The Brazilian company, which owns Olympikus and has a management contract with Adidas for Reebok in three Latin American countries, has reported an adjusted operating profit margin before amortization (Ebitda) of 7.1 percent for 2012, against a negative margin of 6.7 percent for the previous year. The margin even reached 8.3 percent in the fourth quarter despite a steep sales decline in the period.
Noting that Vulcabras is going through a major reorganization, Pedro Grendene Bartelle, president and controlling shareholder of the company, stated that this was an encouraging sign that it will regain its profitability in the next years. He injected new equity worth 100 million Brazilian reais (€37.8m-$49.8m) into the company last year, and this allowed it to reduce its debt by 7.2 percent to R$965.7 million (€365.0m-$481.2m).
The still high debt load and various charges, including provisions of R$22.7 million (€8.6m-$11.3m) for inventory writeoffs, caused the company to suffer a net loss of R$308.0 million (€116.4m-$153.5m) in 2012, only 2.5 percent down from the previous year's net loss. In the fourth quarter, however, the adjusted net loss amounted to only R$39.1 million (€14.8m-$19.5m) against R$156.6 million in the same period of 2011.
Vulcabras' total net sales declined last year by 3.0 percent to R$1,483.1 million (€560.6m-$739.1m), with a drop of 17.9 percent in the fourth quarter, but the gross margin improved to 22.8 percent from 13.7 percent in the previous year. The company continued to blame the pressure from imported shoe products, which went up by 18.9 percent last year in dollars.
The company sold R$955.9 million (€361.3m-$476.4m) worth of sports shoes in the Brazilian market in 2012, 7.2 percent less than in the previous year. The sales decline in this category amounted to 16.0 percent as a drop in volume of 26.9 percent was only partly compensated by a 14.9 percent increase in average prices.
In Argentina and other countries, mainly Columbia and Peru, Vulcabras' sales of sports shoes declined by 4.1 percent to the equivalent of US$154.3 million last year, with a 20.4 percent decrease in the fourth quarter. The company said it continue to have problems with the Argentinian government's import licensing system.
The company managed to reduce its operating expenses, especially in the fourth quarter. It cut back on its investments in advertising and promotion, with a goal to bring them down to a ratio of 7 percent of sales in the longer term. As previously reported, Olympikus is no longer the sponsor of the Brazilian Olympic Committee, but the brand signed a deal to be the official supplier of the Cruzeiro football team.
