Investor presentation - Follow on offering - september 2012

Follow-on Offering Investor Presentation September 2012

Book Runner

Characteristics of the Offering

Characteristics of the Offering Follow-on Offering Current number of shares outstanding

248,617,522

Number of shares being offered

750,000,000

Number of shares after the transaction

Up to 998,617,522

Number of share subscription rights per share

~ 3.01668

Condition of success

Capital Increase will be declared successful after raising the amount required

Amount required by the judicial settlement

CLP 120,000,000,000

Amount required by the EGM

CLP 90,000,000,000 (Prior to approval with lenders)

Subscription

Additional Information

Through any Chilean stockbroker, but the funds will be retained temporarily in an escrow account at Banco Santander Chile until the publication of the result of the capital increase: • Condition of success met: funds will be transferred to La Polar • Condition of success not met: funds will be returned to those who subscribed shares More information about the company is available in a data room after signing a confidentiality agreement

Financial Advisor and Book Runner

3

Characteristics of the Offering Follow-on Offering Subscription Price 

Weighted average of transactions in the Santiago Stock Exchange (“SSE”) during the 3 trading days prior to the subscription less a discount of 5%



Minimum of CLP 160 per share

Use of Proceeds CLP 50 billion

CHILE  Remodeling of Stores  Financing of customer loans

CLP 50 billion

COLOMBIA  New stores  Financing of customer loans

CLP 20 billion

SERNAC1 and others

(1): Chile’s National Consumer Service

4

Characteristics of the Offering Follow-on Offering Key Transaction Dates

Opening of Data Room

PRP 1 begins

Road Show

PRP 1 ends(*)

AUGUST

27 SEPTEMBER

3 AUGUST SEPTEMBER

27 - 28

OCTOBER

2

AUGUST

M

SEPTEMBER

T W

T

F

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31

(*) Once the Preemptive Rights Period 1 ("PRP 1") of 30 days ends, the BOD shall have the power to offer any remaining unsubscribed shares in a second offering period of 7 calendar days to shareholders who subscribed shares and third parties who acquired share subscription rights and subscribed shares.

If there are still unsubscribed shares remaining after this second period, the BOD shall have the power to offer them in a third offering period of 2 calendar days to shareholders who subscribed shares in the first and second offerings and third parties who acquired share subscription rights during the first period and subscribed shares in both the first and second period. Share subscription rights can only be traded through the SSE during the first period.

The BOD also has the power to hold an auction of remaining unsubscribed shares or a “Subasta de un Libro de Órdenes” instead of holding a third offering period.

5

July 2011

La Polar in July 2011 What we found‌ 1

8

No Corporate Governance

Colombia

2

No Executives / Unmotivated Staff

7

3

High Administration Expenses

No Focus on Retail

6

4

Restricted Financial Business

5

Distrustful Suppliers

Affected Customers

7

1 Corporate Governance

Engaged Board of Directors Georges de Bourguignon A.

Juan Pablo Vega W.

Vice-chairman

Director

Alberto Marraccini V.

Jorge Id S. Director

Director

Controller  Control and Transparency  Reports directly to the Board  Internal Audit

Aldo Motta C.

César Barros M.

Director

Chairman

Committee César Barros M. Georges de Bourguinon A. Alberto Marraccini V. Jorge Id S. Juan Pablo Vega W. Fernando Tisné M. Aldo Motta C.

Directors (1)

 

Fernando Tisné M.

Gino Manríquez Controller

Director Directors (2)

Risk

Credit Card

  

 





(1) Committee from Jul/11 to May/12, (2) Committee since May/12

8

2 Motivated Staff

Talented Organization | New Executive Staff First-class team with strong experience in the industry CEO

Strategic Support

Business Areas

Patricio Lecaros

Andrés Molina

Rodrigo Karmy

Rodrigo Nazer

CEO

Soft Lines Mngr.

Hard Lines Mngr.

Marketing Mngr.

IT Mngr.

CFO

H.R. Mngr.

Legal Mngr.

+ 23 years of exp.

Ripley, C&I, Quintec

+ 17 years of exp.

Ripley, Hites

+ 16 years of exp.

Epson Chile

+ 9 years of exp.

La Polar

+ 27 years of exp.

Salcobrand

+ 11 years of exp.

SQM

+ 21 years of exp.

Servipag y Corpgroup

+ 11 years of exp.

Viña Undurraga

Financial Team

Colombia CEO

Francisco Martínez CEO Colombia + 18 years of exp.

Falabella

Ricardo Rubio

Olivia Brito

Andrés Escabini

Sales, Planning and Logistics

Sergio López

Claudio Sierpe

Fernado Silva

Enrique Vitar

Risk Mngr.

Customers and Payments Mngr.

Insurance Brokerage Mngr.

+ 27 years of exp.

Din, Conosur, Ripley

+ 34 years of exp.

Banco Estado, otros

+ 30 years of exp.

Hites, Scotiabank

Álvaro Araya

Eduardo Lobos

Marcelo Acosta

Carlos Arredondo

Collection Mngr.

Planning Mngr. + 22 years of exp.

La Polar, BCI

Sales and Distrib.

Mngr.

Logistics Mngr.

+ 28 years of exp.

Banefe, B. Falab., Johnson

+ 21 years of exp.

Ripley, Johnson

+ 20 years of exp.

Ripley

9

Building the new People Product Culture

3 Strong Reduction in Expenses

Talented Organization Staffing

20% 8.070 6.719

2010 Managers

2011

Variation

51

23

-55%

Professionals, Administrators, etc.

1,795

1,297

-28%

Sellers, Assistants, etc.

6,497

5,399

-17%

38% of employees are new talents

DIC 2010 DEC 2010

DIC DEC2011 2011

11

3 Strong Reduction in Expenses

Selling, General and Administrative Expenses 73.528 74.450

20% expenses reduction 

61.991

Review and tender of existing contracts

- 20% 49.722

 CLP 5 billion decrease in salaries  CLP 5 billion decrease in advertising  CLP 2.2 billion decrease in general expenses

ENE-JUL JAN – JUL(7M) (7M)

AGO-DIC (5M) AUG – DEC (5M)

PPTO 2011

REAL

SG&A expenses over 40% of Retail Revenue

Aconcagua Plan

SG&A expenses below 30% of Retail Revenue

12

4 Improved Supplier Relations

Suppliers

 Trust recovered  Obligations fulfilled  New payment system for foreign suppliers

13

5 Customers: Base of the Business

La Polar, a strong Brand Founded in 1920, the brand has been PRESENT in the market for

¿Would you buy in La Polar again?

Date: jul-11

Date: jan-12

No

nearly a century

15%

No

Yes

32%



49%

Brand PERCEPTION has

27%

dramatically improved

58%

Yes

Maybe

compared to July 2011

19%

68%

Maybe

85%

Source: Guiñez Consultores Market Study | Sample: Population who buy regularly or occasionally in La Polar



Despite what happened in 2011, sales are showing a

Revenues Evolution 13.2

significant recovery

UF/M2

reaffirming BRAND VALUE 6,3 5,5



Dec/23/11 was the best-selling day in LA POLAR HISTORY

5,5

5,2

5,5

5,7

5,5

6,5

6,7

5,9

4,7

Source: La Polar | UF: Unidades de Fomento (currency indexed to Chilean CPI)

14

5

Customers … … one of the most valuable assets of the company

Customers: Base of the Business

456,861 customers with an ACTIVE LA POLAR CREDIT CARD (TLP) AND A POSITIVE BALANCE ¿Would you buy again with your TLP? Date: jul-11

Date: jan-12

No

No Yes

15%

Maybe

Maybe

6%

Yes

15%

10%

75%

79%

85%

94%

Source: Guiñez Consultores Market Study | Sample: Persons with a TLP

15

6 Renewed Financial Business

Reducing the financial risk Decrease in the Risk Rate 33% 34% 35%

34%

 Attracting new customers

26%

 New card

22%

20% 19% 18% 18% 17% 17%

12%

 New credit policy Aconcagua Plan

 New collection policy

Source: La Polar

Decrease in Portfolio Delinquencies Not delinquent (0 -30 days)

16% 14%

69%

Delinquency (31-90 days)

Delinquency (>91 days)

9% 8%

84%

Source: La Polar

16

6 Renewed Financial Business

Financial Revenues  New benefits program  New product development  New financial regulation in Chile

Financial Revenues over Retail Sales (%) 101% 88%

75% 58%

58% 44% 35%

2005

2006

2007

2008

2009

2010

2011

26%

22%

2011 (L5M)

1S12

30%

…

2014

Aconcagua Plan

Source: La Polar

17

7 Focus on Retail

New Business Model… … Focus on Retail

Monthly Retail Revenues in Chile (UF/m2) 11,2 10,0

9,9 8,7 7,4

7,0 6,1

Aconcagua Plan – 10 UF/m2 6,8

6,4

 Product and brand new proposal  New store concept  Attracting new customers

2005

2006

2007

2008

2009

2010

2011 Jun-12 (LTM)

…

2014

Aconcagua Plan

Source: La Polar | UF: Unidades de Fomento (currency indexed to Chilean CPI)

18

7 Focus on Retail

New Business Model… … Focus on Retail

Retail Direct Margin in Chile 30% 26%

26%

24%

24%

26%

25%

23%

Aconcagua Plan – 30%

22%

 Development of private labels  Improvement in logistics

 Strategic alliances with suppliers 2005

2006

2007

2008

2009

2010

2011 Jun-12 (LTM)

…

2014

Aconcagua Plan

Source: La Polar

19

7

Products

Focus on Retail

 Full renovation in clothing department  New mix of our own brands  Improvement of the purchasing process  Creation of a new department dedicated to design  New mix of National/Imported products

20

7

New Store Proposal

Focus on Retail

 Change of image / layout  Remodeling of 100,000 m2

21

8

La Polar Colombia… …growth opportunity Where we are

Colombia

Expansion Plan

Future INVESTMENT of USD 100 million Barranquilla Carabobo Opening: August 2011

Centro Mayor Opening: October 2010

Cartagena de Indias

Bucaramanga Bogotá

Medellín Pereira

Villavicencio

Cali

Los Molinos Opening: October 2011

Floresta Opening: November 2011 Bucaramanga Store Cacique Mall Opening: November 30, 2012 Area of 6.103 m2

18 CONCRETE PROJECTS in development stages and study 22

CHALLENGES

Aconcagua Plan

La Polar has set specific goals for the short and medium term to be achieved by 2014

RETAIL REVENUES

RETAIL MARGIN SG&A EXPENSES / RETAIL REVENUES

10 UF/M2

30%

< 30%

FINANCIAL REVENUES / RETAIL REVENUES

30%

PROVISIONS

12%

RETAIL EBITDA MARGIN

> 10%

Source: La Polar | UF: Unidades de Fomento (currency indexed to Chilean CPI)

24

Background

4th Player in Department Stores… … with 10% Market Share in Sales 

Market Share by Revenues (2011)

Relevant Market Share at NATIONAL LEVEL 

10%

LA POLAR has the largest

5%

number of stores

37% 22%



La Polar is POSITIONED in a segment that presents

significant barriers to entry

25%

Monthly Revenues by Surface (2011)

Source: Company Reports

Number of Department Stores UF/m2

16,3

N° 42

11,1

36

35

38

9,9 7,1

6,8 14

Falabella

Cencosud

Ripley

Hites

La Polar

Source: Company Reports | Note: The selling area of Paris at the end of 2011 was updated from

Falabella 272,388 m2

to

Cencosud

239,531 m2.

Ripley

Hites

La Polar

This correction was provided by the administration of Paris

26

Unique Portfolio of Strategic Locations throughout Chile Chile

Present in 20 of the 24 largest cities in the country, covering over 10 MILLION PEOPLE all over Chile

LOCATIONS are a

significant barrier to entry

Santiago

Iquique Antofagasta

Colina

Copiapó Coquimbo La Serena Ovalle Valparaíso Viña del Mar Los Andes El Belloto Santiago San Antonio Curicó Rancagua Talca Los Ángeles Linares Concepción Bío Bío Chillán Osorno Puerto Montt Valdivia

Plaza Norte Panamericana Estación Central Las Rejas Maipú

La Reina

La Florida Gran Avenida El Bosque

San Bernardo

Puente Alto

Mall Plaza Sur

42 STORES Punta Arenas

Puente Ahumada

+ 160.000 m2 of SELLING SPACE

27

Financial Background What changed since July 2011?

Loan Portfolio Evolution

Agreement with Chile’s National Consumer Service

Net Portfolio Cartera Neta

CLP Billion

Provisions Provisiones

CLP Million

754 707

Interest Rate Reduction + Elimination of fees and interest

119

Amount

Cash effect

Accounting effect

293,000

0

0

Return to Net Creditors1

17,500

13,800

13,800

Provision in RU2 Portfolio

5,200

0

5,200

15,020

2,220

2,220

25

25

25

330,745

16,045

21,245

572 635

Universal Repair Bonus

1 Mar-11

N° of cards with balance



129 29

Tax Benefit Penalty2

135

99

Total

2 Jul-11

3 Jun-12 (1) (2)

1,206,410

630,980

468,684

Cash effect already considered a payment of $3,700 in previous plans UTM 600 fine subject to ratification of the judge. UTM stands for Unidad Tributaria Mensual and is a currency linked to Chilean CPI used for tax purposes. 1 UTM = CLP 39,570 as of August 2012

CLP 500 million of the provisioned portfolio is recovered monthly

28

Financial Background Indicators show recovery in sales Income Statement Income Statement (CLP billion)

Revenues Retail Financial Gross profit EBITDA Chile Colombia Adjusted EBITDA(1) Chile Colombia Net Earnings

Evolution of Retail Sales in Chile 1Q ’12

2Q ’12

81.1 64.8 16.3 -7.2 -32.4 -29.8 -2.7 -10.6 -7.8 -2.7 -34.9

91.6 76.4 15.2 20.4 -5.5 -2.3 -3.3 -5.7 -2.4 -3.3 -10.2

SERNAC provision Compensation Extraordinary fees Penalty recovery Total

Aconcagua Plan

Plan(2)

Real

462 284 +7% 59 55

+4% 71 68

1T'12

2T'12

2012

…

2014

Adjusted(1) EBITDA Mg. over Retail Sales in Chile

Nonrecurring Expenses Nonrecurring (CLP billion)

CLP billion

1Q ’12

2Q ’12

-21.2 -0.8 -1.4 1.5 -21.9

-1.5 0.3 1.3 0.1

Aconcagua Plan

(2)

Real

Plan

15%

-3%-5%

-3%

-13% -14% 1T'12

2T'12

2012

…

2014

(1) EBITDA adjusted for nonrecurring expenses | (2) Business Plan 2012 publicly published on Oct/27/11 29

Financial Background Debt Restructuring Settlement Description (Nov/2011) 

Bond Amortization Profile Senior Amortization

Senior Bond (CLP) Amount $185,013 million(1) Amortization Semiannual starting in 2015

Junior Amortization (e)

Senior Interests

CLP billion 160

442(2)

Interests From 2013 to 2022 with a rate between 4% and 10%



Junior Bond (UF) Amount CLP 235,472 million(1)

140 120

Amortization One coupon in 2032 Interests No interest payments



100

Tranche C Amount CLP 23,820 million(1) Amortization Semiannual starting in July 2018 until July 2024

Interests BCP 10 Rate + 1% starting July 31, 2013

80 60 40 20 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

(1): Plus interest accrued between Jul-2011 and the date of fulfillment of the Condition of Success

…

2032

(2): Junior Amortization estimated with an annual inflation of 3%

30

Balance Sheet Pro-forma Balance Sheet of La Polar post-Capital increase Balance Sheet as of June 2012 Balance Sheet (CLP billion)

Top Impacts Post Capital Increase Dec ‘11

Jun ’12 Pro-forma*

Jun ’12

Cash Effect:

Cash and Equivalents

35

16

136

Accounts Receivables

132

99

99

Inventories

44

52

52

Fixed Assets

69

68

68

Other Assets

55

68

68

335

304

424

Financial Debt Effect:

Financial Debt

476

484

228

- CLP 256 billion due to validity of Judicial Settlement

Current

470

479

14

6

5

214

Accounts Payables

68

56

56

Other Liabilities

20

36

36

-228

-272

104

335

304

424

Total Assets

Non-current

Equity Total Liabilities and Equity

+ CLP 120 billion due to Capital Increase

Effect on Short-Term Debt: The validity of the Judicial Settlement enables La Polar to lower its debt obligations in the short term Effect on equity: + CLP 120 billion due to Capital Increase + CLP 256 billion due to validity of Judicial Settlement

(*) Estimation of the effect post-capital increase

31

“The crisis is the greatest blessing that can happen to people and countries, because the crisis brings progress.

Creativity is born of anxiety as the day is born of the night. The Crisis is in the birthplace of invention, discovery, and the great tragedies. Whoever overcomes crisis outdoes himself without being “overcome”. ”

Investment Thesis 1.

2.

3.

4.

5.

6.

7.

Brand Value Corporate Governance First-class Team Market Position Customers Colombia Aconcagua Plan

32

Follow-on Offering Investor Presentation September 2012

Book Runner

33

Appendix I Retail Industry in Chile

Retail Industry in Chile Consumer Trends in Chile: Sustainable Growth of Commerce GDP and Retail Sales 

Solid macro scenario and domestic demand

Commerce GDP and Private Consumption



Total GDP CAGR of 4.2% from 2005-2011



Private Consumption CAGR of 6.4% from 2005-2011

170



Commerce GDP CAGR of 6.9% from 2005-2011

160

Total GDP

Commerce GDP

Private Consumption

Commerce GDP has had a major boost in the past two years

149

160

150



Structural economic changes support greater private consumption



57% vs. 65% in Private Consumption/GDP in 2005 and 2011 respectively

140

145

130 120

128

110 100 2005



In the LTM, the two lines of products with the highest growth rates in retail sales are present in the business of La Polar



140

2006

2007

2008

2009

2010

2011 2012e 2013e

Source: Central Bank of Chile (www.bcentral.cl) and Latin Concensus Forecasts as of Jul-12

Retail Sales Index (IVCM)

21% real growth in devices, articles and equipment for

Growth in Retail Sales (MoM)

Average

domestic use



18% real growth in textiles, clothing, footwear and leather goods

20%

15% 10%

Average Growth 10.2%

5% 0%

Source: INE (www.ine.cl) | IVCM: Índice de Ventas de Comercio al por Menor (Retail Sales Index)

35

Retail Industry in Chile Retail Industry in Chile Highly Consolidated Top 10 GRDI (Global Retail Development IndexTM) 

Chile ranks 2nd in the GRDI (Global Retail Development IndexTM), index that shows the most attractive developing countries for retail investment



Sophisticated and complete market consolidated in five major operators, both specialized and multi-format



They all have financial services and have expanded to other countries, with the exception of Hites

Brazil Chile China Uruguay India Saudi Arabia Georgia Oman Mongolia Peru

73,8 65,3 63,8 63,1 60,8 60,6 60,6 58,9 58,5 57,4 0



Industry with high barriers to entry 

Highest market penetration in LATAM



Store locations



Brand loyalty

20

40

60

80

Source: A.T. Kearney (www.atkearney.com)

Major retail stores format in Chile

Department Stores







Supermarkets





Home Improvement





Shopping Centers







Financial Services







International Presence













  36

Appendix II Retail Industry in Colombia

Retail Industry in Colombia Consumer Trends in Colombia: Products present in the Department Store format have had a strong boost in sales 



Commerce GDP and Private Consumption

Solid macro scenario and domestic demand 

Total GDP CAGR of 4.8% from 2005-2011



Private Consumption CAGR of 4.8% from 2005-2011

150



Commerce GDP CAGR of 5.1% from 2005-2011 and 7.0% YoY in 2011

140

Total GDP

In the LTM as of 1Q12, retail sales grew by 8.8% in real terms



120

La Polar stores

110

Appliances and home furnishings Textiles and clothing Personal care products, cosmetics and perfumery Footwear and leather goods Home computer equipment Articles and household utensils Pharmaceuticals Products for household cleaning Parts and accessories for vehicles Liquors and Cigars Hardware Other goods Total Sales

Growth in sales (LTM) 13.6% 13.3%

0.9%



11.0%

0.8% 0.5% 0.5% 0.2% 0.2% 0.2% 0.2% 0.1% 0.6% 8.8%

  

28.5% 9.9% 12.0% 5.4% 7.9% 10.1% 9.9% 7.1% 10.2%

7.2%

Source: DANE (www.dane.gov.co) – Boletín GAHM as of mar-12

Private Consumption

135 133 132

130

The first 6 lines with the largest growth are present in Contribution Present in La to total Δ in Polar stores sales 2.4%  2.1% 

Commerce GDP

100 2005

2006

2007

2008

2009

2010

2011

Source: Colombia’s Central Bank (www.banrep.gov.co) and Latin Consensus Forecasts as of Jul-12 Retail Sales Index (MMCM(*))

Growth in Retail Sales (MoM) 25% 20% 15% 10% 5% 0% -5%

Average

Average growth 7,1%

(MMCM): Muestra mensual de comercio al por menor (monthly sample of retail sales, excludes gasoline and vehicles) | Source: DANE (www.dane.gov.co)

38

Retail Industry in Colombia Retail Industry in Colombia with Low Penetration Number of Department Stores and Surface 

Significant participation of Chilean companies in the industry such as La Polar, Falabella, Cencosud and soon Ripley



Colombian competitors mainly participate with the supermarket format



Important opportunity given the low market penetration

N°

6.3 UF/m2 5.2 UF/m2 11 4

 23% of retail sales are in shopping malls vs. 75% in the United States

Falabella

La Polar

 46 million inhabitants vs. 17 million in Chile  12 cities with more than 400,000 inhabitants

Source: Company Reports

Format of the major retail stores in Colombia



Department Stores Supermarkets



Home Improvement



Shopping Centers



Financial Services



International Presence









 





 









 

 

 39

Appendix III Financial Industry in Chile

Financial Industry in Chile Direct advantage of retailers to increase their market share due to the knowledge of the customers and their consumption habits Description 

Evolution of Total Credit Cards with Transactions

Chile has shown an increase in terms of average consumer loans and balance due from client, reflection of the good macroeconomic performance of the country



Consumer market increasingly more educated and conscious, promoting differentiation in retailer’s products



Retailers have extended their reach and market share of their credit cards through strategic alliances with other retailers that operate in different segments



Recent alliances of retailers with Visa and Mastercard could encourage the use of non-bank cards

Bank Credit Cards

Non-bank Credit Cards (ex. La Polar)

N° MM

12,8 10,4

9,6

10,2

6,0

5,3

5,3

5,3

4,3

4,3

4,9

2007

2008

2009

2010

7,4

11,1

5,4

5,6 2011

Source: SBIF (www.sbif.cl)

Loan Evolution associated with Non-bank Credit Cards

2.662

406

2.256

Non-delinquent portfolio (ex. La Polar)

Delinquent Portfolio (ex. La Polar)

2.252 236

2.318 188

2.016

2.130

2.462 179

Mkt. Share of Non-bank Credit Cards with Transactions (dec-11) Johnson Consorcio ABC DIN 3% 0% Presto 5% 8%

La Polar 9%

2.283

Falabella 34%

6 million cards

Ripley 18%

2008

2009

2010

2011

Source: SBIF (www.sbif.cl) | Note: Real CLP billions as of dec-11

Cencosud 23% Source: SBIF (www.sbif.cl) y La Polar

41

Follow-on Offering Investor Presentation September 2012

Book Runner

42

Disclaimer Investing in our shares involves risks that are described in detail in the Prospectus approved by the Superintendencia de Valores y Seguros, which is available in www.lapolar.cl and www.celfin.com. In the case share subscription rights are acquired, the corresponding shares are subscribed and the capital increase is declared unsuccessful, you may recover the amount subscribed but not the amount paid for the share subscription rights

43