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Quarterly Earnings Report
May 2, 2011
1Q11
The Expansion Resulted in Strong Increases; 65.49% in Sales and 52.82% in Operating Income
Financial Highlights:
(All figures are expressed in millions of current Mexican pesos. Comparisons are made with the same period of 2010, unless otherwise stated. Figures may vary due to rounding practices).
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During the first quarter, GCS’s net sales reached $12,782.22 million, an increase of 65.49% compared to 1Q10
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Gross income for the period was $2,215.77 million, an increase of 150.80%
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The gross margin for the quarter was 17.33%
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Quarterly operating expenses as a percentage of sales were 13.51%
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Operating income reached $488.64 million, which resulted in an operating margin of 3.82% for the period
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The quarterly CCF grew by 295.66% versus the same quarter of the previous year
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Operating income plus depreciation and amortization for 1Q11 rose 77.17% versus 1Q10 to reach $600.80 million
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Net profit for the quarter was $231.41 million, 6.49% lower than the net income reported in 1Q10
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As of March 31, 2011 the Group had $1,571.71 million in cash and cash equivalents
Mexico City, Mexico, May 2, 2011. Grupo Casa Saba
(SAB)
(“Saba”, “GCS”, “the Company” or “the Group”),
one of the leading Mexican distributors of pharmaceutical products, health and beauty aids, personal care and consumer goods, general merchandise, publications and other products announces its consolidated financial and operating results for the first quarter of 2011.
QUARTERLY EARNINGS
Several years ago, Grupo Casa Saba entered a stage of expansion as part of its strategy to increase the company’s profitability. Since then, the Group has completed acquisitions in several South American countries, beginning in May 2008 with the acquisition of the Brazilian pharmacy chain Drogasmil (Casa Saba Brasil). In September 2010, the company acquired 97.8% of Farmacias Ahumada, S.A., a chain of more than 1,200 pharmacies with operations in Chile, Mexico and Peru and, as a result, has reclassified its divisions in accordance with its strategy, creating a new division known as “Retail Pharmacy.”
Consequently, GCS will report the results of its affiliates that distribute pharmaceutical and non-pharmaceutical products in Mexico to both its private sector (Distribution – Private Pharma) and government sector (Distribution – Government Pharma) clients. Sales from CITEM and the "Health, Beauty, Consumer Goods, General Merchandise and Others" division will continue to be reported separately within this new business division.
As a result, the majority of the figures presented in this report are not comparable with those that were reported during the same quarter of 2010.
NET
SALES
Net sales during the first quarter of 2011 grew 65.49%, a significant increase compared to 1Q10. The Group sold $12,782.22 million pesos in the period versus $7,724.08 million pesos in sales during the same quarter of the previous year.
This was primarily the result of the acquisition of Farmacias Ahumada, S.A. and the consolidation of its sales.
SALES BY DIVISON
DISTRIBUTION DIVISION
DISTRIBUTION - PRIVATE PHARMA
Quarterly sales for this division reached $5,825.93 million pesos and represented 45.58% of the Group’s overall sales for the period.
DISTRIBUTION - GOVERNMENT
PHARMA
Sales in our Government Pharma division increased 23.52% during the first quarter of 2011 to reach $162.84 million. This compared favorably to the $131.84 million in sales registered during the first quarter of 2010 and can be attributed, in large part, to an increase in sales to the IMSS, ISSSTE and various other state government institutions.
This division represented 1.27% of the Group’s total sales during the quarter, a decline of 44 basis points compared to the 1.71% participation that it had in 1Q10. This decrease is due to the higher base resulting from the significant increase in the company’s overall sales this quarter compared to the same period of the previous year.
HEALTH,
BEAUTY, CONSUMER GOODS, GENERAL MERCHANDISE AND OTHER
Sales in our Health, Beauty, Consumer Goods, General Merchandise and Other division grew by 2.71% compared to the first quarter of 2010 to reach $660.22 million pesos. This was the primarily the result of an increase in promotions for seasonal high priority categories.
As a percentage of the Group’s total sales, this division represented 5.17% during the quarter, a decline of 315 basis points compared to 1Q10. Its participation was diluted as a result of the increase in the Group’s overall sales compared to the same quarter of 2010.
PUBLICATIONS
Sales for CITEM, the company’s publications distribution division, rose 14.27% during the first quarter of 2011 compared to the same period of 2010. This increase was due to the incorporation of new titles into the catalog during the period.
As a result, this division’s participation as a percentage of total sales went from 2.46% in 1Q10 to 1.70% in 1Q11 and was also affected by the higher base resulting from the increase in total sales.
RETAIL PHARMACY
During the quarter, the new retail pharmacy division reported sales of $5,916.09 million pesos and represented 46.28% of the Group’s total sales.
As a result, the sales mix for the fourth quarter of 2010 was as follows:
Division
%
of Sales
Retail Pharmacy 46.28%
Distribution - Private Pharma 45.58%
Distribution - Health,
Beauty, Consumer Goods,
General Merchandise and Other 5.17%
Distribution - Government Pharma
1.27%
Distribution - Publications 1.70 %
TOTAL 100.00%
GROSS INCOME
During the first quarter of the year, the Group’s gross income grew 150.80%, from $883.46 million during the same period of the previous year to $2,215.77 million this quarter.
As a result, the company’s gross margin for the period was 17.33%, which compared favorably to the 11.44% margin posted in 1Q10.
OPERATING EXPENSES
GCS’s operating expenses reached $1,727.13 million in 1Q11, an increase of 206.38% compared to the first quarter of 2010 when expenses were $563.71 million.
Operating expenses accounted for 13.51% of the Group’s overall sales versus the 7.30% margin registered during the same period of 2010.
OPERATING INCOME
Quarterly operating income grew 52.82% to reach $488.64 million pesos, higher than the $319.74 million reported in 1Q10.
As a result, the operating margin for the period was 3.82%, slightly lower than the 4.14% margin reported in the first quarter of 2010.
OPERATING INCOME PLUS DEPRECIATION AND
AMORTIZATION
Operating income plus depreciation and amortization for the first quarter of 2011 was $600.80 million pesos, an increase of 77.17% compared to the $339.12 million pesos reported during the first quarter of 2010.
The company’s EBITDA margin for the quarter was 4.70%, somewhat higher than the 4.39% margin registered during the same period of the previous year.
CASH AND CASH EQUIVALENTS
At the end of the first quarter of 2011 the company’s cash and cash equivalents totaled $1,571.71 million pesos.
COMPREHENSIVE COST OF FINANCING
GCS’s comprehensive cost of financing (CCF) went from $54.92 million in 1Q10 to $217.29 million during the first quarter of this year, an increase of 295.66%.
This was primarily due to the increase in interest payments related to the credits the company obtained in order to acquire Farmacias Ahumada, S.A. as well as the interest generated from the use of short-term credits for our operations.
OTHER EXPENSES (INCOME)
During the first quarter of 2011, the Company registered an income in the Other Expenses (Income) line item of $8.34 million pesos compared to an income of $6.96 million obtained during the same period of 2010. It is important to mention that the results listed in this line item are derived from activities outside of the company’s normal business operations.
TAX PROVISIONS
Grupo Casa Saba’s tax provisions for 1Q11 totaled $48.28 million pesos, 98.44% higher than the $24.33 million paid by the Group during the first quarter of 2010. Of these, $50.84 million were related to income tax payments and ($2.56) million were for deferred income tax.
NET INCOME
Net income for the quarter was $231.41 million pesos, a decline of 6.49% compared to the first quarter of 2010. This was primarily the result of the increase in the CCF as well as the company’s operating expenses.
Consequently, the net margin for the period was 1.81%, 139 basis points lower than the 3.20% net margin registered during the same quarter of 2010.
WORKING CAPITAL
During the first quarter of 2011, the Group’s accounts receivable days declined by 13.9 days from 1Q10 to reach 59.1 days. In addition, the accounts payable days increased by 18.4 days versus 1Q10, to reach 93.3 days. Finally, our inventory days were 63.5 days, 9.3 more days compared to the same period of the previous year.
The 265.4 million shares issued by Grupo Casa Saba are listed on the Mexican Stock Exchange and its ADRs on the New York Stock Exchange, both under the symbol “SAB”. One ADR equals 10 ordinary shares.
Grupo Casa Saba was founded in 1892 and is one of the leading distributors of pharmaceutical products, beauty, personal care and consumer goods, general merchandise, publications and other goods in Mexico. With more than 115 years of experience, the Company distributes to the majority of pharmacies, chains, self-service and convenience stores, as well as other specialized national chains. With the acquisition of FASA in October of 2010 the company now has retail pharmacy outlets located in Mexico, Chile, Brazil and Peru.
As a precautionary note to investors, except for the historic information contained herein, certain topics discussed in this document constitute forward-looking statements. Such topics imply risks and uncertainties, including the economic conditions in Mexico and those countries in which Grupo Casa Saba operates, directly or indirectly, including the United States of America, Brazil, Chile and Peru, as well as variations in the value of the Mexican peso as compared with the currencies of the previously-mentioned countries.
Contacts:
GRUPO CASA SABA IR
Communications:
Sandra Yatsko Jesús
Martínez Rojas
+52 (55) 5284-6672 +52
(55) 5644-1247
syatsko@casasaba.com jesus@irandpr.com
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