4q16 presentation

2016 Results

2016 | Capital Allocation Strategy

3

In 2011, having completed the wholesale expansion to a national coverage, the strategic decision was to diversify in search of higher returns for the company.

Profarma2016 | Capital Allocation Strategy

2011

Acquisition 60% Prodiet

2012

Acquisition 80% ArpMed

Acquisition 40% Prodiet (remaining)Acquisition 50% Tamoio

Acquisition 100% Drogasmil/ Farmalife

2013

2014

Acquisition 20% ArpMed (remaining)Joint Venture AmerisourceBergen

2015

Acquisition 50% Tamoio (remaining)Acquisition 100% Íntegra

2016

Acquisition 100% Rosário

625 631 662 776578 571

709

41 68101

53 6896

156

272389

571

625 672 730

1,032903

1,028

1,376

2010 2011 2012 2013 2014 2015 2016

10.8% 10.9% 10.9%12.2%

13.4% 14.0% 14.3%

Profarma | Histórico Alocação de CapitalProfarma2016 | Capital Allocation Strategy

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.

4

Invested Capital: Equity + Net DebtROIC: NOPAT /Invested Capital

Po

ten

tial

RO

IC

Pharma Consolidated potential ROICSpecialties Retail

ProfarmaDrogasmil | Turnaround

5

Monthly Average Sales per Store

# of stores and R$ thousands

8474 67 67 63 60 62 64 64 67 67 68 67 67 68 67

165

262314 329 324 346 365 385 375 375 385 401 411

442 418456

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16

# of stores Monthly average sale

• Niche brands

• More competitive market

• Long period with no supply

• Renewal of 70% of stores from the original platform

• Complete brand renewal

• Hiring of 400 employees in 3 months

• Replacement of 100% of the technological platform

• Directors and managers team build up on going

ProfarmaCase Drogasmil versus Rosário

• Leading brand

• Less competitive market

• Short period with no supply

• Stores in good condition

• Brand update (implemented in May/17)

• Staff complete

• Migration from SAP legacy to SAP d1000

• Complete management team

6

54.0

29.6 24.8

28.3 31.8

38.1

Dec-15 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16

ProfarmaRosário Integration Evolution

Gross Revenues Evolution - Rosário

(R$ million)

*

*

Acquisition of Rosário by Profarma in 09/22/16

Potentialof 59.0

Considering the average price increase of 10.5% occurred in March 2016(1)

(1)

7

+54%

??

Fonte: Companies estimations

# of stores (2015)

Combined Operation

Brazil’s main competitors

Note (1): Considering 100% of Rede Tamoio, CSB Brasil (“Drogasmil” and “Farmalife”) and Rosário.

Em R$ billion (2015)

Brazil’s main competitors

+

Profarmad1000 | Overview of the Combined Retail Operation

• Regions with different competitive environments assuring a

more balanced gross margin.

• 2nd largest in number of stores considering the regions where it

acts.

o Midwest leader

o 2nd in Rio de Janeiro

• 6th largest in number of stores in Brazil.

• Brand portfolio with complementary positioning.

• Platform that allows accelerated organic expansion.

• Scale

+

9.0

7.0

4.8

2.61.6 1.5 1.4 1.4 1.1 0.6 0.4

1º 2º 3º 4º 5º 6º 8º 9º 10º 11º7º

1,2351,079

828

381 347 279 254 248 240 150 125

1º 2º 3º 4º 5º 7º 8º 9º 10º 11º6º

8

Profarma’s Model Benefits

42.0 38.7

58.2

77.689.1

Aug-16 Sep-16 Oct-16 Nov-16 Dec-16

Integrated logistic structure enables a promptly accelerated

inventory recovery in various regions.

Benefícios do Modelo Misto

Supply agility

47%56%

65%

80%82%

Service Level

(R$ million)

Inventories

ProfarmaProfarma’s Model Benefits to the Retail Division

Lower working capital

3Q16 (Days)

Accounts Receivable 19.0

52.9

47.9

24.0

21.8

88.4

60.3

50.0

25.0

96.0

65.0

56.0Cash Cycle

Accounts Payable

Inventories

Optimized working capital and a cash cycle 30 days shorter than

the average of other retail players.

*

*

10

+130%

Player A Player B

Acquisition of Rosário by Profarma in 09/22/16 Source: Companies website

Normalized estimate d1000 varejo farma cash cycle

* *

Combined purchsing power between retail and wholesale assures more competitive prices

Benefícios do Modelo MistoProfarmaProfarma’s Model Benefits

Average top 3 retail players

11

Variation %CATEGORY A

-2% RJSP

R$ 93

Example: Retail RJ 100 Basis

Variation %CATEGORY B

-17%

RJ

R$ 91

RJSP

R$ 42

RJ

R$ 35

More competitive prices when buying inside the state directly from the wholesale

Relevance to Suppliers| 2016

(R$ billion)

Tax Optimization

+

Source: Companies website

5.55.6

Benefícios do Modelo Misto

Drugstore market – Sales evolution

ProfarmaProfarma’s Model Benefits

G&A Sinergies

• Distribution center shared with wholesale clients – 35 thousand

clients supplied nationally.

• Shared Services Center: legal, fiscal, internal audit and human

resources.

• Better production balancing – optimization of the distribution

center as the production of d1000’s volume occurs in its idleness

time.

12

Source: Close Up | Abafarma: Associação Brasileira do Atacado Farmacêutico

Wholesalers with lower dependence on big chains and market share

growth with higher rates.

(R$ billion)VAR ANO

ANT. %

13.3%

11.7%

15.6%

13.0%

1.0%

14.3%

5.3%0.8%1.5%

3.0%4.3%

11.7%

25.6%

53.1%

57,4

0.9%1.5%

3.3%4.3%

11.4%

25.8%

52.9%

50.7

3.5%

26.2%

52.1%

64.7

11.2%

MAT Jan/17MAT Jan/15 MAT Jan/16

Big Chains Independent Associations Small Chains

Medium Chains Delivery Partner Pharmacies

1.0%

1.6%4.3%

VAR ANOANT. %

2016 Results

Destaques | Abertura por Divisão

Specialties(*)

2015 2016

766.7

84.3

66.4

16.0

967.9

101.6

77.3

17.3

Retail(**)

2015 2016

748.7

222.3

200.6

13.4

839.4

253.9

230.2

18.7

Consolidated(*)(**)

2015 2016

4,913.5

649.4

524.8

114.7

5,529.7

726.9

582.1

144.6

Pharmaceutical Distribution

2015 2016

3,739.3

342.9

257.8

84.4

4,201.1

371.4

274.4

108.7

Gross Revenues

Gross Profit

SG&A

Ebitda

(*) pro forma figures: 100% of Specialties in 2015 and 2016.(**) pro forma figures: 100% of Tamoio in 2015.

ProfarmaHighlights | Breakdown by Division

14

Consolidated Performance

3,3983,722

749

839

767

9684,914

5,530

Consolidado | Receita Bruta

12.5%

pro forma (R$ million)

Specialties

Pharma Distribution

Sales increased by 12.4% year-over-year.



Retail

2015 2016

ProfarmaConsolidated | Gross Revenues

16

Pharma Distribution Retail Specialties

2.3%

3.0%

2015 20162015 2016

Consolidado | Ebitda e Margem Ebitda Ajustada

85

109

-4

19

-1-3

80

124

85

109

13

19

16

17

115

145

3.0%

2.7%

ProfarmaConsolidated | EBITDA and EBITDA Margin

17


Consolidated IFRS (R$ million and % Net Revenues) pro forma (R$ million and % Net Revenues)

Consolidado | Ebitda e Margem Ebitda AjustadaProfarmaConsolidated | EBITDA and EBITDA Margin

18

Pharma

Distribution2015 2016Equity Income

Specialties

Rosário d1000

Consolidated IFRS

Ebitda Bridge per Division 2016 vs 2015 (R$ million)

pro forma

2015 2016

24.3

-6.3

29.0

-3.0

79.6

123.9 24.3

-6.3

10.7 1.3

114.6

144.6

Pharma

Distribution

SpecialtiesRosário d1000

Consolidado | Lucro Líquido

2016

2015 2016

XC

(11.6)(14.5)

(0.5)

XC X

C

XC

(9.1)

(21.2)

(49.0)

(8.3)

2015 2016

(54.5)

-0.6%-1.2%

-0.3%-0.2%

-1.1%

-0.2%

-0.3%

0.0%

ProfarmaConsolidated | Net Income

19

Net Income

Adjusted Net Income

pro forma Net Income

pro forma Adjusted Net Income

pro forma (R$ million and % Net Revenues)Consolidated IFRS (R$ million and % Net Revenues)

Consolidado | Lucro LíquidoProfarmaConsolidated | Net Income

20

2015

Adjusted Net Income Bridge per Division 2016 vs 2015 (R$ million)

pro forma

Financial

Expenses

Tamoio’s

Balance

2016d1000 OthersPharma

DistributionRosário

Equity Income

Specialties

Non-recurring expenses

2015

Financial

Expenses

Tamoio’s

Balance

2016d1000 OthersPharma

DistributionRosário Specialties

Non-recurring expenses

Consolidated IFRS

3.1

24.9

-9.9-3.0

-14.5

0.2-9.1

-21.2

-48.9

-8.3

3.1

16.0

-9.9-6.0

-14.5

0.2

-0.5

-14.5

-54.5

-11.6

Capex

2016OtherITMachinery and

Equipment

32.28.4

4.3

19.5

4Q15 4Q16

415.2

236.6

3.0x3.3x

4Q16

w/o Rosário

353.2

2.7x

ProfarmaConsolidated | Capex and Indebtedness

21

Net Debt and Net Debt / EBITDA (R$ million)Capex (R$ million)

Attachments

3,3983,722

749

839

767

968

861 911 906 925 980

198196 205 198

241224

231 246 241

2494,914

5,530

1,2791,338 1,357 1,364

1,470

3,673 3,862

308

839

919 930 945 965 1,022

82196 205 198

2413,981

4,701

1,001

1,126 1,150 1,163

1,263

Consolidado | Receita Bruta

4Q15 2Q16 3Q161Q16 4Q162015 2016 4Q15 2Q16 3Q161Q16 4Q162015 2016

18.1% 26.1% 12.5% 14.9%

ProfarmaConsolidated | Gross Revenues

23

Consolidated IFRS (R$ million and % Net Revenues) pro forma (R$ million and % Net Revenues)


343 371

94

254

82 75

11494 88

24

58

63

60 72

437

625

106

133

178

154160

343 371

222

254

84

102

82 75

11494 88

5658

63

60 72

24 24

31

2423

649

727

162 158

208

178183

Consolidado | Lucro Bruto

4Q15 2Q16 3Q161Q16 4Q162015 2016

12.6%

15.3%

12.2%13.6%

17.8%

15.2%14.6%

4Q15 2Q16 3Q161Q16 4Q162015 2016

15.0%15.0%

14.4%13.5%

17.6%

14.9%14.3%

ProfarmaConsolidated | Gross Profit

24

Consolidated IFRS (R$ million and % Net Revenues)


pro forma (R$ million and % Net Revenues)

258 274

100

230

67 60 66 6979

2652

53 51

74358

505

93

112120 120

153

258 274

201230

66

77

67 60 66 6979

5252

53 51

74

1818

20 20

19525

582

138130

140 140

172

Consolidado | Despesas Operacionais SGA

4Q15 2Q16 3Q161Q16 4Q162015 2016 4Q15 2Q16 3Q161Q16 4Q162015 2016

12.4%

10.3%

10.8%

11.5%12.0% 11.8%

14.0%

12.0%12.1% 12.3%

11.1%

11.8%11.7%

13.4%

ProfarmaConsolidated | Operating Expenses - SGA

25




85

109

13

19

16

17

20 18

45

30

16

24

10

7

-2

54

5

2

6

115

145

2826

60

39

2085

109

-4

19

-1-3

20 18

45

30

16

-1

4

10

7

-20

-1 -1 -2

0

80

124

1821

54

35

14


Consolidado | Ebitda e Margem Ebitda Ajustada

4Q15 2Q16 3Q161Q16 4Q162015 2016 4Q15 2Q16 3Q161Q16 4Q162015 2016


2.3%

2.1% 2.1%

5.4%

3.5%1.3%

3.0% 3.0%

2.5% 2.2%

5.1%

3.3%

1.6%

2.7%

ProfarmaConsolidated | EBITDA and EBITDA Margin

26


Consolidado | Lucro Líquido

Net Income

Adjusted Net Income

4Q163Q16

2Q16

4Q15 1Q16

pro forma Net Income

pro forma Adjusted Net Income

2016

2015 2016

8.5

(6.2)

(9.3) (9.5)

(18.8)

16.0

(7.3)

(4.4)

0.8%

0.1%

-1.8%

1.6%

-0.5%

-0.9%

-3.5%

-0.6%

-0.8%

1.3%

0.0%

-1.5%

-0.6%-0.3%

0.6%

-1.0%

-3.1%

-0.6%-0.9%

(11.6)

(39.6)

(6.8)(18.9)(14.5)

(0.5)

7.5

15.0

4T16


(9.1)

(21.2)

1.0

(38.6)


(49.0)

(8.3)

4Q163Q16

2Q16

4Q15 1Q162015 2016

(54.5)

(3.9)

-0.6%-1.2%

-0.3%-0.2%

-1.1%

-0.2%

-0.3%

0.0%

(12.2)

(0.1)

(10.2)

(6.9)

ProfarmaConsolidated | Net Income

27

-0.9%

XC

XC

Capex

2016OtherIT

Machinery and

Equipment

32.28.4

4.3

19.5

ProfarmaConsolidated | Capex and Indebteness

28

4Q15 2Q16 3Q161Q16 4Q16

287.7

428.4415.2

236.6

3.0x

3.3x3.8x

3.1x3.3x

397.8

353.2

2.7x

4Q16

w/o Rosário

Net Debt and Net Debt / EBITDA (R$ million)Capex (R$ million)

8.18.27.6

8.9

10.3

9.9

4,201.1

2015 2016

3,739.3

2015 2016 2015 2016 2015 2016

Financial Data (R$ million and % Net Revenue)

EBITDA shot up by 28.8% to R$

108.7 MM, with 3.0% EBITDA

margin;

Operating expenses shrank by

0.4 p.p., from 8.0% to 7.6%;

and

The Independent customers

segment grew by 20.6%.

955.1

1,136.3

10.6

8.0

2.6

3.0

2.4

1.6

Pharma DistributionFinancial Performance

29

EBITDA Margin

(%)

Op. Exp. SG&A

(%)

Gross Margin

(%)

Gross Revenues

(R$ million)

4Q15 4Q16 4Q15 4Q16 4Q15 4Q16 4Q15 4Q16

Especialidades

8.2

8.8

9.4

10.2

11.5

11.4

967.9

Crescimento de 6,3% nas vendas da

categoria de genéricos.

Aumento de 12,3% no lucro bruto, que

alcançou R$ 94,2 milhões e margem

bruta de 10,5%;


Operating expenses slid by 0.7

p.p., from 9.4% to 8.7%;

Sales to the private sector rose

by 37.8%; and

Oncologicals sales boomed by

34.7%.

766.7

224.1

249.0

11.9

8.72,3

2,0

2,6 2,6

SpecialtiesFinancial Performance

30

4Q15 4Q16 2015 2016 4Q15 4Q16 4Q15 4Q162015 2016 4Q15 4Q162015 20162015 2016

EBITDA Margin

(%)

Op. Exp. SG&A

(%)

Gross Margin

(%)

Gross Revenues

(R$ million)

Varejo

EBITDA Margin

(%)

27.026.4

Op. Exp. SG&A

(%)

26.8

29.4

Gross Margin

(%)

30.1

4Q15 4Q16

28.5

Gross Revenues

(R$ million)

801.3

Crescimento de 6,3% nas vendas da

categoria de genéricos.

Aumento de 12,3% no lucro bruto, que

alcançou R$ 94,2 milhões e margem

bruta de 10,5%;

2015 2016 4Q15 4Q16 4Q15 4Q162015 2016 4Q15 4Q162015 2016


Gross margin rose by 0.4 p.p.

to 30.1%;

EBITDA shot up by 86.1% to R$

25.0 MM, with 3.1% EBITDA

margin; and

Average monthly sales per

mature store came to R$ 579.8

thousand, 8.6% higher than

ABRAFARMA’s.

2015 2016

748.7

198.1

202.429.7 26.4

3.1

1.8

1.2

2.3

RetailFinancial Performance (w/o Rosário)

31

Total Sales Growth (%) Same Store Sales (%) SSS Mature Stores (%)

RetailOperating Performance (w/o Rosário)

32

4Q15 2Q16 3Q161Q16 4Q162015 2016

-6.2 p.p.

3.9%

11.1%11.3%10.6%

1.4%

12.3%

6.1%

4Q15 2Q16 3Q161Q16 4Q162015 2016

-4.4 p.p. -8.2 p.p.

-9.2 p.p.

2.5%

8.5%

9.6%

8.2%

0.0%

9.4%

5.0%

3.7%

10.5%

12.4 %

4Q15 2Q16 3Q161Q162015 2016

-5.2 p.p. -9.1 p.p.

11.3%

2.2%

12.2%

7.0%

4Q16

Monthly Average Store's Sales (mature)(R$ thousand) # of Stores (units) Average Ticket (R$)

4 opening

4 close-down

6 reformulated

102 mature

RetailOperating Performance (w/o Rosário)

33

564.0

589.7

549.2

4Q15 2Q16 3Q161Q16 4Q162015 2016

5.7% 4.2%

556.5

4Q15 2Q16 3Q161Q16 4Q162015 2016

580.1

548.4

579.8130

129

128

129 129129 129

4Q15 2Q16 3Q161Q16 4Q162015 2016

9.8% 10.7%0.0%

35.8335.82

34.49

32.84

36.36

32.45

35.62

0.0%

Max Fischer - CFO & IRO | Beatriz Diez - IR ManagerTel.: 55 (21) 4009-0276 | E-mail: [email protected]

www.profarma.com.br/ir

4q16 presentation

Investor Relations