Conference Call 4Q09
                       March 8, 2010
Disclaimer

 This presentation contains forward-looking statements regarding the prospects of
 the business, estimates for...
AGENDA


            Highlights


          Operational
         Performance

  Economic-Financial
       Performance


  ...
Highlights


  MAIN INDICATORS
  •   2009 total gross revenue: +39.4%, of which +44.5% in the domestic
      market;
  •  ...
AGENDA


            Highlights


          Operational
         Performance

  Economic-Financial
       Performance


  ...
Sales Performance

Gross Revenue (R$ million)




                                                                        ...
Sales Performance (cont.)

Domestic Market (R$ million)




             2008                             2009
           ...
Distribution network- Hering Store and PUC


  Evolution of the Distribution Network
                                     ...
Hering Store Network Performance

Hering Store Performance                            4Q08            4Q09          Chg.  ...
AGENDA


            Highlights


          Operational
         Performance

  Economic-Financial
       Performance


  ...
Gross Profit and Gross Margin

Gross Profit (R$ million) and Gross Margin (%)

                                           ...
EBITDA and EBITDA Margin

 EBITDA (R$ million) and EBITDA Margin (%) – Comparable Basis


                                ...
EBITDA and EBITDA Margin (cont.)

 EBITDA (R$ million) and EBITDA Margin (%) – Annual Variation




                      ...
Net Profit

  Net Profit (R$ million) and Net Margin (%)

                                                                ...
CapEx

 By activity (R$ million)



                                                              35.8       12.8%
       ...
Cash Flow

 Free Cash Flow (R$ million)



  Cash Flow - Consolidated                                4Q08      4Q09     Ch...
Indebteness


 Indebteness Evolution                                       Short Term x Long Term




                    ...
AGENDA


            Highlights


          Operational
         Performance

  Economic-Finance
      Performance


     ...
New Expansion Plan - Hering Store Network


 Expansion Plan – 2011 and 2012

                                             ...
Outlooks



      Hering

  •    Hering Store Network: New expansion plan- 405 stores by 2012;

  •    Products with High ...
Investor Relation Team

Fabio Hering – CEO and IR Director
Frederico de Aguiar Oldani – Finance Director
Karina Koerich – ...
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Slide presentation 4 q09

  1. 1. Conference Call 4Q09 March 8, 2010
  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. 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. 3. AGENDA Highlights Operational Performance Economic-Financial Performance Outlooks
  4. 4. Highlights MAIN INDICATORS • 2009 total gross revenue: +39.4%, of which +44.5% in the domestic market; • EBITDA of R$ 154 MM and EBITDA Margin of 21.4% in 2009 (+4.0 p.p.); • Hering Store Same-store sales: + 27.2% in 2009 and +32.6% in the 4Q09; • Hering brand sales +50.6%, PUC +18.1% and dzarm. +34.9% in the 4Q09. OTHER HIGHLIGHTS • Opening of 46 Hering Stores in 2009, 3 over the forecasted; • Opening of15 PUC Stores, 10 in the 4Q09 (4 over the forecasted); • Dzarm. repositiong plan execution shows its results with a 34.9% sales growth in the 4Q09; • The hybrid production model assured to attend production volumes over 4 the forecasted.
  5. 5. AGENDA Highlights Operational Performance Economic-Financial Performance Outlooks
  6. 6. Sales Performance Gross Revenue (R$ million) 39.4% 877.0 15.4 53.3% 629.2 33.0 44.5% 861.6 43.4% 287.7 200.6 42.6% 3.0 596.2 5.2 284.7 195.5 45.7% 4Q08 4Q09 2008 2009 Foreign Market Domestic Market Total With na expressive 43.4% growth in the 4Q09, the gross revenue reached R$ 877.0 million in 2009 (+39.4%). 6
  7. 7. Sales Performance (cont.) Domestic Market (R$ million) 2008 2009 +50.1% R$ 473.8 R$ 711.0 +26.5% 83% 9% R$ 61.9 R$ 78.4 6% +14.0% R$ 47.6 R$ 54.2 Highlight for the double digit growth of the three brands, specially for Hering which represented 83% of the sales.
  8. 8. Distribution network- Hering Store and PUC Evolution of the Distribution Network 416 Goal: 70 365 (+ 4 stores) 15 Goal: 57 311 (+ 2 stores) 15 76 248 22 74 209 59 Goal: 273 23 Goal: 224 (+ 3 stores) 19 Goal: 172 (+ 6 stores) 44 (+ 9 stores) 39 325 276 230 181 151 2006 2007 2008 2009 2010* Abroad PUC Hering Store Total * estimated In 2009, we opened 46 Hering Stores and 15 PUC Stores, reaching 350 stores in Brasil; 7 over the forecasted (+3 HS and +4 PUC). 8
  9. 9. Hering Store Network Performance Hering Store Performance 4Q08 4Q09 Chg. 2008 2009 Chg. Number of Stores 230 276 20.0% 230 276 20.0% Franchise 193 236 22.3% 193 236 22.3% Own 37 40 8.1% 37 40 8.1% Sales (R$ thousand) (1) 169,028 257,956 52.6% 438,844 645,999 47.2% Franchise 133,983 204,088 52.3% 352,371 512,777 45.5% Own 35,045 53,868 53.7% 86,473 133,222 54.1% Same Store Sales growth (2) 29.1% 32.6% 3.5 p.p. 32.4% 27.2% -5.2 p.p. Sales Area (m²) 29,791 35,415 18.9% 29,791 35,415 18.9% Sales (R$ per m²) 5,776 7,368 27.6% 16,256 19,864 22.2% Check-Outs 2,040,928 3,001,915 47.1% 5,225,865 7,391,080 41.4% Units 4,760,440 6,925,219 45.5% 12,222,332 16,851,285 37.9% Average Sales Ticket (R$) 82.82 85.93 3.8% 83.98 87.40 4.1% (1) The amounts reffered to the sales to final costumers. (sell out concept) (2) Compared to the same period of the previous year Highlight fot the SSS, +32.6% in the 4T09 and +27.2 in 2009, boosted mainly by the traffic increase in the stores. 9
  10. 10. AGENDA Highlights Operational Performance Economic-Financial Performance Outlooks
  11. 11. Gross Profit and Gross Margin Gross Profit (R$ million) and Gross Margin (%) 48.6% +0.6 p.p. 48.0% 47.3% +1.1 p.p. 53.1% +2.8 p.p. 46.3% 52.1% +1.1 p.p. 51.0% 50.3% 340.9 238.5 123.8 83.2 4T08 4Q08 4T09 4Q09 2008 2009 Gross Profit Gross Margin Gross Margin Cash Highlight for the Gross Margin Cash, excluding depreciation, which reached 53.1% in the 4Q09 and 48.6% in 2009. 11
  12. 12. EBITDA and EBITDA Margin EBITDA (R$ million) and EBITDA Margin (%) – Comparable Basis +4.0 p.p. 21.4% 17.4% +4.3 p.p. 26.2% 21.9% 154.0 89.6 62.2 35.8 4Q08 4Q09 2008 2009 Comparable EBITDA Comparable EBITDA Margin EBITDA reached R$ 154 million in 2009, with +71.9% growth in comparable basis, and EBITDA Margin of 21.4% (+4.0 p.p.). 12
  13. 13. EBITDA and EBITDA Margin (cont.) EBITDA (R$ million) and EBITDA Margin (%) – Annual Variation 3.3% 23.5 3.1% 14.6 20.2 2.7% 2.0% 35.3 21.4% 154.0 20.5% 15.8 17.4% 105.4 89.6 EBITDA Non EBITDA Sales Deduction - Incentives CPV Dilution EBITDA EBITDA Non Margem Deduction - Incentives CPV Dilution EBITDA 2008 Recurring 2008 - Base Growth Taxes and and and 2009 Margin 2008 Recurring EBITDA 2008 Taxes and and and Margin 2009 Result 2008 Comparavel AVP Subventions Operating Result 2008 - Base AVP Subventions Operating Exp. Comparavel Exp. Expansion of EBITDA and EBITDA Margin are explained mainly by (i) sales growth and (ii) dilution of cost of goods sold and expenses. 13
  14. 14. Net Profit Net Profit (R$ million) and Net Margin (%) +8.6 p.p. 15.9% 140.0 20.4% 120.0 7.3% 100.0 +14.7 p.p. 80.0 60.0 5.7% 114.6 203.7% 40.0 417.9% 48.4 20.0 37.7 9.3 0.0 4Q08 4Q09 2008 2009 Net Profit Net Margin Besides the EBITDA growth, the net profit was affected by the non recurring gain of R$ 24.8 million (Derivatives rev) and R$ 6.6 million (REFIS). 14
  15. 15. CapEx By activity (R$ million) 35.8 12.8% 31.2 6.1 1.2 4.8 2.7 15.5 10.5 26.7% 14.4 7.7 1.2 0.4 1.4 6.6 1.9 13.0 9.3 3.8 0.5 2.2 4Q08 4Q09 2008 2009 Stores Industry IT Other In 2009, we invested R$ 31.2 million, mainly on production, logistics and store openings (3 HS and 1 PUC). 15
  16. 16. Cash Flow Free Cash Flow (R$ million) Cash Flow - Consolidated 4Q08 4Q09 Chg. 2008 2009 Chg. EBITDA 51,534 62,209 10,675 105,358 154,013 48,655 No cash items 3,940 24,813 20,873 4,594 26,757 22,163 Current IR&CS -10,971 -8,690 2,281 -22,798 -22,584 214 Cash Flow Capex -67,627 -54,394 13,233 -110,014 -45,213 64,801 Increase in trade accounts receivable -34,341 -42,751 -8,410 -52,241 -45,710 6,531 Increase in inventories 8,871 15,820 6,949 -19,337 -14,010 5,327 (Decrease) in deffered taxes - REFIS - 31,773 31,773 0 31,773 31,773 Increase (decrease) in accounts payable to suppliers -16,102 -3,295 12,807 -12,477 36,372 48,849 Increase (decrease) in taxes payable -7,373 -34,434 -27,061 -13,437 -67,856 -54,419 Others -18,682 -21,507 -2,825 -12,522 14,218 26,740 CapEx -10,463 -7,670 2,793 -35,773 -31,189 4,584 Free Cash Flow -33,587 16,268 49,855 -58,633 81,784 140,417 In this year, the Free Cash Flow reached R$ 81.8 million, due to the EBITDA growth and the better working capital management. 16
  17. 17. Indebteness Indebteness Evolution Short Term x Long Term Long 201.3 Term 184.6 52% 4,6x Short 3,5x Term 0,1x 48% -0,2x -0,7x 11.0 -25.1 -33.4 2005 2006 2007 2008 2009 Total Debt = R$ 77.6 million Net Debt (R$ million) Net Debt/Ebitda* * Last 12 months EBITDA The management is focused on low leverage and new financing with lower interest rate and longer terms. 17
  18. 18. AGENDA Highlights Operational Performance Economic-Finance Performance Outlooks
  19. 19. New Expansion Plan - Hering Store Network Expansion Plan – 2011 and 2012 Location selection premises: • Cities with > 100 thousand inhabitants • Total and Retail Consumption Potential - IPC +38 (Target) and POF (IBGE) +42 • Actual and forecasted Shopping centers analysis; • Benchmark with other franchise networks 405 • Evaluation of the Operational Potential 367 325 276 230 151 181 2006 2007 2008 2009 2010* 2011* 2012* 80 locations were selected which * estimated presented greater potential The new expansion plan, consistenly elaborated, renew the perspectives for the Hering Store network growth. 19
  20. 20. Outlooks Hering • Hering Store Network: New expansion plan- 405 stores by 2012; • Products with High Perceived Value and the concept “Retail is detail”; • Continuity of the marketing campaign “eu uso Hering desde sempre”; • Actions with the Hering Store Card and the Hering Webstore . Research in the children market to evaluate the opportunities to better explore the potential of the PUC and Hering Kids brands; Continuity of the reposition plan for dzarm.: casual jeans concept, marketing campaign and distribution channel qualification. 20
  21. 21. Investor Relation Team Fabio Hering – CEO and IR Director Frederico de Aguiar Oldani – Finance Director Karina Koerich – IR Manager Gracila Camargo Lopes – IR Analyst Tel. +55 (47) 3321-3469 E-mail: ri@heringnet.com.br Website: www.ciahering.com.br/ir FIRB – Financial Investor Relations Brasil Tel. +55 (11) 3897-6857 E-mail: ligia.montagnani@firb.com
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