Grupo Elektra Announces 15% EBITDA Growth to Ps.1,693 Million in 1Q10

MEXICO CITY, April 29 /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 first quarter of 2010.

"We were able to significantly increase Grupo Elektra's consolidated EBITDA and profitability in the period, as a result of important expense controls and cost reductions, as well as millions of families' preferences for the competitive products and services we offer that improve living standards, " said Carlos Septien, Chief Executive Officer of Grupo Elektra and Banco Azteca.

"The decrease in costs reflects lower reserve requirements, derived from a strengthening of the asset quality. The delinquency rate of Banco Azteca Mexico fell two percentage points in the period, to 5.9%, thanks to effective credit risk controls, and unmatched knowledge of our market," added Mr. Septién. "The solid portfolio quality, strong  deposit growth and world-class products and services represent additional sources of future growth."

Consolidated First Quarter Results

Consolidated revenue was Ps.10,755 million, compared to Ps.10,778 million for the same quarter last year. Costs and operating expenses were Ps.9,061 million, 3% lower than the Ps.9,305 million in the same period of the prior year.

Grupo Elektra reported EBITDA of Ps.1,693 million, 15% higher than the Ps.1,472 million of the first quarter of 2009. The EBITDA margin was 16% this period, two percentage points above that of last year.  The company registered net income of Ps.336 million, compared to a net loss of Ps.2,899 million a year ago.

Figures in millions of pesos.

As of March 31, 2009, Elektra* outstanding shares were 243.2 million and the number of shares as of December 31, 2010, were 243.7 million.

Consolidated Revenue

Consolidated revenue stability was the result of a 7% increase in retail sales, as well as a 6% reduction in financial income.

Costs and Expenses

Consolidated costs were Ps.5,386 million, 5% lower than Ps.5,668 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 costs reduction for this quarter reflects lower preventive credit reserve requirements, due to the strengthening of the consolidated portfolio quality, as well as a decrease in interest expense.

Consolidated operating expenses were Ps.3,675 million, compared to Ps.3,637 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.1,693 million, 15% higher than the Ps.1,472 million reported a year ago; the EBITDA margin for the quarter was 16%, compared to 14% for the previous year.

The principal change below EBITDA was an improvement of Ps.3,761 million in other financial expenses -- which reflects a 2% 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 19% depreciation a year ago. Such change was partially compensated by a Ps.1,151 million increase in the tax provision consistent with the tax rates applicable to the company.

Grupo Elektra reported net income of Ps.336 million, compared to a Ps.2,899 million net loss a year ago.

Cash and Cash Equivalents

As of March 31, 2010, total cash and cash equivalents were Ps.61,848 million, 23% higher than the Ps.50,176 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.36,915 million, and for the commercial business was Ps.24,932 million.

Consolidated Loan Portfolio and Deposits

As of March 31, 2010, Banco Azteca Mexico and Banco Azteca and Elektrafin Latin America's past due loans decreased 42% in the period, to Ps.1,723 million, from Ps.2,962 million for the previous year. The consolidated gross portfolio was Ps.24,642 million, compared to Ps.26,820 million a year ago.

The consolidated delinquency rate reduced four percentage points, from 11% to 7% in the period.

As of March 31, 2010, consolidated deposits were Ps.50,636 million, 6% higher than Ps.47,593 million a year ago.

Financial Business

Banco Azteca Mexico

As of March 31, 2010 the past due loan portfolio decreased 29% in the period to Ps.1,367 million, from Ps.1,916 million a year ago, and the gross portfolio was Ps.23,133 million, 2% above the Ps.22,790 million from the previous year.

The consolidated delinquency rate, as of March 31, 2010, was 5.9%, compared to 8.4% a year ago. The past-due loan portfolio is reserved 1.3 times.

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 9.5 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 fourth quarter.

Deposits of Banco Azteca Mexico were Ps.51,489 million at the end of the quarter, 9% more than the Ps.47,373 million of the previous year. At the end of the period, the bank had a total of 9.2 million active savings and deposit accounts, a 29% increase from the 7.2 million accounts at the end of the same period a year ago.

As of March 31, 2010, the capitalization index of Banco Azteca was 14.3%. The company considers the index to be at a level that optimizes equity profitability.

During the first quarter, revenue from Banco Azteca Mexico was Ps.4,838 million, compared to Ps.5,008 million reported a year ago. The financial cost for the bank during the quarter was Ps.1,202 million, 28% less than the Ps.1,670 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 Vida and Seguros Azteca Danos -- reported additional revenue of Ps.325 million in the quarter and EBITDA of Ps.95 million, total assets of Ps.2,129 million as of March 31, 2010, 22% superior than Ps.1,751 million of the previous year, and shareholders' equity of Ps.1,085 million, 36% higher than the Ps.798 million reported a year ago.

Afore Azteca

As of March 31, 2010, Siefore Azteca's assets under management were Ps.10,733 million. Total revenue was Ps.53 million, 10% higher than Ps.48 million a year ago, and EBITDA of Ps.25 million, 39% higher than the Ps.18 million from the previous year.

Commercial Business

Revenue from the commercial business in the quarter was Ps.5,068 million, 7% superior to the Ps.4,754 million reported a year ago.

As of March 31, 2010, total debt with cost of the commercial business was Ps.7,569 million, compared to Ps.7,079 million from the previous year. The net cash of the commercial business -- excluding debt -- was a positive Ps.17,363 million, 25% higher than the  Ps.13,927 million of March 31, 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%.

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 March 31, 2010, Grupo Elektra had 2,001 points of sales, compared to 2,009 a year ago.  There are currently 1,589 points of sale in Mexico, as well as 412 in Central and South America.

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.

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