apresentação 2q17

2Q17 Earnings Release

2Q17 | Capital Allocation Strategy

Profarma2017 | Focus in profitability

3

Company in

Ramp up

Pharma market

Increasing

FOCUS: ROIC AND NET INCOME

Sharp drop in

Interest RateInflation

Decreasing

Better Return

SegmentsEbitda Margin

EvolutionCapital

Reallocation

Dilution of

Operating Costs

20

17

20

18

816 705

89111

422 679

1.327

1.495

2Q16 2Q17

10,8% 10,9% 10,9%12,2%

13,4% 14,0% 14,3%

Profarma2016 - 2017 | | Capital Allocation Strategy for Best Return Segments

Invested Capital Evolution – Profarma Group

4

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

13,9%14,8%(R$ million)

Pharma Consolidated potential ROICSpecialties Retail

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

Po

ten

tial

RO

IC

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.

Drugstore Market✓

Wholesalers with lower dependence on big chains and market share growth with

higher rates.

Profarma | Histórico Alocação de CapitalProfarmaVerticalization | Profarma’s Model Benefits

5

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.

ProfarmaRosário Performance

Financial Indicator

6

Operating Expenses(R$ Million)

Operating Indicators

Ebitda(R$ Million)

Monthly average sale 2Q17 - RosárioDec/16 Jun/17 - RosárioSep/16

Monthly average sale(R$ thousand)

Service level(%)

Clients served(# thousand)

Average Ticket(R$)

Jun/17 - d1000 varejo farma RJ

165

301

547

56

9294

573

761

1.700

43

52

38

(18.9)

(14.3)

(6.3)

(1.1)

ProfarmaConsolidated | Leverage

7

Gross Debt Aging Annual Decrease of Financial Expenses*

2Q17Cash

(R$ Million)

2018 2019 2020 2021

* Estimate based on Financial Expenses calculated at 11.25% CDI compared

to Financial Expenses calculated at 7.5% CDI. Average level of debt and

spreads kept constant as of 2Q17.

14

2S17 From 2018

36R$642 Million

2017

(R$ Million)

245278

8874

49

152

Consolidated Performance

Profarma2Q17 | Key Highlights

9

PROFARMA GROUP | CONSOLIDATED

• Total sales grew by 6.7% in the period, highlighting the

Retail Division, with a 55.4% growth.

• Reduction of the cash cycle in 16.1 days.

• Price increase 70% lower, impacting all divisions.

• Adjusted net income improved by R$2.9 million

compared to 1Q17.

• Inauguration of the new RJ DC scheduled for

September, approximately R$ 40 million in the last 12

months.

• Competitive scenario more conservative due to a lower

price increase.

• Evolution of 3.9% in sales, delivering growth for the 6th

consecutive quarter over 2 digits in the segment of

independent customers.

• Price increase 74% lower.

• Reduction of the cash cycle in 16.8 days compared to

the same period of the previous year.

PHARMA DISTRIBUTION

Profarma | Histórico Alocação de CapitalProfarma1Q17 | Key Highlights

10

SPECIALTIES

• Total sales in 1H17 increased 3.6% when compared to

the same period of the previous year.

• Operating expenses reduction in the last years, being a

0.3 p.p. drop this quarter when comparing to 2Q16.

• Sales increased by 12.0% compared to 1Q17 (same

stores) and 84.8% in the comparison of the average

store/month sale from Jun/17 to Sep/16.

• Evolution of 82.0% in average Ebitda/month compared

to the result of Dec/16, with a reduction of 24.6% in

operating expenses.

• Clustering of stores according to their market

positioning - popular, standard and premium.

• Final optimization of the stores with the purpose of

reducing the deficit stores.

REDE ROSÁRIO

d1000 VAREJO FARMA RJ

• Average store/month sales grew 8.5% above

ABRAFARMA average.

• Start of the plan to increase productivity in stores and

in corporate.

• Beginning of the renovation and expansion plan in the

cluster of popular stores.

Consolidado | Receita BrutaConsolidated IFRS (R$ million)

Sales increased by 3.9% year-over-year.

Pharma Distribution

Retail

ProfarmaConsolidated | Gross Revenues

11

Sales increased by 55.4% year-over-year.

Pharma Distribution Retail

6.7%

1H16 4Q161H17 1Q173Q162Q16 2Q17

7.4%

1.875 1.818

401625

945 9651.022

910 908

205 198

241

307 318

2.276

2.444

1.150 1.163

1.2631.217 1.226

Consolidado | Ebitda e Margem Ebitda AjustadaProfarmaConsolidated | Adjusted EBITDA and EBITDA Margin (w/o Rosário)

12

* Excluding additional of corporate expense

Pharma Distribution Retail Equity Income -Specialties

Consolidated IFRS (R$ million and % Net Revenues)

63

41

13

-5-2

-1

45

30

16 19 23

10

7

-2 -2 -3-1 -2 0 -1 0

75

35

54

35

1415 19

1.7%

5.4%

1.3%1.9%

3.5%

1H16 4Q161H17 1Q173Q162Q16 2Q17

3.8%

1.5%

Consolidado | Ebitda e Margem Ebitda AjustadaProfarmaConsolidated | Ebitda Bridge per Division 1Q17 vs 1Q16 (w/o Rosário)

13

Pharma

Distribution2Q16 2Q17Equity Income

Specialties

d1000

RJ


ProfarmaConsolidated | Capex and Indebteness

14

Capex(R$ million)

Note: w/o Rosário

2Q17OthersITMachinery and

Equipment

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

21.11.3

2.9

16.8

397.8

428.4

3.8x

3.1x

326.0

397.1

2.5x

4.0x

353.2

2.7x

287.7

3.3x

2Q16 3Q16 1Q17 2Q174Q161Q16

Consolidado | Lucro LíquidoProfarmaConsolidated | Adjusted Net Income (w/o Rosário)

15


Net Income Adjusted Net Income

1Q17

(1.4)

(27.1)

4Q163Q16

2Q16

8.5

(9.5)

(3.9)

20.7

4.9

(38.6)

0.8%

2.1%

-0.9%

0.5%

-3.5%

-0.4%

-2.6%

-0.1%

2Q17 1.5

(24.8)

-2.4%

0.1%

Consolidado | Ebitda e Margem Ebitda AjustadaProfarmaConsolidated | Adjusted Net Income Bridge per Division 1Q17 vs 1Q16 (w/o Rosário)*

16

2Q16 2Q17d1000

RJ

Pharma

Distribution

* Excluding Non Recurring Expenses and Financial Expenses on Retail Investment

Equity Income

Specialties


20.7

-16.9

-2.8

0.5 1.5

Attachments

Consolidado | Receita BrutaProfarmaConsolidated | Gross Revenues

18

Consolidated IFRS (R$ million)


1,875 1,813

401630

945 9651,022

910 903

205 198

241

307 323

6.7%

1H16 4Q161H17 1Q173Q162Q16 2Q17

7.4%

2,276

2,444

1,150 1,163

1,2631,217 1,226

Consolidado | Lucro Bruto


ProfarmaConsolidated | Gross Profit

19


15.7%

17.4%

14.6%

17.1%

15.2%

190 176

121188

11494 88 82 93

63

60 7296

93

311

364 178

154 160

178186

1H16 4Q161H17 1Q173Q162Q16 2Q17

17.8%

17.8%

Consolidado | Despesas Operacionais SGAProfarmaConsolidated | Operating Expenses - SGA

20



126 143

105

196

66 69 79 70 73

53 51

74 99 97

232

338

120 120

153

168 170

11.7%12.0%

14.0%

16.2%

11.8%

1H16 4Q161H17 1Q173Q162Q16 2Q17

16.1%16.2%

Consolidado | Ebitda e Margem Ebitda AjustadaProfarmaConsolidated | Adjusted EBITDA and EBITDA Margin (w/o Rosário)

21

Pharma Distribution Retail Equity Income -Specialties


63

41

13

-5-2

-1

45

30

16 19 23

10

7

-2 -2 -3-1 -2 0 -1 0

75

35

54

35

1415 19

1.7%

5.4%

1.3%1.9%

3.5%

1H16 4Q161H17 1Q173Q162Q16 2Q17

3.8%

1.5%

Consolidado | Lucro LíquidoProfarmaConsolidated | Net Income (w/o Rosário)

22


Net Income Adjusted Net Income

1Q17

(1.4)

(27.1)

4Q163Q16

2Q16

8.5

(9.5)

(3.9)

20.7

4.9

(38.6)

0.8%

2.1%

-0.9%

0.5%

-3.5%

-0.4%

-2.6%

-0.1%

2Q17 1.5

(24.8)

-2.4%

0.1%

ProfarmaConsolidated | Capex and Indebteness

23

Capex(R$ million)

Note: w/o Rosário

2Q17OthersITMachinery and

Equipment

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

21.11.3

2.9

16.8

2Q16 3Q16

397.8

428.4

3.8x

3.1x

1Q17

326.0

397.1

2Q17

2.5x

4.0x

4Q16

353.2

2.7x

1Q16

287.7

3.3x

Gross revenue climbed by

3.9%;

The Independent customers

segment grew by 10.0%;

The cash cycle was shortened

by 16.8 days to 34.3 days.

Pharma DistributionFinancial Performance

24

Financial Data (R$ million and % Net Revenue)

EBITDA Margin

(%)

Op. Exp. SG&A

(%)

Gross Margin

(%)

Gross Revenues

(R$ million)

4Q16 1Q17

1,041

2Q16 3Q16

1,003

1,0561,042

2Q17

1,136

4Q16 1Q17

10.5

2Q16 3Q16

13.3

9.1

10.5

2Q17

8.9

4Q16 1Q17

7.7

2Q16 3Q16

7.7 7.7

8.2

2Q17

8.1

4Q16 1Q17

3.3

2Q16 3Q16

5.3

2.1

2.5

2Q17

1.6

Especialidades

Crescimento de 6,3% nas vendas da

categoria de genéricos.

Operating expenses slid by 0.3

p.p., from 9.0% to 8.7%.

Vaccine sales boomed by

40.2%.

SpecialtiesFinancial Performance

25


EBITDA Margin

(%)

Op. Exp. SG&A

(%)

Gross Margin

(%)

Gross Revenues

(R$ million)

241.5246.5

260.5

233.9

249.0 10.6

13.7

9.9 9.910.2

9.09.0

7.5

8.7

8.2

0.9

2.3

0.3

1.1

2.6

4Q16 1Q172Q16 3Q16 2Q17 4Q16 1Q172Q16 3Q16 2Q17 4Q16 1Q172Q16 3Q16 2Q17 4Q16 1Q172Q16 3Q16 2Q17

Total sales in 1H17 increased

3.6% when compared to the

same period of the previous

year.

Varejod1000 varejo farma RJ Financial Performance (w/o Rosário)

26

EBITDA Margin

(%)

Op. Exp. SG&A

(%)

Gross Margin

(%)

Gross Revenues

(R$ million)


198.1

204.8

197.5200.0

202.430.3

31.030.5

28.529.4

25.826.0

27.927.127.0

3.2

4.4

1.0

0.3

2.3

4Q16 1Q172Q16 3Q16 2Q17 4Q16 1Q172Q16 3Q16 2Q17 4Q16 1Q172Q16 3Q16 2Q17 4Q16 1Q172Q16 3Q16 2Q17

Store expenses fell from 21.8% to

20.9%;

d1000 varejo farma RJ

Rede Rosário

Same-store sales increased by 12.0%

against 1Q17 whereas average monthly

sales per store shot up by 82.2% to

R$301.2 thousand in Jun/17 vs.

Sep/2016

Average EBITDA per month shot up by

82.0% vs. Dec/2016;

The average ticket rose by 5.8% to

R$37.89.

The store service level increased from

56% to 92% (sep/16 x jun/17).

Monthly sales per store came to R$569.8

thousand, 8.5% higher than

ABRAFARMA’s (Associação Brasileira

de Redes de Farmácias e Drogarias, or

the Brazilian Association of Pharmacy

and Drugstore Chains) average.

d1000 varejo farma RJ Operating Performance (w/o Rosário)

27

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

0.8%

2.2%

3.7%

2Q16 4Q16 1Q173Q16

-12.8 p.p.

10.5%

-2.3%

2Q17

3.2%

1.4%

3.9%

2Q16 4Q16 1Q173Q16

-12.9 p.p.

-1.8%

2Q17

0.9%

0.0%

2.5%

2Q16 4Q16 1Q163Q16

-11,5 p.p.

8.5%

-3.4%

2Q17

11.1%

d1000 varejo farma RJ Operating Performance (w/o Rosário)

28

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

5 opening

10 close-down

10 reformulated

102 mature

561.0

580.0

564.0

-3,4%

589.7

569.8

123

129

130

-4,7%

129

123

36.0136.3635.83

5,8%

35.82

2Q16 4Q16 1Q173Q16 2Q17 2Q16 4Q16 1Q173Q16 2Q17 2Q16 4Q16 1Q163Q16 2Q17

37.89

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

www.profarma.com.br/ir

apresentação 2q17

Investor Relations