Conference Call
Third Quarter Results - November 17th, 2004
OPERATOR: Ladies and gentlemen thank you for standing by and welcome to
Lojas Americanas Conference call, to discuss the third quarter results. At this
time all lines are in a listen-only mode. Later there will be a question and answer
session and instructions will be given at that time. Should you require assistance
during the call please press “star, zero”. As a reminder this conference is being
recorded. Today with us we have Mr. Roberto Martins de Souza, CFO and Mr.
Murilo Correa, IR Manager. At this time I would like to turn the conference over
to Mrs. Juliana Rozenbaum from Deutsche Ixe who has some additional
comments. Please go ahead Mrs. Rozenbaum.
MRS. JULIANA ROZENBAUM: Good morning and welcome to Deutsche Ixe’s
meeting with Lojas Americanas to discuss its third quarter 2004 results prepared
in accordance with Brazilian GAAP.
Before proceeding, let me mention that forward-looking statements are being
made under the Safe Harbor of the Securities Litigation Reform Act of 1996.
Forward-looking statements are based on the beliefs and assumptions of Lojas
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Americanas management and on information currently available to the
Company. They involve risks, uncertainties and assumptions because they
relate to future events and therefore depend on circumstances that may or may
not occur in the future. Investors should understand that general economic
conditions, industry conditions and other operating factors could also affect the
future results of Lojas Americanas and could cause results to differ materially
from those expressed in such forward looking statements.
The conference call will be conduct by the Company’s CFO and Investor
Relations Officer Roberto Martins. He will comment on the Company’s operating
and financial highlights and the main events during this quarter.
Afterwards, he will be available to answer any questions you may have. Please
Roberto, you may begin.
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MR. ROBERTO MARTINS: Good morning, ladies and gentlemen. First of all I
would like to thank Deutsche Ixe for the opportunity and also thank you all for
your interest in Lojas Americanas. It’s a pleasure to be here with you and have
the opportunity to talk about the third quarter results. Today I have with me Mr.
Murilo Corrêa, Investor Relations Manager, in addition to the members of our
investor relations team. I would like to make a few comments on the third quarter
results and then open for the questions and answers sessions.
Compared to the same quarter of the previous year, the third quarter of 2004
can be defined as another period of operational development in the consolidated
results of Lojas Americanas, combined with vigorous growth in sales, efficient
control over expenses and an improvement in the generation of operating cash.
The consolidated gross revenue of Lojas Americanas in the third quarter of 2004
was R$670.4 million (six hundred and seventy point four million reais), a growth
of 24.8% (twenty four point eight percent) if compared to the same period of
2003. Year-to-date to september, the consolidated gross revenue amounted to
R$ 1.9 billion (one point nine billion reais), growing 30.0% (thirty percent) in
relation to the same period of 2003.
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In the same-stores sales concept, the accumulated growth to September of this
year was 16.8% (sixteen point eight percent) .
Compared with the year-to-date to September of the previous year, the
productivity per employee increased by 28.4% (twenty eight point four percent).
Another great opportunity of growth is Americanas.com, our e-commerce
subsidiary. Considering the nature of its business, we see great opportunities of
improving the company’s revenues by improving its assortment, what could have
a very positive impact on the operating result and on the EBITDA of the
company in the next years. In the third quarter, Americanas.com reached
R$110.7 million (one hundred and ten point seven million reais) in gross
revenue, equivalent to a growth of 52.3% (fifty two point three percent) in
relation to the same quarter of last year. The accumulated gross revenue for the
nine months of this year amounted R$ 274.0 million (two hundred and seventy
four million reais), 65.3% (sixty five point three percent) higher than in the same
period of 2003.
Moving on to Lojas Americanas consolidated operating performance for the
quarter, the company’s gross margin reached 30.5% (thirty point five percent) of
the net revenue, an increase of 40 (forty) basis points over the same period of
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2003. Year-to-date to September, the gross margin was also 30.5% (thirty point
five percent), or 20 (twenty) basis points higher than in the same period of last
year.
Accumulated, the total operating expenses were 22.6% (twenty two point six
percent) of net revenue, an improvement of 70 (seventy) basis points when
compared to the 23.3% (twenty three point three percent) of the same quarter of
last year. When you compare the figures in percentage of the net revenue,
we´ve reduced not only the sales expenses but also the G and A expenses.
In the third quarter, sales expenses amounted to R$ 89.1 million (eighty nine
point one million reais), or 17.4% (seventeen point four) of net revenue,
compared with R$ 79.0 million (seventy nine million reais), or 17.6% (seventeen
point six percent) of net revenue in the same period of 2003. In spite of the
growth of around 25% (twenty five percent) in the gross revenue for the third
quarter in relation to the same period of 2003, sales expenses did not increase
proportionally in 2004.
Talking about G and A expenses, they amounted to R$ 14.0 million (fourteen
million reais) in the third quarter, or 2.7% (two point seven percent) of net
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revenue, resulting in a reduction of 20 (twenty) basis points in relation to the
same period of 2003.
Moving ahead with our presentation, operating income in the third quarter before
financial income and equity accounting, showed growth of 21.1% (twenty one
point one percent), totaling R$ 39.6 million (thirty nine point six million reais). For
the nine months of the year, the operating income reached R$ 120.1 million (one
hundred and twenty point one million reais), representing growth of 35.2% (thirty
five point two percent) compared to the same period of 2003.
On the same way, EBITDA in the quarter reached R$52.6 million (fifty two point
six million reais), 10.3% (ten point three percent) of net revenue, or 70 (seventy)
basis points higher than the 9.6% (nine point six percent) of net revenue
recorded in the same quarter of last year. This represents growth of 22.6%
(twenty two point six percent) in the generation of operating cash in the third
quarter of this year. Year-to-date to September EBITDA margin was 10.4% (ten
point four percent) of net revenue, an increase of 90 (ninety) basis points in
relation to the accumulated figure to September 2003.
Mentioning the financial income for the third quarter, it was negative in R$ 31.6
million (thirty one point six million reais). Year-to-date to September, the
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consolidated financial income was negative in R$ 95.1 million (ninety five point
one million reais). A comparison of the financial income to September 2004 with
the same period of 2003 reflects the cost of the payment of the Eurobonds (at
the beginning of June 2004), lower financial income due to the reduction in the
interest rate, higher taxation of financial transactions (CPMF/IOF), the increase
in the Social Contribution on Revenues - COFINS rate and financial expenses
arising from hedge on the importation of merchandise for the Christmas selling
campaign and fund-raising to support the company’s growth in the next few
years.
Net income in the quarter amounted to R$ 7.5 million (seven point five million
reais) compared with R$ 20.2 million (twenty point two million reais) in the same
period of last year. Year-to-date to September, net income amounted to R$ 18.6
million (eighteen point six million reais).
Company’s investments accumulated up to september reached R$43.3 million
(forty three point three million reais), of which about 76% (seventy six percent)
were allocated for openings stores, 16% (sixteen percent) were allocated for IT,
and 8% (eight percent) for operational improvements.
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Today, Lojas Americanas is creating value on three main fronts: the traditional
stores, the e-commerce and Americanas Express (a compact store model
launched last year, average size of five hundred square meters and fifteen
thousand skus). For 2004 we have the goal of opening at least 35 (thirty five)
stores. Up to this date we have already opened 21 (twenty one) stores (number
that already surpassed all the openings we had last year) and another 14
(fourteen) are planned to be opened until the end of the year. In the third
quarter, three stores were opened and in October we have opened the first
Express store in São Paulo state. By the end of the year, we expect to have
opened 5 (five) Express stores and 30 (thirty) traditional ones. Today the
company has 142 (one hundred and forty two) stores of which 5 (five) are
Express.
Another important investment was the new Distribution Center in São Paulo,
located in Barueri. We started to operate with this new unit in august and it
increased our storage and distribution capacity by 50% (fifty percent) to support
the organic growth of Lojas Americanas and the e-commerce, Americanas.com.
For 2005 we reaffirm our confidence in Brazil, furthermore, believe in the internal
potential of our business and are aware that there are still many opportunities to
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explore in the development of operating processes, especially in logistics,
distribution, and in the relation with suppliers.
So these are the main comments on the third quarter results. Thank you
everybody for your time and attention, I will now pass on to the operator in order
to open for the questions and answers session.
OPERATOR: Thank you. The floor is now open for questions. If you have a
question please press *1 on your touchtone phone at this time. If at any point
your question is answered, you may remove yourself from the queue by pressing
the pound key. Questions will be taken in the order that they are received. We
do ask that when you pose your question that you pick up your handset to
7provide optimum sound quality. Please hold while we pole for questions. Once
again if you do wish to pose a question, please press *1 on your touchtone
phone. Please hold again while we pool for questions.
Following Q&A session the operator turns the floor back to Mr. Roberto
Martins
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MR. ROBERTO MARTINS: Once again, I would like to thank Deutsche Ixe for
the opportunity and also thank you all for your interest in Lojas Americanas. We
believe this is a time of real opportunities for the Company and that we have a
very strong growth potential going forward.
If you have any additional questions, please feel free to contact our investor
relations department. You can also visit the investor relations section of our
website at http://ir.lasa.com.br. Thank you and have a nice day.
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Financial Income:
The financial income is in line with our expectations and capital structure. As I
said before, the payment of the Eurobonds, the hedge on the importation of
merchandise for the Christmas selling campaign and fund-raising to support the
company’s growth had great impact on the financial income, as well as the
reduction in the interest rate, higher taxation of financial transactions
(CPMF/IOF) and the increase in the Social Contribution on Revenues - COFINS
rate.
Operational Improvements / Is there room to improve?
As we say “We Always Want More”. It’s the company’s strategy to get better
everyday. We are always working and looking for new ways to improve our
operational results. If you look our gross margin along the past three years, we
have been improving 100 basis points each year. We can say that there are
stores which have better than average and others that have lower than average
gross margins. One of the options we have is to bring the stores with lower than
average results to a better level. We can also say that in relation to the expenses
and sales.
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2004 Investments
In 2004 we’ve already invested approximately R$43 million. For the whole year
we expect to have approximately R$80 million invested.
2005 Investments
For 2005 we expect to continue our organic expansion policy, always searching
for good sites to open stores. I enphasize that the most important thing is to find
locations with potential to add value for the company and that’s what we are
looking for. We intend to open more stores than we are going to open this year.
Cash Generation / EBITDA
Along the past years it has been the company’s policy to use 1/3 (one third) of its
cash for dividends payout and share buy-back programs, 1/3 (one third) for
expansion and investments, and the other 1/3 (one third) to hold in cash.
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Americanas.com
We think Americanas.com is a good investment for Lojas Americanas
shareholders. Thus, this year we bought R$11.4 million in shares of
Americanas.com, the equivalent of 4.7% of the company and today our
participation is 77.1%.
Growth of the Net Debt
It is important to observe that when we analyse our net debt we consider our
receivables as cash, since our receivables are in great extent credit cards. If
analysed that way, the net debt will be lower.
Americanas Express / Advantages
The Americanas Express stores are a success. There are still only 5 stores but
we can say that they are exceeding our expectations. Our focus is to open
traditional stores but Americanas Express is an opportunity to open stores in
good locations that have a lack of space.
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Quando for para enviar os dados mais tarde:
I apologize for not having the exact figures at the moment. I will ask Murilo to
transmit the numbers to all the participants of the conference call by email.
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