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Market share increase, reinforced efficiency, internationalization, debt reduction and support to families


1. MAIN HIGHLIGHTS 9M2012: Increased market share in Portugal on main business areas such as Sonae MC, reinforcing its leadership position with 0,8pp, and Worten with 2,4pp; Sonae SR grows international sales by 12%; Consolidated recurrent EBITDA recurrent increased by 4% to 436 M€, with an EBITDA recurrent margin of 11,1%; Net income reached 92M€, with net profit attributable to the Group share positive by 64 M€; Total net debt reduction of 181 M€ and being the 12 consecutive quarters with comparable reduction; Refinancing requirements secured until 2014; Total community support exceeded 6,8 M€, benefiting 2.527 institutions; Purchases from Portuguese perishable producers reach 80%; Portuguese families benefit from more than 299 M€ in discounts.
Commenting on these results, Paulo Azevedo, CEO da Sonae, says: “I am pleased to report that Sonae was again able in 3Q12 to deliver a consistent top line performance and, importantly, growth in consolidated operating profitability and cash flow generation. This performance was made possible by the capacity of our food retail business to reinforce its share in the Portuguese market, while continuously seeking efficiency improvements. This focus on productivity continues to enable us to deliver more value to our customers. Sonae SR is addressing the significant reductions experienced in the demand for the more discretionary categories, by gaining market share at Worten and by reducing costs across all activities. It is also worth highlighting the upward trend in profitability that Sonaecom has once again been able to maintain during the quarter.
The announcement and implementation of more severe austerity measures in Portugal and Spain is expected to further impact the levels of disposable income and private consumption in Iberia in the coming year. Against this negative backdrop, it is critical that we continue to deliver the best value proposals to our customers, which should again allow for a sales performance above market, and that our teams continue the successful implementation of the on‐going efficiency and productivity projects.
Based on the operating and financial performance in the first nine months of the year, I remain confident that we are following the most appropriate path to deal with the current market contractions in Iberia: growing market share and protecting profitability at home whilst growing in international markets, as has been the case, for example, for Sonae Sierra in Brazil and for Zippy in several new markets.”
During the first nine months of 2012, Sonae reinforced its commitment to support Portuguese families in this difficult environment, through an active low pricing policy and promotional activity. The volume of discounts given on loyalty cards and sales receipts by Sonae’s retail brands increased by 36% until september, totalling 299 M€. These initiatives mean real savings for millions of Sonae’s food and specialised retail brand customers, among whom are those who have Continente and Sport Zone loyalty cards. PURCHASES MADE FROM NATIONAL SUPPLIERS OF PERISHABLE PRODUCTS INCREASES, REACHING 80%
The strategic focus on Portuguese production translated into initiatives of entrepreneurship in the primary sector and increased purchases from Portuguese perishable producers, which amounted to 509 M € in the first nine months of the year. The weight of national production in purchases of perishable products of Continente increased to 80%. The achieved result was driven by the activity of the Continente Producers’ Club (responsible for purchases of 174 M € in the first nine months of the year, 32.8% more than in the same period), a bet that has allowed Sonae to support Portuguese perishable agricultural producers developing their business and innovation processes.
Sonae continued to pursue its commitment to the community, benefiting 2,527 institutions which support young people and families across the country, 800 more than in the same period of last year. The support given to third sector organizations, in particular through the donation of food products and other goods, skills training and financial support, exceeded 6,8 M€, regarding areas like Culture, Education, Health, Sports, Science, Innovation and Social Solidarity.
During the first nine months of 2012, the level of private consumption in Iberia has been strongly influenced by the implementation of austerity measures in both Portugal and Spain, aimed at correcting the identified macroeconomic imbalances. For example, in the case of Portugal, it is estimated that retail sales contracted by more than 5% during this period . Despite this challenging macroeconomic backdrop, Sonae has been able to attain market share gains in its main business areas, which has allowed for a reduction of the consolidated turnover of just 2% , to 3.9 billion Euros in this period..
Sonae MC turnover reached 2.405 M€, almost in line with last year, with 3Q12 sales increasing 1% to 870 M€. This performance was still above market average, with Sonae MC again strengthening its leading market share1 in the Portuguese food retail sector during the 9M12 . It is particularly noteworthy the fact that Sonae MC’s “LfL” sales evolution during the 3Q12 was almost flat (-0.3%), corresponding to the best performance in the market in that period. In this environment, Continente’s private label portfolio continued to increase its relative weight, reaching a representativeness of almost 31% in the sales of FMCG categories during the 9M12 (+2 p.p. y.o.y.). Sonae MC EBITDA increased 11% to 169 M€, a very positive outcome in the current environment of consumption retraction. Sonae MC was able, during this period, to sustain its competitiveness in the market and improve its operational profitability via a combination of a relevant promotional effort, leveraged on its “Continente” loyalty card (which was involved in approximately 90% of sales in the period), a rigorous cost control, a strict inventory management policy and further productivity gains delivered by the successful implementation of several internal initiatives.
Sonae SR reached sales of 846 M€, a performance in line with last year (-2%), with by international markets sales growing 12%. Sales outside of Portugal represented almost 30% of total sales in the 9M12, 4 p.p. above the figure registered in the same period of 2011. In the consumer electronics segment, the segment where more reliable market share information is available, Worten continued to strengthen its position in the Iberian market, with the market share in Portugal estimated to have increased y.o.y. by an estimated 2.4p.p. .
Recurrent EBITDA amounted to 436 M€ in the 9M12, an improvement of 4% in comparison with the previous year. This positive performance was determined by the growth in the recurrent EBITDA generation of the food retail and telecommunications businesses, enabling the company to reach a consolidated EBITDA margin of 11%, 0.3 p.p. above the comparable period of 2011, despite the fact that no capital gains associated with the sale & leaseback of stores were registered in 2012.

Total net income amounted to 92 M€, 15 M€ below the figure registered in the same period last year, mainly due to the non-existence of capital gains associated with the sale of assets by Sonae RP (vs. 16 M€ registered in 9M11), but also to a deterioration of Sonae Sierra’s non-cash, indirect results, essentially driven by the devaluation of shopping centres in Iberia. In the same period, the share of net income attributable to the group reached 64 M€.
The consolidated CAPEX reached 177 M€, having been essentially allocated to remodelling and maintenance of retail assets in Iberia and, in the case of Sonaecom, to the development of its telecommunications network, related mainly with the 4G network deployment.
On 30th Sep 2012, total net debt totalled 2,047 M€, 181 M€ below the same period in 2011, despite the impact of the initial payment of the LTE spectrum acquisition (83 M€) made by Sonaecom and the payment of dividends to Sonae’s shareholders (66 M€). The company is thus continuing in the path of strengthening its capital structure, with the consolidated net financial debt decreasing sustainably y.o.y. over the last 12 quarters and representing, at the end of the 3Q12, 55% of invested capital (2 p.p. lower than in the same period of 2011). In cumulative terms, in the last 3 years, the total reduction in net financial debt reached 424 M€, a particularly remarkable achievement when considering the strong investments in international growth carried out by the company during this period.

Consolidated profit and loss account Million euros 9M11PF 9M12 Var
Turnover (ex. fuel) 4.005 3.935 -2%
Recurrent EBITDA 418 436 4%
Recurrent EBITDA margin
11,1 %
0,7 p.p
EBITDA 429 431 1%
EBITDA margin
0,3 p.p
EBIT 166 161 -3%
Net financial activity
Other Items

Shopping centres direct results
EBT 126 116 -8%
12% Direct results 115 107 -7%
Indirect results
Net income 107 92 -14%
… Group share

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