cia. hering – 2q17 results
TRANSCRIPT
2Q17 ResultsConference Call
August 3rd, 2017 – 11:00 am (BrT)10:00 am (NY)/ 3:00 pm (London)
2Q17 Results
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.
• Financial Performance
• Outlook
• Q&A
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FINANCIAL PERFORMANCE
GROSS REVENUES AND BREAKDOWN BY BRAND
R$ MILLION
GROSS REVENUES BREAKDOWN PER CHANNEL
DOMESTIC MARKET EX-OTHER REVENUES
2Q17, R$ MILLION – CHANGE 2Q17 X 2Q16
Gross Revenue of R$ 481.4 million in 2Q17, influenced by own stores,
webstores and multibrand’s performance.
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2Q17 2Q16 Chg. 1H17 1H16 Chg.
481.4 444.4 8.3% 870.4 820.5 6.1%
342.6 317.0 8.1% 617.9 591.6 4.4%
66.8 53.9 23.9% 121.0 99.4 21.8%
31.5 29.3 7.4% 57.6 55.2 4.3%
20.3 18.4 10.5% 35.2 32.7 7.8%
13.1 13.8 -5.4% 23.0 22.9 0.4%InternationalMarket
HERING STORE NETWORK
GROSS SALES
SELL-OUT, R$ MILLION
Gross revenues of R$ 350.6 million (-2.4%), impacted by drop in SSS
due to macroeconomic scenario and 3.2% reduction in sales area
over the last 12 months.
¹ Change in store count over the last 12 months.
PRODUCT ACCEPTANCE
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• Good performance of basics (new releases and
traditional) in the Winter collection
• Combos campaign activation
FINANCIAL PERFORMANCE
EBITDA of R$ 73.4 million, 190 bp of margin expansion
due to sales growth and gross margin increase.
Gross margin gain (+600 bp) due to lower volume of past-season
items, result of improvements in the quality of company's
inventory and fixed costs dilution.
GROSS PROFIT
R$ MILLION
EBITDA
R$ MILLION
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FINANCIAL PERFORMANCE
NET INCOME
R$ MILLION
CAPEX
R$ MILLION
Net income of R$ 88.0 million (+42.8%), due to operating income
improvement and net financial income related to lawsuit in the 90’s.
It stands out the new wave of implementation of a new
automated boxing process (‘sorter’) and sales systems’
integration.6
FINANCIAL PERFORMANCE
Cash flow of R$ 14.1 million, R$ 70.9 million lower than 2Q16.
Company’s higher profitability (EBITDA) was offset by greater need of working capital, mainly in
inventories and trade accounts receivable, given sales growth resumption.
CASH FLOWS
R$ MILLION
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Cash Flow - Consolidated (R$ thousand) 2Q17 2Q16 Chg. 1H17 1H16 Chg.
EBITDA 73,372 61 ,376 11 ,996 115,617 97,867 17 ,750
Non cash items 7,710 (1,546) 9,256 11,682 2,066 9,616
APV (Adjustment to Present Value) - Clients and Suppliers 6,173 5,145 1,028 10,764 10,857 (93)
Current Income tax and Social Contribution (8,639) 2,150 (10,789) (11,383) (1,645) (9,738)
Working Capital Capex (47,769) 22 ,010 (69,779) (23,861) 84 ,778 (108,639)
(Increase) decrease in trade accounts receivable (52,357) (30,480) (21,877) 34,840 92,722 (57,882)
(Increase) decrease in inventories (20,415) 22,948 (43,363) (57,985) 12,570 (70,555)
Increase (decrease) in accounts payable to suppliers 4,079 24,581 (20,502) (16,996) (12,748) (4,248)
(Decrease) in taxes payable (3,423) (10,045) 6,622 (9,776) (16,625) 6,849
Refurbishment Project - Franchisee Financing 2,605 185 2,420 6,002 (2,495) 8,497
Others 21,742 14,821 6,921 20,054 11,354 8,700
CapEx (16,717) (4 ,121) (12 ,596) (21,296) (9 ,955) (11 ,341)
Free Cash Flow 14,130 85 ,014 (70,884) 81,523 183,968 (102,445)
FINANCIAL PERFORMANCE
ROIC
R$ MILLION
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ROIC of 13.9% (+90 bp vs 1Q17), indicating growth resumption in return metrics,
mainly as a result of a recovery in the operating income.
Return on Invested Capital (ROIC) - R$ thousands 2Q17 1Q17Chg.
2Q17 / 1Q172Q16
Chg.
2Q17 / 2Q16
EBITDA 225,319 213,323 5.6% 247,045 -8.8%
(-) Depretiation and Amortization (58,151) (57,238) 1.6% (52,017) 11.8%
(+) Amortization - Right of use properties ¹ 5,726 5,450 5.1% 4,448 28.7%
(+) Financial Results - Adjust to Present Value ² 20,120 19,061 5.6% 19,357 3.9%
(-) IR&CS - Nominal Rate (34%) ³ (82,646) (70,107) 17.9% (79,884) 3.5%
(+) IR&CS - IOC Tax Benefit ³ 28,898 16,965 70.3% 25,932 11.4%
Operating Income 139,266 127,454 9.3% 164,881 -15.5%
Fixed Assets 418,760 422,373 -0.9% 424,619 -1.4%
Accumulated amortization - Right of use properties 38,452 37,021 3.9% 33,318 15.4%
Working capital 547,967 523,957 4.6% 563,361 -2.7%
Average Invested Capital* 1,005,179 983,351 2.2% 1,021,298 -1.6%
ROIC 13.9% 13.0% 90 bp 16.1% -220 bp
Notes to the financial statements: (1) Nr. 15; (2) Nr. 33; (3) Nr. 34
(*) Last 4 quarters average
OUTLOOK
• Multibrand and franchisees more conservative in orders for the third quarter, resulting in a challenging
scenario for revenue growth. Channels should supply more consistently in the 4th quarter;
• Product and Store (“P&S”) fronts, remain as priorities:
• Product: New features and products being added to each collection, especially in the basics;
• Stores: automatic replenishment for fast-turnover basics roll-out and Consultant's Electronic Inspection Report tool extension to the entire store network;
• Leftover reduction of past collections continues to benefit gross margin recovery over the year.
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