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Agenda ARCOS DORADOS 3Q 2015 Conference Call Presentation November 4, 2015

Agenda ARCOS DORADOS · Agenda ARCOS DORADOS 3Q 2015 Conference Call Presentation November 4, 2015. ... o Minions vertigration o Triple Bacon in GPPP. 3Q15 Performance: Caribbean

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Page 1: Agenda ARCOS DORADOS · Agenda ARCOS DORADOS 3Q 2015 Conference Call Presentation November 4, 2015. ... o Minions vertigration o Triple Bacon in GPPP. 3Q15 Performance: Caribbean

Agenda ARCOS DORADOS

3Q 2015 Conference Call Presentation

November 4, 2015

Page 2: Agenda ARCOS DORADOS · Agenda ARCOS DORADOS 3Q 2015 Conference Call Presentation November 4, 2015. ... o Minions vertigration o Triple Bacon in GPPP. 3Q15 Performance: Caribbean

Disclaimer

This presentation contains forward-looking statements that represent our beliefs, projections and predictions

about future events or our future performance. Forward-looking statements can be identified by terminology

such as “may,” “will,” “would,” “could,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,”

“predict,” “potential,” “continue” or the negative of these terms or other similar expressions or phrases.

These forward-looking statements are necessarily subjective and involve known and unknown risks,

uncertainties and other important factors that could cause our actual results, performance or achievements

or industry results to differ materially from any future results, performance or achievement described in or

implied by such statements.

The forward-looking statements contained herein include statements about the Company’s business

prospects, its ability to attract customers, its affordable platform, its expectation for revenue generation and

its outlook. These statements are subject to the general risks inherent in Arcos Dorados' business. These

expectations may or may not be realized. Some of these expectations may be based upon assumptions or

judgments that prove to be incorrect. In addition, Arcos Dorados' business and operations involve numerous

risks and uncertainties, many of which are beyond the control of Arcos Dorados, which could result in Arcos

Dorados' expectations not being realized or otherwise materially affect the financial condition, results of

operations and cash flows of Arcos Dorados. Additional information relating to the uncertainties affecting

Arcos Dorados' business is contained in its filings with the Securities and Exchange Commission. The

forward-looking statements are made only as of the date hereof, and Arcos Dorados does not undertake any

obligation to (and expressly disclaims any obligation to) update any forward-looking statements to reflect

events or circumstances after the date such statements were made, or to reflect the occurrence of

unanticipated events.

1

Page 3: Agenda ARCOS DORADOS · Agenda ARCOS DORADOS 3Q 2015 Conference Call Presentation November 4, 2015. ... o Minions vertigration o Triple Bacon in GPPP. 3Q15 Performance: Caribbean

3Q15: CEO’s Opening Remarks

2

We completed the roll-out of the scheduling and forecasting system in Brazil, which will

increase restaurant level margins over the medium-term

We implemented a restructuring plan across the Company, which will lower our total

G&A by more than $20 million on an annualized basis in today’s dollars

Asset Monetization: we signed our first agreement to sell and relocate one of our

restaurant locations in Mexico

Re-franchising: we have already reached agreements on the re-franchising of more

than twenty of our Company-operated restaurants in Brazil

We have advanced in our plans to address the maturity of our BRL denominated bond

Our 3-year plan will strengthen ARCO’s leadership position and capture

the long-term potential of the QSR industry in Latin America

Page 4: Agenda ARCOS DORADOS · Agenda ARCOS DORADOS 3Q 2015 Conference Call Presentation November 4, 2015. ... o Minions vertigration o Triple Bacon in GPPP. 3Q15 Performance: Caribbean

3Q 2015 Results & Highlights

Achieved high single-digit comparable sales growth

3

3Q15 as reported revenues declined 16.6%

o Impacted by significant currency headwinds across the region

Organic revenues increased 11.4% and comparable sales grew 9.4%,

driven by average check growth

o Despite a weak economic backdrop and softer consumer spending

in our largest markets

Adjusted EBITDA margin contracted by 50 basis points as gains in three divisions were

offset by a decline in Brazil’s Adjusted EBITDA margin

65 new restaurants (TTM), bringing restaurant count to 2,122 (September 2015)

CUSTOMERS ARE RESPONDING WELL TO OUR PROMOTIONAL

STRATEGIES, BUT TRAFFIC TRENDS REMAIN CHALLENGING

Page 5: Agenda ARCOS DORADOS · Agenda ARCOS DORADOS 3Q 2015 Conference Call Presentation November 4, 2015. ... o Minions vertigration o Triple Bacon in GPPP. 3Q15 Performance: Caribbean

3Q15 Performance: Brazil

Significant BRL depreciation and weak consumption environment

continue to impact Brazil’s results

4

Traffic levels were impacted by further deterioration in the challenging consumption

environment

o As reflected in all-time lows in consumer confidence

o Consumers trading down to local offers

o Marketing and promotional activities to support restaurant traffic levels and

provide more value to our customers

As reported revenues decreased 32.3%

o Impacted by the 56% y-o-y average

depreciation of the BRL

+4.3% organic revenue growth

o Comparable sales rose 1.2%

o Average check growth partially offset by negative traffic

Key marketing drivers:

o Super/Mega/Grand Big Mac

o Minions

o Triple Cheeseburger in GPPP

Page 6: Agenda ARCOS DORADOS · Agenda ARCOS DORADOS 3Q 2015 Conference Call Presentation November 4, 2015. ... o Minions vertigration o Triple Bacon in GPPP. 3Q15 Performance: Caribbean

3Q15 Performance: NOLAD

Implemented marketing promotions targeted at protecting traffic

5

New personalized menu in Mexico, McMio, is now fully implemented in Company-

operated restaurants

Continue to see traction in our family business

As reported revenues declined 4.1%

o Impacted by the 25% y-o-y average

depreciation of the Mexican peso

+ 7.3% organic revenue growth

o Comparable sales rose 4.7%

Average check growth and flat traffic

Average check supported by inflation

and more favorable mix

Key marketing drivers:

o Minions vertigration

o “Transformers” & “My Little Pony”

in Happy Meal

Page 7: Agenda ARCOS DORADOS · Agenda ARCOS DORADOS 3Q 2015 Conference Call Presentation November 4, 2015. ... o Minions vertigration o Triple Bacon in GPPP. 3Q15 Performance: Caribbean

3Q15 Performance: SLAD

Marketing initiatives were designed to stimulate traffic

6

Currency headwinds from key markets

As reported revenues were up 12.1%

o Impacted by the 11% y-o-y average depreciation

of the Argentine peso

o Depreciation in the rest of the region’s currencies

+26.2% organic revenue growth

o Comparable sales growth of 26.3%

Inflation-driven average check growth

Modest traffic decline, primarily impacted by the

challenging macroeconomic environment in Argentina

Key marketing drivers:

o Monopoly campaign

o Minions vertigration

o Triple Bacon in GPPP

Page 8: Agenda ARCOS DORADOS · Agenda ARCOS DORADOS 3Q 2015 Conference Call Presentation November 4, 2015. ... o Minions vertigration o Triple Bacon in GPPP. 3Q15 Performance: Caribbean

3Q15 Performance: Caribbean

Ongoing challenging conditions in key markets

7

As reported results impacted by the use of a weaker y-o-y average FX rate in

Venezuela for re-measurement purposes

+14.5% organic revenue growth

o Comparable sales grew 19.9%

Inflation-driven average check growth

more than offset a decline in traffic

Excluding Venezuela:

o As reported revenues impacted by the

depreciation of the Colombian peso and the Euro

o Organic revenues increased 2.8%

o Comparable sales rose 1.8%

Higher average check and traffic gains

Key marketing drivers:

o “Almuerzo Colombiano”

o Big Mac in GPPP (limited time offer)

Page 9: Agenda ARCOS DORADOS · Agenda ARCOS DORADOS 3Q 2015 Conference Call Presentation November 4, 2015. ... o Minions vertigration o Triple Bacon in GPPP. 3Q15 Performance: Caribbean

Mexico

Colombia

Brazil

Argentina

NOLAD

Costa Rica, Mexico,

Panama

BRAZIL

SLAD

Argentina, Chile,

Ecuador, Peru,

Uruguay

CARIBBEAN

Aruba, Colombia, Curaçao, French Guyana,

Guadeloupe, Martinique, Puerto Rico, St.

Croix, St. Thomas, Trinidad & Tobago,

Venezuela

36 Restaurant Additions LTM (net)

29 Re-imagings LTM

3 Restaurant Additions LTM (net)

8 Re-imagings LTM

3 Restaurant Additions LTM (net)

5 Re-imagings LTM

-6 Restaurant Additions LTM (net)

3 Re-imagings LTM

3Q15 New Unit Development & Re-imaging

SLAD

Brazil

Caribbean

NOLAD

Number of systemwide

restaurants(1)

383

869

356

514

18%

41%

17%

24%

2,122 100%

8(1) As of September 30, 2015; does not include McCafé units (328) & Dessert Centers (2,574)

Page 10: Agenda ARCOS DORADOS · Agenda ARCOS DORADOS 3Q 2015 Conference Call Presentation November 4, 2015. ... o Minions vertigration o Triple Bacon in GPPP. 3Q15 Performance: Caribbean

3Q15 Adjusted EBITDA Bridge

As reported Adjusted EBITDA variations ($ Million)

9

*Net impact of: Special Items ($1.7 million), Currency Translation (-$6.6 million) and Organic Growth ($5.5 million).

$ 66.1 $ 0.6 $ 1.3 $ 17.5

$ 3.0 $ 50.9

0

10

20

30

40

50

60

70

80

EBITDA 3Q2014 Venezuela ConsolidatedImpacts*

Organic Growth - Excl.Venezuela

Currency Translation -Excl. Venezuela

Special Items - Excl.Venezuela

EBITDA 3Q2015

Page 11: Agenda ARCOS DORADOS · Agenda ARCOS DORADOS 3Q 2015 Conference Call Presentation November 4, 2015. ... o Minions vertigration o Triple Bacon in GPPP. 3Q15 Performance: Caribbean

0

10

20

30

40

50

60

Brazil NOLAD SLAD Caribbean

Ex.Vza

US

$ M

illi

on

3Q14 3Q15

51.6%

-17.7%

0

50

100

150

200

250

300

350

400

450

500

Brazil NOLAD SLAD Caribbean

Ex.Vza

US

$ M

illion

3Q14 3Q15

4.3%

7.3%

26.2%56.5%

*Excludes currency variations and special items10

Revenues

US$: As reported% growth: Organic basis*

Adjusted EBITDA

US$: As reported% growth: Organic basis*

Consolidated (Ex-Vza) 3Q15 Revenues: +10.0% Consolidated (Ex-Vza) 3Q15 Adj. EBITDA: -1.8%

3Q15 Divisional Results

31.9%

2.8%

EBITDA MARGIN 3Q15 vs 3Q14

Consolidated Brazil NOLAD SLAD Caribbean

-50bps -240bps +356bps +246bps +155bps

Page 12: Agenda ARCOS DORADOS · Agenda ARCOS DORADOS 3Q 2015 Conference Call Presentation November 4, 2015. ... o Minions vertigration o Triple Bacon in GPPP. 3Q15 Performance: Caribbean

3Q15 Non-Operating Results

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$27.9 million foreign currency exchange loss, versus a loss of $7.2 million in 3Q14

o FX loss mainly due to the depreciation of the Brazilian Real from the prior

quarter-end, which generated:

A loss related to intercompany balances, partially offset by a

A gain on BRL-denominated long-term debt

Net interest expense declined $4.7 million to $14.5 million, also partly due to the

impact of a weaker Brazilian real on our BRL-denominated bond

Income tax expense of $14.1 million for the quarter, compared to $7.7 million in the

prior year period

Net loss of $35.9 million, compared to net income of $240 thousand in 3Q14

o Mainly explained by lower operating results coupled with increased foreign

exchange losses, as well as a higher income tax expense

o Partially offset by lower net interest expenses

Page 13: Agenda ARCOS DORADOS · Agenda ARCOS DORADOS 3Q 2015 Conference Call Presentation November 4, 2015. ... o Minions vertigration o Triple Bacon in GPPP. 3Q15 Performance: Caribbean

1Total financial debt includes short-term debt, long-term debt and derivative instruments (including the

asset portion of derivatives amounting to $28.2 million and $9.5 million as a reduction of financial debt as

of September 30, 2015 and December 31, 2014, respectively).2Total financial debt less cash and cash equivalents.3McDonald’s granted an extension of the limited waiver through and including December 31, 2015.

3Q15: Financial Indicators

Plan to bring the Net Debt to EBITDA ratio to within target of 2.0x to

2.5x by 2016 year end

12

As of As of

September 30, December 31,

(In millions of U.S. dollars, except ratios) 2015 2014

Cash & cash equivalents 90.5 139.0

Total Financial Debt1 676.6 801.2

Net Financial Debt2 586.1 662.2

Total Financial Debt / LTM Adjusted EBITDA ratio 3.0x 3.2x

Net Financial Debt / LTM Adjusted EBITDA ratio 2.6x 2.6x

Covenants under the Master Franchise Agreement (MFA)3

Fixed Charge Coverage ratio (>1.50x) 1.48x 1.42x

Leverage ratio (<4.25x) 4.56x 4.65x

Page 14: Agenda ARCOS DORADOS · Agenda ARCOS DORADOS 3Q 2015 Conference Call Presentation November 4, 2015. ... o Minions vertigration o Triple Bacon in GPPP. 3Q15 Performance: Caribbean

13

3Q15: CEO’s Closing Remarks

We made progress on our strategic plan and are on track to achieve our targets

We completed the implementation of our new forecasting and scheduling system in

Brazil

We have taken the necessary steps to deliver the promised absolute reduction of our

G&A expenses

We are following an organized and disciplined process to maximize the value of a

strong asset monetization pipeline

o We believe this can represent a significant proportion of our total $250 million

target for 2017

We have advanced on the refinancing of the BRL bond and expect to communicate

some progress within the next few months

WE ARE REINFORCING THE CUSTOMER EXPERIENCE AS THE LONG-TERM MARKET FUNDAMENTALS ARE STILL IN PLACE

Page 15: Agenda ARCOS DORADOS · Agenda ARCOS DORADOS 3Q 2015 Conference Call Presentation November 4, 2015. ... o Minions vertigration o Triple Bacon in GPPP. 3Q15 Performance: Caribbean

14

IR Contact

For additional information:

Daniel Schleiniger

IR Director

+1.305.961.2856

+54.11.4711.2287

[email protected]

Patricio Iñaki Esnaola

IR Manager

[email protected]

+54.11.4711.2561

www.arcosdorados.com/ir