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4Q13 Results
Conference Call February 21, 2014
DISCLAIMER
This presentation contains forward-looking statements regarding the
prospects of the business, estimates for operating and financial results, and
those regarding Cia. Hering's growth prospects. These are merely projections
and, as such, are based exclusively on the expectations of Cia. Hering
management concerning the future of the business and its continued access
to capital to fund the Company’s business Plan. Such forward-looking
statements depend, substantially, on changes in market conditions,
government regulations, competitive pressures, the performance of the
Brazilian economy and the industry, among other factors and risks disclosed
in Cia. Hering’s filed disclosure documents and are, therefore, subject to
change without prior notice.
AGENDA
Highlights
4Q13 Operating
Performance
Outlook
4
HIGHLIGHTS 4Q13 AND 2013
Gross Revenues growth of 10.2% in the quarter and 12.6% in 2013;
EBITDA of R$137.7 million if 4Q13, 3.5% growth, and R$ 439.0 million in 2013, 7.8% growth;
Net income of R$ 101.7 million (+0.7%) in 4Q13 and R$ 318.2 million in 2013 (+2.3%);
Hering Store Network:
Addition of 77 stores to the network, ending the year with 592 stores;
10.1% sales growth in the quarter and in the year, reaching R$ 584.0 million and R$1,572.0
million respectively
70 stores openings guidance – 662 until the end of 2014
Hering Kids:
Stores network expansion, with 43 openings in 2013
Stores openings guidance of 30 stores – 100 until the end of 2014
5
4Q13 OVERVIEW
Revenues per Brand (R$ million)
EBITDA (R$ million) Distribution Network
Revenues per Channel (R$ million)
R$ 1,335.3
R$ 141.5
R$ 97.0
R$ 1,495.7
R$ 156.9
R$ 101.8
+12.0%
R$ 158.5 R$ 199.1 +25.5%
+10.9%
+5.0%
2012 2013
*Domestic Market
Channel 2012 2013 % Domestic
Market 2013 % Growth
Multi-brand
Retail
17,119
clients
17,898
clients 47.6% 11.6%
Franchises 556
Stores
672
Stores 39.3% 17.7%
Webstore 3 stores 3 stores 1.2% 16.8%
Own Stores 65 stores 71 stores 11.9% 2.6%
407.4 439.0
27.3% 26.1%
7.8%
2012 2013EBITDA EBITDA Margin
834.1 930.8
652.1 767.5
19.5
22.7 226.6
232.5
2012 2013
Multibrand Retail Franchise Webstore Own Stores
16.8
2.6%
11.6
17.7
16.8%
2.6%
11.6%
17.7%
2011 2012 2013
432515
592
5
27
70
76
78
80
1
1
1
16
17
17
Hering Store Hering Kids PUC dzarm. Total Foreign Market
6
STORES NETWORKS
In the domestic market, the Company ended 2013 with 592 Hering Stores, 80 PUC, 70
Hering Kids and 1 dzarm store.
530
638
760 Stores Evolution
7
HERING STORE NETWORK PERFORMANCE
Hering Store Network (Sell Out R$ Millions) Promotional Campaigns
SSS growth acceleration to +1.1% in 4Q13, ending the year with a 0.6% in comparison to
2012. In the quarter was promoted the “Anticipate your Christmas” campaign, stimulating
sales both before and after christmas.
1,428.1 135 135 1,572.0
+77 stores
2012 Expansão SSS 2013
+10.1%
-0.6%
Expansion
AGENDA
Highlights
4Q13 Operating
Performance
Outlook
9
SALES PERFORMANCE
Gross Revenues reached R$ 2.0 billion in 2013, with growth of 10.2% and 12.6% in
4Q13 and in the year, respectively.
545.6 600.4
1,766.61,987.6
7.28.5
27.1
31.8
552.8608.9
1,793.7
2,019.4
10.2%
12.6%
18.1%
17.3%
10.0%
12.5%
4Q12 4Q13 2012 2013
Domestic Market Foreign Market
10
GROSS PROFIT AND GROSS MARGIN
Gross margins of 45.2% (0.3 p.p.) in 2013 and 44.9% (-1.4 p.p.) in 4Q13, due to higher
costs pressure, lower level of fiscal incentives and challenging sales scenario.
212.1 225.9
679.2758.5
6.5%
11.7%
46.3%44.9%
45.5% 45.2%
47.3%45.9%
46.7% 46.2%
4Q12 4Q13 2012 2013
Gross Profit Gross Margin Cash Gross Margin
11
EBITDA AND EBITDA MARGIN
EBITDA of R$ 137.7 million in 4Q13, totalling R$ 439.0 million in the year with EBITDA
margin of 26.1% (-1.2 p.p.), mainly due to the drop in gross margin.
133.0 137.7
407.4439.0
29.0%
27.4% 27.3%26.1%
3.5%
7.8%
4Q12 4Q13 2012 2013
EBITDA EBITDA Margin
NET INCOME AND NET MARGIN
Net income of R$ 318.2 million (+2.3%) with net margin of 18.9% (-2.0 p.p.) in the year,
as a consequence of the reduction in EBITDA margin and higher income and social
contribution taxes.
101.0 101.7
311.0 318.2
22.1%20.2% 20.9%
18.9%
0.7%
2.3%
4Q12 4Q13 2012 2013
Net Income Net Margin
13
CAPEX
CAPEX in 2013 totalled R$ 72.2 million, with a 13.7% growth in the year, mainly due to
the increase in IT investments.
12.3 10.0
33.4 34.68.8
7.8
22.326.6
0.31.3
1.8
2.6
2.52.6
6.0
8.4
23.921.7
63.5
72.2
-9.2%
13.7%
4Q12 4Q13 2012 2013
Industry IT Others Stores
Per Activity ( R$ millions)
14
CASH FLOW
Free cash flow in the year reached R$ 123.7 million, a decrease of R$ 85 million in
comparison to 2012, as a function of the increase in EBITDA compensated by the
increases in inventory levels and higher income and social contribution taxes increase.
Cash Flow - Consolidated (R$ thousand) 4Q12 4Q13 Chg. 2012 2013 Chg.
EBITDA 132,982 137,666 4,684 407,396 438,994 31,598
Non cash items 1,680 1,214 (466) 4,236 4,701 465
Current Income tax and Social Contribution (33,340) (34,752) (1,412) (95,911) (116,654) (20,743)
Working Capital Investment (95,442) (110,814) (15,372) (43,506) (131,139) (87,633)
(Increase) in trade accounts receivable (106,716) (104,859) 1,857 (67,615) (48,805) 18,810
(Increase) decrease in inventories 7,352 10,956 3,604 6,361 (84,573) (90,934)
Increase (decrease) in accounts payable to suppliers 5,627 (18,411) (24,038) 30,130 (1,550) (31,680)
Increase (decrease) in taxes payable (248) 16,204 16,452 (16,895) (1,132) 15,763
Others (1,457) (14,704) (13,247) 4,513 4,921 408
CapEx (23,893) (21,691) 2,202 (63,489) (72,217) (8,728)
Free Cash Flow (18,013) (28,377) (10,364) 208,726 123,685 (85,041)
* Dividends distribution: R$ 49.9 million were destined as a proposal to be distributed through the approval of the General Shareholders
Meeting.
15
DIVIDENDS
34,558
82,446
171,602
261,921
138,504
0.64
0.84
1.05
1.59
0.84
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
-
50000.0
100000.0
150000.0
200000.0
250000.0
300000.0
2009 2010 2011 2012 2013*
Dividends (R$ Thousands) $/Share
*Considering the amount of R$ 49,993 thousand destined to be approved by the
General Shareholder´s Meeting in 04/24/2014 as dividends payment
The dividends and interest on capital payments proposed for 2013 totalled R$ 138.5 million, in
line with the year´s free cash flow.
AGENDA
Highlights
4Q13 Operating
Performance
Outlook
17
OUTLOOK
Challenging scenario in 1H14, both in sales and margins
Hering brand:
New strategy should begin generating results starting in 2H14
Opening of 70 Hering Stores in 2014
Market share increase in the multi-brand retail and in the north and northeast regions
Hering For You – Launching in the winter collection and opening of the first store in the 1st semester
Children Market – Focus on the Hering Kids network expansions (30 openings in 2014)
New dzarm.´s business plan under development
Besides the short term challenges, we remain optimistic with the potential of our brands and the new
management structure should allow us to accelerate growth in our current brands as well as
developing new growth platforms
INVESTOR RELATIONS TEAM
Fabio Hering – CEO
Frederico Oldani – CFO and IRO
Daniel Popovich – IR Analyst
Tel. +55 (11) 3371-4867
E-mail: [email protected]
Website: www.ciahering.com.br/ri