EARNINGS RELEASE SECOND QUARTER 2013 Empresas La Polar S.A.
CONTENTS
1.
2Q 2013 Highlights
2. Recent Events
3. Consolidated Income Statements 4. Retail Business Indicators a. Retail Chile b. Retail Colombia 5. Stores 6. Retail Business Financial Indicators a. Credit Business Chile b. Credit Business Colombia 7. EBITDA a. EBITDA Chile b. Consolidated EBITDA 8. Financial Statements La Polar S.A. – IFRS a. Consolidated Income Statements b. Consolidated Balance Sheet c. Cash Flow
Notes: • • • •
Quarters are named as: 1Q, 2Q, 3Q, 4Q accordingly. Semesters are named as: 1H, 2H accordingly. Currency symbols: CLP$ Chilean Pesos, US$ U.S. dollars, M millions, B Billions. Exchange rate used in this 2Q report: 1 USD$ = CLP$507.16. Source: Internal Revenues Service (Servicio de Impuestos Interno – SII – Chile)
2
1. 2Q 2013 Highlights Same Store Sales in the second quarter Chile continues to grow over 15%. Following the same trend, Sales Same Store Sales (SSS) in Chile, increased during the second quarter of 2013 by 16% compared to the same period last year. At the same time, retail revenues increased 14% to a total income of USD$159 million.
Retail Margin in Chile grows 4 percentage points. Continuing with the trend of growth in the first quarter of 2013, during the second quarter, the retail margin Chile was increased by 16,6% over the same period last year, reaching 28,2%, equivalent to a contribution of USD$44,8 million and getting close to the Aconcagua goal of 30%.
Increase in Financial Margin. The financial margin Chile for the second quarter 2013 was USD$ 22.7 million compared to USD$ 7.9 million in 2Q 2012. Additionally, the overall risk rate for the operation in Chile, as of June 30, 2013, shows a prominent decrease, reaching 10.8%, representing a decline of more than 8 percentage points compared to June 2012. This improvement is the result of the implementation of new business and risk policies, led by the new Financial Retail team.
Second Quarter 2013 Positive EBITDA. After reaching the operational stabilization, the new management of la Polar presents the first quarterly period of Positive EBITDA. During the 2Q 2013 Chile achieved an EBITDA of USD$14.1 million, equivalent to 7% of total revenue for the quarter. This was achieved in part by an improvement in the financial income, which also doubled its margin in the second quarter compared with the same period last year, achieving a 67% (34% from 2Q 2012). On the other hand, the Retail business increased its contribution by 32% over the same period last year, equivalent to a growth of 4 percentage points in the gross margin. The EBITDA Margin1 for the last 12 months gets Nuevapolar close to the breakeven of the Chilean operation. The achievements of this quarter are the continuation of a clear trend towards our Aconcagua objectives.
Recovering the Customer Confidence. In the second quarter 2013, the number of customers buying in our stores in Chile grew by 16% compared to the same period last year. In part, this improvement is explained by the increase in the addition of new credit card holders, which grew by 38% over the same period last year, and on the other hand more attractive product offering and store display.
1
EBITDA Margin: EBITDA/Total Income
3
Junior debt repurchase. Using part of the surplus of proceeds received during the follow-on offering in October 2012, La Polar, through Maipo Investment Fund, offered to buy part of the debt denominated Junior Debt, which totals almost USD 500 million of nominal debt. On June 27, 2013, we completed the purchase of 26.39% of it, at a 10% value (equivalent to USD$130 million of nominal debt), with a cash cost of USD 13 million.
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2. RECENT DEVELOPMENTS Now, sign off and pay with your fingerprint. The month of August marked the kickoff of the new payment method for La Polar Credit Card customers, only using their fingerprint. This new way of payment in our stores is an innovation in the retail industry in Chile. The benefits for our customers include greater safety and easiness when it comes to pay, because all that is required is your fingerprint!
Ahumada Store re-opening after remodeling. On March 19th, we began remodeling the Ahumada store, where 2,720 sqm were remodeled, seeking improvements the store look, updating the layout based on the new definition and commercial strategy of the company, giving prominence to the brands and highlighting its attributes. The work involved a complete transformation of the store space, a complete change of furniture, rear floor and storefront. The re-opening of the store was on August 15.
Store remodeling Centro Mayor in Bogotรก. We remodeled the first store opened in Colombia in 2010, which was re-opened to the public on August 1st, 2013, with a great reception from customers. This remodeling implied a complete change in the layout of the store, expanding the sales room and renovating the brands displays.
Labor Relations. The company, continuing its policy of collaboration with its 18 unions, on July ended its negotiations with 15 of them, on appropriate terms for our employees, in a harmony and goodwill context. In a particularly complex year in the labor sphere, this has been a significant achievement for the company and its more than 7,000 employees.
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3. CONSOLIDATED INCOME STATEMENTS Consolidated Income Statements 2Q CLP M$ Revenues Cost of sales Margin
2Q 2013 104,486 (69,307) 35,179
% Income
SGA (w/o depreciation) Operating Income EBITDA Depreciation Non Operating Profit Profit (loss) before taxes Benefits (expenses) income tax Profit (Loss)
(31,252) 1,877 4,106 (2,050) (2,978) (1,101) 2,997 1,897
-30% 2% 4%
-66% 34%
-1%
2Q 2012 91,615 (71,230) 20,385
% Income
(27,558) (9,037) (5,497) (1,864) (379) (9,416) (782) (10,198)
-30% -10% -6%
-78% 22%
-10%
Consolidated EBITDA Margin for the second quarter 2013 reached 4%, while in the same period last year it was -6%. The main improvements in EBITDA are due to better Financial and Retail margin, which altogether increased 12 percentage points over the same period last year. Consolidated Income Statements 1H CLP M$ Revenues Cost of sales Margin
1H 2013 195,042 (135,950) 59,092
% Income
SGA (w/o depreciation) Operating Income EBITDA Depreciation Non Operating Profit Profit (loss) before taxes Benefits (expenses) income tax Profit (Loss)
(61,129) (5,984) (1,723) (3,947) (5,511) (11,494) 5,263 (6,231)
-31% -3% -1%
-70% 30%
-6%
1H 2013 172,680 (159,451) 13,230
% Income
(54,533) (45,004) (37,951) (3,701) (105) (45,108) 43 (45,065)
-32% -26% -22%
-92% 8%
-26%
The increase in the EBITDA is explained by a group of variables that will be described by business segment, as follows.
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4. RETAIL BUSINESS INDICATORS CONSOLIDATED REVENUES 2Q 2013
2Q 2012
∆%
1H 2013
1H 2012
∆%
Chile
80,583
70,888
14%
147,910
130,246
14%
Colombia
5,717
5,562
3%
12,294
10,972
12%
Retail revenues (CLP M$)
a. RETAIL CHILE Retail Revenues (CLP Billion $)
Revenues from the retail business during the second quarter 2013 compared to the same period last year, were increased by 14%, to CLP M$80,583. The same percentage growth was reached in the first half 2013. It is important to remark, that according to the National Chamber of Commerce, the retail industry in the metropolitan region grew by 11.5% in the second quarter 2013, piling up in the first half of 10.0%.
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Same Store Sales (CLP Billion $)2
Continuing the positive trend, Same Store Sales (SSS) increased during the second quarter of 2013 by 16% over the same period last year. Monthly Sales UF/sqm3 1Q
2Q
3Q
4Q
2012
5.5
6.6
6.1
8.8
2013
6.1
7.3
Var %
10%
11%
During the second quarter 2013 UF/sqm monthly sales were increased by 11% over the same period last year.
2
In the 2Q 2013 SSS did not consider Ahumada store, due to remodeling during this period. UF/sqm: (Retail Sales/UF monthly closing)/Square meters (sales room, hallway, fitting room, Storage). This is a monthly indicator, but reported on a quarterly basis.
3
8
Retail Margin (%)
Retail Gross Margin in the second quarter 2013, was increased by 4 percentage points over the same period last year. Some of the factors driving this margin growth are the improvements in the purchasing process and good inventory management.
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b. RETAIL COLOMBIA Retail Revenues (CLP Billion $)
Revenue from the retail business during the second half of 2013, compared to the same period last year, was increased by 3%, to CLP M$5,717. It is important to remark that the best-selling store in Colombia, Centro Mayor in Bogota, was remodeled during the second quarter. It was only reopened on August 1st.
Same Store Sales4 (CLP Billion $)
The Same Stores Sales had a 14% decrease in the second quarter 2013, compared to the same period last year. The decrease in sales was partly offset by an increase in the Retail Margin Colombia, which grew from 4% in second quarter 2012, to 10% in the same period of 2013.
4
2Q 2013 SSS does not consider Centro Mayor Store, due to remodeling during this period.
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5. STORES Number of Stores Chile Colombia
1Q 2013 40 5
1Q 2012 43 4
2Q 2013 40 5
2Q 2012 42 4
Selling Space (M²) Chile Colombia
1Q 2013 160,700 25,600
1Q 2012 159,100 20,700
2Q 2013 160,300 25,600
2Q 2012 158,600 20,700
By the end of second quarter 2013, La Polar Chile had 160,300 sqm of sales area, a slight decrease from the first quarter, due to the reduction of square meters of the second phase of Ahumada store remodeling. Quarter Revenues ($)/sqm Chile Colombia
1Q 2013 418,963 256,914
1Q 2012 373,084 261,401
2Q 2013 502,699 217,255
2Q 2012 446,962 276,199
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6. RETAIL BUSINESS FINANCIAL INDICATORS CONSOLIDATED FINANCIAL REVENUES 2Q 2013
2Q 2012
∆%
1H 2013
1H 2012
∆%
Chile
17,093
14,210
20%
32,757
29,538
11%
Colombia
1,092
955
14%
2,081
1,924
8%
Financial Revenues (CLP M$)
a. CHILE FINANCIAL BUSINESS Financial Retail Revenue Financial Retail revenues during the second quarter 2013 totaled CLP M$17,093, an increase of 20% over the same period last year. This financial revenue growth was mainly due to an increase in La Polar Credit Card loans, which were increased by 34% in the second quarter 2013.
Financial Margin5 (%)
The growth in Financial Margin was mainly due to the reduction of risk levels and the increase in loans.
5
1H 2012 and 1Q 2012, excludes the existing one off provision of CLP M$21.220 (due to SERNAC settlement).
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Financial Indicators CHILE
2012
2013
FINANCIAL BUSINESS
1Q
2Q
3Q
4Q
1Q
2Q
Credit Card Loan Stock (CLP Billion $)
124
113
103
115
112
121
Provision for loan losses (CLP Billion $)
28
22
17
14
14
13
22.6%
19.1%
16.1%
12.4%
12.9%
10.8%
Net loan losses (CLP Billion $)
20
12
3
5
5
4
Open Accounts w/ balance (Th.)
483
469
453
477
453
461
Average debt (CLP Th.$)
257
242
227
241
247
263
% of sales with Credit Card
45%
50%
49%
49%
45%
50%
% Provision for loan losses
New Credit Cards Holders (Th.)
Credit Card Loans (CLP Billion $)
Credit Card Loan Portfolio (CLP Billions $)
New credit card holders were increased this second quarter by 38%. On the other hand, Credit card loans for the quarter grew by 34% compared to the same period last year. As a result of these factors, loans portfolio reached CLP $121 billion. It’s important to remark that there is an increase in the normal portfolio (not renegotiated) by 28% over the same period last year. As of June 30th, 2013, the risk rate was decreased to 10.8%, a figure that is below the Industry average to the segment that the company serves. It also represents a decline of more than 8 percentage points compared to the 18% risk rate of June 2012.
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Loan Portfolio Indicators – Gross Loans (%)
In the composition of the portfolio, it’s important to mention the sustained increase in participation of the normal portfolio, reaching the end of the second quarter to 85% total, much higher than the 71% of the same period last year.
Loan portfolio indicators – Portfolio by aging segments
There is an important decrease in the 91-180 day overdue segment, reducing its weight in the total portfolio from 9% to 6 %. In addition to that, the 31 to 90 past due day segment decreased its share by 2 percentage points.
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b. FINANCIAL BUSINESS COLOMBIA Financial Revenues Second quarter 2013 financial revenues reached CLP M$1,092. This is 14% higher than the revenues for the same period of last year.
Financial Indicators 2012
2013
FINANCIAL BUSINESS
1Q
2Q
3Q
4Q
1Q
2Q
Credit Card Loan Stock (CLP Billion $)
7.7
7.6
6.5
8.5
7.9
10.1
Provision for loan losses (CLP Billion $)
0.9
1.0
0.8
0.7
0.8
0.9
11.9%
13.8%
11.9%
8.6%
9.9%
9.0%
Net loan losses (CLP Billion $)
0.4
0.6
0.6
0.3
0.3
0.4
Open Accounts w/ balance (Th.)
46.1
46.1
40.6
45.7
43.2
47.6
Average debt (CLP Th.$)
166
164
159
186
182
213
% of sales with Credit Card
53%
51%
47%
46%
49%
56%
% Provision for loan losses
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7. EBITDA a. EBITDA CHILE EBITDA CHILE 2Q (CLP M$) Retail 2Q 2013 2Q 2012 80,583 70,888 22,732 17,161
EBITDA Chile CLP M$ Revenues Gross Margin % Revenues
SG&A w/o depreciation % Revenues
EBITDA % Revenues
Financial 2Q 2013 2Q 2012 17,093 14,210 11,521 3,999
Consolidated 2Q 2013 2Q 2012 97,676 85,098 34,253 21,160
28%
24%
67%
28%
35%
25%
(20,860)
(20,130)
(6,330)
(4,983)
(27,190)
(25,113)
-26%
-28%
-37%
-35%
-28%
-30%
1,872
(2,940)
5,279
692
7,151
(2,248)
2%
-4%
31%
5%
7%
-3%
EBITDA Chile for the second quarter 2013 was 7% of revenues, compared to -3% during the same period of last year. This result is due mainly to the increase in sales and retail margin together with an important increase in the financial margin explained by the lower risk rate and less provisions during the year. The latter plus lower % of costs over revenues, improves the EBITDA over the same period of last year. EBITDA CHILE 1H6 (CLP M$) Retail 1H 2013 1H 2012 147,910 130,246 38,159 29,072
EBITDA Chile CLP M$ Revenues Gross Margin % Revenues
SG&A w/o depreciation % Revenues
EBITDA % Revenues
6
Financial 1H 2013 1H 2012 32,757 29,538 19,061 (14,766)
Consolidated 1H 2013 1H 2012 180,667 159,783 57,219 14,306
26%
22%
58%
-50%
32%
9%
(40,024)
(38,995)
(13,007)
(10,762)
(53,031)
(49,756)
-27%
-30%
-40%
-36%
-29%
-31%
(1,865)
(9,858)
6,230
(22,176)
4,364
(32,033)
-1%
-8%
19%
-75%
2%
-20%
Chile 1H12 EBITDA considers provisions of CLP M$21,220 due to the settlement with the SERNAC.
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CHILE LTM EBITDA MARGIN EVOLUTION
The EBITDA Margin for the last 12 months gets Nuevapolar close to the breakeven of the Chilean operation. The achievements of this quarter are the continuation of a clear trend towards our Aconcagua objectives.
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b. CONSOLIDATED EBITDA CONSOLIDATED EBITDA 2Q (CLP M$) 2Q Consolidated EBITDA
2Q´13
Chile 2Q´12
Revenues (CLP M$)
Colombia 2Q´13 2Q´12 Var %
Consolidated 2Q´13 2Q´12 Var %
Var %
97,676
85,098
15%
6,810
6,517
4%
104,486
91,615
14%
Gross Margin
35%
25%
41%
14%
-12%
na
34%
22%
51%
SG&A w/o depreciation
-28%
-30%
-6%
-60%
-38%
57%
-30%
-30%
-1%
EBITDA
7.3%
-2.6%
na
-44.7%
-49.9%
-10%
3.9%
-6.0%
na
Consolidated EBITDA Margin for the second quarter 2013 reached 4%, while in the same period last year it was -6%. CONSOLIDATED EBITDA 1H (CLP M$) 1H Consolidated EBITDA
Revenues (CLP M$)
1H´13
Chile 1H´12
180,667 159,783
Var %
Colombia 1H´13 1H´12 Var %
13%
14,375
12,897
11%
Consolidated 1H´13 1H´12 Var % 195,042 172,680
13%
Gross Margin
32%
9%
na
13%
-8%
na
30%
8%
na
SG&A w/o depreciation
-29%
-31%
-6%
-56%
-38%
50%
-31%
-32%
-1%
EBITDA
2.4%
-20.0%
na
-42.3%
-45.9%
-8%
-0.9%
-22.0%
na
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8. FINANCIAL STATEMENTS OF LA POLAR S.A. – IFRS a. Consolidated Income Statements For the 6 month period 30-jun-13 CLP M$
For the 6 month period 30-jun-12 CLP M$
Revenues Cost of sales Gross Profit
195,042 (135,950) 59,092
172,680 (159,451) 13,230
Distribution costs Administrative expenses Other profit (loss) Financial income Financial costs Foreign currency exchange differences Profit (loss) from inflation-indexed assets and liabilities Profit (loss) before taxes Benefit (loss) income taxes Profit (loss)
(811) (64,265) (215) 3,279 (8,201) (348) (25) (11,494) 5,263 (6,231)
(734) (57,499) 4,574 1,520 (6,444) 310 (65) (45,108) 43 (45,065)
Profit (loss) attributable to: Owners of parent company Non-controlling interests Profit (loss)
(6,231) 0 (6,231)
(45,065) (45,065)
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b. Consolidated Balance Sheet 30-Jun-13 CLP M$
31-Dec-12 CLP M$
1-Jan-12 CLP M$
Current Assets Cash and cash equivalents Other current financial assets Other current non financial assets Current trade and accounts receivables Inventory Tax assets Total current assets
72,720 13,081 15,619 105,870 59,165 17,070 283,523
137,620 7,293 9,563 103,467 50,227 18,388 326,558
13,126 21,861 8,499 105,680 44,150 15,444 208,760
Non-current Assets Other non-current financial assets Other non-current assets Intangible assets other tan goodwill Properties, plant and equipment Deferred tax assets Total non-current assets
19,885 244 19,494 70,353 12,268 122,244
15,132 246 19,597 70,553 7,490 113,019
26,041 246 17,189 68,621 13,953 126,050
Total Assets
405,767
439,577
334,811
Current Liabilities Other current financial liabilities Other trade and other accounts payable Other current provisions Current tax liabilities Employee benefits provisions Other current non-financial liabilities Total current liabilities
21,322 63,734 13,462 2,483 4,129 1,201 106,330
15,861 76,394 24,035 1,226 5,863 3,142 126,521
469,790 67,621 1,281 758 5,832 2,942 548,223
Non-current Liabilities Other non-current financial liabilities Other long-term provisions Deferred tax liabilities Total non-current liabilities Total Liabilities
173,500 1,630 39,638 214,768 321,098
177,599 2,238 42,106 221,942 348,463
5,820 8,775 14,595 562,818
302,678 (237,491) 19,482
302,678 (230,210) 18,643
171,947 (418,789) 18,834
84,669 0 84,669
91,112 2 91,114
(228,008)
405,767
439,577
334,811
Equity Issues capital Retained earnings Other reserves Equity attributable to: Owner of the parent company Non-controlling interest Total Equity Total Liabilities and Equity
(228,008)
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ASSETS The total Assets as of June 30, 2013 amounted to CLP M$405,767 The variation in Assets, compared to December 2012 was CLP M$-33,810 which is mainly explained by the decrease in current assets of CLP MM$-43,035. Indicators Indicators Current ratio Acid ratio
Unit Times Times
Jun´13 2.67 2.11
Mar´13 2.59 2.07
Dec´12 2.54 2.15
Sep´12 0,31 0,22
Jun´12 0,33 0,24
Mar´12 0,33 0,24
The current ratio increases in June compared to December, due to the decrease in current liabilities. Regarding the acid ratio, it increases for the same reason noted above. Indicators Inventory turnover Inventory turnover
Unit Times Days
Jun´13 5 79
Mar´13 4 81
Dec´12 5 69
Sep´12 4 81
When comparing the end of 1Q 2013 and 4Q 2013, it is observed that the number of days inventory turnover increases by 10 days, mainly because the net inventory increases during the first half of the year. Indicators Average collection period
Unit Days
Jun´13 178
Mar´13 175
Dec´12 197
Sep´12 159
The average collection period decreased in 19 days compared to December, due to an increase the sales with credit card of 20%.
Economic Asset Value The market value of the La Polar S.A. shares as of June 28, 2013 was $131.37 per share. On the same date, the total numbers of shares fully subscribed and paid were 998,617,522, which implies a market capitalization of B$ 131.2.
LIABILITIES Total Liabilities as of June 30, 2013 amounted to CLP M$321,098 The decrease in Liabilities of CLP M$27,365, is mainly explained by a decrease in current liabilities of CLP M$20,191, also the debt repurchase for the amount of CLP M$6,599.
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Indicators Indicators Current Liabilities Non-current liabilities
Unit % %
Jun´13 33.1% 66.9%
Mar´13 34.9% 65.1%
Dec´12 37.0% 63.0%
Sep´12 97.3% 2.7%
Jun´12 97.4% 2.6%
Mar´12 97.5% 2.5%
Current Liabilities, as of June 30, 2013, represent 33.1% of total liabilities. FD / EBITDA Financial Debt to EBITDA
Jun´13 -14.0
Mar´13 -7.4
Dec´12 -3,6
Sep´12 -9,0
The variation in the ratio is explained by the improvement of 74% in the last twelve months June EBITDA, while financial liabilities remained at the same level. Although remains negative. This represents an improvement in this indicator. Indicadores Average payment period
Unit Days
Jun´13 59
Mar´13 73
Dec´12 80
Sep´12 65
The decrease in the average payment period in 21 days is due to a decrease of 17% in the trade payables and other accounts payable.
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c. Cash Flow Statements For the 6 month period For the 6 month period 30-jun-13 CLP M$ Cash flow from (used in) operating activities Proceeds from sales of goods providing services Payment to suppliers for supplying goods and services Payment to and account of empolyees Other payments for operating activities Interest received Income taxes refunded (paid) Net cash flow from operating activities Cash flow (used in) investing activities Proceeds from disposal of property, plant and equipment Addittions to property, plant and equipment Addittions to intangible assets Other cash flow Net cash flow from (used in) investment activities
Cash Flow (used in) financing activities Proceeds from short term banks Total proceeds from loans Loan payments Payments of financial lease liabilities Net cash flow from (used in) financing activities
Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period
30-jun-12 CLP M$
224,683 (215,241) (28,532) (31,311) 3,092 1,617 (45,692)
226,898 (172,748) (27,723) (34,165) 1,361 (402) (6,780)
(4,512) (225) (14,655)
4,083 (2,824) (819) -
(19,393) 0
441 0
5,387 5,387 (4,649) (554) 185
2,947 2,947 (2,091) (343) 513
(64,900) 137,620 72,720
(5,826) 13,126 7,300
During the period the net cash flow equivalent was a negative CLP M$64,900. This amount breaks down as follows: Operating activities generated a negative cash flow of CLP M$45,692 which is mainly explained by the variation in working capital, reflected in the payment of obligations to vendors for the supply of goods and services in the last quarter of 2012, and an sustained increase in Credit Card Loan Portfolio in the first half of 2013. In addition, the decrease in operating cash flow of CLP M$13,321 in Colombia, also affected this cash flow. Investing activities generated a negative cash flow of CLP M$19,393, this is due to purchases of fixed assets, associated to renovating and improvement stores, and also in the investment in financial instruments. Financing activities shows a slight variation, as the decrease in financial liabilities are offset with new loans.
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Cash Flow Statements by Geographic Segment For the 6 month period
Cash flow from (used in) operating activities Cash flow (used in) investing activities Cash flow (used in) financing activities Net decrease in cash and cash equivalent Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period
CHILE 30-jun-13 CLP M$ (32,371) (27,664) (4,301) (64,337) 135,935 71,598
COLOMBIA 30-jun-13 CLP M$ (13,321) (919) 13,677 (563) 1,685 1,122
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