Walmart de México y Centroamérica 4th Quarter 2013 Conference Call
Feb 18, 2014 AM EST
WALMEX*.MX - Wal Mart de Mexico SAB de CV
Walmart de México y Centroamérica 4th Quarter 2013 Conference Call
Feb 18, 2014 / 09:30PM GMT
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Corporate Participants
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* Rafael Matute
Walmart de Mexico S.A. de C.V. - EVP and CFO
* Mariana Rodriguez
Walmart de Mexico S.A. de C.V. - IR
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Presentation
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Operator [1]
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Good afternoon, ladies and gentlemen, and welcome to the Walmart de Mexico y Centroamerica fourth-quarter results conference call.
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Unidentified Company Representative [2]
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The date of this call is February 18, 2014. Before we start, let me remind you that this call is property of Walmart de Mexico, S.A.B. de C.V., and is intended for the use of the Company's shareholders and the investment community. It should not be reproduced in any way.
This call may contain certain references concerning Walmart de Mexico, S.A.B. de C.V.'s future performance that should be considered as good-faith estimates made by the Company. These references only reflect management's expectations and are based upon currently available data. Actual results are always subject to future events, risks and uncertainties, which could materially impact the Company's actual performance.
I turn it over to Rafael Matute, CFO of Walmart de Mexico y Centroamerica.
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Rafael Matute, Walmart de Mexico S.A. de C.V. - EVP and CFO [3]
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Good afternoon and thanks for joining us today for our earnings call to review the fourth quarter and the full-year results of the year 2013.
Here with me is very Mariana Rodriguez, Directive or Investor Relations for Walmart de Mexico y Centroamerica. Next Monday we will have our analyst meeting in Mexico City. We will present more details on our results at the meeting and Walmex top management will be present.
I will begin by going through our fourth-quarter P&L results and wrap up with a summary of the full year.
For the fourth quarter, there is a one-time non-cash expense charge impacting results. Beginning in the year 2013, rent expenses under operating leases with third parties are being recognized on a straight-line basis over the term of the lease agreement in conformity with International Accounting Standards IAS 17 in which the commencement date of lease agreements is generally considered the possession date of the leased property.
As a result, the Company recorded a one-time catch-up expense of MXN464 million, MXN360 million for Mexico and MXN104 million for Central America and MXN61 million pesos related to the current year straight-line method in Mexico.
It is important to mention that this change doesn't have an impact in terms of the Company's cash flow.
Now let's look at Mexico's results. As we have commented in prior webcasts, Sam's Club has been underperforming self-service format in terms of sales growth. Mexico's fourth-quarter comp store sales for the self-service format including Sam's Club was down 1.4% and down 0.1% excluding Sam's. While ANTAD comp store sales report for the rest of the industry excluding Walmex was down 0.8%.
Our Company is very focused on productivity initiatives and expense control. For the quarter expenses increased 6.4%. The increase was driven primarily by the non-cash expense lease charge. Excluding this effect and depreciation, expenses grew 2.5% as lower rates than sales.
Now let's look at the quarterly results for Mexico. Total revenues increased 3.1% for the quarter. Gross margin was 22.2%, an 80 basis point reduction compared to last year. On a comparable basis excluding the store lease expense charge, expenses grew 3.3%; operating income decreased 6.9%; and EBITDA decreased 4.8%.
Now let's comment on our operations in Central America.
Central America total revenue was 7.2% on a constant currency basis. In peso terms, total revenues amounted to MXN16.1 billion, a 6.9% increase over last year's fourth quarter. Gross margin increased 70 basis points from last year on a comparable basis excluding the store lease charge. Expenses grew faster than sales and were up 11.4% on a constant currency basis. Operating income for Central America increased 14.4% and EBITDA increased 10.8% both figures on a constant currency basis.
EBITDA margin for the quarter was 40 basis points lower than prior year. If we exclude the non-cash expense, this charge as I explained earlier, EBITDA margin would have been 7.1%, 30 basis points higher than last year.
Now we will see the consolidated results for the fourth quarter. Consolidated revenues grew 3.6%, gross margin went from 22.8% to 22.2%, a decrease of 60 basis points. On a comparable basis, operating expenses increased 4.6%. EBITDA for the quarter declined 3.6% and net income declined 8.4%.
Now let's review the results for the entire year. I will start with the 2013 results for Mexico. Comparable sales growth for our self-service format including Sam's Club decreased 1.3% and 0.2% excluding Sam's. ANTAD, comp store sales for the rest of the industry excluding Walmex decreased 0.9%. We have a long history of driving productivity and in 2013, expense reduction and improved productivity became even more relevant given the low sales environment.
During the year our in-store capacity increased 7.2% while expenses grew 6.1% and expenses excluding depreciation and the store lease expense charge, grew 4.7%.
Results for 2013 in Mexico including retail stores and banking can be summarized as follows. Total revenues were up 3.4% to MXN368 billion. Gross margin was 22% versus 22.1% of last year. On a comparable basis, expenses increased 5.3%, operating income decreased 1.6% and EBITDA increased 0.3%.
Now let's look at Central America. Central America reported total revenues of MXN57.4 billion, a 2.1% increase over last year. This includes currency impact. On a constant currency basis, total revenues were up 5.7%. Gross margin for the year 2013 was 22.4% versus 20.7% the prior year. On a comparable basis, expenses increased 8.5% on a constant currency basis. Operating income and EBITDA were up 57.5% and 32.6% respectively on a constant currency basis.
I am pleased with Central America's performance for the year 2013. EBITDA margin was 6%, 110 basis points higher than last year. EBITDA margin excluding the store lease expense charge was 6.2%.
Now let's look at the consolidated numbers. Consolidated total revenues amounted to MXN425 billion, a 3.2% increase. As a percentage of total revenues, Walmex gross profit increased 10 basis points. On a comparable basis, expenses increased 5.2%, EBITDA for the year increased 2.2% compared to the year 2012. Net income declined 0.8%.
Our financial position remains strong. We continued delivering strong free cash flow closing the year with MXN21 billion in cash. Our total CapEx spend in Mexico and Central America in the year was MXN14 billion. We paid ordinary and extraordinary dividends for a total of MXN16.1 billion and in addition, the Company repurchased 96 million of our shares for an amount of MXN3.3 billion. Total return to shareholders through dividends, our share repurchases, was MXN90.4 billion.
Now I will turn it over to Mariana.
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Mariana Rodriguez, Walmart de Mexico S.A. de C.V. - IR [4]
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Thanks, Rafael, and good afternoon, everyone. Over the course of the year we added 4.7 million square feet of selling space to our operation. We opened 214 stores in Mexico of all our different formats and 21 in Central America. We increased our in-store capacity in Mexico by 7.2% and by 6.1% in Central America for a total of 7.1%.
Walmex is a large employer that offers development opportunities to its more than 225,000 associates in Mexico and Central America. It is essential to have a constant flow of trained talent that sustains our growth plans. Our talent development plans focus on training, coaching, mentoring and exposure programs, merchandising academies and compensation and performance evaluation systems. Last year we invested MXN98 million in training. 31% of management positions are filled by women and we are continuing to lead on the social issues that matter to our customers through our community support program.
Last year we channeled MXN504 million to the communities of the region. More than 139,000 associates participated in volunteer activities such as conference to female entrepreneurs, consultancy services to small growers and manufacturers, assistance during natural disasters, maintenance activities for schools and (inaudible) among others.
Our Company continues to focus on maintaining a leadership role in sustainability. Some of our priorities in this respect are reducing water and energy use, improving waste management and promoting environmental sustainability in the supply chain.
Last year we saved 71 million kW through energy efficient use of lighting equipment and systems. Over 245,000 tons of organic waste were recycled or transformed. Over 106 million gallons of water saved by water-efficient equipment.
We look forward to seeing all of you at our analyst meeting in Mexico City next February 24. This year we are combining the Walmex and Wal-Mart Stores Inc. meeting for the investment community and we will have an in-depth look at the Walmex business. Management presentations will be webcast and will be available at the Company's investor relations website on walmex.mx.
Our financial and social responsibility report for the year 2013 will be also available on our website once the analyst meeting begins.
Finally, I would also like to inform that that during today's Board of Directors meeting it was decided to call for the annual shareholders meeting on March 20, 2014 in Mexico City.
With this, we conclude our conference call. Thank you once again and I would like to remind you that we will be available to receive phone calls and address any questions you may have and that all the information for this quarter is available on our investor relations website. Thank you.
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Operator [5]
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This concludes the Walmart de Mexico y Centroamerica fourth-quarter results conference call. You may now disconnect.
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