South American retailer Cencosud posts modest revenue growth

Cencosud, a Chile-based retailer with stores also in Argentina, Brazil, Colombia and Peru, posted modest revenue growth in the second quarter in part due to depreciation of local currencies and slower electronic sales following the 2014 World Cup.

“In electronics, we are comparing to the World Cup, so we are seeing a deterioration in sales in that particular area,” CFO Juan Manuel Parada said during a conference call discussing the company's second quarter earnings. "We are seeing a somewhat challenging market in some countries."

Parada also mentioned depreciations of the Brazilian real and the Colombian peso against both the Chilean currency and the U.S. dollar as reasons for the modest revenue. 

The company said that its overall sales revenue for the second quarter of 2015 increased 1.2 percent to nearly $3.8 billion.

In addition, the company reported an “impairment of Brazilian assets” or write-offs equivalent to $169 million.

Parada said that in Brazil a “further deterioration of macro outlook” led to a review of expected cash flows, and mentioned a credit downgrade, rising interest rates and shrinking gross domestic product. 

Debt servicing capacity will not be affected, the company added.

“Despite the write-offs, we are seeing a considerable improvement in our Brazil performance,” Parada said. “We have made some important additions to the Brazilian management team."

The company is making important efforts to cut costs in all regions, Parada added. The efforts have included payroll reductions. 

Cost reduction efforts will continue in the present quarter, he said.

“We are maintaining service and quality, but working on capturing synergies,” Parada explained.

The company is working on “reorganizing human resources, finance and all those areas that are supporting operations," he said.

The company´s net profit, however, doubled year-on-year and, excluding one time effects, it tripled, according to a report on its financial statements.

“Supermarkets posted gross margin expansion in almost all countries and [the] Department Store Division also improved its gross margin, reflecting expansions in both Chile and Peru, explained by lower promotional activity and greater scale,” the company said in a separate press release discussing earnings.

Overall, “results in the second quarter were better than last year but not as good as we expected,” Parada said during the conference call.

The company opened its first supermarket in 1976 in Chile. Just in the last six years it has made acquisitions worth more than $4.4 billion, according to the company´s website. Brands it operates include Metro, Jumbo, Paris, Perini, Santa Isabel, Wong and others.

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Cencosud SA

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