2. • Gross revenues of R$953.3 million, an increase of 12.8% over 2Q13;
• Gross Margin of 19.6%, over gross revenues;
• Total SSS of 12.8%, with 9.0% in mature stores;
• EBITDA of R$-82.8 million, with EBITDA margin of -8.7%;
• Net loss of R$143.1 million;
• 1,219 stores, being 718 owned stores and 501 franchisees.
Operational & Financial
6. Generic penetration in medicine sales
33.8
38.0
2Q13 2Q14
37.6% 38.4% 40.3% 39.4% 36.8%
16.9% 15.8% 13.9% 13.8% 14.2%
45.5% 45.8% 45.8% 46.8% 49.0%
2Q13 3Q13 4Q13 1Q14 2Q14
Non-medicines Generic Medicine Branded medicine
7. 266.0 281.5 256.8
174.8 186.8
31.5% 30.7%
26.3%
18.8% 19.6%
2Q13 3Q13 4Q13 1Q14 2Q14
• Promotional sales campaign: reduction in inventory level;
• Higher volume of expired products;
• Retraction of generics penetration in sales mix;
• Reduction in procurement levels: lower industry fees;
• Challenges in distribution centers performance.
• Decrease of promotional activities;
• Losses : still relevant but under management’s
sight;
• Repricing of produtcs - preserving regional market
share.
8. • Increase in stores/DC staffs;
• New DCs;
• Higher commission on sales;
• Termination Costs.
• Systems implementation;
• Increase in staff;
• Service contracts;
• Big Ben not yet integrated with
other operations.
166.6 174.6 188.5
225.1
216.8
19.7%
19.1% 19.3%
24.2%
22.7%
2Q13 3Q13 4Q13 1Q14 2Q14
51.0 52.1 53.0
66.7 60.4
6.0%
5.7% 5.4%
7.2%
6.3%
2Q13 3Q13 4Q13 1Q14 2Q14
9. Net income (loss) 1,529 (185,296) (143,138) (5,458) (328,434)-
(-) Income tax and social contribution (9,627) 11,152 7,881 (9,063) 19,033
(-) Financial result (15,262) (24,996) (44,505) (34,181) (69,501)
(-) Depreciation and amortization (17,055) (28,591) (20,639) (33,516) (49,230)
(-) Results from equity accounting (2,064) (1,856) (3,090) (3,586) (4,946)-
EBITDA 45,536 (141,005) (82,785) 74,889 (223,790)-
(-) SOP expenses (2,882) - - (5,698) -
(-) Non recurring income/expenses - - - (2,594) --
Adjusted EBITDA 48,417 (141,005) (82,785) 83,181 (223,790)
% Adjusted EBITDA margin 5.7% -15.2% -8.7% 5.0% -11.9%
2Q13EBITDAreconciliation (R$'000) 1Q14 1H132Q14 1H14
1 - Portion related to commercial establishments amortization (2013 only).
Net income (loss) 1,529 (185,296) (143,138) (5,458) (328,434)
% Net margin 0.2% -19.9% -15.0% -0.3% -17.4%
(-) Non recurring expenses - - - 2,594 -
(-) SOP expenses 2,882 - - 5,698 -
(-) D&A Commercial establishments¹ 3,447 - - 7,607 -
-
Adjusted Net Income (loss) 7,858 (185,296) (143,138) 10,441 (328,434)
% Adjusted net margin 0.9% -19.9% -15.0% 0.6% -17.4%
2Q13Net Income reconciliation (R$'000) 1Q14 1H13 1H142Q14
10. • Additional Short-Term Borrowings: R$ 255 million;
• Early redemption of its Debentures (June 24); R$ 560 million;
• Payment of installment of the Big Ben acquisition: R$ 70 million;
• Debt Restructuring Planning (Lengthening of debt maturity).
Cash position and indebtedness (R$'000) 2Q13 3Q13 4Q13 1Q14 2Q14
(+) Loans and financing 160,228 247,170 209,490 204,884 454,124
Short term 41,694 150,963 124,507 125,800 386,812
Long term 118,534 96,207 84,983 79,084 67,312
(+) Debentures 253,964 260,704 549,809 555,276 12
Short term 5,348 11,982 15,249 555,276 12
Long term 248,616 248,722 534,560 0 0
(+) Accounts payable for investment acquisition 232,581 179,652 147,837 156,615 92,619
Short term 81,986 82,681 70,300 108,039 44,110
Long term 150,595 96,971 77,537 48,576 48,509
(=) Total Indebtedness 646,773 687,526 907,136 916,775 546,755
Short term (%) 19.9% 35.7% 23.2% 86.1% 78.8%
Long term (%) 80.1% 64.3% 76.8% 13.9% 21.2%
(-) Cash and cash equivalents (162,205) (213,132) (405,914) (98,131) (51,340)
(=) Net Debt 484,568 474,394 501,222 818,644 495,415
Net debt/Adjusted EBITDA (LTM) 2.5 X 2.5 X 3.3 X NA NA
11. • Inventory reduction trend partially offset by seasonality effect;
• Transferring of procurement volume to the industry;
• Larger volume of credit card receivables advancements;
Working capital 2Q13 3Q13 4Q13 1Q14 2Q14
Accounts receivable 18 5 6 15 6
Inventories 109 112 107 88 86
Suppliers 73 56 77 57 47
Working capital in days 53 62 36 46 46
12. 1- The variation in working capital includes the change in accounts receivable, inventories and suppliers.
Cash flow Statement (R$'000) 2Q13 1Q14 2Q14 1H13 1H14
EBT 11,158 (196,448) (151,019) 3,605 (347,467)
(+) Depreciation and amortization 17,054 28,591 20,664 33,516 49,255
(+/-) Others (4,175) 19,572 27,221 20,214 46,793
Operating cash generation 24,037 (148,285) (103,134) 57,335 (251,419)
(+/-) Change in working capital¹ 159,077 (110,467) 12,634 75,935 (97,833)
(+/-) Change in other assets and liabilities (104,034) (10,682) 50,453 (117,216) 39,771
Cash consumption 55,042 (121,149) 63,087 (41,281) (58,062)
Income Tax & Social Contribution payed (852) (1,235) (342) (1,452) (1,577)
Net cash generated by operating activities 78,228 (270,669) (40,389) 14,601 (311,058)
(-) Capex from operations (49,033) (33,934) (25,288) (73,954) (59,222)
(-) Acquisitions (31,848) 3,688 (70,089) (112,751) (66,401)
Net Cash from investing activities (80,881) (30,246) (95,377) (186,705) (125,623)
(+/-) Loans and financing (25,986) (7,167) (311,024) (41,417) (318,191)
(+/-) Equity funding / Dividends 6,975 299 399,999 6,975 400,298
Net Cash from financing activities (19,011) (6,868) 88,975 (34,442) 82,107
Change in cash and cash equivalents (21,664) (307,783) (46,791) (206,545) (354,574)
Cash and cash equivalents - opening balance 183,870 405,914 98,131 368,751 405,914
Cash and cash equivalents - closing balance 162,205 98,131 51,340 162,205 51,340
13.
14. Greater specialization and team’s reinforcement:
• Finance area;
• HR area;
• Legal area (labor / real state) and
• Commercial area (greater specialization / expertise);
• Creation of Competitive Intelligence area.
Management result-oriented:
• Restructuring of internal meetings’ agenda / committees focused on core
business (results, investments, cash generation, commercial , legal, IT,
loss prevention, etc)
Team alignment towards results:
• Restructuring of compensation model aiming mid and long term alignment.
15. Redesign of organizational structure align strong managerial experience and industry&product knowledge
with extensive retail pharmacy experience and further strengthening of the Financial Department
VP Operations
Álvaro Jr.
CEO
José Ricardo
BOARD OF
DIRECTORS
IR
Otavio Lyra
MANAGEMENT
Rodrigo Silveira
LEGAL
Cristina Caiuby
RISK.Mgm
TBD
HR
Marisa Salgado
CFO
Orivaldo Padilha
Controller Dir.
Gilberto Tavella
Planning Dir.
Sara Rezende
IT
Rogério Segala
Commercial Dir.
TBD
Operations Dir.
Renato Lobo
BIG BEN
Raul Aguilera
Competitive Int.
Igor Rangel
16. 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;
17. In commercial transactions:
• Decrease in Inventory;
• Inventory mapping for products due in the next 20 months (base jul 14);
• Negotiation of pre-expired products with the industry;
• Better distribution of surplus inventory;
• Initiation of margin level and generics mix recovery process;
• Initiation of commercial process towards direct procurement from the industry
(after licenses are obtained);
• Regional Market share protection;
• Daily management of KPIs (sales, progression, sales mix between categories,
POS margin, inventory level and stock-outs).
18. In expenses:
• Initiation of process towards the revision of all active service contracts;
• Layoff of 1,600 employees from stores and DC’s structure;
• Centralization of all expenditure decisions;
• Initiation of process towards the improvement of expenditure authorization.
19. • Plan for targets’ achievement;
• Monthly evaluation of results and of improvements’ action plan;
• Capturing synergies:
Proposal for organized purchase / joint negotiations;
Transferring of surplus inventory between platforms;
Administrative integration;
Investments (decision made by the Investment Committee)
20. • Mid-term debt issue towards the normalization of working capital structure;
• Extending debt terms.
