Grendene - 15th Annual Latin America Conference - Citigroup
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15th Annual Latin America Conference - Citigroup

15th Annual Latin America Conference - Citigroup

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Grendene - 15th Annual Latin America Conference - Citigroup Presentation Transcript

  • 1. 15th Annual Latin America Conference – Citigroup New York - March 28 – 29, 2007 4th quarter and 2006 earnings
  • 2. Footwear industry, domestic market and exports
  • 3. Production and consumption In million pairs Brazil 2002 2003 2004 2005 2006 Var. % Production 642 665 755 725 686 (5,4%) Imports 5 5 9 17 19 11.8% Exports 164 189 212 190 180 (5.3%) Apparent consumption 483 481 552 552 525 (4.9%) Consumption per capita 2.79 2.83 3.02 2.98 2.81 (5.7%) Market share by volume – domestic 20.7% 19.5% 21.2% 18.6% 19.1% 50pb Market share by volume – exports 9.8% 14.3% 13.7% 14.6% 17.5% 290pb Source: Decex, Abicalçados from 2002 to 2005; and IBGE for 2006. 3
  • 4. Gross revenue (R$ million) 2.9% % R: 17.1 1,525 CAG 1,276 1,353 1,392 907 697 574 461 394 1998 1999 2000 2001 2002 2003 2004 2005 2006 4
  • 5. Sales volume (in million pairs) 145 130 132 116 121 29 28 32 16 27 116 100 94 102 100 2002 2003 2004 2005 2006 Domestic Exports 5
  • 6. Average price (R$) 10.5 10.5 7.8 10.4 10.6 11.2 8.2 6.6 6.0 10.1 11.1 11.4 12.0 10.3 7.4 2002 2003 2004 2005 2006 6 Domestic Exports
  • 7. Own brands 7
  • 8. Main licencings 8
  • 9. 4T06 and 2006 Earnings
  • 10. 2006 highlights Gross revenue 2.9% up Sales volume 1.3% higher and average price 1.5% higher Domestic revenue (86.5% of gross revenue) growth: ~2,9% with volume 2.1% lower Exports (13.5% of gross revenue) 15% higher in US dollars, on volume 13.9% higher and average price in Us dollars 1.1% higher Gross profit 11% higher, with gross margin increasing from 41.5% to 44.7% of net sales Adjusted EBITDA 19% higher, at R$317 mn, with margin 28.8% (vs, R$266.7 mn, 25%) Adjusted net income 31.3% higher, at R$ 256.1 mn, margin 23.2% (vs. R$ 195.1 mn, 18.3%) Dividends of R$ 128 mn, pay-out of 50% and dividend yield of 6% Net cash as of December 31, 2006 at R$379 mn, 14% up 10
  • 11. Main financial and economic indicators Main Financial and Economic Indicators (R$ mn) 4Q05 4Q06 Var.% 2005 2006 Var.% Gross Revenues 398.4 483.5 21.4% 1,352.9 1,392.4 2.9% Domestic 345.2 424.3 22.9% 1,169.6 1,204.0 2.9% Exports 53.2 59.2 11.3% 183.3 188.4 2.8% Net Sales 316.3 382.0 20.8% 1,068.0 1,102.9 3.3% Gross Profit 147.8 190.0 28.5% 443.6 493.0 11.1% Adjusted EBITDA 105.2 126.5 20.3% 266.7 317.3 19.0% Net Financial Result 2.3 (4.4) n.s. (0.2) 22.5 n.s. Adjusted Net Income 78.8 96.2 22.1% 195.1 256.1 31.3% EPS (R$ per share) 0.79 0.96 22.1% 1.95 2.56 31.3% Sales Volume (million pairs) 38.1 42.0 10.2% 130.3 131.9 1.3% Average Price (R$) 10.45 11.50 10.0% 10.39 10.55 1.5% Adjusted Margins – as a % of net sales 4Q05 4Q06 Var.(bps) 2005 2006 Var.(bps) Gross 46.7% 49.7% 300 41.5% 44.7% 320 EBITDA 33.3% 33.1% (20) 25.0% 28.8% 380 Net 24.9% 25.2% 30 18.3% 23.2% 490 11
  • 12. Some indicators with variation YoY Gross revenue, adjusted Ebitda and adjusted net income - year-on-year changes, % 400% 300% 200% 100% 0% 1Q04/1Q03 2Q04/2Q03 3Q04/3Q03 4Q04/4Q03 1Q05/1Q04 2Q05/2Q04 3Q05/3Q04 4Q05/4Q04 1Q06/1Q05 2Q06/2Q05 3Q06/3Q05 4Q06/4Q05 -100% Gross sales revenue Adjusted Ebitda Adjusted Net Income 12
  • 13. Raw material cost 4,000 4.00 3,000 3.00 2,000 2.00 1,000 1.00 - - Jan-04 May-04 Oct-04 Feb-05 Jul-05 Nov-05 Mar-06 Aug-06 Dec-06 Plastifying oils (R$'000) PVC resin (R$'000) Our COGS in raw materials - (R$) per pair 13
  • 14. Sales expenses – advertisings 8.8% 8.2% 8.2% 99.8 94.4 90.8 2004 2005 2006 Advertising expenses (R$ mn) As a % of net sales 14
  • 15. Sales expenses Advertising expenses (R$ mn) and net sales, % 10.7% 10.8% 9.6% 10.1% 9.5% 7.8% 8.2% 8.1% 7.6% 7.3% 6.4% 4.3% 42.5 38.6 25.6 24.0 21.9 24.5 24.0 21.7 19.9 14.6 15.9 11.8 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 Advertising expenses Net sales, % 15
  • 16. Adjusted Ebitda Adjusted Ebitda (R$ mn) and adjusted Ebitda margin, % 33.3% 33.1% 127 105 4Q05 4Q06 Adjusted Ebitda Adjusted Ebitda margin, % 16
  • 17. Adjusted Ebitda Adjusted Ebitda (R$ mn) and adjusted Ebitda margin, % 28.8% 25.0% 317 267 2005 2006 Adjusted Ebitda Adjusted Ebitda margin, % 17
  • 18. Extraordinary events in the financial statements in 2006 Non-recurring income: other operational income Recovery in the courts PIS/COFINS levies (June 2006) - R$11,9 mn Recovery in the courts payments to the social security system INSS (December 2006) - R$5,6 mn Non-recurring expenses: selling expenses Rescissions of contracts with sales representatives – R$12 mn New depreciation criteria: it was revised the useful life of machinery and equipments to ten years, to equalize with IFRS, from January 2007 on. For the purposes of the IFRS accounts it was backdated and recalculated based on useful life since acquisition, for each asset. Conciliation with International Accounting Practices (IFRS): main differences in 2006: BR GAAP IFRS Adjusted EBITDA: R$ 317.3 mn R$ 319.5 mn Adjusted net income: R$ 256.1 mn R$ 257.6 mn Shareholders´ equity: R$ 979.0 mn R$ 1.050.3 mn 18
  • 19. Adjusted net income 60% 45% 40% 31% 31% 20% 14% -3% 0% 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06** -20% -24% -40% -35% -36% -60% 12-month result: change year-on-year 19
  • 20. Debt, Tax benefits, Dividends and Capex
  • 21. Debt Net cash of R$ 379.3 million in 31/Dec/06 58.4 108.9 26.3 27.1 215.6 27.2 152.8 153.1 169.9 150.9 654.0 698.0 658.1 638.2 510.8 31/Dec/05 31/Mar/06 30/Jun/06 30/Sep/06 31/Dec/06 Cash and cash equivalents Long Term debt Short term debt 21
  • 22. Cost of debt Cost of debt in 31/Dec/06 17% 23% 60% IGP-M Fixed rate (7.5% to 10.5% p.a.) TJLP 22
  • 23. CAPEX – Capital Expenditure 57.9 40.6 27.5 20.8 12.2 10.0 2002 2003 2004 2005 2006 2007* * Forecast Capital expenditure (R$ mn) 4T05 4T06 2005 2006 Industrial buildings and plant 1.3 0.9 16.6 2.2 Machinery and equipment 2.2 1.5 20.2 6.3 IT equipment & software 0.1 0.5 2.2 1.3 (1) Other capital expenditure 0.5 1.0 1.6 2.4 Total capital expenditure 4.1 3.9 40.6 12.2 (1) includes investments in vehicles, aircraft, real state, utensils, brands and patents 23
  • 24. Tax benefits State Tax Benefits Federal Tax Benefits Expiration Expiration Type of benefit Type of benefit date date Sobral - CE Sobral - CE ICMS - PROVIN FEB / 2019 Reduction 75% 2012 PROAPI - EXPORTS SEP / 2011 Fortaleza - CE Crato - CE Reduction 75% 2010 ICMS - PROVIN SEP / 2022 Crato - CE PROAPI - EXPORTS JAN / 2014 Reduction 75% 2016 Fortaleza - CE Teixeira de Freitas - BA* ICMS - PROVIN APR / 2025 Reduction 75% 2016 Bahia Project * Pre-operational project Teixeira de Freitas - BA ICMS SEP / 2022 EXPORTS MAY / 2021 24
  • 25. Dividends paid 2004 2005 2006 Total dividends R$ 64.1 mn R$ 81.2 mn R$ 128.3 mn # of shares outstanding 100,000,000 100,000,000 100,000,000 1.2826 0.8118 0.6415 50.0% 41.5% 31.8% 2.0% 3.6% 5.6% 2004 2005 2006 Dividend per share Dividend yied (cash yield) Pay-out (accrual) 25
  • 26. Guidance
  • 27. Guidance Gross revenue in 1H07 superior than in 1H06 and higher than 2006 over 2005 (>2.9%) Sales volume in 1H07 slightly higher than in 1H06 Average price in 1H07 higher than 1H06 due to higher added value product mix Capex R$ 10 mn in 2007, including the new plant in Bahia (5% of current installed capacity of 176 mn pairs per year) Advertising expenditure between 8% to 9% of net sales in 2007 27
  • 28. Investment highlights Rigid management discipline (costs and expenses reduction) Strategy for higher added value products mix with lower cost Strategy for lower added value products (State of Bahia new plant) Differentiation and more personality in the products Sustainability and sustainable design oriented Sales restructuring for domestic market and the project Improving sales management International strategy Globalization of brands: Melissa and Ipanema GB Marketing new actions: alternative media, market niches, market segmentation, focus on traders and points of sales Constant development of new technologies: GrendeneTech Raw material management and use of alternative materials Human resources new actions: Grendene Academy, IDP, management model earning-oriented 28 Growth focus with profitability to maximize shareholders return