2. 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.
4. 2Q12 Highlights
Gross Revenue of R$ 460.7 million, up 8.9%;
Sales growth below Company´s expectations, with the exception of the performance of
Hering Kids and PUC brands (+52.7% and 20.8%, respectively);
EBITDA of R$ 110.0 million, with EBITDA margin of 28.7%;
Net Income of R$ 85.2 million (+10.1%).
Hering Store Chain:
27 additional stores in 2Q12 and 89 since 2Q11, with a network of 464 stores at the
end of 2Q12
Total sales of R$ 350.3 million (+11.8% overall growth and -3.9% SSS growth);
4
7. STORES CHAIN EVOLUTION
535 562
16
472 16 1
1 76
16 76 5
1 5
77
3
437 464
375
2T11 1T12 2T12
Hering Store Hering Kids PUC dzarm. Foreign - Franchised Total
In 2Q12, the Hering Store chain increased by 27 stores and the Company remains
confident in reaching the guidance for the year, considering the advanced stage of
openings and stores underway.
7
8. HERING STORE CHAIN PERFORMANCE
Hering Store Chain Performance 2Q11 2Q12 Chg. 1H11 1H12 Chg.
Number of Stores 375 464 23.7% 375 464 23.7%
Franchise 330 416 26.1% 330 416 26.1%
Owned 45 48 6.7% 45 48 6.7%
(1)
Sales (R$ thousand) 313,449 350,345 11.8% 515,955 594,497 15.2%
Franchise 262,818 301,486 14.7% 428,775 506,632 18.2%
Owned 50,631 48,858 -3.5% 87,180 87,865 0.8%
(2)
Same Store Sales growth 16.3% -3.9% -20.2 p.p 19.0% -0.8% -19.8 p.p
Sales Area (m²) 48,665 62,334 28.1% 48,665 62,334 28.1%
Sales (R$ per m²) 6,573 5,731 -12.8% 11,070 9,947 -10.1%
Check-Outs 2,829,678 3,095,931 9.4% 5,246,321 5,869,135 11.9%
Units 5,898,040 6,553,929 11.1% 11,137,172 12,585,356 13.0%
Units per Check-Out 2.08 2.12 1.6% 2.12 2.14 1.0%
Average Sales Price (R$) 53.14 53.46 0.6% 46.33 47.24 2.0%
Average Sales Ticket (R$) 110.77 113.16 2.2% 98.35 101.29 3.0%
(1)
The amounts referred to the sales to final costumers. (sell out concept)
(2)
Compared to the same period of the previous year
Total sales of Hering chain increased 11.8% in 2Q12 due to stores openings, given the
drop of -3.9% in SSS.
8
9. GROSS PROFIT AND EBITDA
Gross Profit and Gross Margin EBITDA and EBITDA Margin
48.1% -1.8 p.p.
48.0% -1.0 p.p. +0.6 p.p. 28.7%
47.0% 28.1% +0.7 p.p. 28.2%
46.3%
47.2% 27.5%
46.9%
-2.0 p.p.
-1.2 p.p.
45.8% 16.4%
45.2% 10.8%
12.8%
5.7%
200.0
324.9 171.9
293.3
110.0
173.1 97.6
163.7
2Q11 2Q12 1H11 1H12 2Q11 2Q12 1H11 1H12
Gross Profit Gross Margin Cash Gross Margin EBITDA EBITDA Margin
Greater promotional activity due to lower than expected sales caused a 2.0
p.p.contraction in gross margin. In spite of that, strict expenses control and profit
sharing reversion led to an increase in EBITDA margin by 0.6 p.p.
9
10. NET PROFIT AND CAPEX
Net Profit (R$ million) Capex (R$ million)
22.3% 0.0 p.p. 22.2% 21.9%
+1.3 p.p.
20.5%
21.0% 19.7
25.5% 1.9
15.7 1.1
25.4% 12.3
10.1% 5.6 8.2
1.2
155.4 9.8
0.5 0.3
128.4 1.5
4.4
4.1
85.2 0.1
77.3 1.3
8.3 8.5
6.2
4.3
2Q11 2Q12 1H11 1H12 2Q11 2Q12 1H11 1H12
Net Income Net Margin Industry IT Other Stores
Net profit growth, as a result of EBITDA growth and lower tax rate due to investment
subvention, even with the effect of non recurring gains in 2Q11.
10
11. CASH FLOW
Cash Flow - Consolidated (R$ thousand) 2Q11 2Q12 Chg. 1H11 1H12 Chg.
EBITDA 97,550 110,008 12,458 171,856 199,983 28,127
Non cash items 674 953 279 1,039 1,899 860
Current Income tax and Social Contribution (26,900) (25,329) 1,571 (41,839) (44,549) (2,710)
Working Capital Investment (21,380) 17,484 38,864 (39,318) 2,999 42,317
(Increase) decrease in trade accounts receivable (47,156) (38,824) 8,332 (29,597) 5,266 34,863
Decrease (increase) in inventories 7,116 34,086 26,970 (6,665) 9,468 16,133
Increase (decrease) in accounts payable to suppliers 3,463 (964) (4,427) (9,355) 3,893 13,248
Increase (decrease) in taxes payable 9,049 18,782 9,733 11,561 (14,899) (26,460)
Others 6,148 4,404 (1,744) (5,262) (729) 4,533
CapEx (9,801) (12,348) (2,547) (15,671) (19,721) (4,050)
Free Cash Flow 40,143 90,768 50,625 76,067 140,611 64,544
Reconciliation from accounting Cash flow to adjusted Cash flow (R$ thousand) 2Q11 2Q12 Chg. 1H11 1H12 Chg.
CFS - Cash provided by operating activities (accounting) 59,691 111,084 51,393 105,495 182,494 76,999
Adjustment – Financial items allocated to operating cash (9,747) (7,968) 1,779 (13,757) (22,162) (8,405)
Unrealized exchange and monetary variation (1,201) (1,220) (19) (2,549) (2,112) 437
Financial Result (9,691) (7,429) 2,262 (13,613) (21,530) (7,917)
Interest paid on loans 1,145 681 (464) 2,405 1,480 (925)
CFS - Cash flow from investing activities (9,801) (12,348) (2,547) (15,671) (19,721) (4,050)
Free Cash Flow 40,143 90,768 50,625 76,067 140,611 64,544
Increase of R$ 50.6 million in free cash flow, mostly due to EBITDA growth and lower
investments and working capital needs, with reduction in inventories.
11
12. INDEBTEDNESS
Net Debt (R$ million) Short Term x Long Term
4.6
3.5
0.1
(0.2) (0.2) (0.5)
(0.7) (0.6) Short
Term
201.3 184.6 98.4%
Long
Term
11.0 1.6%
(33.4) (25.1)
(61.9) (229.8) (207.3)
2005 2006 2007 2008 2009 2010 2011 2Q12
Gross Debt = R$ 27.9 million
Net Debt/ EBITDA*
* LTM EBITDA
Cia. Hering closed 2Q12 with a net cash position of R$ 207.3 million and reduced its
debt by R$ 2.4 million.
12
14. OUTLOOK
Challenges faced in 1H12 might continue to influence negatively in the short run
Measures are already being taken in order to offer a more assertive product mix
in addition to further marketing investments
Hering brand still with high growth potential, despite not in the same pace of
recent past
Children’s market:
Share increase in the multibrand channel with Hering Kids and PUC brands
Expansion of the Hering Kids format – opening of 20 stores, concentrated
in 4Q12
Continuous adjustments in PUC chain, with discontinuation / relocation of a
few other operations.
Maintenance of the dzarm. strategy, combined with investments in marketing and
flagship stores
Rise of dollar and the possibility of additional promotional actions may pressure
results in 2H12
14
15. INVESTOR RELATIONS TEAM
Fabio Hering – CEO
Frederico Oldani – CFO and IRO
Patrícia Salem – IR Manager
Tel. +55 (11) 3371-4867
E-mail: ri@hering.com.br
Website: www.ciahering.com.br/ri
