January - June 2010 2009 2010 2009

Grupo Famsa 1.0% -10.6% -0.4% -11.4% Famsa Mexico 6.7% -12.8% 6.8% -14.1% Famsa USA(4) -17.1% -5.5% -20.5% -6.1%


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

EBITDA Margin (% EBITDA / Sales)

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

Second quarter 2010 operating expenses totaled Ps$1,541 million, 0.3% below those of

second quarter 2009. Grupo Famsa’s quarterly EBITDA margin contracted approximately 110 basis points, largely because of the decline in Famsa USA’s sales volume. Despite the 4.5% quarterly EBITDA growth posted by Famsa México, consolidated EBITDA decreased 9.4% to Ps$433 million during 2Q10.

Gradual sales volume recovery at Famsa USA has narrowed this business unit’s

EBITDA loss from –Ps$54 million in the first quarter 2010 to –Ps$29 million during second quarter 2010.

From January to June 2010, operating expenses before depreciation and amortization

fell 4.4%, largely reflecting savings from the expense control and reduction initiatives implemented since 2009. Comprehensive Financing Expense, Net (millions of Mexican pesos)

The comprehensive financing expense declined 62.4% in 2Q10 to Ps$189 million.

Quarterly interest expense fell more than 25.0%, largely driven by the reduced cost of funding obtained through Banco Ahorro Famsa’s bank deposits. BAF’s average funding rate reached 6.3% during the second quarter of 2010, exceeding the 6.4% target that had been estimated for December 2010. Grupo Famsa also recorded a foreign exchange rate gain (without effect on cash flow) of Ps$44 million from the net long US dollar position Grupo Famsa maintains through Famsa USA.

Second Quarter January - June 2010 2009 % Var(3) 2010 2009 % Var(3)

Grupo Famsa (1) 433 477 -9.4% 675 694 -2.6% Famsa Mexico (2) 444 425 4.5% 732 588 24.4% Famsa USA -29 52 -155.6% -82 109 -175.6% Other -37 -19 97.2% -70 -39 76.5% Intercompany 54 19 182.9% 96 36 168.5%

Second Quarter January - June 2010 2009 2010 2009

Grupo Famsa (1) 11.9% 13.0% 9.8% 9.8% Famsa Mexico (2) 15.9% 16.1% 14.0% 12.1% Famsa USA -3.5% 5.0% -5.2% 5.0%

Second Quarter January - June 2010 2009 % Var 2010 2009 % Var

Comp. Financing Expense, net -189 -502 -62.4% -495 -716 -30.8% Financial Income 1 2 -77.6% 1 5 -81.3% Financial Expense -233 -311 -25.1% -487 -594 -17.9% Exchange gain (loss), net 44 -193 -122.6% -9 -128 -93.1%


Net Income Net income increased 428.7% during the second quarter 2010 to Ps$305 million, while

accumulated consolidated net income grew 216.9% to Ps$356 million. In addition to the 2Q10 increase of more than 214% in Income before Income Tax, a deferred income tax benefit was generated from the transfer of accounts receivable to Banco Ahorro Famsa (from Famsa México), as well as other temporary differences.


Main Balance Sheet Accounts (millions of Mexican pesos)

Second Quarter 2010 2009 % Var(1)

Trade Accounts Receivable 14,395 12,755 12.9% Banco Ahorro Famsa 10,663 7,351 45.0% Famsa 3,732 5,403 -30.9%

Inventory 2,197 2,169 1.3% Net Debt 2,388 2,731 -12.5% Bank Deposits 8,000 6,439 24.2% Stockholder’s Equity 8,692 7,333 18.5% (1) Calculated from consolidated financial statements Trade Accounts Receivable

As of June 30, 2010, accounts receivable totaled Ps$14,395 million, 12.9% above those

as of June 30, 2009. The increase largely reflects the growth of Banco Ahorro Famsa’s accounts receivable which has been driven by the integration of Famsa Mexico’s existing credit portfolio, the issuance of personal loans and the development of complementary banking products (such as commercial loans). Conversely, as a result of the successful integration of our retail and banking business units, the balance of accounts receivable, excluding Banco Ahorro Famsa, fell 30.9% year-over-year.

Inventory

The balance of inventory as of the June 30, 2010 increased 1.3% when compared to

the previous year. Grupo Famsa has maintained a stable inventory balance as a result of working capital optimization initiatives implemented since 2009. Net Debt and Bank Deposits

Net debt decreased 12.5%, from Ps$2,731 million in 2Q09 to Ps$2,388 million in 2Q10.

It is important to note that on July 20, 2010 Grupo Famsa successfully concluded the issuance of senior notes amounting to US$200 million, with a fixed coupon of 11.00% and maturity in 2015. The notes received a rating of “B” from Standard & Poor’s and “B+” from Fitch Ratings. Approximately 80% of the net proceeds will be used to refinance short-term indebtedness. This issuance mitigates Grupo Famsa’s exposure to financial market volatility, increasing the average life of the Company’s debt from 0.5 years to 3.2 years. Grupo Famsa will also reduce significantly its exposure to foreign exchange rate volatility by improving the balance between its dollar-denominated assets and liabilities.

Bank deposits grew 24.2% over the past 12 months to Ps$8,000 million. As of June 30,

2010, deposits represented approximately 77% of Grupo Famsa’s net consolidated financing. Additionally, Banco Ahorro Famsa’s average cost of funding reached 6.3%, declining faster than expected (December 2010 est.: 6.4%). Bank deposits continue to offer an optimum source of financing for the credits extended to Grupo Famsa’s Mexican customers. The diverse financing products that make up BAF’s bank deposit base (demand deposits, short- and medium-term investments, and certificates of deposit) mitigate Grupo Famsa’s exposure to conventional credit market volatility and have also contributed significantly to reducing the Company’s consolidated cost of funding. Stockholders’ Equity

The balance of stockholders’ equity as of June 30, 2010 grew 18.5%, to Ps$8,692

million.


IV. Consolidated Financial Statements

ASSETS 2010 2009CURRENT ASSETS:Cash and cash equivalents Ps 1,259,913 5.4% Ps 1,307,598 6.3%Restricted cash 213,520 0.9% 208,749 1.0%Trade accounts receivable 3,732,453 16.0% 5,403,404 25.9%Trade accounts receivable financial sector 10,662,689 45.6% 7,351,473 35.3%Taxes recoverable 838,399 3.6% 374,361 1.8%Other accounts receivable 584,178 2.5% 488,380 2.3%Inventories 2,197,256 9.4% 2,169,270 10.4%Total current assets 19,488,408 83.3% 17,303,235 83.0%PROPERTY, LEASEHOLD IMPROVEMENTSAND FURNITURE AND EQUIPMENT 2,597,448 11.1% 2,824,152 13.5%

GOODWILL 241,096 1.0% 241,096 1.2%DEFERRED CHARGES 85,197 0.4% 230,715 1.1%OTHER ASSETS 96,631 0.4% 86,931 0.4%DEFERRED INCOME TAX 828,647 3.5% 141,859 0.7%DEFERRED EMPLOYEES'PROFIT SHARING 45,376 0.2% 24,948 0.1%Total assets Ps 23,382,803 100.0% Ps 20,852,936 100.0%

LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT LIABILITIES WITH FINANCIAL COST:Interest-bearing demand deposits and time-deposits Ps 8,000,368 34.2% Ps 6,439,096 30.9%Bank debt 889,813 3.8% 3,034,437 14.6%Commercial paper 1,749,631 7.5% 1,003,970 4.8%

10,639,812 45.5% 10,477,503 50.2%CURRENT LIABILITIES WITHOUT FINANCIAL COST:Suppliers 1,895,476 8.1% 1,739,179 8.3%Accounts payable and accrued expenses 918,403 3.9% 1,000,960 4.8%Income tax payable 70,746 0.3% 153,823 0.7%

2,884,625 12.3% 2,893,962 13.9%Total current liabilities 13,524,437 57.8% 13,371,465 64.1%LONG-TERM LIABILITIES:Bank debt 8,786 0.0% - 0.0%Commercial paper 1,000,000 4.3% - 0.0%Estimated liability for labor benefits 157,250 0.7% 148,549 0.7%Total long-term liabilities 1,166,036 5.0% 148,549 0.7%Total liabilities 14,690,473 62.8% 13,520,014 64.8%STOCKHOLDERS' EQUITY:Capital stock 2,472,600 10.6% 2,252,187 10.8%Additional paid-in capital 3,068,488 13.1% 2,078,758 10.0%Retained earnings 2,479,682 10.6% 2,483,869 11.9%Stock Repurchase Reserve 110,000 0.5% 121,102 0.6%Net income 355,693 1.5% 112,233 0.5%Cumulative translation adjustment 187,074 0.8% 272,001 1.3%Total majority interest 8,673,537 37.1% 7,320,150 35.1%Minority interest 18,793 0.1% 12,772 0.1%Total stockholders' equity 8,692,330 37.2% 7,332,922 35.2%Total liabilities and stockholders' equity Ps 23,382,803 100.0% Ps 20,852,936 100.0%

GRUPO FAMSA, S.A.B. DE C.V. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS AT JUNE 30, 2010 AND 2009

Thousands of Mexican Pesos


2010 2009

Net sales Ps 6,859,798 100.0% Ps 7,054,381 100.0%

Cost of sales (3,407,476) -49.7% (3,455,336) -49.0%

Gross margin 3,452,322 50.3% 3,599,045 51.0%

Operating expenses (2,983,316) -43.5% (3,145,957) -44.6%

Operating income 469,006 6.8% 453,088 6.4%

Comprehensive financing expense, net (495,009) -7.2% (715,828) -10.1%

(26,003) -0.4% (262,740) -3.7%

Other (expenses) income, net (7,781) -0.1% 43,378 0.6%

Loss before income tax (33,784) -0.5% (219,362) -3.1%

Income tax 391,005 5.7% 332,647 4.7%

Consolidated net income 357,221 5.2% 113,285 1.6%

Net income corresponding to minority interest 1,528 0.0% 1,052 0.0%

Net income corresponding to majority interest Ps 355,693 5.2% Ps 112,233 1.6%0 0

GRUPO FAMSA, S.A.B. DE C.V. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOMEFOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009



2Q10 2Q09

Net sales Ps 3,645,936 100.0% Ps 3,677,055 100.0%

Cost of sales (1,767,341) -48.5% (1,772,414) -48.2%

Gross margin 1,878,595 51.5% 1,904,641 51.8%

Operating expenses (1,540,908) -42.3% (1,545,427) -42.0%

Operating income 337,687 9.3% 359,214 9.8%

Comprehensive financing expense, net (188,696) -5.2% (501,816) -13.6%

148,991 4.1% (142,602) -3.9%

Other (expenses) income, net (8,970) -0.2% 19,977 0.5%

Income (loss) before income tax 140,021 3.8% (122,625) -3.3%

Income tax 166,324 4.6% 178,459 4.9%

Consolidated net income 306,345 8.4% 55,834 1.5%

Net income (loss) corresponding to minority interest 991 0.0% (1,916) -0.1%

Net income corresponding to majority interest Ps 305,354 8.4% Ps 57,750 1.6%


CONDENSED CONSOLIDATED STATEMENTS OF INCOMEFROM APRIL 1ST TO JUNE 30, 2010 AND 2009




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009


Operations 2010 2009

Loss income before income tax Ps (33,784) Ps (219,362)

Items relating to investing activities:Depreciation and amortization 206,289 240,434Allowance for doudtful accounts 463,443 344,744Gain on sale of property, plant and equipment (1,223) (30,881)Estimated liability for labor benefits 16,199 12,736Deferred employees profit sharing (9,259) (6,174)Interest gain (1,008) (5,394)

Items relating to financing activities:Interest expense 487,260 593,515Exchange (gain) loss (9,851) 14,616

Accounts receivable (727,485) (162,669)Inventories (71,331) 211,506Other accounts receivable, deferred charges and other assets (372,141) (145,967)Suppliers 164,288 (191,769)Other accounts payable and accrued expenses 10,659 (74,928)Income tax paid (222,326) (124,231)

Net cash flow (used in) provided by operating activities (100,271) 456,176

Investment

Acquisition of property, plant and equipment (46,229) (217,984)Sale of plant and equipment 2,696 75,306Interest collected 1,008 5,394

Net cash flow used in investing activities (42,525) (137,284)

Resources to be (provided by) used in financing activities (142,796) 318,892

FinancingInterest paid (491,695) (629,532)New short-term debt and bank loans 1,763,803 1,003,970Payments of short-term debt and bank loans (2,000,988) (3,888,269)Bank customers' deposits 623,599 3,307,425

Net cash flow from financing activities (105,281) (206,406)

Decrease in net cash and cash equivalent (248,077) 112,486Adjustments to cash flow as a result of changes in exchange rates 15,424 (44,674)Cash and cash equivalent at beginning of period 1,706,086 1,448,535

Cash and cash equivalent at end of period Ps 1,473,433 Ps 1,516,347

Cash and cash equivalent Ps 1,259,913 Ps 1,307,598Restricted cash 213,520 208,749

Ps 1,473,433 Ps 1,516,347


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.

Documents

Second Quarter 2010 BMV: GFAMSA - investor cloudcdn.investorcloud.net/famsa/InformacionFinanciera/Report... · 2015-12-02 · Banco Ahorro Famsa’s development continues to progress