cia hering 3q13 earnings presentation

15
3Q13 Results Conference Call October 25, 2013

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Page 1: Cia hering 3Q13 earnings presentation

3Q13 Results

Conference Call October 25, 2013

Page 2: Cia hering 3Q13 earnings presentation

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.

Page 3: Cia hering 3Q13 earnings presentation

AGENDA

Operating Performance

3Q13 Results

Outlook

Page 4: Cia hering 3Q13 earnings presentation

4

3Q13 OVERVIEW

Gross Revenues (R$ million)

EBITDA (R$ million) Distribution Network

R$ 279.7

R$ 36.8

R$ 23.2

R$ 309.8

R$ 38.4

R$ 24.9

+10.7%

R$ 33.8 R$ 46.1 +36.0%

+4.2%

+7.5%

3Q12 3Q13

Foreign

Market R$ 7.5 R$ 7.9 +5.3%

R$ 388.4 R$ 435.0 +12.0%

Hering Store Network (Sell Out R$ million)

Channel 3Q12 3Q13 % Domestic

Market 3Q13 % Growth

Multi-brand

Retail

16,963

clients

17,717

clients 51.4% 19.3%

Franchises 502

stores 614 stores 36.1% 8.4%

Webstore 3 stores 3 stores 1.3% -3.0%

Own Stores 62 stores 69 stores 11.2% -1.4%

303.0 303.0 303.0 327.5

+71 Stores

-2.4% -

3Q12 Expansion SSS 3Q13

+8.1%

74.4 82.5

23,0% 22,8%

10.8%

3Q12 3Q13

EBITDA EBITDA Margin

Page 5: Cia hering 3Q13 earnings presentation

5

HERING STORE NETWORK PERFORMANCE

Positive SSS performance in July, which was not sustained

throughout the subsequent months.

July sales were important for normalizing the network´s

inventory

Page 6: Cia hering 3Q13 earnings presentation

AGENDA

Operating Performance

3Q13 Results

Outlook

Page 7: Cia hering 3Q13 earnings presentation

7

SALES PERFORMANCE

In 3Q13, Gross Revenues reached R$ 435.0 million (+12.0%) with double digit growth

across Hering and Hering Kids brands.

Gross Revenues per Brand (R$ million) Gross Revenes per Channel (R$ million)

279.7 309.8

33.8

46.1 36.8

38.4 23.2

24.9

3Q12 3Q13

Hering Hering Kids PUC dzarm.

4.2%

7.5%

12.1%

36.5%

180.5 215.4

139.8

151.5

5.5

5.3 47.6

47.0

3Q12 3Q13

Multibrand Retail Franchise Webstore Owned Stores

-3.0%

-1.4%

19.3%

8.4%

Page 8: Cia hering 3Q13 earnings presentation

8

GROSS PROFIT AND EBITDA

1.0 p.p. expansion in gross margin due to lower promotional activity in the quarter,

compensated by the PPR (Profit Sharing Program) provisioning, keeping the EBITDA

margin pratically stable.

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

142.2 162.0

13.9%

43.9% 44.9%

45.1% 46.2%

3Q12 3Q13

Gross Profit Gross Margin Cash Gross Margin

74.4 82.5

23.0% 22.8%

10.8%

3Q12 3Q13

EBITDA EBITDA Margin

Page 9: Cia hering 3Q13 earnings presentation

9

NET INCOME

+6.7% growth in Net Income, as a result of EBITDA growth combined with higher

Income & Social Contribution Taxes.

Net Income (R$ million)

54.6 58.3

16.9% 16.1%

6.7%

3Q12 3Q13

Net Income Net Margin

Page 10: Cia hering 3Q13 earnings presentation

CAPEX

CapEx totalled R$ 25.4 million in 3Q13, with highlight to IT infrastructure (R$ 7.5

million) due to the process of extending the SAP to the commercial and logistics

departments.

Time

2008 Implementation 1st Phase (Project Aug/2007-Mar/2008)

• Back-Office • Accounting

Implementation 2nd Phase (Project Jul/2011-Jan/2014) • Sales • Logistics

• Production

Capex (R$ million)

2014

Future

SAP Project – Phase 2

12.7 14.7

5.4

7.5 0.3

0.8

1.5

2.4

19.9

25.4

27.6%

3Q12 3Q13

Industry IT Others Stores

Page 11: Cia hering 3Q13 earnings presentation

11

SAP Project

The Company is carrying additional inventory due to the preparation for

implementing the SAP and foresees a normalization of inventory levels throughout

1S14.

Inventory* (Items)

*Finished Goods + Resale Goods

2Q13 3Q13 4Q13 1Q14 2Q14

Inventory w/ SAP Additional Inventory SAP Preparation Previous Year

Page 12: Cia hering 3Q13 earnings presentation

12

CASH FLOW

Free Cash Flow of R$32.6 million, afected mainly by the punctual increase in inventory

due to the preparation for implementing the SAP.

Cash Flow - Consolidated (R$ thousand) 3Q12 3Q13 Chg.

EBITDA 74,431 82,461 8,030

Non cash items 815 1,345 530

Current Income tax and Social Contribution (18,022) (19,099) (1,077)

Working Capital Investment 48,779 (6,717) (55,496)

Decrease in trade accounts receivable 33,835 63,151 29,316

Decrease (increase) in inventories (10,459) (84,008) (73,549)

Increase in accounts payable to suppliers 20,610 21,735 1,125

Increase in taxes payable (1,748) (5,043) (3,295)

Others 6,541 (2,552) (9,093)

CapEx (19,875) (25,405) (5,530)

Free Cash Flow 86,128 32,585 (53,543)

Page 13: Cia hering 3Q13 earnings presentation

AGENDA

Operating Performance

3Q13 Results

Outlook

Page 14: Cia hering 3Q13 earnings presentation

14

OUTLOOK

Challenging business enviornment throughout the next quarters.

Evolution of the organizational structure of the Company with a focus on Brand Management

1st Cia. Investor Day: Dec/10

Page 15: Cia hering 3Q13 earnings presentation

INVESTOR RELATIONS TEAM

Fabio Hering – CEO

Frederico Oldani – CFO and IRO

Alissa Prince – IR Manager

Daniel Popovich – IR Analyst

Tel. +55 (11) 3371-4867

E-mail: [email protected]

Website: www.ciahering.com.br/ri