Conference Call 3Q14

NOVEMBER 14, 2014

3Q14 EARNINGS RELEASE

Highlights | Corporate

2

The only Brazil’s mixed market player that features exposure and expansion capacity

in the segments of Retail, Hospital & Specialties and Distribution;

Strategic partnership with AmerisourceBergen, the world’s largest player in the

pharmaceutical specialties, resulting in the creation of the company Profarma

Specialty;

The Company carried out four acquisitions over the last three years, including its

entry into the Retail pharmaceutical segment, and the attainment of a market position

as one of the major players within this segment in the state of Rio de Janeiro;

Proven capacity to integrate acquisitions, combining all group companies in the SAP

plataform.

Highlights | 3Q14

3

CONSOLIDATED

• Consolidated gross revenues up 7.2% from 3Q13;

• 0.9 fall in operating expenses in relation to 3Q13;

• Retail Division EBITDA up R$ 6.7 million, with 4.2% EBITDA

margin.

Retail • 7.5% rise in Drogasmil / Farmalife’s sales and 12.9% rise in

Tamoio’s sales when compared with 3Q13;

• Rise of 83.3% in Drogasmil / Farmalife’s EBITDA and of 51.1%

rise in Tamoio’s 3Q13;

• Average monthly sales per store up 25.5% at Drogasmil

/Farmalife against 3Q13;

• 4 new stores opened in 3Q14, totaling 10 new stores in 2014.

SPECIALTIES

• Specialty retail sales up 16.8% vs. 3Q13;

• Oncologicals sales up 38.0% in relation to 3Q13.

PHARMACEUTICAL DISTRIBUTION

• Sales up 7.8% against 3Q13;

• 0.4 p.p. fall in operating expenses, from 8.3% to 7.9% compared

with 3Q13;

• Branded category sales up 11.5% vs. 3Q13;

• 1.0-day shorter cash in comparison to 3Q13.

Specialties

3Q13 3Q14(**)

163.9

19.4

14.4

4.6

162.8

19.1

15.5

2.2

Retail (*)

3Q13 3Q14

156.1

49.1

48.2

0.5

172.8

54.5

45.5

7.2

Consolidated (*)(**)

3Q13 3Q14

1,080.6

153.7

122.7

27.8

1,158.0

153.3

123.1

26.6

Pharmaceutical

Distribution

3Q13 3Q14

845.2

85.2

60.2

22.6

911.3

79.7

62.1

17.3

Highlights | Breakdown by Division – 3Q14

4

Gross Revenues

Gross Profit

SGA

Ebitda

(*) Pro-forma figures: 100% of revenues from Tamoio and Drogasmil / Farmalife.

(**) Pro-forma figures: 100% of revenues from Profarma Specialty.

CONSOLIDATED PERFORMANCE

Consolidated Performance

6

Gross Revenues Evolution (R$ million)

3Q13 3Q14

1,009.1 987.4

7.7%

7.2%

Pharmaceutical Distribution

Specialties

Retail

Sales growth of 10.0% compared to

2Q14.

Sales growth of 9.7% from 2Q14, with

11.9% in the retail and 9.1% in the

wholesale markets.

Sales growth of 8.9% at Drogasmil /

Farmalife and 6.4% at Tamoio

compared to 2Q14.

71.5 170.6

1,080.6 1,158.0

Accounting Consolidated Gross Revenues

Pro-forma Consolidated Gross Revenues: 100% of revenues from

Tamoio, Drogasmil / Farmalife and Profarma Specialty

2Q14

1,009.2

66.1

1,075.3

Performance by Division


3Q13 2Q14 3Q14

845.2

828.4

911.3

10.0%

7.8%

Specialties

3Q13 2Q14 3Q14(**)

163.9

148.4

162.8

9.7%

- 0.7%

Retail(*)

3Q13 2Q14 3Q14

63.1

10.7%

7

Gross Revenues Evolution (R$ million)

92.9 98.7

105.0

62.3 67.8

156.1

161.0

172.8

7.3%

Accounting Gross Revenues

Pro-forma additional Gross

Revenues

(*) Pro-forma figures: 100% of revenues from Tamoio and Drogasmil / Farmalife

(**) Pro-forma figures: 100% of revenues from Profarma Specialty


8

3Q14 3Q13

104.6

2Q14

117.7

101.6

Proforma (*)

Gross Profit (R$ million and % Net Revenues)

15.6%

3Q14 3Q13

16.2%

153.7

2Q14

148.3

14.9%

153.3

12.0% 13.4 % 11.9%

(*) Pro-forma figures: 100% of revenues from Tamoio, Drogasmil / Farmalife and Profarma Specialty


9

12.9%

3Q13

122.7

12.8%

2Q14

121.8

12.0%

3Q14

123.1

8.6%

3Q13

74.5

11.0 %

2Q14

96.5

9.7%

3Q14

83.0

Operating Expenses – SG&A (R$ million and % Net Revenues)

Proforma (*)



10

3Q13

3.3%

29.1

2Q14

2.3%

20.4

3Q14

2.2%

19.2

- 5.9%

- 34.2%

3Q13

2.9%

27.8

2Q14

2.6%

24.3

3Q14

2.6%

26.6

9.5%

- 4.1%

Adjusted EBITDA and Adjusted EBITDA Margin (R$ million and % Net Revenues)

Proforma (*)



11

Net Profit (R$ million and % Net Revenues)

Proforma (*)


(7.5)

-0.8% 0.4%

- 2.2%

2Q14

3.6

3Q14

(22.2)

3Q13

5.4

3Q14

0.6% 0.2%

-2.4%

(20.6)

2Q14

2.1

7.6

0.7

(2.8)

0.9% -0.3% 0.1%

Net Profit

Adjusted Net Profit

Proforma Net Profit

Proforma Adjusted Net Profit

(5.3) (1.3)

2.4

-0.6% -0,1%

0.2%

3Q13 Non Recurring

+ 2,7 Retail

+ 10,1 Specialty

+ 11,8 Pharma


Reduction of 10.6 days in the Cash Cycle vs 3Q13.

Cash Flow

(R$ million)

3Q14 2Q144 3Q13

Cash Cycle - Days * 54,5 43,6 43,9 40,4 37,3 41,0

Accounts Receivable ¹ 48,7 47,3 43,3 46,6 55,7 20,2

Inventories ² 48,5 55,9 55,1 47,8 40,1 67,6

Accounts Payable ³ 42,7 59,6 54,5 54,1 58,6 46,8

Cash Cycle

(Days)

QT14 3Q13 2Q14

Cash Flow Generated /

Used) in Operating Activities (27.0) (4.5) (11.9)

Internal Cash Generation (2.2) 20.7 1.4

Operating Assets Variation (24.7) (25.2) (13.3)

Cash Flow (Used)

in Investing Activities (4.9) (9.1) 16.6

Cash Flow Generated /

(Used) by Financing Activities (70.9) (9.5) 145.9

Acréscimo / (Decréscimo)

Líquido de Caixa (102.8) (23.1) 150.6

12

3Q14 3Q14 3Q14

Consolidated Consolidated Pharma PFS. Retail

Proforma

* Average

(1) Average of Gross Revenues in the Quarter

(2) Average of COGS in the Quarter

(3) Average of COGS in the Quarter

(4) In 2Q14, the account was based on the average gross sale and CGS,

excluding Specialties division.


13

Capex

3Q14

5.7

Others

1.5

Remodeling

of Stores

0.1

IT

1.5

Machinery and

Equipment

2.7

Capex (R$ million)

Indebtedness: Net Debt and Net Debt / EBITDA

(R$ million)

3Q13

432.8

4.3x

2Q14

167.1

2.2x

3Q14

211.3

3.2x

PHARMACEUTICAL DISTRIBUTION


Financial Data (R$ million and % Net Revenues)

EBITDA Margin

(%)

2.2

3Q13 3Q14

3.1

Op. Exp. SG&A

(%)

7.9

3Q13 3Q14

8.3

Gross Margin

(%)

10.2

3Q13 3Q14

11.7

Gross Revenues

(R$ million)

911.3

3Q13 3Q14

845.2

Operating expenses down

0.4 p.p., from 8.3% in 3Q13

and 2Q14 to 7.9% in 3Q14.

Branded category up 11.5%

and 12.8% vs. 3Q13 and

2Q14 respectively;

Sales up 7.8% and 10.0% vs

3Q13 and 2Q14 respectively;

15

SPECIALTIES


17

Ebitda Margin

(%)

1.5

3Q13 3Q14

3.2

Op. Exp. SGA

(%)

10.3

3Q13 3Q14

9.8

Gross Margin

(%)

12.7

3Q13 3Q14

13.3

Gross Revenues

(R$ million)

162.8

3Q13 3Q14

163.9

Specialties

Specialty retail sales up

16.8% and 11.9% vs. 3Q13

and 2Q14 respectively;

Specialty wholesale sales up

9.1% vs. 2Q14;

Oncologicals sales up 38.0%

and 26.2% against 3Q13 and

2Q14 respectively.

RETAIL


19

Ebitda Margin

(%)

7.6

2Q13 2Q14

5.7

Op. Exp. SGA

(%)

23.4

2Q13 2Q14

24.1

Gross Margin

(%)

31.1

3Q13 3Q14

30.0

Gross Revenues

(R$ million)

105.0

3QT13 3Q14

92.9

Retail | Tamoio

Gross revenue up 12.9% and

6.4% from 3Q13 and 2Q14

respectively;

Average monthly sales per

store, totaling R$ 582.0

thousand, up 10.8% and

6.2% vs. 3Q13 and 2Q14

respectively;

Highest EBITDA margin in

the last 12 months, 7.6%, up

1.9 p.p. and 2.1 p.p. from

3Q13 and 2Q14 respectively.

3Q13

525.1

3Q14

582.0

2Q14

548.2

10.8%

3Q13

92.8

3Q14

104.8

2Q14

91.7

12.9%

3Q13

84.9

3Q14

94.0

2Q14

89.0

10.7%

Retail | Tamoio

6.2% 5.7%

20

14.2%

SSS Mature Stores (R$ million)

Monthly Average Store's Sales (R$ thousand)

Same Store Sales (R$ million)

3Q13

25.5

3Q14

28.0

2Q14

27.3

9.7%

2.5%

Retail | Tamoio

# of Stores (units)

3Q13

59

2Q14

60

3Q14

60

Average Ticket (in reais)

21

0 Opening

0 Close-downs

0 Reformulating

48 Mature

2Q14

vs.

3Q14

1.7%

0.0%


22

Ebitda Margin (%)

-0.8

3Q13 3Q14

-4.8

Op. Exp. SGA

(%)

30.9

3Q13 3Q14

40.9

Gross Margin

(%)

32.3

3Q13 3Q14

33.6

Gross Revenues

(R$ million)

67.8

3Q13 3Q14

63.1

Retail | Drogasmil/Farmalife

Gross revenue up 7.5% and

8.9% from 3Q13 and 2Q14

respectively;

Average monthly sales per

store up 25.5% vs. 3Q13;

Operating expenses down

18.9% in absolute amounts

vs. 3Q13.

EBITDA up 83.3% and 74.0%

from 3Q13 and 2Q14

respectively;

Varejo | Drogasmil/Farmalife

SSS Mature Stores (R$ million)

Monthly Average Store's Sales (R$ thousand)

3Q14

381.7

2Q14

346.2

25.5%

304.1

3Q13 3Q13

54.6

3Q14

64.8

2Q14

58.0

18.6%

3Q13

54.1

3Q14

63.0

2Q14

56.7

16.5%

23

11.7%

Same Store Sales (R$ million)

11.1% 10.2%

Varejo | Drogasmil/Farmalife

24

3Q13

28.9

3Q14

33.5

2Q14

31.8

16.2%

3Q13

69

3Q14

61

2Q14

60

-11.6%

1.7%

Average Ticket (in reais)

5.5%

# of Stores (units)

4 Openings

2 Close-downs

2 Reformulating

51 Mature

2Q14

vs.

3Q14

ANALYST COVERAGE

Cobertura de Analistas

26

Company Analyst Telephone E-mail

Banco Fator Caio Moreira +55 (11) 3049-9487 [email protected]

Brasil Plural Guilherme Assis +55 (11) 3206 8285 [email protected]

BTG Pactual João Carlos dos Santos +55 (11) 3383-2384 [email protected]

Credit Suisse Marcel Moraes +55 (11) 3841 6302 [email protected]

HSBC Luciano Campos +55 (11) 3371 8194 [email protected]

Itaú BBA Juliana Rozenbaum +55 (11) 3073 3040 [email protected]

Merrill Lynch Mauricio Fernandes +55 (11) 2188 4236 [email protected]

Morgan Stanley Javier Martinez de Olcoz +55 (11) 3048 6088 [email protected]

Votorantim Andre Parize +55 (11) 5171 5870 [email protected]

Max Fischer | CFO and IRO & Beatriz Diez | IR Manager

www.profarma.com.br/ir | Tel.: 55 (21) 4009-0276 | E-mail: [email protected]

Conference Call 3Q14

Business

Transcript of Conference Call 3Q14