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  • 1. 2Q13 Results Conference Call July 18, 2013
  • 2. 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.
  • 3. AGENDA Operating Performance 2Q13 Results Outlook
  • 4. 4 2Q13 OVERVIEW Gross Revenues (R$ million) EBITDA (R$ million)Distribution Network R$ 340.9 R$ 35.3 R$ 28.3 R$ 380.3 R$ 41.7 R$ 29.4 +11.6% R$ 40.0 R$ 54.3+36.0% +18.1% +3.9% 2Q12 2Q13 Foreign Market R$ 6.9 R$ 7.9+15.3% R$ 460.7 R$ 521.2+14.4% Hering Store Network (Sell Out R$ million) Channel 2Q12 2Q13 % Domestic Market 2Q13 Multi-brand Retail 16,806 clients 17,596 clients 50.8% Franchises 485 stores 589 stores 37.1% Webstore 3 stores 3 stores 1.3% Own Stores 61 stores 66 stores 10.7% 350,3 350,3 350,3 387,1 +71 Stores -1.2% - 2Q12 Expansion SSS 2Q13 +10.5% 110.0 116.7 28.7% 26.8% 6.0% 2Q12 2Q13 EBITDA EBITDA Margin
  • 5. 5 2Q13 HERING CAMPAINGS Valentine´s DayMother´s Day  Positive SSS performance on the 1st half of 2Q13  Good acceptance of the collection  SSS deceleration after Mother´s Day  Impact of uncertain social-economic scenario  Lower consumer flow
  • 6. AGENDA Operating Performance 2Q13 Results Outlook
  • 7. 7 SALES PERFORMANCE In 2Q13, Gross Revenues reached R$ 521.2 million (+13.1%) with double digit growth across Hering, Hering Kids and PUC brands. Gross Revenues per Brand (R$ million) Gross Revenes per Channel (R$ million) 340.9 380.3 40,0 54.335.3 41.7 28.3 29.4 2Q12 2Q13 Hering Hering Kids PUC dzarm. 18.1% 3.9% 11.6% 36.0% 231.2 257.2 155.4 187.6 4.7 6.7 53.2 54.3 2Q12 2Q13 Multibrand Retail Franchise Webstore Owned Stores 43.6% 2.1% 11.2% 20.7%
  • 8. 8 GROSS PROFIT AND EBITDA 0.8 p.p. expansion in gross margin due to lower promotional activity in relation to 2Q12 compensated by higher profit sharing provisioning, not translating into EBITDA margin Gross Profit and Gross Margin (R$ million) EBITDA and EBITDA Margin (R$ million ) 173.1 200.6 15.9% 45.2% 46.0% 46.3% 47.0% 2Q12 2Q13 Gross Profit Gross Margin Cash Gross Margin 110.0 116.7 28.7% 26.8% 6.0% 2Q12 2Q13 EBITDA EBITDA Margin
  • 9. 9 NET INCOME AND CAPEX +4.3% growth in Net Income, as a result of EBITDA growth combined with higher Income & Social Contribution Taxes. CapEx totalled R$ 16.6 million in 2Q13, with highlight to IT infrastructure (R$ 5.7 million) due to the process of extending the SAP. Net Income (R$ million) Capex (R$ million) 85.2 88.8 22.2% 20.4% 4.3% 2Q12 2Q13 Net Income Net Margin 6.2 8.5 4.4 5.7 0.5 0.2 1.2 2.2 12.3 16.6 35.0% 2Q12 2Q13 Industry IT Others Stores
  • 10. 10 CASH FLOW Reduction of R$ 7.3 million in cash flow generation in comparison to 2Q12, due to (i) higher incidence of Income and Social Contribution taxes, (ii) increase in CapEx and (iii) inventory building. Cash Flow - Consolidated (R$ thousand) 2Q12 2Q13 Chg. EBITDA 110.008 116.656 6.648 Non cash items 953 1.104 151 Current Income tax and Social Contribution (25.329) (32.386) (7.057) Working Capital Investment 17.484 14.689 (2.795) Decrease (Increase) in trade accounts receivable (38.824) (28.987) 9.837 Decrease (increase) in inventories 34.086 18.802 (15.284) Increase (decrease) in accounts payable to suppliers (964) (2.565) (1.601) Increase (decrease) in taxes payable 18.782 7.219 (11.563) Others 4.404 20.220 15.816 CapEx (12.348) (16.643) (4.295) Free Cash Flow 90.768 83.420 (7.348)
  • 11. AGENDA Operating Performance 2Q13 Results Outlook
  • 12. 12 OUTLOOK  2S13 initiates with caution due to uncertainties in the social-economic scenario.  Evolution in the organizational structure of the Company with higher focus on Brand Management.  Hering and Hering Kids as the main growth avenue  Guidance of 77 new Hering Stores e 30 Hering Kids in the year  Hering Store project evolution with 1st pilot store under renovation in the Ibirapuera Shopping Mall  Gain of share in the multi-brand retail channel through qualification strategy  High growth potential in the Hering Kids network  Continuation of campaings and improvements in shopping experience to further exploring the online retail.  Room for gross margin recovery, however PPR normalization allied to a scenario of high volatiliy in exchange rates, should not reflect in operational margin expansion in the year
  • 13. INVESTOR RELATIONS TEAM Fabio Hering – CEO Frederico Oldani – CFO and IRO Patrícia Salem – IR Manager Daniel Popovich – IR Analyst Tel. +55 (11) 3371-4867 E-mail: ri@hering.com.br Website: www.ciahering.com.br/ri