Grupo FAMSA is determined to satisfy the dynamic needs of its consumers, so in 2016 it implemented strategies to enhance profitability and improve its offer of products and financial services. These initiatives produced positive results and sales in line with 2016 SALES GUIDANCE
The 9.5% growth in consolidated net sales is just one outstanding reflection of the Company’s efforts to improve its performance, even in challenging environments, through customer loyalty, and the implementation of successful and continuous advertising campaigns and discounts.
On a consolidated level, annual EBITDA reached $1,411 million pesos in 2016. EBITDA growth was limited during the year, mainly due to the natural gap between the expenses applies to the credit portfolio origination, the recognition of the income of payroll credits and an additional allowance for doubtful accounts that was recorded during 4Q16 since the Company's Management carried out certain adjustments to its reserve estimation methodology, seeking a more conservative approach in its recovery criteria.
During 2016, Grupo FAMSA sought to lower operating expenses and enhance sales-floor efficiency, without affecting quality and customer service. Consequently, Management reduced staff positions by 1,864, resulting in a 7.6% decline in the total number of employees. This action generated non-recurring expenses for severance payments in the second and third quarters of the year. Additionally, the Company selectively closed 35 non-banking branches which did not meet profitability and annual sales growth criteria.
Despite the impact of these initiatives on the Company’s 2016 consolidated EBITDA, their implementation will benefit Grupo FAMSA in the short term, giving it a more profitable operating and business structure. In 2017, the impact should have dissipated, giving rise to estimated savings in administrative expenses of $240 million pesos.
Consolidated Net Income grew from $149 million pesos in 2015 to $346 million pesos in 2016, reflecting interest earned during the year as a result of the updating in the present value of the collection rights with related parties (recorded in December 2015) and a higher deferred asset tax compared to the previous year.
The consolidated results posted for 2016 reflect Grupo FAMSA’s solid operating practices, with customer loyalty and product demand, largely in Mexico, playing a key role.
As far as operations in Mexico are concerned, the Furniture and Appliance marketing business consolidated its industry leadership during the year, growing Net Sales by 9.2% to a total of $15,157 million pesos, compared to $13,884 million pesos in 2015.
FAMSA Mexico’s sales growth was largely driven by the categories of Mobile Phones, Electronics and Appliances, as well as the leveraging of Seasonal campaigns, both in summer and at Christmas.
The implementation of promotions and advertising campaigns such as “Mucha Madre” (Lots of Mother) and “Puntos para Papá” (Points for Daddy), combined with the incorporation of Apple products into the Company’s portfolio of Mobile Phones, also drove the growth of these categories.
“46 Aniversario” (46th Anniversary) was among the year’s most successful campaign, designed to increase sales through attractive promotions.
The FAMSA online store also had a successful year, with transactions growing 23% and more than 11 million visits, consolidating this channel as a value-creating platform of increasing relevance for the Company. The online segment posted total sales of $145 million pesos in 2016, a growth of 5.5% compared to the 2015 sales of $137 million pesos.
According to studies carried out by different entities, such as Asociación Mexicana de Internet AC, E-commerce in Mexico has been growing rapidly. This trend could significantly increase the sales of Grupo FAMSA’s online store over the coming years.
Banco FAMSA also drove consolidated results, mainly because of the decline in the Non-Performing Loans Ratio to 8.5%, 130 basis points below that of 2015. This reduction clearly demonstrates that the client profile of the bank’s loan portfolio is now more attractive, reflecting the increased consolidated participation of clients belonging to the formal economy.
Moreover, the average cost of funding as of year-end 2016 was 4.5%, having grown less than the TIIE (Mexican reference rate) during the year.
At the close of 2016, Bank Deposits provided 67.8% of Grupo FAMSA’s source of funding. Interest to Bank Depositors recorded $844 million pesos, 23.2% higher the previous year given the higher balance of deposits received and the increase in the cost of funding.
Meanwhile, FAMSA USA’s operations during the second half of the year were complicated due to the election campaigns and an expectation of uncertainty among the business unit’s target market for sales, to which FAMSA USA directed its advertising and marketing efforts. Consequently, it implemented specific initiatives to expand its customer base and drive consumption. Combined with the appreciation of the U.S. dollar vis-à-vis the Mexican peso, this resulted in an 11.8% year-over-year increase in Net Sales.
Accumulated 2016 EBITDA in pesos for FAMSA USA was $297 million pesos as of December 31st, 2016, contributing to the consolidated result.
During 2016, the initiatives that the Grupo FAMSA team implemented enhanced the business’s profitability through operating efficiencies and reaffirmed its competitive position, producing results above the industry average.
Thus, despite the difficult economic panorama and dynamic consumer evolution, today Grupo FAMSA is better positioned to face new and greater challenges in 2017 and is fully committed to leveraging the 2016 results.