Corporate Presentation Cencosud Second Quarter 2011 The information - - PowerPoint PPT Presentation

Corporate Presentation Cencosud – Second Quarter 2011

The information contained herein has been prepared by Cencosud S.A. (“Cencosud”) solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities and should not be treated as giving investment or other advice. No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein. Any provided in relation to the accuracy, completeness or reliability of the information contained herein. Any

• pinions expressed in this presentation are subject to change without notice and Cencosud is under no
• bligation to update or keep current the information contained herein. The information contained herein does

not purport to be complete and is qualified in its entirety by reference to more detailed information appearing elsewhere, if any. Cencosud and its respective affiliates, agents, directors, partners and employees accept no liability whatsoever for any loss or damage of any kind arising out of the use of all or any part of this material. This presentation may contain statements that are forward-looking subject to risks and uncertainties and factors, which are based on current expectations and projections about future events and trends that may affect Cencosud’s business. You are cautioned that any such forward-looking statements are not guarantees

• f future performance. Several factors may adversely affect the estimates and assumptions on which these
• f future performance. Several factors may adversely affect the estimates and assumptions on which these

forward-looking statements are based, many of which are beyond our control.

Real GDP growth Unemployment rate Gross debt / GDP

• Source: IMF

5 countries 753 stores 25 shopping centers 122,000 employees

• 122,000 employees

2.8 mm sq2 selling space

+ 37%

Revenues evolution (USD bn)

+ 20% 12,2

Strong increase in sales supported by:

• The consolidation of Bretas in Cencosud (represents 39% of the increase)
• As of 2Q11 the Company added 103 supermarkets (including 66 Bretas stores), 3

Home Improvements, 5 Department Stores and 1 shopping center in Chile

5,0 5,9 8,1 9,4 10,5 12,2 2,8 3,8

2,58 2,5

2005 2006 2007 2008 2009 2010 2Q 2010 2Q 2011

• Source: Cencosud

Note: 2005 – 2009 figures in Chilean Gaap while 2Q10 and 2Q11 figures in IFRs

Home Improvements, 5 Department Stores and 1 shopping center in Chile

• High inflation and strong consumption levels in Argentina (sss for Home

Improvement +26% and Supermarkets +23%)

• In all countries the Supermarket and Home Improvement Divisions achieved

positive levels of SSS

Department Stores 9% Shopping Centers 2% Financial Services 4%

Sales breakdown by business – 2Q 2011 Sales breakdown by country – 2Q 2011

Supermarkets 73% Home Improvement 12% (47%) (47%) (12%) (12%) (10%) (10%) (31%) (31%)

The sales breakdown by divisions has been stable to 2010 and the previous

(%) 2Q 2010 (%) 2Q 2010

• quarter

Brazil was the country with further growth of the group, due to the incorporation of Bretas in October 2010 (5th largest operator of supermarkets in Brazil at that time) Chile remains the largest country in term of sales

Fuente: Cencosud Note: 2005 – 2009 cifras en GAAP Chileno, en el 2 trimestre 2010 y 2011 están en IFRs

EBITDA evolution (USD mm)

39% + 20%

• Mg. 8.6%

Growth in EBITDA reflects an improved performance in the five divisions, despite 2010 bases

• f comparison very high due to both, the effect of Chilean earthquake and World Cup

The EBITDA in 2011 includes expenses associated with the expansion of our operations :

Mg 8.6%

• Start-up expenses of shopping center division (Chile and Peru)
• Expenses related to building up the credit card operation in Peru

Fuente: Cencosud Note: 2005 – 2009 cifras en GAAP Chileno, en el 2 trimestre 2010 y 2011 están en IFRs

EBITDA by Business Units¹ – 2Q 2011 EBITDA by country ² – 2Q 2011

Financial Services 16%

• Supermarkets

53% Home Improvement 14% Department Stores 9% Shopping Centers 14%

55% 55% 8% 8% 6% 6%

(%) 2Q 2010 (%) 2Q 2010

• Source: Cencosud

¹ Other businesses which account for (10%) are not included. ² Colombia EBITDA (1%) is not included.

• Department Stores achieved an Ebitda margin of 9.3% in 2Q11, confirming its focus
• n improving the efficiency, which occurs in a context of sharp increase in selling

space coupled with cost-cutting

• Brazil increased its EBITDA contribution from 6% in 2Q10 to 13% in 2Q11, reflecting

the consolidation of Bretas and its fast improve in margins

66 stores 137 stores

#1

North East Region (34%) Minas Gerais (23%)

#1 #2

172 stores 256 stores

20% 20% 12% 10%

#1

Minas Gerais (23%) 736 tiendas 736 tiendas

#1

27% 17%

#2

Source: Cencosud and AC Nielsen

• Cencosud Carrefour

Coto Wal-Mart

736 tiendas

* Dia Stores not include *

• In the last 12 months the Supermarket division added 103 stores (66 stores after the

acquisition of Bretas)

• Peru in 2011 has achieved positive and increasing

SSS (+1.7% in 1Q11 and +4.5% in 2Q11) reflecting the positive effects of adjustment in their business strategy

Sales evolution (US$ bn) EBITDA evolution (US$ mm)

CAGR

+21% +41%

CAGR

+19% +23%

EBITDA breakdown by country, YTD 2Q 2011 SSS evolution by country 2Q 2011

Mg 7.0% Mg 6.9%

• Fuente: Cencosud

Note: 2005 – 2009 cifras en GAAP Chileno, en el 2 trimestre 2010 y 2011 están en IFRs

EBITDA evolution (USD mm) Sales evolution (USD mm)

CAGR

+20% +22%

CAGR

+29% +18%

4 stores

Market position 82 stores 82 stores SSS evolution per country - 2Q 2011

Mg 6.7% Mg 6.5%

• 29 stores

#2

• 49 stores

#1

• Fuente: Cencosud

Note: 2005 – 2009 cifras en GAAP Chileno, en el 2 trimestre 2010 y 2011 están en IFRs

+9% 18% +44% +22%

CAGR CAGR

1.227 80

EBITDA evolution (USD mm) Sales evolution (USD mm) Market Share 1Q11 35 stores 35 stores

Paris 26% La Polar 13% Mg 9.1% Mg 9.3%

804 300 353 2005 2010 2Q 2010 2Q 2011 13 80 27 33 2005 2010 2Q 20102Q 2011

SSS evolution per country - 2Q 2011

Source: Company reports. Considers only department stores that disclose retail sales

• Falabella

39% Ripley 23%

Fuente: Cencosud Note: 2005 – 2009 cifras en GAAP Chileno, en el 2 trimestre 2010 y 2011 están en IFRs

EBITDA evolution (US$ mm)(1) Sales evolution (US$ mm)

CAGR

+10% +52%

CAGR

+5% +18%

High occupancy rates in our malls

2 Shopping Centers 65,763 m2

25 Shopping Centers

Mg 60% Mg 77%

• 39%

45% 55%

#2

14 Shopping Centers 582,241 m2 99% occupancy rate

#2

9 Shopping Centers 487,927 m2 97% occupancy rate 65,763 m 96% occupancy rate

Fuente: Cencosud Note: 2005 – 2009 cifras en GAAP Chileno, en el 2 trimestre 2010 y 2011 están en IFRs

Gross loan porfolio per country (USD mm) Loan loss allowances as % of total porfolio Penetration of Credit Card by Division 2Q 2011 Total cards 4.0 MM Active credit Cards

JV with Bradesco

• Source: Cencosud

Note: 2007 – 2009 figures in Chilean GAAP while 2010 and 2011 figures in IFRS. ¹ Since July 2010

Cencosud¹ 0.3 MM Cencosud 2 MM Cencosud 0.8 MM JV with Bradesco 0.9 MM

Capex (US$ mm) excl. acquisitions

+82% +83%

Total debt evolution (US$ bn) Net debt evolution (US$ bn)

• Source: Cencosud

Note: 2005 – 2009 figures in Chilean GAAP while 1Q 2010 and 1Q 2011 figures in IFRS.

Bretas was financed with internal funds and additional debt (USD 290 MM). Bretas added USD 70 MM debt The procedures of the international bond are being used to prepay debt due in 2011-2012 and 2013

Net debt / EBITDA

• 22%
• 18%

Total debt / EBITDA

+ 75%

Financial debt / Equity EBITDA / Interest expenses

• 13%
• Source: Cencosud

Note: 2005 – 2009 figures in Chilean GAAP while 2010-2011 figures in IFRS. Multiples calculated in local currency.

• Duration 4.67 Y

Duration 4.67 Y ! ! ! ! !

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Duration 4.85 Y Duration 4.85 Y

• Duration 4.67 Y

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Source: Cencosud

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! ! ! ! ! ! ! Duration 5.01 Y Duration 5.01 Y ! ! ! !! ! ! ! ! ! ! ! !!!! ! ! !

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Revenues : USD 14 bn EBITDA : 9%

Revenues by country – 2009 Revenues by country (e) - 2011

EBITDA : 9% Capex : USD 1.0 bn

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Cencosud had an increase in its Financial Expenses in the first half of 2011 compared to the first half of 2010 due to:

• Higher financial debt and less cash available (used to fund the acquisition of Bretas in 10/2009)
• Higher interest rates (due to the increase in the TAB and ICP rates in Chile as 33% of the

Company’s debt is indexed to those rates)

• The acceleration of capitalized costs as a consequence of the refinancing program of the
• The acceleration of capitalized costs as a consequence of the refinancing program of the

company funded with the issuance of a 750 MMUSD 144A/Reg S bond in January this year.

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FLOATING RATES EVOLUTION

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• Oppening of 10 stores in 3 years

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• Capex of USD 70 million
• First opening: 4Q 2012
• Agreement with Parque Arauco for rental in its Peruvian

shopping centers

• In August 2011 Cencosud signed an agreement with Bradesco to
• perate their credit card at Brazil
• Is expected to triple over the next few years the business cards in

Brazil, and support the development of wholesale electronics

• It contemplates a up front payment to Cencosud of USD125 million

Conservative risk management and collections

• Risk management and control department is independent of the commercial side of the business,

with decision-making independence but working integrated with the business

*, 2 (16 $3 (!

• Control of credit and collection policies are defined and approved by the Chile’s risk management
• f and authorized by Corporate Risk Management Office
• Management processes are supported by statistical information and are controlled in their

application by both internal control and internal audit areas

• Management and risk management have the world-class standards and are based on a World

Class technology platform

• There is no lending authority in the commercial area, any exception to approved policies are

channeled to risk areas specialists

• Refinancing policies are intended to give payment options to clients

2 (16 + $3 (! 741 ,--3

• Refinancing policies are intended to give payment options to clients
• Mainly renegotiating debts from 60 days in default
• Refinancing policies require the client to make an upfront payment to show his/her intention
• f payment (15% of the total amount owed) and in addition his/her written consent to

renegotiation is requested

• Renegotiated clients can no longer use their card, only after showing a good payment

behavior (6 paid installments or 50% of the debt paid off depending on the clients profile) the client can be enabled again, usually lowering their previous credit limit

• Our card is one value attribute of the Cencosud retail value proposal
• It allows us to achieve a greater customer loyalty by establishing long term relationships
• We are conservative in our credit policies and we are careful in the collections’ management,

seeking to maintain customers’ satisfaction and loyalty

• We have the lower average debt per cardholder (37% less than average) and 76% less than

La Polar, reflecting

• ur

conservative strategy. Source SBIF (debt total/clients with

We have a conservative strategy

La Polar, reflecting

• ur

conservative strategy. Source SBIF (debt total/clients with movements).

• The average debt of Cencosud’s cardholders is $239,000 and has remained stable in recent

years

• Cencosud has the lowest loan portfolio versus sales in the industry(1)

Lowest loan porfolio of the industry

4! 4 4 4 4!

Porfolio as monthly retail sales

(in months)

• We maintain a healthy portfolio, with an excellent payment performance:
• ver 81% are current and only 4% of our clients and 5% of our outstanding are 90 days
• re more overdue.
• Only 6% of our clients have debt renegotiation, leading to higher provision rates to

cover the higher risks

• Renegotiated clients are provisioned extra, reflecting their increased risk profile

Provisiones Base por Tipo de Carteras

3105 $ (2. ! 8!%501

5,0% 20,3% 0% 5% 10% 15% 20% 25% 30% d i c

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• 9

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1 Riesgo Cartera Normal Riesgo Cartera Renegociada

Impacts of the international financial crisis to Cencosud

Prior to the Crisis situation

• Since the end of 2007 Cencosud has being adjusting its risk policies in the

Financial Division.

• Higher requirements for the opening of new accounts and credit limit

restrictions increased.

• Investment in technology to improve collection (Cyber Financial)
• Technology transfer project through Model Builder of FairIsaac Score

models for the circuit of credit and collection development. Crisis

• Cencosud continued adjusting its lending policies, abolished the offering of

financial products and eliminated the three installments no interest product.

• This is shown by the decline in the outstanding volume (-10% from March

2009 to March 2011) Post Crisis Post Crisis

• Significant improvement in our clients portfolio and ratios of late payments,

from 14.1% in June 2009 to 9.5% in June 2011 (more than 30 days late payment).

• The net write-off rate of the total portfolio decreased from 15.9% to 7.6% in

the same period and continues its downward trend.

• Renegotiated portfolio decreased from 10.2% in June 2009 to 5.6% of the

total number of customers in June 2011.

• 8

8 8 8 88 55

Stock loans / GDP

• 8

8 8 8 8

• !
• (55

% )! $ 3105 % )! $ 3105

During the crisis and the 4Q08 Falabella and Cencosud reduced their

• utstanding, on the other hand La Polar continued to grow its loan portfolio.

Since 4Q09, all retailers restarted the growth pace of their portfolios, but Cencosud did it at a slower rate.

Model of Provisions

Model to estimate the losses from uncollectable accounts, gathers world class practices and is in line with Basel II standards (associated to banks), allows to establish the required provisions The model is based on:

• Portfolio segmentation (252 customer clusters):
• business (channel of account opening)
• business (channel of account opening)
• default (sections of delinquency)
• quota (sections of lines of credit)
• tenure (new/old)
• portfolio type (normal/renegotiated)

Statistical modeling:

• Model group assessment, customer segment in homogeneous groups.
• Probability of failure is estimated according to the punishment rates net of

provision

• Estimated for 7 sections of default all customers exceeding 180 days are
• Estimated for 7 sections of default all customers exceeding 180 days are

written-off, recognizing 100% loss. Additional and voluntary provisions:

• Additional provisions to reflect future changes in the behavior of the portfolio

not reflected in the history.

• Voluntary provisions are determined when exogenous factors that will affect

the behavior of the clients; are for example earthquake Feb 2010.

50% 60% 70% 80% iones

Provisions evolution and GDP (2008-2011)

2,1% 0,9% 6,4% 3,7% 5,0% 5,2% 9,8% 5,8% 6,9% 1,7%

• 1,4%
• 2,5%
• 4,8%
• 10%

0% 10% 20% 30% 40% 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Crecimiento Provision PIB 0%

• 20%

PIB CMR CENCOSUD LA POLAR

During the crisis and the 4Q08 Falabella and Cencosud reduced their outstanding, on the

• ther hand La Polar continued to grow its loan portfolio.

Since 4Q09, all retailers restarted the growth pace of their portfolios, but Cencosud did it at a slower rate.

Late payments > 30 days Renegotiated porfolio (% total)

Avolution of Risk Figures as of June 2011

Write-offs Revoveries

All the main indicators has excellent trends, with reductions in late payments, low participation of renegotiated loans in the portfolio, low write-offs and higher recoveries of write of

• High rate of payments in cash; more than 95% of payments are in cash,
• nly 5% are renegotiations of 15% down payments

The tendency in Credit Card Operation in Cencosud

• The volume of payments on the portfolio stock continues to rise in volumes and as

a percentage of the stock: more than CLP 95,000 mm are pay during a month, about 23% of the stock.

• On the other hand, more than 95% of these payments corresponds to payments

in cash, and 5% for debt rollovers or renegotiations. Percentages that are down in cash, and 5% for debt rollovers or renegotiations. Percentages that are down for the years of the crisis of 2009.

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