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  • 1. Brazil PharmaVI Equity Ideas ConferenceCredit SuisseInstitutional Presentation22 January, 2013
  • 2. CompanyOverviewSantana store. Salvador, BASector Overview
  • 3. 37.008.30 9.40 10.30 11.20 11.6013.1014.8017.2019.2021.5023.6026.4030.2036.0043.001996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Source: IMS Health.Drivers Micro MomentumRegionalBrandsFragmentedMarketSectorFormalizationDrivers MacroIncomeGrowthPopulationAgingGenericMedicines14.4 15.8 17.720.323.06.37.08.09.711.22.93.64.56.28.823.626.430236.243.02007 2008 2009 2010 2011Branded OTC GenericCAGR ‘07-11Medicine: 12.7%Generics: 24.9%Branded: 9.8%OTC: 12.2%Sales performance in the Brazilian pharmaceutical market from 1996-2011 (R$ Billion)Industry PerformanceA Growth and Accelerating History
  • 4. 4Brazil Pharma vs Competitors (2011)Competitors FocusDrugstores per region (2011)More denseLess denseMarket Growth - CAGR (2007-2011)Geographic ConcentrationStill concentrated in the SoutheastThere is low competition on the regions outside the Southeast.Source: IMS.
  • 5. SectorOverviewRosário store. Brasília, DFCompany Overview
  • 6. 6CLIENTSINVESTORSSUPPLIERSTALENTSTo be the first choice to our public is one of the main strategic business guidelines of the CompanyYour First Choice:1st
  • 7. 7Source: Brazil Pharma; Note: (1) Ranking by number of owned stores as of December 31, 2012 considering the four largest Drugstore chains in Brazil; (2) n/a: Other chains do not haveoperations in the regionDrugstore ranking per RegionNumber of Stores14th2nd1stNortheastn/a(2)3rdNorthn/a(2)n/a(2)Southeastn/a(2)Mid-westn/a(2)Southn/a(2)Strong Local KnowledgeLeadership position in four out of five regions
  • 8. 886Brazil Pharma footprint and clustersNorth 109Northeast 244Midwest 121SoutheastSouth 207REGIONSOwned stores101108 2015211119877511619237 Owned stores116 Owned stores121 Owned stores369 Franchises207 Owned stores05 Distribution centersFootprint 1,050 Stores89Source: Brazil PharmaNational FootprintThe largest drugstore chain outside the Southeast
  • 9. 9Strong Organic Growth CapacityOrganic Growth (# owned stores)Brazil Pharma AbrafarmaBranded GenericsHPCProfitable Sales Mix(3Q12)Geography: More Growth and Less Competition(CAGR07’-11’)Maturation of Owned Stores(3Q12)Brazil Pharma competitive advantagesCompetitive AdvantagesStrong growth potentialSource: Brazil Pharma and IMS.3339095109 54 6812009 3Q12Openings2011Openings9M12Openings2010Openings200914.2%17.2%13.7%54.9%Stores < 12 monthsStores > 12 < 24 monthsStores > 24 < 36 monthsStores > 36 months64.9%28.5%11.7%37.1%45.9%17.0%
  • 10. 10Rodrigo SilveiraOperationsSara RezendeCFOCarlos DutraCommercial DirectorAndré SáCEO13 yearsRenato LoboDirector of Investor Relations 18 yearsFlavio SanchezShared Service Center DirectorManagement Experiência6 years20 years19 yearsExperienceGabriel GuiotoDirector of People & Management13 years16 yearsLogisticsJadirTavaresProcurementRenatoStefanoniTradeMarketingRovilsonApolinárioOperationsN/NERicardoKitamuraOperationsNE(Bahia)WesleyBarbosaOperationsMWEmílioAzevedoOperationsSDelmarRaguzzoniCommercialIntegrationCarlos DutraIntegration ofOperationsRodrigoSilveira33 years20 years7 years 18 years12 years12 years 10 years20 years20 yearsProjectsJulianaAmaralITRogérioSegalaSSCAlessandraAraújoSSC -AdministrativeIntegrationFlávio Sanchez6 yearsSAPProjectEduardoPortela11 yearsExperienced ManagementStrong industry and pharma retail background
  • 11. 11Shareholder’s StructureBTG Pactual + FIPs ManagersOperating Partners Free Float35.7% 44.6%19.3% 0.4%100% 100%100% 100% 100% 100%Note: As of January, 201340%
  • 12. 12Remaining Lock-up PeriodNote : Rosario’ s familly did not have lock-up (1) After the 3 years lock-up shareholders have the right to sell all stake (2) Shareholder have the right to sell up to 1/3 of the shares everyyear after the first anniversary (June, 2011).2011 2012 2013 2014 2015 2016Feb/2012 Feb/2015Mar/2012 May/2015Jun/2011 Jun/2014Jun/2011 Jun/20141211Jan/2013Shares: 2,250,974% Shares: 0.9Shares: 7,864,262% Shares: 3.1Shares: 15,000,000% Shares: 5.9Shares: 23,840,957% Shares: 9.4
  • 13. Carlos Alberto. Sant’Ana store, Salvador, BA.Value DriversIntegration & Retail Management
  • 14. 14Becoming 100% IntegratedApplying management excellence to pharmaceutical retail: 4 fronts3.Training & Culture• Expand sales training program• Spread Brazil Pharma culture toall chains• Ensure excellence for customerservice• Train regional leaders1.Administrative(SSC)• Unification and integration of allback-offices into one singlecenter• Standardize controls andpractices• Cutting costs and simplificationof administrative processes• Systems unification - SAPproject2.Commercial• Integrated procurement andmix optimization• Strengthen relationships withindustry• Maximization of logisticsintelligence from DCs• Standardization of store layoutand utilization of consumerintelligence4.Operations• Consolidate leadership in ourmarkets• Expansion - identify points andanalyze new markets• Monitor sales targets andperformance• Monitor local market practicesand competitionsFocusing on integrating our regional chains and bringing in retail management expertise
  • 15. 15Opened in March 2012, the purpose of the SSC is to integrate back-office activities of all our platformsSSC Aim - More with LessPlug-in more activities in SSC leveraging effort to boost productivityPAS Sant’anaPAS Corporate and FarmaisPAS Mais EconomicaFuture: PAS Big Ben and GuararapesShared Services Center - SSCAdministrative - Back-officesMAPPINGPLUG-INCONTINUOUSIMPROVEMENT123Plugging platform into SSC. Mirroring:activities running in parallel - SSC andplatform - for 60 days, to mitigate errors;Understanding needs of platform, design ofscope and processes;Through quality tools, constant pursuit ofimprovements in process and productivitygains.Plug-in StagesPAS RosárioAdmission to TerminationCalculation and CollectionCalculating ResultsAdministrative-FinancialAdministrative SupportIT SupportPASCenterSharedServices-SSC• SSC in Brasilia, DF• 6 Service Outposts (PAS) executinglocal activities
  • 16. 16PurchasesIntegratedCommercial – ProcurementBusiness Intelligence - Ongoing integration frontSegregatedPurchasing DepartmentsIntegratedPurchasing Department• A purchasing department for each platform• Purchases made separately based on policiesspecific to each regional• Unified structure and commercial conditions• Strengthening relationship with industry• Negotiating nationwide campaigns• Ensuring profitable mix: fewer SKUs and maximizeprofitability by category, manufacturer, tax situationSingle Purchasing Department model with regional cells tounderstand local needs
  • 17. 175 distribution centers strategically located in order to support our regional operationsNorth – 1 DC• Belém do Pará, PAStorage: 50,000 SKUsDistribution centersSupply of owned storesCommercial - LogisticsDistribution centersSouth – 1 DC• Canoas, RSStorage: 12,000 SKUsMidwest – 1 DC• Brasilia, DF - New DC inaugurated in Oct/12Storage: 13,000 SKUsNortheast – 2 DCs• Jaboatão dos Guararapes, PEStorage: 13 thousand SKUs• Salvador, BA - New DC inaugurated in Nov/12Storage: 15,000 SKUsFast delivery capacity and stock replacementPurchases made directly from the industry :Better purchasing conditions
  • 18. 18Commercial - LogisticsDistribution Centers - Improvement and integration frontsAppropriate DC’s Structure :Managing stock and break discontinuity:Efficient store replenishmentCamaçari, BAJaboatão dos Guararapes, PE Canoas, RS• Adequate physical space for the company’s growthmission• Standardization of operating processes across alldistribution centers - systems, indicators, stock control.• Operational excellence for storage, transportation andsecurity, with focus on productivity.Switch photoOperational excellence to support sales growth
  • 19. 19Trade MarketingConstantly working to improve the consumer experienceNon-renovated stores Renovated storeEffort in adjusting mix and layout to maximize sales and provide betterconsumer experienceComplete renovation: store facade and interiorPartial renovation: adjust gondolas and category management(intelligence in organization depending on consumption stimulus )Sant’Ana store, Salvador Shopping. Salvador, BAGuararapes store. Recife, PE
  • 20. 20Trade MarketingTools for optimizing store space: higher profitability and salesCheck-out display: high turnover products to encourageimpulse purchasingGondola point: clusterizing stores by customer profile tomaximize potential of product exposureWork with the industry to increase exposure of products and adjust layout to provide better consumerexperienceDermocosmetics space to display premium productsCategory management : Product layout organizationdepending on consumption driversSant’Ana store, Salvador Shopping. Salvador, BA
  • 21. 21Training & CultureTraining and tools• Correct each sales teams major deviations or productivityproblems;• Educational, training and professional developmentprograms;• Training to offer our clients the same consumer experiencewhichever platform they are visiting;• Integrating methods: endorsement of store facades,uniform, attendance and sales force compensation.Brazil Pharma Sales Training Program - created in 2012Focus on sales has generated robust and tangible results10%90%13%87%MULTIPLICADORLOJAMultiplier share of salesPortion of Sales (%)Before course After courseThinkabout this!MULTIPLIERSTORE
  • 22. 22Training & CultureCulture roadshow• Dimension of Brazil Pharma’ structure, proud to be part of the group;• Delivery of the “Culture plaque”: symbol of Brazil Pharma presencein each store and guideline for employees conduct;• Promote high management – employee proximity: every employeecan reach the Company’s top leadership.Stores visits with management to disseminate the corporate culture all over Brazil84 stores visited since the beginning ofthe project in July/2012
  • 23. Big Ben store, Belém, PAPerformanceSince IPO
  • 24. 24Footprint at and 12 months later the IPO663 Points of sale302 Owned Stores361 FranchisesPlatform @ IPO Actual Platform207 Owned stores369 Franchises237 Owned stores121 Owned stores116 Owned stores1,050 Points of sale681 Owned stores369 Franchises89 Owned stores60 Owned stores153 Owned stores361 Franchises(1) Sant’Ana’s Distribution Center caught fire on December 2011. A new distribution center was inaugurated on November, 2012 ; (2) Includes 11 stores acquired from EstrelaGaldino on April , 2012 and added to Sant’Ana’s store count in June 30, 2012.Therefore they generated no revenues in 9M12.1(1Q11) (3Q12)Distribution CenterOwned storesFranchisesIncreasing Footprint Since IPOStrong delivery since the IPO…
  • 25. 25Incresing operational efficiency and stores productivitySource : Brazil Pharma ; Notes: (1) Considers total stores and distribution centers employees ; (2) Considers total employees (store, distribution centers and administrative).3.7 7.422.6 19.7BRPH @ IPO (1Q11)34,4 51.3BRPH 3Q121.5 3.8-13%+100%+153%+49%Store EBITDA / employee1(R$ thousand)# of store employeesper storeSales per store / employee(R$ thousand)EBITDA / employee2(R$ thousand)Operational Performance Since IPONot only in growth, but also on the performance3.8 3.6 -5%# of administrative + distributioncenter employees per storeStores PerformanceAdministrative Performance
  • 26. 9M12 – FinancialHighlightsMais Econômica store, Canoas, RS
  • 27. 2728.3 29.9 30.5 28.8 31.4 31.31Q11 2Q11 3Q11 1Q12 2Q12 3Q1210.0%12.4%8.6%16.2%13.8% 15.1%1Q11 2Q11 3Q11 1Q12 2Q12 3Q125.8%8.9%6.1%12.1%9.1% 7.8%1Q11 2Q11 3Q11 1Q12 2Q12 3Q12Sales Profile¹Sales Mix(% of Gross Revenues)Average Ticket(R$)(1) Proforma information, except when otherwise indicated.Same-Store Sales (SSS)(Total - %) (Mature Stores - %)31.6% 37.5% 36.5% 37.1%47.5% 46.1% 46.4% 45.9%21.0% 16.4% 17.1% 17.0%2011 (Non-proforma)1Q12 2Q12 3Q12Non-Medicine Branded Generics
  • 28. 28Gross Profit and Gross Margin(R$ Million | % of Gross Revenues)Adjusted EBITDA and EBITDA Margin 2(R$ Million | % of Gross Revenues)Gross Revenues(R$ Million)(1) As of September 30th, 2012, on a proforma basis; (2) Excludes non-recurring expenses.673.6 719.0 699.3 746.8 804.43Q11 4Q11 1Q12 2Q12 3Q12211.3 226.8 211.0 224.5 247.131.4% 31.5% 30.2% 30.1% 30.7%3Q11 4Q11 1Q12 2Q12 3Q1244.0 43.6 36.9 46.3 52.36.5% 6.1%5.3%6.2% 6.5%3Q11 4Q11 1Q12 2Q12 3Q12SG&A Expenses 2(R$ Million)3Q12144.750.1194.824.2%122.72Q12126.251.9178.123.8%1Q1251.5174.224.9%4Q11134.548.7183.225.5%3Q11111.455.9167.328.5%SG&ASG&ASalesSG&A (%)Financial Highlights¹ 9M12
  • 29. FarmaisFarmais franchise, São Paulo, SP
  • 30. 30 30Brazil Pharma• Capturing market share in regions where operation by our owned stores would not be justified• Expansion with little capital investment• Market perception in regions in which we do not yet operateFarmaisLargest chain of franchises in Brazils pharmaceutical retailingFranchisee• Professionalization of point of sale and retail expertise• Better procurement conditions - ensure profitability for the businessStrengthening brandvisibility forconsumers• Purchases made under conditions negotiated for the entire Brazil Pharmagroup (over 1,000 stores) - better margin• More attractive rates for financial products• Team specialized in retail management and trade marketing know-how toboost store sales and product visibility• Managing stocks and optimizing regionalized mix• Legal and Accounting Support• Marketing campaigns with well know artistsStrengtheningperceived value forfranchiseeStrengthening BrandTarget 2013: Farmais nationwidepenetration
  • 31. 31Why to expand the footprint?Addressable market•10,062 stores• Average turn-over ~R$140 thousand/month• Total turn-over ~R$ 1,4Bi / month ~R$ 16,8 Bi /yearSource: IMS internal bases. Data related to medicine salesCat. 1Cat. 2Cat. 3Cat. 4Cat. 5Cat. 6Cat. 7Cat. 8312 stores12,7% market share660 stores12,5% market share1,023 stores12,4% market share1,627 stores12,4% market share2,887 stores12,4% market share5,548 stores12,5% market share11,172 stores12,6% market share41,052 stores12,6% market shareR$ 1,267R$ 592R$ 377R$ 237R$ 134R$ 70R$ 35R$ 10Average monthly sales in R$ 000
  • 32. BPHA3 in the CapitalMarket
  • 33. 33Performance BPHA3Performance BPHA3 since IPO¹-YTD²Share/price after Stock splitPerformance BPHA3 IPO¹-YTD²(Index 100: 06/24/11)R$ 14.60BPHA3169IBOV101+69,4%IPO-YTD²Source: Bloomberg. 1- IPO Brazil Pharma: 06/24/2012. 2- Close of trading 01/21/13. BPHA3 R$14.60; Ibovespa 61.899 points.IbovespaIPO BRPH¹ - YTD²: 1.4%2012: 7.4%Brazil PharmaIPO BRPH¹ - YTD²: 69.4%2012: 69.5%Average daily volume (2012): R$5.4 millionEnd of Minimum LotBPHA3IPOEnd of trading restrictions withminimum lot of 10,000 shares10,000 100 sharessince 12/26/12020406080100120140160180Brazil Pharma IBOVR$ 0,00R$ 2,00R$ 4,00R$ 6,00R$ 8,00R$ 10,00R$ 12,00R$ 14,00R$ 16,00
  • 34. Renato LoboInvestor Relations DirectorOtavio LyraInvestor Relations ManagerMarina SousaInvestor Relations CoordinatorPhone: +55 (11) 2117- 5299E-mail: ri@brph.com.brIR Website: ww.brph.com.brIR CONTACTCentro de Serviços Compartilhados - CSC, Brasília, DF