Grupo Carso de C V : Second Quarter 2014 Results

Second Quarter 2014 Results

Mexico City, July 24, 2014 Grupo Carso S.A.B. de C.V. (BMV: GCARSO OTC: GPOVY) announced today its results for the second quarter of 2014.

Highlights

o Total consolidated sales amounted $19,340 MM Ps in the 2Q14.

o Sales of Grupo Sanborns and Grupo Condumex reached $9,485 and $6,523 million pesos, representing increases of 0.7% and 2.4%, respectively.

o Cumulative EBITDA for the first half of the year totaled $4,839 million pesos, while its margin was

12.7% of sales, improving 0.2 percentage points over the same period last year.

Summary

Amounts in million pesos (MM Ps)

CONSOLIDATED RESULTS

Revenues

2Q14 Revenue

Breakdown

CICSA

17.4%

Other &

elimin

-0.1%

GCondumex

33.7%

GSanborns

49.0%

Operating Income and EBITDA

CICSA

18.3%

GCondum

30.4%

GSanborn

49.3%

Other &

elimin.

2.0%

3000
2500
2000

2Q13 2Q14

Financial Results

Financial Results 2Q14 2Q13 Var% 2014 2013 Var% Interest Expenses -112.3 -138.4 -18.8% -239.5 -292.4 -18.1% Income (Loss) on derivatives net -100.9 229.6 NA -62.0 53.0 NA Income (Loss) change in value of fin. instrum. 0.0 0.0 0.0% 0.0 0.0 0.0% Interest Income 98.9 123.1 -19.7% 194.8 192.2 1.3% Interest (net) -114.4 214.3 NA -106.8 -47.2 126.2%

ForEx Results 24.8 81.7 -69.6% -1.3 143.5 NA CFR -89.6 296.0 NA -108.1 96.3 NA Income taxes 629.9 786.8 -19.9% 1,261.4 1,341.1 -5.9% Earnings from non-consolidated companies 308.6 376.4 -18.0% 792.5 695.6 13.9% Non-controlling participation in Net Income 227.4 250.3 -9.2% 437.8 413.3 5.9%

NA= Not applicable

Net Income

Controlling net income totaled $1,275 MM Ps during the second quarter of the year, recording a 33.1% decrease compared to the net income recorded in the 2Q13. This was attributable to: i) lower sales in the Infrastructure and Construction division, ii) a reduction of 1.2 percentage points in the operating margin, due to the combination of business, and lastly iii) a comprehensive financial cost (CFC) of $90 million pesos.

Interest-bearing Liabilities

Total debt at June 30, 2014 was $6,383 MM Ps, a reduction of 28.1% compared with a total debt of $8,883

MM Ps at the end of December 2013. Net debt was negative by $2,885 MM Ps, compared to a negative net debt of $1,671 MM Ps at December 31, 2013.

Net debt to LTM EBITDA remained stable at (0.2) times compared to December 2013. Additionally, the ratio
LTM EBITDA to Interest Expense was 34.8 times in the 2Q14 compared to 14.7 times recorded in the 2Q13.

Total Debt by CURRENCY

(Includes ForEx Hedges)

Pesos

83%

Dollars

17%

Long T

79%

Short T

21%

34.8
14.7

SEGMENT RESULTS RETAIL

Consolidated Results 2Q14 2Q13 Var % 2014 2013 Var %

Sales 9,485 9,417 0.7% 18,509 18,490 0.1% Operating Income 944 1,097 -14.0% 1,783 2,062 -13.5% Controlling Net Income 574 755 -24.0% 1,123 1,407 -20.2% EBIT DA 1,148 1,270 -9.6% 2,179 2,406 -9.4% Operating Margin 10.0% 11.7% 9.6% 11.2%

EBIT DA Margin 12.1% 13.5% 11.8% 13.0%

Contribution to

Consolidated Results

49% SALES

49% OP. INCOME

49% EBITDA

During the 2Q14, the consolidated sales of Grupo Sanborns totaled $9,485 MM Ps, which meant an increase of
0.7%.
Sears increased 1.4% its total sales (TS) but decreased 1.2% its same store sales (SSS), Sanborns kept stable its total sales by 0.03% but decreased 0.7% its SSS, while iShop/Mixup increased 2.0% its TS but decreased 4.9% its SSS.
Even when special promotions were held for Mother's Day, Father's Day and the Soccer World Cup, SSS decreased due to the following reasons: i) the partial closure of stores being remodeled and iii) the negative impact on sales at the stores located at the border areas due to the VAT increase.
Cost as percentage of sales increased one percentage point, affecting the gross margin, which fell from 40.9% to 39.9%. Additionally operating expenses represented 30.6% of sales, reflecting wage increases, higher depreciation, higher NPLs and an increase in the provision of advertising expenses. Therefore operating income and EBITDA were $944 and $1,148 million pesos, showing reductions of 14.0% and 9.6%, respectively.
Similarly, controlling net income totaled $574 MM Ps representing a 24.0% reduction compared to the net income recorded from April to June 2013, which was $755 MM Ps.

Other

5.9% iShop/M

9.6%

iShop/M

0.7%

Sanborn

31.2%

Sanborn

13.1%

Other

25.0%

Sears

53.3%

Sears

61.2%

Note: For additional information please refer to Grupo Sanborns S.A.B. de C.V. 2Q14 Earnings Report.

Contribution to

Consolidated Results

34% SALES

30% OP. INCOME

29% EBITDA

The sectors that contributed to this performance were: i) Telecom with a 23.6% growth due to higher volumes of fiber optic and copper cables and ii) the Automotive sector, which increased 19.8%.
Construction and Energy declined 12.6% due to the slowdown in turnkey projects and energy cables; while the line of transformers continued the recovery shown in the previous quarter, increasing its sales.
Adjustments in the business strategies as well as savings in costs and expenses caused the operating income and EBITDA to reach $582 and $680 million pesos, posting increases of 54.8% and 44.6% respectively, compared to the second quarter of the previous year. This was reflected in an expansion of 3.0 percentage points in both the operating and EBITDA margins, being 8.9% and 10.4% of revenues.
The improvement in operating results was reflected in a controlling net income of $330 MM Ps, representing an increase of 6.2% over the net income of $311 MM Ps recorded a year ago.

T elecom 23.6% 10.5% Automotive 19.8% 23.6% Construction and Energy -12.6% -10.4%

Industrial Metals -7.2% -14.0%

SEGMENT RESULTS

INFRAESTRUCTURE AND CONSTRUCTION

Contribution to

Consolidated Results

17% SALES

18% OP. INCOME

21% EBITDA

CICSA's sales were $3,371 MM Ps, representing a reduction of 29.8% compared to the same period of 2013. The sectors that recorded higher sales were: Civil Construction, Housing and Ducts Installations, which grew
26.3%, 29.7% and 2.7%, respectively. This was due to the progress in the construction of various projects such as shopping centers, apartments and office buildings, as well as facilities for telecom customers and natural gas networks.
Manufacture and Services for the Oil & Chemical Industries was one of the sectors that showed reductions in its revenues, being this of -71.9% mainly due to the lack of new tenders. It is important to remember also that in the 2Q13 the levels of drilling were extraordinary because of the expansion in existing contracts.
The other sector that showed lower sales was Infrastructure, which decreased 5.9%. It is noteworthy that in the 2Q13 the projects included the Culiacan bypass road as well as various mining projects which were completed. Currently the Company participates in bids for new projects while existing projects include the Emisor Oriente Tunnel, the Guadalajara bypass road and the Atotonilco wastewater treatment plant, among others.
As a consequence of lower sales and less absorption of fixed expenses, operating income and EBITDA
decreased 51.9% and 42.6% in the 2Q14, while margins were 10.4% and 14.3, respectively.

CICSA's backlog was $19,722 MM Ps at June 30, 2014, decreasing 23.6% compared to the backlog reported in the same period a year ago. It is important to highlight that this figure does not include $2,534 MM pesos from projects in consortium with other companies, such as the Atotonilco wastewater plant and the Mitla-

Tehuantepec highway.

Forward Looking Statements

Certain statements in this earnings release may be related to expectations about future events of Grupo Carso. The phrases "will allow," "will," "estimate," "expect," "intend," "might," "should" and similar expressions generally indicate comments based on financial information, operating levels and conditions of the market to date. These statements are subject to factors such as volatility in metals prices, energy inputs and other inputs, the possibility of cyclical or seasonal business or consumer slowdown risks that are detailed in the Company's annual report and may cause actual results to differ materially from current expectations. Grupo Carso undertakes no obligation to publish a review on these forward-looking statements to reflect events or circumstances occurring after the date of publication of this release.

Invitation to the Conference Call

Date: Friday, July 25, 2014
Time: 9:00-9:30 A.M. Mexico City Time/10:00-10:30 A.M. NY Time (US EST) Access Number: +1 (412) 317-6776 (International and Mexico)
Conference ID: Grupo Carso

Investor Relations Contact

Jorge Serrano Esponda
T. +52 (55) 5625-4900 Xt. 6617 jserranoe@inbursa.com

ADDITIONAL CHARTS:

Million PESOS

Million DOLLARS

GRUPO CARSO

2Q14 2Q13 Var % 2014 2013 Var % 2Q14 2Q13 Var %

Revenues 19,340.4 100.0% 20,536.3 100.0% -5.8% 38,154.0 100.0% 40,237.2 100.0% -5.2% 1,487.4 1,647.4 -9.7% Operating Income 1,912.8 9.9% 2,270.9 11.1% -15.8% 3,978.4 10.4% 4,268.9 10.6% -6.8% 147.1 182.2 -19.2% EBIT DA 2,347.3 12.1% 2,653.9 12.9% -11.6% 4,839.1 12.7% 5,025.2 12.5% -3.7% 180.5 212.9 -15.2% Financial Results -89.6 -0.5% 296.0 1.4% NA -108.1 -0.3% 96.3 0.2% NA -6.9 23.7 NA Controlling Net Income 1,274.5 6.6% 1,906.1 9.3% -33.1% 2,963.6 7.8% 3,306.0 8.2% -10.4% 98.0 152.9 -35.9%

GRUPO SANBORNS

Sales 9,484.9 100.0% 9,417.0 100.0% 0.7% 18,509.0 100.0% 18,490.5 100.0% 0.1% 729.5 755.4 -3.4% Operating Income 943.6 9.9% 1,096.6 11.6% -14.0% 1,783.4 9.6% 2,061.7 11.1% -13.5% 72.6 88.0 -17.5% EBIT DA 1,147.9 12.1% 1,270.0 13.5% -9.6% 2,179.1 11.8% 2,405.5 13.0% -9.4% 88.3 101.9 -13.3% Controlling Net Income 573.9 6.1% 755.3 8.0% -24.0% 1,123.0 6.1% 1,406.5 7.6% -20.2% 44.1 60.6 -27.2% GRUPO CONDUMEX

Sales 6,523.2 100.0% 6,372.8 100.0% 2.4% 12,857.8 100.0% 12,915.3 100.0% -0.4% 501.7 511.2 -1.9% Operating Income 582.2 8.9% 376.1 5.9% 54.8% 1,195.4 9.3% 812.8 6.3% 47.1% 44.8 30.2 48.4% EBIT DA 679.7 10.4% 470.1 7.4% 44.6% 1,390.3 10.8% 1,001.2 7.8% 38.9% 52.3 37.7 38.6% Controlling Net Income 329.9 5.1% 310.7 4.9% 6.2% 850.1 6.6% 704.7 5.5% 20.6% 25.4 24.9 1.8% CICSA

Sales 3,371.1 100.0% 4,801.9 100.0% -29.8% 6,851.1 100.0% 8,921.6 100.0% -23.2% 259.3 385.2 -32.7% Operating Income 350.9 10.4% 728.9 15.2% -51.9% 937.5 13.7% 1,308.7 14.7% -28.4% 27.0 58.5 -53.8% EBIT DA 483.4 14.3% 841.4 17.5% -42.6% 1,207.0 17.6% 1,526.6 17.1% -20.9% 37.2 67.5 -44.9% Controlling Net Income 268.5 8.0% 509.3 10.6% -47.3% 720.2 10.5% 923.3 10.3% -22.0% 20.7 40.9 -49.5%

NA=Not Applicable

distributed by