AUSTRALIAN PHARMACEUTICAL INDUSTRIES LIMITED

FULL YEAR FY13 RESULTS PRESENTATION

THURSDAY 24 OCTOBER 2013

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Important notice

The material in this presentation is of general information about API’s

activities current at the date of the presentation. It is information given in

summary form and does not purport to be complete. Nothing in this

presentation should be construed as a recommendation or forecast by API

or an offer to sell or a solicitation to buy or sell shares. It does not take into

account the investment objectives, financial situation or needs of a

particular investor. These should be considered with or without professional

advice when deciding if an investment is appropriate.

This presentation contains certain non‐IFRS measures that API believe are

relevant and appropriate for the understanding of the business. Refer to

Appendix 1 for further information.

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OVERVIEW

CONTINUES TO DELIVER IMPROVED PROFIT & OPERATIONAL PERFORMANCE

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Executive summary

Improvement on key financial measures

NPAT $24.3m; underlying NPAT* up 9.6% on prior year

EPS lifting to 5.0 cents from 4.5 cents underlying on prior year

Balance sheet continues to strengthen – working capital, cash flow,

debt reduction

Management of operational environment

Difficult retail market

Pharmacy sector reforms

Final fully-franked dividend of 1.75 cents brings annual dividends

to 3.25 cents, an increase of 8.3%

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* Definition of underlying NPAT, EBIT and free cash refer Appendix 1 and page 9

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Executive summary

Strategic execution maintains momentum:

Priceline sales performance creditable in difficult market

conditions

Finalist and Award Winner – Australian Retailer of the Year;

Priceline on-line launched with $1.8m sales achieved

Priceline Sister Club Loyalty Program now 4.3 million

members

Network now 363 stores, despite difficult economic

conditions

Brand Health metrics and Franchisee Satisfaction results

improved year-on-year

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Executive summary

Strategic execution maintains momentum:

Pharmacy Distribution underlying income maintained

Brand & Club Premium membership now total 1,000

pharmacies

Impacts of PBS Reforms continues to be faced

Investment in Supply Chain delivering annual efficiencies

Enterprise Resource Planning (oneERP) continues to plan

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FINANCIAL OVERVIEW FULL YEAR RESULTS 2013

GRAEME FALLET

CHIEF FINANCIAL OFFICER

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FY13 financial highlights

Revenue down 0.4% to $3.2b

Gross profit up 3.9% to $404m

Underlying EBIT* down 1.8%

Underlying NPAT* up 9.6% to

$24.3m

Increase in operating cashflow

and free cash following trading

terms improvements

EPS 5.0 cents

Final fully franked dividend lifted to

1.75 cents bringing the annual

dividend to 3.25 cents

FY13 FY12

Revenue $3.186b $3.199b

Gross profit $404.3m $389.0m

Dep / Amort $18.2m $20.2m

EBIT $55.9m $68.5m

Financing $21.3m $25.2m

NPAT $24.3m $30.3m

Free Cash* $42.7m $23.4m

EPS 5.0c 6.2c

DPS 3.25c 3.0c

* Definition of underlying NPAT, EBIT and free cash refer Appendix 1 and page 9

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Underlying earnings reconciliation

A$m 2013 2012

Reported result from operating activities 55.9 68.5

Accounting treatment of guarantees - (2.5)

Insurance recoveries / loss from QLD floods* - (9.1)

Underlying result from operating activities 55.9 56.9

Reported net profit after tax 24.3 30.3

After tax effect of underlying adjustments - (8.1)

Underlying net profit after tax 24.3 22.2

* $9.1m contingent asset reported as at 31 August 2011 refer Appendix 2 for reconciliation of Insurance

proceeds

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Revenue

Pharmacy Distribution sales down 1.5% following continued PBS

reforms

Underlying sales* growth up 6.0%

Priceline reported sales up 2.9% to $676.5m

Priceline comparable store growth negative 0.4%

Priceline Company Stores 41.8% of reported sales (42.6% FY’12)

Priceline Franchise Stores 58.2% of reported sales (57.3% FY’12) following

increase in store network during the year

NZ revenue up 5.9% to $54.6m

Earnings lifted 12.0% to $3m

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* Underlying sales growth – pharmacy sales before PBS price adjustments

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Operating margins

A$ FY13 FY12

Revenue 3,186m 3,199m

Gross Profit 404.3m 389.0m

Gross Profit Margin 12.7% 12.2%

Underlying EBIT* 55.9m 56.9m

EBIT Margin 1.8% 1.8%

* Underlying EBIT and EBITDA refer Appendix 1 11

Pharmacy Distribution margin improvement following continued

management of PBS reforms during the year

One API restructure drives Retail margin improvement

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Warehousing costs

Warehousing and distribution costs reflects continued productivity

gains in network with labour costs down 1.5% after absorbing EBA

increases of 3.5%

Units picked increased 4% with stock returns and provisioning

improvement on prior year

Occupancy costs reflect minor increases after sale of regional

Distribution centres in prior year offset by higher energy costs.

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Sales and Marketing expenses

Sales and marketing expenses

increased predominantly from

increase in tactical marketing

spend and company store wage

and rent increases

Priceline $5.0m marketing

investment predominantly in the

Better Homes and Garden

program

Doubtful debt charges were $1.5m

greater than the prior year

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Administration and Financing costs

Administration costs include $800k One ERP

pre-commissioning project costs expensed

as not eligible under AUD GAAP and an

increase in office rent following the move

to Camberwell

Financing costs reductions reflects the run

off of the $100m interest rate swap in

February this year

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API One Enterprise cost structure

API moved to whole of company functional approach in 2012 to

leverage merchandising, marketing and back office synergies

Stage one complete with re-engineering of the merchandising,

marketing and some back office functions merged as one

Stage two now commenced with $35m investment in SAP ERP

platform to facilitate re-engineering of Company back office

systems and functions

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Working capital

A$m FY13 FY12

Trade Receivables 528.5 542.5

Inventories 335.9 320.6

Trade Payables 561.8 529.5

Net Working Capital 302.6 333.6

Trade debtors days 43.3 44.8

Inventories days 47.1 45.0

Trade payables days 49.7 47.1

Cash Conversion Cycle 40.7 42.7

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Cash conversion improved following reduction in debtors

day and revised supplier terms

Increase inventory reflects offshore prepaid purchases of

Xmas retail stock in transit

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Cashflow

A$m FY13

FY

FY12

FY

Cash from Operating Activities 66.6 47.8

Net Capital Expenditure/Pharmacy Loans (23.9) (24.4)

Free cash 42.7 23.4

Debt Repayment (25.3) (23.8)

Dividend (14.6) (14.6)

Net movement in cash 2.8 (15.0)

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Strong cash flow generated from operations and reduced

financing costs offset by increased taxes paid.

Investing cashflows reflects commencement of API One Enterprise

platform and continued store refurbishment program

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Improved financial position

Reduction in average net debt of $26.8m during the year

Improvement in interest cover and debt coverage

A$m FY13 FY12

Cash 22.6 19.5

Debt 139.9 164.7

Net Debt 117.3 145.2

Average Net Debt 201.0 227.8

Net Debt/(Net Debt + Equity) 17% 20%

Net Debt/Underlying EBIT 2.1x 2.5x

Underlying EBIT/Interest 2.6x 2.3x

• Underlying EBIT refer Appendix 1

• Average net debt is the average of all long term and short term borrowings offset by average cash on hand

over the financial year 18

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Return on funds employed maintained

Lift in Return on Equity

Return on Funds Employed maintained

Lift in EPS

A$m FY13 FY12

Underlying EBIT* 55.9 56.9

Underlying NPAT* 24.3 22.2

Equity 584.1 568.3

Net debt 117.3 145.2

Funds employed 701.4 713.5

Underlying RoFE* 8.0% 8.0%

Underlying ROE* 4.1% 3.9%

Underlying EPS* 5.0 cents 4.5 cents

* Underlying EBIT, NPAT RoFE, ROE and EPS refer Appendix 1

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Retail segment highlights

Solid revenue and sales

performance

Segment revenue up 3.4% to

$756.6m

Reported sales* up 2.9% to

$676.5m

Comparable store sales -0.4%

Gross profit up 4.7% to $184.7m

Reduction in debtors days

following reductions in deferred

payment terms

A$m FY13 FY12 %

Revenue 756.6 731.9 3.4%

Sales 676.5 657.2 2.9%

Gross Profit 184.7 176.4 4.7%

GP Margin 24.4% 23.6%

Debtors Days 54.4 62.5

* Excludes Dispensary Sales

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Net increase of 14 Priceline stores

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Pharmacy Distribution segment highlights

Sales marginally down

following April and

December PBS price

reductions

Underlying growth of 6.0%

adjusted for PBS Reforms

Gross profit reflects

discount reductions

Debtors days stable

A$ FY13 FY12 %

Revenue 2,395m 2,428m (1.4%)

Sales 2,310m 2,345m (1.5%)

Gross Profit 200.3m 193.7m 3.4%

GP Margin 8.4% 8.0% -

Debtors

Days 40.0 40.1 -

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OPERATIONAL SUMMARY FULL YEAR 2013

STEPHEN ROCHE

CHIEF EXECUTIVE OFFICER

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Priceline Pharmacy continues to deliver

For more complete reporting, we intend

to disclose sales for both front-of-store

and whole-of-store

Front of store sales growth of 3.5%

(LFL -0.4%)

Including dispensary, growth of 4.9%

(LFL -0.3%)

These sales results represent sustained

top-tier retail performance in the current

economic climate and competitive

environment

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Post-election sales suggest consumer confidence returning

Sales results 7 weeks ending 19 October LFL 1.9%

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Priceline Pharmacy continues to deliver

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Sister Club membership has hit 4.3 million

+10% growth on prior year

Basket size continues to be typically 50 per cent greater than

non-members

Purchases represent 55% of front of store sales

Continues to be unrivalled in pharmacy

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Priceline Pharmacy continues to deliver

During the year we increased our marketing

activity by $5m

More mainstream media activity – maintain

leadership position and customer consideration

Ita Buttrose re-signed as Priceline Ambassador

On-line store had sales of $1.8 million during

the year, with further potential

Bricks & clicks are the consumers’ expectation

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Priceline Pharmacy delivering for Franchisees

Franchisee satisfaction scores increased on prior year and

continue to be significantly above the franchise sector average

Satisfaction with marketing and brand/promotion are all above the

90th percentile ranking

Margin boosting in-house beauty range now in top 10 best

sellers

Expanding in-house range to sun and haircare and vitamins

Investing in state-of-the-art in-store connectivity with consumers

In store multi-media partnership with Telstra

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Priceline Pharmacy network growth continues

Store numbers grew by 14 during the year - total 363

Opened 23 new stores

Continue to have confidence in growth of network, with 20

prospects currently

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Pharmacy performance – operational capability

Stability is what we promised to deliver and that has been

achieved

Underlying growth of 6.0% pre-PBS reforms

Gross profit +3.4% - implies income maintained

We continue to face PBS impacts by a combination of reduced

discounts and operational adjustments

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Pharmacy performance – operational capability

We continue to lobby to ensure

that government must consult

prior to the 2015 agreement - if it

wants both further PBS savings

and equity of access to

medicines maintained

New Zealand business continues

to add value:

Blackmores partnership remains

strong

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Final dividend

Final fully-franked dividend declared of 1.75 cents per share

Brings full year dividends to 3.25 cents per share

Rolling 12 month fully franked dividend payments imply a yield

of over 6.7% on 30 VWAP

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OVERVIEW

STEPHEN ROCHE

CHIEF EXECUTIVE OFFICER

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In summary…

Another solid result in difficult market conditions

Solid performance across key financial metrics:

Underlying NPAT increase

Underlying EPS increase

Operational cash flow

Working capital management

Debt reduction

Accelerating impact of PBS reform will focus pharmacists’

attention on front-of-store

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Outlook

Continued improvements in earnings performance for 2014

further improving customer experience in Priceline Pharmacy

operational efficiencies

expansion of Priceline Pharmacy network

Outlook is subject to:

no material change in consumer or customer demand

a stable economic climate

no unforeseen adjustments to the regulatory environment or reforms

to the PBS

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THANK YOU

FULL YEAR RESULTS

24 OCTOBER 2013

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Appendix 1

ASIC Regulatory Guide 230 Disclosing non-IFRS financial information

In December 2011 ASIC issued Regulatory Guide 230. To comply with this Guide, Australian Pharmaceutical Industries Limited is required to make a clear statement about the non-IFRS information included in the Profit announcement and Half Year presentation for the year ending 31 August 2013.

In addition to statutory report amounts, the following non-IFRS measures are used by management and the directors as the primary measures of assessing financial performance of the Group and Individual Segments:

Non-IFRS measures used in describing the Business Performance include:

• Earnings before interest tax (EBIT) • Earnings before interest, tax, depreciation, amortisation (EBITDA) • Free cash • Comparative Store Growth • Interest cover • Underlying EBIT Interest Cover Adjustment • Return on funds employed (RoFE) • Underlying sales growth

In addition to the above the following non-IFRS measures are used by management and the directors to assess the underlying performance of the Group following the Queensland floods in January 2011 and the Financial Guarantee impairment charge in February 2011.

• Underling NPAT • Underlying EBIT • Underlying EBITDA

The directors consider that these performance measures are appropriate for their purposes and present meaningful information on the underlying drivers of the continuing business after considering the impact of the Queensland floods in January 2011 and the Financial Guarantee Charge brought to account in February 2011.

Many of the measures used are common practice in the industry within which Australian Pharmaceutical Industries Limited operates. The Profit Announcement and Full Year presentation has not been audited or reviewed in accordance with Australian Auditing Standards.

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Appendix 1 - Definitions

• EBITDA - Result from operating activities before Depreciation and Amortisation

• EBIT – Result from operating activities (includes late fee income from overdue trade debt)

• Free Cash – Net cash from operating activities plus net cash from investing activities

• Comparative Store Growth - Sales performance compared to last period on stores

trading in the network greater than one year

• Interest Cover – Result from operating activities divided by net financing costs

• Net Debt – Borrowings less cash on hand

• Return on funds employed – EBIT / Equity plus Net Debt

• Underlying sales growth – pharmacy sales before PBS price adjustments

• Underlying EBIT – Refer page 9

• Underlying EBITDA – Underlying EBIT less depreciation and amortisation

• Underlying NPAT – Refer page 9

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Appendix 2

Underlying earnings reconciliation Net insurance recoveries / loss from QLD floods A$m

Accounting loss from 2011 (Contingent asset 2011) 3.6

Business Interruption losses in 2011(Contingent asset 2011) 5.5

Total prior year recoveries 9.1

Business Interruption losses in 2012 5.4

Total Insurance recovery as per Note 7 Financial Report 14.5

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• Business interruption losses include loss of Gross Profit from lost sales and increased costs of doing business

• The indemnity period for recovery was for 12 months post event ceasing on 15 January 2012

• API finalised a commercial settlement with its insurer in April 2012 that satisfactorily recovered its pre-

flood position. This settlement included recovery of extra costs incurred, an estimate of Gross Profit

forgone from the Pharmacy Distribution and Retail segments and an estimate of the additional cost of

doing business predominantly from the company's distribution network after taking into account the

level of investment the company has recently invested in its distribution network

• The commercial settlement does not allow an accurate apportionment between Gross Profit and

additional supply chain costs of doing business.

• As a result management has allocated the 2011 recovery on the estimate as at 31 August 2011 of $5.5m

which was reported as a contingent asset as at 30 August 2011. Recovery of the 2011 accounting loss of

$3.6m has been apportioned in full to 2011