Post on 24-May-2015
Institutional Presentation
February 2012
The Sector
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Sales Performance in the Brazilian Pharmacy Retail Sector from 1996-2011 (R$ Billion)
Pharmacy Retail: A Growth History…
Sources: IBGE, Farmácia Popular, Health, OMS IMS, Brazil Central Bank
Micro Drivers Timing
Regional
Brands
Fragmented
Market Formalization
Macro Drivers
Income Growth Population Aging Generic Drugs
1997 – 2000
1997: Asian Crisis
1998: Russian Crisis
1999: Real Depreciation
2000: Internet Bubble burst
2001 - 2002
2002: Crisis pre-Lula election
2001: Argentine Default
2003 – 2005
2003-04: First years of
Lula´s election
2004: Mensalão scandal
2006 – 2007
2006: Second Lula election
2008 – 2011
2008: Subprime Crisis
2010: Greece Debt Crisis
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2 / 79 / 159 Market Share and Players Footprint
Source: IMS Health, Companies web site, Brazil Pharma
Brazil Pharma is located in strategic regions with low competition, high growth perspectives and large
complementarities to top players.
Revenues
Breakdown per
State
Raia +
Drogasil
Drogaria
S. Paulo +
Pacheco
Brazil
Pharma
São Paulo 31%
Rio de Janeiro 14%
Minas Gerais 10%
Rio Grande do Sul 8%
Paraná 6%
Goiás + DF 5%
Bahia 4%
Santa Catarina 4%
Pernambuco 3%
Ceará 3%
Pará 2%
Others 11%
Pharmacy Retail: ... With Consolidation Opportunity
South
East
Region
Other
Regions
Brazil Pharma Focus
Peers Focus
The Company
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2 / 79 / 159 Geographic Location Strong Organic Growth Capacity (# Stores)¹
TOTAL: 986
627 own stores e
359 franchise stores
Brazil Pharma: Ready to Grow
Largest Pharmacy Retail Company in Brazil outside the Southeast
Profitable Mix (3Q11 Sales Mix)¹
Brazil Pharma Abrafarma
Branded
Generics
Non-Medicines
¹Excluded Big Ben and Estrela Galdino’s Stores
104 own stores
1st
228 own stores
1st
359 franchise stores
1st
194 own stores
2nd
5
1
95 20
14
89 7
8
187
7
1
7
85
98
52
150
71
221
71
292
378
2007 2008 2009 2010 2011
86
101 own stores
101
1st
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Brazil Pharma: Strategies to Create Value
Market
Consolidation
Highly fragmented
market with large room
for consolidation
Organic Growth
Opening of new stores to
consolidate local
leadership and enter new
states
Differentiation
Product development,
private label and loyalty
programs
Operational
Efficiency
Strong synergy to come
through integration
Unparalleled
Growth
(# of stores
9M11)
60
34
21
Source: Drogasil and Droga Raia’s press releases as of September 30th, 2011
Consolidation
Integration IT: Totvs
Head Count Reduction: 1.069
Shared Service Center: Midwest
Differentiation
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Experienced management with more than 25 years in the pharmacy retail industry on average
Brazil Pharma: Our People
André Sá
CEO
Marcelo Doubek
CFO
Renato Lobo
Investor Relations
Álvaro Silveira Jr.
Head of Midwest and Commercial Director
Gilberto Portela
Head of Northeast Operations
Raul Aguilera
Head of North Operations
Wilson José Lopes
Head of South Operations
Management
Board of Directors
Marcelo Kalim
Board Member
Carlos Fonseca
Board Member
Roberto Martins
Board Member
José Luiz Depiere
Board Member
2
2
n/a
22
36
30
25
25
# Years
Pharmacy Retail
n/a
n/a
20
14
25
# Years
Financial Industry
12
14
18
n/a
n/a
n/a
n/a
n/a
15
14
22
n/a
n/a Artur Grynbaum
Independent Board Member
Experience
Álvaro Silveira
Board Member
Carlos Dutra
Comercial Director 20 n/a
Financial Expertise
Retail Expertise
Manufacturing Expertise
122 years of
Pharmacy Retail
Experience
Entrepreneurship
Experience
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(1) Including Sant’ana and Big Ben acquisirttion that is still pending shares incorporation
Brazil Pharma: The Shareholders
BTG is our main Shareholder
Farmais Rosário
Distrital
Mais
Econômica
100% 100% 100%
Big Ben
100%
Sant’ana
100%
Sócios
Operacionais
23%
Free Float
39%
BTG
Pactual(2)
31%
Sant’ana
Family
7%
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226
338 352
27,6%
19,2%20,9%
Brazil Pharma Drogasil Raia
Brazil Pharma: Comparing With The Peers
Solid track record in sales, Gross Margin and EBITDA
9M11 EBITDA and EBITDA Margin
(R$ million, % of Gross Revenues
9M11 Selling, General, Administrative and Other
Expenses1 and % of Gross Revenue
(R$ million, % of Gross Revenues)
¹Excluded Big Ben’ Stores
48
107
87
5,9% 6,1%
5,2%
Brazil Pharma Drogasil Raia
352
359
384
Brazil Pharma Drogasil Raia
9M11 Gross Profit and Gross Margin
(R$ million, % of Gross Revenues)
Stores (as of September 30, 2011)¹
275
446 439
33,6%
25,3% 26,2%
Brazil Pharma Drogasil Raia
Integration Process
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Operations Administrative
(SSC) Procurement
Corporate
Finance
Accounts Payable
Human Resource
Accounting
IT
Legal department
Sales (pricing, mix,
location
New stores
Logistics
Purchase process
Relationship with
manufactures
Service Level
Working Capital
G&A Reduction Sales increase
Operational efficience
Gross margin Benefits
We have three operations areas:
(i) Procurement
(ii) Sales and Operations
(iii) Back Office
Brazil Pharma: Integration Process
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TRANSPORTATION
1 PARKING LOT
2 BUS STOP
3 BUS STOP
4 102 SUL SUBWAY
STATION
FOOD
1 303 SUL
2 103 SUL
3 304 SUL
4 302 SUL
5 PÁTIO BRASIL SHOPPING
MALL
COMMERCE
1 303 SUL
2 PÃO DE AÇÚCAR
SUPERMARKET
3 304SUL
4 103 SUL
5 302 SUL
6 SHOPPING PÁTIO BRASIL
SERVICES
1 BANCO SANTANDER
2 LANGUAGE SCHOOL
3 DOM BOSCO HIGH SCHOOL
4 SWIMMING GYM
5 GYM
6 GALOIS HIGH SCHOOL HEALTHCARE
1 7 SENAC COLLEGE
2 HOSPITAL
LEISURE
1 PARQUE DA CIDADE PARK
2 NIQUELÂNDIA
3
CSC: “Go Live” In April of 2012
New Acquisition
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2 / 79 / 159 Founded in 1945, with head offices in Salvador - Bahia;
CEO and Majority Partner: José Sant’Ana;
Brazil’s 9th largest drugstore chain – according to Abrafarma’s 2011 ranking;
Largest drugstore chain in the state of Bahia, with 63% of top of mind in the regional market, according to “Marketing
Consult”;
101 stores in the states of Bahia, while 33% of the stores still under maturation;
Sales per store of approximately R$470 thousand/month;
In December 2011, Sant’Ana’s Distribution Center of approximately 7,000 m² burned down, since then Sant’Ana has been
operating with 2 Distribution Centers of a total of 2,400 m²; and
R$ 527 million Sales and R$ 36 million EBITDA as of LTM Sep.11.
61%18%
21%
Branded Medicine
Generics
Non Medicine
Sant'Ana Overview
Sant’Ana is the absolute leader of the state of Bahia, which is the most important state of the
Northeastern region.
(1) As of Pro-forma September 30, 2011.
Sales Breakdown
LTM Sep.11
Sant'Ana (1)
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Total acquisition amount of R$ 497.0 million
• R$150.0 million in Brazil Pharma’s shares, issued at a price of R$10 per share;
• R$247.0 million in cash;
• R$100.0 million in cash at the 48th month anniversary, adjusted by IPC-A (Consumer Price Index);
• Up to R$35.0 million conditioned to the achievement of pre settled goals;
• Index Cupon: R$17.2 million;
• Net Debt: R$14.0 million at the signing date;
• Goodwill: R$314.8 million, representing a present value estimated fiscal benefit of R$81.0 million.
Indemnity and Securities
• 100% of previous contingencies will be secured by the former owner as agreed by contract; and
• Forward installment in cash and equity interest in Brazil Pharma will be secured by indemnities.
Corporate Governance
• José Sant’Ana remains as Sant'Ana’s CEO;
• 3-year lock-up for issued shares; and
• 5-year Non-Compete agreement, additionally to the lock-up period..
Transaction Analysis
The acquisition has a cash component and a share issuance.
Transaction Highlights
R$ 347,0 million in cash
15,000,000 shares @ R$10.0
100% shares
Implied EV/EBITDA 2012 E
Transaction Multiples: 8,5x
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(1) Ranking by stores considering only the 4 largest drugstore chains of Brazil, data as of September 30, 2011; and
(2) “n/a”: Other players doesn’t have any operating stores in the region.
4th
2nd
Brazillian New Rank
Brazil Pharma condolidates its leadership position in 4 out of the 5 main Brazilian regions, becoming
Brazil´s Largest Drugstore Retailer excluding Southeast region.
Ranking – Comparison of the 4th Largests Drugstores Chains in Brazil
1st
3rd
North South Southeast Northeast Mid- West
(1)
(1)
n/a n/a n/a
n/a
n/a n/a
(2)
(2) (2) (2) (2) (2)
Operational and Financial Highlights 3Q2011
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Sales and SSS
Solid track record in sales and SSS growth
Gross Revenues
(R$ million)
SSS (Same Store Growth Sales)
SSS SSS mature stores (36 months)
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Sales Mix and Average Ticket
Increase in average ticket even with the growing relevance of generics in our sales mix
Sales Mix
(% of sales)
Average Ticket
(R$)
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Gross Profit and Expenses
Gross margin expansion, given better mix and inventory management
Gross Profit and Gross Margin
(R$ million, % of gross revenues)
Selling, General, Administrative and Other
Expenses1 and % of Gross Revenue
(R$ million, % of gross revenue)
(1) Includes other net operating revenues. Data adjusted to exclude non-recurring expenses occurred during
the quarters. On the 3T11 non recurring expenses were R$5.9million, being R$4.3 million related to
severance paid, in view of the headcount cut in the South platform and R$1.6 million expenses related to the
stock option plan.
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EBITDA and Depreciation and Amortization
Highest EBITDA margin since the creation of Brazil Pharma
EBITDA and EBITDA Margin
(R$ million, % of gross revenue)
Depreciation and Amortization Expenses
(R$ million)
Starting January 2011 there was a change in our accounting criteria and
the key money (commercial establishments) amortization was classified
under depreciation and amortization expenses in the income statement.
This same line includes the depreciation of our plant and equipment and
the investments in the layout adjustment at our stores.
Out of the R$6.8 million depreciation and amortization expenses booked in
3Q11, R$3.9 million represented the amortization of intangible assets
(commercial establishments).
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Financial Result and Net Income
Lower financial expenses given Company’s capitalization and maintenance of profitability
Financial Result
(R$ million)
Net Income and Net Margin1
(R$ million, % of gross revenue)
(1) Net income before minority interest and adjusted to exclude non-recurring expenses in the period.
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Contact Details
Investor Relations
Renato Lobo IR Officer
renato.lobo@brph.com.br
(55 11) 2117 -5200
www.brazilpharma.com.br/ri
Brazil Pharma S.A.
Rua Gomes de Carvalho, 1629
6º e 7º andares
CEP 04547-006
São Paulo, SP, Brasil