Bloomberg News

Elektra Reports First-Quarter Loss on Derivative Value

April 11, 2012

Grupo Elektra (ELEKTRA*) SA, the banking and retail company controlled by billionaire Ricardo Salinas, reported a first-quarter net loss as derivatives based on its stock declined in value.

The net loss was 3.83 billion pesos ($292 million), compared with net income of 622 million pesos a year earlier, Mexico City-based Elektra said in a filing today. Sales rose 35 percent to 15.1 billion pesos on a surge in loans to small businesses and pawn-shop customers.

A decrease in the value of an equity swap held by Elektra cut 7.08 billion pesos from profit, the company said. The company recorded the non-cash charge because it must value the derivative instrument at the end of every quarter.

The instrument allows Elektra to bet on its stock price as if it held the shares itself, and lost value as the shares fell 13 percent in the quarter. The decline came after a person familiar with the matter said in January that Mexico’s stock- exchange operator, Bolsa Mexicana de Valores SAB, was looking into ways to make more of the shares available for trading.

The stock had more than doubled in value last year, partly because the other party in the derivative swap normally buys up shares as a hedge, a process that would have made Elektra shares scarce.

Leaving out the derivative charge, along with interest, taxes, depreciation and amortization, profit rose 54 percent to 3.3 billion pesos, Elektra said.

Elektra rose 3.9 percent to 1,258.08 pesos at the close in Mexico City.

To contact the reporter on this story: Crayton Harrison in Mexico City at tharrison5@bloomberg.net

To contact the editor responsible for this story: Ville Heiskanen at vheiskanen@bloomberg.net


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