2 q11 results conference call presentation

2Q11 Results

August 16, 2011

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Disclaimer

This material contains statements that are forward looking and information related to the Company and its subsidiaries which reflect current views and/or

Company’s and its management expectation with respect to its performance, its business and future events. This presentation contains forward-looking

statements which were not based on historical data, and they reflect expectations of Company’s management. The words “foresees”, “estimates”, “wishes”,

“expects”, “intends”, “plans”, “believes”, “projects”, as well as other similar words were used to identify these statements. Although the Company believes

the expectations and hypothesis reflected in those forward looking statements are reasonable and were based in current information made available to

Company's management, the Company can not guarantee its results or future events. Please consider that real results may differ significantly from those

expressed or implicit in forward looking statements. The Company and its subsidiaries, as well as its board members, directors, agents, employees,

consultants or representatives, are not liable for any losses arising from the herein presented information nor for any damage arising from it, correspondent

or specific. The information presented in this material is based on internal research, market research, public information and corporate editorials, and the

Company did not check the accuracy of these date with the respective sources. Therefore, the Company does not provide any guarantee on the accuracy

and integrity of these data. Such data involve risks and uncertainties, as well as remain subject to changes based on several factors. The Company does

not assume responsibility for the veracity of such information. Except for the figures for the 2nd quarter of 2011, which were object of limited review, the

other financial information presented herein, as well as possible comparisons and/or resulting inferences, were not the object of a limited review or audit

and corresponds to pro-forma internal management information and should not be considered in an isolated manner as sufficient for any investment

decision and should be read jointly with the Company’s financial information that are the object of limited review or audit filed with the CVM. For a complete

analysis of the Company, please verify all the information related to it on its website and at the CVM. This presentation and its content are property of the

Company and can not be reproduced or circulated, partial or entirely, without the Company’s previous written consent.

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2Q11 Operating and Financial Highlights

• 681 points of sale, 323 own stores and 358 franchise stores

• 21 own stores opened in 2Q11, a total of 31 new own stores opened in the 1H11. 323 own stores in

operation at the end of 2Q11, with 43 new stores already contracted for 2H11

• Gross revenue growth of 24.8% versus 2Q10, reaching R$274.1 million in 2Q11 and R$514.1 million in

1H11

• Same-store sales (SSS) growth of 12.7% in the quarter

• Gross margin of 34.3%, a margin expansion of 3.9 p.p. when compared 2Q10

• EBITDA of R$15.2 million in 2Q11 reaching R$27.4 million in the 1H11. EBITDA margin of 5.5% in the 2Q11

and 5.3% in 1H11

• IPO: placement of 24,000,000 shares and gross proceeds of approximately R$414.0 million

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Pharmacy Retail

Sales Performance in the Brazilian Pharmacy Retail Sector from 1996-2010 (R$ Billion)

7.08.3

9.4 10.3 11.2 11.613.1

14.817.2

19.221.5

23.6

26.4

30.2

36.0

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

1997-2000

• 1997: Asian Crisis

• 1998: Russian Crisis

• 1999: Real Depreciation

• 2000: Internet Bubble

burst

Avg. GDP Growth: 1,5%

Avg. Inflation: 5,5%

Avg. Interest Rate: 21,1%

Avg. Sales CAGR: 10,5%

2001-2002

• 2002: Crisis pre-Lula

election

• 2001: Argentine Default





2003-2005

• 2003-04: First years of

Lula’s mandate

• 2004: Mensalão scandal





2006-2007

• 2006: Second Lula

election





2008-2010

• 2008: Subprime Crisis





Sources: IMS and Brazil Central Bank.

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245

259 270

292 302

323

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11

168 own stores

358 franchise stores

63 own stores

92 own stores

Brazil Pharma’s Expansion in 2Q11

National presence with regional focus and accelerated organic growth with the opening of 31 new own

stores in the 1H11

Our Platform (as of June 30, 2011)

681 points of sale

Acelerated Organic Growth

Number of own stores (Pro-Forma)

323 own stores e 358 franchise stores

Distribution of the Stores by Stage

(Existing stores on June 30, 2011)

70 22%

83 26%

55 17%

115 35%

Stores with less than 12 months

Stores with 12 to 24 months

Stores with 24 to 36 months

Stores with more than 36 months (mature)

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Ownership Structure

Ownership structure after the IPO

Operating

Partners

Farmais Rosário

Distrital Guararapes Mais

Econômica

100.0% 100.0% 100.0% 100.0%

BTG

Pactual

34.8% 28.1%

Market

13.6%

FIPs1

23.5%

(1) Funds managed by Banco BTG Pactual

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Sales and SSS

Solid growth track record in sales and SSS

Gross Revenues

(R$ million)

SSS (Crescimento Vendas Mesmas Lojas)

SSS SSS mature stores (36 months)

192.4

219.6

249.4

259.8

240.0

274.1

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11

6.7%

2.2%

4.2%

5.6%

1.9%

6.1%

13.8%

10.6%

13.4%

15.0%

8.4%

12.7%

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11

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Sales Mix and Average Ticket

Increase in average ticket even with the growing relevance of generics in our sales mix

Sales Mix

(% of sales)

Average Ticket

(R$)

33.5% 31.7% 31.1% 33.5% 31.6% 30.7%

47.0% 47.7% 47.1% 46.1% 46.7% 48.0%

19.6% 20.5% 21.8% 20.4% 21.6% 21.3%

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11

Non-drugs Brands Generic drugs

33,5% 31,7% 31,1% 33,5% 31,6% 30,7%

47,0% 47,7% 47,1% 46,1% 46,7% 48,0%

19,6% 20,5% 21,8% 20,4% 21,6% 21,3%

1T10 2T10 3T10 4T10 1T11 2T11

Non medicines Branded Generic

26.89

27.69

28.31

27.74

28.05

29.47

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11

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Gross Profit and Expenses

Gross margin expansion, given better mix and inventory management

Gross Profit and Gross Margin

(R$ million, % of gross revenues)

Selling, General, Administrative and Other

Expenses1 and % of Gross Revenue

(R$ million, % of gross revenue)

(1) Includes other net operating expenses of R$0.7 million. Excludes depreciation and amortization expenses

of R$4.9 million, non-recurring expenses related to the IPO of R$2.1 million and other non-recurring expenses

of R$1.6 million.

59.8

66.7

74.3

77.6 78.9

94.1

31.1% 30.4% 29.8% 29.9%

32.9% 34.3%

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11

Gross Profit Gross Margin

50.2

55.3

60.8

67.7 66.7

79.0

26.1% 25.2%

24.4% 26.1%

27.8% 28.8%

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11

SG&A % of gross revenue

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EBITDA and Depreciation and Amortization

Higher EBITDA margin since the creation of Brazil Pharma

EBITDA and EBITDA Margin


Depreciation and Amortization Expenses

(R$ million)

Starting January 2011 there was a change in our accounting criteria and

the key money (commercial establishments) amortization was classified

under depreciation and amortization expenses in the income statement.

This same line includes the depreciation of our plant and equipment and

the investments in the layout adjustment at our stores.

Out of the total depreciation and amortization expenses in 2Q11,

R$3.0 million represented the amortization of intangible assets

(commercial establishments).

9.6

11.4

13.4

9.9

12.2

15.2

5.0% 5.2% 5.4%

3.8%

5.1% 5.5%

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11

EBITDA EBITDA Margin

0.7 0.8 0.8 0.8

5.0 4.9

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11

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Financial Result and Net Income

Lower financial expenses given Company’s capitalization and maintenance of profitability

Financial Result, Net Expenses

(R$ million)

Net Income and Net Margin1


(1) Net income before non-controlling interest and adjusted to exclude the non-recurring expenses.

(3.4)

(4.4) (4.6)

(2.9)

(2.4)

(1.8)

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11

2.0

4.7

4.6

5.4

6.1

4.0

5.2

7.8

2.4% 2.5% 2.4%

1.5%

0.8%

1.7% 2.2%

2.8%

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11

Net Income Adjusted for key money amortization

Net Margin Adjusted Net Margin

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Working Capital, Cash Flow and Debt

Brazil Pharma as the most capitalized company in the sector and in a continuous process of financial

management improvement

Working Capital Operating and Investing Cash Flow

(R$ million)

Debt

(R$ million)

2Q11 1Q11 2010

Receivables

(in days) 23 20 26

Inventory

(in days) 87 86 89

Suppliers

(in days) 60 69 70

Working capital

(in days) 50 37 45

2Q11 1Q11

Loans and financing 75.6 117.4

Current 44.4 104.6

Non-current 31.1 12.8

Accounts payable

(acquisitions) 152.7 102.9

Current 85.1 36.3

Non-current 67.6 66.7

Total Debt 228.2 220.3

Cash and cash

equivalents 456.3 142.4

Net Debt (Net Cash) (228.0) 77.9

1H11 1H10

Audited

EBT 5.9 (0.6)

(+) Depreciation and amortization 9.4 0.4

(+) Others 0.9 0.1

Cash generated from operations 16.2 (0.1)

(-) Working capital (58.4) 1.4

(-) Deferred taxes (79.1) (0.1)

(-) Others (23.0) 11.4

Net cash generated from

operations (144.2) 12.6

(-) Capex (21.3) (1.6)

(-) Aquisitions (70.1) (30.6)

Cash flow from operations and

investments (235.6) (19.5)

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Recent Events

• E-commerce

• Integration process and Shared Service Center (SSC)

• Opening of new stores

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Integration

• Culture integration

Integration event realized: “Juntos Podemos Mais”

>> Themes:

1- Culture

2- Strategic Planning 2012-2014

3- Best Practices

>> Participants: 140 people (among directors,

managers, supervisors and multipliers)

• Shared Service Center

Holding

Lean corporate center

focused in strategic activities

SSC Business Units

Demand

Service

Services rendered with

excellence at competitive costs Business units focused on

their final activities

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Strategy 2011-2014

We maintain our growth, optimization and differentiation strategy for value creation

Market Consolidation

Highly fragmented market

with large room for

consolidation

Organic Growth

Opening of new stores to

consolidate local leadership

and enter new states

Differentiation

Product development,

private label and loyalty

programs

Operational

Efficiency

Strong synergy to come

through integration

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Contact Details

Investor Relations

Renato Lobo IR Officer

[email protected]

(55 11) 2117 -5200

www.brazilpharma.com.br/ri

Brazil Pharma S.A.

Rua Gomes de Carvalho, 1629

6th and 7th floors

CEP 04547-006

São Paulo, SP, Brazil

2 q11 results conference call presentation

Documents

Transcript of 2 q11 results conference call presentation