R$ Million

90 Years
Supporting the Brazilian Culture
Presentation to Investors
Agenda
Overview
Editora Saraiva – Publishing House
Livraria Saraiva – Retail
Final Remarks
02
Overview
Saraiva S/A Livreiros Editores – Publishing House
9
9
9
9
9
9
Publishes and sells proprietary content
Strong cash generation - ROE: 59% in 1Q05 (47% in 2004)
Leader in Law Publishing
Ranked 3rd among textbooks & readers publishers
Economics and Business & Adm. Publishing Line
Publicly held and controlling Company of Livraria Saraiva
(book retailer):
Š ADR level 1 OTC
03
Overview
Livraria e Papelaria Saraiva S/A - Retail
9
Largest book retailer in Brazil
Š 29 stores: 14 SuperStores e 15 Tradicional Stores
9
9
Pioneered the “SuperStore” concept in Brazil
9
Saraiva.com.br (on-line operations)
Retailer of books, CDs, DVDs, stationery, softwares and
periodicals
Š One of the largest on-line book retailer in Brazil
Š “Clicks and Mortar” model
04
Overview - Shareholdings
Controlling Group
Others
Total
Common
6,142,574
3,479,739
9,622,313
%
%
63.8%
36.2%
100.0%
Pref. B
Preferred
396,419
13,250,471
13,646,890
05
%
%
2.9%
97.1%
100.0%
Total
Total
6,538,993
16,730,210
23,269,203
%
%
28.1%
71.9%
100.0%
Group Overview
06
Consolidated Gross Revenue (R$ Million)
CAGR 8.5% p.a. (2000 - 2004)
Lower allocation of textbook sales to
the Government under PNLD.
489
444
408
392
353
182
213
171
195
2000
2001
1Q05 – R$ 24.7M X 1Q04 – R$ 28.1M
238
262
220
172
2002
-0.5%
206
2003
227
2004
185
184
73
75
111
108
1Q04
1Q05
(*) Editora´s gross revenue does not include inter-company sales
Editora
Livraria
Overview
07
Consolidated Sale Mix – 1Q05
26.6%
%
4.1 1.8%
%
7.1
%
1 .5
Editora
59.0%
Textbooks & Readers 31.4%
Law 13.0%
Government 13.0%
Others 1.6%
1.6%
31.4%
Livraria
13.0%
41.0%
13.0%
Books 26.6%
Stationery 4.1%
Software 1.8%
Audio/Video 7.1%
Others 1.5%
Overview
08
Highlights: “Saraiva Consolidated 1Q05”
Gross Revenue
R$ 183.6 Million
Gross Profit
R$ 104.6 Million
24%
24%
41%
41%
59%
59%
76%
76%
Editora
Livraria
Overview
09
Highlights: “Saraiva Consolidated 1Q05”
Gross Revenue
R$ 183.6 Million
EBITDA
R$ 51.5 Million
10%
10%
41%
41%
59%
59%
90%
90%
Editora
Livraria
Overview
10
Highlights: “Saraiva Consolidated 1Q05”
EBITDA
R$ 51.5 Million
CAPEX
R$ 0.8 Million
10%
10%
39%
39%
61%
61%
90%
90%
Editora
Livraria
Overview
(1)
11
Net Cash Position
(R$ Million)
18
(12)
(21)
(38)
2001
(1)
(31)
(43)
2002
2003
2004
Net Cash Position = Cash & Banks – Loans and financing
1Q04
1Q05
Agenda
Overview
Editora Saraiva – Publishing House
Livraria Saraiva - Retail
Final Remarks
12
Publishing Market in Brazil
Gross Revenue
R$ 1.65 Billion (2003)
13
R$ Million
Textbooks & Readers - 2003
400
300
200
Religious
8%
100
Technical &
Professional
17%(*)
0
Textbooks
54%
General
Reading
21%
FTD /
Quinteto
Saraiva /
Atual / (²)
Formato
Moderna
(²)
Editora do
Brasil (²)
IBEP /
Nacional (¹)
R$ Million
60
Law Publishing - 2003
40
20
0
Source:CBL (Câmara Brasileira do Livro), Saraiva, Serasa
Ática
Scipione
Saraiva (²)
Atlas
RT (¹)
(²)
Forense (¹)
(1)
Saraiva´s estimate
(2)
2004 Figures
Education in Brazil
14
High School & College Levels – Large Potential
Students Enrolled
(Million)
SARAIVA is well
positioned to
fulfill future
demand in both
segments
34.0
32.0
9.2
4.9
4.6
1.7
1994
Elementary
CAGR
Sources: Inep; MEC
0.6%
2004
High School
6.5%
College
10.5%
Editora Saraiva – Publishing House
Financial Data
9 Government Book Purchases – PNLEM: Possibly beginning in FY05
(PNLEM – Government Book Purchases for students enrolled in Public High Schools)
Š Possible purchase of text books for Brazilian public high schools,
in subjects such as Portuguese and Mathematics
= 14 Million books (¹) in 2005
= 28.6 Million books (¹) in 2006
9 Large Potential Market:
Š 8.0 million students enrolled in public high schools
9 Editora Saraiva:
well positioned catalog = great potential
Š “Pilot Project” PNLEM05: Saraiva’s market share 23.9%
Š 2.7 million books = R$ 27 Million (Saraiva = R$ 5.1 Million)
(¹)
Estimate furnished by FNDE, purchases depends on budgetary resources.
15
Editora Saraiva – Highlights 1Q05
Evolution of the Gross Revenue
Gross Revenue: R$112.2 in 1Q05 vis-a-vis R$115.7 in 1Q04.
Decrease of 3% in gross revenue due to lower allocation of
textbook sales under PNLD in 1Q05:
Total Sales
Program /
School Year (Contract´s value)
2004
2005
Appropriation of
Sales
(fiscal year)
R$ Million
R$ Million
85.5
83.3
4Q03 1Q04 4Q04 1Q05
57.4 28.1
58.6 24.7
16
Editora Saraiva – Product Mix
17
1Q04
1Q05
0.6%
1%
0.4%
0.4%
2%
24%
22%
74%
Textbooks & Readers
Law
Econonics & Business Administration
Saraiva Data
Source: Editora Saraiva (2003)
Other
0.6%
75%
Editora Saraiva – Financial Data
Gross Revenue (R$ Million)
178
107
2000
202
126
2001
216
EBITDA (R$ Million)
46
235
38
180
135
2002
154
2003
148
2004
116
112
88
87
45
43
44
46
35
1Q04 1Q05
Total Sales
Priv. Market Sales
2000
2001
2002
Gross Margin (%)
63% 65%
2000
18
2001
69%
2002
66% 66%
2003
2004
71% 71%
1Q04
1Q05
2003
2004
1Q04
1Q05
Editora Saraiva - Financial Data
(R$ million)
1Q 04
19
1Q 05
Var.
Gross Revenue
115.7
112.2
(3.0%)
Net Sales
107.4
112.1
4.4%
% Gross Margin
70.9%
70.7%
43.6
46.2
6.0%
40.6%
41.2%
0.6pp
25.9
29.8
14.9%
0.5
0.3
(39.8%)
EBITDA
% EBITDA Margin
Net Income
Investments
% Operating Income (¹)/Net Sales
33.5%
30.5%
50%
41%
43%
42%
(0.2pp)
(3.0pp)
47%
ROE
Fiscal Year
(1)
It includes depreciation.
2000
2001
2002
2003
2004
Sales to Government – PNLD
(¹)
20
Considerable Growth in Government Book Purchase Programs
(R$ Million)
“Replacement Year”
Constant Catalog Renovation
1998 – Atual Editora Acquisition
2000 – Renascer Catalog Acquisition
2003 – Formato Editorial Acquisition
85.5 83.3
PNLEM =
73.4
R$ 10.3 M
65.0
42.9
9.1
PNLD’s
'95
14.9
'96
41.9
23.4
19.8
11.8
'97
'98
'99
'00
'01
'02
'03
(1) PNLD – Annual Program by which the Government Purchases Textbooks for Elementary Public Schools
(2) It includes R$ 5.1 Million of PNLEM Minas Gerais
Souce: Saraiva
'04
'05
Editora Saraiva – Publising House
Competitive Advantages
21
Belém
Fortaleza
Manaus
Recife
9 Proprietary content
9 Adoption of books in Brazil is
decided by teachers
9 Printing Plant: it is not
Saraiva´s core business,
but adds value...
Salvador
Brasília
Belo Horizonte
Goiânia
Campo Grande
Ribeirão Preto
Curitiba
Porto Alegre
Rio de Janeiro
São Paulo:
Distribution Center &
Saraiva´s Printing
Agenda
Overview
Editora Saraiva – Publishing House
Livraria Saraiva - Retail
Final Remarks
22
Livraria Saraiva – Bookstore Industry in Brazil
23
Gross Revenues of the Brazillian Book Industry - R$ 2.36 Billion (2003)
61% via Bookstores - R$ 1.44 Billion (2003)
Other
39%
R$ Million
250
Gross Revenue - 2003
200
150
100
50
Bookstore
61%
0
Saraiva
(1)
Siciliano
Cultura
(1)
Sources: CBL (Câmara Brasileira do Livro), Saraiva, Serasa.
La Selva
(1)
Saraiva´s estimative.
Livraria Saraiva - Retail
24
Geographic Localization
29 Stores - 14 Super Stores e 15 Traditional Stores
DF
DF
Traditional
Traditional Store
Store
RJ
RJ (6
(6 Stores)
Stores)
11
GO
GO
Super
Super Store
Store
Traditional
Traditional Stores
Stores
22
Super
Super Stores
Stores
44
11
PR
PR
Super
Super Store
Store
11
SP
SP (19
(19 Stores)
Stores)
Traditional
Traditional Stores
Stores
RS
RS
Super
Super Store
Store
11
Super
Super Stores
Stores
12
12
77
Livraria – Highlights 1Q05
Gross Revenue
o
Same store sales: growth of 5.2% in 1Q05;
o
Saraiva.com growth: 31.6%;
o
Physical stores: recovery, however slow:
-1.2% in 1Q05, against –3.3% in 1Q04.
Profitability
o
Better operational margin: due to the rationalization plan
initiated in 2004;
o
Annual savings of R$ 4.5 million.
25
Livraria Saraiva - Retail
Mix of Products – 1Q05
26
Highlights:
The sales of books, whose taxes (PIS
and COFINS) were reduced to zero,
17%
4%
represent 65% of gross revenue in 1Q05.
Books
4%
Stationery
Software
Áudio & Video
Periodical
10%
65%
Livraria Saraiva – Financial Data
Gross Margin (%)
Gross Revenue (R$ Million)
213
220
238
27
262
37%
38%
37%
38%
37%
37%
37%
182
2000
2001
2002
2003
2004
73
75
1Q04
1Q05
2000
EBITDA (R$ Million)
2001
2002
2003
2004
Net Income (R$ Million)
8
6
1Q05
2.0
0.7
7
6
1Q04
5
5
4
(1.6)
(2.5)
(3.9)
2000
2001
2002
2003
2004
1Q04
1Q05
2000
(2.9)
(4.0)
2001
2002
2003
2004
1Q04
1Q05
Livraria Saraiva - Financial Data
(R$ million)
1Q 04
28
1Q 05
Var.
Gross Revenue
73.3
75.3
2.6%
Net Sales
63.5
68.7
8.2%
37.0%
36.8%
% Gross Margin
EBITDA
% EBITDA Margin
Net Income
Investments
% Operating Income (¹)/Net Sales
Avarage Working Capital (¹)
Working Capital / Gross Revenue (²)
16.0%
3.6
5.3
5.7%
7.7%
0.7
2.0
196.3%
0.4
0.5
32.6%
Inventories (+) Clients (-) Suppliers
(2)
Gross revenue in the last 12 months
46.2%
2.0pp
35.2%
31.9%
(3.3pp)
35.1
30.7
(12.5%)
14.4%
11.6%
(2.8pp)
17.7%
16.8%
14.4%
11.6%
Working Capital (1) /
Gross Revenues (2) (%)
(1)
(0.2pp)
1Q01
1Q02
1Q03
1Q04
1Q05
Saraiva.com.br – Competitive Advantages
Relationship with Bookstore Chain
9 Fulfillment capabilities
9 Brand recognition
9 Large products offering
9 Geographic coverage
9 “In-store” orders /
services provided
9 Customer profile
29
Saraiva.com - Financial Data
(R$ million)
30
1Q 04
1Q 05
13.82
18.2
31.6%
Gross Profit
4.3
6.3
47.6%
EBITDA
0.8
2.9
250.4%
Net Income
0.4
1.8
366.9%
Custumers base (Thousand)
1,142
1,514
32.6%
% of Livraria´s Revenue
Avarage Ticket (R$)
18.8%
24.2%
5.3pp
81.09
87.79
8.3%
Gross Revenue
1,142
1,228
1,336 1,406
1,514
Number of
Customers Base
1Q04
2Q04
3Q04
4Q04
1Q05
Var.
Livraria Saraiva - Retail
Livraria Saraiva – Competitive Advantages
9 “First
mover”, with presence in the most important
shopping malls
9 Strong brand name: customers’ share of mind
9 Privileged position for expansion
Š Lower costs for implementing new stores
9 Internet: large synergies with the bricks and mortar model
31
Agenda
Overview
Editora Saraiva – Publishing House
Livraria Saraiva - Retail
Final Remarks
32
Social Initiatives
9 Program “Company that Educates” - SENAC
9 “Telecurso”
9 Blood Donation Campaigns
9 “Christmas with solidarity”
33
Corporate Governance - Other
9
9
1st Company in Brazil to guarantee tag along rights in its By Laws;
9
9
9
Representative of non-controlling shareholders in the Board of Directors;
By Laws oblige the Company to distribute cash that exceeds 25% of its total
assets if it occurs in four successive quarters;
ADR level 1 OTC;
GVA: Value-added Oriented Methodology, being implemented in FY04, FY05.
34
Final Remarks
In the Publishing House (Editora Saraiva):
o PNLEM06: 14 million of books to High School;
o Confortable cash position for new investments;
o Control of Expenses: better operational efficiency.
In the Retail (Livraria Saraiva):
o Saraiva.com: new categories; strong growth;
o New stores: Super Shopping Osasco: inauguration in
2nd half 2005;
o Existing stores: recovery of sales/rationalization of expenses.
35
Exceptions on future declarations
This presentation contains future information. Such information involve
not only historical facts, but they reflect the goals and expectations of the
Saraiva´s Board. The words "anticipate", "desire", "wait", "foresee",
"intend", "plan", "predict", "project", "long for" and similars, written
and/or pronounced, intend to identify affirmations that, necessarily,
involve known and unknown risks.
Known risks include uncertainties, that are not limited to the impact of the
competitiveness of the prices and products, acceptance of the products in
the market, behavior of the competitors, prescribed approval, type and
fluctuation of currencies, regularity in the supply of raw materials and
operation, amongst other. This presentation is brought up to date up to
March 31, 2005 and Saraiva is not compelled to bring up to date it by
means of new information and/or future events.
Saraiva on the basis of does not make responsible for operations or
decisions of investment taken the information contained in this
presentation.
36
Contacts
João Luís Ramos Hopp
CFO and Investor Relations Director
phone: (55 11) 3613 3263
e-mail: [email protected]
Mauricio Fanganiello
Planning and Controlling Manager
phone: (55 11) 3613 3302
e-mail: [email protected]
IR Website: www.saraivari.com.br
Ligia Montagnani
Investor Relations Consultant
FIRB – Financial Investor Relations Brasil
phone: (55 11) 3897 6405
e-mail: [email protected]
37