Grupo Elektra Announces Record Net Income of Ps. 671 Million for
4Q04, up 57% YoY, and Ps. 1.9 Billion in 2004, up 60% YoY - Record
EBITDA of Ps. 1.3 Billion for 4Q04, up 21% YoY, and Ps. 4.1 Billion
for 2004, up 13% YoY - MEXICO CITY, Feb. 16 /PRNewswire-FirstCall/
-- Financial Highlights Ps. Million Change 4Q03 4Q04 $ %
Consolidated Revenues 6,505 8,028 1,523 23.4% Gross Profit 3,009
3,521 512 17.0% EBITDA 1,081 1,312 231 21.4% Net Income 428 671 243
56.8% EPS (pesos per share) 1.79 2.82 1.03 57.7% EPS (US$ per ADR)
* 0.64 1.01 0.37 57.7% * Ps. 11.15 per US$ Ps. Million Change 2003
2004 $ % Consolidated Revenues 21,845 26,315 4,469 20.5% Gross
Profit 9,645 11,620 1,975 20.5% EBITDA 3,629 4,106 477 13.1% Net
Income 1,202 1,917 715 59.5% EPS (pesos per share) 5.02 8.06 3.04
60.5% EPS (US$ per ADR) * 1.80 2.89 1.09 60.5% * Ps. 11.15 per US$
Grupo Elektra S.A. de C.V. (BMV: ELEKTRA*; NYSE: EKT; Latibex:
XEKT), Latin America's leading specialty retailer, consumer finance
and banking and financial services company, reported today its
financial results for the fourth quarter and full year of 2004.
Javier Sarro, CEO of Grupo Elektra said, "Congratulations go to all
of our talented employees from both our retail and financial
divisions for delivering double-digit revenue and EBITDA growth for
the year and for an excellent job in meeting our customers' needs.
Our store improvements and expansions throughout all our formats
with added goods and services are a sound foundation for growth in
2005. We are bullish on 2005 as we continue to deliver valued-added
merchandise and financial products and services to the vast
majority of the population in Mexico and other Latin American
countries where we operate." "We have a lot to celebrate in our
second anniversary," said Carlos Septien, CEO of Banco Azteca. "It
has been two years of intense effort that has yielded concrete
results. Not only have we greatly expanded our product offering,
but also our customer base and the number of bank branches to serve
them. We send our warmest thanks to all of our employees that are
making the dream of bringing quality services to a once
"unbankable" segment of the population. We look forward to
repeating this success in 2005." Mr. Septien concluded. Rodrigo
Pliego, Grupo Elektra's Chief Financial Officer, commented "Our
results during the past year clearly demonstrate our efforts to
improve profitability. Early on 2004, we took a major step in
calling our Senior Notes issued in US dollars and refinancing them
with peso debt. The savings in financial expenses is clear, as are
the results of our store expansion program. For 2005, we will
continue improving our operating leverage, and expect the results
to be evident in our EBITDA for the year." 4Q04 and 2004 Financial
Highlights Consolidated Revenues Total consolidated revenues
increased 23.4% YoY from Ps. 6.5 billion in 4Q03 to Ps. 8.0 billion
in 4Q04, the highest level reached in a fourth quarter. This result
is explained by a solid 74.4% increase YoY in financial revenues
from Banco Azteca, from Ps. 1.2 billion in 4Q03 to Ps. 2.1 billion
in 4Q04; continued growth of merchandise sales, which increased
7.4% YoY from Ps. 4.8 billion in 4Q03 to Ps. 5.2 billion in 4Q04;
and a 12.6% YoY growth in money transfer revenues from Ps. 210.1
million in 4Q03 to Ps. 236.6 million in 4Q04. Merchandise sales
growth was consistent across Elektra and Bodega de Remates formats,
with YoY increases of 9.5% and 2.0%, respectively; and a 6.8%
decrease in the Salinas y Rocha format due to stores closed over
the year. Growth was buoyed by new, relocated and remodeled stores;
the addition of new merchandise including motorcycles, scooters and
mopeds; LCD, HDTV and plasma televisions; and cellulars with PDA
technology; as well as our Empresario Azteca program. In addition,
our newest store format Elektricity is starting to show encouraging
results. Finally, we are also reaping the benefits of our continued
aggressive pricing and promotional strategies, and our door-to-door
sales initiative. Increases in Banco Azteca's financial income are
largely due to greater credit availability and streamlined
processing of credit applications at our stores and other channels;
higher limits on personal loans; longer credit terms for our weekly
payments credit programs: and the success of our mobile sales force
(Comercializadora) in attracting new customers. Lastly, other
income includes Milenia, our extended warranties services; and
revenues from Afore Azteca and Seguros Azteca. In this revenue
line, the 114.3% YoY increase is explained by very encouraging
results registered from our two newest business units. Consolidated
Revenues Ps. Million Change 4Q03 4Q04 $ % Total Revenues 6,505
8,028 1,523 23.4% Merchandise 4,845 5,206 361 7.4% Money Transfer
210 237 26 12.6% Banco Azteca 1,246 2,148 902 72.4% Other 204 437
233 114.3% Ps. Million Change 2003 2004 $ % Total Revenues 21,845
26,315 4,469 20.5% Merchandise 15,982 17,682 1,700 10.6% Money
Transfer 743 893 149 20.1% Banco Azteca 3,262 6,904 3,642 111.6%
Other 1,858 836 (1,022) (55.0%) Total consolidated revenues for
2004 increased 20.5% YoY to Ps. 26.3 billion from Ps. 21.8 billion
in 2003. Merchandise sales for the year grew 10.6% to Ps. 17.7
billion from Ps. 16.0 billion in 2003 as revenue from our store
formats Elektra, Salinas y Rocha and Bodega de Remates grew YoY
11.7%, 1.8% and 7.6%, respectively. Revenues from Banco Azteca
increased 111.6% YoY to Ps. 6.9 billion from Ps. 3.3 billion in
2003. Money transfer revenues grew 20.1% YoY, from Ps. 743.1
million in 2003 to Ps. 892.5 million in 2004. Lastly, other income
revenues decreased 55.0% YoY to Ps. 835.6 million from Ps. 1.9
billion in 2003. The decrease is due to the fact that at the end of
2003, there was still a balance left from our credit operations
granted before October 30, 2002, thus making the base of comparison
higher when compared to 2004. EBITDA and Operating Profit
Consolidated EBITDA was a record for a fourth quarter as it
increased 21.4% YoY, from Ps. 1.1 billion in 4Q03 to Ps. 1.3
billion in 4Q04. EBITDA growth is largely attributable to increased
consolidated revenues and gross profit, despite a 15.3% increase
YoY in selling, general and administrative expenses. The increase
in operating expenses was mainly a result of the compensation based
on contribution of our sales force, collections personnel,
cashiers, credit executives and all employees with a direct
interaction with clients, the amortization of preoperative expenses
during the quarter from our two new businesses units, Afore Azteca
and Seguros Azteca, hiring and training of new employees for our
new stores and financial division business units, our door-to-door
sales force for retailing, the mobile sales force of the financial
division, and expenses associated with our store and bank branch
expansion program. This is reflected in the 15.6% YoY increase in
headcount, from 24,328 employees at the end of 4Q03 to 28,121
employees in 4Q04. Operating income increased by 0.5% YoY as
depreciation and amortization expenses increased 92.3% YoY. This
increase is attributable to the growth in fixed assets in both the
retail and financial division due to our expansion, remodeling and
relocation plans. EBITDA & Operating Profit Ps. Million Change
Change 4Q03 4Q04 $ % 2003 2004 $ % EBITDA 1,081 1,312 231 21.4%
3,629 4,106 477 13.1% Operating Profit 863 868 5 0.5% 2,576 2,890
314 12.2% Consolidated EBITDA for 2004 was also a record high at
Ps. 4.1 billion, 13.1% above the Ps. 3.6 billion of 2003.
Notwithstanding an increase in operating expenses of 24.8% YoY,
from Ps. 6.0 billion to Ps. 7.5 billion in 2004, operating income
grew 12.2% YoY to Ps. 2.9 billion from Ps. 2.6 billion in 2003.
Depreciation and amortization expenses increased 16.0% over the
same period due to equipment purchased for our new and remodeled or
relocated stores and our new bank branches opened YoY. Net Income
Our solid operating performance, coupled with an 63.0% YoY decrease
in the comprehensive cost of financing, as well as a Ps. 55.0
million gain from our equity participation in Comunicaciones
Avanzadas, led to record net income of Ps. 670.7 million in 4Q04,
56.8% higher than the Ps. 427.9 million net income of 4Q03.
Consolidated record net profit for the full year was Ps. 1.9
billion, 59.5% YoY higher than the net profit reported in 2003 of
Ps. 1.2 million. Our participation in Comunicaciones Avanzadas
resulted in a gain of Ps. 72.5 million in 2004. Net Income Ps.
Million Change 4Q03 4Q04 $ % Total Net Income 428 671 243 56.8% EPS
(Peso Per Share)(1) 1.79 2.82 1.03 57.7% EPS (US$ Per ADR)(1)* 0.64
1.01 0.37 57.7% (1) Calculation based on 239,378,000 Elektra*
(59,845,000 ADR equivalent) weighted average at December 31, 2003
and 237,957,000 Elektra* (59,489,000 ADR equivalent) weighted
average outstanding at December 31, 2004 *Ps. 11.15 per US$ Ps.
Million Change 2003 2004 $ % Total Net Income 1,202 1,917 715 59.5%
EPS ( Peso Per Share )(1) 5.02 8.06 3.04 60.5% EPS (US$ Per
ADR)(1)* 1.80 2.89 1.09 60.5% (1) Calculation based on 239,378,000
Elektra* (59,845,000 ADR equivalent) weighted average at December
31, 2003 and 237,957,000 Elektra* (59,489,000 ADR equivalent)
weighted average outstanding at December 31, 2004 *Ps. 11.15 per
US$ Retail Division Highlights During 2004, Grupo Elektra opened
100 new Elektra stores in Mexico, 11 new Elektra stores in Latin
America, and relocated or remodeled another 53 Elektra stores in
Mexico, Guatemala and Honduras. Also through the year, we closed 12
Salinas y Rocha stores and 5 Bodega de Remates stores that did not
meet our profitability standards. In addition, during the quarter
we operated 34 stores under our new Elektricity store format, which
targets a higher income segment of the population than previously
served by Grupo Elektra by offering high-tech electronics and other
brands not currently offered in our other store formats.
Furthermore, our Latin American operations (Guatemala, Honduras and
Peru) continue showing excellent results. During the 4Q04, revenues
and gross profits in this region registered YoY increases of 47.3%
and 35.2%, respectively. For 2004, revenues and gross profit grew
by 47.8% and by 43.1% YoY, respectively. Finally, during the fourth
quarter, Grupo Elektra launched the Empresario Azteca program and
the Asociacion del Empresario Azteca in conjunction with Banco
Azteca to finance, assist and help entrepreneurs who are looking to
start up or to expand small businesses. This program and its
association aim to help strengthen Mexico's economic growth by
nurturing small businesses throughout the country. Empresario
Azteca is comprised of three pillars: 1. The financing of working
capital needs and equipment purchases through Banco Azteca; 2. The
procurement capabilities and extensive store network of Grupo
Elektra; and 3. The Asociacion del Empresario Azteca to provide
support, assistance and consulting to all its members. Other
highlights in the Retail Division include: Dinero Express, our
intra-Mexico electronic money transfer business, continues with
excellent results from its successful marketing efforts. These are
reflected in an increase in revenues of 24.3% YoY to Ps. 109.3
million in the 4Q04 from Ps. 87.9 million in the 4Q03. Also during
the quarter, we transferred the equivalent of Ps. 1.6 billion
through 1.4 billion transactions, representing YoY increases of
47.2% and 37.3%, respectively. For the year, revenues increased
29.6% to Ps. 388.6 million from Ps. 299.8 million in 2003. This
result was led by increases in the amount transferred and number of
transactions of 43.5% and 35.1% YoY, respectively. Revenues from
our agency relationship with Western Union increased 4.1% YoY to
Ps. 127.3 million in the 4Q04 from Ps. 122.3 million in the 4Q03.
Revenues were boosted by a 28.2% growth in the number of transfers
and by a 41.9% growth in the amount transferred. We have further
strengthened our relationship with Western Union and now offer
electronic money transfer service from Mexico to the US and the
rest of the world. For the year, revenues increased 13.7% to Ps.
504.0 million from Ps. 443.3 million in 2003. During the same
period, the amount transferred and the number of transactions
increased by 42.1% and by 28.0%, respectively. Banco Azteca On
October 30, 2004, Banco Azteca celebrated two years of offering
banking products and services to the vast majority of the Mexican
population, as well as outstanding results beyond our expectations
in many areas. The synergies created between the retail and
financial divisions have made Banco Azteca the fastest growing bank
in Mexico. For 4Q04, Banco Azteca reported net income of Ps. 36.0
million, 67.6% lower than the net income of Ps. 111.0 million for
4Q03. The 74.4% YoY increase in financial revenues was offset by
interest expense on deposits and funding, loan-loss provisions, and
operating expenses. In addition, Banco Azteca launched
"Comercializadora" or mobile sales force that has the mandate to
attract new customers and companies for Banco Azteca and also
provides services to Seguros Azteca and Afore Azteca. During 4Q04,
Grupo Elektra made a Ps. 410.0 million infusion into Banco Azteca,
which shareholder's equity reached Ps.1,046.0 million. This is
attributable to the excellent performance and growth achieved by
Banco Azteca, above expectations. As of December 31, 2004, the
estimated capitalization index of Banco Azteca was 11.2%, compared
to 10.9% on September 30, 2004, and 11.3% on December 31, 2003. All
the figures exceed the 8.0% minimum capitalization index required
by Mexican regulators. For 4Q04, the average funding cost of Banco
Azteca was 3.8%, 30 basis points higher when compared to the
average funding mix registered in 3Q04, and 60 basis points above
the cost reported in 4Q03. The YoY increase in the funding cost is
explained by the 2.3 times growth of deposits in Inversion Azteca
from Ps. 5.0 billion in 2003 to Ps. 11.8 billion in 2004. Credimax
Consumo (Consumer Loans) and Credimax Efectivo (Personal Cash
Loans) Combined Credit Portfolio. As of December 31, 2004, Credimax
Consumo and Credimax Efectivo continued to be our two main
financing products as they accounted for 72.3% of our total gross
loan portfolio. During the quarter we launched the student loan
product for undergraduate studies at the Universidad ICEL (Credimax
Estudiantil) and Credimax Empresario Azteca in connection with the
launching of Empresario Azteca. Going forward, we will continue
pilot-testing different credit products and cautiously analyzing
the risks associated with them in our efforts to continue expanding
our array of credit products for our customers. At the end of 4Q04,
we had a total of 4.1 million active accounts, representing a 13.9%
QoQ increase from the 3.6 million accounts in 3Q04 and a 36.7% YoY
increase over the same period of last year. The gross loan
portfolio increased 19.4% QoQ, reaching Ps. 11.3 billion from Ps.
9.5 billion at the end of 3Q04. Our gross credit portfolio grew
100.9% YoY from Ps. 5.6 billion in 4Q03. The average term of the
combined credit portfolio at the end of the 4Q04, was 54 weeks,
representing an increase of 3 weeks when compared to 4Q03 and flat
when compared to 3Q04. Personal loans represented 16.4% of the
gross credit portfolio at the end of 4Q04, showing 70 basis points
decrease when compared to 17.1% at the end of 3Q04. The collection
rate of Banco Azteca continues at the same excellent historic level
that defines Grupo Elektra's standard, about 98% as of December 31,
2004. Guardadito (Savings Accounts) and Inversion Azteca (Term
Deposits). Net deposits increased 12.9% QoQ, from Ps. 15.4 billion
in 3Q04 to Ps. 17.4 billion in 4Q04, and they increased 100.2% YoY
the net deposits of 4Q03. Over the quarter, the total number of
accounts rose by approximately 600,000 to 5.6 million. Afore Azteca
For 4Q04, Afore Azteca reported a net loss of Ps. 24.2 million from
a net income of Ps. 3.2 million for 4Q03. YoY, net income for 2004
increased to Ps. 11.0 million from a net loss of Ps. 10.0 million
registered in 2003. This result is mainly attributable to the
amortization of Ps. 29.0 million of preoperating expenses during
the quarter. On a proforma basis, excluding the amortization of
these expenses, Afore Azteca would have registered a net income of
Ps. 5.0 million during 4Q04, and Ps. 40.0 million during 2004 As of
December 31, 2004, Siefore Azteca reached Ps. 2.7 billion in net
assets under management, a 31.9% increase over the previous
quarter, and yielded a 7.65% return in the 4Q04, 71 basis points
above the average rate of the industry of 6.94% and 41 basis points
above the previous quarter. The number of affiliates reached 79,500
and the number of assignees was 743,000, both as of December 31,
2004. YoY, the affiliate base increased 84.3% mainly because of
transfers among the Afore system in Mexico and by the CONSAR
(National Commission of the Retirement Fund System) that took place
during the year. These new affiliates were distributed among the
three Afores of the system that charge the lowest commissions. New
regulation in the Afore business related to the affiliate base was
approved at the end of 2004. Starting 2005, an affiliate can move
to a cheaper Afore at any time he or she wants but if he or she
wants to move to a more expensive one, he or she has to wait at
least one year as it was restricted for everybody in the former
law. This new criteria applies for both workers assigned by Banco
de Mexico and transfers among the Afore system. Afore Aztea is
ranked as the second most affordable Afore in the system and both,
this new law and our "Comercializadora" mobile-sale force
initiative, will enhance the opportunity to increase our affiliate
base. Seguros Azteca During the fourth quarter, Seguros Azteca
showed a strong performance, as about 75% of customers acquired
term life insurance along with either a consumer or personal loan
from Banco Azteca. As a result of this success, we increased the
weekly premiums up to Ps. 15 and Ps. 20 to acquire a Vidamax life
insurance policy, thus increasing the benefit for customers in case
of natural or accidental death. Finally, also during the quarter,
Seguros Azteca started to pilot-test its Vidamax life insurance
policy on financed purchases of mobile phone products sold at our
stores. For 4Q04, Seguros Azteca recorded positive net income for
the third quarter in a row, with Ps. 4.5 million, reaching Ps. 9.0
million for 2004. Net income for 4Q04 was 52.2% lower than the Ps.
6.8 million from the previous quarter. This is largely attributable
to the amortization of Ps. 28.0 million of preoperating expenses
during the quarter. On a proforma basis, excluding the amortization
of these expenses, Seguros Azteca would have registered a net
income of Ps. 32.5 million during 4Q04, and Ps. 36.0 million for
2004. Seguros Azteca will continue pilot testing other insurance
products in line with the products and services offered by Banco
Azteca. Financial Condition (Consolidated Balance Sheet) To
continue maintaining clarity in regards to our consolidated balance
sheet, in the following we discuss certain items included on a
separated basis. Total cash and cash equivalents rose to Ps. 13.4
billion in 4Q04 from Ps. 7.5 billion in 4Q03, comprised of Ps. 4.6
billion from the retail division and Ps. 8.8 billion from Banco
Azteca. The retail division cash and equivalents registered an
increase of 10.0% YoY when compared to 4Q03. Cash and equivalents
from the Financial Division increased 160% or by Ps. 5.4 billion
over the same period a year ago. Banco Azteca's gross credit
portfolio increased 100.9% YoY to Ps. 11.3 billion in 4Q04 from Ps.
5.6 billion at the end of 4Q03. The retail division's customer
accounts receivables, now comprised only from our credit operations
in Latin America, is starting to show encouraging results as they
increased 36.8% YoY to Ps. 568.4 million in 4Q04 from Ps. 415.5
million in 4Q03. At the end of 4Q04, total debt with cost at the
retail division was Ps. 3.7 billion, 7.9% lower when compared to
Ps. 4.0 billion at the end of 4Q03, and 4.2% lower when compared to
Ps. 3.9 billion of 3Q04. Net debt at the retail division decreased
YoY, from negative Ps. 138.1 million in 4Q03 to negative Ps. 868.9
million in 4Q04. For 4Q04, total net deposits for Banco Azteca
increased 12.9% QoQ to Ps. 17.4 billion from Ps. 15.4 billion at
the end of 3Q04. Year-over-year, deposits increased 100.2% from Ps.
8.7 billion in 4Q03. Consolidated equity grew 31.4% YoY, from Ps.
6.4 billion in 4Q03 to Ps. 8.4 billion in 4Q04, largely as a result
of the 55.0% YoY increase in net income. We invite you to visit our
award-winning corporate website at http://www.grupoelektra.com.mx/
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. Risks that may affect Grupo
Elektra are identified in its Form 20- F and other filings with the
US Securities and Exchange Commission. As used in this press
release, EBITDA is operating income (loss) before interest expense,
taxes, depreciation and amortization, and adjusted by eliminating
monetary (loss) gain included in our revenues and cost,
respectively. In accordance with Regulation G, issued by the U.S.
Securities and Exchange Commission, reconciliation between net
income and EBITDA is provided in the notes provided in our
financial statements. EBITDA is presented because of the following
reasons: * Our management uses EBITDA as a measure of performance
business allowing us to compare ourselves with our peers'
multiples, ratios and margins derived from EBITDA. It also serves
to evaluate and compensate certain employees. * We believe EBITDA
is one of the tools that we can use to measure our cash-flow
generation, because it excludes some non-cash items as monetary
gains or losses, depreciation and amortization, etc. * EBITDA is
also a measure contained in certain financial covenants of our
debt, and consequently we are required to calculate it in order to
verify compliance with such covenants. * We are aware that EBITDA
has material limitations associated with its use, (i.e., EBITDA, as
defined by us, excludes items such as Discontinued operations, and
includes the Allowance for doubtful accounts, which contains or
does not contain, respectively, portions of cash). However, our
management compensates these material limitations with the use of
our consolidated financial statements and its notes. * We believe
that EBITDA is used by certain investors as one measure of a
company's historical ability to service its debt. EBITDA should not
be considered in isolation or as a substitute for the consolidated
income statements or the consolidated statements of changes in
financial position prepared in accordance with Mexican GAAP (PCGA)
or as a measure of profitability or liquidity. EBITDA is not (a) a
measure determined under PCGA or U.S. GAAP, (b) an alternative to
PCGA or U.S. GAAP operating income (loss) or net income (loss), (c)
a measure of liquidity or cash flows as determined under PCGA or
U.S. GAAP or (d) a measure provided in order to smooth earnings.
EBITDA does not represent discretionary funds. EBITDA, as
calculated by us, may not be comparable to similarly titled
measures reported by other companies. Grupo Elektra - Tradition
with Vision Grupo Elektra is Latin America's leading specialty
retailer, consumer finance and banking services company. Grupo
Elektra sells retail goods and services through its Elektra,
Salinas y Rocha, Bodega de Remates and Elektricity stores and over
the Internet. The Group operates more than 1,000 stores in Mexico,
Guatemala, Honduras and Peru. Grupo Elektra also sells and markets
its consumer finance, banking and financial products and services
through its Banco Azteca branches located within its stores and in
other channels. Banking and financial services include consumer
credit, personal loans, money transfers, extended warranties,
savings accounts, term deposits, pension-fund management and
insurance. Investor and Press Inquiries: Esteban Galindez, CFA
Director of Finance & IR Grupo Elektra, S.A. de C.V. Tel. +52
(55) 1720-7819 Fax. +52 (55) 1720-7822 Rolando Villarreal Head of
Investor Relations Grupo Elektra S.A. de C.V. Tel. +52 (55)
1720-7819 Fax. +52 (55) 1720-7822 Samantha Pescador Investor
Relations Grupo Elektra S.A. de C.V. Tel. +52 (55) 1720-7819 Fax.
+52 (55) 1720-7822 DATASOURCE: Grupo Elektra S.A. de C.V. CONTACT:
Esteban Galindez, CFA, Director of Finance & IR, Grupo Elektra,
S.A. de C.V., Tel. +52-55-1720-7819, or Fax, +52-55-1720-7822, or ;
or Rolando Villarreal, Head of Investor Relations, Grupo Elektra
S.A. de C.V., Tel. +52-55-1720-7819, or Fax, +52-55-1720-7822, or ;
or Samantha Pescador, Investor Relations, Grupo Elektra S.A. de
C.V., Tel. +52-55-1720-7819, or Fax, +52-55-1720-7822, or Web site:
http://www.grupoelektra.com.mx/
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