Grupo Elektra Announces 10% EBITDA Growth to Ps.1,714 Million in 2Q10

MEXICO CITY, July 27 /PRNewswire-FirstCall/ -- Grupo Elektra, S.A. de C.V. (BMV: ELEKTRA*; Latibex: XEKT), Latin America's leading financial services company and specialty retailer, reported today its financial results for the second quarter of 2010.

"Once again we were able to generate firm EBITDA growth in the quarter, thanks to strong performance of consolidated revenue and important financial costs reductions," said Carlos Septien, Chief Executive Officer of Grupo Elektra and Banco Azteca. "Increased revenue was comprised of double-digit growth in merchandise sales, amid superior demand for our world-class brands, which positively affect the well-being of thousands of families in Mexico, Central and South America."

"The financial cost decrease, on the other hand, reflects lower credit reserve requirements, derived from the improved strength of our assets; consolidated delinquency rate decreased five percentage points, to 6.2% in the period, in line with an unparalleled experience in credit placement and administration within our target market", added Mr. Septien.

Consolidated second quarter results

Consolidated revenue was Ps.11,326 million, 5% higher than the Ps.10,770 million of the prior year. Costs and operating expenses were Ps.9,613 million, compared to Ps.9,208 million in the same period of a year ago.

Grupo Elektra reported EBITDA of Ps.1,714 million, 10% higher than the Ps.1,562 million of the second quarter of 2009. The EBITDA margin was 15% this period, unchanged from the second quarter of 2009. The company registered a net loss of Ps.2,583 million, compared to net income of Ps.4,601 million a year ago.

Consolidated revenue

Consolidated revenue increased 5% as the result of a 13% growth in retail sales and a 1% reduction in financial income.  

Costs and expenses

Consolidated costs were Ps.5,804 million, compared to Ps.5,563 million from a year ago.  

Consolidated costs include financial cost —which represents the creation of loan-loss reserves and interest paid to depositors on savings— as well as sales cost, which mainly represents the cost of the goods sold.  

The financial costs decreased 16% this quarter due to lower preventive credit reserve requirements, as a result of the strengthening of the consolidated portfolio quality, as well as a decrease in interest expense.

Consolidated operating expenses were Ps.3,809 million, compared to Ps.3,645 million for the same period a year ago, as a result of an increase in personnel expenses.

EBITDA and net result

Consolidated EBITDA was Ps.1,714 million, compared to Ps.1,562 million reported a year ago; the EBITDA margin for the quarter was 15%.

The principal change below EBITDA was an increase of Ps.9,536 million in other financial expenses —which reflects a 17% depreciation this quarter in the market value of underlying financial instruments that the company holds and doesn't imply cash flow in the quarter, compared to a 27% appreciation a year ago. Such change was partially compensated by a Ps.2,542 million decrease in the tax provision consistent with the tax rates applicable to the company.

Grupo Elektra reported net loss of Ps.2,583 million, compared to a Ps.4,601 million net income a year ago.

Cash and cash equivalents

As of June 30, 2010, total cash and cash equivalents were Ps.65,492 million, 19% higher than the Ps.54,940 million of the prior year, mainly due to higher investment levels of the financial business.  At the end of the quarter, the cash and investments balance for the financial business was Ps.40,014 million, and for the commercial business was Ps.25,478 million.

Consolidated loan portfolio and deposits

As of June 30, 2010, Banco Azteca Mexico and Banco Azteca and Elektrafin Latin America's past due loans decreased 46% to Ps.1,521 million, from Ps.2,803 million for the previous year. The consolidated performing portfolio was Ps.22,858 million, 1% above the  Ps.22,735 million a year ago.

The consolidated delinquency rate reduced five percentage points, from 11% to 6.2% in the period.

As of June 30, 2010, consolidated deposits were Ps.51,251 million, 6% higher than the Ps.48,572 million a year ago.

Financial business

Banco Azteca Mexico

As of June 30, 2010, the past due loan portfolio decreased 33% to Ps.1,152 million, from Ps.1,727 million a year ago, and the performing portfolio was Ps.21,752 million, 8% above the Ps.20,131 million from the previous year.

The delinquency rate, as of June 30, 2010, descended to 5%, compared to 7.9% a year ago. The past-due loan portfolio is reserved 1.4 times, compared to 1.1 times a year ago.

The company has a deep knowledge of customers and their ability to pay, which combined with effective risk analysis has a positive impact on asset quality.

At the end of the quarter, the bank had a total of 9.3 million active credit accounts; the large customer base is an additional strength of the bank that further reduces credit risk. The average term of the credit portfolio for principal credit lines —consumer, personal loans and Tarjeta Azteca— was 58 weeks at the end of the second quarter.

Deposits of Banco Azteca Mexico were Ps.52,103 million at the end of the quarter, 8% more than the Ps.48,170 million of the previous year. At the end of the period, the bank had a total of 9.9 million active savings and deposit accounts, a 32% increase from the 7.5 million accounts at the end of the same period a year ago.

As of June 30, 2010, the capitalization index of Banco Azteca was 14.5%. The company considers the index to be at a level that optimizes equity profitability.

During the second quarter, revenue from Banco Azteca Mexico was Ps.4,876 million, compared to Ps.5,071 million reported a year ago. The financial cost for the bank during the quarter was Ps.1,184 million, 27% less than the Ps.1,613 million reported the previous year, derived principally from a lower estimation of credit risk, and a decrease in interest expense.

Seguros Azteca

Grupo Elektra's insurance companies —Seguros Azteca and Seguros Azteca Danos— reported additional revenue of Ps.323 million in the quarter and EBITDA of Ps.64 million, total assets of Ps.2,124 million as of June 30, 2010, 19% superior than Ps.1,787 million of the previous year, and shareholders' equity of Ps.1,152 million, 28% higher than the Ps.898 million reported a year ago.

Afore Azteca

As of June 30, 2010, Siefore Azteca's assets under management were Ps.11,126 million. Total revenue was Ps.52 million, 6% higher than Ps.49 million a year ago, with EBITDA of Ps.27 million.

Commercial business

Revenue from the commercial business in the quarter was Ps.5,457 million, 13% superior to the Ps.4,827 million reported a year ago.

As of June 30, 2010, total debt with cost of the commercial business was Ps.7,540 million, compared to Ps.6,917 million from the previous year. The net cash of the commercial business —excluding debt— was a positive Ps.17,938 million, 25% higher than the  Ps.14,294 million of June 30, 2009.

The total debt of the commercial business is denominated in pesos, in line with most of the earnings of the company, with a weighted average interest rate of 8.1%.

Expansion

The company has a large distribution network, which allows us to stay close to customers and provides a superior market position in Mexico and Latin America.  As of June 30, 2010, Grupo Elektra had 2,013 points of sale, compared to 2,004 a year ago.  There are currently 1,603 points of sale in Mexico, as well as 410 in Central and South America.

Six month results

Total consolidated revenue in the first six months of 2010 was Ps.22,081 million, 2% higher than the Ps.21,548 million a year ago.  The company reported consolidated EBITDA of Ps.3,407 million, 12% superior to Ps.3,034 for the same period a year ago;  the EBITDA margin in the first six months of 2010 was 15%, one percentage point above that of the prior year.  Grupo Elektra registered net loss of Ps.2,247 million, compared to net income of Ps.1,703 million a year ago, mainly due to a depreciation this period in the market value of underlying financial instruments that the company holds, which doesn't imply cash flow, compared to appreciation in the prior year.

Company Profile:

Grupo Elektra (www.grupoelektra.com.mx) is Latin America's leading financial services company focused on the mass market. The Group operates close to 2,000 points of sale in Mexico, Brazil, Guatemala, Honduras, Peru, Panama, El Salvador and Argentina.  Grupo Elektra also sells and markets its consumer finance, banking and financial products and services through Banco Azteca branches located in Mexico, Brazil, Panama, Guatemala, Honduras, Peru and El Salvador.

Grupo Elektra is a Grupo Salinas company (www.gruposalinas.com), a group of dynamic, fast-growing, and technologically advanced companies focused on creating shareholder value, contributing to build the middle class of the countries in which they operate and improving society through excellence. Created by Mexican entrepreneur Ricardo B. Salinas (www.ricardosalinas.com), Grupo Salinas operates as a management development and decision forum for the top leaders of member companies. The companies include TV Azteca (www.irtvazteca.com), Azteca America (www.aztecaamerica.com), Grupo Elektra (www.grupoelektra.com.mx), Banco Azteca (www.bancoazteca.com.mx), Afore Azteca (www.aforeazteca.com.mx), Seguros Azteca (www.segurosazteca.com.mx) and Grupo Iusacell (www.iusacell.com.mx). Each of the Grupo Salinas companies operates independently, with its own management, board of directors and shareholders. Grupo Salinas has no equity holdings. However, the member companies share a common vision, values and strategies for achieving rapid growth, superior results and world-class performance.

Except for historical information, the matters discussed in this press release are forward-looking statements and are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected.  Other risks that may affect Grupo Elektra and its subsidiaries are identified in documents sent to securities authorities.

SOURCE Grupo Elektra, S.A. de C.V.

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