3. Pharmacy Retail: A Growth History…
Sales Performance in the Brazilian Pharmacy Retail Sector from 1996-2011 (R$ Billion)
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
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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
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6. Brazil Pharma: Ready to Grow
Largest Pharmacy Retail Company in Brazil outside the Southeast
Geographic Location Strong Organic Growth Capacity (# Stores)¹
1st
86
1
228 own stores
71
1 378
95 20 71
14 5 292
85 52
221
150
7 98
8 101 2007 2008 2009 2010 2011
101 own stores
89
7
1st Profitable Mix (3Q11 Sales Mix)¹
104 own stores 1st
Brazil Pharma Abrafarma
627 own stores e 1st
359 franchise stores
7 359 franchise stores
TOTAL: 986
187
2nd
194 own stores
Non-Medicines
Branded
¹Excluded Big Ben and Estrela Galdino’s Stores Generics
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7. Brazil Pharma: Strategies to Create Value
Market Organic Growth
Consolidation Opening of new stores to Unparalleled 60
Highly fragmented consolidate local Growth
market with large room leadership and enter new (# of stores 34
for consolidation states 9M11) 21
Consolidation
IT: Totvs
Integration Head Count Reduction: 1.069
Shared Service Center: Midwest
Differentiation Operational
Efficiency Differentiation
Product development,
private label and loyalty Strong synergy to come
programs through integration
Source: Drogasil and Droga Raia’s press releases as of September 30th, 2011
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8. Brazil Pharma: Our People
Experienced management with more than 25 years in the pharmacy retail industry on average
Management # Years # Years
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
Álvaro Silveira Jr. 22 n/a
Head of Midwest and Commercial Director
122 years of
Wilson José Lopes 25 n/a
Head of South Operations Pharmacy Retail
Gilberto Portela
Experience
30 n/a
Head of Northeast Operations
Raul Aguilera
25 n/a
Head of North 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. Brazil Pharma: The Shareholders
BTG is our main Shareholder
Sant’ana BTG Sócios
Free Float
Family Pactual(2) Operacionais
7% 39% 31% 23%
100% 100% 100% 100% 100%
Rosário Mais
Sant’ana Big Ben Farmais
Distrital Econômica
(1) Including Sant’ana and Big Ben acquisirttion that is still pending shares incorporation
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10. Brazil Pharma: Comparing With The Peers
Solid track record in sales, Gross Margin and EBITDA
Stores (as of September 30, 2011)¹ 9M11 Gross Profit and Gross Margin
(R$ million, % of Gross Revenues)
33,6%
384
25,3% 26,2%
446 439
359
352 275
Brazil Pharma Drogasil Raia
Brazil Pharma Drogasil Raia
9M11 Selling, General, Administrative and Other
Expenses1 and % of Gross Revenue 9M11 EBITDA and EBITDA Margin
(R$ million, % of Gross Revenues) (R$ million, % of Gross Revenues
5,9% 6,1%
27,6%
5,2%
107
20,9%
19,2% 87
338 352
226 48
Brazil Pharma Drogasil Raia Brazil Pharma Drogasil Raia
¹Excluded Big Ben’ Stores
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12. 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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13. CSC: “Go Live” In April of 2012
TRANSPORTATION SERVICES
1 PARKING LOT 1 BANCO SANTANDER
2 BUS STOP 2 LANGUAGE SCHOOL
3 BUS STOP 3 DOM BOSCO HIGH SCHOOL
4 102 SUL SUBWAY 4 SWIMMING GYM
STATION
5 GYM
HEALTHCARE 6 GALOIS HIGH SCHOOL
1 3 7 SENAC COLLEGE
2 HOSPITAL
LEISURE
1 PARQUE DA CIDADE PARK
2 NIQUELÂNDIA
COMMERCE
1 303 SUL
2 PÃO DE AÇÚCAR
SUPERMARKET FOOD
3 304SUL
1 303 SUL
4 103 SUL
2 103 SUL
5 302 SUL 3 304 SUL
6 SHOPPING PÁTIO BRASIL
4 302 SUL
5 PÁTIO BRASIL SHOPPING
MALL
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15. Sant'Ana Overview
Sant’Ana is the absolute leader of the state of Bahia, which is the most important state of the
Northeastern region.
(1)
Sant'Ana
Founded in 1945, with head offices in Salvador - Bahia;
CEO and Majority Partner: José Sant’Ana;
Brazil’s 9th largest drugstore chain – according to Abrafarma’s 2011 ranking;
Largest drugstore chain in the state of Bahia, with 63% of top of mind in the regional market, according to “Marketing
Consult”;
101 stores in the states of Bahia, while 33% of the stores still under maturation;
Sales per store of approximately R$470 thousand/month;
In December 2011, Sant’Ana’s Distribution Center of approximately 7,000 m² burned down, since then Sant’Ana has been
operating with 2 Distribution Centers of a total of 2,400 m²; and
R$ 527 million Sales and R$ 36 million EBITDA as of LTM Sep.11.
Sales Breakdown
LTM Sep.11
21%
Branded Medicine
Generics
18% 61%
Non Medicine
(1) As of Pro-forma September 30, 2011.
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16. Transaction Analysis
The acquisition has a cash component and a share issuance.
R$ 347,0 million in cash
15,000,000 shares @ R$10.0
100% shares
Transaction Highlights
Implied EV/EBITDA 2012 E
Total acquisition amount of R$ 497.0 million Transaction Multiples: 8,5x
• R$150.0 million in Brazil Pharma’s shares, issued at a price of R$10 per share;
• R$247.0 million in cash;
• R$100.0 million in cash at the 48th month anniversary, adjusted by IPC-A (Consumer Price Index);
• Up to R$35.0 million conditioned to the achievement of pre settled goals;
• Index Cupon: R$17.2 million;
• Net Debt: R$14.0 million at the signing date;
• Goodwill: R$314.8 million, representing a present value estimated fiscal benefit of R$81.0 million.
Indemnity and Securities
• 100% of previous contingencies will be secured by the former owner as agreed by contract; and
• Forward installment in cash and equity interest in Brazil Pharma will be secured by indemnities.
Corporate Governance
• José Sant’Ana remains as Sant'Ana’s CEO;
• 3-year lock-up for issued shares; and
• 5-year Non-Compete agreement, additionally to the lock-up period..
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17. Brazillian New Rank
Brazil Pharma condolidates its leadership position in 4 out of the 5 main Brazilian regions, becoming
(1)
Brazil´s Largest Drugstore Retailer excluding Southeast region.
(1)
Ranking – Comparison of the 4th Largests Drugstores Chains in Brazil
North Northeast Mid- West Southeast South
1st
2nd
(2)
3rd n/a
(2) (2) (2) (2) (2)
4th n/a n/a n/a n/a n/a
(1) Ranking by stores considering only the 4 largest drugstore chains of Brazil, data as of September 30, 2011; and
(2) “n/a”: Other players doesn’t have any operating stores in the region.
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19. Sales and SSS
Solid track record in sales and SSS growth
Gross Revenues SSS (Same Store Growth Sales)
(R$ million)
SSS SSS mature stores (36 months)
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20. Sales Mix and Average Ticket
Increase in average ticket even with the growing relevance of generics in our sales mix
Sales Mix Average Ticket
(% of sales) (R$)
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21. Gross Profit and Expenses
Gross margin expansion, given better mix and inventory management
Selling, General, Administrative and Other
Gross Profit and Gross Margin Expenses1 and % of Gross Revenue
(R$ million, % of gross revenues) (R$ million, % of gross revenue)
(1) Includes other net operating revenues. Data adjusted to exclude non-recurring expenses occurred during
the quarters. On the 3T11 non recurring expenses were R$5.9million, being R$4.3 million related to
severance paid, in view of the headcount cut in the South platform and R$1.6 million expenses related to the
stock option plan.
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22. EBITDA and Depreciation and Amortization
Highest EBITDA margin since the creation of Brazil Pharma
EBITDA and EBITDA Margin Depreciation and Amortization Expenses
(R$ million, % of gross revenue) (R$ million)
Starting January 2011 there was a change in our accounting criteria and
the key money (commercial establishments) amortization was classified
under depreciation and amortization expenses in the income statement.
This same line includes the depreciation of our plant and equipment and
the investments in the layout adjustment at our stores.
Out of the R$6.8 million depreciation and amortization expenses booked in
3Q11, R$3.9 million represented the amortization of intangible assets
(commercial establishments).
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23. Financial Result and Net Income
Lower financial expenses given Company’s capitalization and maintenance of profitability
Financial Result Net Income and Net Margin1
(R$ million) (R$ million, % of gross revenue)
(1) Net income before minority interest and adjusted to exclude non-recurring expenses in the period.
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24. Contact Details
Investor Relations Brazil Pharma S.A.
Renato Lobo
IR Officer
renato.lobo@brph.com.br Rua Gomes de Carvalho, 1629
(55 11) 2117 -5200 6º e 7º andares
CEP 04547-006
www.brazilpharma.com.br/ri São Paulo, SP, Brasil
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