March/2006

1
Presentation to Investors
Agenda
Overview and Consolidated Performance
Editora Saraiva
Livraria Saraiva
2
First Class Corporate Governance
9 First company in Brazil to guarantee tag along
rights in its Bylaws - March 2000
Š 90% tag along for preferred shares
3
Jorge Eduardo
Saraiva
9 Bylaws establishing that the company will not retain
excess cash – mandatory distribution of financial
availability* that exceeds 25% of total assets in
case it occurs during four consecutive quarters
99.91%
9 GVA®: Shareholder Value Management
9 Level 2 of Bovespa Corporate Governance
*
Financial availability: Cash and banks + financial investments – short and long term loans and financings
Our Business
4
The company focuses on book publishing and retailing of books and other related products
9 Saraiva offers a complete catalogue of elementary and high school Textbooks;
Law books; Business Administration, Economics and Accounting books
9 Market leader in the Law segment – approximately 40% of market share
9 3rd largest publisher of elementary and high school Textbooks – around 17% of
market share
9 National distribution: Chain of 12 branches
9 Largest bookstore chain in Brazil in terms of revenues
9 30 stores: 15 MegaStores and 15 regular stores
9 Pioneer in the concept of MegaStore in Brazil
9 Category Killer: books, CDs, DVDs, stationery, periodicals, electronics, etc.
9 The “Saraiva Plus” loyalty Card launched in Jun/05 already has more than 773,0
thousand members as of March 2006
9 One of the pioneers in e-commerce in Brazil - 1998
9 One of the largest on-line book retailers in Brazil
9 More than 896 thousand active clients
9 Operation integrated with the physical stores
9 Extended product mix
History of Constant Success and Growth
5
We are an innovative company, we have proprietary and quality content, we have a strong brand
and constantly seek for innovation in our operations
Consolidated Gross Revenue (R$ million)
CAGR 13.9% p.a. (1996-2005)
Acquisition of Atual
Publishing House
1st MegaStore
Publishing *
Bookstore
Launching of
Saraiva.com website
353
229
254
157
178
78
83
79
95
121
140
1996
1997
1998
1999
108
Business
Administration,
Economics and
Accounting Books
171
408
195
392
172
(1)
1
444
206
489
227
114
224
(1)
1
182
213
220
238
262
281
2000
2001
2002
2003
2004
2005
Acquisition of Renascer
Publishing House catalogue
Launching of SaraivaJur.com
website
* Publishing Revenue: excludes sales to Saraiva Bookstore
(1)
Lower governmental purchases – Years of book replacement
506
Acquisition of
Formato
Publishing
House
Long Distance
Learning,
Customized
Editions
Saraiva Breakdown – FY2005
6
Publishing House: strong cash generation and low CAPEX needs
Bookstore: accelerated growth potential (physical stores and Saraiva.com)
Net Revenues (1)
R$ 477.2 Million
EBITDA (1)
R$ 76.3 Million
Bookstore
21%
Bookstore
53%
Publishing House
47%
Publishing House
79%
(1)
Consolidated 2005
2005 Financial Highlights – Consolidated
7
9 Record net profit for the second year in a row
Š Net profit of R$ 40.0 million, growth of 120.0% compared to 2004
Š Net revenue of R$ 477.2 million, increase of 9.0% compared to 2004
Š EBITDA of R$ 76.3 million, significant increase of 52% compared to 2004
Gross Revenues
Net Revenues
Gross Profit
EBITDA
Net Profit
2005
R$ million
505.6
477.2
260.4
76.3
40.0
VA %
105.9%
100.0%
54.6%
16.0%
8.4%
2004
R$ million
489.1
437.7
229.6
50.4
18.2
VA %
111.8%
100.0%
52.5%
11.5%
4.2%
HA%
3.4%
9.0%
13.4%
51.5%
119.8%
Consolidated Performance
8
Highlights
R$ million
Gross Revenue Consolidated
Gross Revenue BooksStores
Gross Revenue Publishing House
Net Sales
% Gross Margin
1Q 05
1Q 06
Var.
183,6
200,5
9,2%
75,3
97,4
30,2%
108,3
103,1
-3,2%
177,0
191,8
8,4%
59,1%
60,9%
51,5
56,7
% EBITDA Margin
29,1%
29,6%
Net Income
29,8
34,1
14,7%
Investiment
0,8
0,8
-6,2%
32,8%
33,0%
0,2pp
24,8
14,8
-40,4%
EBITDA
% SGA/Net Sales
PNLD
1,8pp
10,2%
0,5pp
Consolidated Performance
9
Sale Mix– 1Q 06
3.5% 3.0%
9.0%
1.1%
1.3%
1Q 06 1Q 05
Editora
51.4%
30.6%
29.2%
Livraria
2.0%
48.6%
7,4%
12.9%
Textbooks & Readers
Law
Government
Others
29.2% 31.4%
12.9% 13.0%
7.4% 13.0%
2.0%
1.6%
1Q 06 1Q 05
Books
Stationery
Software
Áudio & Video
Electronics
Others
30.6% 26.5%
3.5%
4.1%
3.0%
1.7%
9.0%
7.1%
1.1%
0.3%
1.3%
1.3%
Consolidated Performance
(1)
10
Net Cash Position
(R$ Million)
36.1
40.8
36.7
21.5
1Q02
(1)
1Q03
1Q04
Net Cash Position = Cash & Banks – Loans and financing
18.1
1Q05
1Q06
Offering Structure
11
Offering Size
(Including Greenshoe)
Total:
8.3MM Preferred Shares
Primary:
3.0MM Preferred Shares
Secondary: 5.3MM Preferred Shares
Transaction Date
Pricing: April 11
Selling Shareholders
Saraiva S/A Livreiros Editores, Investidor
Profissional ("IP"), IFC, Others.
Free Float after Offering
70,6% of preferred shares
Lock-Up
180 days
Bookrunners
Banco Santander and Pactual
Shareholdings – Preferred Shares
Preferred Shares Before Offering
Preferred Shares After Offering
Investidor
Profissional
21.1%
Investidor
Profissional;
50.0%
Others;
37.7%
.9%
IFC;
3
IRB;
6.1%
Others
70.6%
Treasury
Shares;
2.3%
12
IRB 4.7%
IFC 1.7%
Treasury
Shares
1.9%
Agenda
Overview and Consolidated Performance
Editora Saraiva
Livraria Saraiva
13
Publishing Market Overview
14
Outstanding position in the markets where we operate and possibility to operate in other publishing
lines
(1)
60
Brazil(1)
Publishing Market in
Gross Revenue – R$ 1.76 Billion
57
Law Books
Net Revenues – R$ million
50
41
40
30
23
Professional and
Technical Books*
14.0%
20
16
10
0
300
Textbooks
54.6%
General
Publications
21.8%
RT (2)
Saraiva
Religious Books
9.6%
Atlas
Forense
Text Books (1)
269
Net Revenues – R$ million
250
219
200
163
150
150
100
60
50
* Includes law books
(1)
2004
(2)
2003
Source: Company reports and Serasa
50
0
Ática
Scipione
FTD /
Quinteto
Saraiva /
Atual /
Formato
Moderna
IBEP /
Nacional
Editora do
Brasil
Education in Brazil
15
Growth potential in High Schools and College
Investments to increase the quantity of students attending school
9 In this market, the largest purchaser of elementary and high school textbooks is the Federal
Government through the National Book Acquisition Program for public schools - PNLD (14.8% of the
Group revenues in 2005)
32.0
Students Enrolled (million) 34.0
Saraiva is well
positioned to fulfill
the future demand
in both segments
9.2
4.9
4.2
1.7
1994
Elementary School
CAGR
Source:
MEC, INEP e SEEC
0.8%
2004
High School
6.4%
College
10.6%
Publishing House
16
Saraiva Publishing House has a national presence - 12 branches and 17 authorized dealers
• Several publishing lines allows Saraiva to dilute fixed cost and create competitive advantages
Location of branches and dealers
9 The adoption of elementary and
high school textbooks in Brazil is
decided by teachers
Santarém
Santarém
Belém
Macapá
Macapá
Teresina
Fortaleza
Manaus
São Luiz
Imperatriz
Imperatriz
Natal
Natal
Recife
9 The branches have inventories to
meet local demand and maximize
sales efforts through our sales
personnel
Rio Branco
Aracaju
João
Pessoa
Maceió
Salvador
Porto Velho
Cuiabá
á
Palmas
Bras ília
Brasília
Belo Horizonte
Uberlândia
Uberlândia
Goiânia
Vitória
Vitória
Campo Grande
Rio de
Janeiro
Ribeirão Preto
São Paulo:
Centro
Distribution
de Distribui
Center
ç
ção
Curitiba
Porto Alegre
Florianópolis
Branch
Dealers
Government Programs Cycles
17
The National Elementary Textbook Program (PNLD) is based on a three-year cycle, and on the third year of
the cycle a smaller number of books is purchased, only to replace books that have been ruined in the two
previous years
9 In replacement years, Saraiva sales within PNLD are naturally lower
Book replacement year
9 Great market potential
(Public Schools):
85.5
Š 8.0 million students enrolled in Public High
Schools
73.4
65.0
Š PNLEM 06 = 12.6 million books
9 Saraiva: well positioned catalogue = big
potential
11.8
9.1
(1) In million of R$
1995
41.9
23.4
19.8
1994
63.8
42.9
Š PNLEM 06: Saraiva = 25.1% market share in
monetary terms
14.9
83.3
1996
1997
1998
1999
2000
PNLD/PNLEM (1)
(contract year)
2001
2002
2003
2004
2005
Cycle of Governmental Purchases - Elementary Education 18
Fiscal Year
Program
st
1 Grade
nd
th
2 - 4 Grade
th
th
5 - 8 Grade
Number of books
Purchased (Total)
Allocation
Fiscal Year
% children who receive books
2006
PNLD 07
100%
100%
8%
2007
PNLD 08
100%
8%
100%
2008
PNLD 09
100%
8%
8%
100 - 110MM 100 - 110MM
40 - 45MM
70% 4Q06
30% 1Q07
70% 4Q07
30% 1Q08
90% 4Q08
10% 1Q09
Strategy – Publishing House
19
We will keep on expanding our business through the consolidation of our market position and strategic
acquisitions of publishing houses and catalogues
9 Entrance barriers: local content, strong distribution, relationship with authors and teachers
9Market position growth and consolidation
ΠAcquisition of other publishing houses or catalogues
Š New products and strong distribution chain
Š Use of new medias, CD ROM, Internet and Long Distance Learning
9Enhancement of the relationship with teachers
9Increase in operating efficiency
Saraiva S.A. Livreiros Editores - “Editora”
20
Highlights
R$ million
Gross Revenue
1Q 05
1Q 06
Var.
112,2
108,6
-3,2%
Private Market
87,4
93,8
7,3%
Government
24,8
14,8
-40,4%
112,1
108,5
-3,3%
Net Sales
% Gross Margin
70,7%
77,6%
6,9pp
EBITDA
46,2
50,5
9,3%
% EBITDA Margin
41,2%
46,5%
5,3pp
Net Income
29,8
34,1
14,7%
Investiment
0,3
0,2
-36,6%
30,5%
30,2%
(0,3)pp
% SGA/Net Sales
Editora Saraiva
21
Gross Revenue (R$ Million) and
EBITDA (R$ Million) and
Gross Margin (%)
EBITDA Margin (%)
75.8%
1
76.4%
1
70.9%
1
70.7%
1
77.6%
1
60.0
49.2%
50.0
44.2%
40.6% 41.2%
46.5%
40.0
83.3
92.0
115.7
112.2
108.6
30.0
20.0
10.0
39.5
38.7
43.6
46.2
50.5
1Q02
1Q03
1Q04
1Q05
1Q06
-
1Q02
1Q03
1Q04
1Q05
1Q06
Gross Revenue
R$ million
Private Market
Government
1Q02
1Q03
1Q04
1Q05
1Q06
74,4
86,8
87,6
87,4
93,8
8,8
5,2
28,1
24,8
14,8
55.0%
53.0%
51.0%
49.0%
47.0%
45.0%
43.0%
41.0%
39.0%
37.0%
35.0%
33.0%
31.0%
29.0%
27.0%
25.0%
23.0%
Agenda
Overview and Consolidated Performance
Editora Saraiva
Livraria Saraiva
22
The Book Retail Market
23
The States of São Paulo and Rio de Janeiro represent around 65% of the book retail market in Brazil(1)
9 Very fragmented market
9 More than 1,500 bookstores in Brazil, of which 70% are located in the South and Southeast regions
9 Inequality in bookstore distribution
Book retail market revenues – R$ 2.47 Billion(2)
250
223
Net Revenues(2) -R$ Million
200
Other
39%
147
150
Bookstores
61%
89
100
66
50
0
Saraiva
(1)
Source CBL
In 2004
Sources: CBL (Brazilian Book Chamber), Saraiva, Serasa.
(2)
Siciliano
Cultura
La Selva
Bookstore: Bricks and Mortar
24
Leader in book retailing in Brazil in terms of revenues, Saraiva operates through 30 stores in some of the
main cities and through Saraiva.com, one of the main e-commerce websites in Brazil
9 Sales area of 20.1 thousand m² in strategic locations
9 Store models: MegaStores, regular stores and “new regular stores”
9 They offer an unique purchasing experience in a pleasant and well dimensioned physical areas
Bookstores Location
Expansion
potential
PE
MegaStore
DF
Regular Store
1
GO
MegaStore
1
PR
MegaStore
RS
MegaStore
Evolution of the product mix
1
1
RJ (6 stores)
Regular Stores
MegaStores
2
4
1
SP (19 stores)
Regular Stores
MegaStores
12
7
Books
18.7%
17.7%
8.5%
10.9%
11.2%
10.9%
8.6%
57.9%
56.5%
56.2%
2003
2004
2005
Stationary
25.4%
5.3%
Multimedia
Audio & Video
Periodicals
Electronic
Other
Saraiva.com – Operating Synergies with Bricks and Mortar
Through complementary activities, we are capable of quickly reducing costs and adding scale, in
addition to identify and act with more flexibility and readiness
9 Scale of operations
9 Brand recognition
9 Expertise in logistics
and distribution
9 Geographic coverage
9 Service rendering
9 Consumer’s profile
25
Bookstore Strategy: Bricks and Mortar
Our growth strategy is based on the evolution of the concept of MegaStore and on the new
concept of regular store, on the diversification and adaptation of the product mix and strategic
acquisitions
9Market position growth and consolidation
Š Expansion of the physical store chain in the new model
Š Strategic acquisitions
Š Store refurbishing
9New categories of products and store models
9Efficiency in working capital management
9Brand enhancing
26
Strategy: Saraiva.com
Focus on the consolidation of our categories and on the diversification of our product mix along
with marketing investments
9 Investment in services
9 Larger investments in marketing and larger
presence on internet portals
9 New categories
Š Imported books
Š Electronic products
Š Games
9 Logistics and delivery services
27
Livraria Saraiva – Evolution of Revenues
R$ million
1Q 05
Gross Revenue
75,3
Same Comparable Sales
(*)
1Q 06
28
Var.
98,0
30,2%
74,5
93,3
25,2%
Saraiva.com
18,2
27,0
48,5%
Physical Stores (total)
57,1
71,0
24,3%
Same Stores Sales (*)
56,3
66,3
17,7%
1Q 05
4%
1Q 06
17%
10%
7%
6%
2%
1%
3%
3%
Books
Stationery
Software
65%
(*) Includes Saraiva.com
19%
Áudio & Video
Electronics
Others
63%
Livraria e Papelaria Saraiva S.A. - “Livraria”
29
Highlights
R$ million
1Q 05
1Q 06
Var.
Gross Revenue
75,3
98,0
30,2%
Net Sales
68,7
89,5
30,2%
% Gross Margin
36,8%
36,5%
(0,3)pp
5,3
7,3
36,9%
% EBITDA Margin
7,7%
8,1%
Net Income
2,0
2,9
48,0%
Investiment
0,5
0,6
13,1%
% SGA/Net Sales
31,9%
30,9%
(1,0)pp
Working Capital
33,8
27,3
-19,3%
% Working Capital/Net Sales
12,8%
Ajusted EBITDA (*)
(*) Ajusted EBITDA: does not include Saraiva Plus provision.
9,0%
0,4pp
(3,8)pp
Livraria Saraiva
R$ million
Inventories
Clients
Suppliers
Working Capital
1Q 05 Turn Over
38,8
97
17,8
24
22,8
58
33,8
63
30
1Q 06 Turn Over
35,8
77
25,7
30
34,2
68
27,3
39
Working Capital (1) / Gross Sales (2) (%)
18.3% 17.8%
16.2%
12.8%
9.0%
1Q02 1Q03 1Q04 1Q05 1Q06
(1)
Inventories + Clients – Suppliers (avarage last 12 months)
(2)
Gross Sales last 12 months.
Var.
-7,7%
44,4%
50,2%
-19,3%
Saraiva.com.br
31
Highlights
R$ million
1Q 05
1Q 06
Var.
Gross Revenue
18,2
27,0
48,5%
Net Sales
17,0
24,8
46,1%
Ajusted EBITDA
(1)
2,9
3,3
13,3%
Customers Base (Thousand)
(2)
551
896
62,6%
18,6%
27,6%
87,8
108,2
% of Livraria's Revenue
Avarage Ticket (R$)
5.9
8.9
3.0
3.0
23,2%
27,0
Gross Revenue X SG&A
18%
18.2
13.8
9,0pp
3.7
3.6
28%
5.1
Megas
Tradicionais
1Q02
1Q03
1Q04
1Q05
Gross Revenue
SG&A
(1) Ajusted EBITDA: does not include Saraiva Plus provision.
(2) Active clients: users who have bought at least once in the last two years.
Pontocom
1Q06
54%
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]
32