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Apresentação 3Q17
- Profarma's 3Q17 earnings release discusses financial results, capital allocation strategy, and division performances. Key highlights include consolidated gross revenue growth of 4.5% and a shortened consolidated cash cycle. The Retail Division accounted for 55% of gross profit versus 40% in 3Q16. Pharma distribution sales decreased 6.6% year-over-year. Net income was adjusted for non-recurring expenses from restructuring. Capex was primarily for IT, machinery, and equipment while net debt declined.
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Apresentação 3Q17
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- 2. 3Q17 | CapitalAllocation Strategy
- 3. Profarma 2017 | Focusin profitability 3 Company in Ramp up Pharma Market Increasing FOCUS: ROIC AND NET INCOME Sharp drop in Interest Rate Inflation Decreasing Better return Segments Ebitda Margin Evolution Capital Reallocation Dilution of Operating Costs 2017 2018
- 4. Profarma | HistóricoAlocação de Capital Profarma Verticalização | 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.
- 5. 10.8% 10.9% 10.9% 12.2% 13.4%14.0% 14.3% Profarma | Histórico Alocação de Capital Profarma 2016 - 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 POTENTIAL ROIC 625 631 662 776 578 571 709 41 68 101 53 68 96 156 272 389 571 625 672 730 1,032 903 1,028 1,376 2010 2011 2012 2013 2014 2015 2016 Farma ROIC Potencial ConsolidadoEspecialidades Varejo 771 702 98 106 421 667 1,291 1,475 3Q16 3Q17 13.6% 14.6% Invested Capital: Equity + Net Debt ROIC: NOPAT /Invested Capital
- 6. Profarma | HistóricoAlocação de Capital Profarma Marginal ROIC – New Stores and Renovated Stores Rede Rosário 6 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
- 7. Profarma | HistóricoAlocação de Capital Profarma Consolidated | 3Q17 Non Recurring Expenses vs Savings 7 Division Action/Iniciative Estimate Savings (annual, except PERT) 3Q17 Non Recurring Expenses Closing DC Ceará and Change of from Espírito Santo to Rio de Janeiro R$ 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
- 8. Profarma Rosário Performance Financial Indicator 8 (18.9) (11.9) OperatingIndicator (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$)
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- 10. Profarma | HistóricoAlocação de Capital Profarma 3Q17 | 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
- 11. Profarma | HistóricoAlocação de Capital Profarma 3Q17 | 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 September 2016. • Store expenses reduction from 30.0% to 26.7%, quarter-over-quarter. • Average EBITDA per month shot up by 91.1% from December 2016. REDE ROSÁRIO d1000 VAREJO FARMA RJ • Monthly sales per store came to R$579.0 thousand, 6.2% higher than ABRAFARMA’s (Brazilian Association of Pharmacy and Drugstore Chains) average. • Store expenses fell from 21.5% to 19.6%. • The contribution margin of stores stood at 9.0%.
- 12. Consolidado | ReceitaBruta 4.5% Consolidated IFRS (R$ million) Sales decreased by 6.6% year-over-year. Distribuição Farma Varejo Profarma Consolidated | Gross Revenues 12 Sales increased by 58,7% year-over-year 6.4% 2,840 2,720 599 940 965 1,022 910 908 901 198 241 307 318 314 3,439 3,659 1,163 1,263 1,217 1,226 1,216 Pharma Distribution Retail 9M16 1Q179M17 2Q174Q163Q16 3Q17
- 13. Consolidated IFRS (R$million and % Net Income) Consolidado | Ebitda e Margem Ebitda Ajustada Profarma Consolidated | Ebitda and Adjusted Margin Ebitda (Ex-Rosário) 13 60 20 20 23 17 93 54 20 -2 -3 -2 30 16 19 23 13 7 -2 -2 -3 4 -2 0 -1 0 -1 110 51 35 14 15 19 16 Pharma Distribution Retail Equity Income -SpecialtiesConsolidated Ex-Rosário 9M16 1Q179M17 2Q174Q163Q16 3Q17 1.6% 3.5% 1.5% 1.5%1.3% 3.7% 1.9% 1.9% 1.8% 1.9% 2.2% 1.7%
- 14. Consolidado | Ebitdae Margem Ebitda Ajustada Profarma Consolidated | Ebitda Bridge per Division 3Q17 vs 3Q16 (w/o Rosário) 14 Consolidated IFRS (R$ million and % Net Income) Pharma Distribution 3Q16 3Q17Equity Income Specialties d1000 RJ Rosário 35.4 -16.9 -1.9 -1.7 1.0 15.8
- 15. Profarma Consolidated | Capexand Indebtness 15 Capex 3Q17OthersIT Machinery 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
- 16. Consolidado | LucroLíquido Profarma Consolidated | Adjusted Net Income (w/o Rosário) 16 Net Income Adjusted Net Income 3Q17 2.4 (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% Consolidated IFRS (R$ million and % Net Income)
- 17. Consolidado | Ebitdae Margem Ebitda Ajustada Profarma Consolidated | Adjusted Net loss Bridge 3Q17 vs 3Q16* 17 Consolidated IFRS (R$ million and % Net loss) 3Q16 3Q17 Ebitda 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 since acquisition Almost flat Mainly due to Retail reestructuri ng, Including 34 stores closed Financial expenses due to Rosário acquisition Lower interest rates Higher operating loss before taxes
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- 19. Consolidado | ReceitaBruta Profarma Consolidated | Gross Revenues 19 Consolidated IFRS (R$ million) Pharma Distribution Retail 4.5%6.4% 2,840 2,720 599 940 965 1,022 910 908 901 198 241 307 318 314 3,439 3,659 1,163 1,263 1,217 1,226 1,216 9M16 1Q179M17 2Q174Q163Q16 3Q17
- 20. Consolidado | LucroBruto Profarma Consolidated | Gross Profit 20 Pharma Distribution Retail 284 256 181 281 94 88 82 93 81 60 72 96 93 93 465 537 154 160 178 186 173 9M16 1Q179M17 2Q174Q163Q16 3Q17 15.6% 17.2% 17.1% 17.8% 14.6%15.2% 16.6% Consolidated IFRS (R$ million and % Net Income)
- 21. Consolidado | DespesasOperacionais SGA Profarma Consolidated | 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 97 85 352 494 120 153 168 170 156 Pharma Distribution Retail 9M16 1Q179M17 2Q174Q163Q16 3Q17 Consolidated IFRS (R$ million and % Net income)
- 22. Consolidado | Ebitdae Margem Ebitda Ajustada Profarma Consolidated | Adjusted EBITDA and EBITDA Margin (w/o Rosário) 22 93 54 20 -2 -3 -2 30 16 19 23 13 7 -2 -2 -3 4 -2 0 -1 0 -1 110 50 35 14 15 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 20 23 17 Pharma Distribution Retail Equity Income SpecialtiesConsolidated Ex-Rosário 1.9% 1.8% 1.9% 2.2% 1.7%
- 23. Consolidado | LucroLíquido Profarma Consolidated | Net Income (w/o Rosário) 23 Consolidated IFRS (R$ million and % Net Income) Net lncome Adjusted Net Income 3Q17 2.4 (35.3) 3Q16 (9.5) 4.9 1Q17 (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%
- 24. Profarma Consolidated | Capexand Indebteness 24 Capex 3Q17OthersIT Machinery 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
- 25. Financial Data (R$million and % Net Income) Pharma Distribution Financial Performance 25 1,136 1,041 1,042 1,0481,056 8.9 10.5 10.5 9.09.1 8.1 7.7 8.2 7.9 7.7 1.6 3.3 2.5 1.5 2.1 1Q17 2Q173Q16 4Q16 3Q17 1Q17 2Q173Q16 4Q16 3Q17 1Q17 2Q173Q16 4Q16 3Q17 1Q17 2Q173Q16 4Q16 3Q17 EBITDA Margin (%) Op. Exp. SG&A (%) Gross Margin (%) Gross Revenues (R$ 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.
- 26. Especialidades Crescimento de 6,3%nas vendas da categoria de genéricos. Financial Data (R$ million and % Net Income) Operating Expenses Reduction by 0.8 p.p., from 9,0% to 8,2%; Specialties Financial Performance 26 Increase of 25.7% in sales of the vaccine category. 249.0 241.5 233.9 233.9 260.5 10.210.6 9.9 9.29.9 8.2 9.0 8.7 8.2 7.5 2.6 0.9 1.1 0.4 0.3 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)
- 27. Varejo 202.4 Financial Data (R$million and % Net Income) Monthly sales per store came R$ 569,8 Thousand, 8.5% higher than ABRAFARMA’s average; Store expenses fell from 21.8% to 20,9%; 198.1 200.0 201.0 d1000 varejo farma RJ Financial Performance (w/o Rosário) 27 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 30.5 27.0 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)
- 28. d1000 varejo farmaRJ Operating Performance (w/o Rosário) 28 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
- 29. d1000 varejo farmaRJ Operating Performance (w/o Rosário) 29 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 569.8 561.0 580.0 3Q16 1Q17 2Q174Q16 2.7% 564.0 579.0 3Q17 123123 129 3Q16 QT17 2Q174Q16 -6.9% 130 121 3T17 37.89 36.01 36.36 3Q16 1Q17 2Q174Q16 7.8% 35.83 38.62 3Q17
- 31. Max Fischer -CFO e IRO | Beatriz Diez - GRI Tel.: 55 (21) 4009-0276 | E-mail: [email protected] www.profarma.com.br/ri