LATAM_CONSUMER_MONTHLY_-_OCTOBER_2012-2012-10-08.ppt

deutsche bank markets research,global emerging markets latin america consumer october 2012,periodical latam consumer monthly,date 2 october 2012 jose yordan research analyst (+1) 212 250-5528 ,100% of our coverage rose in usd in september (and 89% outperformed) in september, 100% of our coverage universe (all 27 stocks) had a positive performance in usd terms (versus 58% in august), and 89% outperformed their respective market (versus 58% in august). retail stocks outperformed other consumer sectors, rising 9.8% on average (led by btow3 +44% and radl3 +11.1%). hpc companies also performed well as a group (up 9.3% on average) lead by a strong performance from kimbera (+13.9%) followed by beverage and food stocks (up 7.7% and 6.5% on average respectively). monthly feature: updated coke system maps (+comments on consolidation),renata coutinho research analyst (+55) 11 2113-5976 rebeca sanchez sarmiento research associate (+1) 212 250-2009 ,in this issue, we have updated our coca-cola bottling system maps for latin america with 2011 volume information: based on coca-cola company filings for the overall country totals and on annual reports of publicly-traded for individual franchise territories (or estimated for privately-held bottlers). these maps should give investors an idea of the size of the m and although we do not predict any future deals we point out some potential candidates. grain prices remain high but have stabilized thanks to better supply visibility since the end of june wheat, corn and soybean rallied as much as 27.6%, 23.6% and 17% respectively. but with preliminary harvest figures starting to materialize, it appears that the market is growing more comfortable with availability prompting a slight sell off towards the end of september. sugar prices continue to trend downward, proving some relief to soft drink producers, but the outlook for total sweetener costs remains problematic. outlook for brazilian and mexican consumer still in question the brazilian consumer confidence index rose again in september (consistent with a falling unemployment rate), and while recent retail sales figures generally indicate a moderate recovery (partially driven by fiscal incentives), the uptick in food inflation continues to put a question mark on the timing of any consumer recovery. considering that food inflation will likely remain on the rise (given continued uncertainty over grains prices and the impact of higher beverage excise taxes, which will be passed on to the consumer), 2012 may turn out to be another difficult year for the brazilian consumer. the mexican consumer remains in relatively good shape, as evidenced by rising consumer confidence and robust retail sales. but an uptick in unemployment, the disappearance of pre-election spending by political parties and the recent deterioration in remittances raise some yellow flags, in our view. brazilian protein exports: sept. data points to weak 3q12 for poultry exporters secexs september release indicates continued u.s. dollar pricing weakness for the brazilian protein companies with beef, pork and poultry export prices falling by 12.1%, 7.3% and 1.6% respectively on a yoy basis. alternatively, export volumes in september were up (albeit to varying degrees) across all three major protein categories. we calculate that in 3q12, the overall brazilian pork and beef export industry saw revenues increase while the poultry industry remains under pressure thanks to tough volume and pricing comparables. _ deutsche bank securities inc. all prices are those current at the end of the previous trading session unless otherwise indicated. prices are sourced from local exchanges via reuters, bloomberg and other vendors. data is sourced from deutsche bank and subject companies. deutsche bank does and seeks to do business with companies covered in its research reports. thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. investors should consider this report as only a single factor in making their investment decision. disclosures and analyst certifications are located in appendix 1. mica(p) 072/04/2012.,2 october 2012 consumer latam consumer monthly table of contents db recent related research 5 we reinstated coverage of liverpool . 5 db initiated coverage of mercadolibre, calbee, de masters 1753 and bloomin brands; upgraded heineken and kohls to buy . 5 monthly feature: updated coke system maps. 7 thoughts on latam coca-cola bottling consolidation trends . 7 db latam consumer coverage summaries 10 global peer valuation tables 14 historical valuation multiples 20 latam food stocks . 20 latam beverage stocks 22 latam household & personal care stocks 25 latam retail stocks 26 input cost tracker 30 beverage raw materials: sugar continues to provide relief, but corn syrup outlook remains problematic . 30 better supply side visibility has stabilized grain prices 31 other inputs still declining 33 brazil protein update 34 september release indicates weak 3q12 for poultry exporters . 34 update on brazilian, mexican and chilean consumers . 35 food inflation remains an ongoing problem in brazil 35 mexican consumers remain in good shape, for now 37 outlook for the chilean consumer remains generally positive 39,page 2,deutsche bank securities inc.,2 october 2012 consumer latam consumer monthly table of exhibits figure 1: recent latam consumer research 5 figure 2: other related global research . 5 figure 3: mexico coca-cola bottling system map . 7 figure 4: brazil coca-cola bottling system map 8 figure 5: latin american coca-cola bottling system map 9 figure 6: highlighted stock listdb-covered latam food and beverage companies 10 figure 7: highlighted stock listdb-covered latam retail and hpc companies . 11 figure 8: db-covered latam consumer valuation summary . 12 figure 9: db-covered latam consumer share price performance summary 13 figure 10: global commodity foodvaluation (latam names in bold) 14 figure 11: global packaged foodvaluation (latam names in bold) . 15 figure 12: global beveragesvaluation (latam names in bold). 16 figure 13: global food retailvaluation (latam names in bold) 17 figure 14: global non-food retailvaluation (latam names in bold) . 18 figure 15: global cosmetics, hpcvaluation (latam names in bold) 19 figure 16: brasil foods 12-month forward ev/ebitda 20 figure 17: brasil foods 12-month forward p/e . 20 figure 18: grupo bimbo 12-month forward ev/ebitda . 20 figure 19: grupo bimbo 12-month forward p/e . 20 figure 20: gruma 12-month forward ev/ebitda . 21 figure 21: gruma: sotp analysis 21 figure 22: jbs sa 12-month forward ev/ebitda 21 figure 23: jbs sa 12-month forward price/bv 21 figure 24: marfrig 12-month forward ev/ebitda 21 figure 25: marfrig 12-month forward price/bv. 21 figure 26: minerva 12-month forward ev/ebitda . 22 figure 27: minerva 12-month forward price/bv . 22 figure 28: ambev 12-month forward ev/ebitda 22 figure 29: ambev 12-month forward p/e . 22 figure 30: andina 12-month forward ev/ebitda . 22 figure 31: andina 12-month forward p/e . 22 figure 32: arca continental 12-month forward ev/ebitda . 23 figure 33: arca continental 12-month forward p/e 23 figure 34: ccu 12-month forward ev/ebitda . 23 figure 35: ccu 12-month forward p/e 23 figure 36: coke femsa 12-month forward ev/ebitda 23 figure 37: coke femsa 12-month forward p/e . 23 figure 38: concha y toro 12-month forward ev/ebitda . 24 figure 39: concha y toro 12-month forward p/e . 24 figure 40: femsa stub 12-month forward ev/ebitda . 24 figure 41: femsa sotp analysis 24 figure 42: hypermarcas 12-month forward ev/ebitda . 25 figure 43: hypermarcas 12-month forward price/bv . 25 figure 44: kcm 12-month forward ev/ebitda 25 figure 45: kcm 12-month forward p/e . 25 figure 46: natura 12-month forward ev/ebitda . 25 figure 47 natura 12-month forward p/e . 25 figure 48: b2w 12-month forward ev/ebitda 26 figure 49: b2w 12-month forward pbv . 26 figure 50: cbd 12-month forward ev/ebitda . 26 figure 51: cbd-pao de acucar 12-month forward p/e . 26 figure 52: cencosud 12-month forward ev/ebitda 26 figure 53: cencosud 12-month forward p/e . 26 figure 54: cia hering 12-month forward ev/ebitda . 27 figure 55: cia hering 12-month forward p/e 27 figure 56: liverpool 12-month forward ev/ebitda . 27 figure 57: liverpool 12-month forward p/e 27 figure 58: lojas americanas 12-month forward ev/ebitda . 27 figure 59: lojas americanas 12-month forward p/e 27 figure 60: lojas renner 12-month forward ev/ebitda . 28,deutsche bank securities inc.,page 3,2 october 2012 consumer latam consumer monthly table of exhibits (continued) figure 61: lojas renner 12-month forward p/e 28 figure 62: magazine luiza 12-month forward ev/ebitda . 28 figure 63: magazine luiza 12-month forward p/e 28 figure 64: marisa lojas 12-month forward ev/ebitda 28 figure 65: marisa lojas 12-month forward p/e 28 figure 66: raia drogasil 12-month forward ev/ebitda . 29 figure 67: raia drogasil 12-month forward p/e . 29 figure 68: walmex 12-month forward ev/ebitda . 29 figure 69: walmex 12-month forward p/e 29 figure 70: sugar #11 (us/lb) 30 figure 71: mexican sugar (us/lb) 30 figure 72: lme aluminium (us/lb) . 30 figure 73: pet bottle resin (us/lb) 30 figure 74: us wheat (usd/bushel) 31 figure 75: us corn (usd/bushel) . 31 figure 76: us soybeans (usd/bushel) . 31 figure 77: us soybean meal (usd/ton) . 31 figure 78: brazilian live cattle prices (r$/) 32 figure 79: brazil corn (r$/60 kg sack) . 32 figure 80: brazil soybeans (r$/60 kg sack) . 32 figure 81: brazil soybean meal (r$/ton) 32 figure 82: nbsk market pulp (usd/mt) 33 figure 83: cotton # 2 (usd/lb) . 33 figure 84: brent crude ($/bbl) 33 figure 85: brazilian beef exports . 34 figure 86: brazilian poultry exports . 34 figure 87: brazilian pork prices 34 figure 88: brazilretail sales by category . 35 figure 89: brazilconsumer confidence (yoy change) 35 figure 90: brazilunemployment rate . 35 figure 91: brazilinflation . 35 figure 92: brazilyoy % change in consumer credit 36 figure 93: brazilcredit default rates 36 figure 94: brazilloan spreads 36 figure 95: brazilpersonal loans (interest rate vs maturity). 36 figure 96: mexicosss by category 37 figure 97: mexicoconsumer confidence (yoy change) . 37 figure 98: mexicoremittances yoy % ch. (in pesos, using monthly average fx) 37 figure 99: mexicoremittances yoy % change (in usd) 37 figure 100: mexicounemployment rate 37 figure 101: mexicoinflation 37 figure 102: mexicoyoy % change in consumer credit . 38 figure 103: mexico% of consumer npls . 38 figure 104: chileretail durable vs. non-durable sales growth rate 39 figure 105: chileconsumer confidence (yoy change). 39 figure 106: chileunemployment rate 39 figure 107: chileinflation 39 figure 108: chileyoy % change in consumer credit . 39 figure 109: chileprovisions / total loans . 39,page 4,deutsche bank securities inc.,2 october 2012 consumer latam consumer monthly db recent related research we reinstated coverage of liverpool figure 1: recent latam consumer research,liverpool: still dominating mexican d-store sector (reinstating coverage with buy) lojas renner: lower rates: not a simple estimate femsa: maintain hold despite improved outlook for heineken minerva: maintaining buy on margin upside and additional de- leveraging,jose yordan sept 26, 2012 jose yordan sept 26, 2012 jose yordan sept 25, 2012 rebeca sarmiento sept 19, 2012,cia hering: conference takeaways - st macro challenges remain,renata coutinho,sept 9, 2012,source: deutsche bank db initiated coverage of mercadolibre, calbee, de masters 1753 and bloomin brands; upgraded heineken and kohls to buy figure 2: other related global research,tate & lyle: leaving a better aftertaste global economic perspectives: qe3 to boost asset values and growth gem strategy quantitative viewpoint: the liquidity wave versus the contrarian-defensive focus the house view: september 25, 2012 heineken: tiger feat coca cola icecek: finalizing the acquisition of south iraq operations tesco plc: uk trading encouraging, international and bank pressuring forecasts mercadolibre: riding the latam e-commerce wave, but water may get choppy katzmans kitchen: gmoomg conagra foods: strong out of the gate global economic perspectives: explaining asian restraint global tobacco monthly: september 2012 general mills: signs of recovery bloomin brands: initiate at hold: casual dining with a kick.but facing headwinds supermarket macro update: grocery inflation still moderating no drought impact (yet) the wide angle: what does the world consume? avon: why 6.5% isnt the right operating margin mcdonalds: nazdrovie! - thoughts post-europe mctrip em monthly: gearing up fall comeback of retail trader: allocating capital across coverage group source: deutsche bank deutsche bank securities inc.,harold thompson sept 27, 2012 peter hooper sept 27, 2012 mehmet beceren sept 26, 2012 db fixed income sept 25, 2012 jonathan fell sept 23, 2012 muharrem sept 21, 2012 gulsever james-g collins sept 21, 2012 ross sandler sept 20, 2012 eric katzman sept 20, 2012 eric katzman sept 20, 2012 peter hooper sept 20, 2012 andrew kieley, sept 20, 2012 jonathan fell, masashi mori eric katzman sept 19, 2012 jason west sept 18, 2012 charles grom sept 17, 2012 sanjeev sanyal sept 17, 2012 bill schmitz jr sept 17, 2012 jason west sept 16, 2012 drausio giacomelli sept 13, 2012 charles grom sept 12, 2012,page 5,2 october 2012 consumer latam consumer monthly figure 2: other related global research (continued),global economic perspectives: international imbalances and the eurosystem em special publication: brazil economic update kohls: out of purgatory = upgrade to buy, $62 pt calbee: initiating with hold: snack businesses highly evaluated, but priced in coca-cola: global bottling - overhang vs. opportunity kraft foods: back to basics,peter hooper sept 12, 2012 jose faria sept 12, 2012 charles grom sept 12, 2012 masashi mori sept 11, 2012 bill schmitz jr sept 11, 2012 eric katzman sept 10, 2012,commodities special report: a deep dive into livestock liquidation global economic perspectives: qe: still potent but costly snyders-lance: crisp and clean heinz: earnings power still compelling campbell soup company: condensing expectations procter & gamble: state of the union mix matched de master blenders 1753: arabicadabra?: initiate with buy campari group: acquisition a nice (magnum) tonic for the shares source: deutsche bank page 6,christina mcglone- hahn peter hooper rohini nair eric katzman eric katzman bill schmitz jr jamie isenwater jamie isenwater,sept 7, 2012 sept 6, 2012 sept 6, 2012 sept 6, 2012 sept 5, 2012 sept 4, 2012 sept 3, 2012 sept 3, 2012,deutsche bank securities inc.,2 october 2012 consumer latam consumer monthly monthly feature: updated coke system maps in this issue, we have updated our coca-cola bottling system maps for latin america with 2011 volume information: based on coca-cola company filings for the overall country totals and on annual reports of publicly-traded for individual franchise territories (or estimated for privately-held bottlers). these maps should give investors an idea of the size of the m and although we do not predict any future deals we point out some of the potential candidates. thoughts on latam coca-cola bottling consolidation trends given the three transactions (in quick succession) announced by coca-cola femsa in 2011 (and already incorporated into the map below under kof), we had high hopes at the outset of 2012. but so far, no additional consolidation has happened in the mexican coke system. figure 3: mexico coca-cola bottling system map nogales:,10 mm (e),arca continental : 1,039 mm (pf),corp. del fuerte: 100 mm (e) total 2011 volume: 3,415 mm unit cases bepensa: 190 mm (e) rica: 77 mm (e) tepic: 10 mm (e) colima: 5 mm (e) yoli: 89 mm (e) kof: 1,895 mm (pf) source: panamco mexico originally (now a subsidiary of coca-cola femsa), maintained through various company filings and other news sources. items market “e” are db estimates.,deutsche bank securities inc.,page 7,sjr,ribero,camb,belo,de fora,real,2 october 2012 consumer latam consumer monthly the only related news we have seen was an article in excelsior newspaper earlier this month, which commented that arca continental was interested in acquiring rica and yoli, which as is illustrated in figure 3 above, are not contiguous territories and as a result would not contribute significant synergies (beyond procurement and overhead reduction). but it would not be the first time this happens. recall that when coca-cola femsa bought remil (the bottler in minas gerais state, or the easternmost bright red territory in figure 4 below), it was not a contiguous territory either. and more recently, embotelladora andina bought a 40% stake in the sorocaba bottler (in red stripes below, and also not contiguous with andinas territory in rio de janeiro and up the coast). in other words, recent news flow suggests that the consolidation process in latin america has entered a new, more “competitive” phase. figure 4: brazil coca-cola bottling system map boa vista,manaus,santarem,macap,belm marab,total 2011 volume: 1,936 mm unit cases so luis natal joo pessoa,rio branco,imperatriz,teresina,petrolina,garanhuns,recife,porto velho,maceio,brazilian coca-cola franchises,cacoal,barra do garas,goinia braslia,salvador vitria da conquista montes claros,aracaju ibicara,uberlndia: 40 mm (e),andina: 184 mm ipiranga: 70 mm (e) bandeirantes: 75 mm (e) cbo: 125 mm (e) cvi: 60 mm (e),campo grande,uberlndia aracatuba preto preto bauru campinas,governador horizontevaladares vitria divinopolis juiz pinda campos,renosa: 60 mm (e),maring,sorocaba,niteri,sorocaba: 37 mm monteiro: 80 mm (e) nor