1
A New Companyfor a New Market                   2
Profarma | DisclaimerThis presentation does not constitute an offering, invitation or solicitation of any kind to subscrib...
Long-term Growth                   4
Profarma | Long-Term Growth StrategyProfarma’s long-term growth strategy rests on three main pillars.                     ...
Profarma | A Strategy Based on A Broad Market Vision and Perfect Execution                               Strategic Positio...
Profarma | Main EventsA proven history of success: a unique ability to enter new regions and segments and make successful ...
Profarma | Our Growth in Figures                                                    Rise in Gross Revenues In R$ million  ...
Profarma | Revenues and EBITDA                             Diversification                                                ...
Sector Dynamics                  10
Global Pharmaceutical Distribution and Retail Industries | Overview       Developed countries: An                       Th...
Global Pharmaceutical Distribution and Retail Industries | Main Trends                                           World Ran...
The Brazilian Pharmaceutical Market | Overview A unique combination of high growth rates and sound industry fundamentals. ...
Distribution in Brazil | A Fragmented, Highly Competitive Market                    Distribution Overview                 ...
Distribution in Brazil | A Fragmented Market with Opportunities• The Brazilian pharmaceutical distribution market is still...
The Retail Industry in Brazil | A Fragmented Market    The retail market is still very fragmented, with about 60,000 drugs...
The Retail Industry in Brazil | Opportunities for Establishment in the Retail Industry                                  Th...
Vertical Integration: The MixedModel in Brazil and Worldwide                                  18
The Mixed Model | Recent Moves in Latin America in Line with a Global Trend                             Mexico            ...
The Mixed Model | The Changing Reality in Brazil                 Examples of Brazilian Pharmaceutical Distributors Migrati...
The Mixed Model | The Main Advantages for ProfarmaVertical integration offers Profarma several opportunities to create val...
Acquisition of Casa Saba Brasil                                  22
Profarma | Overview of Casa Saba Brasil                       Highlights                                             Trans...
Casa Saba Brasil | Transaction Rationale                   Robust entry on the retail sector through an 85 store platform...
Profarma | A New Company                                                Mixed Model                Distribution           ...
Analyst Coverage                   26
Profarma | Analyst Coverage   Company           Analyst                   Phone number          Email address    Morgan St...
IR contacts                     Max Fischer | Chief Financial and IR Officer                             Beatriz Diez | IR...
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Profarma Casa Saba Brasil Acquisiton Conference Call 2

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Profarma Casa Saba Brasil Acquisiton Conference Call 2

  1. 1. 1
  2. 2. A New Companyfor a New Market 2
  3. 3. Profarma | DisclaimerThis presentation does not constitute an offering, invitation or solicitation of any kind to subscribe for or purchase shares or any other type of securities, nordoes this presentation or any information contained herein form the basis of any type of contract or commitment.This material should not be construed as investment advice to potential investors. This information is not intended to be complete and is presented as asummary. No trust should be built upon the basis of the accuracy of the information herein and no representation or guarantee, whether expressed orimplied, is made as to the accuracy of the information herein.This presentation contains forward-looking statements that may be based upon forecasts which, as such, are no guarantee of future performance.Investors are advised that these forecasts are and will be subject to countless risks, uncertainties and factors related to Profarma’s operations andbusiness environments, such as: competitive pressure, the performance of the Brazilian economy and of the pharmaceutical industry and changing marketconditions among other factors mentioned in the documents released by Profarma. These risks may cause the Company’s results to be materially differentfrom any future results expressed or implied by such forward-looking statements.Although Profarma believes the expectations and assumptions contained in the forward-looking statements and information to be reasonable and basedupon data presently available to its management, the Company cannot guarantee future results or events. Profarma does not assume the obligation toupdate any forward-looking statements and information.It is summary information not intended to be complete and should not be deemed investment advice by potential investors. This presentation is strictlyconfidential and may not be disclosed to any other persons. We make no statements and no guarantee as to the accuracy, suitability or completeness ofthe information posted herein, which should not be relied upon for investment decisions. 3
  4. 4. Long-term Growth 4
  5. 5. Profarma | Long-Term Growth StrategyProfarma’s long-term growth strategy rests on three main pillars. Selected Acquisitions New Segments Regional Expansion 5
  6. 6. Profarma | A Strategy Based on A Broad Market Vision and Perfect Execution Strategic Positioning Comments Business Segment Profarma has been consistently implementing the strategy of diversifying its pharmaceutical distribution business by Distribution Hospitals Specialties Services Retail breaking into new market segments such as: Scale  The hospital industry  Special products (vaccines, dermatological products, higher value-added products, etc.) Price  Value-added services for manufacturersGoals  Retailing Quality Profarma’s new business segments complement and strengthen the Company’s position in the industry: Products Distinct  Higher-margin segments  Synergies with the logistics segment Initial Focus Synergy Approach New Focus  Synergies with storage services Selected Portfolio  Synergies with the purchasing department 6
  7. 7. Profarma | Main EventsA proven history of success: a unique ability to enter new regions and segments and make successful acquisitions. Timeline CAGR Market (97-00) = 12% CAGR Market (04-10) = 12% Market (9M11-9M12) = 17% Dimper’s DC Hospitals (RS) Prodiet Casa Saba Minas K+F Hospitals in SP Brasil Gerais (SP) DF CE GO Espírito In RJ IPO Arpmed Santo Bahia PE Paraná Vaccines 1996 1998 1999 2001 2003 2004 2005 2006 2007 2009 2011 2012 2013 Organic Growth / New Regions New Segments / Products Selected Acquisitions 7
  8. 8. Profarma | Our Growth in Figures Rise in Gross Revenues In R$ million 3,317 3,042 3,133 2,940 2,832 2,596 1,968 1,725 1,443 1,102 2003 2004 2005 2006 2007 2008 2009 2010 2011 9M12 8.4% 9.3% 9.6% 9.6% 11.5% 11.7% 10.9%* 10.2%* 9.2%* 9.0%* Market Share | * Not including similar medications 8
  9. 9. Profarma | Revenues and EBITDA Diversification EBITDA and EBITDA MarginAs a % of Gross Revenues In R$ MM and as a % of Net Revenues 2.0% 2.7% 3.1% 2.7% 4.3 6.7% 4.1% 4.5% 3.9 12.6% 3.5 3.1 3.0 3.1 17.8% 18.9% 2.7 17.8% 7.1% 110.7 5.7% 5.7% 13.5% 7.0% 8.6% 80.1 79.9 78.7 75.9 73.4 68.1 67.7% 69.7% 66.5% 55.4% 2006 2008 2010 9M12 2006 2007 2008 2009 2010 2011 9M12 Branded Generics OTC EBITDA EBITDA Margin (%) Health and Beauty Hospitals + Vaccines Specialties 9
  10. 10. Sector Dynamics 10
  11. 11. Global Pharmaceutical Distribution and Retail Industries | Overview Developed countries: An This process was driven by the scalability inherent to the industry, This trend benefited companies establishment process has which leads to an increase in with higher scales and greater taken place over the last 15 companies’ earnings thanks to higher volumes, better negotiation efficiency, able to obtain high years. There are currently terms with suppliers and, returns and profitability. few players. consequently, higher margins. M&A Transactions in the Distribution and Top 3 Distributors’ Market Share Retail Industries% of the Total Market In € billion 57% 43% 43 42 100% 36 35 93% 92% 30 23 24 10.4 19 21 21 72% 16 64% 61% 58% 55% 6.6 39% 5.5 4.2 3.9 4.3 2.9 2.5 2.5 13% 1.8 1.9 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Transaction Amounts # of Transactions 11Source: IMS Health 2010. Source: J.P. Morgan
  12. 12. Global Pharmaceutical Distribution and Retail Industries | Main Trends World Ranking of Distributors Ranking Distributor Growth 11/10 Sales EBITDA Margin Mixed 1 13.0% 31.2 6.4% 2 2.9% 30.8 3.0% 3 -3.0% 28.8 2.6% N.A. 4 3.0% 112.0 2.1% 5 4.0% 102.6 1.8% 6 3.0% 80.2 1.6% Mixed Model: A Reality Worldwide, with Different Focuses Strong presence through company-owned chains Source: IMS Health 12 Focus on services / franchises
  13. 13. The Brazilian Pharmaceutical Market | Overview A unique combination of high growth rates and sound industry fundamentals. Sales of the Brazilian Pharmaceutical Industry 1996-2011 (R$ billion) 41.8 36.0 30.0 26.1 23.2 20.9 18.3 16.6 13.1 14.4 10.3 11.2 11.6 8.3 9.4 7.0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2001: Argentine Default 2006: Lula’s Re-election 2008: Subprime Crisis 1997: Asian Crisis 2003-04: First Years 1998: Russian Crisis 2002: Pre-Lula of Lula’s Administration 1999: Real Depreciation Election Crisis 2004: Mensalão 2000: Internet Bubble Burst (cash-for-votes scheme) Scandal Macro Drivers Micro Drivers Timing Income Growth Aging Population Generic Drugs Regional Brands Fragmented Market FormalizationSource: IBGE. Farmácia Popular, Health, OMS, IMS, Brazil Central Bank 13
  14. 14. Distribution in Brazil | A Fragmented, Highly Competitive Market Distribution Overview Share of the Top 3 Distributors by Geographical Region Total area (km²) 8.5 MM 42% # of Drugstores 60 thd Share: 7.8% 28% Total Market R$41.8 Bil Market: R$3.2 Bil Top 3 Area: 1,606,372 km² # of Drugstores: 6.7 thd Share: 4.1% Market: R$1.7 Bil Area: 3,853,327 km² 2006 2011 # of Drugstores: 4.3 thd • Highly fragmented: The top 3 account for 42% of Share: 16.3% the Brazilian market, vs. 92% in the USA, 72% in Market: R$6.8 Bil Area: 1,554,257 km² Mexico and 55% in Argentina; # of Drugstores: 4.3 thd • A slow establishment process: mainly labor and Share: 54.6% tax liabilities and contingencies hinder Market: R$22.8 Bil consolidation in the distribution industry; Area: 924,511 km² # of Drugstores: 27.2 thd • Margins under pressure from the consolidation of the retail industry; Share: 17.2% Market: R$7.2 Bil • A drop in part of the tax incentives. Area: 575,410 km² # of Drugstores: 12.4 thdSource: IMS, IBGE Source: IMS, IBGE 14
  15. 15. Distribution in Brazil | A Fragmented Market with Opportunities• The Brazilian pharmaceutical distribution market is still much more fragmented than in the U.S. and Europe;• The top Brazilian distributors have not yet felt the need to adopt the European mixed business model or the American model, with services. Business Segments of the Main Pharmaceutical Distributors in Brazil Retail / Distribution European Mkt U.S. Mkt Distributor Medications Vaccines Hospital Health and Beauty Specialties Government Retail Services                        Source: IMS Health Profarma has the scale, efficient operational platform and execution capacity needed to become one of the major mixed distribution players in Brazil. 15
  16. 16. The Retail Industry in Brazil | A Fragmented Market The retail market is still very fragmented, with about 60,000 drugstores in Brazil. Independent stores continue to play an important role in the retail industry – The top chains in Brazil are establishing themselves through geographical expansion whereas medium-sized chains are establishing themselves regionally. Top Established Players – 2011 Presence of Chains by Brazilian Region Groups Names # of Stores Relevant Market Chains S SW MW NE N Droga Raia 389 Raia Drogasil Aug 2011 Drogasil 363 DSP Pacheco Top 5 Chains São Paulo 374 23,3% Pague menos Aug 2011 Pacheco 348 Brazil Pharma Pague Menos 466 Araújo Araújo 99 Panvel Catarinense 197 Nissei Top 6-10 Chains Nissei 209 7,2% Onofre Panvel 274 Extrafarma Ultrafarma 6 Drogasmil Bifarma Bigfarma 86 Venâncio Bom Preço 180 Brazil Pharma Big Bem (PA) 128 Drogal Rosário (DF) 85 Angélica Venâncio 17 Drogãosuper Top 11-20 Chains 8,5% Indiana Extrafarma 177 Estrela Galdino A Nossa Drog Mais Econômica (RS) 187 Guararapes Santana (BA) 103 Permanente Farmais Onofre 39 São Bento São João (RS) 240 Moderna Other Chains Outras 3.713 12,8% Santa Lúcia Independent Independentes 57.825 48,3% Minas Brasil 16Source: Media publications. IMS Distribution Study.
  17. 17. The Retail Industry in Brazil | Opportunities for Establishment in the Retail Industry The Growth of 3 of the Top 5 Players – Number of Stores 1,050 828 688 776 737 582 503 555 423 489 400 333 2009 2010 2011 2012 2009 2010 2011 2012 2009 2010 2011 2012 2011 2011 2011 Sales EBITDA Net Income Sales EBITDA Net Income Sales EBITDA Net Income R$4.7 Bil R$271.5 MM R$151.4 MM R$2.6 Bil R$155.4 MM R$95.7 MM R$2.9 Bil R$232.2 MM R$109.1 MM 17
  18. 18. Vertical Integration: The MixedModel in Brazil and Worldwide 18
  19. 19. The Mixed Model | Recent Moves in Latin America in Line with a Global Trend Mexico Chile • Socofar is one of the top three pharmaceutical• Founded in 1892, Grupo Casa Saba is the top distributors in Chile; • It owns the largest retail chain in that country (Farmacias pharmaceutical distributor in Mexico, with US$2.8 billion Cruz Verde), which has over 500 stores and established net revenues in 2010; itself after the acquisition of Farmacias Conosur in 2001• Grupo Casa Saba is also present in the retail market. It (ranking 4th in the industry). had over 160 stores under the brands Farmacias ABC and Farmacias Provee de Especialidades (in Mexico) and Peru Drogasmil (in Brazil) at the close of 2009;• In October 2010, Grupo Casa Saba acquired Farmacias Ahumada AS and became the largest mixed distributor in • Quimica Suiza, the top pharmaceutical distributor in Peru, Latin America, with a retail platform of over 1,500 stores acquired Boticas BTL, one of the top drugstore chains in in Mexico, Brazil, Chile and Peru. that country in 2011 and now has a retail platform of over 300 stores. 19
  20. 20. The Mixed Model | The Changing Reality in Brazil Examples of Brazilian Pharmaceutical Distributors Migrating to the Mixed Model Northeast • Grupo Jorge Batista, one of the top distributors in Northeastern Brazil, owns the retail chain Globo Guararapes (with 30 stores in Rio Grande do Norte State), has recently acquired Lusitana chain (with 25 stores in Piauí State) and is engaged in negotiations with Drogaria Ceará, which has 20 stores in Fortaleza, Ceará State. Mid-West • Founded in 1972, Distribuidora Brasil distributes pharmaceuticals in the states of Mato Grosso and Mato Grosso do Sul and has recently expanded its presence to the states of São Paulo and Paraná, and the Federal District. It operates in the retail industry through Drogaria São Bento, a chain with about 75 drugstores in Mato Grosso and Mato Grosso do Sul. Southeast • Headquartered in Ribeirão Preto (São Paulo State), Drogacenter is a pharmaceutical distributor operating in the states of São Paulo, Minas Gerais, Goiás and Rio de Janeiro. The company owns the largest drugstore chain in the country of São Paulo State (Drogão Super), with over 50 stores inland, in the Santos area and Southern Minas Gerais State. North • Imifarma is a pharmaceutical distributor based in Belém (Pará State). The company owns Extrafarma drugstore chain, with over 70 stores located in the states of Pará, Maranhão and Ceará. South • Dimed was one of the first distributors to adopt the mixed model in Brazil. It operates in the industry under the Panvel brand, which is currently the largest drugstore chain in Southern Brazil, with 290 stores. 20
  21. 21. The Mixed Model | The Main Advantages for ProfarmaVertical integration offers Profarma several opportunities to create value. Efficiency Gains Higher Gross Margin A management structure combining Adoption of the best purchasing optimized logistics, an integration terms and conditions and gross between systems and processes, a margin and leveraging of the dispersal of expenses and the combined scale of purchases in elimination of redundancies. new business negotiations. Complementarity Strategic access to information Growth and market needs will be able to Entry into the retail industry, a leverage new business (e.g. provision of fragmented market with multiple additional services to industry and retail). opportunities for establishment 21
  22. 22. Acquisition of Casa Saba Brasil 22
  23. 23. Profarma | Overview of Casa Saba Brasil Highlights Transaction Geographical Coverage • Two strong brands in the market: “Drogasmil” and • Aquisition of 100% of CSB Drogarias S.A.(Drogasmil “Farmalife” with complementary positioning; / Farmalife) total equity, for R$ 87.0 million, to be paid net of debt and cash balances; • Platform of 85 stores; • Gross Revenue of R$ 332.8 million in 2011; • 100% paid upon CADE´s approval of the operation. • Leading position in Rio de Janeiro (2nd largest market in Brazil); Geographical Coverage • Strong presence in shopping malls (less competitive environment); • Relevant participation in the hygiene and beauty RJ segment, and also dermocosmetics. Rio de Janeiro State 23
  24. 24. Casa Saba Brasil | Transaction Rationale  Robust entry on the retail sector through an 85 store platform, being one of the largestDiversification drugstore chains in Brazil, second largest in Rio de Janeiro; and Scale  Creation of one of the largest mixed distribution and pharmaceutical retail platforms in Latin America, and the largest in Brazil.  Company with a differentiated position to become an important player of the industry consolidation process; Growth  Improved flexibility and capillarity for the entry into new markets where Profarma already has operations (support from the local Profarma team).  Support from regional industry managers, generating possible synergies in purchases, marketing funds, logistics and back-office; Sinergy  Tax optimization in Rio de Janeiro;  Easier integration and management of retail operations. 24
  25. 25. Profarma | A New Company Mixed Model Distribution Retail A Solid Regional Expansion and Diversification of Channels and A Fragmented Retail Market Products  3rd largest distributor in Brazil, with 12  Mixed operation model (distribution + distribution centers and nationwide retail) already established in the coverage; European market;  The Company also has two platforms +  Greater consolidation opportunity: (Prodiet and Arpmed) focused on the more than 80% of the points of sale are hospitals, government and specialties still independent shops. segments. 25
  26. 26. Analyst Coverage 26
  27. 27. Profarma | Analyst Coverage Company Analyst Phone number Email address Morgan Stanley Fernando Amaral (55 11) 3048-6088 fernando.amaral@morganstanley.com Merrill Lynch Mauricio Fernandes (55 11) 2188-4236 mauricio.fernandes@baml.com Credit Suisse Marcel Moraes (55 11) 3841-6302 marcel.moraes@credit-suisse.com Itaú BBA Juliana Rozenbaum (55 11) 3073-3040 juliana.rozenbaum@itausecurities.com Banco Fator Gabriel Gaetano (55 11) 3049-9480 ggaetano@bancofator.com.br BTG Pactual João Carlos dos Santos (55 11) 3383-2384 joaocarlos.santos@btgpactual.com Votorantim Andre Parize (55 11) 5171-5870 andre.parize@votorantimcorretora.com.br 27
  28. 28. IR contacts Max Fischer | Chief Financial and IR Officer Beatriz Diez | IR Manager 28Phone number.: 55 (21) 4009-0276 | E-mail: ri@profarma.com.br | www.profarma.com.br/ir

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