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4 q10
4 q10
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4 q10

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  • 1. 4Q10Conference Call March 04, 2011
  • 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. 2
  • 3. AGENDA Highlights 4Q10 Operational Performance Outlooks
  • 4. 4Q10 HIGHLIGHTS Gross Sales - growth in the quarter (+41.6%) and in 2010 (+40.8%). Double-digit sales growth for all brands, mainly Hering: (+44.6% in 4Q10 and +44.2% in the year). Same Store Sales growth in Hering Store chain: (+20.8% in 4Q10 and +24.4% in 2010). EBITDA of R$ 276.5 million and an EBITDA margin of 27.3% in 2010 Net Profit: growth of 101.6% in 4Q10 and 54.2% in 2010, resulting from better operational performanceand lower tax provision due to investment grants. Hering Store Chain: Store openings exceed forecast (+10) in the Hering Store chain, which ended the year with 347 stores. New guidance for store openings - 418 by the end of 2011 Opening of two Hering Kids pilot stores and the first dzarm flagship store. 4
  • 5. AGENDA Highlights 4Q10 Operational Performance Outlooks
  • 6. SALES PERFORMANCEGross Revenue ( R$ million) 1,235.1 40.8% 21.2 877.0 37.6% 15.4 407.4 40.9% 1,214.0 41.6% 287.7 3.8 861.6 3.0 28.8% 41.7% 403.6 284.7 4Q09 4Q10 12M09 12M10 Domestic Market Foreign Market TotalGross Sales reached R$ 1.2 billion in 2010, with 41.6% and 40.8% growth in4Q10 and in the year, respectively, 6
  • 7. SALES PERFORMANCE (cont.)Domestic Market ( R$ million) 2009 2010 R$ 652.6 +44.2% R$ 941.1 Hering Hering R$ 58.4 +40.8% R$ 82.2 77% Kids 7% R$ 78.4 +26.1% R$ 98.8 PUC 8% R$ 54.2 +27.1% R$ 68.9 dzarm. Others 6% 2%Double-digit sales growth in all brands, in 4Q10 and 2010, highlight to theHering brand (+44.6% and +44.2%). 7
  • 8. STORES CHAIN EVOLUTION 443 15 365 1 78 311 15 2 22 74 248 209 59 Goal: 325 23 Goal: 273 (+22 stores) 19 44 Goal: 224 (+3 stores) 39 Goal: 172 (+6 stores) 347 (+9 stores) 276 230 151 181 2006 2007 2008 2009 2010 Hering Store Hering Kids PUC dzarm. Foreign - Franchised TotalIn the domestic market, we ended 2010 with 347 Hering Stores, 78 PUC, 2Hering Kids e 1 dzarm. store 8
  • 9. HERING STORE CHAIN PERFORMANCESSS growth (+20.80% in 4Q10 and +24.4% in 2010) mainly driven byincreased stores traffic 9
  • 10. GROSS PROFIT AND GROSS MARGIN 50.6% +1.9 p.p. 48.7% 49.5% +2.2p.p. -0.8 p.p. 53.3% 52.6% 47.3% -0.7 p.p. 52.2% 51.5% 47.3% 501.9 340.9 37.4% 170.5 124.1 4Q09 4T09 4Q10 4T10 12M09 12M10 Gross Profit (R$ Million) Gross Margin (%) Cash Gross Margin (%)Gross margin expansion of 2.2 p.p. in 2010, with a 0.7 p.p. decrease in 4Q10due to higher AVP and advanced yarn purchase. 10
  • 11. EBITDA AND EBITDA MARGIN 27.3% +5.9 p.p. 21.4% 31.1% 26.4% +4.7 p.p. 79.0% 276.5 154.5 63.9% 102.9 62.8 4Q09 4T09 4Q10 4T10 12M09 12M10 EBITDA (R$ Million) EBITDA Margin (%)Strong EBITDA growth and EBITDA margin expansion in 4Q10 as well as in2010. 11
  • 12. EBITDA MARGIN EBITDA Margin - 4Q Variation EBITDA Margin - Annual Variation 0.0% 1.3% 0.1% 0.1% 0.8% 1.1% 0.3% 1.2% 3.9% 0.5% 4.6% 0.1% 31,1% 27.3% 26.4% 21.4% Mg Deduction Tax AVP Net Gross SG&A Others Mg EBITDA Mg Deductions Tax AVP Net Gross SG&A Others EBITDA MgEBITDA Incentives Margin (ex Dilution EBITDA 2009 Incentives Margin (ex Dilution 2010 4Q09 TI and ded) 4Q10 TI and ede)Significant EBITDA margin expansion due to the high operating leverage of ourbusiness model. 12
  • 13. NET PROFIT 19.1% +1.8 p.p. 20.9% + 9.4 p.p. 30.5% 21.0% 54.2% 212.0 137.5 101.6% 100.8 50.0 4Q09 4T09 4Q10 4T10 12M09 12M10 Net Profit (R$ Million) Net Margin (%)Net profit growth due to better operating performance, adjustment topresent value (AVP) and establishment of investment grants 13
  • 14. CAPEXBy Activity ( R$ million) 71.0 12.1 8.1 127.5% 31.2 9.3 129.1% 48.6 17.6 2.7 4.8 7.7 2.6 0.5 11.6 14.4 1.4 3.8 4T09 4Q09 4T10 4Q10 12M09 12M10 Industry IT Other StoresCapex in 2010 totaled R$ 71.0 million of which R$ 48.6 million was aimed atthe industrial area and R$ 12.1 million was invested in stores. 14.
  • 15. CASH FLOWFree cash flow decrease due to higher capex, restocking and advanced yarnpurchase. 15
  • 16. INDEBTEDNESSNet Debt ( R$ million) Short Term x Long Term 4.6 3.5 0.1 (0.2) (0.2) Short (0.7) Term 51.6% Long 201.3 184.6 Term 48.4% 11.0 (33.4) (25.1) Gross Debt = R$ 53.9 million (61.9) 2005 2006 2007 2008 2009 2010 Net Debt/ EBITDA* * Last 12 months EBITDAIn 2010 the R$ 23.7 million debt reduction was a result of the Company’sstrategy on concentrating its financing in operations with lower interest ratesand longer maturity. 16
  • 17. AGENDA Highlights 4Q10 Operational Performance Outlooks
  • 18. OUTLOOKS We remain confident about growth prospects for 2011. Hering brand continues to be the company’s main growth platform: HS chain - stores openings and growth in same-store sales concept. New guidance for HS openings, + 71 stores in 2011, reaching 418 stores. Share increase in the multibrand channel mainly though specialization. Children’s market – opening of two more Hering Kids pilot stores. With dzarm. we will continue to execute the brand strategy by launching collections in thejeans casual concept, supported by marketing campaigns associating young celebrities to thebrand. The company decided to rethink the current online business format in order to betterexplore the potential of the channel. Rising cotton prices might affect the gross margins in the coming quarters, however webelieve we will be able to sustain EBITDA margins at 2010 levels. 18
  • 19. INVESTOR RELATIONS TEAM Fabio Hering – CEO Frederico Oldani – CFO and IRO Karina Koerich – IR Manager Admar A. Topazio Junior – IR Analyst Tel. +55 (47) 3321-3469 E-mail: ri@hering.com.br Website: www.ciahering.com.br/ir

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