- Gross revenues increased 6.6% year-over-year to R$976.3 million in 3Q14, with same-store sales growth of 6.3%. However, EBITDA was negative at R$34.8 million.
- Key factors negatively impacting financial results included weak domestic demand, world cup holidays, and price increases to level with the market. The company also underwent changes to its commercial management system.
- Looking ahead, the company plans to focus on commercial initiatives, optimize inventory and generic drug mix, intensify supplier partnerships, and monetize prior investments to improve financial performance.
2. •Gross revenues of R$976.3 million, an increase of 6.6% over 3Q13;
•Total SSS of 6.3% with 3.5% in mature stores;
•Gross margin of 27.0% over gross revenues, 7.4p.p above 2Q14 figures;
•EBITDA:
•Negative EBITDA of R$34.8million with EBITDA margin of -3.6%, 5.1p.p. above 2Q14 figures;
•Negative EBITDA of R$13.2million with EBITDA margin of -1.4%, 7.3p.p. above 2Q14 figures (ex- REFIS);
Operational & Financial
* EBITDA for the period excludes the effects of the Company’ s joining the Tax Recovery Program (REFIS)
4. 154
153
153
193
188
188
127
128
128
259
249
254
2
5
17
0
2013
Organic growth
Closings
1S14
Organic growth
Closings
3Q14
733
718
723 4.1% 10.5% 10.8% 74.6% Stores with up to 12 monthsStores with 12 to 24 monthsStores with 24 to 36 monthsStores with more than 36 months
5. External Factors:
•Weakening of domestic demand;
•World cup holidays. Internal Factors:
•Price increases: leveling with the market;
•Change of commercial management system (“Gestão”) in Mais Economica;
•Qualitative adjustments to adequate inventory profile in each platform;
•Basis of comparison affected due to additional sales in the 3Q13 related to “Ruptura Zero”.
6. Generic penetration in medicine sales
Main focus: Rosario, Mais Economica e Sant’Ana
•Generic sales mix: July August September 15.9% 16.6% 17.4%
7. Negative effects:
•Reduction of purchase volume: less trade revenues;
•Obstacles to DC performance.
Recovering of gross margin :
•Price increases: leveling with the market;
•Shrinkage reduction;
•Better mix of generics in Rosario, Sant’Ana and Mais Economica operations.
8. •REFIS: R$18.4 million
•Reduction of workforce
•REFIS: R$5.4million
R$214.5 million (ex-REFIS)
R$65.4 million (ex-REFIS)
(ex-REFIS)
(ex-REFIS)
9. -141.0 -82.8 -34.8
11QT1144 22TQ1144 33TQ1144
1 - Portion related to commercial establishments amortization (2013 only).
2- Adjustments made in the 2013 results when published were maintained
• REFIS: R$21.7 million
Net income (loss) 42,325 (185,296) (143,138) (92,466) 36,870 (420,900) • REFIS: R$24.7 million
% Net margin 4.6% -19.9% -15.0% -9.5% 1.4% -14.7%
(-) Non recurring expenses (35,000) - - - (32,406) -
(-) SOP expenses 3,205 - - - 8,904 -
(-) D&A Commercial establishments¹ 2,987 - - - 10,594 -
Adjusted Net Income (loss) 13,518 (185,296) (143,138) (92,466) 23,961 (420,900)
% Adjusted net margin 1.5% -19.9% -15.0% -9.5% 0.9% -14.7%
Lucro líquido (prejuízo) ajustado (ex REFIS) 13,518 (185,296) (143,138) (67,771) 23,961 (396,205)
% Margem líquida ajustada (ex REFIS) 1.5% -19.9% -15.0% -6.9% 0.9% -13.9%
Net Income reconciliation (R$'000) 3Q13 1Q14 2Q14 3Q14 9M13 9M14
-15.2%
-8.7%
-3.6%
-1.4% (ex-REFIS)
R$-13.2 million (ex-REFIS)
10. •Real change in net debt was R$77.2 million, considering the variation of derivatives (assets) of R$ 15.6, not deducted from the balance of the debt;
•Additional short-term borrowings: R$ 98 million;
•Debt restructuring plan (Lengthening of debt maturity).
Cash position and indebtedness (R$'000)3Q134Q131Q142Q143Q14(+) Loans and financing 247,170209,490204,884454,124532,457Short term150,963124,507125,800386,812461,246Long term96,20784,98379,08467,31271,211(+) Debentures260,704549,809555,276120Short term11,98215,249555,276120Long term248,722534,560000(+) Accounts payable for investment acquisition179,652147,837156,61592,61993,004Short term82,68170,300108,03944,11043,556Long term96,97177,53748,57648,50949,448(=) Total Indebtedness687,526907,136916,775546,755625,461Short term (%)35.7%23.2%86.1%78.8%80.7% Long term (%)64.3%76.8%13.9%21.2%19.3% (-) Cash and cash equivalents(213,132) (405,914) (98,131) (51,340) (37,224) (=) Net Debt474,394 501,222 818,644 495,415 588,237 Net debt/Adjusted EBITDA (LTM)2.5 X3.3 XNANANA
11. •The increase in inventories is due to the seasonality effects in Big Ben operation, which was partially offset by longer payment terms from suppliers;
Working capital3Q134Q131Q142Q143Q14Accounts receivable561568Inventories112107888694Suppliers5677574751Working capital in days6236464651
12. 1- The variation in working capital includes the change in accounts receivable, inventories and suppliers.
Cash flow Statement (R$'000)3Q131Q142Q143Q149M139M14EBT50,559 (196,448) (151,019) (88,907) 54,164 (436,374) (+) Depreciation and amortization18,732 28,591 20,664 19,210 52,248 68,465 (+/-) Others(34,379) 19,572 27,221 27,954 (14,165) 74,747 Operating cash generation34,912 (148,285) (103,134) (41,743) 92,247 (293,162) (+/-) Change in working capital¹(39,520) (110,467) 12,634 (17,304) 36,415 (115,137) (+/-) Change in other assets and liabilities6,498 (10,682) 50,453 28,000 (110,719) 67,771 Cash consumption(33,022) (121,149) 63,087 10,696 (74,304) (47,366) Income Tax & Social Contribution payed(4,646) (1,235) (342) (3,470) (6,098) (5,047) Net cash generated by operating activities(2,756) (270,669) (40,389) (34,517) 11,845 (345,575) (-) Capex from operations(31,280) (33,934) (25,288) (19,720) (105,232) (78,942) (-) Acquisitions(1,542) 3,688 (70,089) (493) (114,293) (66,894) Net Cash from investing activities(32,822) (30,246) (95,377) (20,213) (219,525) (145,836) (+/-) Loans and financing92,508 (7,167) (311,024) 40,613 51,091 (277,578) (+/-) Equity funding / Dividends(6,005) 299 399,999 1 970 400,299 Net Cash from financing activities86,503 (6,868) 88,975 40,614 52,061 122,721 Change in cash and cash equivalents50,926 (307,783) (46,791) (14,116) (155,619) (368,690) Cash and cash equivalents - opening balance162,205 405,914 98,131 51,340 368,751 405,914 Cash and cash equivalents - closing balance213,132 98,131 51,340 37,224 213,132 37,224
13.
14. •Mr. Igor Rongel, previously responsible for Farmais’ operation, took over as Commercial Director. Mr. Igor Rongel and Mr. Renato Lobo, Director of Operations, report directly to the CEO of the Company;
•Intensify partnership with key suppliers seeking greater specialization with emphasis on the above categories;
•Proximity to the other EBM: more objective and faster strategic decision making.
15. Monetize investment made:
•Distribution Centers
WMS system implemented in all DCs – appropriate service level
Controlled Drugs’ authorization still pending;
•SAP
Implemented in 3 platforms: (Mid-west, South and Bahia);
Implementation in the South completed in July;
•“Gestão” (commercial management system):
Implemented in 3 platforms: (Mid-west, South and Bahia);
External support to guarantee full use of its functionalities;
•POS System
Under evaluation for exchange;
16. Commercial e Competitive Intelligence:
•Sales enhancement using the correct positioning of each brand (platform) in each of the regions where we operate;
•Inventory optimization;
•Improvement of generic medicine and HPC mix of sales (focus in convenience products);
•Negotiation of supply contracts and trade marketing revenues for 2015, aiming to enforce strategic long-term partnerships and uniform negotiation conditions to every platforms;
•Improvement of margin level with intelligence in the pricing without losing competitiveness;
•Reduction in shrinkage level (cyclical inventory rounds, mapping and renegotiation of pre-expired products, greater quality in inventories, constant focus on loss prevention.
17. Operations:
•Platforms Accountability (accounted for the P&L of the platform);
•Daily management of KPIs (sales, progressions, mix of sales between categories, POS margin, inventory level and shrinkage, P&L per store, operational expenses etc.);
•Continuous management of headcount productivity;
•New remuneration policy;
•Complete analysis of active service contracts;
•Continuous management and centralization of every spending decision;
•Focus on recovering stores with operation deficit;
18.
19. •Lengthening of the debt structure with proper grace period aligned to the expected generation of results.