GUADALAJARA, Mexico, July 28,
2022 /PRNewswire/ -- Betterware de Mexico S.A.P.I. de
C.V. (NASDAQ: BWMX), ("Betterware" or the "Company"), announced
today its consolidated financial results for the second quarter
fiscal year 2022. The figures presented in this report are
expressed in nominal Mexican Pesos (Ps.) unless otherwise noted,
presented and approved by the Board of Directors, prepared in
accordance with IFRS, and may include minor differences due to
rounding. The Company will host a conference call at 9:00 am (Eastern Time) on July 29, 2022, to discuss its results for the
second quarter of 2022.
Key Highlights of Q2 2022
- Betterware is positioned to continue its history of growth
in the future and maintain its hallmarks of high profitability,
strong balance sheet and cash flow generation.
- JAFRA acquisition contributes to the Group's revenue growth,
profitability and cashflow generation.
- Company introduces guidance inclusive of the acquisition of
JAFRA, noting that due to a tougher external environment than
anticipated, it expects 2022 net revenues and EBITDA for Betterware
de Mexico to be lower than its
previous guidance. A revised consolidated guidance for the year,
including JAFRA, is released.
Luis G. Campos, Executive
Chairman of the Board, stated, "The completion of the acquisition
of Jafra on April 7th is
instrumental to our future growth plans, as we are now a
multi-channel group with unique brands in different product
segments, targeting similar consumer profiles and distribution
channels in Mexico and the U.S. We
are excited about our growth prospects as a group and are confident
on our talented team´s ability and defined action plans to
capitalize on the opportunities that lie ahead, even in uncertain
periods.
The first half of 2022 has presented relevant challenges, with a
tougher than expected external environment and increased
uncertainty, which negatively impacted our consumers and our
associates and distributors. In this context, we continued to
advance our key priorities. We stabilized Betterware´s
associate and distributor base at approximately 880 thousand and 44
thousand respectively for the last eight weeks, while showing signs
of recovery in the last two weeks and maintaining the activity
levels, resulting in average weekly sales of more than double of
our pre-pandemic comparable period, and we capitalized on
opportunities to expand our reach with the successful completion of
the JAFRA acquisition. We are confident that this
stabilization period, after the extraordinary growth experienced
since the pandemic began, is setting the base for future revenue
and EBITDA growth in the years to come.
We maintain our focus on our long-term growth opportunities
which will allow us to maximize value for all Betterware's
stakeholders in the long term."
Luis G.
Campos
Executive Chairman of the
Board
JAFRA Acquisition
On April 7, 2022, the Company
announced the successful completion of the acquisition of 100% of
JAFRA's operations in Mexico and
the United States, along with
JAFRA´s trademark rights worldwide.
JAFRA, a leading company in the beauty and personal care
products industry, is a strong and well positioned international
brand with access to millions of households in Mexico and in the U.S. through its direct
selling business model.
The acquisition provides a unique opportunity for us to enter an
attractive and complementary new industry for Betterware, with
estimated annual revenues in Mexico and the U.S. of approximately
US$100 billion, with the proven
experience of JAFRA´s management team.
The transaction, which is expected to be highly accretive for
Betterware since its first year adding approximately Ps.
550M to EBITDA in 2022*, was funded
primarily by debt, on a debt-free, cash-free basis with a purchase
price of US$246M, an attractive
valuation even without considering any of the identified cost
synergies of between US$10M and
US$15M per year.
We are confident in our ability to accelerate JAFRA´s profitable
growth by leveraging our scale and infrastructure, by replicating
Betterware´s three strategic pillars into JAFRA´s day to day
operations.
Consolidated Group
The incorporation of JAFRA allows us to create a multi-channel
group with unique brands in different product segments, targeting
similar consumer profiles and distribution channels in Mexico and the U.S.
JAFRA and Betterware share the key features that will allow us
for continued success going forward:
- Asset-light business models with low CAPEX requirements
- High profitability and high free cash flow generation
- Flexibility to promptly adapt to different market conditions
and consumption trends.
Our action plans for each company, described below, have been
defined to regain growth and successfully expand our business
towards additional international markets, such as the United States in the case of Betterware,
and Colombia and Peru in future years in the case of the
consolidated group.
All of this will be possible thanks to JAFRA´s and Betterware´s
outstanding and experienced management teams, which will remain
focused on their respective business, operating as independent
companies, supported by the new corporate structure announced in
February 2022, which will be
overseeing both companies.
Q2 2022 Operating Metrics and Consolidated Results
Company
|
Average
Associates/Consultants
|
Average
Distributors/Leaders
|
Total
|
Betterware
|
908.0
thousand
|
44.4
thousand
|
952.4
thousand
|
Jafra
|
409.7
thousand
|
22.4
thousand
|
432.2
thousand
|
Total
|
1,317.7
thousand
|
66.8
thousand
|
1,384.6
thousand
|
Consolidated
Results
|
Betterware
|
Variation vs.
Q2 2021
|
Jafra*
|
Total
|
Variation vs.
Q2 2021
|
Net
Revenue
|
Ps. 1,602.8M
|
(38 %)
|
Ps. 1,640.2M
|
Ps. 3,242.9M
|
+25 %
|
Gross
Margin
|
57.2 %
|
+41 bps
|
80.7 %
|
69.1 %
|
+1,230 bps
|
EBITDA
|
Ps. 383.3M
|
(49 %)
|
Ps. 212.1M
|
Ps. 595.3M
|
(20 %)
|
EBITDA
Margin
|
23.9 %
|
(484 bps)
|
12.9 %
|
18.4 %
|
(1,039 bps)
|
Consolidated
Results
|
Total
|
Variation vs.
Q2 2021
|
Net
Income
|
Ps. 252.0M
|
(45 %)
|
Adjusted Net
Income
|
Ps. 223.7M
|
(48 %)
|
Adjusted
EPS
|
Ps. 5.99
|
(48 %)
|
*Q2 2022 figures
include JAFRA´s operations since April 7th, 2022.
|
Net revenues for Q2 2022 increased 25% to Ps. 3,242.9M from Ps. 2,594.5M in Q2 2021, mainly explained the
inclusion of JAFRA´s net revenues since the acquisition was
completed on April 7th,
2022.
Betterware's net revenues reflect the following three
factors:
- Back to normal consumption: Shifts in consumption
of product categories
- Back to normal activities: Effects of spring vacation,
Labor Day, Mother´s Day and Teacher´s Day, which have always
temporarily affected sales
- Inflation: impact in the consumers´ disposable
income
These three factors resulted in higher-than-average weekly churn
rates in our associates and distributors base in Betterware. For
the period, on average we had 44.4 thousand distributors, 32% lower
than in Q2 2021, and 908.0 thousand associates, 25% lower than in
Q2 2021.
These factors also impacted performance in JAFRA, where on
average we had 22.4 thousand leaders, 7% lower than in Q2 2021, and
409.7 thousand consultants, 10% lower than in Q2 2021.
Gross margin expanded 1,230 bps to 69.1% in Q2 2022 from 56.8%
in Q2 2021, mainly due to the incorporation of JAFRA´s operations
to our business, reflecting its higher gross margin profile.
Betterware´s Gross margin expanded 41 bps to 57.2% in Q2 2022
from 56.8% in Q2 2021, due to the increase in our product prices of
12% previously announced, efficient cost management and the
stabilization of supply chains, which allowed us to offset cost
pressures and discounted sales to reduce inventory levels for the
quarter.
For the second quarter of 2022, consolidated EBITDA decreased
20% Year-on-Year to Ps. 595.3M,
compared to Ps. 746.0M in Q2 2021, of
which Betterware represented Ps. 383.3M of consolidated EBITDA and JAFRA, in turn,
Ps. 212.1M.
For Betterware, EBITDA decreased due to the lower revenue and
operating leverage relative to the prior year period, as SG&A
expenses represented 34.9% of net revenues for Q2 2022, compared to
28.8% of Q2 2021.
Consolidated EBITDA margin contracted 1,039 bps to 18.4% in Q2
2022 compared to 28.8% in Q2 2021, reflecting the incorporation of
Jafra into the results, which historically has had a lower EBITDA
margin than Betterware, which opens the opportunity for us to
improve JAFRA´s cost structure and increase margins in the
future.
During the quarter, we cut fixed costs in Betterware to adjust
to the new level of revenues going forward which led us to incur in
one-time expenses of approximately Ps. 15M related to the restructuring of our
workforce, which should positively reflect on EBITDA margins in the
future.
For the second quarter of 2022, consolidated Net Income
decreased 45% Year-on-Year to Ps. 252.0M, compared to Ps. 460.9M in 1H 2021, which only considers JAFRA
results since the acquisition was completed on April 7th, 2022.
Adjusted consolidated Net Income, which excludes non-cash income
of Ps. 28.3M related to the
unrealized gain in mark-to-market valuation of financial derivative
instruments, which do not affect the Company´s cash flows or
operating income, decreased 48%. Adjusted Earnings per Share were
Ps. 5.99.
1H 2022 Operating Metrics and Consolidated Results
Company
|
Average
Associates/Consultants
|
Average
Distributors/Leaders
|
Total
|
Betterware
|
952.9
thousand
|
46.3
thousand
|
999.2
thousand
|
Jafra
|
414.0
thousand
|
22.6
thousand
|
436.7
thousand
|
Total
|
1,366.9
thousand
|
68.9
thousand
|
1,435.8
thousand
|
Consolidated
Results
|
Betterware
|
Variation vs.
1H 2021
|
Jafra*
|
Total
|
Variation vs.
Q2 2021
|
Net
Revenue
|
Ps. 3,471.9M
|
(37 %)
|
Ps. 1,640.2M
|
Ps. 5,112.1M
|
(7 %)
|
Gross
Margin
|
60.6.%
|
+348 bps
|
80.7 %
|
67.1 %
|
+991 bps
|
EBITDA
|
Ps. 931.1M
|
(44 %)
|
Ps. 212.1M
|
Ps. 1,143.1M
|
(32 %)
|
EBITDA
Margin
|
26.8 %
|
(356 bps)
|
12.9 %
|
22.4 %
|
(802 bps)
|
Consolidated
Results
|
Total**
|
Variation vs.
Q2 2021
|
Net
Income
|
Ps. 519.3M
|
(53 %)
|
Adjusted Net
Income
|
Ps. 590.4M
|
(37 %)
|
Adjusted
EPS
|
Ps. 15.82
|
(38 %)
|
*1H 2022 figures
include JAFRA´s operations since April 7th, 2022. Non-IFRS net
revenues and Adjusted EBITDA from January 1st to April
6th were Ps. 1,686.8M and Ps. 158.4M,
respectively.
|
|
**Net Income figures
exclude Jafra's non-IFRS Adjusted Net Income from January
1st to April 6th, 2022.
|
Net revenues for 1H 2022 decreased 7% to Ps. 5,112.1M from Ps. 5,496.1M in 1H 2021, which only considers JAFRA´s
results since the acquisition was completed.
The lower level of consolidated net revenue resulted mainly from
the effects of the return to normality and high inflation rates
previously described in the Q2 2022 Results section, deriving in a
lower average distributor and associates' base in Betterware and
lower level of consultants and leaders in JAFRA.
Consolidated gross margin expanded 991 bps to 67.1% in 1H 2022
from 57.1% in Q1 2021, mostly explained by the inclusion of
JAFRA´s operations to the business during the second quarter,
reflecting its higher gross margin profile.
Betterware´s gross margin expanded 348 bps, mainly driven by the
product price increase of 12% announced at the beginning of the
year, efficient cost management and planning for freight
expenses.
For the first half of 2022, consolidated EBITDA decreased 32%
Year-on-Year to Ps. 1,143.1M,
compared to Ps. 1,669.6M in 1H 2021,
which only considers JAFRA´s results since the acquisition was
completed. Betterware represented approximately 81% of consolidated
EBITDA for the period.
Consolidated EBITDA margin contracted 802 bps to 22.4% in 1H
2022 compared to 30.4% in 1H 2021, reflecting JAFRAs inclusion to
the results.
For Betterware, EBITDA margin contracted 356 bps to 26.8% in 1H
2022 compared to 30.4% in 1H 2021, reflecting the extremely tough
comparison base, a lower operating leverage in line with the
current level of sales, and higher operating expenses due to
surging inflation.
For the first half of 2022, consolidated Net Income decreased
53% Year-on-Year to Ps. 519.3M,
compared to Ps. 1,099.4M in 1H 2021,
which only considers JAFRA´s results since the acquisition was
completed.
Adjusted consolidated Net Income, which excludes non-cash
expense of Ps. 71.1M related to the
unrealized loss in mark-to-market valuation of financial derivative
instruments, which do not affect the Company´s cash flows or
operating income, decreased 37%, explained by a lower EBITDA and
higher interest expense due to the acquisition of JAFRA. Adjusted
Earnings per Share were Ps. 15.82.
Strong Balance Sheet
As of the end of Q2 2022, the Company's financial position
remains strong, reflecting the main attributes of our
differentiated business model, namely high cash flow generation and
asset light business model.
The mainly debt funded acquisition of JAFRA, which resulted in a
cash outflow of Ps. 574M from our
balance sheet, increased our leverage ratio to 2.2x Net Debt to
EBITDA in Q2 2022, considering Betterware´s last twelve months
EBITDA and JAFRA´s 1H 2022 Annualized Adjusted EBITDA. While our
position remains strong and conservative, we are confident that
Betterware´s and JAFRA´s high cash flow generation nature will
allow us to gradually deleverage going forward.
As of Q2 2022, our Balance Sheet includes approximately Ps.
482M in additional inventory
proactively acquired at the beginning of the year in response to
supply chain disruptions and to a lesser extent the ending
inventory also reflects lower-than-expected sales. As we expect the
global supply chain situation to normalize, our inventory levels
are expected to be gradually reduced during Q3 2022 and going
forward, which will improve our cash conversion cycle, without
impacting our gross margins.
Outlined Action Plan
From the start of the second half of 2021 to date, Betterware
and the home solutions market experienced a downturn due to the
return to normality, following the extraordinary growth during the
COVID period, namely from Q1 2020 to Q1 2021, which resulted in a
211% growth in our average weekly gross revenues and a 183% growth
in our average associate and distributor base.
The effects of the return to normality have been amplified by a
softer-than-expected economic environment and a weaker consumer
spending, which has been impacted by the highest inflation rate in
Mexico since 2001, which has
decreased spending on discretionary products. In fact, according to
the market study we entrusted to one of the most prestigious
companies in its field in Mexico,
the market size for household products temporarily expanded from
approximately Ps. 82 billion in 2019 to approximately Ps. 134
billion in 2020, and in 2021 it normalized back to its pre-pandemic
level. In turn, we managed to expand our average weekly gross
revenues from Ps. 119M in Q2 2019 to
Ps. 240M weekly gross revenues in 2Q
2022, representing a 26% CAGR. This resulted in an increase
in market share to 7.7% in 2021, up from 5.0% in 2020, due to our
successful business model.
During this uncertain and unusual period, we have remained
focused on maintaining profitability while taking internal action
to stabilize and improve our business trend. During the first
quarter of 2022 we recovered our profitability levels thanks to the
flexibility and resiliency of our business model, while during the
second quarter, we stabilized our network of associates and
distributors, maintaining our base at approximately 880 thousand
and 44 thousand respectively, for the last eight weeks of the
quarter and showing signs of recovery in the last two. While the
churn rates for associates and distributors for the quarter
remained at higher than usual weekly rates, at 3.6% and 2.1%
respectively, we have seen this trending back to normal levels
during the last eight weeks of the period, which has us optimistic
that our network will start to experience growth prior to year-end
and continuing going forward. It is important to mention that
we have experienced an associate growth month-to-date in
July 2022, being the first month
since February 2021 that we grow our
salesforce.
In this market downturn, both associates and distributors have
remained active, with weekly rates of 28.2% and 78.3% respectively
for the quarter, resulting in average weekly sales today more than
double of our pre-pandemic comparable period (Q2 2019), expanding
our market share to 7.7% and our household penetration to 29%,
attaining a stronger brand positioning and market dominance.
This proves the resiliency of our business model, where we´ve been
able to retain Associates and Distributors, despite a normalization
in demand.
The home solutions market pre-pandemic secular trends remain
valid and stronger than ever. To seize the opportunity that
these trends bring and return to growth, we are deploying several
initiatives based on our three strategic pillars:
-
-
- Product Innovation:
-
- Grow the core: reinforce our position in core categories (e.g.
Home Organization, Space Optimization, and Cooking, and Commuting
Solutions, which lost share in our sales during the downturn and
are ready to regain relevance).
- Expand our portfolio into promising Concepts, such as: Bedding,
Home Entertainment, Kids, Pets, Tabletop, and Drinkware.
Additionally, we are developing an innovative "cleaning products"
line, which could disrupt the market, and increase the frequency of
purchase from our customers. More to come soon.
- Technology:
-
- Upgrading our e-commerce website, which should increase our
penetration, attracting customers we don´t reach with our
traditional model. It is important to stand out that (1) we will
keep a model in which our Associates and Distributors are benefited
from these customers, and (2) since our launch in December 2020, we´ve learned many details that we
are adapting to make this platform successful in the medium
term.
- The recent rollout of our new Betterware Plus app should yield
more retention and activity, as our Associates and Distributors
enjoy the new and improved benefits of this new platform.
- Business Intelligence:
-
- Undergoing a process of evaluation of data analysis
capabilities at JAFRA and Betterware, to replicate best practices
in both companies.
As mentioned before, we have two main avenues for organic
growth: expanding household penetration and increasing share of
wallet.
Our household penetration in Mexico expanded from 24% in 2020 to 29% in
2021, according to the latest market study concluded in
March 2022. Relevant opportunities to
further expand our household penetration and reach our target 40%
include:
- Refocused rewards program to incentivize associate and
distributor growth and reactivation.
- Hybrid model between personal contact and technology.
Relaunched person-to-person companion program, which allows
distributors to support their associates in developing their
business leveraging on technological tools.
- Revamping of the physical and digital catalogues. Enabled first
dual strategy through QR codes on the physical catalogue,
strengthening our digital catalogue design.
- Social selling and social influencing. Currently working on
this front, the progress will be shared in the coming
quarters.
As for increasing our share of wallet, the results of the market
study referred above, clearly identify the existing market size
opportunity in various categories and concepts we participate in.
With this new knowledge, we are ready to ride the curve back to
growth as the Home and Life Solutions market stabilizes:
- Innovation. Continue increasing market penetration in core
categories as we mentioned above.
- Expand to new categories, as we also mentioned above in the
Product Innovation pillar.
- Pricing Strategy. Revised pricing strategy will focus on
delivering great value packages to fuel consumer´s desire to buy as
disposable income remains pressured. Furthermore, we are adjusting
prices to reflect the recent decline in container costs, which will
further incentive consumers to purchase our products.
In terms of our international expansion plans to support our
long-term growth:
- We started our initial assessment and are in the process of
finding the right team to lead the expansion of Betterware to
the United States with the aim of
starting operations in Q4 2023.
- For the longer term, we target further international expansion
to South America, namely
Colombia and Peru, between 2025 and 2026.
Having completed the acquisition of JAFRA in 2022, we are
focused on reaccelerating its growth to high single-digit or low
double-digit in the near term beginning in 2023, as well as
improving its profitability and cash flow generation. We are
confident we can achieve our objectives by replicating Betterware´s
three strategic pillars into JAFRA´s day to day operations, and we
have been intensively working to set up the conditions to achieve
our growth and profitability objectives:
- Product Innovation: implementing our best practices to
achieve a successful and enhanced innovation pipeline in JAFRA´s
product line.
-
- Assembled a new Product Innovation Committee led by a talented
and experienced team based in Mexico
City, which is very close to Queretaro.
- Relocated our R&D team from Los
Angeles to our manufacturing facilities in Queretaro, Mexico, which allows for faster
joint product development. This has already enabled us to reduce
the time-to-market of products from 18 to 8 months.
- Increased focus on Product Innovation in every category, aimed
at: strengthening our position in the fragrance category, which we
lead in Mexico and increasing our
participation in other categories, especially Skin Care and
Color.
- Technology: focusing our digital efforts through a
comprehensive strategy to provide a better experience for
consumers.
-
- Deployed Betterware´s previous commercial application for JAFRA
Mexico, allowing leaders and consultants in Mexico to perform their most critical business
transactions digitally.
- Advanced work on our B2C digital platform, which is expected to
be introduced by Q2 2023. This platform will allow us to attract
new customers and enter untapped market segments, increase our data
analytics capabilities and our understanding of our customers. As
in Betterware, the platform will include flexible payment options,
on-line and cash-on-delivery, and will represent an incremental
income opportunity for JAFRA´s sales force, as they will receive
the same compensation as in their traditional sales.
- Business Intelligence: replicating Betterware´s big data
capabilities to improve JAFRA´s understanding of the market and
accelerate its market penetration.
-
- The Chief Business Intelligence Officer at Betterware for the
last 10 years was designated Corporate Chief Business Intelligence
Officer, overseeing both JAFRA and Betterware.
- Started the process to significantly improve JAFRA´s sales
catalogue, backed by Betterware's decade long experience.
- Realigned our strategies to focus on personal contact with our
sales force throughout the country.
- Enhanced understanding of the market and our customers through
data analysis. We are building the appropriate team to lead our
business intelligence efforts.
- Finance: As for efficiencies and synergies, for 2023 are
expected to be in the range of Ps. 200M and Ps. 300M
million. These include:
-
- Elimination of Jafra's Global Expenses, which will allow us to
save over Ps. 140M per year going
forward.
- Relocation of USA Offices,
reducing approximately 40% of our current rent expenses, or
approximately Ps. 10M in savings per
year
- Relocation of our R&D team will allow us to save
approximately Ps. 20M from 2023
onwards
- Savings in IT expenses of approximately Ps. 30M per year.
- Other efficiencies, including the renegotiation of supply
contracts, streamlining of expenses, and consolidating purchases of
Jafra and Betterware's rewards programs.
- Currently evaluating divestments of unproductive assets worth
around Ps. 500- 700M, including the
sale of JAFRA´s Headquarters in Mexico
City and spare land adjacent to our manufacturing facilities
in Queretaro. This sale is
expected to be completed in Q1 2023 and the resources will be used
for the prepayment of debt. Prior to the sale, we will invest
approximately Ps. 65M in new leased
facilities for our JAFRA team in Mexico
City.
For the rest of 2022 and going forward, we will continue the
integration process and the evaluation of efficiency and growth
opportunities.
Growth Expectations for 2022
Given our consolidated results for the first half of the year,
we expect our consolidated net revenues to be in the range of Ps.
12,800M and Ps. 14,200M, and our consolidated EBITDA to be in the
range of Ps. 2,400 and Ps. 2,700M,
which include JAFRA's full year 2022 results. Our full year
expectations per company, including JAFRA´s full year results, are
as follows:
|
Betterware
|
Jafra*
|
Total
|
Net
Revenue
|
Ps. 6,800M - Ps
7,200M
|
Ps. 6,000M - Ps.
7,000M
|
Ps. 12,800M – Ps.
14,200M
|
EBITDA
|
Ps. 1,700M - Ps.
1,900M
|
Ps. 700M - Ps.
800M
|
Ps.
2,400M-2,700M
|
*JAFRA 2022 Guidance
includes JAFRA´s non-IFRS net revenues and Adjusted EBITDA from
January 1st to April 6th of Ps. 1,686.8M and
Ps. 158.4M, respectively.
|
In the longer term, we are fully confident of our growth
opportunities in the years to come.
For Betterware, we remain confident we will reach our target of
40% household penetration in Mexico, as well as expand our geographic
reach, starting with expansion to the
United States, which we have already started the initial
evaluation process, and expect to start operations by Q4 2023.
And for JAFRA, we are confident that based on our three
strategic pillars of product innovation, technology and business
intelligence, and executing on the efficiency strategies we have
already identified, we will reignite its revenue growth while
improving its EBITDA margins in the short and long term.
Dividend
The prevailing macroeconomic outlook is characterized by low
growth, high inflation and increasing interest rates for the coming
months and, furthermore, supply chain disruptions remain at present
and can potentially prevail in the future. In this context, we
remain focused on Jafra's efficient integration and
consolidation in the short-term.
Based on the above and considering the revenue decline
year-to-date, our Board of Directors has proposed to adjust the
dividend payment to Ps. 200M for the
quarter, a sustainable level even in this uncertain
environment, prioritizing company's financial strength
after the temporary cash reduction in our balance sheet due to the
initial cash investment of Ps. 574M
related to the acquisition of Jafra, as well as other investments
aimed at unleashing JAFRA's full potential and enhancing its value
through investments in venues like Business Intelligence and
further IT capabilities, coupled with severance payments due to
workforce restructuring, a temporary increase in inventories aimed
at preserving an adequate service level to our customers, and
anticipating higher interest payments due to rising interest
rates.
The dividend is subject to approval at the Ordinary General
Shareholders' Meeting of August
19th, 2022.
In the longer term, we remain fully confident in our
ability to generate strong cash flows and continue to return value
to our shareholders through constant and growing dividend payments
as our businesses continue to grow. As the situation
stabilizes and our strategies begin to show results in JAFRA, the
board will analyze the long-term sustainable dividend policy.
Share Repurchase Program
During the second quarter, we paused the execution of our share
repurchase program due to the completion of the JAFRA acquisition.
We will continue to conservatively analyze the appropriate
execution of the repurchase program, as we remain focused on
maximizing long-term shareholder´s value while maintaining a strong
balance sheet.
Betterware de
México, S.A.P.I. de C.V.
|
Consolidated
Statements of Financial Position
|
As of June 30, 2022,
and 2021
|
(In Thousands of
Mexican Pesos)
|
|
|
June
2022
|
June
2021
|
Assets
|
|
|
Cash and cash
equivalents
|
575,727
|
520,081
|
Trade accounts
receivable, net
|
1,215,517
|
886,923
|
Accounts receivable
from related parties
|
6,414
|
74,867
|
Inventories
|
2,540,360
|
1,468,342
|
Prepaid
expenses
|
177,126
|
254,605
|
Value added tax
receivable
|
3,202
|
-
|
Other assets
|
502,478
|
37,293
|
Total current
assets
|
5,020,824
|
3,242,111
|
Property, plant and
equipment, net
|
1,848,424
|
1,020,895
|
Right of use assets,
net
|
153,006
|
19,002
|
Deferred income
tax
|
302,651
|
17,605
|
Investment in
subsidiaries
|
1,235
|
26,958
|
Intangible assets,
net
|
646,989
|
330,701
|
Goodwill
|
3,084,893
|
365,813
|
Other assets
|
121,732
|
3,775
|
Total non-current
assets
|
6,158,930
|
1,784,749
|
Total
assets
|
11,179,754
|
5,026,860
|
Liabilities and
Stockholders' Equity
|
|
|
Short term debt and
borrowings
|
679,933
|
100,450
|
Accounts payable to
suppliers
|
1,531,240
|
2,243,161
|
Accrued
expenses
|
324,831
|
272,065
|
Provisions
|
775,076
|
59,546
|
Income tax
payable
|
79,193
|
160,866
|
Value added tax
payable
|
67,832
|
31,759
|
Trade accounts payable
to related parties
|
120,001
|
20,898
|
Statutory employee
profit sharing
|
73,442
|
6,537
|
Lease
liability
|
115,285
|
5,990
|
Derivative financial
instruments
|
42,904
|
138,745
|
Total current
liabilities
|
3,809,737
|
3,040,017
|
Employee
benefits
|
224,454
|
1,596
|
Derivative financial
instruments
|
-
|
14,305
|
Deferred income
tax
|
98,304
|
56,959
|
Lease
liability
|
35,681
|
13,597
|
Long term debt and
borrowings
|
5,905,688
|
475,344
|
Total non-current
liabilities
|
6,264,127
|
561,801
|
Total
Liabilities
|
10,073,864
|
3,601,818
|
|
|
|
Stockholders'
Equity
|
1,104,683
|
1,425,042
|
Non-controlling
interest
|
1,207
|
-
|
Total Stockholders'
Equity
|
1,105,890
|
1,425,042
|
Total Liabilities
and Stockholders' Equity
|
11,179,754
|
5,026,860
|
Betterware de
México, S.A.P.I. de C.V.
|
Consolidated
Statements of Profit or Loss and Other Comprehensive
Income
|
For the three-months
ended on June 30, 2022, and 2021
|
(In Thousands of
Mexican Pesos)
|
|
|
Q2
2022
|
Q2
2021
|
∆%
|
Net revenue
|
3,242,928
|
2,594,477
|
25.0 %
|
Cost of
sales
|
1,003,638
|
1,122,071
|
(10.6 %)
|
Gross
profit
|
2,239,290
|
1,472,406
|
52.1 %
|
|
|
|
|
Administrative
expenses
|
791,204
|
335,719
|
135.7 %
|
Selling
expenses
|
784,685
|
275,003
|
185.3 %
|
Distribution
expenses
|
158,138
|
135,765
|
16.5 %
|
Total
expenses
|
1,734,027
|
746,487
|
132.3 %
|
|
|
|
|
Share of results of
subsidiaries
|
-
|
(944)
|
(100.0 %)
|
|
|
|
|
Operating
income
|
505,263
|
724,975
|
(30.3 %)
|
|
|
|
|
Interest
expense
|
(131,163)
|
(13,975)
|
838.6 %
|
Interest
income
|
10,301
|
5,212
|
97.6 %
|
Unrealized gain in
valuation of financial derivative instruments
|
28,315
|
34,458
|
(17.8 %)
|
Foreign exchange loss,
net
|
(31,888)
|
(82,295)
|
(61.3 %)
|
Financing cost,
net
|
(124,435)
|
(56,600)
|
119.8 %
|
|
|
|
|
Income before income
taxes
|
380,828
|
668,375
|
(43.0 %)
|
|
|
|
|
Income taxes
|
129,143
|
207,505
|
(37.8 %)
|
|
|
|
|
Net income including
minority interest
|
251,685
|
460,870
|
(45.4 %)
|
Non-controlling
interest loss
|
316
|
-
|
100.0 %
|
Net
income
|
252,001
|
460,870
|
(45.3 %)
|
|
|
EBITDA breakdown
(Ps. 595 million)
|
Concept
|
Q2
2022
|
Q2
2021
|
∆%
|
Net income including
minority interest
|
251,685
|
460,870
|
(45.4 %)
|
(+) Income
taxes
|
129,143
|
207,505
|
(37.8 %)
|
(+) Financing cost,
net
|
124,435
|
56,600
|
119.8 %
|
(+) Depreciation and
amortization
|
90,072
|
20,989
|
329.1 %
|
EBITDA
|
595,335
|
745,964
|
(20.2 %)
|
EBITDA
margin
|
18.4 %
|
28.8 %
|
(10.4 %)
|
Betterware de
México, S.A.P.I. de C.V.
|
Consolidated
Statements of Profit or Loss and Other Comprehensive
Income
|
For the six-months
ended on June 30, 2022, and 2021
|
(In Thousands of
Mexican Pesos)
|
|
|
Jun
2022
|
Jun
2021
|
∆%
|
Net revenue
|
5,112,055
|
5,496,138
|
(7.0 %)
|
Cost of
sales
|
1,683,965
|
2,355,351
|
(28.5 %)
|
Gross
profit
|
3,428,090
|
3,140,787
|
9.1 %
|
|
|
|
|
Administrative
expenses
|
1,107,158
|
634,453
|
74.5 %
|
Selling
expenses
|
1,044,932
|
570,332
|
83.2 %
|
Distribution
expenses
|
226,216
|
302,129
|
(25.1 %)
|
Total
expenses
|
2,378,306
|
1,506,914
|
57.8 %
|
|
|
|
|
Share of results of
subsidiaries
|
(18,333)
|
(679)
|
2600.0 %
|
|
|
|
|
Operating
income
|
1,031,451
|
1,633,194
|
(36.8 %)
|
|
|
|
|
Interest
expense
|
(160,580)
|
(29,119)
|
451.5 %
|
Interest
income
|
15,713
|
8,601
|
82.7 %
|
Unrealized (loss) gain
in valuation of financial derivative instruments
|
(71,097)
|
167,243
|
(142.5 %)
|
Foreign exchange loss,
net
|
(25,048)
|
(186,118)
|
(86.5 %)
|
Financing cost,
net
|
(241,012)
|
(39,393)
|
511.8 %
|
|
|
|
|
Income before income
taxes
|
790,439
|
1,593,801
|
(50.4 %)
|
|
|
|
|
Income taxes
|
271,779
|
494,387
|
(45.0 %)
|
|
|
|
|
Net income including
minority interest
|
518,660
|
1,099,414
|
(52.8 %)
|
Non-controlling
interest loss
|
636
|
-
|
100.0 %
|
Net
income
|
519,296
|
1,099,414
|
(52.8 %)
|
|
|
EBITDA breakdown
(Ps. 1,143 million)
|
Concept
|
Jun
2022
|
Jun
2021
|
∆%
|
Net income including
minority interest
|
518,660
|
1,099,414
|
(52.8 %)
|
(+) Income
taxes
|
271,779
|
494,387
|
(45.0 %)
|
(+) Financing cost,
net
|
241,012
|
39,393
|
511.8 %
|
(+) Depreciation and
amortization
|
111,689
|
36,415
|
206.7 %
|
EBITDA
|
1,143,140
|
1,669,609
|
(31.5 %)
|
EBITDA
margin
|
22.4 %
|
30.4 %
|
(8.0 %)
|
Betterware de
México, S.A.P.I. de C.V.
|
Consolidated
Statements of Cash Flows
|
For the six-months
ended on June 30, 2022, and 2021
|
(In Thousands of
Mexican Pesos)
|
|
|
Jun
2022
|
Jun
2021
|
Cash flows from
operating activities:
|
|
|
Profit for the
period
|
518,660
|
1,099,414
|
Adjustments
for:
|
|
|
Income tax expense
recognized in profit of the year
|
271,779
|
494,387
|
Depreciation and
amortization of non-current assets
|
111,689
|
36,415
|
Interest income
recognized in profit or loss
|
(15,713)
|
(8,601)
|
Interest expense
recognized in profit or loss
|
160,580
|
29,119
|
Gain of property,
plant, equipment sale
|
(368)
|
-
|
Unrealized (gain)/ loss
in valuation of financial derivative instruments
|
71,097
|
(167,243)
|
Share-based payment
expense
|
9,011
|
39,241
|
Currency translation
effect
|
1,291
|
-
|
Loss in
subsidiary
|
4,560
|
679
|
Movements in working
capital:
|
|
|
Trade accounts
receivable
|
54,646
|
(129,117)
|
Trade accounts
receivable from related parties
|
3,857
|
-
|
Inventory,
net
|
(193,207)
|
(194,316)
|
Prepaid expenses and
other assets
|
(143,126)
|
4,548
|
Accounts payable to
suppliers and accrued expenses
|
(731,386)
|
326,546
|
Provisions
|
(39,700)
|
(91,462)
|
Value added tax
payable
|
85,719
|
5,056
|
Statutory employee
profit sharing
|
(39,058)
|
(817)
|
Trade accounts payable
to related parties
|
120,204
|
(74,876)
|
Income taxes
paid
|
(307,100)
|
(423,776)
|
Employee
benefits
|
3,642
|
(82)
|
Net cash (used) generated by operating activities
|
(52,923)
|
945,115
|
Cash flows from
investing activities:
|
|
|
Investment in
subsidiaries
|
(4,629,997)
|
(24,102)
|
Payments for property,
plant and equipment, net
|
(110,603)
|
(276,212)
|
Proceeds from disposal
of property, plant and equipment, net
|
5,486
|
4,852
|
Interest
received
|
15,713
|
8,601
|
Net cash used in investing activities
|
(4,719,401)
|
(286,861)
|
Cash flows from
financing activities:
|
|
|
Repayment of
borrowings
|
(220,010)
|
(73,752)
|
Proceeds from
borrowings
|
5,368,651
|
20,000
|
Interest
paid
|
(154,629)
|
(29,450)
|
Cost of
emission
|
(76,910)
|
-
|
Lease
payment
|
(18,985)
|
(4,791)
|
Share
repurchases
|
(25,264)
|
-
|
Dividends
paid
|
(700,000)
|
(700,000)
|
Net cash (used) generated in financing activities
|
4,172,853
|
(787,993)
|
Net decrease in cash and cash equivalents
|
(599,471)
|
(129,739)
|
Cash and cash
equivalents at the beginning of the period
|
1,175,198
|
649,820
|
Cash and cash
equivalents at the end of the period
|
575,727
|
520,081
|
Use of Non-IFRS Financial Measures
This announcement includes certain references to EBITDA, EBITDA
Margin, Net Debt:
EBITDA: defined as profit for the year adding back the
depreciation of property, plant and equipment and right of use
assets, amortization of intangible assets, financing cost, net and
total income taxes
EBITDA Margin: is calculated by dividing EBITDA by net
revenues
EBITDA and EBITDA Margin are not measures recognized under IFRS
and should not be considered as an alternative to, or more
meaningful than, consolidated net income for the year as determined
in accordance with IFRS or as indicators of our operating
performance from continuing operations. Accordingly, readers are
cautioned not to place undue reliance on this information and
should note that these measures as calculated by the Company, may
differ materially from similarly titled measures reported by other
companies.
Betterware believes that these non-IFRS financial measures are
useful to investors because (i) Betterware uses these measures to
analyze its financial results internally and believes they
represent a measure of operating profitability and (ii) these
measures will serve investors to understand and evaluate
Betterware's EBITDA and provide more tools for their analysis as it
makes Betterware's results comparable to industry peers that also
prepare these measures.
About Betterware de México, S.A.P.I. de C.V.
Founded in 1995, Betterware de Mexico is the leading direct-to-consumer
company in Mexico focused on
creating innovative products that solve specific needs regarding
organization, practicality, space saving and hygiene within the
household. Betterware's wide product portfolio includes home
organization, kitchen, commuting, laundry and cleaning, as well as
other categories that include products and solutions for every
corner of the household.
The Company has a differentiated two-tier network of
distributors and associates that sell their products through twelve
catalogues per year. All products are designed by the Company and
under the Betterware brand name through its different sources of
product innovation. The Company's state-of-the-art infrastructure
allows it to safely and timely deliver its products to every part
of the country, backed by the strategic location of its national
distribution center. Today, the Company distributes its products in
Mexico and Guatemala, and has plans of additional
international expansion.
Supported by its asset light business model and its three
strategic pillars of Product Innovation, Business Intelligence and
Technology, Betterware has been able to achieve sustainable
double-digit growth rates by successfully expanding its household
penetration and share of wallet.
Forward-Looking Statements
This press release includes certain statements
that are not historical facts but are forward-looking statements
for purposes of the safe harbor provisions under the United States
Private Securities Litigation Reform Act of 1995. Forward-looking
statements generally are accompanied by words such as "believe,"
"may," "will", "estimate", "continue", "anticipate", "intend",
"expect", "should", "would", "plan", "predict", "potential",
"seem", "seek," "future," "outlook", and similar expressions that
predict or indicate future events or trends or that are not
statements of historical matters. The reader should understand that
the results obtained may differ from the projections contained in
this document and that many factors could cause our actual
activities or results to differ materially from the activities and
results anticipated in forward looking statements. For this reason,
the Company assumes no responsibility for any indirect factors or
elements beyond its control that might occur inside Mexico or abroad and which might affect the
outcome of these projections and encourages you to review the
'Cautionary Statement' and the 'Risk Factor' sections of our annual
report on Form 20-F for the year ended December 31, 2020 and any of the Company's other
applicable filings with the Securities and Exchange Commission for
additional information concerning factors that could cause those
differences
The Company undertakes no obligation and does
not intend to update these forward-looking statements to
reflect events or circumstances occurring after the date hereof.
You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof.
Further information on risks and uncertainties that may affect the
Company's operations and financial performance, and the forward
statements contained herein, is available in the Company's filings
with the SEC. All forward-looking statements are qualified in their
entirety by this cautionary statement.
Q2 2022 Conference Call
Management will hold a conference call with investors on
July 29, 2022 at 8:00 am Central Standard Time (CST)/ 9:00am Eastern Time (EST). For anyone who wishes
to join live, the dial-in information is:
Toll Free: 1-877-451-6152
Toll/International: 1-201-389-0879
Conference ID: 13731394
If you wish to listen to the replay of the conference call,
please see instructions below:
Toll Free: 1-844-512-2921
Toll/International: 1-412-317-6671
Replay Pin Number: 13731394
* JAFRA´s 2022 estimated EBITDA after the closing of the
acquisition, which excludes adjusted EBITDA of Ps. 158.4M pertaining to January 1st to April 6th,2022.
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SOURCE Betterware de México, S.A.B. de C.V.