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Letter From the Chairman of the Board

"To Our Stockholders:"

In a complex and challenging environment across the markets it serves, Grupo FAMSA reiterated its determination to continue perfecting its business model, generating value for its customers, employees, community and stockholders.

In 2016, the Company’s Consolidated Net Sales grew 9.5% year-over-year, to $17,544 million pesos. The result was driven to a greater extent by its operations in Mexico, highlighting the dynamism in sales of various categories of durable goods, such as Mobile Phones, Electronics and Appliances.

In Banco FAMSA improved the risk profile of its credit portfolio, with a growth in the consolidated participation of clients belonging to the formal sector of the economy, increased from 54.7% as of year-end 2015 to 61.0% as of December 31, 2016.

As a result of this portfolio improvement and the reinforcement in collection activities, Banco FAMSA’s Non-performing Loans Ratio (IMOR) was 8.5% as of December 31, 2016, 130 basis points below that of 2015.

Bank Deposits reached $21,063 million pesos, 14.7% above the previous year, of which, 89.0% are term deposits.

With regard to Grupo FAMSA’s furniture and financial services business in the United States, the weak consumer environment resulting from the uncertainty facing the company’s target customers was offset by the strength of the dollar. At the end of 2016, FAMSA USA posted an increase in annual Net Sales in MXP of 11.8% year-over-year.

In addition, Grupo FAMSA´s accompanied a series of actions undertaken by the company’s leadership to guarantee liquidity in face of the 2015 reclassification of accounts receivable. The Company endorsed its continued compliance in the best interest of its investors, with the support of its main stockholder, Don Humberto Garza González, who guaranteed the accounts receivable with the properties of his real-estate companies.

As a result, in January 2017, Grupo FAMSA and Don Humberto Garza González defined the optimal structure for amortize the accounts receivable guaranteed in December 2015. The process for the implementation of this structure was finished during April 2017, before the originally established term limit of 2017.

Moreover, during 2016 Grupo FAMSA made diverse changes to its Corporate Government and internal control processes, seeking to align them as closely as possible to the corresponding best practices.

At the General Extraordinary Shareholder´s Assembly of October 2016, Roberto Gutiérrez García was appointed as an independent member of the Board of Directors and Chairman of the Audit Committees of Grupo FAMSA and of Banco FAMSA. With extensive experience in internal auditing and financial and credit risk management, Mr. Gutiérrez García will reinforce the internal control mechanisms of both companies to provide investors greater certainty.

Additionally, Mr. Jorge Luis Ramos Santos was appointed Chairman of Grupo FAMSA’s Corporate Practices Committee. Likewise, Mr. José Luis Ochoa Bautista was designated as Chairman of the Board of Directors of Banco FAMSA.

With the reliance that the actions taken in 2016 underscore the Company’s vocation to ensure profitability and continuous improvement, we would like to express our gratitude to our customers, both in Mexico and the United States, for their trust and preference.

We would also like to thank our Board of Directors for their leadership and vision. Their guidance and support during the year led the Company to the positive results that we are presented here.

In particular, we would like to recognize the commitment of Don Humberto Garza González. His support was key for the liquidity of our business and providing certainty for our stockholders.

To our investors of Grupo FAMSA, we would like to reiterate the determination of our management team and associates to continue improving the Company’s performance.

In 2017, we will focus our efforts on enhancing the effectiveness of our operating and business structure, in order to grow the Company’s profitability and generation of operating cash flow.

During the current year we will pursue an administration focused on the care of its resources, accompanied by a greater efficiency in its structure, which will allow it to guarantee the solidity of its financial position statement and a greater ability to generate cash flow.

Likewise, in follow of a discretionary investment approach and the current environment of economic uncertainty, Grupo FAMSA does not anticipate any new opening in its current store-network, seeking to maximize the efficiency of its current network.

We are sure that, with the strength of our business model and winning strategy, we will be able to face all current and future challenges.


Presidente

Humberto Garza González
Founder and Chairman of the Board

Presidente

Humberto Garza Valdéz
CEO


CONSOLIDATED NET
SALES GROWTH


FAMSA MEXICO
SALES GROWTH


BANK DEPOSITS
GROWTH


FAMSA USA
SALES GROWTH

2016

Financial Highlights

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406

Stores

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452

Banking Branches

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1.2 Mill.

Active Accounts

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17,667

Employees