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Grupo Casa Saba Announces 3Q09 Earnings Report

Thursday, October 29, 2009 General News J E 4
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MEXICO CITY, Oct. 28 Grupo Casa Saba(NYSE: SAB) ("Saba", "GCS", "the Company" or "the Group"), one of the leadingMexican distributors of pharmaceutical products, health and beauty aids,personal care and consumer goods, general merchandise, publications and otherproducts, announces its consolidated financial and operating results for thethird quarter of 2009.

Financial Highlights:

(All figures are expressed in millions of Mexican pesos of purchasingpower as of September 2009. Comparisons are made with the same period of 2008,unless otherwise stated. Figures may vary due to rounding practices).

NET SALES

During the third quarter of 2009, GCS's sales were $7,009.53 million, anincrease of 4.90%.

SALES BY DIVISION

Private Pharma

Sales in our Private Pharma division rose 6.19% during the third quarterof 2009. This growth was primarily driven by our Mexican pharmaceuticaldistribution business.

Sales for this division reached $5,951.63 million versus $5,604.89 millionin 3Q08 and represented 84.91% of the Group's total sales.

GOVERNMENT PHARMA

Sales in our Government Pharma division this quarter grew 5.19% to$269.42 million compared to $256.13 million in the third quarter of 2008.This was mainly due to an increase in our participation in the biddingprocesses of the Instituto Mexicano del Seguro Social (IMSS), the Instituto deSeguridad Social del Estado de Mexico y Municipios (ISSEMYM) and the CentroNacional de Equidad de Genero y Salud Reproductiva (National Center for GenderEquity and Reproductive Health).

As a percentage of total sales, this division went from representing 3.83%in 3Q08 to 3.84% during the third quarter of 2009.

HEALTH, BEAUTY, CONSUMER GOODS, GENERAL MERCHANDISE AND OTHER

Sales in our Health, Beauty, Consumer Goods, General Merchandise and Otherdivision reached $595.08 million, a decline of 3.14% compared to the thirdquarter of 2008. This was due to a decrease in promotions and discounts in aneffort to improve this division's operating margin.

This division represented 8.49% of GCS's total sales in 3Q09, slightlylower than the same period of the previous year when it accounted for 9.19% ofthe Group's total sales.

PUBLICATIONS

Publication sales decreased 6.39% during the quarter, primarily as aresult of lower unit sales. This decrease in units was due to the fact thatCitem stopped distributing publications to international clients as well assome publications that no longer met our minimal profitability requirements.

Consequently, this division's participation as a percentage of total saleswent from 3.09% in 3Q08 to 2.76% in the third quarter of 2009.

There were marginal changes in the sales mix during the quarter. PrivatePharma sales represented 84.91% of total sales (compared to 83.88% during thethird quarter of 2008), while Government Pharma accounted for 3.84% (versus3.83% during the third quarter of 2008). Health, Beauty, Consumer Goods,General Merchandise and Other represented 8.49% (compared to 9.19% in thethird quarter of 2008) and Publications made up the remaining 2.76% (versus3.09% during the third quarter of 2008).

GROSS INCOME

During the third quarter of the year, Grupo Casa Saba's gross incomeincreased 2.43% versus the same period of the previous year to reach$762.04 million. This growth was primarily driven by our Private Pharmadivision.

The company's gross margin was 10.87%, 26 basis points lower than the11.13% margin posted during 3Q08. The margin was affected by an increase inthe cost of sales resulting from less favorable commercial conditions with themain Brazilian wholesalers.

OPERATING EXPENSES

GCS's operating expenses reached $551.63 million in 3Q09, an increase of6.52% compared to the third quarter of 2008. The increase in expensescontinues to be related to our Brazilian operations.

Operating expenses represented 7.87% of our total sales in 3Q09 comparedto 7.75% during the same period of the previous year.

OPERATING INCOME

Quarterly operating income was $210.41 million, 6.93% lower than the$226.07 reported in 3Q08. This decline was due to the fact that the growth insales was not sufficient to offset the increase in operating expenses.

The operating margin was 3.00%, 38 basis points lower than the 3.38%margin registered in the third quarter of 2008.

OPERATING INCOME PLUS DEPRECIATION AND AMORTIZATION

Operating income plus depreciation and amortization for 3Q09 was$235.41 million, a decrease of 5.72% compared to the third quarter of 2008.Depreciation and amortization for the period was $25.00 million, 5.90% higherthan in the third quarter of 2008.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents at the end of the third quarter of 2009 was$161.17 million, a decline of 44.99% compared to the same period of 2008.

COMPREHENSIVE COST OF FINANCING

During the period, GCS's comprehensive cost of financing (CCF) reached$47.71 million, 22.15% lower than the CCF reported during 3Q08. This wasprimarily due to a reduction in the amount of interest income paid as well asa lower exchange rate loss.

These interest payments are related to the long-term credit that wasobtained as a result of the acquisition in Brazil as well as the interest thatwas generated from the utilization of short-term credits for our operations inboth Mexico and Brazil.

OTHER EXPENSES (INCOME)

During the third quarter of 2009, the Company registered an income of$17.43 million in other expenses (income), an increase of 20.59% versus thesame period of 2008. The expenses (income) from this line item were derivedfrom activities that are distinct from the company's everyday businessoperations.

TAX PROVISIONS

During the third quarter, tax provisions were $24.74 million, 61.14% lessthan the $63.67 million obtained during 3Q08. Of these, $75.89 million wererelated to income tax payments and ($51.15) million were attributed todeferred income tax.

The effective tax rate for the quarter was 13.74%.

NET INCOME

As a result, GCS's net income for the third quarter was $155.38 million,an increase of 39.03% compared to the third quarter of 2008. The growth wasprimarily due to the reduction in both the CCF as well as the tax provisions.Consequently, the net margin for the period was 2.22%, 55 basis points higherthan the 1.67% net margin registered during the third quarter of 2008.

WORKING CAPITAL

During the third quarter of 2009, our accounts receivable days increasedby 7.3 days from 3Q08 to reach 69.3 days. In addition, our accounts payabledays rose by 6.1 days versus 3Q08, to reach 56.3 days. Finally, our inventorydays were 60.4 days, 0.7 fewer days compared to the same period of theprevious year.- Sales for the quarter grew 4.90% to reach $7,009.53 million - Gross income increased 2.43% - The gross margin for the quarter was 10.87% - Quarterly operating expenses as a percentage of sales were 7.87%, slightly higher than the margin of 7.75% registered during the third quarter of 2008 - Operating income decreased 6.93% versus 3Q08 - The operating margin for the quarter was 3.00% - The CCF for the quarter declined 22.15% - Tax provisions were 61.14% lower than in 3Q08 - Net profit for the quarter was $155.38 million, an increase of 39.03% - Cash and cash equivalents at the end of the quarter was $161.17 million QUARTERLY EARNINGS

SOURCE Grupo Casa Saba
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