3. Pharmacy Retail: A Growth History…
Sales Performance in the Brazilian Pharmacy Retail Sector from 1996-2011 (R$ Billion)
CAGR 03-11 Generics: 37%
1997 – 2000 2001 - 2002 2003 – 2005
1997: Asian Crisis 2006 – 2007 2008 – 2011
2002: Crisis pre-Lula election 2003-04: First years of
1998: Russian Crisis 2006: Second Lula election 2008: Subprime Crisis
2001: Argentine Default Lula´s election
1999: Real Depreciation 2010: Greece Debt Crisis
2004: Mensalão scandal
2000: Internet Bubble burst
Macro Drivers Micro Drivers Timing
Regional Fragmented
Income Growth Population Aging Generic Drugs Formalization
Brands Market
Sources: IBGE. Farmácia Popular. Health. OMS IMS. Brazil Central Bank
3
4. Pharmacy Retail: ... With Consolidation Opportunity
Brazil Pharma is located in strategic regions with low competition. high growth perspectives and large
complementarities to top players.
Market Share and Players Footprint
Brazil Pharma Focus
Revenues Drogaria Peers Focus
Raia + Brazil
Breakdown per S. Paulo +
State Drogasil Pharma
Pacheco
São Paulo 31%
South
Rio de Janeiro 14% East
Region
Minas Gerais 10%
Rio Grande do Sul 8%
Paraná 6%
Goiás + DF 5%
Bahia 4%
Other
Santa Catarina 4%
Regions
Pernambuco 3%
Ceará 3%
Pará 2%
Others 11%
Source: IMS Health. Companies web site. Brazil Pharma
4
6. Brazil Pharma: Ready to Grow
Largest Pharmacy Retail Company in Brazil outside the Southeast
Geographic Location Strong Organic Growth Capacity (# Stores)
643
16
1 86
237 own stores
378
20 1
102
4
292 86
15 221 71
87
71
7
101
8
92 101 own stores 2009 2010 2011 1Q12
7
107 own stores Profitable Mix (1Q12 Sales Mix)
Brazil Pharma Abrafarma
998 points of sale
643 own stores 12.4%
7
355 franchises 355 franchises 30.7%
191
56.9%
198 own stores
Non-Medicines
Branded
Generics
6
7. Brazil Pharma: The Shareholders
BTG is our main Shareholder
BTG Operating
Free Float
Pactual Partners
39% 38% 23%
100% 100% 100% 100% 100%
Rosário Mais
Sant’ana(1) Big Ben Farmais
Distrital Econômica
(1) Including Sant’ana acquisition that is still pending shares incorporation
7
8. Brazil Pharma: Our People
Experienced management with more than 25 years in the pharmacy retail industry on average
# Years # Years
Management Pharmacy Retail Financial Industry Experience
André Sá
CEO 2 12
Marcelo Doubek
CFO
2 14 Entrepreneurship
Experience
Renato Lobo n/a 18
Investor Relations
Carlos Dutra n/a
20
Comercial Director
Gilberto Portela
30 n/a
Head of Institutional Relations
Álvaro Silveira Jr.
22 n/a
Head of Midwest Operations Pharmacy Retail
Wilson José Lopes
Head of South Operations
25 n/a Experience
Raul Aguilera
25 n/a
Head of North and Northeast Operations
José Santana 30 n/a
Head of Bahia Operations
Board of Directors
Marcelo Kalim
n/a 15
Board Member
Financial Expertise
Carlos Fonseca
n/a 14
Board Member
Álvaro Silveira
36 n/a
Board Member
Retail Expertise
Roberto Martins
20 22
Board Member
José Luiz Depiere
14 n/a
Board Member
Artur Grynbaum
25 n/a
Manufacturing Expertise
Independent Board Member
8
9. 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) Total number of stores (own stores + franchisees)
998(2)
245
200
986(1)
824
100
Debentures
681 Issuance
45
Sant’ana Beauty’in
10
1 663 Big Bem Acquisition Acquisition
Acquisition
Sep/09-Apr/10 May/10-Jan/10 Jul/10-Jan/11 Feb/11-Sep/11 Oct/11-Dec/11 Jan/12-Feb/12
Set/09 - Abr/10 Mai/10 - Jan/10 Jul/10 - Jan/11 Fev/11 - Set/11 Out/11 - Dez/11 Jan/12 - Fev/12 506
498
Mais
468 Econômica IPO
465 Acquisition
Launching the
397 Guararapes and
Multiplus
384 RNF Merger
Fidelity
Farmácia dos program (GRD)
(RNF) Rede Grupo Rosário Pobres´
Nordeste de Distrital (GRD) points-of-sale
Farmácias´ Acquisition Acquisiton
Farmais Foundation points-of-sale
Acquisition Acquisition
Sep May Jun Jul Aug Oct Jan Mar Jun Nov Feb Apr
2009 2010 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012
(1) Pro forma as 30/12/2011 (2) Pro-forma as 31/03/2012 9
10. Brazil Pharma: Strategies to Create Value
Operational Organic Growth
Efficiency
Opening of new stores
Strong synergy to come Integration / Stabilization
to consolidate local
through integration Restructuring Governance
leadership and enter
G&A Synergies
new states
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
Market Consolidation Differentiation Geographic presence in all regions boosts the
opportunity to grow organically
Highly fragmented Product development.
market with private label and loyalty
opportunities for programs
consolidation
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11. Competitive Geographic Position with Differenced Mix
Medicines Sales Mix 1Q12
Located in strategic regions Brazil Pharma Abrafarma
Lower competition. giving higher gross margin
High growth with higher Real Estate opportunity 26%
Complementarity with Large Networks
74%
Favorable Mix to capture the potential of generics in Brazil
Higher HPC participation gives higher profitability per m2 Branded Generics
Brazil Pharma Focus / Competitors Drugstores per region Total Sales Mix 1Q12
Brazil Pharma Abrafarma
12.4%
30.7%
56.9%
Brazil Non-Medicines
More dense
Pharma Focus Branded
Competitors Focus Less dense Generics
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12. The New Brazil Pharma
Brazil Pharma consolidates its leadership position in four of the five regions of Brazil. becoming the
(1)
largest retail pharmacy. excluding Southeast.
2011 Abrafarma Ranking
1
Number of Stores Number of Stores Revenue
(1).
North Northeast Mid-West Southeast South Brazil
1o
2o
(2)
n/a
3o
(2) (2) (2) (2) (2)
n/a n/a n/a n/a n/a
4o
(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. 12
13. Results Consistency with Margin Stability
Own Store Growth Gross Revenue
# of own stores (pro forma) (R$ million; Pro-forma)
643
16
378
292 86
221 71
71 Gross Profit and Gross Margin
(R$ million)
2009 2010 2011 1Q12
Stores Maturation
131
20% Stores with less than 12 months EBITDA and EBITDA Margin
Stores with 12 months to 24 months (R$ million)
336 75
52% 12% Stores with 24 months to 36 months
Stores with more than 36 months
101 (mature)
16%
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14. Brazil Pharma: Comparing With The Peers
Solid track record in sales. Gross Margin and EBITDA
Own Stores (as of March 31 2012) 1Q12 Gross Profit and Gross Margin
(R$ million. % of Gross Revenues)
1Q12 Selling & General Administrative and Other
Expenses and % of Gross Revenue 1Q12 EBITDA and EBITDA Margin
(R$ million. % of Gross Revenues) (R$ million. % of Gross Revenues)
14
16. Brazil Pharma: Integration Process
We have three operations areas:
(i) Procurement
(ii) Sales and Operations
Corporate
(iii) Back Office
Operations Administrative
Procurement
(SSC)
Purchase process Sales (pricing. mix. Finance
Relationship with location Accounts Payable
manufactures New stores Human Resource
Service Level Logistics Accounting
Working Capital IT
Legal department
Benefits Gross margin Sales increase G&A Reduction
Operational efficience
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17. SSC Brazil Pharma
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
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19. Sales and SSS Growth
SSS and Sales acceleration during 2012
Gross Revenue SSS (Same-Store Sales)
(R$ million)
699.3
+26.4%
553.1
pro forma
1Q11 pro forma 1Q12 pro forma
699.3
305.2 323.2
274.1
240.0
pro forma
1Q11 2Q11 3Q11 4Q11 1Q12 pro forma
SSS SSS Mature(36 months)
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20. 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
Selling, General and Administrative Expenses
Gross Profit and Gross Margin (SG&A)¹ and % of Gross Revenue
(R$ million, % of Gross Margin) (R$ million) 25.4% 24.9%
174.2
+27.0% 140.7
pro forma 1Q11 pro forma 1Q12 pro forma
37.5% 28.8% 30.5%
27.8% 26.6%
32.9% 34.3% 33.5% 30.2% 24.9%
211.0
121.1 174.2
94.1 102.1
78.9 79.0 81.0 98.7
66,7
1Q11 2Q11 3Q11 4Q11 1Q12 pro forma 1Q11 2Q11 3Q11 4Q11 1Q12 pro forma
Gross Profit Gross Margin SG&A % Gross Revenue
(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.
20
21. EBITDA and Net Income
EBITDA margin and net margin pressured by recent acquisitions
EBITDA and EBITDA Margin 1
(R$ million, % of Gross Revenue)
+45.1%
pro forma
(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.
Net Income and Net Margin (% of Gross Revenue) 1
(R$ million)
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
21
22. Debt
Debt affected by recent acquisitions. Debentures improving debt profile in 2Q12
Debt Breakdown by Indexes
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)
* R$150 million to be paid in stock issuance for Sant’ana acquisition
Debentures Issue
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.
22
23. Contact Details
Investor Relations
Renato Lobo Brazil Pharma S.A.
IR Officer
Mara Boaventura
IR Manager Rua Gomes de Carvalho. 1629
6th and 7th floors
ri@brph.com.br CEP 04547-006
(55 11) 2117 -5200 São Paulo. SP. Brazil
www.brazilpharma.com.br/ri
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