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8th Annual Brazil Consumer & Healthcare Check-up J.P. Morgan August 19 th , 2014

Brph apresentação jpmorgan 19082014

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Page 1: Brph apresentação jpmorgan 19082014

8th Annual Brazil Consumer & Healthcare Check-up

J.P. Morgan

August 19th, 2014

Page 2: Brph apresentação jpmorgan 19082014

Administrative structure

ORGANIZATIONAL RESTRUCTURING

• 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.

• Result-oriented Management:

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.

Focus on results: on going actions

Page 3: Brph apresentação jpmorgan 19082014

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

Page 4: Brph apresentação jpmorgan 19082014

Administrative structure

• SAP System

Implemented in 3 platforms: (Mid-west, South and Bahia);

Implementation in the South completed in July;

• Layoff of 1,600 employees from stores and DC’s structure;

• Complete analysis of all active service contracts;

• Centralization of all expenditure decisions;

Focus on results: on going actions

Page 5: Brph apresentação jpmorgan 19082014

249 Owned stores

128 Owned stores

153 Owned stores

188 Owned stores

718 Owned stores

REGIONS

Owned stores

North 129

Northeast 255

Midwest 146

Southeast

South 188

15

2

120 20

15

33

16

178

9

63

128

5

10

97

7

National Footprint

Page 6: Brph apresentação jpmorgan 19082014

845.4 953.3

1,648.9

1,882.6

2Q13 2Q14 1H13 1H14

9.8%

12.8%

5.3%

9.0%

2Q13 2Q14

Healthy growth trend, above inflation

+12.8%

+14.2%

Page 7: Brph apresentação jpmorgan 19082014

Generic penetration in medicine sales

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

Page 8: Brph apresentação jpmorgan 19082014

• Platforms accountability:

• Daily management of KPIs (sales, progression, sales mix between categories,

POS margin, inventory level and stock-outs);

• Pricing strategy:

• Gross margin recovery without losing competitiveness;

• Regional market share protection;

Focus on results: on going actions

Page 9: Brph apresentação jpmorgan 19082014

• Expansion:

Investment Committee: focus on ROI of new stores;

Speed will depend on short-term liquidity;

• POS System: under evaluation for exchange.

Focus on results: on going actions

GESTÃO ? Back-office Commercial POS

Page 10: Brph apresentação jpmorgan 19082014

Distribution centers structure

• WMS system implemented in all DCs – appropriate service level

• “Gestão” (commercial management system):

Implemented in 3 platforms: (Mid-west, South and Bahia);

External support to guarantee full use of its functionalities;

• Controlled Drugs’ authorization still pending (Mais Economica and Sant’Ana);

• Increasing direct procurement from the industry;

• Inventory Reduction:

Mapping of products due in the next 20 months (base jul 14);

Negotiation of pre-expired products with the industry;

Better distribution of excess inventory.

Focus on results: on going actions

Page 11: Brph apresentação jpmorgan 19082014

• Capital Increase: R$400 million (completed on June 24th);

• New debt issue R$255 million (short-term);

• Early redemption of debentures: R$560 million (paid on June 23rd);

• Mid-term debt issue seeking normalization of working capital structure;

Receivables;

Payables to suppliers;

• Extending debt terms.

Page 12: Brph apresentação jpmorgan 19082014
Page 13: Brph apresentação jpmorgan 19082014

• Capturing synergies:

Proposal for organized purchase / joint negotiations;

Transferring of surplus inventory between platforms;

Administrative integration;

Investments (decision made by the Investment Committee)

• Plan for targets’ achievement;

• Monthly evaluation of results and of improvements’ action plan;

Page 14: Brph apresentação jpmorgan 19082014

RESPONSIBILITIES

• Guaranteeing that action plan has strong adherence to the Company’s strategy;

• Increasing profitability of the different categories in our mix of sales;

• Careful analysis of products to be introduced/maintained in the sales mix;

• Creation of strategic partnerships with suppliers;

• Assuring ROI on marketing investments.

Page 15: Brph apresentação jpmorgan 19082014

• E-commerce & Delivery operations:

Sales optimization;

Customer loyalty;

New markets.

• PBM’s:

Proactively maximizing customer base.

Page 16: Brph apresentação jpmorgan 19082014