Saraiva is a leading publisher and bookseller in Brazil, offering a complete catalog of elementary and high school textbooks, readers, law books, business administration, economics, business literature, and accounting books, claiming a market share in Brazil of 15% in professional and technical books and 16% in textbooks.

The retail branch of Saraiva is the largest bookstore chain in Brazil, with 112 stores. It is experimenting the “Super Store” concept, with a product mix including books, CDs, DVDs, stationery, periodicals, and information technology. Saraiva also operates one of the country’s largest online bookstore, offering a larger mix of products than its brick-and-mortar stores.

The publishing division of Saraiva also includes two learning systems: Ético, focused on private schools, and Agora, focused on public schools.

Key company developments 2013

Consolidated net revenue reached R$ 2.14 bn in 2013, up 11% year-over-year. Net revenue in the publishing division totaled R$ 507 m, up 8% in the yearly comparison, due to the good performance by the National Textbooks Program for the 2014 academic year. Net revenue in the retail division reached R$ 1.69 bn, an increase of 12% in the year-over-year comparison, due to increased sales volume in the physical stores division, driven by both an increase in the number of stores and solid sales performance in the e-commerce business.

Consolidated EBITDA was R$ 95 m in 2013, compared to R$ 182 mi in 2012. The decrease is due to: extraordinary impairment provisions in the amount of R$ 42 m – with no impact on cash; non-recurring expenses of approximately R$ 14 m related to the organizational restructuring, and to operational and M&A transactions advisory services; reinforcement of the business teams; and reduction in the gross margin.

Adjusted EBITDA for these non-recurrent effects would have been R$ 150 million, down 17% year-over-year.

Ownership, mergers & acquisition, internal organization
Saraiva made an important strategic move in 2013 with the acquisition of the Editora Érica. The transaction marked the company’s entry into the market for content aimed at technicians and professionals, strengthening diversification and increasing Saraiva’s relevance in the Brazilian publishing market. In December 2013, Saraiva announced it had entered into a contract with Kroton Educacional.

During 2013, Saraiva initiated a deep structural reorganization. The main results included the elimination of the independence that the publishing and bookseller divisions previously enjoyed. According to the company, this was done in order to strengthen Saraiva’s organizational structure and prepare it for the opportunities and challenges presented by the markets in which it operates. By November 2013, the independent structures were completely gone, and the former Microsoft CEO in Brazil, Michel Levy, assumed as Chief Executive Officer (CEO) of the whole Saraiva Group.

Also, in 2013, Saraiva’s publishing division continued to act and see itself as a full educational company and not simply as an educational publisher. Its projects are now conducted under this mentality and the publishers are becoming more and more educational business developers.

Saraiva has very little international exposure and interactions with the exception of its relationships with foreign vendors of service and goods.

Saraiva Group owns the largest domestic eBookstore in Brazil, being a strong competitor to Amazon.

The publishing division has the largest ePub catalogue in Brazil with over 2,300 titles.

Saraiva has launched an eBook cloud-based subscription platform, called Minha Biblioteca, with thre other Brazilian STM publishers as partners. The independent company aims mainly in selling licenses to universities.

Within the portfolio of services offered by Saraiva Group is Publique-se!, a self-publishing digital service launched in May 2013 that already has published more than 1,700 books in digital format.

Bestselling authors & titles
In a country where the Federal Government is responsible for a quarter of publishers’ revenue, it is no surprise that Saraiva’s bestsellers are the ones selected by the Ministry of Education’s programs. In 2013, for instance, the revenues of the contract with the Federal Government under the Nationla Textbook Program for 2014 reached R$ 173 m, R$ 16 m of which is digital.

In its trade book division, the bestseller author is Augusto Cury. This self-help writer has been successfully recycled by Saraiva’s publishing division after being published by other houses and starting to lose ground in the bestseller charts.

Key points for analysis & conclusions

It is important to highlight that while the retail division is more than three times bigger than the publishing division, the latter generates much higher margins. One big challenge for Saraiva currently is to improve the performance of its online retail operation as well as of its bricks-and-mortar stores.

Another challenge for Saraiva is the transition from being a publishing company to being an educational one. The consolidation of its learning systems, Ético and Agora, as well the development of new educational business and platforms, being it K12 or university-level, are key to the future of the company.

Earlier developments
Over the last six years, Saraiva has doubled in size.

Since 2009, Saraiva publishing division has been moving toward a more active role in the education industry. In that year, is start to sell complete solutions in the Learning System format for the private network in all educational segments, from kindergarten education up to the pre-university entrance exam level.

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