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Disclaimer
This presentation does not constitute an offering, invitation or solicitation of any kind to subscribe for or purchase shares or any other type of securities, nor does
this presentation or any information contained herein form the basis of any type of contract or commitment.
This material should not be construed as investment advice to potential investors. This information is not intended to be complete and is presented as a summary.
No trust should be built upon the basis of the accuracy of the information herein and no representation or guarantee, whether expressed or implied, is made as to
the accuracy of the information herein.
This presentation contains forward-looking statements that may be based upon forecasts which, as such, are no guarantee of future performance. Investors are
advised that these forecasts are and will be subject to countless risks, uncertainties and factors related to Profarma‟s operations and business environments, such
as: competitive pressure, the performance of the Brazilian economy and of the pharmaceutical industry and changing market conditions among other factors in the
documents released by Profarma. These risks may cause the Company‟s results to be materially different from any future results expressed or implied by such
forward-looking statements.
Although Profarma believes the expectations and assumptions contained in the forward-looking statements and information to be reasonable and based upon data
presently available to its management, the Company cannot guarantee future results or events. Profarma does not assume the obligation to update any forward-
looking statements and information.
It is summary information not intended to be complete and should not be deemed investment advice by potential investors. This presentation is strictly confidential
and may not be disclosed to any other person. We make no statements and no guarantee as to the accuracy, suitability or completeness of the information posted
herein, which should not be relied upon for investment decisions.
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3Q11 Earnings Release
October, 25th, 2011
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Highlights in the Period
• This year, Profarma celebrates its 50th anniversary and the 5th anniversary of its IPO. Based on its results-oriented culture and
practical initiatives designed day by day, the Company seeks to continue consolidating its prominent position in the distribution
segment in Brazil;
• Profarma has acquired 60% of Prodiet Farmacêutica’s total capital by means of a primary offer of R$ 8.0 million and a secondary offer
of R$ 18.0 million, totaling R$ 26.0 million. The remaining 40%, will be acquired in the future;
• Net income rose by 80.3% year-over-year and stood at R$ 8.5 million, with a 1.2% net margin;
• Growth of 6.5% in consolidated gross revenues, when compared to the 2Q11, totaling R$ 830.3 million;
• It is worth highlighting the health and beauty category, whose sales increased for the seventh consecutive quarter. There was a steep
year-over-year increase of 63.1%;
• There was 4.1-day fall in the cash cycle, which caused a drop in working capital of about R$ 52.5 million;
• The positive operating cash flow amounted to R$ 45.0 million in 3Q11, or 6.4% of net operating revenues;
• Operating expenses fell by 0.6 percentage point quarter-over-quarter and totaled 6.9% of net operating revenues, the lowest over the
last two years;
• Sales through electronic orders hit a record high and accounted for 72.0% of total sales in 3Q11.
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5 5
3Q10 2Q11 3Q11
830.3809.8
779.4
Branded
Generics
OTC
Health and Beauty
Hospitals + Vaccines
Total
3Q10
537.8
56.2
153.7
38.6
23.5
809.8
Chg. %
1.5
5.3
-12.3
63.1
17.2
2.5
2Q11
512.2
45.7
141.3
53.9
26.3
779.4
Chg. %
6.6
29.5
-4.7
17.0
5.1
6.5
3Q11
545.9
59.2
134.7
63.0
27.6
830.3
Gross Revenues Evolution Gross Revenues Breakdown
In R$ MM In R$ MM
6 6
*Excluding the similar‟s effect
3Q10 2Q11 3Q11
9.0
10.2
9.0
Market Share Evolution (%)*
3Q10 2Q11 3Q11
Gross Profit and Revenues from Services to Suppliers
(R$ million and as % Net Revenues)
Gross Profit Revenues from Services to Suppliers Gross Profit Margin (%)
26.8
43.3
27.5
43.1
10.2% 10.0%10.7%
27.4
42.9
7 7
3Q10 2Q11 3Q11
Operating Expenses - SGA
3Q10 2Q11 3Q11
Ebitda and Ebitda Margin
48.548.6
7.1%6.9%
7.5%
49.5
3.1%
2.7%
19.2
21.5
3.2%
20.7
(R$ million and as % Net Revenues)(R$ million and as % Net Revenues)
8 8
3Q10 2Q11 3Q11
Net Financial Expenses
3Q10 2Q11 3Q11
Net Profit
0.8% 1.0%
6.8
5.4
1.3%
8.8
0.7%
1.2%
8.5
4.7
1.4%
9.5
(R$ million and as % Net Revenues)(R$ million and as % Net Revenues)
9 9
(R$ Million)
Cash Flow Generated / (Used) in Operating Activities
Internal Cash Generation
Operating Assets Variation
Trade Accounts Receivable
Inventories
Suppliers
Other Items
Cash Flow (Used) in Investing Activities
Cash Flow Generated / (Used) by Financing Activities
Net Increase / (Decrease) in Cash
3Q11
45.0
18.5
26.5
(29.5)
24.1
(4.0)
36.0
(2.5)
(30.3)
12.2
3Q10
62.1
9.5
52.7
(50.8)
(10.2)
120.7
(7.1)
(1.5)
(43.8)
16.9
Chg. %
-27.6%
94.9%
-49.7%
41.9%
-
-
-
-66.1%
30.8%
-27.5%
2Q11
50.0
19.8
30.2
37.3
46.3
(48.7)
(4.6)
(1.8)
(51.0)
(2.8)
Chg. %
-10.1%
-6.8%
-12.3%
-
-48.0%
91.8%
-881.7%
-37.3%
40.6%
-
Cash Flow
* Average
(1) Average of Gross Revenues in the Quarter
(2) Average of COGS in the Quarter
(3) Average of COGS in the Quarter
Cash Cycle (Days) *
Accounts Receivable (1)
Inventories (2)
Accounts Payable (3)
3Q10
48.8
43.3
43.9
38.4
2Q11
60.4
39.4
53.1
32.0
3Q11
56.3
39.9
46.1
29.7
Cycle IFRS Basis
10 10
3Q10 2Q11 3Q11
Indebtedness: Net Debt and Net Debt / Ebitda*
3Q10 2Q11 3Q11
Capex
(R$ million)
0.8x
1.7x
119.8
75.1
2.2x
157.1
0.2%
2.5
1.5
1.9
0.3% 0.4%
(R$ million and as % Net Revenues)
* Ebitda = Accumulated last 12 months
1111
Service Level
(Units served/ Units requested)
Logistics E.P.M.
(Errors per Million)
90.4%
88.6%
89.8%
3Q10 2Q11 3Q11
93.0
337.0
157.0
3Q10 2Q11 3Q11
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Profarma Corporate Overview
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o Since 1961, Profarma has been distributing pharmaceutical, personal hygiene
and cosmetic products to drugstores and hospitals in Brazil;
o The only publicly-held company in this sector;
o Profarma is one of the leading distributors in Brazil;
o It distributes its products in states that account for approximately 93.5% of the
pharmaceutical product consumer market in Brazil (June 2010), and holds 12
Distribution Centers: RJ, MG, ES, SP (capital and upstate), PR, BA, PE, CE, RS,
GO and DF;
o About 18.0 million units per month are sold to 31,000 points of sale, in a total of
60,000 points of sale in Brazil;
o Compound Annual Growth Rate of 14% (CAGR 2004-2010), whereas the
market recorded a 12% CAGR for the same period.
Company Overview Financial Highlights
Operational Highlights
Operational Metrics
Orders per day 17,000
Service Level 90.1%
Items Offered 8,500
Customers 29,500
Geographical Coverage 94%
Representatives 270
Employees 2,300
Distribution Centers 12
Timeline
20102009
2,626.1
281.4
10.7%
79.9
3.0%
34.4
1.3%
108.7
518.9
1,011.9
3,132.8
1.4
2,578.3
301.5
11.7%
110.7
4.3%
53.2
2.1%
118.1
485.4
1,070.6
3,041.6
1.1
In R$ millions
Net Revenue
Gross Profit +
Revenue from Services to Suppliers% Net Revenue
EBITDA
% EBITDA Margin
Net Income
% Net Margin
Net Debt
Shareholders‟ Equity
Total Assets
Gross Revenue
Net Debt / EBITDA
Cash Cycle (days)
20082007
2,535.5
270.2
10.7%
78.7
3.1%
31.6
1.2%
149.4
467.4922.1
2,940.4
1.9
2,268.9
249.7
11.0%
80.1
3.5%
47.0
2.1%
124.0
443.4924.2
2,596.4
1.5
49.048.852.766.0
CE
PEParaná
1998 1999
Minas
GeraisEspírito
Santo
1996 2001 2003 2004 2005
Hospitals
in SP
Bahia
DF
2007
Vaccines
2006
IPO
Acquisition
of K+F
São Paulo
Acquisition
of Dimper
DC (RS)
2009
GO
2011
Acquisition
of Prodiet
Hospitals
in RJ
Distributor Center / Service
Service
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(*) Distribution and Service Business of
Vaccination Segment is countrywide
Distributor Center / Service
of Hospital Segment
Service of Hospital Segment
o Since 2003, Profarma‟s operations have focused on the hospital segment and, as of 2005, also on the
vaccination segment. Currently, it also operates in the medical procedures segment, which led us to create
the New Business Division;
o Supplementing the pharmaceutical business, the New Business Division currently accounts for 5% of the
Company's business;
o In the hospital segment, the business mainly focuses on the distribution of supplies to the markets located in
the states of São Paulo, Rio de Janeiro, Minas Gerais and Bahia. As for the vaccination segment, supplies
are distributed countrywide;
o Profarma operates with some major laboratories in Brazil, such as Sanofi Aventis, Johnson & Johnson,
BMS, MSD, Pfizer, Novartis, Roche, Bayer, GSK, Ache, Boehringer, Cristália, União Química, Biosintética,
among others;
o Profarma holds exclusive units for the hospital segment, through which its support via call center, sales
representatives and logistics is provided by specialized professionals;
o The Company is accredited by all major hospitals in Brazil and by the relevant certificating bodies. It is
through the accreditation letters provided by the laboratories that Profarma corroborates the reliability,
quality and origin of the medications that it markets, thus ensuring the traceability required by major
hospitals in Brazil.
o Quick quotation structure, which ensures quick responses to requests for quotations. This allows us to save
time when negotiating;
o It boasts state-of-the-art equipment to store medications, complying with all “cold chain” management
standards set up by WHO and Brazilian FDA (Anvisa);
o Delivery logistics with control of tracking lot, temperature and service, which ensures safety of goods from
DC shipment to their destination.
Overview of Profarma New Business Division
Operational Highlights
Geographical Coverage
Operational Metrics
Orders per day 300
Items Offered 2,000
Customers 1,500
Representatives 15
Employees 55
Distribution Centers 1
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Brazilian Market
Pharmaceutical x Hospital
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Brazilian Market – Pharmaceutical x Hospital
The Brazilian pharmaceutical market increased by 14.0% in 2010, totaling R$ 36 billion, maintaining the strong upward trend from previous years.
Over the past seven years, this market CAGR reached 14.0%. In comparison to the R$ 36 billion Pharma market, the Hospital market (Public +
Private) amounted to R$18 billion in 2010.
(*) Numbers were projected by IMS in Dec/07, prior to Abradilan inclusion.
In R$ billions
14.4
2003
16.6
2004
18.3
2005
20.9
2006
23.2
2007
26.1
2008
30.0
2009
36.0
2010
39.1
2011*
Brazilian Pharmaceutical Market
42.4
2012*
46.0
2013*
IMPORTANT: all market figures mentioned herein are at factory price, but there is a structural difference between Pharmaceutical and Hospital markets as far as discounts practiced
are concerned. While IMS indicates about 15% discount in the Pharmaceutical market, the Hospital market accounts for 50%, which leads it to R$ 9 billion in 2010.
Source: IMS
(*) The big difference from 2009 to 2008 is due to an increase in the
measured base.
(**) Growth projected by IMS between 10% and 13%.
Hospital Market
In R$ billions
2008 2009* 2010 2011**
10.0
16.0
18.0
20.0
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Prodiet Farmacêutica Corporate Overview
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o Prodiet Farmacêutica was incorporated in 1990;
o The Company operates in the product distribution to the hospital segment;
o The Company is headquartered in the city of Curitiba, state of Paraná and holds five
distribution centers in the states of São Paulo, Distrito Federal, Pernambuco, Porto Alegre,
besides Curitiba;
o It operates in the states of Paraná, Santa Catarina and Rio Grande do Sul, with a portfolio of
more than 3,500 customers including hospitals, clinics and municipal governments. In the
public sector, its business extends throughout the national territory – therefore the Company
has a Bid Center, which solely serves this segment;
o In 2010, Prodiet Farmacêutica recorded revenues in the amount of R$ 200 million, distributed
between the public and private sectors. Gross revenue compound annual growth rate for the
2007-2010 period was 37% p.a.;
o The Ebitda margin in 2010 was 4.6%;
o Acquisition of 60% of the Company for the amount of R$ 26.0 million, being R$ 8.0 million
through a primary offer and R$ 18.0 million through a secondary offer;
o The EV/Ebitda multiple related to the acquisition of the initial 60% was 4.6x (2011E), which
represents a 29.2% discount in relation to Profarma „s multiple;
o Equity holders' non-competitiveness commitment for a 5-year period after their departure form
the Company, as entailed by contract.
Prodiet Farmacêutica Overview Geographical Coverage
Distributor Center
Service units to public sector
(procurement)
Service units to hospitals,
clinics and city halls
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Strategic Advantages
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o Supplementary geographical coverage: Profarma is present in the states of Rio de Janeiro, São Paulo, Bahia and Minas Gerais, whereas Prodiet Farmacêutica
concentrates its business in the states of Paraná, Rio Grande do Sul and Santa Catarina. Thus, it supplements the Company's business;
o Product Mix: Profarma currently does not operate with some hospital product lines, and Prodiet Farmacêutica does not operate with some pharmaceutical product lines.
Thus, there will be synergy gain in both Companies;
o Expertise: at present, Profarma does not operate with the public sector, whereas Prodiet Farmacêutica does. As a result from this acquisition, we will enter the public
market.
Strategic Advantages Geographical Coverage - Countrywide
Among Major
Companies in
this sector in
Brazil
Supplementary in
the Business Area
New Business
will represent
more than 10% of
the Company
Supplementary
product line
Synergy in
operation
Significant
improvements in
Market Share
+
Profarma + Prodiet Farmacêutica Combined
Profarma
Prodiet Farmacêutica
Distributor Center / Service of
Hospital Segment
Service of Hospital Segment
Distributor Center
Service units to public sector
(procurement)
Service units to hospitals,
clinics and city halls
Distributor Center / Service
Service of Hospital / Vaccination
Segment
Profarma + Prodiet Farmacêutica
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Acquisition Model
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Primary Offer:
• 40% paid on the execution date;
• 30% paid after 1 year from the execution date;
• 30% paid after 2 years from the execution date;
Secondary Offer:
• 50% paid on the execution date;
• 50% paid in 12 monthly installments from the execution date.
Earn-out:
• Payment of additional secondary offer, over the first five years, of the difference between the projected x actual unleveraged free cash flow, adjusted to present
value.
Payment Flow
Acquisition Model
Profarma will immediately acquire 60% of the total capital stock of Prodiet Farmacêutica through a primary capital subscription in the amount of R$
8.0 million and a secondary subscription in the amount of R$ 18.0 million, representing an EV/EBITDA (2011E) multiple of 4.6x, along with the
payment of an additional earn-out, whose calculation is based on the difference between the unlevered free cash flow projected versus the actual
figure. The remaining 40%, when acquired, will be valued at an EV/EBITDA multiple of 4.3x based on the 12-month period prior to the acquisition
date. The current shareholders of Prodiet shall be fully responsible for occasional existing contingencies or those falling due on a date prior to the
date of execution of the acquisition agreement.
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Contingency Cover and Description of Guarantees
Contingency Cover:
• Current Prodiet Farmacêutica Shareholders are liable for 100% of contingencies arising from triggering events prior to the the execution date.
Description of Guarantees:
1 – Interest Adjustment via Subscription Bonus:
• Beginning on the execution date, a renewable subscription bonus will be issued for Profarma, entitling it to issuing new Prodiet Farmacêutica shares in case of
default by Current Shareholders in indemnifying past contingencies. Accordingly, Profarma will be indemnified by adjusting its interest in Prodiet Farmacêutica;
• The subscription price of new Prodiet Farmacêutica shares will consider an assessment based on the 4.3x multiple EBITDA LTM for each Subscription Bonus
exercised.
2 – Retained Payments:
• Upon subscription of the remaining 40%, Profarma will retain payments should there be remaining lawsuits, administrative proceedings or arbitration disputes
pending judgment, or any other fact that may result in a possible contingency.
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Analyst Coverage
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Company Analyst Telephone E-mail
Merrill Lynch Alexandre Pizano (55 11) 2188-4024 [email protected]
Credit Suisse Marcel Moraes (55 11) 3841-6302 [email protected]
Banco Fator Iago Whately (55 11) 3049-9480 [email protected]
Raymond James Guilherme Assis (55 11) 3513-8706 [email protected]
BTG Pactual João Carlos dos Santos (55 11) 3383-2384 [email protected]
Juliana Rozenbaum (55 11) 3073-3035 [email protected]
Marcio Osako (55 11) 3073-3040 [email protected]ú BBA
Javier Martinez de Olcoz Cerdan (1 212) 761-4542 [email protected]
Clarissa Berman (55 11) 3048-6214 [email protected] Stanley
Analyst Coverage
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