Brazil pharma including big ben and santana - may 2012 10.05
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Institutional Presentation
May 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
CAGR 03-11 Generics: 37%
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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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30.7%
56.9%
12.4%
Geographic Location Strong Organic Growth Capacity (# Stores)
Brazil Pharma: Ready to Grow
Largest Pharmacy Retail Company in Brazil outside the Southeast
Profitable Mix (1Q12 Sales Mix)
Brazil Pharma
Branded
Generics
Non-Medicines
86
107 own stores
237 own stores
355 franchises
198 own stores
4
1
102 20
15
92 7
8
191
7
1
7
87
101 own stores
101
71
71
86
16
221
292
378
643
2009 2010 2011 1Q12
Abrafarma
998 points of sale
643 own stores 355 franchises
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(1) Including Sant’ana acquisition 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(1)
100%
Operating
Partners
23%
Free Float
39%
BTG
Pactual
38%
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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
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
36
# Years
Pharmacy Retail
n/a
n/a
20
14
25
# Years
Financial Industry
12
14
18
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
Pharmacy Retail
Experience
Entrepreneurship
Experience
Gilberto Portela
Head of Institutional Relations 30 n/a
Álvaro Silveira Jr.
Head of Midwest Operations
Wilson José Lopes
Head of South Operations
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25
n/a
n/a
Raul Aguilera
Head of North and Northeast Operations 25 n/a
José Santana
Head of Bahia Operations 30 n/a
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110
45
100
200
245
Set/09 - Abr/10 Mai/10 - Jan/10 Jul/10 - Jan/11 Fev/11 - Set/11 Out/11 - Dez/11 Jan/12 - Fev/12
Proved Historical Success Since its foundation in 2009. Brazil Pharma has been successfully implementing its growth strategy based in
acquisitions and organic growth.
Revenue evolution ( Average Monthly in R$ mm)
Foundation
Farmácia dos
Pobres´
points-of-sale
Acquisiton
Guararapes and
RNF Merger
(RNF) Rede
Nordeste de
Farmácias´
points-of-sale
Acquisition
Launching the
Multiplus
Fidelity
program (GRD)
Mais
Econômica
Acquisition
Grupo Rosário
Distrital (GRD)
Acquisition
384 397
465
468
506
663
Sep
2009
Aug
2010
Oct
2010
May
2010
Jun
2010
Jan
2011
Mar
2011
Nov
2011
681
IPO
Jul
2010
Jun
2011
498
Big Bem
Acquisition
824
(1) Pro forma as 30/12/2011 (2) Pro-forma as 31/03/2012
Total number of stores (own stores + franchisees)
Feb
2012
Farmais
Acquisition
Sant’ana
Acquisition
986(1)
Sep/09-Apr/10 May/10-Jan/10 Jul/10-Jan/11 Feb/11-Sep/11 Oct/11-Dec/11 Jan/12-Feb/12
998(2)
Apr
2012
Debentures
Issuance
Beauty’in
Acquisition
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Brazil Pharma: Strategies to Create Value
Organic Growth
Opening of new stores
to consolidate local
leadership and enter
new states
Operational
Efficiency
Strong synergy to come
through integration
Market Consolidation
Highly fragmented
market with
opportunities for
consolidation
Differentiation
Product development.
private label and loyalty
programs
Integration / Stabilization
Restructuring Governance
G&A Synergies
Training. Career Plan and Remuneration
Improvements prioritization
Monitoring of process indicators
Implementation of culture and services
Scalability
Operational Consolidation
Migration of new processes
Operational efficiency
Organic Growth
Geographic presence in all regions boosts the
opportunity to grow organically
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30.7%
56.9%
12.4%
26%
74%
Competitive Geographic Position with Differenced Mix
Brazil Pharma Focus / Competitors Drugstores per region
Brazil
Pharma Focus
Competitors Focus
More dense
Less dense
Located in strategic regions
Lower competition. giving higher gross margin
High growth with higher Real Estate opportunity
Complementarity with Large Networks
Favorable Mix to capture the potential of generics in Brazil
Higher HPC participation gives higher profitability per m2
Brazil Pharma Abrafarma
Branded Generics
Medicines Sales Mix 1Q12
Total Sales Mix 1Q12
Branded
Generics
Non-Medicines
Brazil Pharma Abrafarma
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Brazil
4o
2o
1o
3o
North
n/a (2)
n/a (2)
Northeast
n/a (2)
Mid-West
n/a (2)
Southeast
n/a (2)
South
n/a (2)
(1). Number of Stores Number of Stores Revenue
2011 Abrafarma Ranking
1
The New Brazil Pharma Brazil Pharma consolidates its leadership position in four of the five regions of Brazil. becoming the
largest retail pharmacy. excluding Southeast. (1)
(1)Ranking by number of own stores as on September 30. 2011. considering the four largest drugstore chains in Brazil; and
(2)n/a: other chains do not have operations in the region.
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Gross Revenue
(R$ million; Pro-forma)
Results Consistency with Margin Stability
Gross Profit and Gross Margin
(R$ million)
EBITDA and EBITDA Margin
(R$ million)
Stores Maturation
131 20%
75 12%
101 16%
336 52%
Stores with less than 12 months
Stores with 12 months to 24 months
Stores with 24 months to 36 months
Stores with more than 36 months(mature)
Own Store Growth
# of own stores (pro forma)
71
71
86
16
221
292
378
643
2009 2010 2011 1Q12
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Brazil Pharma: Comparing With The Peers
Solid track record in sales. Gross Margin and EBITDA
1Q12 EBITDA and EBITDA Margin
(R$ million. % of Gross Revenues)
1Q12 Selling & General Administrative and Other
Expenses and % of Gross Revenue
(R$ million. % of Gross Revenues)
1Q12 Gross Profit and Gross Margin
(R$ million. % of Gross Revenues)
Own Stores (as of March 31 2012)
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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On March 5. 2012 we opened our Shared Services Center. which will integrate the
back office areas of operations. allowing the integration and optimization of
activities. processes and implementation of a unified management system
SSC Brazil Pharma
Operational and Financial Highlights 1Q2012
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553.1
699.3
1Q11 pro forma 1Q12
Gross Revenue
(R$ million)
SSS (Same-Store Sales)
+26.4%
240.0 274.1
305.2 323.2
699.3
1Q11 2Q11 3Q11 4Q11 1Q12
Sales and SSS Growth
SSS and Sales acceleration during 2012
pro forma pro forma
pro forma pro forma
SSS SSS Mature(36 months)
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2 / 79 / 159 Gross Profit and Gross Margin
(R$ million, % of Gross Margin)
Selling, General and Administrative Expenses
(SG&A)¹ and % of Gross Revenue
(R$ million)
+27.0%
Gross Profit and Expenses • Gross margin reduction due to the sales mix and acquisitions
• SG&A reduction as percentage of the Gross Revenue due to a more productive and mature portfolio
pro forma
78.9 94.1 102.1
121.1
211.0
32.9% 34.3% 33.5% 37.5%
30.2%
1Q11 2Q11 3Q11 4Q11 1Q12
Gross Profit Gross Margin
pro forma
66,7 79.0 81.0 98.7
174.2
27.8% 28.8% 26.6%
30.5%
24.9%
1Q11 2Q11 3Q11 4Q11 1Q12
SG&A % Gross Revenue
pro forma
140.7
174.2
25.4% 24.9%
1Q11 1Q12 pro forma pro forma
(1) These figures exclude expenses with stock options of R$1.5 million and non-recurring expenses for each period. In 1Q12,
non-recurring expenses comprised R$1.8 million with M&A transactions and non-recurring revenue totaled R$21.7 million,
related to insurance payments from the fire in the Sant’ana distribution center, variable compensation in the amount of R$1.5
million and expenses on issuance of the debentures in the amount of R$ 0.1 million.
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Net Income and Net Margin (% of Gross Revenue) 1
(R$ million)
EBITDA and EBITDA Margin 1
(R$ million, % of Gross Revenue)
+45.1%
EBITDA and Net Income EBITDA margin and net margin pressured by recent acquisitions
pro forma
pro forma
(1) Net income before minority interest and adjusted to exclude non-recurring expenses in the period expenses, brand and key money amortization, taxes over insurance revenue and employees SOP’s
(1) exclude expenses with stock options of R$1.5 million and non-recurring expenses for each period. In 1Q12, non-recurring expenses are: R$1.8 million with M&A transactions and non-recurring revenue of R$21.7 million,
related to insurance payment from the fire in the Sant’ana distribution center, variable compensation in the amount of R$1.5 million and expenses on issuance of the debentures in the amount of R$ 0.1 million.
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Debt
* R$150 million to be paid in stock issuance for Sant’ana acquisition
R$ million 1Q12 4Q11
Loans and financing 344.5 64.4
Current 241.3 22.4
Non-current 103.2 42
Accounts payable
for the acquisition
of investments 497.2 54.4
Current 184.8* 17.7
Non-current 312.4 36.7
Total debt 841.7 118.8
Cash and cash
equivalents 122.9 263.6
Net debt (net cash) 718.8 (144.8)
Debt
Debt affected by recent acquisitions. Debentures improving debt profile in 2Q12
Breakdown by Indexes
On April, we concluded a R$250 million debenture issuance
Two series of four and five years, yielding CDI+1.705% and CDI+1.775%, respectively,
which was assigned Aa3.br (national scale) and Ba2 (global scale) risk ratings by
Moody’s.
Debentures Issue
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Contact Details
Investor Relations
Renato Lobo IR Officer
Mara Boaventura
IR Manager
ri@brph.com.br
(55 11) 2117 -5200
www.brazilpharma.com.br/ri
Brazil Pharma S.A.
Rua Gomes de Carvalho. 1629
6th and 7th floors
CEP 04547-006
São Paulo. SP. Brazil
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