R$ Million

90 Years
Supporting the Brazilian Culture
Presentation to Investors
Agenda
Overview
Editora Saraiva – Publishing House
Livraria Saraiva – Retail
Final Remarks
2
Overview
Saraiva S/A Livreiros Editores – Publishing House
9
9
9
9
9
9
Publishes and sells proprietary content
Strong cash generation - ROE: 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
3
Overview
Livraria e Papelaria Saraiva S/A - Retail
9
Largest book retailer in Brazil
Š 31 stores: 15 SuperStores e 16 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
4
Overview - Shareholdings
Common
%
5
Preferred
%
Total
%
Controlling Group
4,520,574
47.0%
546,018
3.4%
5,066,592
19.8%
Others
5,101,739
53.0%
15,427,792
96.6%
20,529,531
80.2%
Total
9,622,313
Total
%
%
100.0%
Data of Market - Bovespa
Number of trades
(1)
Participation in trading sessions - %
Quantity traded - 000
Volume traded - 000
Price per share - R$
(1)
(1)
(1)
(1) (2)
(1)
Referring to registered preferred shares (SLED4)
(2)
At end of period
Source: São Paulo Stock Exchange (Bovespa)
Pref. B
%
3Q04
3Q05
15,973,810 100.0%
25,596,123 100.0%
%
384
706
84%
53
71
34%
2,466
2,744
11%
26,058
34,087
31%
12.30
11.70
-5%
Group Overview
6
Consolidated Gross Revenue (¹) (R$ Million)
CAGR 8.5% p.a. (2000 - 2004)
408
353
213
182
171
2000
195
2001
392
444
238
Lower allocation of textbook sales to
the Government under PNLD(²).
9M05 – R$ 24.7M X
9M04 – R$ 28.3M
489
1.9
262
333
339
186
194
220
172
2002
206
2003
227
2004
147
145
9M04
9M05
(¹) Editora´s gross revenue does not include inter-company sales
(²) PNLD – Annual Program by which the Government Purchases Textbooks for Public Elementary Schools
Livraria
Editora
Overview
7
Consolidated Sale Mix – 9M05
Book Sales:
78% of the consolidated sales mix
4.1% 2.7%
2%
.
2
1
%
2.6
35.5%
Textbooks & Readers 18.0%
Editora
Law 15.7%
42.9%
Government
Others
18.0%
6.9%
2.3%
Books 35.5%
Livraria
57.1%
2.3%
6.9%
15.7%
Stationery
Software
4.1%
2.7%
Audio/Video 12.2%
Others 2.6%
Overview
8
Highlights: “Saraiva Consolidated 9M05”
Gross Revenue
R$ 339.3 Million
57%
57%
Gross Profit
R$ 177.7 Million
39%
39%
43%
43%
Editora
Livraria
61%
61%
Overview
9
Highlights: “Saraiva Consolidated 9M05”
Gross Revenue
R$ 339.3 Million
EBITDA
R$ 44.2 Million
22%
22%
43%
43%
'
57%
57%
78%
78%
Editora
Livraria
Overview
10
Highlights: “Saraiva Consolidated 9M05”
EBITDA
R$ 44.2 Million
CAPEX
R$ 4.8 Million
22%
22%
47%
47%
'
78%
78%
53%
53%
Editora
Livraria
Overview
(1)
Net Cash Position
(R$ Million)
(1)
Net Cash Position = Cash & Banks – Loans and financing
11
Agenda
Overview
Editora Saraiva – Publishing House
Livraria Saraiva - Retail
Final Remarks
12
Publishing Market in Brazil
Gross Revenues of the Brazillian
300
Publishing Market
R$ 1.76 Billion (2004)
Net Sales - R$ Million
269
Textbooks & Readers - 2004
219
200
Religious
10%
13
163
150
100
Technical &
Professional
17%
60
50
IBEP / Nacional
Editora do Brasil
0
Ática Scipione
Textbooks
54%
60
FTD / Quinteto
Saraiva / Atual /
Formato
Moderna
Net Sales - R$ Million
57
Law Publishing - 2004
41
40
General
Reading
22%
23
20
16
0
Saraiva
Source:CBL (Câmara Brasileira do Livro), Saraiva, Serasa
RT
(1)
(1)
Atlas
2003 Figures
Forense
Editora Saraiva – Publising House
14
Competitive Advantages
Santarém
Belém
Macapá
Teresina
Fortaleza
Manaus
São Luiz
Imperatriz
Natal
Recife
Rio Branco
Aracaju
João
Pessoa
Maceió
Salvador
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...
Porto Velho
Palmas
Bras ília
Belo Horizonte
Cuiabá
Uberlândia
Goiânia
Vitória
Campo Grande
Centro
de Distribuição
São Paulo:
Distribution
Paulo Printing
CenterSão
& Saraiva’s
Ribeirão Preto
Curitiba
Porto Alegre
Filiais
Revendedores
Authorized
Dealers:
Rio de
Janeiro
(only textbooks and readers)
Florianópolis
Education in Brazil
15
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
Opportunities
9
Large Potential Market:
Š 8.0 million students enrolled in public high schools
Š PNLEM 06 = 12.6 Million books
Š PNLEM 07 = 19.0(1) Million books
9
Editora Saraiva: well positioned catalog = great potential
Š PNLEM 06: Saraiva = 25.1% “market share” in monetary terms
(¹)
Estimate furnished by FNDE, purchases depends on budgetary resources.
16
Editora Saraiva – Product Mix
17
9M04
9M05
1%
1%
3%
3%
1%
1%
37%
37%
Textbooks & Readers
58%
Law
Econonics & Business Administration
Saraiva Data
Source: Editora Saraiva (2003)
Other
58%
Editora Saraiva – Financial Data
Gross Revenue (R$ Million)
202
178
107
2000
216
126
135
2001
2002
154
2003
Lower allocation of
textbook sales to the
Government under PNLD(²).
9M05 – R$ 24.7M x
9M04 – R$ 28.3M
235
180
154
153
126
129
148
2004
9M04
18
9M05
Total Sales
Priv. Market Sales
EBITDA (R$ Million)
46
38
Gross Margin (%)
45
43
63% 65%
69%
66% 66%
72% 71%
35
35
25
2000
2001
2002
2003
2004
9M04
9M05
2000
2001
2002
2003
2004
9M04
9M05
Editora Saraiva – Highlights 9M05
19
Evolution of the Gross Revenue
R$153.5 in 9M05 vis-a-vis R$154.0 in 9M04.
0,3% decrease in 9M05: lower allocation of textbook sales under
PNLD(¹):
Program /
School Year
Total Sales
Appropriation of
Sales
(Contracted)
(fiscal year)
R$ Million
R$ Million
2H03 1H04 2H04 1H05
2004
85.5
2005
83.3
57.4
28.1
(¹) PNLD – Annual Program by which the Government Purchases Textbooks for Public Elementary Schools
58.6
24.7
Editora Saraiva - Financial Data
R$ million
3Q04
3Q05
Gross Revenue
21.5
22.9
7.0%
154.0
153.5
-0.3%
Net Sales
19.5
22.9
17.6%
142.1
153.3
7.9%
% Gross Margin
75.1%
71.8%
(3.3pp)
71.7%
71.1%
(0.6pp)
EBITDA
(4.9)
(3.5)
-29.8%
25.3
34.5
36.4%
-15.1%
10.2pp
17.8%
22.5%
4.7pp
(3.2)
-48.3%
% EBITDA Margin
-25.3%
Net Income
(6.2)
Investments
% Operating Income
1.3
(¹)
/ Net Sales
1.0
123.6% 92.3%
Var.
20
-24.9%
(31.3pp)
50%
41%
43%
42%
9M04
5.3
3.9
64.1%
47%
ROE
Fiscal Year
2000
2001
2002
2003
2004
9M05
Var.
19.8
272.8%
2.2
-42.5%
50.7% (13.4pp)
Cycle of Governmental Purchases - Basic Education
Fiscal Year
Program
st
1 Grade
2nd - 4th Grade
th
th
5 - 8 Grade
Number of books
Purchased (Total)
Booking
Fiscal Year
2006
PNLD 07
100%
100%
8%
2007
PNLD 08
100%
8%
100%
100 - 110MM 100 - 110MM
70% 4Q06
30% 1Q07
70% 4Q07
30% 1Q08
2008
PNLD 09
100%
8%
8%
40 - 45MM
90% 4Q08
10% 1Q09
21
Sales to Government – PNLD
(¹)
22
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
73.4
42.9
9.1
PNLD’s
19.8
14.9
11.8
'95 '96
'97 '98
63.8
65.0
41.9
23.4
'99 '00 '01
'02 '03
'04 '05
(1) PNLD – Annual Program by which the Government Purchases Textbooks for Public Elementary Schools
(2) It includes R$ 5.1 Million of PNLEM Minas Gerais
Souce: Saraiva
'06
Agenda
Overview
Editora Saraiva – Publishing House
Livraria Saraiva - Retail
Final Remarks
23
Livraria Saraiva – Bookstore Industry in Brazil
24
Gross Revenues of the Brazillian Book Industry - R$ 2.47 Billions (2004)
61% via Bookstores - R$ 1.51 Billion (2004)
Other
39%
250
R$ Million
223
200
Net Sales - 2004
165
150
89
100
66
50
0
Bookstore
61%
Saraiva
Siciliano
(1)
Cultura
(1)
(2)
Sources: CBL (Câmara Brasileira do Livro), Saraiva, Serasa.
La Selva
(²)
2003 Figures
Saraiva´s estimative
Livraria Saraiva – Financial Data
Gross Margin (%)
Gross Revenue (R$ Million)
37%
182
2000
213
2001
220
2002
238
38%
37%
38%
37% 38%
2003
2004
2004
9M04
194
9M05
2000
EBITDA (R$ Million)
2001
2002
9M04
Net Income (R$ Million)
3.0
10
8
6
6
7
(3.9)
(4.0) (2.5)
(1.6) (2.9)
(3.3)
5
2
2000
2001
2002
2003
39%
262
187
2003
25
2004
9M04
9M05
2000
2001
2002
2003
2004
9M04
9M05
9M05
Livraria – Highlights 9M05
Gross Revenue
o
Same store sales: 6.5% growth in 9M05;
ƒ Saraiva.com growth: 20.4%;
ƒ Book store chain: recovery (same store sales)
2.9% in 9M05, against -0.6% in 9M04.
8.2% in 3Q05, against 0.1% in 3Q04.
Profitability
o
Better operational margin: rationalization plan initiated in 2004;
o
Annual savings of R$ 4.5 million.
26
Livraria Saraiva - Retail
27
Geographic Localization
31 Stores - 15 Super Stores e 16 Traditional Stores
PE
PE
Super
Super Store
Store
11
DF
DF
Traditional
Traditional Store
Store
11
RJ
RJ (6
(6 Stores)
Stores)
GO
GO
Super
Super Store
Store
11
Traditional
Traditional Stores
Stores
22
Super
Super Stores
Stores
44
PR
PR
Super
Super Store
Store
11
SP
SP (20
(20 Stores)
Stores)
Traditional
Traditional Stores
Stores
RS
RS
Super
Super Store
Store
11
Super
Super Stores
Stores
13
13
77
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
28
Livraria Saraiva - Retail
Mix of Products – 9M05
29
Highlights:
The sales of books, whose taxes (PIS and
COFINS) were reduced to zero, represent
63% of gross revenue in 9M05.
5%
21%
1%
3%
7%
Books
Stationery
Software
Áudio & Video
Eletronics
Periodical
63%
Livraria Saraiva - Financial Data
R$ million
3Q04
3Q05
Gross Revenue
57.7
61.9
7.2%
186.5
193.8
3.9%
Net Sales
48.9
56.0
14.7%
159.0
176.0
10.7%
39.4%
40.6%
1.2pp
37.6%
39.0%
1.4pp
2.2
9.6
1.4%
5.5%
-206.0%
(3.3)
3.0
191.0%
160.1%
% Gross Margin
EBITDA
0.7
% EBITDA Margin
1.4%
Net Income
(1.1)
Investiments
% Operating Income
( ¹)
/ Net Sales
Working Capital
% Working Capital / Net Sales
(1)
(2)
Inventories (+) Clients (-) Suppliers
Net Sales in the last 12 months
9M04
3.0 -342.9%
5.4%
1.2
4.0pp
9M05
Var.
336.8%
4.1pp
0.3
1.8
537.0%
1.0
2.5
42.6%
37.1%
(5.5pp)
40.7%
36.1%
(4.6pp)
35.3
26.1
-25.9%
35.3
26.1
-25.9%
13.9%
10.1%
(3.8pp)
13.9%
10.1%
(3.8pp)
16.2%
Working Capital (1) /
Net Sales (2) (%)
Var.
30
17.2%
15.7%
13.9%
10.1%
9M01 9M02 9M03 9M04 9M05
Saraiva.com - Financial Data
R$ milhões
3Q04
3Q05
12.9
14.5
4.1
Gross Revenue
Gross Profit
31
Var.
9M04
9M05
Var.
12.7%
37.5
45.2
20.4%
5.3
28.3%
11.8
16.3
38.0%
EBITDA
1.3
1.9
43.5
2.1
6.5
206.8%
Net Income
0.7
1.1
53.6%
1.0
3.9
306.3%
1,700
27.2%
1,336
1,700
27.2%
Customers Base (Thousand)
1,336
% of Livraria´s Revenue
22.3% 7.5%
Avarage Ticket (R$)
73.0
76.1
Customers Base Evolution
1,336
3Q04
1,406
4Q04
1,514
1Q05
(14.8pp) 20.1% 23.3%
4.2%
1,603
2Q05
75.8
1,700
3TQ5
80.7
3.2pp
6.5%
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 - FY06.
34
Final Remarks
In the Publishing House (Editora Saraiva):
o PNLEM06: 13 million of books to High Schools;
o Confortable cash position for new investments;
o Control of Expenses: better operational efficiency.
In the Retail (Livraria Saraiva):
o New executives:
o Marcilio D´Amico Pousada – CEO
o Frederico Soares Indiani – Purchase Director
o Ricardo Daumas – Marketing Director
o Saraiva.com: new categories;
o Two New Stores in October of 2005: Super Shopping Recife (1.016m2)
Shopping Osasco (305m2)
o Existing stores: recovery of sales/rationalization of expenses.
o Expansion Plan: 7 new store in 2006 and 2007 (subject to the alterations)
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
June 30, 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