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Grendene - Apimec SP meeting - March/2011

This document summarizes the key points from an APIMEC meeting that took place in March 2010. The meeting agenda included discussing Grendene's history, highlights, corporate structure, production plants, sustainability efforts, the footwear sector, strategy, products, and results. Grendene is a large Brazilian footwear producer with 26,000 employees and the capacity to produce 200 million pairs per year across multiple plants in Brazil. The company discussed its vertical integration, brands, marketing partnerships, exports, and financial results.

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APIMEC meeting March 2010 40 years old
Disclaimer This presentation contains statements that can represent expectations about future events or results, These statements are based on certain suppositions and analyses made by the company in accordance with its experience, with the economic environment and market conditions, and expected future developments, many of which are beyond the company’s control, Important factors could lead to significant differences between real results and the statements on expectations about future events or results, including the company’s business strategy, Brazilian and international economic conditions, technology, financial strategy, developments in the footwear industry, conditions of the financial market, and uncertainty on the company’s future results from operations, plans, objectives, expectations and intentions – among other factors, In view of these aspects, the company’s results could differ significantly from those indicated or implicit in any statements of expectations about future events or results, 2 2
Agenda History Highlights Corporate structure Plants Production Sustainability Footwear sector Strategy Products Results Guidance 3
Mission • To create a type of fashion that is democratic, responding rapidly to the market´s needs, while generating attractive returns for the company´s and its partners. Values • Profit, Competitiveness, Innovation & Agility and Ethics. 4
Timeline The beginning 1971 Grendene was founded. With two injection machines, 15 employees and novelty: to produce plastic packaging for wine. 5
Timeline 1975 With diversification, was the pioneer to produce shoes with nylon as raw material. 1978 The launch of the Nuar sandal, an old dream came true. The following year the collection of sandals with the Melissa brand has conquered the world. 6
Timeline 1983 The succesful collaboration between Melissa and greatest designers like: Jean-Paul Gaultier, Thierry Mugler, Jacqueline Jacobson and Elisabeth De Seneville. 1986 Launch of the Rider sandals line, target for the masculine public. 7
Timeline 1990/93/97 In Ceará, the plant at Fortaleza, Sobral and Crato, was inaugurated. 1994 Launch of the Grendha product line, targeting the feminine public. 8
Timeline The 2000’s  Launch of the Ipanema line and  Grendene started having partnership with top model common shares (“GRND3”) Gisele Bündchen. negotiated at the Novo Mercado of BM&F Bovespa.  Openning of Galeria Melissa in  In the State of Bahia, the plant at São Paulo. Teixeira de Freitas, was inaugurated.  Dividend policy – Grendene will  After thirty years making history distribute dividends quarterly as a fashion accessory, Melissa from 2009 on. makes a surprise move and releases the brand´s perfurme to celebrate the occasion.  Launch of the Ilhabela, Zaxy,  Relaunch of the Rider Brand. Ipanema RJ and Cartago brands. 9
Highlights Grendene is one of the world´s largest producers of footwear Production capacity: 200 million pairs/year Average production: 500,000 pairs/day Employees: 26,000 New products in 2010: 861 World presence: more than 90 countries Brands with strong personality Innovation in product, distribution and media Listed on São Paulo´s Novo Mercado; free float 25% Solid capital structure, strong cash flow 10
Shareholder Structure Alexandre Grendene Pedro Grendene Bartelle Bartelle 100% 50.08% Alexandre G. Bartelle 55% 45% Verona Negócios e Ações em circulação Grendene Negócios S.A. Participações S.A. Participações S.A. (free-float) (Brazil) (Brazil) (Brazil) 25.1% 0.3% 30% 20.1% 24% 0.5% Grendene S.A. (Brazil) 99.998% 100% 95% 100% Grendene USA MHL Calçados Ltda Saddle Corp. S.A. Grendene Argentina S.A. Corporation (Brazil) (Uruguay) (Argentina) (USA) 0.001% 0.001% 2.75% 2.25%
Board of Directors Pedro G. Bartelle Vice-Chairman Oswaldo de Renato Assis Filho Ochman Director Director Alexandre G. Bartelle Chairman Walter Janssen Neto Maílson F. da Nóbrega Independent Director director 12
Executive board of directors Alexandre G. Bartelle Chief Executive Officer Pedro G. Bartelle Vice-Chief Executive Officer Rudimar Dall Onder Gelson Luis Rostirolla Francisco Schmitt Chief Industrial and CFO and Administrative and Investor Relations Sales officer Controller Officer Officer 13
Plants 14
Location of industrial plants Brazil Plants Farroupilha / RS – 2 units Fortaleza / CE – 2 units Sobral / CE – 7 units Crato / CE – 1 unit Teixeira de Freitas / BA – 1 unit Farroupilha Directors / R&D / MKT / Sales / Exports / Finance / Supplies / Plants Carlos Barbosa Molds 1515
Industrial plants Installed capacity: 200,000,000 pairs / year Sobral / CE Farroupilha / RS Carlos Barbosa / RS Fortaleza / CE Crato / CE Teixeira de Freitas/BA 16
Productive process VERTICALIZATION = AGILITY PVC Formulation Design Moulds R&D 17
Sustainability 18
Our chalenge 19
The landscape 20
Low income FOTO: Luiz Carneiro 21
Poverty 22
Inefficient energy use No sanitation 23
Desertification Erosion 24
Climate problems 25
Our response 26
Social responsability Providing employment and income 27
Social responsability Healthy food 28
Social responsability Training 29
Social responsability Over the years Grendene has helped to put on the shoes of people. 30
Social and Environmental Responsability PVC that is unused or damaged in the Unused paints are removed from the process, plus leftovers and scraps are water for reuse of the paint and the fully reused. water. 31
Social and Environmental Responsability The water is treated in a decantation lake The water used for watering the plants and reused for conserving the comes from reusing factory water. vegetation. 32
Footwear sector 33
Brazil´s footwear sector Profile 8,094 producers in 2009 325,000 direct employees Production: 858 million pairs in 2010* (814 million pairs in 2009) World´s 3rd largest producer. Apparent consumption, Brazilian domestic market: 744 million pairs, and 3.9 pairs per capita in 2010 (717 million pairs and 3.7 pairs in 2009) Exports in 2010: 143 million pairs to more than 140 countries (+12.9% vs. 2009) Source: IEMI/RAIS/ABICALÇADOS/SECEX (*) Estimate by Abicalçados – January/2011 The industry itself is not much more than 100 years old – companies are typically small and labor-intensive, with no entry or exit barriers. 34
Footwear sector 2008 The 5 principal countries 12.000 produce: 13,873 million 9.806 pairs = 82% of total 10.000 world production of Million pairs 8.000 16,887 million pairs. 6.000 4.000 3.014 2.012 2.000 816 676 563 - China India Brazil Vietnam Indonesia Others Source: IEMI / World Shoe Review 2009 / ABICALÇADOS 35
The footwear sector in Brazil Million pairs 2006 2007 2008 2009 2010 Production 830 808 816 814 858* Imports 19 29 39 30 29 Exports 180 177 166 127 143 Apparent consumption 669 660 689 717 744* Per capita consumption 3.6 3.5 3.6 3.7 3.9* * Estimate by Abicalçados – January/2011 Source: IEMI / SECEX / ABICALÇADOS Consumption – 2007 Total Per capita USA 2,393 7.94 United Kindgom 451 7.42 Italy 387 6.65 Source: Satra 2008 / France 417 6.55 Abicalçados / U.S. Census Japan 707 5.55 Bureau 36
Grendene vs. Brazilian footwear sector Brazilian production Grendene CAGR (2001/2010): 3.9% CAGR (2001/2010): 6.7% 1000 897916877 180 166170 900 830808816814858 160 146146 145 800 130132 Million pairs / year 140 Million pairs / year 700 610642 116 121 120 600 94 500 100 400 80 300 60 200 40 100 20 0 0 2010* 2001 2002 2003 2004 2005 2006 2007 2008 2009 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Abicalçados Grendene has grown faster than the Brazilian * Estimate Abicalçados – Jan/2011 footwear industry. 37
Exports: Grendene vs. Brazil Brazilian exports Grendene CAGR (2001/2010): (2.0%) CAGR (2001/2010): 15.5% 250 60 55 212 189 190180 48 48 200 171 177 50 Million pairs / year Million pairs / year 164 166 40 143 40 150 127 32 30 27 29 28 100 20 15 16 50 10 0 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Grendene´s exports were 38.2% of total Brazilian Source: DECEX / MDIC / ABICALÇADOS footwear exports in 2010. (38.1% in 2009) 38
Strategy: Break paradigms Less labor-intensive More capital-intensive Higher entry barriers Highly marketing Melissa + Gaetano Pesce intensive 39
Our expertise of more than 35 years, producing innovative footwear and generating desired brands, shows the success of our vision of the market, our strategy and our business model – and our capacity to create value for stockholders. 40
Value proposition Brands Products Marketing Management  Constant creation  Aggresive marketing  Scale gains, scope of products  Licenses with gains  Innovative design celebrities  Profitability  Segmentation  Continuous  Manufacturing  Investment in media improvement technology / events  Financial solidity  Few products in  Strong relationship  Sustainable large scale with trade growth Value for stakeholders 41
Products Products for all the Products that meet income levels: A, B, C, essential and basic D and E – with very needs at low cost. good cost x benefit. 42
Creative process Melissa + Jean Paul Gaultier 43
Work flow R&D Validation Layout Mockup Technical Technical prototype Technical Samples Sale Database Construction Product Approval of briefing evaluation / especifications avaliation of projects briefing planning prototype Cost / Mold prototype 44
Media Internet Hot Site Ipanema Flora Fem 45
Management process 46
47
Melissa Talking Melissa Enjoying Melissa Kissing Melissa Thinking Melissa Having Melissa Believing 48
49
Grendha Coral AD Grendha Ambar AD Grendha Rose AD 50
Zaxy Emotion AD Zaxy Dream AD Zaxy Smile AD
Hello Kitty Show Inf Barbie Pink Me Inf Ben 10 Alienize Inf Homem Aranha Urban Inf 52
Disney Carros Soft Baby Disney Magia Baby Hello Kitty Klog Baby Backyardigans Aquarela Baby 53
Main licenses 54
Celebrities Juliana Paes Ivete Sangallo Ana Hickmann Claudia Leite Camila Pitanga Carolina Dieckmann 55
Sales channels: Brazil Retail – Di Santinni Retail – Centauro 56
Sales channels: Brazil Magazine – C&A Self service – Carrefour 57
Sales channels: Brazil Select. distrib. – Doc Dog Select. distrib. – Daslu 58
International sales channels Monastiraki - Atenas Footlocker - Milão 59
International sales channels Fred Segal - Los Angeles Jean Pierre Bua - Barcelona 60
Galeria Melissa – Concept Store © All rights reserved Rua Oscar Freire, 827, São Paulo, SP 61
Results (in IFRS) 62
Main financial and economic indicators R$ million 2009 2010 Change % 2009/10 Net sales revenue 1,455.8 1,604.5 10.2% Net income 272.2 312.4 14.8% Margins % 2009 2010 Change p.p. Gross 38.9% 40.6% 1.7 p.p. EBIT 10.4% 13.2% 2.8 p.p. EBITDA 12.2% 15.0% 2.8 p.p. Net 18.7% 19.5% 0.8 p.p. Share 2009 2010 Profit per share R$ R$0.9052 R$1.0388 Share price (31/12/10) R$ R$9.95 R$9.32 Book value per share R$ R$4.87 R$5.57 Market cap (R$ 1,000) R$2,992,164 R$2,802,710 63
Gross sales revenue (IFRS) (R$ million) Gross sales revenue Gross sales revenue Gross sales revenue CAGR (2006/2010): 9.8% Domestic market Exports CAGR (2006/2010): 8.2% CAGR (2006/2010): 17.9% 1,604 395 1,999 1,464 356 355 1,819 1,266 1,170 1,220 1,515 1,576 1,374 249 205 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 64
Market % Gross sales revenue Sales volume 14,9% 16,5% 22,6% 19,5% 19,8% 23,9% 27,5% 32,7% 29,1% 32,2% 85,1% 83,5% 77,4% 80,5% 80,2% 76,1% 72,5% 67,3% 70,9% 67,8% 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Domestic market Exports Domestic market Exports 65
Results (IFRS) (R$ million) Gross profit / Gross margin EBIT / EBIT margin CAGR (2006/2010): 6.9% CAGR (2006/2010): 5.0% 651 212 566 506 519 499 175 173 161 151 45.1% 42.2% 41.5% 40.6% 38.9% 15.8% 14.5% 12.9% 13.2% 10.4% 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 66
Results (IFRS) (R$ million) EBITDA / EBITDA margin Net income / Net margin CAGR (2006/2010): 4.1% CAGR (2006/2010): 5.0% 312 241 272 257 261 205 201 239 187 177 23.3% 21.7% 19.2% 18.7% 19.5% 18.5% 16.7% 15.0% 15.0% 12.2% 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 67
Sales volume (Million pairs) Sales volume Sales volume – Sales volume – CAGR (2006/2010): 6.5% Domestic market Exports CAGR (2006/2010): 3.4% CAGR (2006/2010): 14.8% 166 170 55 146 117 115 146 48 48 132 106 100 99 40 32 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 68
Shareholder´s equity and return on equity 28.1% 24.9% 20.3% 20.7% 21.3% R$ million 1,676 % 1,465 1,318 1,180 1,047 2006 2007 2008 2009 2010 Shareholder´s equity (R$ million) Return on equity (%) 69
Operational result (IFRS) (R$ ‘000) 2009 %V 2010 %V %H Marginal %V Domestic market 1,464,338 100.6% 1,603,820 100.0% 9.5% 139,482 93.8% Exports 355,024 24.4% 394,766 24.6% 11.2% 39,742 26.7% Gross sales revenue 1,819,362 125.0% 1,998,586 124.6% 9.9% 179,224 120.5% Sales deduction (363,605) (25.0%) (394,079) (24.6%) 8.4% (30,474) (20.5%) Net sales revenue 1,455,757 100.0% 1,604,507 100.0% 10.2% 148,750 100.0% Cost of sales (889,711) (61.1%) (953,261) (59.4%) 7.1% (63,550) (42.7%) Gross profit 566,046 38.9% 651,246 40.6% 15.1% 85,200 57.3% Operating income (expenses) Selling expenses (356,275) (24.5%) (377,010) (23.5%) 5.8% (20,735) (13.9%) General & administrative expenses (57,854) (4.0%) (58,938) (3.7%) 1.9% (1,084) (0.7%) Management fees (1,123) (0.1%) (2,940) (0.2%) 161.8% (1,817) (1.2%) EBIT 150,794 10.4% 212,358 13.2% 40.8% 61,564 41.4% Other operating income 3,200 0.2% 3,368 0.2% 5.3% 168 0.1% Other operating expenses (1,810) (0.1%) (7,313) (0.5%) 304.0% (5,503) (3.7%) Operating result before financial 152,184 10.5% 208,413 13.0% 36.9% 56,229 37.8% revenue (expenses) 70
Net cash, cash and cash equivalents and debt 996 1.031 939 927 859 860 845 794 815 852 758 756 793 733 733 R$ million 664 (104) (52) (45) (131) (206) (238) (194) (178) 31/03/09 30/06/09 30/09/09 31/12/09 31/03/10 30/06/10 30/09/10 31/12/10 Cash and cash equivalents Debt Net cash Strong cash flow 71
Dividends R$ 0.3991 R$ 0.4048 R$ 0.3633 R$ 0.3667 46.0% 45.5% R$ % 40.4% 38.9% 4.9% 6.7% 5.8% 4.7% 2007 2008 2009 2010 Dividendo por ação (R$) Dividend yield (%) Payout (%) Dividend yield: Profit per share divided by average value of the share in the year. 72
Low need for CAPEX 40 35 35 33 30 24 25 R$ million 20 20 15 10 5 0 2007 2008 2009 2010 73
Outlook • Galeria Melissa (the brand´s concept store): In the next two years Grendene will open Galeria Melissa in New York, Paris and Tokyo. 74
Perspectivas Targets for: 2009 – 2013 / 2011-2015 Growth of gross revenue at a CAGR between 8% and 12% in the five years. Growth of net profit at a CAGR between 12 and 15% in the five years. Advertising expenses: average: 8% - 10% of net revenue in this period. Our view is that, in this period, we may have years with greater growth that these rates, as was the case in 2009, and others with less growth, but on average we intend to meet this target. 75
Thank You! Grendene s IR Team Francisco Schmitt Investor Relations Officer schmitt@grendene.com.br 40 years old (5554) 2109.9022 Secretary Cátia Gastmann (5554) 2109.9011 Analysts Alexandre Vizzotto Lenir Baretta (5554) 2109.9036 (5554) 2109.9026 Further information Internet: http://ri.grendene.com.br / Email: dri@grendene.com.br 76
GRENDENE S.A.

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Grendene - Apimec SP meeting - March/2011

  • 1.
  • 2.
    Disclaimer This presentation containsstatements that can represent expectations about future events or results, These statements are based on certain suppositions and analyses made by the company in accordance with its experience, with the economic environment and market conditions, and expected future developments, many of which are beyond the company’s control, Important factors could lead to significant differences between real results and the statements on expectations about future events or results, including the company’s business strategy, Brazilian and international economic conditions, technology, financial strategy, developments in the footwear industry, conditions of the financial market, and uncertainty on the company’s future results from operations, plans, objectives, expectations and intentions – among other factors, In view of these aspects, the company’s results could differ significantly from those indicated or implicit in any statements of expectations about future events or results, 2 2
  • 3.
  • 4.
    Mission • To createa type of fashion that is democratic, responding rapidly to the market´s needs, while generating attractive returns for the company´s and its partners. Values • Profit, Competitiveness, Innovation & Agility and Ethics. 4
  • 5.
    Timeline The beginning 1971 Grendene was founded. With two injection machines, 15 employees and novelty: to produce plastic packaging for wine. 5
  • 6.
    Timeline 1975 With diversification, was the pioneer to produce shoes with nylon as raw material. 1978 The launch of the Nuar sandal, an old dream came true. The following year the collection of sandals with the Melissa brand has conquered the world. 6
  • 7.
    Timeline 1983 The succesful collaboration between Melissa and greatest designers like: Jean-Paul Gaultier, Thierry Mugler, Jacqueline Jacobson and Elisabeth De Seneville. 1986 Launch of the Rider sandals line, target for the masculine public. 7
  • 8.
    Timeline 1990/93/97 In Ceará, the plant at Fortaleza, Sobral and Crato, was inaugurated. 1994 Launch of the Grendha product line, targeting the feminine public. 8
  • 9.
    Timeline The 2000’s  Launch of the Ipanema line and  Grendene started having partnership with top model common shares (“GRND3”) Gisele Bündchen. negotiated at the Novo Mercado of BM&F Bovespa.  Openning of Galeria Melissa in  In the State of Bahia, the plant at São Paulo. Teixeira de Freitas, was inaugurated.  Dividend policy – Grendene will  After thirty years making history distribute dividends quarterly as a fashion accessory, Melissa from 2009 on. makes a surprise move and releases the brand´s perfurme to celebrate the occasion.  Launch of the Ilhabela, Zaxy,  Relaunch of the Rider Brand. Ipanema RJ and Cartago brands. 9
  • 10.
    Highlights Grendene is oneof the world´s largest producers of footwear Production capacity: 200 million pairs/year Average production: 500,000 pairs/day Employees: 26,000 New products in 2010: 861 World presence: more than 90 countries Brands with strong personality Innovation in product, distribution and media Listed on São Paulo´s Novo Mercado; free float 25% Solid capital structure, strong cash flow 10
  • 11.
    Shareholder Structure Alexandre Grendene Pedro Grendene Bartelle Bartelle 100% 50.08% Alexandre G. Bartelle 55% 45% Verona Negócios e Ações em circulação Grendene Negócios S.A. Participações S.A. Participações S.A. (free-float) (Brazil) (Brazil) (Brazil) 25.1% 0.3% 30% 20.1% 24% 0.5% Grendene S.A. (Brazil) 99.998% 100% 95% 100% Grendene USA MHL Calçados Ltda Saddle Corp. S.A. Grendene Argentina S.A. Corporation (Brazil) (Uruguay) (Argentina) (USA) 0.001% 0.001% 2.75% 2.25%
  • 12.
    Board of Directors Pedro G. Bartelle Vice-Chairman Oswaldo de Renato Assis Filho Ochman Director Director Alexandre G. Bartelle Chairman Walter Janssen Neto Maílson F. da Nóbrega Independent Director director 12
  • 13.
    Executive board ofdirectors Alexandre G. Bartelle Chief Executive Officer Pedro G. Bartelle Vice-Chief Executive Officer Rudimar Dall Onder Gelson Luis Rostirolla Francisco Schmitt Chief Industrial and CFO and Administrative and Investor Relations Sales officer Controller Officer Officer 13
  • 14.
  • 15.
    Location of industrialplants Brazil Plants Farroupilha / RS – 2 units Fortaleza / CE – 2 units Sobral / CE – 7 units Crato / CE – 1 unit Teixeira de Freitas / BA – 1 unit Farroupilha Directors / R&D / MKT / Sales / Exports / Finance / Supplies / Plants Carlos Barbosa Molds 1515
  • 16.
    Industrial plants Installed capacity: 200,000,000 pairs / year Sobral / CE Farroupilha / RS Carlos Barbosa / RS Fortaleza / CE Crato / CE Teixeira de Freitas/BA 16
  • 17.
    Productive process VERTICALIZATION =AGILITY PVC Formulation Design Moulds R&D 17
  • 18.
  • 19.
  • 20.
  • 21.
    Low income FOTO: Luiz Carneiro 21
  • 22.
  • 23.
    Inefficient energy use No sanitation 23
  • 24.
    Desertification Erosion 24
  • 25.
  • 26.
  • 27.
  • 28.
    Social responsability Healthy food 28
  • 29.
  • 30.
    Social responsability Over the years Grendene has helped to put on the shoes of people. 30
  • 31.
    Social and Environmental Responsability PVC that is unused or damaged in the Unused paints are removed from the process, plus leftovers and scraps are water for reuse of the paint and the fully reused. water. 31
  • 32.
    Social and Environmental Responsability The water is treated in a decantation lake The water used for watering the plants and reused for conserving the comes from reusing factory water. vegetation. 32
  • 33.
  • 34.
    Brazil´s footwear sector Profile 8,094producers in 2009 325,000 direct employees Production: 858 million pairs in 2010* (814 million pairs in 2009) World´s 3rd largest producer. Apparent consumption, Brazilian domestic market: 744 million pairs, and 3.9 pairs per capita in 2010 (717 million pairs and 3.7 pairs in 2009) Exports in 2010: 143 million pairs to more than 140 countries (+12.9% vs. 2009) Source: IEMI/RAIS/ABICALÇADOS/SECEX (*) Estimate by Abicalçados – January/2011 The industry itself is not much more than 100 years old – companies are typically small and labor-intensive, with no entry or exit barriers. 34
  • 35.
    Footwear sector 2008 The 5 principal countries 12.000 produce: 13,873 million 9.806 pairs = 82% of total 10.000 world production of Million pairs 8.000 16,887 million pairs. 6.000 4.000 3.014 2.012 2.000 816 676 563 - China India Brazil Vietnam Indonesia Others Source: IEMI / World Shoe Review 2009 / ABICALÇADOS 35
  • 36.
    The footwear sectorin Brazil Million pairs 2006 2007 2008 2009 2010 Production 830 808 816 814 858* Imports 19 29 39 30 29 Exports 180 177 166 127 143 Apparent consumption 669 660 689 717 744* Per capita consumption 3.6 3.5 3.6 3.7 3.9* * Estimate by Abicalçados – January/2011 Source: IEMI / SECEX / ABICALÇADOS Consumption – 2007 Total Per capita USA 2,393 7.94 United Kindgom 451 7.42 Italy 387 6.65 Source: Satra 2008 / France 417 6.55 Abicalçados / U.S. Census Japan 707 5.55 Bureau 36
  • 37.
    Grendene vs. Brazilianfootwear sector Brazilian production Grendene CAGR (2001/2010): 3.9% CAGR (2001/2010): 6.7% 1000 897916877 180 166170 900 830808816814858 160 146146 145 800 130132 Million pairs / year 140 Million pairs / year 700 610642 116 121 120 600 94 500 100 400 80 300 60 200 40 100 20 0 0 2010* 2001 2002 2003 2004 2005 2006 2007 2008 2009 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Abicalçados Grendene has grown faster than the Brazilian * Estimate Abicalçados – Jan/2011 footwear industry. 37
  • 38.
    Exports: Grendene vs.Brazil Brazilian exports Grendene CAGR (2001/2010): (2.0%) CAGR (2001/2010): 15.5% 250 60 55 212 189 190180 48 48 200 171 177 50 Million pairs / year Million pairs / year 164 166 40 143 40 150 127 32 30 27 29 28 100 20 15 16 50 10 0 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Grendene´s exports were 38.2% of total Brazilian Source: DECEX / MDIC / ABICALÇADOS footwear exports in 2010. (38.1% in 2009) 38
  • 39.
    Strategy: Break paradigms Less labor-intensive More capital-intensive Higher entry barriers Highly marketing Melissa + Gaetano Pesce intensive 39
  • 40.
    Our expertise ofmore than 35 years, producing innovative footwear and generating desired brands, shows the success of our vision of the market, our strategy and our business model – and our capacity to create value for stockholders. 40
  • 41.
    Value proposition Brands Products Marketing Management  Constant creation  Aggresive marketing  Scale gains, scope of products  Licenses with gains  Innovative design celebrities  Profitability  Segmentation  Continuous  Manufacturing  Investment in media improvement technology / events  Financial solidity  Few products in  Strong relationship  Sustainable large scale with trade growth Value for stakeholders 41
  • 42.
    Products Products for all the Products that meet income levels: A, B, C, essential and basic D and E – with very needs at low cost. good cost x benefit. 42
  • 43.
    Creative process Melissa +Jean Paul Gaultier 43
  • 44.
    Work flow R&D Validation Layout Mockup Technical Technical prototype Technical Samples Sale Database Construction Product Approval of briefing evaluation / especifications avaliation of projects briefing planning prototype Cost / Mold prototype 44
  • 45.
    Media Internet Hot Site Ipanema Flora Fem 45
  • 46.
  • 47.
  • 48.
    Melissa Talking Melissa Enjoying Melissa Kissing Melissa Thinking Melissa Having Melissa Believing 48
  • 49.
  • 50.
    Grendha Coral AD GrendhaAmbar AD Grendha Rose AD 50
  • 51.
    Zaxy Emotion AD Zaxy Dream AD Zaxy Smile AD
  • 52.
    Hello Kitty ShowInf Barbie Pink Me Inf Ben 10 Alienize Inf Homem Aranha Urban Inf 52
  • 53.
    Disney Carros SoftBaby Disney Magia Baby Hello Kitty Klog Baby Backyardigans Aquarela Baby 53
  • 54.
  • 55.
    Celebrities Juliana Paes Ivete Sangallo Ana Hickmann Claudia Leite Camila Pitanga Carolina Dieckmann 55
  • 56.
    Sales channels: Brazil Retail– Di Santinni Retail – Centauro 56
  • 57.
    Sales channels: Brazil Magazine– C&A Self service – Carrefour 57
  • 58.
    Sales channels: Brazil Select.distrib. – Doc Dog Select. distrib. – Daslu 58
  • 59.
    International sales channels Monastiraki- Atenas Footlocker - Milão 59
  • 60.
    International sales channels FredSegal - Los Angeles Jean Pierre Bua - Barcelona 60
  • 61.
    Galeria Melissa –Concept Store © All rights reserved Rua Oscar Freire, 827, São Paulo, SP 61
  • 62.
  • 63.
    Main financial andeconomic indicators R$ million 2009 2010 Change % 2009/10 Net sales revenue 1,455.8 1,604.5 10.2% Net income 272.2 312.4 14.8% Margins % 2009 2010 Change p.p. Gross 38.9% 40.6% 1.7 p.p. EBIT 10.4% 13.2% 2.8 p.p. EBITDA 12.2% 15.0% 2.8 p.p. Net 18.7% 19.5% 0.8 p.p. Share 2009 2010 Profit per share R$ R$0.9052 R$1.0388 Share price (31/12/10) R$ R$9.95 R$9.32 Book value per share R$ R$4.87 R$5.57 Market cap (R$ 1,000) R$2,992,164 R$2,802,710 63
  • 64.
    Gross sales revenue(IFRS) (R$ million) Gross sales revenue Gross sales revenue Gross sales revenue CAGR (2006/2010): 9.8% Domestic market Exports CAGR (2006/2010): 8.2% CAGR (2006/2010): 17.9% 1,604 395 1,999 1,464 356 355 1,819 1,266 1,170 1,220 1,515 1,576 1,374 249 205 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 64
  • 65.
    Market % Gross sales revenue Sales volume 14,9% 16,5% 22,6% 19,5% 19,8% 23,9% 27,5% 32,7% 29,1% 32,2% 85,1% 83,5% 77,4% 80,5% 80,2% 76,1% 72,5% 67,3% 70,9% 67,8% 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Domestic market Exports Domestic market Exports 65
  • 66.
    Results (IFRS) (R$ million) Gross profit / Gross margin EBIT / EBIT margin CAGR (2006/2010): 6.9% CAGR (2006/2010): 5.0% 651 212 566 506 519 499 175 173 161 151 45.1% 42.2% 41.5% 40.6% 38.9% 15.8% 14.5% 12.9% 13.2% 10.4% 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 66
  • 67.
    Results (IFRS) (R$ million) EBITDA / EBITDA margin Net income / Net margin CAGR (2006/2010): 4.1% CAGR (2006/2010): 5.0% 312 241 272 257 261 205 201 239 187 177 23.3% 21.7% 19.2% 18.7% 19.5% 18.5% 16.7% 15.0% 15.0% 12.2% 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 67
  • 68.
    Sales volume (Million pairs) Sales volume Sales volume – Sales volume – CAGR (2006/2010): 6.5% Domestic market Exports CAGR (2006/2010): 3.4% CAGR (2006/2010): 14.8% 166 170 55 146 117 115 146 48 48 132 106 100 99 40 32 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 68
  • 69.
    Shareholder´s equity andreturn on equity 28.1% 24.9% 20.3% 20.7% 21.3% R$ million 1,676 % 1,465 1,318 1,180 1,047 2006 2007 2008 2009 2010 Shareholder´s equity (R$ million) Return on equity (%) 69
  • 70.
    Operational result (IFRS) (R$ ‘000) 2009 %V 2010 %V %H Marginal %V Domestic market 1,464,338 100.6% 1,603,820 100.0% 9.5% 139,482 93.8% Exports 355,024 24.4% 394,766 24.6% 11.2% 39,742 26.7% Gross sales revenue 1,819,362 125.0% 1,998,586 124.6% 9.9% 179,224 120.5% Sales deduction (363,605) (25.0%) (394,079) (24.6%) 8.4% (30,474) (20.5%) Net sales revenue 1,455,757 100.0% 1,604,507 100.0% 10.2% 148,750 100.0% Cost of sales (889,711) (61.1%) (953,261) (59.4%) 7.1% (63,550) (42.7%) Gross profit 566,046 38.9% 651,246 40.6% 15.1% 85,200 57.3% Operating income (expenses) Selling expenses (356,275) (24.5%) (377,010) (23.5%) 5.8% (20,735) (13.9%) General & administrative expenses (57,854) (4.0%) (58,938) (3.7%) 1.9% (1,084) (0.7%) Management fees (1,123) (0.1%) (2,940) (0.2%) 161.8% (1,817) (1.2%) EBIT 150,794 10.4% 212,358 13.2% 40.8% 61,564 41.4% Other operating income 3,200 0.2% 3,368 0.2% 5.3% 168 0.1% Other operating expenses (1,810) (0.1%) (7,313) (0.5%) 304.0% (5,503) (3.7%) Operating result before financial 152,184 10.5% 208,413 13.0% 36.9% 56,229 37.8% revenue (expenses) 70
  • 71.
    Net cash, cashand cash equivalents and debt 996 1.031 939 927 859 860 845 794 815 852 758 756 793 733 733 R$ million 664 (104) (52) (45) (131) (206) (238) (194) (178) 31/03/09 30/06/09 30/09/09 31/12/09 31/03/10 30/06/10 30/09/10 31/12/10 Cash and cash equivalents Debt Net cash Strong cash flow 71
  • 72.
    Dividends R$ 0.3991 R$ 0.4048 R$ 0.3633 R$ 0.3667 46.0% 45.5% R$ % 40.4% 38.9% 4.9% 6.7% 5.8% 4.7% 2007 2008 2009 2010 Dividendo por ação (R$) Dividend yield (%) Payout (%) Dividend yield: Profit per share divided by average value of the share in the year. 72
  • 73.
    Low need forCAPEX 40 35 35 33 30 24 25 R$ million 20 20 15 10 5 0 2007 2008 2009 2010 73
  • 74.
    Outlook • Galeria Melissa(the brand´s concept store): In the next two years Grendene will open Galeria Melissa in New York, Paris and Tokyo. 74
  • 75.
    Perspectivas Targets for: 2009 – 2013 / 2011-2015 Growth of gross revenue at a CAGR between 8% and 12% in the five years. Growth of net profit at a CAGR between 12 and 15% in the five years. Advertising expenses: average: 8% - 10% of net revenue in this period. Our view is that, in this period, we may have years with greater growth that these rates, as was the case in 2009, and others with less growth, but on average we intend to meet this target. 75
  • 76.
    Thank You! Grendene s IR Team Francisco Schmitt Investor Relations Officer schmitt@grendene.com.br 40 years old (5554) 2109.9022 Secretary Cátia Gastmann (5554) 2109.9011 Analysts Alexandre Vizzotto Lenir Baretta (5554) 2109.9036 (5554) 2109.9026 Further information Internet: http://ri.grendene.com.br / Email: dri@grendene.com.br 76
  • 77.