Grupo Elektra Announces 39% EBITDA Growth to Ps.1,703 Million in 4Q10

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• Latin America - español

MEXICO CITY, Feb. 24, 2011 /PRNewswire/ -- 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 fourth quarter and full year 2010.

"We achieved remarkable expansion in EBITDA and profitability with income reaching a historical maximum, together with a reduction of financial cost due to lower credit reserves requirements during the quarter," commented Carlos Septien, Chief Executive Officer of Grupo Elektra and Banco Azteca. "The lower reserves reflect the growing strength of our assets; Banco Azteca Mexico's delinquency rate was 4.6%, four percentage points lower than last year and the lowest level since 2006."

"The strength of the results was not limited to the quarter, with remarkable full-year performance. Merchandise sales grew double digits, EBITDA reached a new record and the EBITDA margin grew two percentage points to 15%," added Mr. Septien.

Consolidated fourth quarter results

Consolidated revenue was Ps.12,779 million, up from the Ps.11,473 million of the prior year. Costs and operating expenses were Ps.11,075 million, compared to Ps.10,251 million in the same period last year.

Grupo Elektra reported EBITDA of Ps.1,703 million, 39% higher than the Ps.1,222 million of the fourth quarter of 2009. The EBITDA margin was 13% this period, two percentage points higher than the fourth quarter of 2009. The company registered a net profit of Ps.2,149 million, compared to Ps.3,661 million a year ago.

Consolidated revenue

Consolidated revenue increased 11%, to Ps.12,779 million, a historical maximum for a fourth quarter. The increase was the result of a 13% growth in retail sales and a 10% growth in financial income.  

Costs and expenses

Consolidated costs for the quarter were Ps.6,293 million, compared to Ps.6,163 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 goods sold.  

The financial costs decreased 8% this quarter due to lower preventive credit reserve requirements, as a result of the strengthening of the consolidated portfolio quality.

Consolidated operating expenses were Ps.4,782  million, compared to Ps.4,088 million for the same period a year ago, primarily as a result of an increase in personnel expenses in the context of growing operations.

EBITDA and net result

Consolidated EBITDA was Ps.1,703 million, 39% higher than the Ps.1,222 million reported a year ago; the EBITDA margin for the quarter was 13%, up from 11% in the same period last year.

The principal change below EBITDA was a Ps.4,486 million loss under other financial expenses, resulting from a decreased valuation of financial instruments owned by the company. The loss does not imply cash flow. This was partially compensated by a Ps.1,364 million decrease in tax provisions.

Grupo Elektra reported net profit of Ps.2,149 million, compared to a Ps.3,661 million a year ago.

Cash and cash equivalents

As of December 31, 2010, total cash and cash equivalents were Ps.62,152 million, compared to Ps.63,302 million of the prior year, mainly due to lower investment levels of the financial business as a result, primarily, of the dynamic growth of credit during this period.  At the end of the quarter, the cash and investments balance for the financial business was Ps.36,973 million, and for the commercial business was Ps.25,178 million.

Consolidated loan portfolio and deposits

Banco Azteca Mexico and Banco Azteca and Elektrafin Latin America's past due loans decreased 30% to Ps.1,489 million, from Ps.2,119 million for the previous year. The consolidated gross portfolio was Ps.28,854 million, 18% above the  Ps.24,384 million a year ago.

The consolidated delinquency rate reduced more than three percentage points, from 8.7% to 5.2% in the period.

As of December 31, 2010, consolidated deposits were Ps.54,960 million, 5% higher than the Ps.52,525 million a year ago.

Financial business

Banco Azteca Mexico

The past due loan portfolio decreased 33% to Ps.1,195 million, from Ps.1,776 million a year ago, and the performing portfolio grew 26% to Ps.24,806 million. The gross portfolio was Ps.26,001 million, 21% above of Ps.21,440 million from the previous year.

The delinquency rate, as of December 31, 2010, descended to 4.6%, compared to 8.3% 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 9.1 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 57 weeks at the end of the fourth quarter.

Deposits of Banco Azteca Mexico were Ps.54,110 million at the end of the quarter, 3% more than the Ps.52,660 million of the previous year. At the end of the period, the bank had a total of 10.8 million active savings and deposit accounts, a 24% increase from the 8.7 million accounts at the end of the same period a year ago.

As of December 31, 2010, the estimated capitalization index of Banco Azteca was 13.5%. The company considers the index to be at a level that optimizes equity profitability.

During the fourth quarter, revenue from Banco Azteca Mexico was Ps.5,224 million, 6% higher than the Ps.4,939 million reported a year ago. The financial cost for the bank during the quarter was Ps.898 million, 35% less than the Ps.1,386 million reported the previous year, derived principally from a lower estimation of credit risk.

Seguros Azteca

Grupo Elektra's insurance companies —Seguros Azteca and Seguros Azteca Danos— reported revenue of Ps.366 million in the quarter, 8% above last year's same period, and EBITDA of Ps.69 million, 17% more than in 2009. The company also reported total assets worth Ps.2,516 million as of December 31, 2010, 19% superior than the previous year, and shareholders' equity of Ps.1,353 million, 29% higher than the Ps.1,048 million reported a year ago.

Afore Azteca

As of December 31, 2010, Afore Azteca's assets under management were Ps.11,305 million. Total revenue was Ps.58 million, 7% higher than the Ps.54 million a year ago, with a 44% increase in EBITDA to Ps.35 million.

Commercial business

Revenue from the commercial business in the quarter was Ps.6,572 million, 13% superior to the Ps.5,807 million reported a year ago.

As of December 31, 2010, total debt with cost of the commercial business was Ps.8,295 million, compared to Ps.6,906 million from the previous year. The net cash of the commercial business —excluding debt— was a positive Ps.16,883 million, compared to a positive result of Ps.18,271 million of December 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 7.9%.

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 December 31, 2010, Grupo Elektra had 2,253 points of sale, compared to 2,042 a year ago.  There are currently 1,830 points of sale in Mexico, as well as 423 in Central and South America.

Twelve months consolidated results

Total consolidated revenue of 2010 was Ps.46,019 million, 7% higher than the Ps.43,122 million a year ago.  The company reported consolidated EBITDA of Ps.6,776 million, 20% superior to a year ago and a historical maximum;  the EBITDA margin for 2010 was 15%, two percentage point above that of the prior year.  Grupo Elektra registered net profit of Ps.245 million, compared to Ps.4,945 million a year ago, mainly due to a higher depreciation this period in the valuation of 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 more than 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 Elektra, S.A. de C.V.