Fourth Quarter 2018 1 Disclaimer The information contained in - - PowerPoint PPT Presentation

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Fourth Quarter 2018

EARNINGS PRESENTATION

2

Disclaimer

Cencosud and their respective affiliates, officers, directors, partners and employees accept no liability for any loss or damage of any kind arising from the use of all or part of this material. This presentation may contain statements that are subject to risks and uncertainties and factors, which are based on current expectations and projections about future events and trends that may affect the business of Cencosud. You are cautioned that such forward-looking statements are not guarantees of future performance. There are several factors that can adversely affect the estimates and assumptions

• n which these forward-looking statements are

based, many of which are beyond our control. The information contained in this presentation has been prepared by Cencosud SA ("Cencosud") for informational purposes only and should not be construed as a solicitation or an offer to buy or sell securities and should not be treated as giving investment advice or

• therwise. No representation or warranty, express or

implied, is provided in relation to the accuracy, completeness or reliability of the information contained

• herein. The views expressed in this presentation are

subject to change without notice and Cencosud has no

• bligation to update or keep current the information

contained herein. The information contained in this presentation is not intended to be complete.

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Executive Summary

• Macro environment across the region remained weak, with softer consumption and

currency volatility across most

• f
• ur

markets. Despite these headwinds, Supermarkets Brazil and Department Stores Peru posted positive Adjusted EBITDA1 during the quarter.

• At constant exchange rates, revenue increased 9.2%. Under previous accounting

standards, revenues decreased 7.7% due to the depreciation of most currencies against CLP. As reported, and including IAS29 (Argentina as hyperinflationary economy) revenues increased 3.7%.

• Online channel sales increased 27.5% YoY at constant currency, reaching a

penetration of 3.6%2 over total retail sales up from 2.6% in 4Q17. In 12M18, online revenues grew 37.2% and penetration reached 3.0%, up 98 bps from 2.1% in 12M17.

• At constant exchange rates, Adjusted EBITDA decreased 8.2%. Under previous

accounting standards, Adjusted EBITDA decreased 22.9%. As reported, Adjusted EBITDA decreased 11.9% mainly due to the hyperinflationary accounting adjustment in Argentina.

1 Adjusted EBITDA: Gross profit + Other income by function + Other gains (losses) – SG&A + D&A + profit of equity method associate

• Asset Revaluation

2 Considers supermarket formats at all countries with the exception of Brazil, Department Stores Chilean Operations and Home Improvement in the 3 countries

(A) (B) (C) (D) CLP mn CLP mn Ex-IAS29 3 Constant Currency CLP mn CLP mn CLP mm (%) Revenues 2,630,179 2,849,851

• 7.7%

9.2% 155,687 169,878 2,955,743 3.7% Gross Profit 741,122 829,226

• 10.6%

10.3% 64,236 67,299 872,657 5.2% Gross Mg. 28.2% 29.1%

• 92 bps

29.5% 43 bps SG&A (623,089) (665,209)

• 6.3%

14.9% (49,710) (52,054) (724,853) 9.0% SG&A (% of revenues)

• 23.7%
• 23.3%
• 35 bps
• 24.5%
• 118 bps

Adjusted EBITDA 186,133 241,319

• 22.9%
• 8.2%

20,940 5,955 213,028

• 11.7%
• Adj. EBITDA Mg.

7.1% 8.5%

• 139 bps

7.2%

• 126 bps

Net Profit 216,446 319,555

• 32.3%
• 5.6%

(88,612) 12,317 140,151

• 56.1%

Net Profit Mg. 8.2% 11.2% 4.7% Inflation Effect4 Conversion Effect5 As Reported Under Previous Accounting Standards 4Q181 4Q172

• Chg. YoY
• Chg. YoY

IAS29 4Q186

• Chg. YoY

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4Q18 Highlights

Consolidated 4Q18 Results

1 Excludes the adjustment by hyperinflation in Argentina 2 As Reported 3 Considers the quarter results with previous accounting methodology, using an average exchange rate per month in Argentina. 4 ‘Inflation effect’ reflects the nine months period results from Argentina updated by inflation. 5 ‘Conversion effect’ reflects the translation from ARS to CLP figures of the 3 months period using end of period exchange rate as of December 2018. 6 Includes the adjustment by hyperinflation in Argentina. 7 (A) + (B) + (C) = (D)

(A) (B) (C) (D) CLP mn CLP mn Ex - IAS29 3 Constant Currency CLP mn CLP mn CLP mn (%) Revenues 9,755,154 10,456,987

• 6.7%

9.2% 331,553 (440,705) 9,646,002

• 7.8%

Gross Profit 2,776,594 2,998,160

• 7.4%

10.3% 149,825 (165,779) 2,760,640

• 7.9%

Gross Mg. 28.5% 28.7%

• 21 bps

28.6%

• 5 bps

SG&A (2,385,165) (2,583,084)

• 7.7%

14.9% (111,062) 130,516 (2,365,711)

• 8.4%

SG&A (% of revenues)

• 24.5%
• 24.7%

25 bps

• 24.5%

18 bps Adjusted EBITDA 635,599 702,851

• 9.6%
• 8.2%

55,163 (48,623) 642,139

• 8.6%
• Adj. EBITDA Mg.

6.5% 6.7%

• 21 bps

6.7%

• 6 bps

Net Profit 257,241 440,136

• 41.6%
• 5.6%

(49,247) (17,400) 190,594

• 56.7%

Net Profit Mg. 2.6% 4.2% 2.0% Under Previous Accounting Standards As Reported 12M186

• Chg. YoY

IAS29 Conversion Effect5 Inflation Effect4 12M181 12M172

• Chg. YoY
• Chg. YoY

5

12M18

Consolidated 12M18 Results

1 Excludes the adjustment by hyperinflation in Argentina 2 As Reported 3 Considers the quarter results with previous accounting methodology, using an average exchange rate per month in Argentina. 4 ‘Inflation effect’ reflects the nine months period results from Argentina updated by inflation. 5 ‘Conversion effect’ reflects the translation from ARS to CLP figures of the 12 months period using end of period exchange rate as of December 2018. 6 Includes the adjustment by hyperinflation in Argentina. 7 (A) + (B) + (C) = (D)

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2019 Focus: Financial Flexibility

Objective Scope

IPO Shopping Centers

Objetives two-fold: reduce debt at Cencosud and boost

• rganic

growth in Shopping Centers (brownfield and greenfield). Chile, Peru and Colombia

Improve working capital

Reduce working capital needs through a focus on inventory days, obsolescence and cash Regional

Divestiture of non-core assets

• JV Financial Retail in Peru

Maximize the financial retail operation working with a banking partner that supports a greater development of the credit card portfolio Peru

• JV Financial Retail in Argentina

Argentina

• Sale of Gas Stations

Sale of non-strategic land bank. In Chile, the Company divested land in Santiago for USD 25 MM. Proceeds to reduce indebtedness at Cencosud level Colombia

• Divestiture of non-strategic land

bank Regional

• Selective Organic Growth

Organic growth to be financed by internal cash flow generation Regional

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NEAR TERM FINANCING OPTIONS SHOPPING CENTERS IPO + LOCAL BOND ISSUANCE

1. Shopping Centers IPO

• Banks Mandated
• Registration at CMF (pending)
• Transaction Expected Q2 2019

2. Local Bond by Cencosud Shopping

• Amount: UF 10 mm equivalent to USD 400 mm
• Tenor: bullet 10 years
• Banks: Santander & Scotiabank
• Process: prospectus presented to CMF and first round of comments answered

JV AGREEMENT FOR BANCO CENCOSUD IN PERU

• JV transaction approved on March 1st, 2019
• Cash inflow of USD 100 mm
• Proceeds will be used to pay down debt
• Net EBITDA USD 138.5 mm, tax of USD 42.7 mm and net income USD 95.7 mm to

be included in the 1Q19 results

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BRAZIL

• Commercial model:
• Greater autonomy in pricing and supply, but unified commercial strategy
• IT developments to improve the end-to-end process with suppliers
• Negotiation focus on Front vs. Back (i.e. discount in the price list instead of bonuses,

this generates less dependence on suppliers for closing results)

• Reduce the share of promotions over total sales
• Focus on destination / service categories: Butchery, Bakery, Fruits and Vegetables.

Differentiation vs Cash & Carry

• Remodel stores to reduce GLA
• Reduce HQ Back Office of 6% vs previous year

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2019 Focus : Operational Efficiencies Across the Region

Supermarkets

• Reformat existing stores / increase sale over square meter sale and reduce fixed costs
• Improve business processes such as price management, promotions and assortment of our

stores

• Search for improvements in sourcing / planning processes and logistics operations capabilities

to face the development of e-commerce.

• Strengtheing own brands and exclusive imported products

Home Improvement

• Optimize internal processes and commecial agreements with suppliers to improve profitability

Department Stores

• Right-size selling areas, with emphasis on GLA around 2,000 m2average store size.
• Transformation of Johnson stores to primarily an apparel format
• Redefine and automate processes to improve the customer experience and service in the

stores, through the introduction of internally developed RPA (Robotic Process Automation).

• Establish and develop logistics as a competitive advantage. Enhance C&C through the

expansion of new points of pick-up and the offer of product dispatch within a specified time frame

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2019 Focus: Omnichannel

Omnichannel

Supermarket

• Ongoing development of e-commerce and a memorable omnichannel shopping experience
• Transformation to face the digital era (focus on the cultural change that this entails, the

incorporation of new technologies and the automation of processes)

Home Improvement

• Increase online assortment
• Invest to improve service quality and expand the distribution coverage

Department Stores

• In Paris stores, focus on the online sale of durable goods
• Strength the digital channel by increasing the assortment and development of new capacities,

through the launch of third-party marketplaces, with the aim of increasing national and international assortment

• Improve the user experience of the website, by enhancing the AI application for search and
• sorting. Three-focus areas for check-out: new dispatch alternatives, improve the C&C process

and one-click payment.

Omnichannel: Supermarket

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Argentina Chile Colombia Peru Better in-store experience Self Check Out 6 6

• 3

Scan&Go

• 4
• Omni-channel

Click&Collect 7 5 3 6 Kiosks in store

• 6

Drive thru´s 5 5 3 5 E-commerce App

• 3

5 5 Website 6 6 6 6 Home delivery 7 7 7 7 Use of own logistics for delivery 7 7 7 7 Marketplace

• 4

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2019 Focus: Digital Transformation

Supermarkets

• Regional program of RPA (Robotic Process Automation), looking for efficiencies, greater precision

and the automation of critical processes that are currently manual

• Automation of in store processes. Continue implementation of robots that audit the prices of

products in the shelves, detect stock shortages and validate their correct disposal

• Continue to innovate in self-service models, such as pilot Scan & Go, which allows customer to

perform the entire transaction from an app (scanning and payment)

Home Improvement

• Continued work on the application of artificial intelligence and advanced analytics to achieve

efficiencies in store processes (for example the optimization of shift meshes)

• Roadmap of applications for direct use by store employees, which will improve operational process

times , thus allocating more time to serve our customers

• Provide dropship option for a larger range of products without incurring higher levels of inventory

Department Stores

• These first teams are focused on the development of Ecommerce capabilities, payments, delivery
• ptions and customer service. We are working on a set of initiatives that seek to install the data-

driven culture for decision making, including technical implementations such as a data pool, a dashboard with key business indicators in real time and various initiatives that apply advanced analytics to core processes of the business.

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Supermarkets

Results1 Supermarket SSS by Country & Food Inflation

Revenues declined 6.9% in CLP reflecting the depreciation of ARS and BRL against CLP, partially offset by increased revenues in Peru, Colombia & Chile. Adjusted EBITDA decreased 16.1% in CLP YoY explained by:

• Chile due to higher promotional activity and increased

logistics costs

• Argentina driven by higher promotional activity and

payroll expenses (collective union agreements)

• Peru Adjusted EBITDA was affected by logistics costs due

to higher e-commerce sales and higher shrinkage

• Brazil: Adjusted EBITDA grew for the fourth consecutive

quarter, registering a profit during 4Q driven by favorable commercial agreements, lower shrinkage and SG&A

• Colombia: Adjusted EBITDA decreased reflecting the

contraction of gross profit and higher SG&A expenses

Source: INE, IBGE, BCRP, BanRep 1 For comparative purposes and business performance analysis, figures exclude the effect of hyperinflation in Argentina.

4Q18 4Q17

• Chg. YoY
• Chg. YoY

CLP mn CLP mn As Reported Constant Currency Revenues 1,831,099 1,967,082

• 6.9%

8.2% Gross Profit 436,692 486,329

• 10.2%

7.2% Gross Mg. 23.8% 24.7%

• 87 bps

SG&A (378,096) (409,717)

• 7.7%

14.0% SG&A (% of revenues)

• 20.6%
• 20.8%

18 bps Adjusted EBITDA 97,661 116,333

• 16.1%
• 17.9%
• Adj. EBITDA Mg.

5.3% 5.9%

• 58 bps
• Chg. YoY
• Chg. YoY

4Q18 4Q17 4Q18 4Q17 4Q18 4Q17 (%) (%) (%) (%) CLP mn CLP mn Chile 0.6 2.0 3.2 1.6 743,108 729,954 1.8% 1.8% Argentina 33.0 15.1 49.1 n.d. 278,549 414,956

• 32.9%

33.0% Brazil 1.4

• 1.2

4.1

• 5.1

366,881 397,328

• 7.7%

1.3% Peru 1.5 0.4 1.5 0.9 231,246 218,732 5.7% 2.0% Colombia 2.4

• 4.5

2.3 2.3 211,314 206,112 2.5% 1.3% Same Store Sales Constant Currency Food Inflation Revenues As Reported

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Home Improvement

Results1 Home Improvement Revenues & SSS by Country

Revenues decreased 20.1% and Adjusted EBITDA decreased 23,3% in CLP YoY, affected by the depreciation of ARS against CLP:

• Chile: revenue growth reflects positive SSS with higher wholesale and
• nline sales. Adjusted EBITDA increased, but margin contracted due to

higher mix of lower-margin wholesale revenues

• Argentina: higher average ticket reflecting increased inflation. Adjusted

EBITDA remains stable despite higher personnel expenses, as gross profit expanded reflecting positive effect of higher inflation on inventory

• Colombia: traffic increased for the sixth consecutive quarter. EBITDA

margin down driven by clearance of obsolete inventory given focus on working capital and inventory days

1 For comparative purposes and business performance analysis, figures exclude the effect of hyperinflation in Argentina. 4Q18 4Q17

• Chg. YoY
• Chg. YoY

CLP mn CLP mn As Reported Constant Currency Revenues 296,977 371,703

• 20.1%

14.5% Gross Profit 106,003 130,060

• 18.5%

23.1% Gross Mg. 35.7% 35.0% 70 bps SG&A (73,281) (86,429)

• 15.2%

26.1% SG&A (% of revenues)

• 24.7%
• 23.3%
• 142 bps

Adjusted EBITDA 38,663 50,387

• 23.3%

14.3%

• Adj. EBITDA Mg.

13.0% 13.6%

• 54 bps
• Chg. YoY
• Chg. YoY

4Q18 4Q17 4Q18 4Q17 (%) (%) CLP mn CLP mn Chile 3.9

• 3.3

147,018 141,034 4.2% 4.2% Argentina 17.7 30.0 131,255 213,694

• 38.6%

21.7% Colombia 8.6 6.2 18,703 16,974 10.2% 8.6% As Reported Constant Currency Revenues Same Stores Sales

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Department Stores

Results Department Stores Revenues & SSS by Country

Revenues decreased 1.2% in CLP and Adjusted EBITDA decreased by 39.4%:

• Chile: revenues decreased reflecting negative SSS due to higher

promotional activity, partially

• ffset by increased traffic.

Adjusted EBITDA decreased due to greater promotional activity and logistics cost resulting from higher e-commerce sales

• Peru: higher revenues driven by double-digit SSS growth,

reflecting brand consolidation in the Peruvian market. Adjusted EBITDA turned positive as a result of lower expenses from

• bsolescent inventory.

4Q18 4Q17

• Chg. YoY
• Chg. YoY

CLP mn CLP mn As Reported Constant Currency Revenues 370,040 374,499

• 1.2%
• 1.5%

Gross Profit 105,329 111,434

• 5.5%
• 5.7%

Gross Mg. 28.5% 29.8%

• 129 bps

SG&A (96,676) (93,554) 3.3% 3.0% SG&A (% of revenues)

• 26.1%
• 25.0%
• 114 bps

Adjusted EBITDA 17,650 29,128

• 39.4%
• 39.5%
• Adj. EBITDA Mg.

4.8% 7.8%

• 301 bps
• Chg. YoY
• Chg. YoY

4Q18 4Q17 4Q18 4Q17 (%) (%) CLP mn CLP mn Chile

• 3.2

2.1 338,280 348,840

• 3.0%
• 3.0%

Peru 19.6 6.7 31,759 25,659 23.8% 19.6% As Reported Constant Curency Revenues Same Stores Sales

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Shopping Centers

Results1 Shopping Centers Occupancy Rates & Revenues by Country

Revenues decreased 1.4% in CLP and Adjusted EBITDA decreased 3.9% YoY, affected by the depreciation of ARS against CLP:

• Chile: revenues increased driven by fixed revenues partially
• ffset by lower variable sales from tenants. Adjusted EBITDA

decreased due to higher labor contingencies, increased insurance coverage and higher advertising expenses

• Argentina: revenues increased 86,6% in ARS pesos driven by a

non-recurrent effect

• f

accumulated deferred revenues. Eliminating this effect, Revenues increased 19.6% in local currency. Excluding the non-recurring effect, EBITDA margin decreased due to higher tax payments, basic services tariffs, leases and advertising.

• Peru: revenue growth related to increased tenant’s
• sales. Adjusted EBITDA margin increased driven by

greater SG&A leverage and lower uncollectables,

• ffset by greater common expenses.
• Colombia: revenues remained stable YoY on constant
• currency. Adjusted EBITDA margin increased on

lower maintenance expenses and uncollectible accounts.

1 For comparative purposes and business performance analysis, figures exclude the effect of hyperinflation in Argentina.

4Q18 4Q17

• Chg. YoY
• Chg. YoY

CLP mn CLP mn As Reported Constant Currency Revenues 70,114 71,128

• 1.4%

26.3% Gross Profit 62,550 61,245 2.1% 30.5% Gross Mg. 89.2% 86.1% 311 bps SG&A (11,746) (10,374) 13.2% 31.2% SG&A (% of revenues)

• 16.8%
• 14.6%
• 217 bps

Adjusted EBITDA 51,311 53,376

• 3.9%

25.3%

• Adj. EBITDA Mg.

73.2% 75.0%

• 186 bps
• Chg. YoY
• Chg. YoY

4Q18 4Q17 4Q18 4Q17 (%) (%) CLP mn CLP mn Chile 99.2 99.3 42,104 42,067 0.1% 0.1% Argentina 97.6 98.5 20,153 21,509

• 6.3%

86.6% Peru 97.2 96.9 5,709 5,436 5.0% 1.3% Colombia 72.1 72.0 2,147 2,116 1.5%

• 0.1%

As Reported Constant Currency Revenues Occupancy Rate

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Financial Services

• Peru: higher revenues driven by loan portfolio
• growth. Lower Adjusted EBITDA Margin due to

higher risk from the growth strategy focused on emerging segments and higher personnel expenses

• Colombia: Adjusted EBITDA declined mainly due to

lower interest income due to regulatory changes and higher contribution from the credit card sales to retail units, partially offset by written off portfolio sale and a decrease in funding costs.

Financial Services Revenues, Loan Portfolio & Risk by Country

Results2

1 Provisions over past due loan portfolio (with delinquency greater than 90 days). 2 For comparative purposes and business performance analysis, figures exclude the effect of hyperinflation in Argentina.

Revenues decreased 5.7% in CLP and Adjusted EBITDA was down 31,6% YoY:

• Chile: Adjusted EBITDA was down due to retroactive contractual

adjustments, higher risk provisions and salary adjustments.

• Argentina: revenue growth reflecting increased interest income,
• partially. Adjusted EBITDA margin decreased due to higher charged

interest rates, increased tariff of services charged in USD and higher risk charge.

• Brazil: Adjusted EBITDA increased due to the sale of written-off

portfolio, higher retail sales, commission revenues and lower funding costs.

• Chg. YoY
• Chg. YoY
• Chg. YoY

4Q18 4Q17 4Q18 4Q17 4Q18 4Q17

Chile

• N.A.

N.A. 1,161,526 984,275 18.0% 2.5 2.5

Argentina

36,406 45,667

• 20.3%

57.8% 11,524,771 11,229,446 2.6% 1.0 2.2

Brazil

1,259 745 69.0% 85.6% 536,465 544,282

• 1.4%

0.7 0.6

Peru

22,036 16,642 32.4% 27.7% 840,281 633,198 32.7% 1.8 1.9

Colombia

1,693 2,078

• 18.5%
• 20.3%

860,388 822,070 4.7% 3.0 2.4 CLP mn Local Currency (times) Loan Portfolio NPL1 Revenues As Reported Constant Currency As Reported

4Q18 4Q17

• Chg. YoY
• Chg. YoY

CLP mn CLP mn As Reported Constant Currency Revenues 61,394 65,132

• 5.7%

47.9% Gross Profit 30,087 41,594

• 27.7%

13.9% Gross Mg. 49.0% 63.9% -1,486 bps SG&A (10,471) (14,031)

• 25.4%

8.8% SG&A (% of revenues)

• 17.1%
• 21.5%

449 bps Adjusted EBITDA 22,585 33,010

• 31.6%

6.3%

• Adj. EBITDA Mg.

36.8% 50.7% -1,389 bps

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Debt Structure

Key Figures1

1 Figures converted to USD using end of period exchange rate as of December 31, 2018. 2 Figures converted to USD using end of period exchange rate as of December 31, 2018. Figures are presented net off gains/losses from mark to market of derivatives, overdrafts and Comex debt. 3 Debt by Currency and Debt by Rate include Cross Currency Swaps.

Amortization Schedule (USD mn)2 Debt by Currency3 Debt by Interest Rate3 4Q18 4Q17

334 581 165 56 744 35 711 51 1.039 219 41 15 199 350 19 20 21 22 23 24 25 26 27 28 29 30 41 45

CLP + UF; 73% USD; 21% Otras Latam; 6% CLP + UF; 71% USD; 21% Otras Latam; 8% Fijo; 83% Variable; 17% Fijo; 80% Variable; 20%

4Q17 4Q18

Total Financial Debt (US$ Bn) 5.2 4.9 Cash (US$ Mn) 382 319 Other Financial Assets (US$ Mn) 507 703 Net Financial Debt (US$ Bn) 4.3 3.9

• Adj. EBITDA LTM (US$ Mn)

1,139 921 Net Financial Debt / Adj. EBITDA LTM 3.75 4.26

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Closing Comments

2018 - Mixed Performance

• Macro and FX volatility curbed consumer consumption
• Ecommerce continues to post double-digit YoY growth and increased

penetration

• Supermarkets Brazil and Department Stores Peru report positive Adjusted

EBITDA 2019 – Another Challenging Year but with Opportunities

• Financial Flexibility provides support to grow the Company
• Brazil – many levers to pull to further improve profitability
• Accelerate cost efficiency and digital transformation initiatives
• Continue to Strengthen Balance Sheet
• Working capital optimization
• Debt reduction

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