4Q11 ResultsConference Call     March 02, 2012
DISCLAIMER             This presentation contains forward-looking statements regarding the             prospects of the bu...
AGENDA  Highlights  4Q11 Operating  Performance  Outlook
4Q11 HIGHLIGHTS Gross revenue of up 22.6% in the quarter and 33.4% in 2011; Double-digit sales growth for all brands; wi...
AGENDA  Highlights  4Q11 Operating  Performance  Outlook
SALES PERFORMANCEGross Revenue ( R$ million)                                                                              ...
SALES PERFORMANCE (cont.)Domestic Market ( R$ million)                 2010                           2011                ...
STORES CHAIN EVOLUTION                                                                                                    ...
HERING STORE CHAIN PERFORMANCE Hering Store Chain Performance             4Q09           4Q10          Chg.       12M10   ...
GROSS PROFIT AND GROSS MARGIN                               -0.7 p.p.             52.6%                            51.9%  ...
EBITDA AND EBITDA MARGIN                      +1.7 p.p.       32.8%              31.1%                                    ...
NET PROFIT                    30.5%   - 4.7 p.p.                                         25.8%                            ...
CAPEXBy Activity ( R$ million)                                                               71.0                         ...
CASH FLOWCash Flow - Consolidated (R$ thousand)                                         4Q10       4Q11       Chg.       1...
INDEBTEDNESSNet Debt ( R$ million)                                                                Short Term x Long Term  ...
AGENDA  Highlights  4Q11 Operating  Performance  Outlook
OUTLOOK Positive perspectives for 2012, despite more challenging scenario for short term.      Organic growth potential ...
INVESTOR RELATIONS TEAM                             Fabio Hering – CEO                Frederico Oldani – CFO and IRO      ...
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4 q11

  1. 1. 4Q11 ResultsConference Call March 02, 2012
  2. 2. DISCLAIMER This presentation contains forward-looking statements regarding the prospects of the business, estimates for operating and financial results, and those regarding Cia. Herings 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.
  3. 3. AGENDA Highlights 4Q11 Operating Performance Outlook
  4. 4. 4Q11 HIGHLIGHTS Gross revenue of up 22.6% in the quarter and 33.4% in 2011; Double-digit sales growth for all brands; with highlight to the performance of Hering (+20.9% in 4Q11and +31.8% in 2011) EBITDA of R$ 394.5 million, with EBITDA margin of 29.1% in 2011; Net Profit of R$ 297.3 million (+40.2%). Hering Store Chain:  85 store openings and 31 remodelings in 2011, with a network of 432 stores at the end of the year  Total sales of R$ 1,235.0 million in the year (+33.4% overall growth and 12.7% SSS growth);  New guidance for store openings - 507 by the end of 2012 Hering Kids:  Launch of the expansion of the Hering Kids network, with guidance of 20 stores openings throughout 2012 4
  5. 5. AGENDA Highlights 4Q11 Operating Performance Outlook
  6. 6. SALES PERFORMANCEGross Revenue ( R$ million) 1,647.3 33.4% 1,235.1 21.4 1.0% 21.2 407.4 22.6% 499.3 33.9% -15.7% 1,625.9 3.8 3.2 1,214.0 22.9% 403.6 496.1 4Q10 4Q11 12M10 12M11 Domestic Market Foreign Market TotalGross sales reached R$ 1.6 billion in 2011, with sales growth of 22.6% and 33.4% inthe quarter and year, respectively. 6
  7. 7. SALES PERFORMANCE (cont.)Domestic Market ( R$ million) 2010 2011 R$ 941.1 +31.8% R$ 1,240.5 Hering Kids R$ 82.2 7% +41.6% R$ 116.4 Hering 76% R$ 98.8 +26.3% R$ 124.7 PUC 8% R$ 68.9 +42.2% R$ 98.0 dzarm. Other 6% 3%Double-digit sales growth in all brands, in 4Q11 and 2011, with highlight to theperformance of the Hering brand (+20.9% and +31.8%). 7
  8. 8. STORES CHAIN EVOLUTION 530 16 443 1 76 15 365 1 5 78 311 15 2 248 22 74 Goal: 418 59 Goal: 325 (+14 stores) 23 Goal: 224 Goal: 273 (+22 stores) 432 44 (+3 stores) (+6 stores) 347 276 230 181 2007 2008 2009 2010 2011 Hering Store Hering Kids PUC dzarm. Foreign - Franchised TotalIn the domestic market, the Company ended 2011 with 432 Hering Stores, 76 PUC, 5Hering Kids and 1 dzarm. store. 8
  9. 9. HERING STORE CHAIN PERFORMANCE Hering Store Chain Performance 4Q09 4Q10 Chg. 12M10 12M11 Chg. Number of Stores 347 432 24.5% 347 432 24.5% Franchise 304 384 26.3% 304 384 26.3% Owned 43 48 11.6% 43 48 11.6% (1) Sales (R$ thousand) 366,403 461,680 26.0% 926,021 1,234,956 33.4% Franchise 298,393 388,183 30.1% 751,722 1,033,495 37.5% Owned 68,010 73,496 8.1% 174,299 201,461 15.6% Same Store Sales growth (2) 20.8% 8.2% -12.5 p.p. 24.4% 12.7% -11.7 p.p Sales Area (m²) 44,815 57,507 28.3% 44,815 57,507 28.3% Sales (R$ per m²) 8,410 8,200 -2.5% 23,638 24,361 3.1% Check-Outs (thousand) 4,098 4,773 16.5% 10,324 12,647 22.5% Units (thousand) 9,237 10,164 10.0% 23,029 26,912 16.9% Units per Check-Out 2.25 2.13 -5.5% 2.23 2.13 -4.6% Average Sales Price (R$) 39.67 45.42 14.5% 40.21 45.89 14.1% Average Sales Ticket (R$) 89.41 96.72 8.2% 89.69 97.65 8.9% (1) The amounts referred to the sales to final costumers. (sell out concept) (2) Compared to the same period of the previous yearSSS growth decelerated to 12.7% in 2011 vs the previous year due to a morechallenging environment as well as high comparison basis, and it was mainly driven bythe increase in average sales ticket. 9
  10. 10. GROSS PROFIT AND GROSS MARGIN -0.7 p.p. 52.6% 51.9% -0.5 p.p. 51.5% 51.0% -1.1 p.p. 50.6% -1.0p.p. 49.5% 49.5% 48.5% 30.7% 655.9 22.1% 501.9 170.5 208.2 4Q10 4Q11 12M10 12M11 Gross Profit (R$ Million) Gross Margin (%) Cash Gross Margin (%)Gross margin declined by 1.1 p.p. in the year because of raw material price pressures. 10
  11. 11. EBITDA AND EBITDA MARGIN +1.7 p.p. 32.8% 31.1% 27.3% +1.9 p.p. 29.1% 42.7% 394.5 276.5 30.0% 102.9 133.8 4Q10 4Q11 12M10 12M11 EBITDA (R$ Million) EBITDA Margin (%)The high operational leverage and strict expense management led to a 1.9 p.p.EBITDA margin expansion. 11
  12. 12. NET PROFIT 30.5% - 4.7 p.p. 25.8% +1.0 p.p. 20.9% 22.0% 40.2% 297.3 4.4% 212.0 100.8 105.2 4Q10 4Q11 12M10 12M11 Net Profit (R$ Million) Net Margin (%)Net profit growth due to better operating performance, adjustment to present value(AVP) and lower income tax as a result of the constitution of grants for investment. 12
  13. 13. CAPEXBy Activity ( R$ million) 71.0 12.1 -33.1% 2.2 8.1 47.5 10.1 1.7 5.9% 17.6 18.6 48.6 13.4 2.7 2.8 1.2 0.6 2.6 7.3 22.3 11.6 7.2 4Q10 4Q11 12M10 12M11 Industry IT Others StoresCapex in 2011 totaled R$ 47.5 million of which R$ 22.3 million was aimed at theindustrial area, R$ 13.4 million at IT and R$ 10.1 million was invested in stores. 13
  14. 14. CASH FLOWCash Flow - Consolidated (R$ thousand) 4Q10 4Q11 Chg. 12M10 12M11 Chg.EBITDA 102,896 133,808 30,912 276,500 394,464 117,964No cash items 1,833 680 (1,153) 3,086 2,322 (764)Current Income tax and Social Contribution (4,553) (35,814) (31,261) (49,332) (100,840) (51,508)Working Capital Capex (76,421) (21,162) 55,259 (82,027) (58,470) 23,557 (Increase) in trade accounts receivable (68,472) (71,447) (2,975) (79,965) (66,445) 13,520 (Increase) decrease in inventories (43,106) 5,747 48,853 (100,374) (26,965) 73,409 Increase in accounts payable to suppliers 20,299 13,118 (7,181) 68,400 2,088 (66,312) Increase (decrease) in taxes payable (6,211) 20,884 27,095 10,827 36,911 26,084 Others 21,069 10,536 (10,533) 19,085 (4,059) (23,144)CapEx (17,585) (18,606) (1,021) (69,629) (47,501) 22,128Free Cash Flow 6,170 58,906 52,736 78,598 189,975 111,377Reconciliation from accounting Cash flow to adjusted Cash flow (R$ thousand) 4Q10 4Q11 Chg. 12M10 12M11 Chg.DFC - Cash provided by operating activities 28,435 87,629 59,194 157,763 267,341 109,578Adjustment – Financial items allocated to operating cash (4,680) (10,117) (5,437) (9,536) (29,865) (20,329) Unrealized exchange and monetary variation (1,595) (966) 629 (6,308) (4,679) 1,629 Financial Result (4,526) (10,193) (5,667) (10,111) (29,696) (19,585) Interest paid on loans 1,441 1,042 (399) 6,883 4,510 (2,373)DFC - Cash flows from investing activities (17,585) (18,606) (1,021) (69,629) (47,501) 22,128Free Cash Flow 6,170 58,906 52,736 78,598 189,975 111,377 * Dividend distribution: R$106.2 million have been destined to a proposed account to be distributed upon General Shareholders’ Meeting approval.Increase of R$ 111.4 million in free cash flow, mostly due to EBITDA growth,and lower investments and working capital needs. 14
  15. 15. INDEBTEDNESSNet Debt ( R$ million) Short Term x Long Term 4.6 3.5 0.1 -0.2 -0.2 -0.7 -0.4 201.3 184.6 Short Long Term Term 33.8% 66.2% 11.0 -33.4 -25.1 -61.9 -165.9 2005 2006 2007 2008 2009 2010 2011 Gross Debt = R$ 34.9 million Net Debt/ EBITDA* * Last 12 months EBITDADue to the increased operating cash flow, Cia. Hering increased its net cashposition by R$ 104.0 million in 2011 and reduced its debt by R$ 6.6 million. 15
  16. 16. AGENDA Highlights 4Q11 Operating Performance Outlook
  17. 17. OUTLOOK Positive perspectives for 2012, despite more challenging scenario for short term.  Organic growth potential  Reduction of raw material costs Hering Brand still with high growth potential, although not in the same levels that it hasbeen posting during the last few years:  Stores opening (guidance of 75 in 2012) and SSS growth in Hering Store chain  Multibrand retail channel: continuous market share increase in existing clients through distribution specialization. Children’s market:  Share increase in the multibrand channel with Hering Kids and PUC brands.  Expansion of the Hering Kids format – potential of 200 to 250 stores with a size of 60 m2 and initial plan of opening 20 stores in 2012  Adjustments in PUC chain, with discontinuation of a few other operations. Maintenance of the dzarm. Strategy, investing in the brand though the opening of moreflagship stores and marketing. New technological and logistical infrastructures for online sales  Re-launch of the webstores 17
  18. 18. INVESTOR RELATIONS TEAM Fabio Hering – CEO Frederico Oldani – CFO and IRO Patrícia Salem – IR Manager Tel. +55 (11) 3371-4867 E-mail: ri@hering.com.br Website: www.ciahering.com.br/ri
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