Cencosud : Earnings Release 4Q15

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Fourth Quarter 2015

CONSOLIDATED PERFORMANCE 4Q15

• Performance significantly improves as a result of efficiency plans and the review of implemented commercial strategies.

  
  

• Gross margin posted a 190 bps expansion and adjusted EBITDA margin improved 235 bps, reaching 9.3%, the highest in the last 3 years. Adjusted EBITDA grew 35.1% with a double-digit increase in Shopping Centers, Department Stores and Home Improvement.

• Net profit increased 86.6%, reaching CLP 187,535 million.

  
  

• Net Financial Debt/Adjusted EBITDA ratio decreased 50 bps vs. 4Q14 and reached 3.3x. Excluding LTM non-recurring items, ratio decreased 90 bps and reached 2.8x.

  
  

  BUSINESS PERFORMANCE

  Supermarkets: reached a 7.4% adjusted EBITDA margin, driven by a better performance in Colombia and Argentina.

  Argentina: adjusted EBITDA margin improved 138 bps YoY after organizational structure and processes adjustments. Colombia: the 263 bps adjusted EBITDA margin expansion reflects the double-digit SSS growth in perishables and better contracts with suppliers. Chile: continues to achieve double-digit adjusted EBITDA margin thru shrinkage reductions and centralized processes. Peru: SSS growth improvement vs. 3Q15. Brazil: positive EBITDA margin, in line with profitability reached last year: Prezunic continues to achieve positive SSS and improve its profitability level, Gbarbosa continues to improve its perishables performance, Bretas adjusted its commercial strategy focusing on perishables and converting stores to Atacarejo.

  Department Stores: achieves EBITDA margin of 8.1% due to record profitability in Chile and double-digit SSS growth in Peru

  Chile: the business obtained an 8.8% EBITDA margin, the highest since 2011, driven by margins levels of 8.5% in Paris and 10.3% in Johnson. Johnson achieved its first year of positive EBITDA since the acquisition. Peru: continues its double-digit SSS expansion.

  Home Improvement: achieves a 13.3% EBITDA margin due to better performance in Chile, Argentina and Colombia

  Chile: increased profitability on the implementation of the efficiency program. Argentina: continues with solid levels of revenue growth and profitability.

  Shopping Centers: continues posting a resilient performance against the economic cycle

  Chile and Argentina: improvement in profitability due to high levels of occupancy. Peru;

  occupancy rate improvements. Colombia: in the process of strengthening mix of tenants.

  Relevant Events

  • Sale of Non-Core Assets: process continues to advance. To date it has been completed the sale of:

    • Sale of Pharmacies: on February 10th, Cencosud announced the sale of 47 pharmacies in Peru to Mifarma. These pharmacies operated inside our Wong and Metro supermarket stores. The deal includes the transfer of assets and leasing of the stores for a period of 10 years starting in March 2016.

    • Real estate and land bank in Chile: agreement to sale 9 properties.

    • Other assets: On March 1st Cencosud announces the sale of the 33.3% stake in Mall Viña del Mar S.A.- the company that owns and operates a shopping center in Viña del Mar and another one in Curico- totaling UF 4,275,000 (approximately USD 160 million).

  • IPO Shopping Centers: we continue to work with investment banks on structuring and preparing the transaction.

  • 120 Stores Program: by the end of December, all stores under this program had already been analyzed by the committee with its corresponding plan to improve performance. Among the advances achieved by the program, which started in April 2015, 8 stores were closed1 and 17 started to achieve positive EBITDA levels.

(In millions of Chilean pesos as of December 31st, 2015)	Fourth Quarter		Twelve-Month, ended December 31st
2015	2014	∆ %	2015	2014	∆ %
Net revenues	3.048.854 3.014.		833	1,1%	10.991.338	10.711.029	2,6%
Cost of sales	-2.143.598 -2.177.		047	-1,5%	-7.813.226	-7.827.432	-0,2%
Gross profit	905.256 837.		785	8,1%	3.178.112	2.883.597	10,2%
Gross margin	29,7% 27		,8%	190 bps	28,9%	26,9%	199 bps
Selling and administrative expenses	-682.708 -686.		612	-0,6%	-2.675.486	-2.482.777	7,8%
Other income by function	145.154 78.		038	86,0%	210.521	114.438	84,0%
Other gain (Losses)3	-1.369 -1.		648	-16,9%	-63.082	-6.515	868,3%
Operating income	366.333 227.		564	61,0%	650.065	508.743	27,8%
Participation in profit of equity method associates	5.296 5.		730	-7,6%	14.067	8.893	58,2%
Net Financial Income	-75.981 -49.		025	55,0%	-244.100	-173.548	40,7%
Income (loss) from foreign exchange variations	-9.600 -3.		657	162,5%	-116.743	-24.411	378,2%
Result of indexation units	-6.113 -13.		207	-53,7%	-22.009	-39.576	-44,4%
Non-operating income (loss)	-86.398 -60.		158	43,6%	-368.784	-228.642	61,3%
Income before income taxes	279.935 167.		405	67,2%	281.281	280.101	0,4%
Income taxes	-92.400 -66.		908	38,1%	-58.540	-100.486	-41,7%
Profit (Loss) from continued operations	187.535 100.		497	86,6%	222.740	179.615	24,0%
Profit (Loss) from discontinued operations	0	778	N.A.	9.244	11.409	-19,0%
Profit (Loss)	187.535 101.		275	85,2%	231.985	191.024	21,4%

Financial Highlights 4Q15 2

• Gross margin expanded by 190 bps YoY reaching 29.7% in 4Q15. This increase is the result of better commercial conditions with suppliers, lower promotional activity and improved levels of shrinkage.

• Operating income increased 61.0% YoY, reflecting Cencosud's focus on efficiency and improved profitability across all operations.

• Profit increased 86.6% YoY, explained by the operating income improvement which was partially offset by increased financial expenses and foreign exchange losses. Both increases were impacted by the increase in debt denominated in USD after CCS (11% in 4Q14 vs. 32% in 4Q15) - due to a Bond issuance in the International markets

1 Out of the 8 closings, 4 were performed at December 31st; therefore number of stores reduction will be reflected starting from January 2016.

2 As a consequence of the association of Scotiabank and Cencosud for the joint development of financial services in Chile, in 4Q14 the Financial Services Division includes the Chilean operation line by line (it is consolidated and then eliminated in discontinued operations), however, in 4Q15 49% of the profit is included in "Participation in profit of equity method"

3 In 3Q15 Cencosud reclassified Fair Value of Derivatives from the line "Other gains (losses)" which was part of the

operating income line, to "Net Financial Cost" and "Income (Loss) from foreign exchange variations" to exclude from operating income variables that do not reflect the business performance.

in early February 2015, along with the devaluation of the Chilean peso against the USD YoY (14.4%) in the case of the foreign exchange variation.

Consolidated Performance

Supermarkets

SUPERMARKETS

2015	2014	∆ %
CLP MM	CLP MM

2015	2014	∆ %
CLP MM	CLP MM

Fourth Quarter Twelve-Month, ended December 31st

Chile	683.793	663.736	3,0%	2.504.714	2.354.805	6,4%
Argentina	602.847	527.819	14,2%	2.154.753	1.813.586	18,8%
Brazil	401.503	548.711	-26,8%	1.677.543	2.154.313	-22,1%
Peru	245.321	233.033	5,3%	867.511	836.677	3,7%
Colombia	226.113	269.206	-16,0%	841.046	999.857	-15,9%
Revenues	2.159.578	2.242.506	-3,7%	8.045.566	8.159.237	-1,4%
Chile	180.694	176.561	2,3%	628.725	588.723	6,8%
Argentina	187.980	162.892	15,4%	679.447	556.577	22,1%
Brazil	86.435	115.760	-25,3%	360.576	420.837	-14,3%
Peru	54.476	52.121	4,5%	194.021	183.532	5,7%
Colombia	45.761	51.373	-10,9%	168.431	192.799	-12,6%
Gross Profit Gross Margin

555.346	558.707	-0,6%
25,7%	24,9%	80 bps
-429.640	-449.242	-4,4%
127.412	111.569	14,2%

2.031.199	1.942.468	4,6%
25,2%	23,8%	144 bps
-1.722.351	-1.662.113	3,6%
317.316	289.567	9,6%

SG&A

Operating Income

Chile

• Revenues: grew 3.0% driven by 1.6% growth is SSS and the net opening of 7 stores YoY. SSS performance was impacted by a high comparison basis (strike of one of our competitors in December 2014), increased promotional activity in the industry and higher organic growth from competitors.
• Gross Margin: posted a slight compression of 18 bps, explained by a high comparison basis due to higher rebates in 4Q14 vs. 4Q15. Isolating that effect, gross margin increased 187 bps due to lower shrinkage and savings as a result of the centralization of processes (meat, bakery and prepared food) and better logistic performance.
• Operating Income: decreased 35 bps YoY due to lower gross margin, higher energy costs (30% increase of energy costs), higher payments of credit card commissions and increased legal provisions, partially offset by a better collection management.

  
  

  Argentina

• Revenues: increased 14.2% YoY driven by a 13.9% SSS growth and the appreciation of the official average exchange rate by 0.8% in 4Q15 vs. 4Q14.
• Gross Margin: posted an expansion of 32 bps as a result of decreased promotional activity YoY.
• Operating Income: posted an increase of 71.8% and margin expanded 174 bps, driven by a leaner organizational structure and the division's efforts in reducing discretional expenses.

  
  

  Brazil (Consolidated)

• Revenues: were impacted by the devaluation of the Real against the Chilean peso, and a decrease in SSS by 6.1% (despite being the best result in the last 3 quarters), partially offset by the net opening of 3 stores YoY. SSS performance is explained by a decrease in Bretas and Gbarbosa non-food sales, which was partially offset by the increase in Prezunic (SSS 3.9%), Mercantil Rodriguez (SSS 13.1%) and the improvement of Gbarbosa SSS.
• Gross Margin: expanded for the fifth consecutive quarter (+43 bps vs. 4Q14) due to better price management along with lower promotional activity and logistical improvements.
• Operating Income: slightly declined due to lower absorption of expenses, and the rise in energy and rental costs, partially offset by lower marketing, back office and maintenance expenses.

  Prezunic

  • Revenues: were affected by positive SSS growth of 3.9% due to the implementation of the new commercial strategy, which resulted in the review of our product mix and pricing policy, in addition to a better availability of products ratio.
  • Gross Margin: increased 18 bps YoY due to the ongoing improvement process that the flag is undergoing, which maintains efforts to keep obtaining the best commercial conditions with suppliers, lower shrinkage and lower logistic costs.
  • Operating Income: posted a 62% increase and margin expanded 129 bps, explained by a greater gross margin and lower SG&A expenses, as a result of lower headcount, maintenance and marketing expenses, reflecting the benefits obtained by the execution of the efficiency plan.

    
    

    Gbarbosa

  • Revenues: negative SSS explained by the drop in non-food sales (double- digit decrease in electro, in line with industry and peer conditions), partially offset by an increase in food sales, which improved performance in the quarter. To compensate the drop in electro sales, the Company is changing the commercial proposition, pushing categories that bring greater traffic to the stores and generating regular customer from perishables.
  • Gross Margin: expanded 190 bps YoY despite the drop in sales, as a result of the focus on a more competitive pricing strategy, a 70 bps reduction in shrinkage and lower logistic costs.
  • Operating Income: posted an 8% increase as a result of greater gross margin, partially offset by higher energy expenses.

    
    

    Bretas

  • Revenues: negative SSS reflecting slower economic activity, a more competitive environment from the Atacarejo format and an increase in openings from the competition. Bretas has seen a better performance in sales and profitability in the transformed stores (3) and continues its plan to do more transformations during 2016. Additionally, the chain has as an objective to deliver an improved proposition for the perishables area, strengthening logistics for the category, and broadening product mix.
  • Gross Margin: was impacted by a greater cost of sales YoY, explained by greater shrinkage as a result of the focus on perishables, partially offset by lower promotional activity.
  • Operating Income: posted a drop YoY due to the lower absorption of expenses as a result of lower sales (higher energy and rental expenses).

Peru

• Revenues: grew 5.3% driven by 1.0% SSS growth and the net opening of three sores vs. 4Q14.
• Gross Margin: decreased slightly by 16 bps due to higher promotional activity, specifically in December, and greater contribution from the wholesale business.
• Operating Income: grew 3.4% and margin decreased 13 bps, explained by lower gross margin, partially offset by a slight improvement in SG&A expenses, driven by lower headcount and decreased discretionary expenses.

  
  

  Colombia

• Revenues: lower revenues as a result of the devaluation of COP against CLP, partially offset by a positive SSS. SSS growth was explained by a double-digit increase in perishables, partially offset by a drop in electro, which was affected by lower television sales as a consequence of currency devaluation. The business continues to focus its efforts to generate loyalty from perishables, providing more frequency in customer' purchases. Additionally, the Company's loyalty program has allowed that 75% of sales come from regular customers, reaffirming the consolidation of our brands in the Colombian market.
• Gross Margin: expanded by 115 bps as a result of increased rebates and better commercial agreements with suppliers.