Brazil 2014

28/02/2014
XV Brazil CEO Conference – Brazil 2014
Disclaimer
This presentation contains statements that can represent expectations about
future events or results. These statements are based on certain suppositions
and analyses made by the company in accordance with its experience, with the
economic environment and market conditions, and expected future
developments, many of which are beyond the company’s control. Important
factors could lead to significant differences between real results and the
statements on expectations about future events or results, including the
company’s business strategy, Brazilian and international economic conditions,
technology, financial strategy, developments in the footwear industry,
conditions of the financial market, and uncertainty on the company’s future
results from operations, plans, objectives, expectations and intentions – among
other factors. In view of these aspects, the company’s results could differ
significantly from those indicated or implicit in any statements of expectations
about future events or results.
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Agenda
Mission, Vision and Values
History
Dividends
Capital markets
Plants
Capital Expenditure (CAPEX)
Production
Footwear Sector
Brands and Marketing
Resultads
Guidance
3
Mission
To create democratic fashion, responding rapidly to the market’s
needs, generating an attractive return for the company and its
partners.
To be the most profitable company in the world among the
leading organizations in the sector.
Vision
Grendene Values
Profitability
Competitiveness
Innovation
Agility
Ethics
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Profitability
Source: Grendene / Bloomberg / Companies Financial Statements
EBIT margin 2012
Grendene
Belle International…
A. Grings S.A. (Piccadilly)
Arezzo
VF Corp (Timberland)
Deckers Outdoor Corp
Nike
Crocs Inc
Usaflex
Daphne Intl Holding
Alpargatas
Calçados Jacob (Kildare)
Beira Rio
Adidas
Yue Yuen Industrial…
Puma SE
Net margin 2012
19,3%
16,4%
15,1%
14,9%
13,5%
13,2%
13,2%
13,1%
13,0%
12,7%
11,1%
10,3%
9,3%
8,0%
6,1%
3,4%
Grendene
Belle International…
Crocs Inc
Arezzo
A. Grings S.A. (Piccadilly)
VF Corp (Timberland)
Nike
Alpargatas
Beira Rio
Deckers Outdoor Corp
Daphne Intl Holding
Yue Yuen Industrial…
Usaflex
Calçados Jacob (Kildare)
Adidas
Puma SE
0,0% 5,0% 10,0% 15,0% 20,0% 25,0%
22,8%
13,2%
11,7%
11,3%
10,4%
10,0%
9,5%
9,3%
9,3%
9,1%
9,1%
6,9%
6,5%
5,9%
3,5%
2,1%
0,0% 5,0% 10,0% 15,0% 20,0% 25,0%
Grendene had lower margins in 2013, but are still better than those presented
by the company ranked in second in 2012.
5
Profitability
Net margin %
25%
% of net sales
20%
22,8%
19,2%
18,7%
13,7%
15%
11,8%
10,4%
10%
5%
19,5%
10,1%
6,1%
7,8%
5,9%
6,5%
11,3%
20,6%
2008
2009
Source: Grendene / Bloomberg
(*) Results of 2013 are not available yet.
(**) Year ended on May 31.
Adidas *
13,5%
11,9%
10,0%
10,2%
4,7%
4,6%
2010
2011
2,4%
0%
19,8%
Alpargatas *
11,3%
9,5%
9,8%
Nike **
Arezzo *
9,3%
Grendene
3,5%
2012
2013
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Main companies in Brazil
Profit
500
429,0
450
433,5
400
Million of R$
350
312,4
272,2
300
250
239,4
306,3
307,4
305,4
Arezzo *
280,0
Alpargatas *
200
150
173,2
100
50
22,3
Grendene
125,9
48,7
64,5
91,6
96,9
2011
2012
2008
2009
2010
2013
Source: Grendene / Bloomberg
(*) Results of 2013 are not available yet.
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Shareholder´s equity and return on equity
Shareholder´s equity
Return on average equity
2.500
1,954
2.000
R$ million
1,676
1.500
1.000
2,068
1,801
1,465
19.9%
19.9%
22.9%
21.6%
17.6%
500
0
12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013
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Timeline
70s
80s
Foundation Grendene.
Openning the plant
making molds, at Carlos
Barbosa.
Launch of the sandal
collection with the
brand Melissa.
90s
Openning of the factories
at Fortaleza, Sobral and
Crato, in Ceará.
Launch men´s sandal
line Rider.
Launch Grendha brand.
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Timeline
2000s
Grendene started having
common shares (“GRND3”)
negotiated at the Novo
Mercado of BM&FBOVESPA.
Openning of Galeria
Melissa in São Paulo
and New York.
Creation Clube Melissa
New Business – Constitution of A3NP Indústria e Comércio de
Móveis S.A. for industrial-scale production of consumer products
made from plastic, with sophisticated design, and cost that is
accessible to the middle income groups, in partnership with
Philippe Starck and others.
Foto: A. Carreiro – Out/2004
New Plants – Teixeira de
Freitas (2007) and Sobral
(2013).
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Dividend Policy
R$ per share
74,8%
71,8%
71,1%
0,9760 0,9980
46,6%
41,3%
39,9% 0,7300
%
Due to the Provisional Measure nº
627/2013, the Company decided
to change its dividend policy by
not doing difference destination of
state grants to integrate the basis
of dividends, as the Company was
doing before, and distribute as
dividend the total profit that has no
origin from government grants,
after the constitution of the Legal
and Statutory Reserves.
0,3625 0,3658 0,4048
7,0%
5,9%
4,7%
2008
2009
2010
Dividend per share
8,5%
8,4%
2011
2012
Payout (*)
5,0%
2013
Dividend yield (**)
(*) Payout: Dividend divided by profit after the allocations to legal reserves
(**) Dividend yield: Dividend per share in the period divided by the weighted average price of the share, annualized.
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Capital markets
Last 52 weeks
Date
Minimum
Feb. 5, 2014
Share price
R$ 14.98
Market capitalization
R$ 4.2 billion
Market Capitalization– free-float
R$ 1.2 billion
Maximum
Apr. 24, 2014
R$ 23.73
R$ 7.0 billion
R$ 1.8 billion
Evolution GRND3 x IBOVESPA – Dec. 31, 2008 to Feb. 11, 2014
800
700
500
579.6
505.1
P/E – Share price dividend by the amount of ptofits it makes for each share in a 12-month period.
506.5
400
300
250.1
235.0
245.1
220.2
182.7
184.6
217.2
181.7
389.5
151.1
162.3
427.3
373.5
200
100
137.2
129.1
0
30-Dec-08
28-Feb-09
30-Apr-09
30-Jun-09
31-Aug-09
31-Oct-09
31-Dec-09
28-Feb-10
30-Apr-10
30-Jun-10
31-Aug-10
31-Oct-10
31-Dec-10
28-Feb-11
30-Apr-11
30-Jun-11
31-Aug-11
31-Oct-11
31-Dec-11
29-Feb-12
30-Apr-12
30-Jun-12
31-Aug-12
31-Oct-12
31-Dec-12
28-Feb-13
30-Apr-13
30-Jun-13
31-Aug-13
31-Oct-13
31-Dec-13
11-Feb-14
Basis 100 = Dec. 31, 2008
600
Price/Earnings (P/E):
12/31/08 – 5.32
12/31/09 – 10.99
12/31/10 – 8.97
12/31/11 – 7.57
12/31/12 –11.56
12/31/13 – 12.55
IBOVESPA
GRND3 - No dividend reinvest.
GRND3 - With dividends reinvest.
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Location of industrial plants
Production capacity:
250 million pairs / year
Brasil
Fortaleza / CE
Sobral / CE
Sobral
Fortaleza
Crato
Teixeira de
Freitas
Carlos Barbosa / RS
Carlos Barbosa
Crato / CE
Farroupilha
Área construída = 296.000 m 2
Farroupilha / RS
Employees:
Northeast Region : 26.500
South Region : 2.200
Teixeira de Freitas/BA
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Capex (Property, plant and equipment and intangible assets)
180,0
154,0
160,0
140,0
Million of R$
120,0
100,0
80,0
63,6
60,0
35,4 33,0 39,4
40,0
24,2
Casa Ipanema – Rio de Janeiro/RJ - Brazil
2008 2009 2010 2011 2012 2013
Investments in expanding
production capacity.
20,0
-
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Productive process
Verticalization = Agility
PVC formulation
Design
Moulds
P&D
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Footwear Sector
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Footwear Sector– Brazil
• World´s 3rd largest producer;
• About 8,000 producers;
• 348,000 direct employees;
• Production: 908 million pairs in
2013;
Barbie Fashion
Dream Baby
• Exports: 123 million pairs to more
than 150 países countries in 2013;
• Apparent consumption, Brazilian
domestic market: 824 million
pairs and 4,2 pairs per capita/year
in 2013.
Fonte: IEMI/RAIS/ABICALÇADOS/SECEX
The industry itself is not much more than
180 years old – companies are typically
small and labor-intensive, with no entry
or exit barriers.
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Footwear sector – World
Country
Distribution of footwear
production by continent in 2011
3.6%
5.1%
6.2%
1.4%
1.7% 0.01%
Production 2011
(million pairs)
China
10,503
India
2,250
Brazil
819
Vietnam
707
Indonesia
640
Others
Total
81.9%
Aia
South America
Europa
Africa
North & Central America
Middle East
Oceania
Consumption – 2011
United States
France
United Kingdom
Italu
Japan
Brazil
3,498
18,417
The 5 principal
countries produce:
14,919 million pairs =
81% of total world
production.
Source: World Shoe
Review 2010 /
ABICALÇADOS
Total
Per capita*
2,170
424
377
337
684
740
6.9
6.5
6.0
5.5
5.3
3.9
* Estimated by Grendene. Sources – World Shoe Review / Abicalçados
/ CIA – Central Intelligence Agency
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Brazilian footwear sector x Grendene
Brazilian production
CAGR (2013/2003): 0.1%
Change (2012/2011): 5.1%
Grendene
CAGR (2012/2003): 5.9%
Change (2012/2011): 16.8%
900
250
897 916
908
894
877
830
800
216
864
819
808 816 814
200
700
Million pairs /year
Million pairs /year
Source: IEMI / Abicalçados / Grendene
1.000
600
500
400
300
200
185
166 169
150
146 146
145
150
130 132
121
100
50
100
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
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Exports: Grendene vs. Brazil
Brazilian Exports
CAGR (2013/2003): (4.2%)
Change (2013/2012): 8.5%
Grendene
CAGR (2013/2003): 6.5%
Change (2013/2012): 11.4%
60
55
211
190
189
50
48
51
48
45
180 177
43
166
143
150
127
113 113
123
100
50
Million pairs / year
40
40
32
30
27
20
10
28
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
-
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Grendene accounts for 41,1% of
Brazilian footwear exported in
2013. (40,0% in 2012).
2003
200
Million pairs /year
Source: MDIC / Decex / Abicalçados / Grendene
250
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Brands & Marketing
Products that meet
essential and basic needs
at low cost
Products for all the
income levels: A, B, C, D
and E – with very good
cost x benefit.
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Sales Channels
C&A - Retail
Selective distribution
Selective distribution
Strong relationship with trade
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Marketing
Ipanema and Rider
at Rock in Rio
Ipanema on the website of Victoria's Secret and
boutique Patricia Field - NY
Fernanda Paes Leme
Fiorella Mattheis
Giovanna Lancelotti
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In October the Club
Melissa celebrated one
year with the opening of
the 100th store.
Melissa at Galeria Lafayette
Pop Up Store Melissa in Miami
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25
Gross sales revenue (IFRS) – R$
million
Gross sales revenue –
Total
CAGR (2013-2008): 11.5%
2.711
Gross sales revenue –
Domestic market
CAGR (2013-2008): 12.0%
Note: CAGR 5 years
Gross sales revenue –
Exports
CAGR (2013-2008): 9.7%
2.324
2.147
1.999
1.845
1.832
1.819
564
479
1.604
1.490
1.464
395
355
2009
2010
2011
2012
342
2013
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
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Market %
Gross sales revenue
19.5%
19.8%
18.7%
20.6%
20.8%
Sales volume
80.5%
80.2%
81.3%
79.4%
79.2%
29.1%
32.2%
28.3%
24.5%
23.4%
2009
2010
2011
2012
2013
70.9%
67.8%
71.7%
75.5%
76.6%
2010
2011
2012
2013
Domestic market
Exports
2009
Domestic Market
Exports
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Results (IFRS) – R$ million
Obs: CAGR 5 anos
EBIT / EBIT margin
CAGR (2013-2008): 19.2%
399
EBITDA / EBITDA margin
363
CAGR (2013-2008): 17.9%
436
395
208
187
19.3%
18.3%
152
13.0%
12.6%
10.5%
237
216
21.0%
19.9%
178
14.7%
14.6%
2010
2011
12.3%
2009
2010
2011
2012
2013
2009
2012
2013
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Production (million pairs)
Obs: CAGR 5 anos
Sales volume - Total
CAGR (2013-2008): 8.1%
Sales Volume –
Domestic market
216
166
185
166
Sales volume –
Exports
CAGR (2013-2008): 10.9%
169
CAGR (2013-2008): 1.1%
140
150
117
115
55
51
48
45
108
43
Market share gains
2009
2010
2011
2012
2013
2009
2010
2011
2012
World presence:
more than 90
countries
2013
2009
2010
2011
2012
2013
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Cash and cash equivalents and financial investments (short- and
long-term), borrowings (short- and long term) and net cash
1.200
1.031
916
R$ million
800
794
849
805
664
874
734
736
616
400
Solid Capital Structure and
Strong Cash Generation
0
(131)
(181)
(111)
(138)
(118)
-400
12/31/09 12/31/10 12/31/11 12/31/12 12/31/13
Cash and cash equivalents and financial investments
Borrowings
Net Cash
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Less labor intensive
More capitalintensive
Our expertise of 40 years,
producing innovative
footwear and generating
desired brands, shows the
success of our vision of the
market, our strategy and our
business model – and our
capacity to create value for
stockholders.
Strategy: Break
Paradigms
Higher entry
barries
Highly
marketing
intensive
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Value proposition
Cartoon characters, local celebrities and successful designers
Brands
Products
Marketing
 Constant creation of
products
 Aggresive marketing
 Segmentation
 Investment in media /
events
 Strong relationship
with trade
 Innovative design
 Manufacturing
technology
 Few products in large
scale
Management
 Scale gains, scope
gains
 Profitability
 Continuous
improvement
 Financial solidity
 Sustainable growth
Value for Stakeholders
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Market
Melissa
Brand: Melissa
Main Competitors: Arezzo, Schultz, Grudy, Flor de Mel,
Cravo e Canela.
Vivienne
Westwood
Anglomania +
Melissa Lady
Dragon XI
Melissa Jean
+ Jason Wu
Melissa Ginga
+ Karl Lagerfeld
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Market
Women
Main Brands: Grendha, Zaxy, Ilhabela
Main Licenses: Ivete Sangalo, Shakira, Paula Fernandes
Main Competitors: Via Marte, Beira Rio, Ramarim, Dakota,
Picadilly, Via Uno, Anacapri, Usaflex.
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Market
Men
Main Brands: Rider, Cartago
Main Licenses: Guga Küerten, Bad Boy, Mormaii
Main Competitors: Kenner, Beira Rio, Alpargatas, Itapuã, FreeWay.
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Market
Kids
Main brands: Grendene Kids, Grendene Baby, Zizou
Main licenses: Ben 10, Hello Kitty, Disney, Hot Wheels,
Smurfs, Barbie, Moranguinho, Fisher-Price, Max Steel, Angry
Birds entre outras.
Main Competitors: Klim, Bibi, Pampily, Bical, Pé com Pé,
Marisol
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Linha
Mass Market
Main brand: Ipanema
Main Competitors: Alpargatas, Dupé, Balina, Beira-Rio.
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Guidance
Gross sales revenue
3.500
Guidance 12% a.a.
R$ million
3.000
2,711
Guidance 8% a.a.
2.500
2,324
, 1.999
2.000
1,819
1,847
1,576
1.500
2008
2009
2010
Guidance 8% a.a.
2011
2012
2013
Guidance 12% a.a.
2014
2015
Accomplished
We expect in this period to have some years with higher growth than these rate, as happened in 2009 and
other years with lower growth, but on average we intend to achieve these targets.
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Guidance
Net Profit
700
Guidance 15% a.a.
R$ million
600
Guidance 12% a.a.
500
429
434
400
300
239
272
312
305
200
2008
2009
2010
Guidance 12% a.a.
2011
2012
2013
Guidance 15% a.a.
2014
2015
Accomplished
We expect in this period to have some years with higher growth than these rate, as happened in 2009 and
other years with lower growth, but on average we intend to achieve these targets.
39
Guidance
Targets for:
2008-2015
Growth of gross revenue at a CAGR
between 8% and 12% in the five years.
Growth of net profit at a CAGR between
12% and 15% in the five years.
Advertising expenses: average: 8% - 10%
of net revenue in this period.
We expect in this period to have some years with higher growth than these rate, as happened in
2009 and other years with lower growth, but on average we intend to achieve these targets.
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Guidance 2014
Approximately R$120 million
in CAPEX - modernization
and productivity gains of the
plant.
Beginning
revenues from the
furniture company
in partnership with
Philippe Starck.
Philippe Starck
@LeaCrespi
Openning of Galeria Melissa,
London – at 43 King Street, in
the heart of Covent Garden.
41
Grendene’s IR Team
Francisco Schmitt
CFO & IRO
(55 54) 2109.9022
Secretary
Cátia Gastmann
(55 54) 2109.9011
Analysts
Lenir Zatti / Alexandre Vizzotto
Further Information
Internet: http://ri.grendene.com.br
Email: dri@grendene.com.br
Thank You!
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