Download Presentation Credicorp September 2015

Company Presentation
XIII Capital Markets Event
September 2015 - Lima, Peru
Content
1 Company Description & Fundamentals
2 Industry Overview
3 Financial Summary – Business Units
4 Consolidated Financials - SalfaCorp
5 Stock Information & Market Ratios
2
Who We Are

Headquartered in Chile with more than 85 years of history, SalfaCorp is
a diversified Engineering & Construction and Real Estate Company 
USD 1.4 billion in consolidated revenues in 2014, with USD 1.3 billion in
total assets

With its presence in Chile, Colombia, Panama and Peru, SalfaCorp is
among the largest E&C/Real Estate companies in latam

SalfaCorp is positioned as a leading company in large private/semiprivate infrastructure projects in relevant sources of demand for capital
investment:
Mining,
Energy,
Industrial,
Retail,
Marine
Works,
Commercial & Residential Real Estate

Publicly listed in the Santiago Stock Exchange since 2004
3
Fundamentals of SalfaCorp
Engineering & Construction



Diversified lines of businesses in E&C segment
Regional presence in investment grade – low risk countries
Vast experience and strong know-how in the management of large / specialized
E&C projects. Capacity to adapt to different infrastructure needs within the
economic sectors / cycles


Long standing relationships with its client base
Readily available high-tech / specialized Machinery & Equipment or for different
construction projects and services

30-40% of E&C revenues come from recurring services
Real Estate Development & Investments




Nationwide coverage in Chile
Value proposition to customers is innovative and value-added products
Vertically integrated with SalfaCorp’s Home Building Business Unit
Attractive land bank of app. 1,500 has. in urban centers allowing a long term and
sustainable growth, in different deployment formats (residential, commercial and
land development)
4
Revenues (USD m)
SalfaCorp among the largest E&C and
Real Estate Companies in the Region
Main E&C and Real Estate Companies in
Chile (Publicly Listed)
 In Chile, SalfaCorp is the largest player in the E&C industry and is among the main
players in the Real Estate industry.
Source: ENR The Top 250 Global Contractors Report; Companies’ Financial Information as of December 2014
5
Highly Diversified
Business Base
69.560
68.782
2013
2014
60.931
45.049
44.759
2011
34.033
10.000
2009
20.000
33.618
30.000
2008
36.450
40.000
2010
50.000
(1) Sum of Operating Result, Depreciation & Amortization and Share of Profits (Losses) from Associates.
2012
0
2007
 4 Business Units, over 10
Lines of Business and
presence in 4 countries
60.000
16.396
 Focus on lines of business
with higher value added
70.000
2006
on
these
Consolidación
SALFA PERÚ
10.249
 2012
focused
consolidating
acquisitions
80.000
2005
 International expansion to
Peru, Colombia, Panama
Merger with
6.728
 Growth over the last 5
years through mergers
and
acquisitions
in
complementary
businesses
EBITDA¹
CLP million
2004
 Significant organic growth
6
Projects
Structure of Business Units
Engineering &
Construction
Home Building
Residential Real Estate
Development
Chile
Novatec
Inmobiliaria Aconcagua
Assembly Works
Houses (single and multifamily) &
Apartment Buildings
Land Infrastructure
Wholly-owned Projects
JV Projects
Underground Mining Develop.
Earth Movement
Drilling & Blasting
Civil Construction
Services
Industrial Maintenance
1,500 has. of land bank
• Nationwide coverage
• Long term agreement
arrangements
• Long term financing
arrangements
Noval
Marine Works
Underground Mining Operation
Real Estate Develop. &
Investments
Entry level households
(Construction & Sale)
Peru
Assembly Works
Civil Construction
Colombia
Assembly Works
Panama
Marine Works
2014:
2014:
2014:
2014:
Revenues: CLP 599,709 million
Revenues: CLP 167,765 million
Revenues: CLP 135,631 million
Revenues: CLP 23,499 million
Employees: 9,846
Employees: 4,862
Employees: 523
Employees: 27
June 2015:
June 2015:
June 2015:
June 2015:
Revenues: CLP 201,893 million
Revenues: CLP 46,400 million *
Revenues: CLP 45,262 million
Revenues: CLP 1,237 million
Employees: 9,379
Employees: 3,255
Employees: 306
Employees: 29
* The majority of Home Building Revenues are inter-company sales
7
Shareholder Base
Source: Depósito Central de Valores as of June 2015


Listed company in the local stock market since 2004.

Free Float ~ 50%-60%
Members of the Controlling Group hold ~45% interest in SalfaCorp, of which 36.3% is
represented by a Shareholders Agreement within this Group.
8
Content
1 Company Description & Fundamentals
2 Industry Overview
3 Financial Summary – Business Units
4 Consolidated Financials - SalfaCorp
5 Stock Information & Market Ratios
9
Macro Situation in
Countries where we Operate
GDP Growth per Country (Var. %)
Inflation per Country (Var. %)
Source: Central Banks; Focus Economics; World Bank; Consensus Forecast
Foreign Direct Investment per Country (% of GDP)
Sovereign Rating per Country (Fitch Ratings)
10
Key Variables of the Construction
Industry in Chile
National GDP and Construction GDP
Fuente: Banco Central de Chile

Monthly Index of Construction Activity (IMACON)
Fuente: Cámara Chilena de la Construcción
The Construction industry is pro-cyclical to the economic activity, particularly related to
capital investment – recently mining industry

In average, Construction GDP represents ~7% of the country’s total GDP, equivalent to
approximately US$ 12 billion

Forecast for Total GDP growth for 2015 is approximately 2.2%

Growth of Investment of Fixed Capital is estimated at approx. 0.7% for 2015.
11
Sectors that conform Chile’s Estimated
Inv. of USD 79 billion: 2015-2019
Portfolio of Estimated Investments 2015-2019 per Economic
Sector

In
the
Mining
Sector,
CODELCO
requires an important Investment
Plan of app USD 24 billion for the
next 5 years in order to maintain
production
and
keep
competitive
costs.

These initiatives are mainly on 2
areas:


Source: 1Q 2015 Report of Corporation of Capital Goods (CBC in Spanish acronym)
Structural Long-Term
Projects (Capex)
Operating Investments
(Opex)
12
CODELCO’s Structural Projects
Source: CODELCO presentation during 1Q 2015
13
CODELCO’s Operating Investments
Source: CODELCO presentation during 1Q 2015
14
Supply and Demand of
Households in Chile
Sales/Supply/Months to Reduce Stock (Santiago)
Physical units

Key variables of demand:
o
Mortgage rates – still low
o
Credit market - good
access with minor recent
restrictions
o
Unemployment rates –
still low (1 digit)
o
Impact of new regulations
 demand is still healthy
despite global economy
Source: Chilean Chamber of Construction

adjustments
The supply of households has temporary and permanent elements:
o
o
o
o
Scarcity of land  higher average prices
Mortgage regulation  Future restrictions from banks (higher % of down payment)
Tax Reform  households will incorporate VAT sales tax starting 2016-2017
DS 116 bill: subsidies for economic households (> 38,000+ units)
15
Content
1 Company Description & Fundamentals
2 Industry Overview
3 Financial Summary – Business Units
4 Consolidated Financials - SalfaCorp
5 Stock Information & Market Ratios
16
E&C
Financial Results
Strategy & Opportunities
Revenues (CLP m)
•
Focus on higher specialized lines of business – with
higher entry barriers
•
•
Gross Profit (CLP m) / Mg %
7.6%
8.1%
10.3%
Migrate from more “commodity-type” segments
o
Higher quality of Backlog
o
Increase Gross Margin
o
Less capital employed
SG&A efficiencies opportunities
Net Profit (CLP m)
EBITDA (CLP m) / Mg %
7.6%
11.4%
4.8%
6.1%
6.8%
17
E&C
Evolution of Backlog
Backlog (CLP million)
Plus: CLP 110,000 million in projects
recently awarded after Jun-15

Approximately 50 projects were awarded during 1H2015  over CLP 200,000 million

~30% backlog is related to recurring/long term service contracts
18
E&C
Backlog (CLP million)
Backlog by Economic Activity
19
E&C
P&L and Breakdown of Revenues
P&L Statement
($ million of each period)
Revenues
Gross profit
% of revenues
SG&A Expenses
jun-15
201.893
21.986
10,9%
(10.831)
336.074
30.422
9,1%
(14.334)
Operating result
% of revenues
11.473
5,7%
Non-operating result
Net Profit (loss) Parent Co.
% of revenues
EBITDA (Adj. Associates)
% of revenues
Variation
$ mill
%
(134.181)
-39,9%
(8.436)
-27,7%
3.503
-24,4%
16.561
4,9%
(5.088)
-30,7%
(5.190)
4.896
2,4%
(7.871)
6.704
2,0%
2.681
(1.808)
-34,1%
-27,0%
16.646
8,2%
22.249
6,6%
(5.603)
-25,2%
Revenues per Line of Business - June 2015
-
jun-14
Specialized Mining Services include Earth Movement, Underground Mining and Drilling & Blasting.
Construction includes Civil Works and the line of Business Zona Austral.
Revenues per Line of Business - June 2014
20
Home Building
Financial Results
Strategy & Opportunities
Revenues (CLP m)
•
Discontinue lines of business related to third party
customers.
•
Focus con “in-house” contracts - AEPC
•
Reduction of top-line is starting to pay down as of
2Q 2015 – improvement of margins
EBITDA (CLP m) / Mg %
1.4%
-0.7%
-0.4%
-2.2%
Net Profit (CLP m)
Gross Profit (CLP m) / Mg %
2.2%
-0.5%
-1.3%
-4.2%
21
Home Building
Backlog
June 2015
June 2014
Backlog per Line of Business
Backlog per Line of Business
External
Projects
1%
Economic
Households
11%
External
Projects
25%
Own Projects
33%
Own Projects
28%
Backlog
CLP 91,030 m
JV Projects
60%

Backlog
JV Projects
42%
CLP 96,488 m
Backlog with third parties CLP 977 million - practically completed - compared to CLP24,801
million 12 months ago and CLP 4,775 million at Dec-14. Margin improvement will follow.

Higher quality of portfolio of projects
22
Home Building
P&L and Breakdown of Revenues
P&L Statement
($ million of each period)
Revenues
Gross profit
% of revenues
SG&A Expenses
jun-15
jun-14
46.400
(162)
-0,3%
(2.265)
94.347
508
0,5%
(1.412)
Operating result
% of revenues
(2.427)
-5,2%
Non-operating result
Net Profit (loss) Parent Co.
% of revenues
EBITDA (Adj. Associates)
% of revenues
Revenues per Line of Business - June 2015
Variation
$ mill
%
(47.947)
-50,8%
(670) -131,9%
(853)
60,4%
(880)
-0,9%
(1.547)
175,8%
(423)
(2.477)
-5,3%
(955)
(1.483)
-1,6%
532
(993)
-55,7%
66,9%
(2.239)
-4,8%
(891)
-0,9%
(1.348)
151,4%
Revenues per Line of Business - June 2014
23
Consolidated Real Estate
Historic Information
Revenues Consolidated RE (CLP m) *
Gross Profit (CLP m) / Mg %
17.5%
25.7%
27.9%
17.7%
EBITDA (CLP m) / Mg %
18.4%
Net Profit (CLP m)
21.8%
14.6%
11.5%
* Includes Residential Households and land revenues
24
Residential RE Development
Financial Results
P&L Statement
($ million of each period)
Revenues
Gross profit
% of revenues
SG&A Expenses
Operating result
% of revenues
Non-operating result
Net Profit (loss) Parent Co.
% of revenues
EBITDA (Adj. Associates)
% of revenues
jun-15
jun-14
45.262
11.065
24,4%
(6.438)
55.158
11.018
20,0%
(11.021)
4.708
10,4%
Variation
$ mill
%
(9.896)
-17,9%
48
0,4%
4.583
-41,6%
(4)
0,0%
4.712
-
(2.380)
1.954
4,3%
(3.380)
(2.308)
-4,2%
1.000
4.261
-29,6%
184,7%
6.615
14,6%
2.433
4,4%
4.182
171,9%
Revenues per Line of Business - June 2015
Strategy & Opportunities:
•
•
Increase profitability (return) of the RE
projects – capitalize on still-strong demand
Improve capital turnover:
• Reduce household stock
o ∆- financial debt (construction
loans)
o ∆- financial & general expenses
•
DSO
Revenues per Line of Business - June 2014
25
RE Develop. & Investments
Financial Results
P&L Statement
($ million of each period)
Revenues
Gross profit
% of revenues
SG&A Expenses
jun-15
jun-14
1.237
787
63,6%
(817)
2.694
346
12,9%
(112)
Operating result
% of revenues
(29)
-2,4%
Non-operating result
Net Profit (loss) Parent Co.
% of revenues
EBITDA (Adj. Associates)
% of revenues
Variation
$ mill
%
(1.456)
-54,1%
441
127,3%
(705)
629,0%
234
8,7%
(264)
-112,5%
(5)
(4)
-0,3%
322
548
20,3%
(327)
(552)
-101,4%
-100,7%
(29)
-2,4%
234
8,7%
(264)
-112,5%
Strategy & Opportunities:
•
Maximize land bank value (1,500 has.)
different development formats.
•
Identify & Acquire land for new business
development.
•
Short term prospective business of CLP
10,000m gross profit
26
Evolution of Pre-sales and
Deliveries (Combined)
Pre-sales (Combined)1
Deliveries (Combined)2
UF millions*
UF millions*
14,6
11,1
10,9
9,6
12,1
9,0
11,6
8,3
8,4
8,6
4,7

4,0
Backlog of Combined Pre-sales is UF 8,6 million
o
o
o
Near UF 5,7 million would become Deliveries (revenues) during the 2H 2015
The Pre-sales generated during the rest of 2015 will be added to this backlog
 UF 4,0 + 5,7 ~ 9,5 million of Combined Deliveries are expected for full year 2015
(1) Pre-sales do not constitute revenues
(2) Deliveries do constitute revenues
(*) 1 UF is equivalent to ~ USD 37
27
Distribution of Land Bank
Strategic Value
E
Geographical Distribution of Land Bank

This Business Unit manages approximately 1,500 has.
of land for future real estate developments.
North Zone

Book value as of Jun-2015, reached CLP 160 billion vs.
fair value of CLP 239 billion as of the same date. *

Current volume of land is an important element of the
Company’s strategy and strengthens its sustainability
for the long term.

As part of its financial strategy, this business unit
22%
Central Zone
51%
Southern Zone
maintains control of its lands with options, agreements
and ownership of land.
27%
Total: 1.500 has.
(*) Includes Investment Properties, Land Inventory (Non-current) and RE Projects under Development; based on Financial Statements as of June 2015.
28
Content
1 Company Description & Fundamentals
2 Industry Overview
3 Financial Summary – Business Units
4 Consolidated Financials - SalfaCorp
5 Stock Information & Market Ratios
29
Consolidated Financials
Outcome of Strategy
Gross Profit (CLP m) / Mg %
Revenues (CLP m)
8.7%
8.0%
12.2%
14.0%
Net Profit (CLP m)
EBITDA (CLP m) / Mg %
6.6%
9.5%
9.5%
5.7%

Salfacorp has been able to consolidate its past growth strategy, with a relevant improvement on Gross and
EBITDA Margins.

Despite the lower-than-expected market growth, the company has been able to deleverage and maintain a
reasonable Net Profit.
30
SalfaCorp - Consolidated
P&L and Breakdown of Revenues
Revenues per Business Unit (Jun-15)
P&L Statement
($ million of each period)
Revenues
Gross profit
% of revenues
SG&A Expenses
jun-15
jun-14
Variation
$ mill
%
268.789
33.115
12,3%
(19.796)
445.233
42.179
9,5%
(26.582)
(176.444)
(9.064)
-39,6%
-21,5%
6.786
-25,5%
Operating result
% of revenues
13.717
5,1%
16.093
3,6%
(2.376)
-14,8%
Non-operating result
(7.216)
(11.863)
4.647
-39,2%
5.033
1,9%
3.518
0,8%
1.515
43,1%
21.000
7,8%
24.227
5,4%
(3.227)
-13,3%
Net Profit (loss) Parent Co.
% of revenues
EBITDA (Adj. Associates)
% of revenues
31
SalfaCorp - Consolidated
Balance Sheet
Balance Sheet
As of June 2015
CLP Millions
Total Assets
Total Liabilities
Total Net Worth
Net Financial Debt
Total Leverage
E&C
353.558
191.532
162.026
75.516
1,18
Home
Residential RE RE Develop &
Building
Develop.
Investment
62.740
285.301
202.221
42.702
204.933
160.268
20.038
80.368
41.952
13.477
147.003
96.063
2,13
2,55
3,82
Total Assets per Business Unit
Ajust.
Consolidated
(25.205)
(52.073)
26.868
17.111
878.615
547.364
331.251
349.171
1,65
Net Financial Debt per Business Unit
32
SalfaCorp - Consolidated
Financial Results – Cash Flow Generation
Jan. -June 2015 (CLP mn)
Home
Building
Residential RE Develop. &
RE Devolp.
Invest.
Jan. - Dec. 2014
Jan. - Dec. 2013
Consolidated
Consolidated
Consolidated
E&C
21.135
(5.671)
(1.328)
14.136
0
0
0
(2.156)
(156)
372
(1.940)
5.088
(3.189)
(226)
1.673
(817)
(25)
30
(812)
71.213
(10.346)
(3.233)
57.634
62.546
(14.097)
(5.204)
43.245
Var. Working Capital
59.879
21.408
7.725
36.972
(3.947)
38.191
75.369
Cash Flow from Operating Activities
74.016
5.784
38.645
(4.759)
95.825
118.614
Operating Result + Depreciation & Amortizations
- Net Financial Expenses
- Taxes
Subtotal
21.408
Operating Investments
(15.553)
(3.532)
(2.088)
(7.064)
0
6.536
(62.168)
Long term Investments
(4.257)
(95)
(264)
1.475
12.514
(18.466)
(35.817)
Cash Flow from Related Companies/Associates
(18.133)
(11.247)
0
(6.886)
0
5.079
(7.883)
Cash Flow from Investing Activities
(37.943)
(14.874)
(2.352)
(12.475)
12.514
(6.851)
(105.868)
(515)
(1.648)
373
895
(241)
(13.535)
(7.690)
Dividends Paid
(6.749)
(3.961)
0
(2.780)
0
(7.510)
(6.847)
Free Cash Flow (a)
28.809
925
3.805
24.285
7.513
67.929
(1.792)
(22.141)
(4.616)
(1.572)
(13.296)
(2.657)
713
713
6.667
(3.690)
2.233
10.988
4.856
68.642
(1.079)
Var. Deferred Taxes (long term)
Asset Base Lending (b)
Available Cash Flow (a+b)




Cash Flow from Operating Activities at a similar level to Jun-14
Cash Flow from Investing Activities decreased by CLP 17,353 million
Free Cash Flow was CLP 28,809 million, 3.4x than the CLP 8,501 million as of Jun-14
Available Cash Flow used to service total financing of CLP 28,088 million
33
Debt Maturity Profile
SalfaCorp as of Jun-2015
Asset Base Lending
Type (CLP million)
Construction loans
Leasing
Options over Land
Subtotal Financing of Assets
2015
91.746
5.064
0
96.809
2016
16.506
7.658
0
24.164
2017
Financing of Working Capital
Type (CLP million)
Working capital loans
Balance of Factoring with liability
Subtotal Financing of Working Capital
2015
23.086
31.374
54.461
2016
2017
0
0
0
0
0
0
0
0
0
0
0
0
Structured Financing (long term)
Type (CLP million)
Structured loans
Bonds (local)
Derivatives registered as financial coverage
Subtotal Structured Financing
2015
13.302
26.840
0
40.141
2016
25.535
2.698
498
28.731
2017
26.139
2.630
0
28.769
2018
13.227
2.630
0
15.857
2019
3.531
26.347
0
29.878
191.411
52.895
41.708
17.656
38.356
2015
13.302
1.857
0
15.158
2016
31.781
2.698
498
34.977
2017
32.385
2.630
0
35.015
2018
19.473
2.630
0
22.102
2019
9.777
26.347
0
36.124
166.428
59.141
47.954
23.902
44.601
Total Financing
Cash balance
Structured Financing (post II Tranch Syndicated Loan)
Type (CLP million)
Structures loans (includes amort. Syndicated Loan)
Bonds (paid with Syndicated Loan)
Derivatives registered as financial coverage
Subtotal Structured Financing
Total Financing
Cash balance
2018
0
4.832
8.107
12.939
2019
0
1.800
0
1.800
2018
2020
0
430
8.047
8.477
2019
2021+
0
0
4.177
4.177
2020
0
0
5.963
5.963
2021+
Total
108.252
19.784
26.294
154.329
0
0
0
Total
23.086
31.374
54.461
0
2.630
0
2.630
0
25.442
0
25.442
Total
81.734
89.216
498
171.448
6.807
31.405
0
0
0
2020
2020
2021+
2021+
0
2.630
0
2.630
0
25.442
0
25.442
6.807
31.405
380.238
31.067
Total
106.717
64.233
498
171.448
380.238
31.067
34
Financial Ratios & Credit Ratings
have improved in the last 3 years
Financial Ratios
jun-15
dic-13
dic-12
Liquidity
(times)
1,18
1,19
1,31
1,39
Leverage
(times)
1,65
1,75
1,99
2,19
Financial Leverage
(times)
1,15
1,18
1,28
1,33
Net Financial Leverage
(times)
1,05
1,10
1,18
1,23
Net Financial Debt / EBITDA
(times)
5,33
5,26
5,64
6,27
EBITDA / Net Financial Cost
(times)
5,83
6,65
4,93
4,21
%
7,3%
6,9%
8,2%
8,2%
ROE
Feller Rate
Fitch Ratings
ICR
dec-14
Solvency /
LT Debt (Bonds)
Outlook
BBB
BBB
BBB+
Positive
Stable
Stable
Price Evolution of Bonds
35
Content
1 Company Description & Fundamentals
2 Industry Overview
3 Financial Summary – Business Units
4 Consolidated Financials - SalfaCorp
5 Stock Information & Market Ratios
36
Stock Information of SalfaCorp
and Industry
Stock Price vs IPSA vs E&C/RE Index

Price variations reflect how pro-
cyclical the construction industry
is to the economic activity.

The Santiago Stock Exchange has
shown
low
levels
of
trading
volume (liquidity) over the past
couple of years.

Stock prices affected by low
trading
volumes
an
capital
outflow from Chile & EM.

Important drivers affecting trade
volume and stock prices:
o Lower
Price Var. % Price Var. %
YTD
2014
SalfaCorp
SK
Besalco
Ingevec
EISA
Moller
Socovesa
Paz
-19,2%
-14,4%
-29,1%
26,1%
-23,7%
5,7%
-5,7%
-14,7%
-6,5%
18,2%
-37,9%
-37,8%
-11,3%
-23,2%
-5,4%
24,2%
P/E
P/B
7.2
10.7
0.0
0.0
30.9
6.7
4.9
3.65
Source: Companies’ Financial Information; Santiago Stock Exchange
SK: the E&C business represents a minor part of total lines of business
0.52
1.17
0.88
0.74
1.20
0.90
0.60
0.79
Market Cap.
(USD m)
EV / EBITDA
274
1.376
237
30
189
92
251
147
7.6
n.a.
23.6
-26.8
10.1
6.3
8.9
5.2
economic
growth
expected for China,
o Commodity prices declining 
Chile influenced by copper
o Uncertainty
of
future
investments in fixed capital in
Chile (Mining and Energy)
37
Company Presentation
XIII Capital Markets Event
September 2015 - Lima, Peru