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Rosário Chain Acquisition September, 2016
This presentation is not an offer, invitation or request of any kind to subscribe to or purchase shares or any other financial instrument, nor shall this
presentation or any information herein be construed as grounds for any type of contract or commitment.
This material should not be construed as advisory to potential investors. The information here is not intended to be complete and is summarized. No
assurance is given as to the accuracy of the information here and no representation or warranty, whether express or implicit, is made in relation to the
accuracy of the information herein.
This presentation contains forward-looking statements, which are merely forecasts and not guarantee of future performance. Investors are advised
that such forward-looking statements are and will be subject to numerous risks, uncertainties and factors related to the operations and business
environments of Profarma, such as: competitive pressure, performance of the Brazilian economy and of the pharmaceutical industry, changes in
market conditions, among other factors mentioned in the documents disclosed by Profarma. Such risks may cause the Company's future results to
differ materially from those expressed or implicit in such forward-looking statements.
Although Profarma believes that the expectations and assumptions contained in such forward-looking statements and information are reasonable and
based on data currently available to its management, it cannot guarantee future results or developments. Profarma takes no responsibility to update
any of such forward-looking statements or information.
This information is summarized and does not aspire to be complete, and therefore should not be considered by potential investors as a
recommendation. This presentation is strictly confidential and may not be disclosed to any person. We provide no representation or warranty with
regard to the accuracy, adequacy or comprehensiveness of the information herein, which may not serve as grounds for investment decisions.
Profarma | Opening Remarks
2
PROFARMA OVERVIEW
Profarma's long-term growth strategy is to be well positioned to capture the opportunities in Brazil's pharmaceutical
market.
Profarma | Long-Term Growth Strategy: Diversification
55 years of operations
DISTRIBUTION RETAIL
4
SPECIALTIES
5
Expansion to cover
95% of Brazil
Entry into the
Specialty segment
(hospitals)
2003 2011
Acquisition
of Prodiet
2012
Acquisition
of Arpmed
Acquisition of
Drogasmil / Farmalife
Acquisition
of Tamoio
2013
2014
Joint Venture
ABC
1996
Initial
regional
expansion Creation
of d1000
Capital
increase
2016
Acquisition
of Rosário
1999
Acquisition
of K+F
Vaccines
2005
2006
IPO
Acquisition of Dimper
2007
Proven history of success: unique ability to enter new regions and
segments, both organically and through acquisitions.
Profarma | Timeline
Pharma Distribution Specialties Retail Consolidated
Profarma | Diversification as a Growth Strategy
6
Growth has been driven mainly by the Specialties and Retail divisions, capturing higher margins and higher rates of
return.
DISTRIBUTION SPECIALTIES RETAIL
Growth
Long-Term Margins
Cash Conversion Cycle (Days)
Synergies
Capex
Low High High
2.0 – 2.5 4.0 – 4.5 5.5 – 6.0
Low Low High
≈ 35 ≈ 35 ≈ 28
High High High
Market Fragmented Fragmented Highly
Fragmented
Profarma | Diversification as a Growth Strategy
7
Diversification - Weight by Division EBITDA, EBITDA Margin and Cash Conversion Cycle
* Pro forma data, considering 100% of all companies
** Considering normalized EBITDA margin in Retail and Specialties divisions.
% Gross Revenue R$ million, % Net Revenue and no. of days
EBITDA EBITDA Margin (%) Cash Conversion Cycle (days, quarterly basis)
Pharma Distribution Specialties Retail
78.7 74.6
92.2
125.1** 119.4**
2008 2010 2012 2013
65.8
49.0 47.9* 46.3
2014
39.8*
Pro forma
2018E
32.5*
2008
97%
3%
2012
85%
15%
71%
14%
15%
2014
60%
15%
25%
2018E
250.0**
69%
16%
15%
2015 2015
33.2*
150.0**
3.1 2.8 2.9 2.9 3.3
3.9 3.5
Profarma Group. Company better balanced and with higher rates of return. Synergies to be captured.
Markets with higher margins. New markets with multiple
growth opportunities.
OPPORTUNITY OVERVIEW
Drogaria Rosário | Overview
Company Highlights
Established in 1975, in Brasília, Federal District
Present in 3 states and the Federal District
Acquired by Brasil Pharma in 2010
Network of 150 stores and 1 distribution center
Leadership in all regions of operation
Well-defined administrative, financial and HR processes
Well-structured and well-maintained stores
Seasoned team
Present in less competitive markets nationwide
Integrated management information systems
Drogaria Rosário. Largest drugstore chain in
Brazil's Midwest region
Leading brand in
the region.
1st
10
Drogaria Rosário | Footprint
11
Rosário Chain is the leader in all the regions it operates.
Tocantins – TO
no. of stores
Total
no. of stores
Mato Grosso – MT
no. of stores
Goiás – GO
no. of stores
Federal District – FD
no. of stores
Source: Company
7 0 0
10 0
16 10
0
13
0
32
61
35 31
12
95
45
14 12 13
150
116
49 66
25
2nd 1st 1st 3rd 1st
Drogaria Rosário | Transaction Overview
12
• Acquisition of 100% of the capital of Drogaria Rosário S.A. and the Distribution Center for R$173 million, free of debt,
assuming a normalized working capital (probable price adjustment of R$50 million)
Payment of R$32 million in cash on the closing date
Payment of R$91 million in the 36th month (bullet)
• Payment of the term installment adjusted by 120% of the interbank deposit rate (CDI), possible to be paid with common shares
• Payment of R$15 million 36 months after the closing date (bullet), in case of fulfillment of earn-out pegged to cumulative
revenues in the period (R$2.3 billion)
Acquisition of 100% of the capital for R$173 million, of which
R$32 million in cash and R$91 million in the 36th month.
d1000 | Overview of the Combined Retail Operation
13
Source: Company estimates
Number of stores
Footprint
Key Competitors in Brazil (no. of stores 2015A)
1.235 1.079
828
381 347 280 254 248 240
150 125
?
Note (1): Considering 100% of Tamoio Chain, CSB Brasil (“Drogasmil” and “Farmalife”) and Rosário.
R$ billion
Key Competitors in Brazil (Revenues 2015A)
9.0
7.0
4.8
1.6 1.5 1.4 1.4 1.1 0.6 0.4
Drogaria Rosário
Profarma Retail
Number of stores
16
32
95
7
129
1st 2nd 3rd 4th 5th 6th 8th 9th 10th 11th
1st 2nd 3rd 4th 5th 7th 8th 9th 10th 11th
+
+
2.6
d1000 | Overview of the Combined Retail Operation
14 ?
More than 260 stores
6th largest drugstore chain in Brazil
Geographic expansion into less competitive markets
Increase in bargaining power with suppliers
Ease of integration
Potential synergies of up to 1.5. p.p., calculated by the 2015 chain’s gross revenue
d1000 varejo farma reinforces its positioning of a set of
leading brands.
Acquisition of Rosário. Leading
brand in the region.
Synergies with the d1000
retail operation and also
with distribution. Tax efficiency. Ease of integration since the
systems are the same.
Drogasmil / Farmalife CASE
TURNAROUND OF THE OPERATION
Average Monthly Sales per Store
Turnaround Drogasmil / Farmalife | Proven Capacity to Deliver
R$ thousand
+165% (1Q13 - 2Q16)
17
Gross Revenue
R$ million
+109% (1Q13 - 2Q16)
41.9
58.0 63.0
65.9 61.2 62.3
67.8
73.9 72.0 75.4
78.6 81.8 83.9
87.5
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
164
253
303 330 324
346 365
385 375 375 385 401
417 435
0
100
200
300
400
500
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
Rosário Case
Turnaround Drogasmil / Farmalife | Proven Capacity to Deliver
18
Turnaround Highlights
• Regularization of licenses
• Regularization of supply
• Renovation of 70% of the stores from the original platform
• Rebranding of the brands
• Hiring of 400 employees over 3 months
• Staff training
• SAP implementation
• Change of commercial system - ITEC
• Regularization of licenses
• Regularization of supply
• Renovation of the stores from the original platform
• Rebranding of the brands
• Hiring employees
• Staff training
• SAP implementation
• Change of commercial system
x
✓
✓
✓
✓
✓
✓
x
d1000 varejo farma. Track record of success in acquisitions.
Proven integration
processes and seasoned
team Learning curve
overcome in retail.
KEY TAKEAWAYS
Profarma | New Strategic Positioning
21
Specialties
• Joint Venture with AmerisourceBergen
• Distribution / Retail / Specialty Services
Profarma Group
• Company better balanced and with higher rates of return
• Operations in new markets with multiple growth opportunities
• Synergies to be captured
Retail
• Consolidation of retail
• Own Brand
Pharma Distribution
• One of only 2 Brazilian distributors
Profarma Group.
Superior governance,
innovation, pioneering
spirit, capacity to grow
organically or through
acquisitions and
partnerships, strategic
vision and solid relationship
with the market.
ANALYST COVERAGE
Profarma | Analyst Coverage
23
Company Analyst Telephone E-mail
Brasil Plural Guilherme Assis +55 (11) 3206 8285 [email protected]
BTG Pactual Rodrigo Gastim +55 (11) 3383-2468 [email protected]
BofA Merrill Lynch Roberto Otero +55 (11) 2188 4119 [email protected]
Votorantim Paulo Prado +55 (11) 5171 5625 [email protected]
J.P. Morgan Joseph Giordano +55 (11) 4950-3020 [email protected]
Eleven Financial Raul Grego Lemos +55 (11) 4302-3340 [email protected]
Max Fischer - CFO and IRO | Beatriz Diez – IR Manager
www.profarma.com.br/ir | Tel.: +55 (21) 4009-0276 | E-mail:
