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BM&FBOVESPA S.A. Posts Robust Results For The Third Quarter 2011
BM&FBOVESPA S.A. Posts Robust Results For The Third Quarter 2011
BM&FBOVESPA S.A. Posts Robust Results For The Third Quarter 2011
3Q11
MARKET CAPITALIZATION R$20.8 billion (Nov. 7, 2011)
RATINGS Standard&Poors BBB+ (Counterparty credit rating) A-2 (issuer) Moodys A1 (global scale issuer) Aaa.br (Brazilian scale issuer) Baa1 (global notes)
CONFERENCES Date: November 9, 2011 In Portuguese Time: 11 am Brazil: +55 11 4688-6361 In English Time: 1 pm Brazil: +55 11 4688-6361 U.S.: +1 800 860-2442 Intern.: +1 412 858-4600 Password: BMFBOVESPA
Net Operating Revenues Operating Expenses Operating Income Financial Income Net Income attributable to shareholders EBITDA EBITDA Margin Adjusted Net Income Adjusted Operating Expenses Adjusted EBITDA Adjusted EBITDA Margin
www.bmfbovespa.com.br/ri ri@bmfbovespa.com.br
Operating expenses adjusted to eliminate expenses associated with the Companys stock options plan, depreciation, allowance for doubtful accounts and tax on dividends from the CME Group. 2 Net income adjusted to eliminate deferred liability recognized in correlation with temporary differences from amortization of goodwill for tax purposes, the impact of the stock options plan and the investment in associates (CME Group) accounted for under the equity method, net of taxes.
Gross operating revenues were R$547.1 million, flat in comparison with 3Q10 and up 5.0% against the previous quarter. Revenues from the Bovespa segment totaled R$248.6 million (45.4% of gross revenues), down 9.5% from 3Q10 as extraordinary revenue gains (R$39.7 million) from the settlement of Petrobras and Banco do Brasils public offerings contributed to revenues in 3Q10. Revenues from trading and post-trading (transactions) at Bovespa were up 5.1% year-over-year, totaling R$244.9 million in 3Q11. The 11.7% growth in trading volumes reflected strong market volatility in the third quarter. These volume gains were partially offset by reduction in the Bovespa segment margin to 5.708 bps from 6.162 bps due to record HFT volumes and higher participation of day trades in overall volumes, which are charged discounted fees. Revenues from trading and settlement activities in the BM&F segment reached R$205.2 million (37.5% of gross revenues), representing a year-over-year increase of 9.9% and mainly driven by a 15.5% growth in derivatives trading volumes. Monetary policy changes and increased volatility in FX rates generated growth in derivatives volumes. The gain was partially offset by a 4.7% drop in the average Revenue per Contract (RPC) resulting from increased share of US dollar-denominated interest rate and Mini Contracts, which have lower fees than the average BM&F contracts, as well as the average appreciation of 11.5% 3 of the Brazilian Real against the US Dollar year-over-year. Real appreciation impacted the RPC of US dollar-denominated interest rate contracts and foreign exchange contracts, which dropped by 19.0% and 10.5%, respectively.
Gross Revenues 3Q10 over 3Q11
R$544.1 Million
R$547.1 Million 45.4%
50.5%
34.3% 15.2%
37.5%
17.0% 3Q11
Trd/Sttlmnt BM&F Segment Other Revenues
3Q10
Trd/Sttlmnt Bovespa Segment
Operating revenues not related to trading and settlement activities amounted to R$93.3 million (17.0% of gross revenues), a 13.1% increase year-over-year. Highlights for 3Q11 were: Securities lending: Revenues of R$19.8 million (3.6% of gross revenues) were up 56.1% from 3Q10. This increase was mainly a result of the higher volume of lending services. The overall financial value of outstanding contracts rose 51.7% from the previous quarter. Depository, custody and back office services: Revenues were R$22.9 million in 3Q11 (4.2% of gross revenues), up 6.6% year-over-year resulting mainly from a 55.1% increase in revenues from the Tesouro Direto custody. This increase was partly offset by a reduction in revenue from depository services, down 4.5% to R$17.1 million in 3Q11, mainly due to a 2.2% reduction in the average number of custody 4 accounts and a 7.4% drop in the average financial value of assets under custody . Market data sales (Vendors): Revenues reached R$16.2 million in 3Q11 (3.0% of gross revenues), posting a 5.7% increase year-over-year due to a rise in the number of active users of market data.
Year-over-year exchange rate variation is calculated as the average fluctuation of the PTAX exchange rate as at the end of June, July and August of 2010 and 2011, as these rates provide the basis on which to calculate average RPC for the months of July, August and September 2010 and 2011, respectively. 4 Excluding the ADR balance and foreign investors, who are exempt from the depository variable rate.
OPERATING EXPENSES
Opex totaling R$169.6 million was up by 1.2% year-over-year and 1.7% quarter-over-quarter. Adjusted Opex was R$136.3 million, a 6.6% decrease over 3Q10, mainly as a result of reductions in marketing and promotion activities and data processing. Adjusted Operating Expenses
3Q11 Operating expenses (-) Stock opti ons progra ms (-) Depreci a ti on (-) Al l owa nce for doubtful a ccounts (-) Ta x on di vi dends from CME Adjusted operating expenses 169.6 8.5 20.7 1.4 2.6 136.3 3Q10 167.6 5.5 15.1 -0.8 2.0 145.8 2Q11 166.8 10.1 10.1 0.6 2.2 143.7 3Q11/3Q10 3Q11/2Q11 9M11 (%) (%) 1.2% 55.6% 37.3% -266.7% 31.9% -6.6% 1.7% -15.7% 104.8% 146.2% 18.1% -5.2% 525.0 43.2 53.1 0.9 7.2 420.6 9M10 444.8 21.5 35.9 0.6 2.0 384.8 9M11/9M10 (%) 18.0% 101.0% 47.9% 51.8% 259.5% 9.3%
The Company has revised downward its budget for 2011 adjusted Opex, now ranging from R$580 million R$590 million (compared to the previous range of R$615 million - R$635 million). This change demonstrates the Companys effort to reduce expenses through improvements in its expense tracking processes, the introduction of stricter internal policies and reprioritization of activities. Personnel. Personnel expenses in 3Q11 amounted to R$81.0 million, representing a 12.9% increase yearover-year mainly due to the following factors: The average headcount increased by 15.0% year-over-year as the Company hired additional staff in its IT department (including hiring outsourced IT personnel in 2010, expenses for which were previously included in data processing expenses) and in the Business Development and Promotion area; these expenses are in line with the Companys growth strategy. Headcount in 2011 did not increase compared to the headcount approved for 2010 year-end. The August 2011 salary increase required under the existing collective bargaining agreement represented around 7% increase in payroll.
Personnel expenses during 3Q11 fell 8.2% compared to 2Q11, reflecting: Improvements made by BM&FBOVESPA to its methodology for capitalizing certain personnel costs as project costs, which led to an increase in the amount capitalized as investment (R$8.4 million in 3Q11 compared to R$5.5 million and R$5.0 million capitalized in 1Q11 and in 2Q11, respectively). Also, based on this methodology, a R$3.2 million adjustment was made to 3Q11 personnel expenses to reverse expenses for 1Q11 and 2Q11; Reduction in the Companys provisions for profit sharing by R$2.9 million (3Q11 compared with 2Q11), reflecting an updated earnings forecast for 2011 based on current market conditions.
Adjusted personnel expenses: Excluding recognition of stock options expenses, adjusted personnel expenses were R$72.4 million in 3Q11, up 9.4% over 3Q10, mainly due to the abovementioned headcount and payroll increases (see appendix for table). Data processing: Data processing expenses reached R$25.3 million, down 7.7% over 3Q10, mainly due to the abovementioned hiring of outsourced IT personnel. Marketing and promotion: Marketing and promotion expenses in 3Q11 reached R$6.5 million, a 58.7% decrease year-over-year and a 39.2% decrease quarter-over-quarter, reflecting mainly the reduction in marketing expenses related to the Wanna be a Shareholder campaign in 3Q11. Depreciation and amortization: Depreciation expenses of R$20.7 million were up 37.3% compared to 3Q10, mainly due to a rise in the Companys investments. The 104.8% growth quarter-over-quarter is due mainly to accounting improvements made in 2Q11 for depreciation and amortization of certain IT expenses, which generated a R$6.8 million credit in 2Q11 to reconcile prior quarters expenses.
Cash and cash equivalents: Cash and cash equivalents plus short- and long-term financial investments at the end of the quarter ending September 30, 2011 amounted to R$3.5 billion, and were composed of R$1.3 billion mainly related to third-party collateral pledged to the Companys clearing facilities and R$467.9 million in restricted financial resources tied to the clearing safeguard structure. Unrestricted cash and cash equivalents available at the end of the quarter totaled R$1.5 billion. Indebtedness: At the end of 3Q11, BM&FBOVESPA recorded R$1.1 billion in interest-bearing and principal debt outstanding, primarily consisting of senior unsecured notes issued in July 2010. Equity-method investment: The Companys net share of gain from investment in the CME Group, applying the equity-method, totaled R$28.3 million in 3Q11, up 22.3% over 3Q10 mainly due to growth of the CME Group results year-over-year and the effect of Brazilian Real depreciation against the US Dollar at the end of the quarter. Net Interest Income: Net interest income for 3Q11 was R$82.7 million, up 10.3% over 3Q10, reflecting a 9.9% year-over-year increase in financial revenues resulting from higher average interest rates. Income tax and social contribution: Income tax and social contribution totaled R$143.2 million in 3Q11, consisting primarily of deferred income tax and social contribution of R$142.2 million. Deferred tax liabilities of R$124.7 million were recognized in 3Q11 due to temporary differences from amortization of goodwill for tax purposes. BM&FBOVESPA also utilized tax credits in the amount of R$17.5 million from Interest on Equity Capital approved in 1Q11 and 2Q11, increasing the deferred income tax and social contribution in 3Q11. Deferred income tax and social contribution have no cash impact. CAPEX: Investments of R$42.5 million were capitalized in 3Q11. Total Capex at the end of the nine-month period ended September 30, 2011, totaled R$115.5 million. The 2011 investment budget was revised to the range of R$180 million to R$210 million (against a previously announced range of R$235 million -R$255 million) due mainly to changes in the construction of the new Data Center. Dividends: On November 8, 2011, the Companys Board of Directors approved a R$233.6 million dividend distribution to be paid on January 31, 2012, based on shareholders registration dated November 17, 2011. Share Buyback Program: BM&FBOVESPAs Share Buyback Program, authorizing the Company to repurchase up to 30 million shares, took effect on July 1, 2011 and is set to end on December 31, 2011. As of endOctober 2011, 27.5 million shares had been repurchased (out of that, 0.2 million shares were repurchased in October) at an average price per share of R$9.18.
Performance by Segment
Bovespa Segment The Average Daily Trading Volume (ADTV) for the Bovespa segment rose by 11.7% over 3Q10 and 6.3% when compared to 2Q11. This increase is due mainly to a rise in market volatility. The average daily volume traded by HFTs in 3Q11 represented a record 10.3% of the total volume traded in the Bovespa segment. This amount represents a 149.4% increase over the average volume traded by HFTs in November and December 2010 (when the new pricing policy was implemented), and a 47.9 % increase compared to 2Q11.
BM&F Segment The ADTV in the BM&F segment in 3Q11 grew by 15.5% over 3Q10. Contributing factors include a 9% increase in BRL-interest rate futures contract volumes stemming from market volatility due to monetary policy change in Brazil and a 49% year-over-year increase in US Dollar-denominated Interest Rate future contracts volumes. Volumes of Mini Contracts also rose 103.3% year-over-year, intrinsically linked to the HFT activity in the segment. In 3Q11, the volume of Mini Contracts from HFT was 116% higher than in 3Q10 and 89% higher than in 2Q11. HFT trading activity rose compared to 3Q10 and 2Q11, representing a record 7.8% of the total trading volume in the BM&F segment in 3Q11.
Development of a new multi-asset trading platform (PUMA Trading System) The first phase of this project for derivatives and spot FX trading in the BM&F segment, developed in partnership with the CME Group, was completed and is now in operation. The Company expects modules for stock trading and fixed income securities to be implemented over the course of 2012. Integration of Clearing Facilities BM&FBOVESPA continues to make progress on the integration of its four clearinghouses (equities, derivatives, forex and bonds) following the announcement in 2Q11 of the development of CORE, or CloseOut Risk Evaluation, the Companys new central counterparty multi-asset, multi-market risk management framework. CORE which will be the linchpin on which BM&FBOVESPAs clearing and settlement risk management system architecture will be based. The project is currenly underway through the development of the technology infrastructure of the Companys future integrated clearing facility conducted in partnership with a international provider.The development of the integration project is set to be completed by late 2012 and implemented in 2013.
EBITDA 347,470 338,852 EBITDA Margin 70.4% 69.2% Sharecount 1,944,885,163 2,004,305,572 EPS attributable to BM&FBOVESPAs Shareholders 0.150140 0.146176 Adjusted Net Income Adjusted Operational Expenses Adjusted EBITDA Adjusted EBITDA Margin Adjusted EPS 399,594 (136,281) 356,011 72.1% 0.205459 388,978 (145,847) 344,341 70.4% 0.194071
2.5% 313,216 113 bps 67.0% -3.0% 1,958,140,957 2.7% 0.150230 2.7% -6.6% 3.4% 174 bps 5.9% 409,150 (143,725) 323,342 69.1% 0.208948
10.9% 968,745 1,018,546 340 bps 67.6% 71.5% -0.7% 1,948,895,031 2,003,688,557 -0.1% 0.439702 0.440734 -2.3% -5.2% 10.1% 297 bps -1.7% 1,192,960 (420,634) 1,011,957 70.6% 0.612121 1,218,396 (384,846) 1,040,046 73.0% 0.608077
3Q10
2Q11
3Q11/3Q10 3Q11/2Q11 9M11 (%) (%) -0.3% 11.7% 55.6% -0.7% 0.0% -15.7% 856.9 373.5 43.2
(+) Deferred ta x l i a bi l i ti es (+) Stock opti ons progra m (-) Net Sha re of profi t from i nves tment i n a s s oci a te (equi ty method i nves tment) Adjusted net income
1
25.7 399.6
21.1
19.9
21.4% 2.7%
29.2%
80.7
21.1 1,218.4
281.9% -2.1%
389.0 409.2
-2.3% 1,193.0
(In R$ thousands)
09/30/2011 1,605,163 1,222,289 37,324 12,098 61,930 23,706 3,671 15,006 3,213 225,926 2,253,992 1,125,360 1,061,434 67,198 19,285,812 2,540,239 16,679,727 22,678 441,572 (1,159,085) 103,911 235,336 404,992 19,269,370 16,442 23,144,967 12/31/2010 1,416,204 954,605 34,791 80,828 64,351 23,981 5,576 33,154 2,773 216,145 1,798,723 1,010,059 732,074 56,590 19,419,048 2,540,239 16,662,480 22,971 847,658 (613,903) (88,680) 32,000 19,402,765 16,283 22,633,975
Shareholders equity Capital and reserves attrib. to parents shareholders Capital Capital reserve Revaluation reserves Revenue reserves Treasury shares Valuation Adjustments Additional Dividends proposed Retained earnings Interest of non-controlling shareholders
Total assets
23,144,967
22,633,975
Stocks and Equity Deriv. Cash market Derivatives Forward market Options market (stocks / indices) Fixed income and other spot securities Total
Stocks and Equity Deriv. Cash market Derivatives Forward market Options market (stocks / indices) Fixed income and other spot securities Total
627,727 503,616 416,700 540,584 422,148 338,481 87,143 81,467 78,219 975 1,277 1,390 86,168 80,190 76,829 14 13 12 627,741 503,629 416,712
Average Market Cap. (in R$ billions) Average Ibovespa Average value under custody (in R$ billions) Average value under custody - ex ADRs and Forgn. Inv. (in R$ billions) Number of custody accounts - average Securities Lending (average open interest - in R$ billions) # Listed Companies to Trade Stocks High Frequency Trading Participation Turnover Velocity (annualized)
2,234.8 2,451.5 2,265.2 56,474 64,378 66,177 1,068 1,190 1,133 445 495 480 624,631 631,383 638,611 31.6 28.3 20.8 377 377 377 10.3% 7.4% 69.5% 59.7% 60.1%
-8.8% -12.3% -10.3% -10.1% -1.1% 11.6% 0.0% 291 bps 981 bps
Stocks and Equity Derivatives Cash Market Derivatives Options Market Forward Market Total BOVESPA
Interest Rates in BRL FX Rates Stock Indices Interest Rates in USD Commodities Mini Contracts OTC Total
Interest Rates in BRL FX Rates Stock Indices Interest Rates in USD Commodities Mini Contracts OTC Total
7.8%
5.0%
4.6%
278 bps
325 bps