Apresentação 3Q17

3Q17 Earnings Release

3Q17 | Capital Allocation Strategy

Profarma2017 | Focus in profitability

3

Company in Ramp up

Pharma Market

Increasing

FOCUS: ROIC AND NET INCOME

Sharp drop in Interest Rate

Inflation

Decreasing

Better return

SegmentsEbitda Margin

EvolutionCapital

Reallocation

Dilution ofOperating Costs

20

17

20

18

Profarma | Histórico Alocação de CapitalProfarmaVerticalização | Vantagens do Modelo Integrado

4

Drugstore Market✓

Wholesalers with lower dependence on big chains and market share growth with

higher rates.

Lower Working Capital✓

Optimized working capital and a cash cycle 30 days shorter than the average of

other retail players.

Supply Agility✓

Integrated logistic structure enables a promptly accelerated inventory recovery

in various regions.

Relevance to Suppliers✓

Combined purchsing power between retail and wholesale assures more

competitive prices.

Tax Optimization✓

More competitive prices when buying inside the state directly from the

wholesale.

G&A Sinergies✓

Shared Services Center: legal, fiscal, internal audit and human resources.

Distribution center shared with wholesale clients – 35 thousand clients supplied

nationally.

10.8% 10.9% 10.9%12.2%

13.4% 14.0% 14.3%

Profarma | Histórico Alocação de CapitalProfarma2016 - 2017 | Capital Allocation Strategy for Best Return Segments

Invested Capital Evolution – Profarma Group

(R$ million)

Pharma: 10.6% - last 5 years average.Specialties: 12.6% - last 5 years average for a adjusted EBITDA margin of 3.2%.Retail: 19.2% - top 3 players average.Consolidated: Weighted average potential ROIC, considering each division’s potential ROIC.

5

PO

TEN

TIA

LR

OIC

625 631 662 776578 571

709

41 68101

53 6896

156

272389

571

625 672 730

1,032903

1,028

1,376

2010 2011 2012 2013 2014 2015 2016

Farma ROIC Potencial ConsolidadoEspecialidades Varejo

771 702

98106

421 667

1,291

1,475

3Q16 3Q17

13.6%14.6%

Invested Capital: Equity + Net DebtROIC: NOPAT /Invested Capital

Profarma | Histórico Alocação de CapitalProfarmaMarginal ROIC – New Stores and Renovated Stores Rede Rosário

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Market Rede Rosário - Integrated Model

Ramp up

Sales 12 m

Gross Profit 100 100

Gross Margin 30.1 31.0

Operating Expenses - Store 16.5 1

Contribution Margin - Store 13.6 30.0

NOPAT 10.1 21.2

Capex 15.7 20.8

Working Capital 6.5 3.1

Pre-Operational Expenses 2.4

Total Invested 24.6 23.9

Marginal ROIC % (Standard Income Tax) 40.9% 88.8%

Marginal ROIC - New Stores | Pharma Retail | Base 100

R$ thousand

√ Does not include Investment in D.C.

√ Does not include Investing in D.C. Stock

Profarma | Histórico Alocação de CapitalProfarmaConsolidated | 3Q17 Non Recurring Expenses vs Savings

7

Division Action/IniciativeEstimate Savings

(annual, except PERT)

3Q17 Non Recurring

Expenses

Closing DC Ceará and Change of from Espírito Santo to Rio de

JaneiroR$ 4.2MM R$ 1.5MM

Operating productivity gains - Logistics/Commercial R$ 5.6 MM R$ 1.2MM

Stores operating expenses reduction d1000 RJ R$ 9.1MM R$ 3.1MM

Corporate expenses reduction R$ 12.0MM R$ 2.1MM

Closing 33 stores: Negative Contribution Margin R$ 6.5MM R$ 11.3MM

Consolidated PRFM joined the new refinacing program for Federal taxes (PERT)*¹ R$ 32.6MM R$ 1.9MM

Total 3 Years Savings R$ 144.8MM R$ 21.2MM

Pharma

Retail

ProfarmaRosário Performance

Financial Indicator

8

(18.9)

(11.9)

Operating Indicator

(6.3)

(0.6)

Monthly average sale 3Q17 - RosárioDez/16 Sep/17 - RosárioSep/16

165

340

537

56

92 92

573

655

1,700

43

55

39

Sep/17 – d1000 varejo farma RJ

Operating Expenses(R$ Million)

Ebitda(R$ Million)

Monthly average sale(R$ thousand)

Service level(%)

Clients served(# thousand)

Average Ticket(R$)

Consolidated Performance

Profarma | Histórico Alocação de CapitalProfarma3Q17 | Key Highlights

10

PROFARMA GROUP | CONSOLIDATED

• Gross revenue rose by 4.5%.

• The consolidated cash cycle was shortened by 16.0

days to 35.2 days.

• The Retail Division accounted for about 55% of our

consolidated gross profit, vs. 40% in 3Q16.

• The Independent customers segment grew by 8.6%.

• Sales of health & beauty products climbed by 44.6%.

• The cash cycle was shortened by 14.3 days to 32.4 days.

PHARMA DISTRIBUTION

Profarma | Histórico Alocação de CapitalProfarma3Q17 | Key Highlights

11

SPECIALTIES

• Total sales rose by 1.3% year-over-year in 9M17.

• Operating expenses slid by 0.8 p.p., from 9.0% to 8.2%.

• Vaccine sales shot up by 25.7%.

• Average monthly sales per store increased by 112.9%to R$353.4 thousand between 3Q17 and September2016.

• Store expenses reduction from 30.0% to 26.7%,quarter-over-quarter.

• Average EBITDA per month shot up by 91.1% fromDecember 2016.

REDE ROSÁRIO

d1000 VAREJO FARMA RJ

• Monthly sales per store came to R$579.0 thousand,6.2% higher than ABRAFARMA’s (Brazilian Associationof Pharmacy and Drugstore Chains) average.

• Store expenses fell from 21.5% to 19.6%.

• The contribution margin of stores stood at 9.0%.

Consolidado | Receita Bruta

4.5%

Consolidated IFRS (R$ million)

Sales decreased by 6.6% year-over-year.

Distribuição Farma

Varejo

ProfarmaConsolidated | Gross Revenues

12

Sales increased by 58,7% year-over-year

6.4%

2,840 2,720

599 940

9651,022

910 908 901

198

241

307 318 314

3,439

3,659

1,163

1,2631,217 1,226 1,216

Pharma Distribution Retail

9M16 1Q179M17 2Q174Q163Q16 3Q17

Consolidated IFRS (R$ million and % Net Income)

Consolidado | Ebitda e Margem Ebitda AjustadaProfarmaConsolidated | Ebitda and Adjusted Margin Ebitda (Ex-Rosário)

13

60

20 2023

1793

54

20

-2-3 -2

30

1619

23

13

7

-2 -2 -3

4

-20 -1 0

-1

110

51

35

1415

19

16

Pharma Distribution Retail Equity Income -SpecialtiesConsolidated Ex-Rosário

9M16 1Q179M17 2Q174Q163Q16 3Q17

1.6%3.5%

1.5% 1.5%1.3%

3.7%1.9%

1.9%1.8% 1.9% 2.2%

1.7%

Consolidado | Ebitda e Margem Ebitda AjustadaProfarmaConsolidated | Ebitda Bridge per Division 3Q17 vs 3Q16 (w/o Rosário)

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Pharma

Distribution3Q16 3Q17Equity Income

Specialties

d1000

RJRosário

35.4

-16.9-1.9

-1.7

1.0 15.8

ProfarmaConsolidated | Capex and Indebtness

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Capex

3Q17OthersITMachinery and

Equipment

Capex(R$ million)

Net Debt and Net Debt / EBITDA(R$ million)

3Q16 4Q16 2Q17 3Q171Q17

Ex-Rosário.

2Q16

397.8

428.4

3.8x

3.1x

326.0

397.1

2.5x

4.0x

353.2

2.7x

395.6

4.9x8.41.1

0.8

6.5

Consolidado | Lucro LíquidoProfarmaConsolidated | Adjusted Net Income (w/o Rosário)

16

Net Income Adjusted Net Income

3Q172.4

(35.3)

3Q16

(9.5)

0.7 1Q17

(1.4)

(27.1)

4Q16

(3.9)

(38.6)

2Q17 1.5

(24.8)

-0.9%

0.1%

-3.5%

-0.4%

-2.6%

-0.1%

-2.4%

0.1%

-3.4%

0.2%


Consolidado | Ebitda e Margem Ebitda AjustadaProfarmaConsolidated | Adjusted Net loss Bridge 3Q17 vs 3Q16*

17

Consolidated IFRS (R$ million and % Net loss)

3Q16 3Q17Ebitda

d1000

RJ

Ebitda

Pharma

Distribution

Ebitda

Rosário

Equity

Income

Specialties

Financial

Expenses

Retail Invest.

Non

Recurring

Expenses

Operating

Financial

Expenses

Income Tax /

Holdings /

Depreciation

Why?Mainly due to the highest

price increase last 10 years

in 2016

Best Rosário Ebitda sinceacquisition

Almost flat

Mainly dueto Retail

reestructuring,

Including 34 storesclosed

Financial expenses

due toRosário

acquisition

Lowerinterest

rates

Higheroperating

loss beforetaxes

Attachments

Consolidado | Receita BrutaProfarmaConsolidated | Gross Revenues

19

Consolidated IFRS (R$ million)


4.5%6.4%

2,840 2,720

599 940

9651,022

910 908 901

198

241

307 318 314

3,439

3,659

1,163

1,2631,217 1,226 1,216

9M16 1Q179M17 2Q174Q163Q16 3Q17

Consolidado | Lucro BrutoProfarmaConsolidated | Gross Profit

20


284 256

181281

94 88 82 93 81

60 7296

9393

465

537

154 160

178186

173

9M16 1Q179M17 2Q174Q163Q16 3Q17

15.6%

17.2%17.1% 17.8%

14.6%15.2%16.6%


Consolidado | Despesas Operacionais SGAProfarmaConsolidated | Operating Expenses - SGA

21

11,8% 11,8%

16,1%15,0%14,0%

16,2%15,8%

195 213

156

281

69 79 70 73 71

51

74 99 9785

352

494

120

153

168 170156


9M16 1Q179M17 2Q174Q163Q16 3Q17

Consolidated IFRS (R$ million and % Net income)

Consolidado | Ebitda e Margem Ebitda AjustadaProfarmaConsolidated | Adjusted EBITDA and EBITDA Margin (w/o Rosário)

22

93

54

20

-2-3 -2

30

1619

23

13

7

-2 -2 -3

4

-20 -1 0

-1

110

50

35

1415

19

16

Consolidated IFRS (R$ million e % Net income)

9M16 1Q179M17 2Q174Q163Q16 3Q17

1.6%3.5%

1.5% 1.5%1.3%

3.7%1.9%

60

20 2023

17

Pharma Distribution Retail Equity Income SpecialtiesConsolidated Ex-Rosário

1.9%1.8% 1.9% 2.2%

1.7%

Consolidado | Lucro LíquidoProfarmaConsolidated | Net Income (w/o Rosário)

23


Net lncome Adjusted Net Income

3Q172.4

(35.3)

3Q16

(9.5)

4.91Q17

(1.4)

(27.1)

4Q16

(3.9)

(38.6)

2Q17 1.5

(24.8)

-0.9%

0.5%

-3.5%

-0.4%

-2.6%

-0.1%

-2.4%

0.1%

-3.4%

0.2%

ProfarmaConsolidated | Capex and Indebteness

24

Capex

3Q17OthersITMachinery and

Equipment

8.41.1

0.8

6.5

Capex(R$ million)

2Q16 3Q16

397.8

428.4

3.8x

3.1x

Net Debt and

Net Debt / Ebitda (R$ milion)

1Q17

326.0

397.1

2Q17

2.5x

4.0x

4Q16

353.2

2.7x

Ex-Rosário.

395.6

3Q17

4.9x

Financial Data (R$ million and % Net Income)

Pharma DistributionFinancial Performance

25

1,136

1,041 1,042 1,0481,056 8.9

10.5 10.5

9.09.1

8.1

7.7

8.27.9

7.7

1.6

3.3

2.5

1.5

2.1

1Q17 2Q173Q16 4Q16 3Q17 1Q17 2Q173Q16 4Q16 3Q17 1Q17 2Q173Q16 4Q16 3Q17 1Q17 2Q173Q16 4Q16 3Q17

EBITDA Margin

(%)

Op. Exp. SG&A

(%)

Gross Margin

(%)

Gross Revenues

(R$ million)

Increase of 8.6% in the

segment of independent

customers;

Evolution of 44.6% in the

category of personal hygiene &

cosmetics;

Reduction of 14.3 days of the

cash cycle, which reached 32.4

days.

Especialidades

Crescimento de 6,3% nas vendas da

categoria de genéricos.


Operating Expenses Reduction

by 0.8 p.p., from 9,0% to 8,2%;

SpecialtiesFinancial Performance

26

Increase of 25.7% in sales of

the vaccine category.

249.0

241.5 233.9 233.9

260.5

10.210.69.9

9.29.9 8.2

9.08.7

8.2

7.5

2.6

0.9 1.1

0.40.3

Total sale in 9M17 increased

1,3% when compared to the

same period of the previus

year;

1T17 2T173T16 4T16 3T17 1T17 2T173T16 4T16 3T17 1T17 2T173T16 4T16 3T17 1T17 2T173T16 4T16 3T17

EBITDA Margin

(%)

Op. Exp. SG&A

(%)

Gross Margin

(%)

Gross Revenues

(R$ million)

Varejo

202.4


Monthly sales per store came R$

569,8 Thousand, 8.5% higher than

ABRAFARMA’s average;

Store expenses fell from 21.8% to

20,9%;

198.1200.0 201.0

d1000 varejo farma RJFinancial Performance (w/o Rosário)

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d1000 varejo farma RJ

Rosário

Same-Store Sales increased by 3%

against 2T17 and average

store/month sales 106.1% in the

comparison of Sep/2017 versus

Sep/16, reaching R$ 339.6

Thousand;

Reduction in store expenses, from

21.5% to 19.6%;

197.5

29.4

30.3

28.5 28.6

30.527.0

25.8

27.1

24.8

27.9

2.3

3.2

0.3

2.6

1.0 Contribution Margin reached 9.0%.

Evolution of 91.1% in the average

Ebitda/month compared to the

result of Dec/16;

1Q17 2Q173Q16 4Q16 3Q17 1Q17 2Q173Q16 4Q16 3Q17 1Q17 2Q173Q16 4Q16 3Q17 1TQ7 2Q173Q16 4Q16 3Q17

EBITDA Margin

(%)

Op. Exp. SG&A

(%)

Gross Margin

(%)

Gross Revenues

(R$ million)

d1000 varejo farma RJ Operating Performance (w/o Rosário)

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Total Sales Increased (%) Same Store Sales (%) SSS Mature Stores (%)

-2.3%

0.8%

2.2%

3Q16 1Q17 2Q174Q16

-2.2 p.p.

3.7%

1.5%

3Q17

-1.8%

1.4%1.4%

3Q16 1Q17 2Q174Q16

-0.1 p.p.3.9%3.8%

3Q17

-3.0%

0.9%

0.0%

3Q16 1Q17 2Q164Q16

-0.3 p.p.2.5%2.2%

3Q17

d1000 varejo farma RJ Operating Performance (w/o Rosário)

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5 aberturas

10 fechamentos

10 reformas

102 maduras

Monthly Average Store’s Sales (mature) (R$ thousands) # of Stores (units) Average Ticket (R$)

3 opened

11 closed

7 reformed

101 mature

569.8561.0

580.0

3Q16 1Q17 2Q174Q16

2.7%

564.0

579.0

3Q17

123123

129

3Q16 QT17 2Q174Q16

-6.9%

130

121

3T17

37.89

36.0136.36

3Q16 1Q17 2Q174Q16

7.8%

35.83

38.62

3Q17

Max Fischer - CFO e IRO | Beatriz Diez - GRITel.: 55 (21) 4009-0276 | E-mail: [email protected]

www.profarma.com.br/ri

Apresentação 3Q17

Investor Relations

Transcript of Apresentação 3Q17