Grendene - 2nd Qquarter 2007 Earnings

Grendene - 2nd Qquarter 2007 Earnings - Presentation Transcript

1. Meeting with Investors 2Q07 earnings 2. Adjusted net income 60% 45% 40% 31% 31% 31% 38% 20% 14% 13% 24% 24% 25% 3% 0% 8% 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 -20% 15% -24% -40% -35% -36% -60% 12-month result: change year-on-year (*) 12-month result: change year-on-year (*) without non-recurring revenues 2 3. 2Q07 YoY highlights 1H07 Gross revenue, R$ 253.7 mn, 1.6% Gross revenue, R$ 580.2mn, 8.4% higher up Sales volume 2.2% up Sales volume 13% higher Average price 6% higher Average price 10% lower Domestic revenue: 5% up, volume 4.2% lower Domestic revenue flat and volume Exports revenue 34% higher in dollar, average 10% higher price 14% up and volume 4.2% lower Exports revenue 23.6% up in dollar, Gross profit 5.9% higher, gross margin flat, average price flat in dollar and volume ~37% 23% higher Gross profit flat, gross margin Adjusted EBITDA at R$ 95.7mn, 7% up, margin flat (around 21%) around 37% Adjusted EBITDA at R$ 34.5 mn, Adjusted net income at R$ 78.7mn, 5.5% lower, margin 17.2% (R$ 83.3 mm, 19.6%), without non- 9.1% lower, margin 17.4% (R$ 38mn, recurring revenue: 8% higher, R$ 77mn (R$ 71.3 margin 19.3%) mn), net margin flat (around 17%) Adjusted net income at R$ 31.2mn, Net cash in June 30, 2007 at R$ 602.4mn, 59% 25.3% lower, margin 15.7% (R$ 41.8 up from December 31, 2006. mn, 21.2%), without non-recurring revenue: flat at R$ 29.5mn, margin Interim dividends: R$ 30mn will be paid from 15% August 22, 2007 (Ex-dividend on August 07, 2007) 3 4. Main financial and economic indicators Guidance Guidance given to market Actual Gross revenue in 1H07 higher than 1H06 + 8.4% Sales volume in 1H07 slightly higher than 1H06 + 2.2% Average price in 1H07 higher than 1H06 + 6.0% Gross Revenues 249.7 253.7 1.6% 535.2 580.2 8.4% Domestic 217.3 217.5 0.1% 446.4 468.9 5.0% Exports 32.4 36.2 11.7% 88.8 111.3 25.3% Net Sales 197.1 198.8 0.9% 425.3 457.2 7.5% Gross Profit 72.9 72.7 (0.4%) 158.6 168.1 5.9% Adjusted EBITDA 38.0 34.5 (9.1%) 89.4 95.7 7.0% Net Financial Result 14.8 6.2 (58.3%) 21.8 8.0 (63.3%) Adjusted Net Income 41.8 31.2 (25.3%) 83.3 78.7 (5.5%) Adjusted Net Income (*) 29.8 29.5 (0.9%) 71.3 77.0 8.0% EPS (R$ per share) 0.42 0.31 (25.3%) 0.83 0.79 (5.5%) Sales Volume (million pairs) 22.3 25.2 12.8% 55.7 56.9 2.2% Average Price (R$) 11.17 10.06 (9.9%) 9.62 10.20 6.0% Adjusted Margins as a % of net sales 1Q06 1Q07 Var.(bps) 1H06 1H07 Var.(bps) Gross 37.0% 36.5% (50) 37.3% 36.8% (50) EBITDA 19.3% 17.4% (190) 21.0% 20.9% (10) Net 21.2% 15.7% (550) 19.6% 17.2% (240) Net (*) 15.1% 14.9% (20) 16.8% 16.8% 7 (*) without non-recurring revenue 4 5. Shares evolution and dividend distribution 40,00 IPOs price: R$ 31.00 per share Current price: R$ 26.00 per share 35,00 30,00 25,00 20,00 US$ 1.4084 15,00 10,00 5,00 IPOs price: US$ 10.82 per share Current price: US$ 13.95 per share - 10/28/04 05/16/05 12/02/05 06/20/06 01/06/07 07/25/07 Source: Bovespa / Bacen GRND3 - R$ GRND3 US$ US$ 0.6097 R$ 3.0359 US$ 0.3770 Grendene paid in dividends 13% US$ 0.2595

since the IPO (2004 2007) taking R$ 1.2826 US$ 0.1622 in account the price in US$ issued R$ 0.8118 R$ 0.6415 on October 28, 2004. R$ 0.3000 2004 2005 2006 2007 Dividends paid since the IPO (2004-07) Dividend per share (R$) Dividend per share (US$) 5 6. Operational performance Gross revenues (in mn of Reais) .3% CAGR: 11 1,525 235 1,353 1,392 1,276 183 188 Var.% H06: 303 Var.% 1H07/1 Var.% Q06: 8 .4 % 907 2Q07/2 Q06: 1 .6 % 1Q07/1 167 14.4% 1,290 535 580 1,170 1,204 973 89 111 285 326 740 250 254 57 75 33 36 446 469 229 251 217 218 2002 2003 2004 2005 2006 1Q06 1Q07 2Q06 2Q07 1H06 1H07 Domestic Exports 6 7. Operational performance Sales volume (in mn of pairs) % CAGR: 3.3 145 130 132 121 29 116 28 32 Var.% Var.% Var.% H06: 16 27 1Q07/ 1H07/1 1Q06: Q06: 2 .2 % 2Q07/2 (5%) 12.8% 56 57 116 100 94 102 100 17 20 33 32 22 25 11 13 5 6 39 37 22 19 17 19 2002 2003 2004 2005 2006 1Q06 1Q07 2Q06 2Q07 1H06 1H07 Domestic Exports 7 8. Operational performance Average price (in Reais) Var.% Var.% Var.% Q06: 2Q07/2 H06: CAGR: 8% 1Q07/1 (9.9%) Q06: 1H07/1 20.3% 6% 13.59 12.63 12.54 11.99 11.40 11.51 11.43 11.24 11.07 11.17 10.52 10.50 10.39 10.5510.49 10.14 10.32 10.31 10.20 10.06 9.62 8.57 8.20 7.80 7.41 6.63 6.30 5.98 5.71 5.72 5.71 5.35 4.92 2002 2003 2004 2005 2006 1Q06 1Q07 2Q06 2Q07 1H06 1H07 Domestic Exports Total 8 9. Operational performance Gross profit (R$ mn) and gross margin (%) 47.5% 44.1% 44.7% 43.4% 41.5% 37.6% 36.9% 37.0% 37.3% 36.8% 36.5% 504 526 493 444 333 159 168 86 95 73 73 2002 2003 2004 2005 2006 1Q06 1Q07 2Q06 2Q07 1H06 1H07 Gross profit Gross margin 9 10. Operational performance Adjusted Ebitda (R$ mn) and Ebitda margin (%) 33.4% 28.8% 28.0% 26.4% 25.0% 23.7% 22.5% 21.0% 20.9% 19.3% 17.4% 354 320 317 267 212 89 96 51 61 38 35 2002 2003 2004 2005 2006 1Q06 1Q07 2Q06 2Q07 1H06 1H07 Adjusted Ebitda Ebitda margin 10 11. Operational performance Adjusted net income (R$ mn) and net margin (%) 23.2% 22.4% 21.2% 19.6% 18.3% 18.2% 18.4% 17.2% 16.7% 15.5% 15.7% 256 238 202 195 117 83 79 42 47 42 31 2002 2003 2004 2005 2006 1Q06 1Q07 2Q06 2Q07 1H06 1H07 Adjusted net income Net margin 11 12. Operational performance Adjusted net income (R$ mn) and net margin (%) 23.2% 22.4% 18.3% 18.2% 18.4% 16.7% 16.8% 16.8% 15.5% 15.1% 14.9% 256 238 202 195 117 71 77 42 47 30 30 2002 2003 2004 2005 2006 1Q06 1Q07 2Q06 (*) 2Q07 (*) 1H06 (*) 1H07 (*) Adjusted net income Net margin (*) Without non-recurring revenue 12 13. Domestic market highlights Well-successed repositioning of mass-market products in the 2Q07, contributed on sales volume 9.8% higher Hiring of ads agency Africa for Ipanema brand repositioning with the beginning of the flip-flops ads campaign Only Ipanema has the Anatomics (As Anatmicas, s a Ipanema tem) from July of 2007 on The average price 8.9% lower reflected the higher weighting of lower added value products in the product mix in 2Q07 Maintaining the strategy of launching peoducts with higher perceived value Expansion of licensings and acessories in the childrens segment Increased promotional campaigns Reduction in the average cost per pair in 10.2%, following the average price decrease 13 14. Exports highlights Grendene accounted for 21.3% market share in 1H07 to vis-a-vis 17.6% in 1H06 (Decex) Brands globalization: Melissa & Ipanema Gisele Bndchen Consumption growth in Europe, South America, Middle East and Africa Exports

breakdown by volume and region Pairs (in '000) 2006/05 2006 % 2005 % Var. % North America 13,457 42.7% 12,169 44.0% 10.6% South America 12,211 38.8% 9,786 35.4% 24.8% Europe 3,408 10.8% 3,607 13.0% (5.5%) Others 2,427 7.7% 2,094 7.6% 15.9% Total 31,503 100.0% 27,656 100.0% 13.9% Pairs (in '000) 1H07/1H06 1H07 % 1H06 % Var. % North America 6,579 33.8% 8,883 53.5% (25.9%) South America 5,450 28.0% 3,810 22.9% 43.0% Europe 4,762 24.5% 2,666 16.0% 78.6% Others 2,686 13.8% 1,252 7.5% 114.5% Total 19,477 100.0% 16,611 100.0% 17.3% 14 15. Outlook and guidance 2007 Gross revenue in 2007 higher than 2006 Sales volume in 2007 higher than 2006 Average price in 2007 in line with 2006 Capex R$ 10 mn in 2007, including the new plant in Bahia (5% of current installed capacity of 176 mn pairs per year) Teixeira de Freitas (BA) startup in September, 2007. Advertising expenditure between 8% to 9% of net sales in 2007 Maintaining of the dividends policy of up 100% of distributable net income Small improvement in gross margin, EBITDA margin and net margin. 15 16. Reasons for the guidance Domestic market was based e estimates on the following factors: (i) new spring-summer collection (Francal in July 2007), with new technologies and novelties in design and materials (ii) new marketing campaigns with linked to sustainability: Agua (Water) project of Ipanema G2B (continuity from Y Ikatu Xingu project) and Mormaii NeoCycle (recycled sandals and flip-flops) (iii) widening of licensing, accessories and campaigns in the kids segment with associted campaigns (iv) Still higher competitiveness with the Bahia plant star-up (v) well-successed repositioning of mass-market products and the beginning of As Anatmicas, s a Ipanema tem (vi) maintaining the strategy of launching products with higher added value (vii) increase in the real disposable income and recovring of domestic consumption Exports good outlook maintained: (i) strategy of globalization of brands with good results: Melissa and Ipanema GB (ii) widening the number of countries with sales of the brand Ipanema GB (iii) new collection and campaign of Ipanema G2B in 2H07; and (iv) sustained growth in all markets 16 17. Seasonality is part of the business Seasonality 60% 45% 39.4% 38.4% 33.1% 34.7% 31.8% 30.2% 27.3% 28.0% 29.4% 26.8% 26.2% 30% 24.1% 23.2% 21.0% 22.1% 20.5% 19.4% 19.0% 18.5% 19.3% 17.9% 17.0% 17.6% 14.9% 15% 0% 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 Quarter Gross sales revenues Adjusted EBITDA Adjusted Net Income 17 18. Medium and long term strategy Top line recovery emphasis: to present growth in the revenue and sales volume indicators, with defined strategies for domestic and export markets Objective to grow structurally, developing in its differentiated business model Enough room for organic growth and value and volume market share gains, evaluating opportunities that can be a good deal for the Company Constant costs and expenses control, looking for productivity and margin gains Globalization in some brands to improve revenues and volume in exports Exports improving with sustained growth (nine quarters in a row) Products launching validation: retailers, traders and consumers (research) Investment in differentiated evolution in the plastic technology = Grendenes DNA Emphasis in increase more and more the competitiveness Tripod: (i) low-end and high-end product mex in the portfolio; (ii) market and segments diversification; and (iii) ideal product mix: cost / price / marketing 18

19. GRND3 Share evolution Basis 100 = Dec. 31, 2006 140 130 120 110 100 90 80 70 12/31/06 01/31/07 03/05/07 04/03/07 05/04/07 06/04/07 07/04/07 08/06/07 Grendene Ibovespa IGC ITAG 19 20. Evolution in the average daily trading and number of trades average volume of shares (#) Average volume (in R$) Per Var. % Daily Var. % Per trade Var. % Daily Var. % trade Acummulated 2004 (Nov-Dec 4,213 718,616 139,788 24,013,037 Average (montly) 1,404 239,539 46,596 8,004,346 Acummulated 2005 19,735 1,830,560 384,026 37,748,688 Average (montly) 1,645 17.1% 152,547 (36.3% ) 32,002 (31.3% ) 3,145,724 (60.7% ) Acummulated 2006 22,906 1,734,000 438,830 34,029,417 Average (montly) 1,909 16.1% 144,500 (5.3% ) 36,569 14.3% 2,835,785 (9.9% ) Acummulated 2007 (JanJul) 16,277 644,395 406,674 16,136,600 Average (montly) 2,325 21.8% 92,056 (36.3% ) 58,096 58.9% 2,305,229 (18.7% ) 20 21. Companys Overview Grendene is one of the worlds largest producer of synthetic footwear, in house technology, approximately 180 mn pairs / year of installed capacity and 18 thousand actives employees. Presence in both markets: domestic ~86% in revenues (R$) and 76% in volume; exports ~14% in revenues (R$) and 24% in volume (2006) Diversification / Segmentation: feminine, masculine, kids and mass consumption Products Constant innovation, product differentiation and value recognition, launching more than 400 products per year Strong marketing culture, strong national and global brands and the most important licenses Brands / marketing Marketing campaigns associated to a sustainability projects and celebrities Alternative media, marketing segmentation, market niches, actions with traders and points of sales Rigid management discipline in costs and expenses reduction Management Raw material management and use of alternative materials improvements National and international coverage in terms of logistic and distribution Human resources: Grendene Academy, IDP, management earning-oriented 100% common shares and tag long Dividends policy to distribute up 100% of net income distributable Corporate governance Independent members in the board of directors Sustainability approach: triple bottom line (economic result, maximizing social impact and minimizing environmental impact 21 22. Own brands 22 23. Main licenses 23 24. Grendenes IR Team Alexandre Grendene Bartelle WARNING Chairman and IRD This presentation contains statements that might Doris Wilhelm represent projections of future events and results. These IRO statements are based upon certain assumptions and doris@grendene.com.br analyses performed by the company according to its (5554) 2109.9036 experience, economic environment, market conditions, and expected future developments that might be out of the Analysts companys control. Important facts that may lead to Alexandre Vizzotto significant differences between expected and actual avizzotto@grendene.com.br results, including the companys business strategy, local (5554) 2109.9011 and international economic condition, technology, financial Lenir Baretta strategy, developments in the shoes industry, equity lbaretta@grendene.com.br market conditions, uncertainties concerning future results, (5554) 2109.9026 plans, expectations and intentions, and other facts. As a consequence of these facts, the actual results may significantly differ from the ones indicated and/or implied in the statements of projections concerning future events and results. 24