Edgar Filing: GRUPO CASA SABA, S.A.B. DE C.V.

Quarterly Earnings Report April 30, 2014
1Q14

Financial Highlights:
(All figures are expressed in millions of Mexican pesos. Comparisons are made with the same period of 2013, unless otherwise stated. Figures may vary slightly due to rounding).

The Group’s net sales for the fourth quarter reached $8,614.9 million pesos
Gross income for the period was $1,687.9 million; the gross margin for the quarter was 19.59%
Operating expenses reached $1,694.9 million pesos and represented 19.67% of the Company total sales
Quarterly operating income was of $-6.9 million, resulting in an operating margin of -0.8% for the period
First quarter EBITDA was $-53.7 million, or -0.62% of total sales
As of March 31, 2014, GCS’s net debt decrease in $7,082.8 5 million
GCS closed the quarter with 22 Distribution Centers and 1,467 pharmacies in operation across Latin America

Mexico City, Mexico, April 30, 2014.Grupo Casa Saba (SAB)(Saba, GCS, the Company or the Group), one of the leading Mexican distributors of pharmaceutical products as well as health, beauty aids and consumer goods and one of the most important pharmacy chains in Latin America, announced its consolidated financial and operating results for the first quarter of 2014.

QUARTERLY EARNINGS

As of the end of the first quarter, the competition in the distribution and marketing of pharmaceutical products, health and beauty aids, and consumer goods segments prevailed in Mexico as well as in Chile, mainly due to a larger number of participants in the markets in which we operate. Our operating strategy continues to focus on improving logistics efficiency levels, controlling costs and expenses, in addition to offering competitive prices and generating positive results in practically all our divisions. At the sales level, we are continuing to focus on improving the availability of the products that our customers most demand both at the wholesale and retail pharmacy chain networks. With regards to growth, we continue to implement our strategy, which has enabled us to strengthen our presence in the markets in which we already operate, as well as improving the recognition of our brands.

NET SALES

Net sales for the quarter totaled $8,614.9 million, and equivalent to a decrease of 11.3% when compared to $1,888.4 million in 1Q2014.

SALES BY DIVISON

DISTRIBUTION DIVISION

PHARMA, HEALTH, BEAUTY AND CONSUMER GOODS

Sales from our Pharma, Health, Beauty and Consumer Goods divisions totaled $2,793.6 million. When compared to the same quarter of last year, there was a 48.8% decrease, which resulted mainly due to the disincorporation of distribution division. In addition, sales were negatively affect due to o lower economic growth in the country during the 1st quarter of 2014.

In terms of total sales, this division’s underwent a decrease on participation from 49.6%in 1Q2013 in comparison to the 32.4% in the 1Q2014

GOVERNMENT PHARMA

Quarterly sales in our Government Pharma division totaled $89.8 million. This division registered a 34.0% decrease in sales compared to the first quarter of 2013, as the result of the deferral on the date of tenders.
In terms of total sales, this division passed from 1.2% in 1Q2013 to 1.0% in the 1Q2014.

RETAIL PHARMACY

During the first quarter of the current year, sales from our Retail Pharmacy division reached $5,731.3 million. Compared to the same quarter last year, there was a 5.7% increase. The increase was mainly achieved due to the correct implementation of our growth strategy, focused on the markets in which we already operate. This division’s percentage attribution to the Group’s overall sales rose to 66.5%, versus 49.2% in the 1Q2013.

As a result, the sales mix for the first quarterof 2014 was as follows:

                                         Division                            % of Sales
                                         Retail Pharmacy                           66.5%
                        Total Distribution 33.5%
    Pharma, Health & Beauty 32.4%
               Government Pharma                      1.0%
                                                 TOTAL                        100.0%

GROSS INCOME

During the first quarter of 2014, gross income reached $1, 687.9 million pesos, and an amount 10.6% lower than the gross income reached in the first quarter of 2013. This was mainly due a decrease in sales in our distribution and government areas.

OPERATING EXPENSES

Operating expenses in the first quarter of 2014 resulted in $1,694.9 million. This represents an increase of $73.9 million pesos, or 4.5%, compared to the same period of the previous year. This increase was mainly a result of the expenses were incurred due to the opening of 84 new pharmacies in this quarter.

As a percentage of total sales, operating expenses represented 19.6% during the first quarter of 2014 compared to 14.7% during the same period of 2013.

OPERATING INCOME

Quarterly operating income for 1Q2014 was $-6.9 million, an amount 102.6% lower than the $267.5 million reported in 1Q2013. This decrease in operating income was the result of the decline in sales due the disincorporation of companies in previous quarters and declining sales in the distribution division.

Operating income margin for the 1Q2014 was -0.08%, versus 2.43% in 1Q2014.

OPERATING INCOME PLUS DEPRECIATION AND AMORTIZATION (EBITDA)

EBITDA for 1Q2014 was $-53.7 million, a lower amount compared to the $50.3 million reported in the first quarter of 2013.

EBITDA margin for the first quarter of 2014 was -0.62%.

COMPREHENSIVE COST OF FINANCING (CCF)

The Group’s CCF reached $112.7 million in 1Q2014, 47.3% lower than the CCF reported during 1Q2013.

This decrease was primarily due to lower bank debt

NET DEBT

The Company’s net debt at the end of 1Q2014 was $7,082.8 million pesos. There was a decrease of 10.6% with respect to last year.

OTHER EXPENSES (INCOME)

During the first quarter of the year, other expenses totaled $66.0 million. This was mainly due to the restructuring of extraordinary expenses done by one the Group’s subsidiaries.

It is important to mention that the results listed in this line item are derived from activities outside of the company’s normal business operations and, as a result, they are not necessarily recurrent.

TAX PROVISIONS

Tax provisions for the first quarter of 2014 resulted in a positive balance of $41.3 million pesos, while the 1T2013 this Sector totaled $ 54.6 million to pay.

NET INCOME (LOSS)

In the first quarter, 2014 GCS recorded a net loss of $94.9 million, an amount 90.6 million higher compared to the amount recorded during the same period of the previous year. This variation is mainly due to the extraordinary expenses recorded during the previous year.

Analysis Coverage: Through the Bolsa Mexicana de Valores program, Independent Analyst, Grupo Casa Saba counts with the coverage of Morningstar.

The 328.5 million shares issued by Grupo Casa Saba are listed on the Mexican Stock Exchange under the symbol SAB.

Grupo Casa Saba was founded in 1892 and is one of the leading distributors of pharmaceutical products, beauty, personal care and consumer goods, general merchandise, publications and other goods in Mexico. With more than 115 years of experience, the Company distributes to the majority of pharmacies, chains, self-service and convenience stores, as well as other specialized national chains. With the acquisition of FASA in October of 2010 the company now has retail pharmacy outlets located in Mexico, Chile and Brazil.

As a precautionary note to investors, except for the historic information contained herein, certain topics discussed in this document constitute forward looking statements.Such topics imply risks and uncertainties, including the economic conditions in Mexico and those countries in which Grupo Casa Saba operates, directly or indirectly, including the United States of America, Brazil and Chile, as well as variations in the value of the Mexican peso as compared with the currencies of the previously mentioned countries.

Contacts:
GRUPO CASA SABA                                                                    Grayling
Raymundo Barreiro                                                                    Jesus Martínez Rojas

GRUPO CASA SABA, S.A.B. DE C.V. in thousands of Mexican Pesos as of March 2014

Jan-March

Difference

Income Statement

2013

% of sales

2014

% of sales

NET SALES

11,016,746

100.00%

8,614,928

100.00%

-2,401,818

(21.80%)

COST OF SALES

9,128,265

82.86%

6,927,013

80.41%

-2,201,251

(24.11%)

Gross Profit

1,888,481

17.14%

1,687,914

19.59%

-200,567

(10.62%)

OPERATING EXPENSES

Sales Expenses

177,396

1.61%

161,464

1.87%

-15,932

(8.98%)

Administrative Expenses

1,443,545

13.10%

1,533,439

17.80%

89,894

6.58%

Operating Expenses

1,620,940

14.71%

1,694,903

19.67%

73,962

4.56%

Operating Income

267,541

2.43%

-26,102

(0.30)%

-293,642

(109.76%)

COMPREHENSIVE COST OF FINANCING

Interest Paid

240,345

2.18%

168,883

1.96%

-71,463

(29.73%)

Interest (Earned)

-24,575

(0.22%)

-33,944

(0.39%)

-9,369

38.12%

Exchange Loss (Gain)

-1,849

(0.02%)

-22,205

(0.26%)

-20,356

1101.12%

Monetary Position (gain)

0.00%

Comprehensive Cost of Financing

213,921

1.94%

112,733

1.31%

-101,187

(47.30%)

OTHER EXPENSES (INCOME), net

3,298

0.03%

-66,005

(0.77%)

-69,303

(2101.39%)

NET INCOME BEFORE TAXES

50,322

0.46%

-53,717

(0.62%)

-104,038

(206.75%)

PROVISIONS FOR:

Income Tax

54,683

0.50%

44,979

0.52%

-9,703

(17.74%)

Asset Tax

0.00%

Deferred Income Tax

0.0%

-3,729

(0.04%)

-3,729

Profit sharing due

0.00%

Deferred Profit sharing due

0.00%

Total taxes

54,683

0.50%

41,250

0.48%

-13,433

(24.56%)

Net Income Before Extraordinary Items

-4,361

(0.04%)

-94,967

(1.10%)

-90,606

2077.53%

Extraordinary Items (Income)

0.00%

Net Income

-4,361

-0.04%

-94,967

-1.10%

-90,606

2077.53%

Depreciation and Amortization

80,813

0.73%

98,821

1.15%

18,008

22.28%

Operating Income plus Depreciation and Amortization

348,353

3.16%

91,832

1.07%

-256,521

(73.64%)

Net Income corresponding to Minority Interest

1,833 601 0.01% -1,231 -67.18%

GRUPO CASA SABA, S.A.B. DE C.V.
BALANCE SHEET

Figures are expressed in thousands ofMexican pesos as of March 2014
ACCOUNT / SUBACCOUNT

QUARTER CURRENT YEAR

CLOSE PRIOR YEAR

AMOUNT

TOTAL ASSETS

27,060,765

28,513,587

CURRENT ASSETS

15,974,289

17,435,810

CASH AND CASH EQUIVALENTS

1,580,696

1,135,536

CLIENTS (NET)

6,398,160

6,664,165

CLIENTS

8,392,478

8,257,575

ALLOWANCE FOR DOUBTFUL ACCOUNTS

-1,994,318

-1,593,410

OTHER ACCOUNTS RECEIVABLES (NET)

2,205,677

2,404,310

INVENTORIES

5,778,351

7,219,119

OTHER CURRENT ASSETS

11,405

12,680

LONG TERM

21,529

33,052

INVESTMENTS IN SHARES OF SUBSIDIARIES AND

ASSOCIATED COMPANIES

21,529

33,052

PROPERTY MACHINARY AND EQUIPMENT NET

3,131,262

3,115,617

PROPERTY

2,318,963

2,249,221

MACHINERY AND EQUIPMENT

2,433,272

2,644,048

OTHER EQUIPMENT

1,463,523

1,764,214

ACCUMULATED DEPRECIATION

-3,090,350

-3,554,540

CONSTRUCTION IN PROGRESS

5,854

12,674

INTANGIBLE ASSETS (NET)

6,505,596

6,567,239

GOODWILL

2,421,223

2,462,132

BRANDS

2,697,297

2,677,690

RIGHTS AND LICENSING

1,370,831

1,412,252

OTHER INTANGIBLE ASSETS

16,245

15,165

OTHER NON CURRENT ASSETS

1,428,089

1,361,869

ADVANCE PAYMENTS

97,058

28,623

DEFERRED CHARGES (NET)

OTHERS

1,331,031

1,333,246

TOTAL LIABILITIES

22,789,695

23,928,776

CURRENT LIABILITIES

14,905,838

15,837,330

BANK CREDITS

1,513,095

1,683,123

SUPPLIERS

12,622,286

13,411,416

TAXES PAYABLE

770,457

742,791

OTHER CURRENT LIABILITIES

1,205,209

1,123,201

EMPLOYEE BENEFITS

317,437

280,710

OTHER CURRENT LIABILITIES

887,772

842,491

NON CURRENT LIABILITIES

7,150,445

7,373,937

BANK CREDITS

7,150,445

7,373,937

OTHER LIABILITIES

-471,797

-405,692

SHAREHOLDERS' EQUITY

4,271,070

4,584,811

CONTRIBUTED CAPITAL

2,593,872

CAPITAL STOCK PAID (NOMINAL)

767,902

CAPITAL STOCK PAID UPDATE

956,093

PREMIUM ON STOCK SOLD

869,877

CAPITAL INCREASE (DECREASE)

1,677,198

1,990,939

ACCUMULATED PROFIT AND LEGAL RESERVE

709,965

1,415,907

RESERVE FOR STOCK REPURCHASE

1,062,200

PROFIT

-94,967

-487,168