Cencosud grows 16%, but need to integrate business in Brazil

Chile's Cencosud was the retail company that has grown in Latin America last year. The rate of expansion was ahead of the two major retail operations in the region, Grupo Pão de Açúcar, in Brazil, and Walmart, in Mexico. Gross sales, according to Analyst estimates, grew 16% in 2012, to $ 18 billion for 2011. Since 2010, sales rose by almost 50%. But analysts also say that the retailer will have to deal with two parallel issues in 2013: reduction of debt and business integration purchased in Brazil, which still operate separately.
How quickly grew because went shopping aggressively-spent $ 4 billion on acquisitions in South America since 2010, Cencosud if got in. About $ 1.5 billion have been invested in the purchase of seven Brazilian retailers. In the network box, $ 3 billion in a year and a half, through bond issuance abroad and capital increase.
Much of the value was obtained with the J.P.Morgan, in October, to pay for the purchase of Carrefour, in Colombia, the largest acquisition in the network. With this operation, specialists began to do math: the latest acquisitions of Cencosud in Brazil, slightly increased the debt. But the purchase of Carrefour, strategically positive, can change the rating of the company.
Fitch Ratings has assigned BBB-rating to issue $ 1 billion in bonuses at the end of last year, and for all operations involving the company. If they kept the pace of acquisitions in 2013, without reducing the debts, Joseph, Our analyst who prepares the report, speaks of a possible reduction of the company's debt rating: "this reflects the pressure on the company's liquidity position and financial flexibility, in an operation financed with short-term debt".
According to analysts at Santander, without the acquisition of Carrefour in Colombia, the relationship between net debt and Ebitda (earnings before interest, taxes, amortization and depreciation) would have varied from 2.8 to 3 times at the end of 2012. With the new debt and the value of Ebitda Colombia operation, this ratio goes to 4.4 times. "Funding is our biggest concern and we cannot rule out a capital increase of the company in the medium term," writes Adolfo Ortuzar, Santander. On September 30, the Cencosud had $ 6.7 billion in total debt.
With operations in five Latin American countries, Cencosud already reported that do not plan short-term entering a new country. Daniel Rodriguez, its Chief Executive, said at the end of 2012 it plans to return the debt over Ebitda at the level it was before the acquisition of Colombia. Sought by Value, Cencosud did not manifest itself.
Experts do not question the strategy of expansion via acquisitions. But it has to happen within a planning of integration of acquired assets. "They [Cencosud] not yet joined almost nothing. Integration costs money, increases the costs and takes time. Many retailers are postponing it, "says Antonio Coriolanus, partner at RetailConsulting.
The Cencosud bought seven supermarkets in Brazil (see table above). And these companies still do not operate under a single CPNJ. Some departments, like human resources and administrative, were centered and work for the seven network, showed the value. The distribution centers also are not integrated.
The first acquisition occurred in 2007, with the Sergipe g. Barbosa. For the next two years, did not make new purchases and returned to negotiate two years ago. It is not uncommon to postpone integrations. Walmart, which began in Brazil in 2004, began to integrate operations in 2011.