ARCOS DORADOS 3Q2014 Conference Call Presentation November 4, 2014

Transcription

1 Agenda ARCOS DORADOS 3Q2014 Conference Call Presentation November 4, 2014

2 Disclaimer This presentation contains forward-looking statements that represent our beliefs, projections and predictions about future events or our future performance. Forward-looking statements can be identified by terminology such as may, will, would, could, should, expect, intend, plan, anticipate, believe, estimate, predict, potential, continue or the negative of these terms or other similar expressions or phrases. These forward-looking statements are necessarily subjective and involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements or industry results to differ materially from any future results, performance or achievement described in or implied by such statements. The forward-looking statements contained herein include statements about the Company s business prospects, its ability to attract customers, its affordable platform, its expectation for revenue generation and its outlook. These statements are subject to the general risks inherent in Arcos Dorados' business. These expectations may or may not be realized. Some of these expectations may be based upon assumptions or judgments that prove to be incorrect. In addition, Arcos Dorados' business and operations involve numerous risks and uncertainties, many of which are beyond the control of Arcos Dorados, which could result in Arcos Dorados' expectations not being realized or otherwise materially affect the financial condition, results of operations and cash flows of Arcos Dorados. Additional information relating to the uncertainties affecting Arcos Dorados' business is contained in its filings with the Securities and Exchange Commission. The forward-looking statements are made only as of the date hereof, and Arcos Dorados does not undertake any obligation to (and expressly disclaims any obligation to) update any forward-looking statements to reflect events or circumstances after the date such statements were made, or to reflect the occurrence of unanticipated events. 1

3 3Q14 Results & Highlights Third quarter results reflect a weaker than expected operating environment As reported revenues impacted by the use of a weaker FX rate to remeasure Venezuelan results High single-digit organic revenue growth, driven by: o 7.4% expansion in comparable sales o Contribution of $42.5 million from 93 net openings (LTM) o Brazil s topline growth impacted by the FIFA World Cup Evidence of stabilizing volume trends 2015 key measures: o Technological investments to reduce labor costs o Lower capital expenditures, with new restaurants to be concentrated in Brazil o Expected efficiencies in G&A and other non-product purchasing o Recommendation of elimination of 2015 dividend THE McDonald's BRAND REMAINS THE PREFERRED BRAND IN BRAZIL & OUR OTHER MAJOR MARKETS 2

4 Key Marketing Initiatives Marketing activities designed to protect traffic and market share Marketing campaigns focused on: o Affordability platform (GPPP) o Strengthening the McDonald s brand o Family experience and iconic products Key marketing activities in 3Q14 included: o The re-hit of Chicken McBites in the largest markets o The Danonino yogurt in the Happy Meal in Brazil, Argentina % Uruguay o The Triple Bacon with Cheese, McBacon and Duplo Pampa in GPPP o The McFlurry Oreo and the McFlurry Milka Choco Swing in the Dessert category Ongoing campaigns across the region continue to enhance the brand o qué bueno que viniste ( Glad You Came ) o Happy character 3

5 3Q14 Performance: Brazil Results impacted by the FIFA World Cup and a weak environment. Evidence of a stabilization in traffic trends at quarter-end Topline growth below expectations and impacted by a slowdown in economic activity and the FIFA World Cup As reported revenues were up 3.7%, supported by: o The contribution of new restaurants (71 net openings, LTM) o A 0.6% year-over-year average appreciation of the BRL +3.0% organic revenue growth o Comparable sales decline of 2.4%, driven by Average check growth and negative traffic A calendar shift in winter holidays An ongoing soft consumption environment Signs of stabilizing volumes at end of 3Q Key marketing drivers: o Chicken McBites o Crispy Tasty & Duplo Pampa in GPPP o McFlurry Talento Castanhas-do-Pará & Mc Flurry Oreo 4

6 3Q14 Performance: NOLAD Results reflect a weak consumer environment and the FIFA World Cup As part of our turnaround strategy in Mexico, we have been testing a new personalized menu, the McMío, or McMine o Enables customers to customize meals o Provides more choices, including local tastes and spicy condiments Open doors program > kitchen tours 5.1% decline in organic revenue o Comparable sales decreased 8.3% Declines in average check & traffic Negative shift in mix, which more than offset price adjustments Negative impact from the FIFA World Cup Intensified competition in Costa Rica and Panama Key marketing drivers: o Chicken Festival o Big Mac Manía o Happy Meal * Costa Rica, Mexico and Panama 5

7 3Q14 Performance: SLAD Strong organic revenue growth, despite a deteriorating macroeconomic environment in Argentina Continued strong contributor to consolidated organic revenue growth As reported revenues were down by 12.2%, mainly impacted by: o 48% y-o-y average depreciation of the Argentine Peso +19.5% organic revenue growth o Comparable sales growth of 18.5% Driven by average check growth Modest decline in traffic due to soft macro environment in Argentina and the FIFA World Cup Key marketing drivers: o Chicken McBites o Triple Bacon with Cheese in GPPP o McFlurry Tres Sueños & McFlurry Milka Choco Swing * Argentina, Chile, Ecuador, Peru and Uruguay 6

8 3Q14 Performance: Caribbean Maintained leading market share despite ongoing challenging conditions in Venezuela Results impacted by the use of a weaker FX rate to remeasure Venezuelan business +19.0% organic revenue growth o Comparable sales grew 24.3% Driven by average check growth Excluding Venezuela: o Organic revenue declined by 2.9% o Comparable sales declined 11.2% Negative traffic & lower average check in Puerto Rico and Colombia Negative shift in mix related to efforts to protect market share and traffic Key marketing drivers: o Chicken McBites o CBO sandwich (beef & chicken) o McBacon (beef & chicken) in GPPP * Colombia, Puerto Rico, Venezuela and Caribbean Islands 7

9 3Q14 New Unit Development & Reimaging Mexico NOLAD Costa Rica, Mexico, Panama 8 Restaurant Additions LTM (net) 6 Reimagings LTM Colombia CARIBBEAN Aruba, Colombia, Curaçao, French Guyana, Guadeloupe, Martinique, Puerto Rico, St. Croix, St. Thomas, Trinidad & Tobago, Venezuela 6 Restaurant Additions LTM (net) 1 Reimagings LTM BRAZIL Brazil 71 Restaurant Additions LTM (net) 33 Reimagings LTM SLAD Argentina, Chile, Ecuador, Peru, Uruguay 8 Restaurant Additions LTM (net) 5 Reimagings LTM Argentina Brazil Number of systemwide restaurants (1) SLAD NOLAD Caribbean % 18% 25% 17% 2, % (1) As of September 30, 2014; does not include McCafé units & Dessert Centers 8

10 3Q14 Adjusted EBITDA Bridge Adjusted EBITDA variations ($ Million) $ 90.4 $ 8.7 $ 1.9 $ In constant currencies $ 4.7 $ EBITDA 3Q2013 Revenues 3Q2013 EBITDA Margin EBITDA Margin Variation excl. Special Items in CC Fluctuation of the local currencies Special Items EBITDA 3Q2014 9

11 3Q14 Non-Operating Results Results reflect increased foreign exchange losses $7.7 million increase in non cash foreign currency exchange losses o Mainly driven by the impact of the depreciation of the Brazilian Real (BRL) within the quarter, which generated: a loss on intercompany balances, partially offset by a gain related to BRL-denominated long-term debt $8.8 million decrease in net interest expense versus the prior-year quarter o Interest expense in 3Q13 included a one-time charge of $12.7 million related to the debt restructuring completed in that quarter $7.3 million decrease in income tax expense The company registered net income of $240 thousand, compared to net income of $19.6 million in 3Q13 EPS were near zero in the third quarter of 2014, compared to $0.09 in the previous corresponding period 10

12 3Q14: Financial Indicators Solid financial ratios Plan in place to reduce leverage As of As of September 30, December 31, (In million of U.S. dollars, except ratios) Cash & cash equivalents Total Financial Debt Net Financial Debt Total Financial Debt / LTM Adjusted EBITDA ratio Net Financial Debt / LTM Adjusted EBITDA ratio (i) Total financial debt includes short-term debt, long-term debt and derivative instruments (including the asset portion of derivatives amounting to $5.4 million and $0.5 million as a reduction of financial debt as of September 30, 2014 and December 31, 2013, respectively). (ii) Total financial debt less cash and cash equivalents. 11

13 3Q14: Closing Remarks While cyclical, our sector produces strong growth in times of robust economic activity We are taking steps to streamline our organization These steps will: o Improve our short-term results o Position us well for the next upturn in the cycle Looking ahead to 2015, we will focus on: o Defending traffic o Containing costs items that are under our control o Reducing leverage o Expanding our footprint, strategically We expect margin improvement in 2015 as we take steps to control labor and other non-product costs, and leverage our G&A expenses We have a strong marketing calendar in place which we expect will drive topline growth and a slow recovery in volumes in 2015 WE REMAIN DEEPLY COMMITTED TO OUR MARKET AND CUSTOMERS 12

14 IR Contact For additional information: Daniel Schleiniger IR Director Patricio Iñaki Esnaola IR Manager