CITIBANK 18062010 BrazilEquityConference.ppt [Modo de ...

Generic Drug Market in Brazil (1/3)Generic Drug Market in Brazil (1/3)

CAGR: 27 3%P A27.3%P.A.

Source: IMS Health New Flash

3

Source: IMS Health New Flash

Generic Drug Market in Brazil (2/3)Generic Drug Market in Brazil (2/3)

Drug Patent to expire in 2010 .

Source: IMS Health New Flash- Mar 2010

4Source: Anvisa

Generic Drug Market in Brazil (3/3)R$ 2503.500

R$ 200

3.000

R$ 150

$

2.500

R$ 150

1.500

2.000

R$ 100

1.000

R$ 50

500

R$ 00Apr‐08 Jun‐08 Aug‐08 Oct‐08 Dec‐08 Feb‐09 Apr‐09 Jun‐09 Aug‐09 Oct‐09 Dec‐09

QTY PLAVIX C/28 QTY CLOPIDOGREL MEDLEY C/28 QTY CLOPIDOGREL SANOFI C/28

5Source: Company Rerports

price PLAVIX C/28 price CLOPIDOGREL MEDLEY C/28 price CLOPIDOGREL SANOFI C/28

Top 5 in the Brazilian Market

Top 5 Therapeutic Classes in BrazilCriteria: YTD Local Currency mar‐10Criteria: YTD Local Currency mar‐10

Analgesic Non NarcoticHormonas ContraceptiveAnti‐ Rheumatic non‐steroidalAnti‐Depressive Anti‐Ulcer

Top 5 Manufacturers in BrazilTop 5 Manufacturers in BrazilCriteria: YTD Local Currency mar‐10

EMS PHARMA 6,5%MEDLEY 5,8%,SANOFI‐AVENTIS 5,7%ACHE 5,2%EUROFARMA 4,0%

6

DROGASIL Evolution – Brazil Market Share and Ranking.Ranking- Drugstore Chain (ABRAFARMA)

Empresa UF 2009 2008

Drogaria Pague Menos CE 1ª 1ª

Drogasil SP 2ª 3ª

g g ( )

Drogaria São Paulo SP 3ª 2ª

Drogaria Pacheco RJ 4ª 4ª

Brand Analytics ranksDROGASIL brand in 39th

among top 50 mostvaluable brands in BrazilSource: www.brandanalystics.com.br

7

DROGASIL in Brazil

Minas GeraisMinas GeraisBrasiliaBrasilia(DF) (DF)

Stores 27Stores 27Stores 34

295 Stores distributed in five Brazilian States. Headquarter in S.Paulo , SPBrazil One Central Distribution located in S Paulo SP

GoiásGoiás295 Stores5 Brazilian States.78 cities in Brasil13 stores in Supermarkets

Brazil. One Central Distribution located in S.Paulo, SP.

Stores 23

Distr. Center

LegendaSão PauloSão Paulo

Stores 199

13 stores in Supermarkets37 stores in Shoppings32 stores open 24 hours.244 street stores.963 Pharmacists ( Mar 2010)

‐Metropolitan area129

‐Inner cities 70

Espírito SantoEspírito Santo963 Pharmacists ( Mar 2010)6318 Employees ( Mar 2010)

Stores 128

DROGASIL Expansion• 2007‐ Acquistion of 10 store locations in Goiânia

.

• 2008‐ Drugstore chain company acquisition in

Brasília (DF) with 24 stores.Brasília (DF) with 24 stores.

• 2009‐ 12 store locations acquistion in Espírito

Santo State. Campinas Norte SulNova Odessa

• 2007 Innauguration: 32 Stores

• 2007 Net Addition: 32 stores.

• 2008 Innaguarations: 46 Stores

• 2008 Net Addition : 45 stores.JundiaíItatiba

• 2009 inaugurations: 28 stores.

• 2009 Net Addition‐ 27 stores

Ju d a

• 2010 Net Addition: 12 Stores

• Last update ( June 21, 2010)

99

PiracicabaGoiania- Setor Marista

DROGASIL REVAMPING THE DRUGSTORE CHAIN....

Growth of 10.3%Growth of 22.3%

2010: Project to revamp 60 STORES.2009: REFURBISHED 60 STORES.

2008: REFURBISHED 30 STORES.So far, 28 Stores were revamped. (last update June 21, 2010)

10

ANVISA RDC 44: OTC DRUGS MOVING BEHIND THE COUNTER: ANVISA RDC 44: OTC DRUGS MOVING BEHIND THE COUNTER: SoSo FarFar 144 144 StoresStoresalreadyalready revampedrevamped( ( JuneJune 18, 2010)18, 2010)ANVISA RDC 44: OTC DRUGS MOVING BEHIND THE COUNTER: ANVISA RDC 44: OTC DRUGS MOVING BEHIND THE COUNTER: SoSo FarFar 144 144 StoresStoresalreadyalready revampedrevamped( ( JuneJune 18, 2010)18, 2010)

BEFO

RE

AFTE

R

BEFO

RE

AFTE

R

11

SAME STORE SALES(1/2)

TICKETAvg Ticket: 1Q10 = R$38 4Avg Ticket: 1Q10 = R$38,4Avg Ticket : 1Q09 = R$34,3

Growth : 11.9%

TRANSACTIONSGrowth: 13.1% 12

DROGASIL: SAME STORE SALES– INDEX ANALYSIS (2/2).• Number of Stores eop Dec, 2009: 283 Stores

13

• DROGASIL‐ Drugstore Chain Expansion Vis à Vis EBTIDA MARGIN. Working Capital Investment (1/3)

Calculation.1Q 09 1Q 10 20091Q 09 1Q 10 2009

NOPLAT 11.063 14.650 66.173

EBITDA 20.527 26.495 118.574(-) Depreciação -4.776 -6.600 -21.770EBIT 15.750 19.895 96.804(-) Cash Taxes -4.687 -5.245 -30.631NOPLAT 11.063 14.650 66.173

1Q 09 1Q 10 2009

NOPLAT 11.063 14.650 66.173 CAPEX 13.280 18.561 49.854 W.I. 158.927 205.789 169.209 Var W I 1 656 36 580 8 626

14

Var W.I. -1.656 36.580 8.626ROIC 6,4% 6,5% 30,2%

WORKING CAPITAL(2/3)Gross Revenue Sales 2010 1T 10 4T 09 2009 1T 09 4T 08Gross Revenue Sales 479.936 479.936 492.915 1.787.773 379.408 369.353 Net Sales 461.371 461.371 474.373 1.720.548 364.931 354.987

Current Assets S/ Vd Bruta S/ Vd Bruta S/ Vd Bruta S/ Vd Bruta S/ Vd Bruta S/ Vd BrutaChecks 4.450 0,9% 4.450 0,9% 4.582 0,9% 4.582 0,3% 4.918 1,3% 4.548 1,2%Debit & Credit Cards 89 597 18 7% 89 597 18 7% 89 865 18 2% 89 865 5 0% 68 097 18 4% 61 994 16 8%Debit & Credit Cards 89.597 18,7% 89.597 18,7% 89.865 18,2% 89.865 5,0% 68.097 18,4% 61.994 16,8%Others 7.444 1,6% 7.444 1,6% 7.353 1,5% 7.353 0,4% 8.595 2,3% 8.464 2,3%(-) Provision for Bad Debt (527) -0,1% (527) -0,1% (544) -0,1% (544) 0,0% (847) -0,2% (749) -0,2%Taxes to Recover 48.261 10,1% 48.261 10,1% 47.032 9,5% 32.352 1,8% 34.431 9,3% 30.528 8,3%Difered Income Tax 5.499 1,1% 5.499 1,1% 6.313 1,3% 6.313 0,4% 4.414 1,2% 4.771 1,3%Inventories 280.880 58,5% 280.880 58,5% 260.936 52,9% 260.936 14,6% 247.479 67,0% 218.120 59,1%

Current LiabilitiesSuppliers 183.608 38,3% 183.608 38,3% 196.047 39,8% 196.047 11,0% 170.344 46,1% 133.330 36,1%Taxes 14.548 3,0% 14.548 3,0% 14.613 3,0% 14.613 0,8% 13.594 3,7% 7.855 2,1%S l i 27 648 5 8% 27 648 31 499 31 499 20 798 22 675 Salaries 27.648 5,8% 27.648 5,8% 31.499 6,4% 31.499 1,8% 20.798 5,6% 22.675 6,1%Rentals 3.353 0,7% 3.353 0,7% 3.418 0,7% 3.418 0,2% 2.774 0,8% 2.803 0,8%Tenure Entitlement 657 0,1% 657 0,1% 752 0,2% 752 0,0% 651 0,2% 430 0,1%

Current Assets 435.603 435.603 415.538 400.858 367.087 327.677 Current Liabilities 229 814 229 814 246 329 246 329 208 160 167 094 Current Liabilities 229.814 229.814 246.329 246.329 208.160 167.094

W.I.> 205.789 42,9% 205.789 42,9% 169.209 34,3% 154.529 8,6% 158.927 43,0% 160.583 43,5%Additional W.C> 36.580 7,6% 36.580 7,6% 7.995 1,6% 8.626 0,5% (1.656) -0,4% 37.165 10,1%Days on Receivables 19 19 18 20 19 18

I t i 71 71 71 79 72 Inventories 71 71 64 71 79 72

Suppliers 46 46 48 53 55 44

Icms 12 12 11 9 8 7

15

Cash Cycle 56 56 46 47 52 53

WORKING CAPITAL : Inventory Days(3/3)

16

THE SECOND DISTRIBUTION CENTER: In operation by 4thQuarter 2010

17

GROSS SALES BREAKDOWN

2009

17 8%

14,0% 72,8%OTC DRUGS

GENERIC

DRUGS

27,2%

68,2%

17,8%

Non DRUGS

BRANDED

OTC DRUGS

0,0% 20,0% 40,0% 60,0% 80,0%

2008

Medicamentos74% 66,3%

18,8%

14,9% 72,3%

BRANDED

OTC DRUGS

GENERIC

DRUGS

27,7%

0,0% 20,0% 40,0% 60,0% 80,0%

Non DRUGS

26%

18

3%

Receivable Method 2009

32%

38%

2%

22%3%

19

DROGASIL : Financial Highlights(1/3)

CAGR: 33.3% p.a.

20


FY09oFY08: -1.2 p.p

21


CAGR: 52% p.a.

22

DROG3: EBITDA GROWTH(QoQ X EV/EBITDA last 12 m)

Net Profit EBITDA EBITDA EBITDA EBITDA SALES SALES SALES SHARE P. QTY Mkt CAP Cash DEBT E.V. EV/EBITDAL.12M growth. CUM. L.12M GROWTH

1Q10 16.024 26.496 124.544 29% 302.248 479.936 1.888.302 26,5% 28,59 59.406 1.698.418 104 .045 33.519 1.627.892 13,14Q09 18.738 30.339 118.574 52% 275.752 492.916 1.787.774 33,5% 28,00 59.321 1.660.988 142 .201 37.320 1.556.107 13,13Q09 19.891 33.052 108.240 76% 245.413 474.073 1.664.211 35,9% 22,50 59.321 1.334.723 141 .484 40.637 1.233.876 11,42Q09 22 10 34 6 93 929 91% 212 361 441 3 1 38 862 33 8% 18 4 9 321 1 111 6 6 117 913 43 9 1 03 322 11 02Q09 22.105 34.657 93.929 91% 212.361 441.377 1.538.862 33,8% 18,74 59.321 1.111.676 117 .913 43.559 1.037.322 11,01Q09 13.856 20.526 77.428 91% 177.704 379.408 1.427.245 30,4% 10,50 59.060 620.130 135 .550 46.299 530.879 6,94Q08 14.925 20.005 67.622 39% 157.178 369.353 1.338.742 32,6% 10,00 59.060 590.600 125 .204 40.474 505.870 7,53Q08 13.936 18.741 61.970 46% 137.173 348.724 1.247.859 34,9% 10,15 59.496 603.884 143 .806 33.751 493.829 8,02Q08 12.760 18.156 56.043 23% 118.432 329.760 1.157.575 33,8% 14,90 61.142 911.016 198 .521 36.558 749.053 13,41Q08 9.551 10.720 52.702 15% 100.276 290.905 1.074.343 30,7% 13,00 61.859 804.167 225 .402 39.147 617.912 11,7

23

4Q07 11.410 14.353 51.305 34% 89.556 278.470 1.006.091 23,1% 14,35 62.773 900.793 271 .411 57.951 687.333 13,43Q07 10.510 12.814 47.648 17% 75.203 258.440 953.864 20,8% 14,75 62.773 925.902 269 .550 56.336 712.688 15,02Q07 6.884 14.815 45.751 10% 62.389 246.528 909.369 21,9% 16,69 62.773 1.047.681 34 .624 44.473 1.057.530 23,1

PERFORMANCE BENCHMARK(1/5)

Dec‐08 Dec‐07 Dec‐06CVSCVS

Net Sales $87,471.9 $76,329.5 $43,821.4

Sales Growth 14.6% 74.2%

Gross Profit $18,290.4 $16,107.7 $11,742.2

Gross margin 20 9% 21 1% 26 8%Gross margin 20.9% 21.1% 26.8%

Net profit 3,198.0$ 2,622.8$ 1,355.0$

Return On SALES 3.7% 3.4% 3.1%

EBITDA 7,174.3$ 5,873.0$ 3,161.0$

EBITDA margin 8.2% 7.7% 7.2%

24


Dec‐09 Dec‐08 Dec‐07DROGASIL

Retail Pharmacy Segment Dec‐08 Dec‐07 Dec‐06CVS DROGASIL

Net sales 1,720,548 1,260,147 833,069


CVS Net Sales $48,989.9 $45,086.5 $40,285.6

Sales Growth 8.7% 11.9% 18.2%

Gross Profit 398,850 294,158 226,834

Gross margin 23.2% 23.3% 27.2%

Gross Profit $14,704.4 $13,110.6 $11,283.4

Gross margin 30.0% 29.1% 28.0% Gross margin 23.2% 23.3% 27.2%

S.G.A. 307,328 244,706 184,538

S G A 17 9% 19 4% 22 2%

Gross margin 30.0% 29.1% 28.0%

S.G.A. 11,256.7$ 10,419.3$ 9,159.9$

S G A 23 0% 23 1% 22 7% S.G.A 17.9% 19.4% 22.2%

Operating profit 105,220 69,770 47,701

S.G.A 23.0% 23.1% 22.7%

Operating profit 3,483.7$ 2,691.3$ 2,123.5$

EBITDA 118,574 69,378 51,266


EBITDA 3,483.7$ 2,691.3$ 2,123.5$


Source: Company reports;Annual Reports. Source: Company reports;Annual Reports.

(All values US$000) Comparative to Net Sales

(All values R$000) Comparative to Net Sales

25

PERFORMANCE BENCHMARK(3/5)Dec‐09 Dec‐08 Dec‐07

DROGASIL

Aug‐09 Aug‐08 Aug‐07WALGREENS

Net sales 1,720,548 1,260,147 833,069


Net sales 63,335.0$ 59,034.0$ 53,762.0$

Sales Growth 7.3% 9.8% 13.4%

Gross Profit 398,850 294,158 226,834

Gross margin 23.2% 23.3% 27.2%

Gross Profit 17,613.0$ 16,643.0$ 15,244.0$

Gross margin 27.8% 28.2% 28.4%

S.G.A. 307,328 244,706 184,538

S.G.A 17.9% 19.4% 22.2%

S.G.A. 14,366.0$ 13,202.0$ 12,093.0$

S.G.A 22.7% 22.4% 22.5%

Operating profit 105,220 69,770 47,701

EBITDA 118 574 69 378 51 266

Operating profit 3,164.0$ 3,430.0$ 3,189.0$

EBITDA 4 222 0$ 4 281 0$ 3 827 0$

S C t A l R t

EBITDA 118,574 69,378 51,266


EBITDA 4,222.0$ 4,281.0$ 3,827.0$




(All values R$000) Comparative to Net Sales

26


Retail Pharmacy Segment Dec‐08 Dec‐07 Dec‐06CVS

l h


Net Sales Growth 8.7% 11.9% 18.2%

SSS 4.5% 5.3% 8.1%

Pharmacy % of Net Revenue 67 5% 67 8% 68 4%


SSS 27.4% 19.0% 15.6%

DRUGS % of GROSS Revenu 72 8% 72 3% 73 6%Pharmacy % of Net Revenue 67.5% 67.8% 68.4%

Third Party % Pharmacy Revenue 96.1% 95.3% 94.7%

Number of Stores 6,923 6,245 6,150

DRUGS % of GROSS Revenu 72.8% 72.3% 73.6%

Third Party % GROSS Revenue 4.0% 5.0% 5.0%

Number of Stores 283 256 211



(All values R$000) Comparative to Net Sales’

27



Aug‐09 Aug‐08 Aug‐07WALGREENSN S l G h 7 3% 9 8% 13 4% Net Sales Growth 36.5% 51.2% 23.5%

SSS 27.4% 19.0% 15.6%

DRUGS % of GROSS Revenu 72 8% 72 3% 73 6%


SSS 2.0% 4.0% 8.1%

Pharmacy % of Net Revenue 65.3% 64.9% 65.0% DRUGS % of GROSS Revenu 72.8% 72.3% 73.6%

Third Party % GROSS Revenue 4.0% 5.0% 5.0%

Number of Stores 283 256 211

Pharmacy % of Net Revenue 65.3% 64.9% 65.0%

Third Party % Pharmacy Revenue 95.4% 95.3% 94.8%

Number of Stores 7,496 6,934 5,997



(All values R$000) Comparative to Net Sales’

28

DROG3: SHAREHOLDERS STRUCTURE

Shareholder Profilein FREE FLOAT

INTERNATIONAL 67,0%

BRASIL 33,0%Free Float

Segment “Novo Mercado”.Fiscal Board.

Tag Along.

Carlos Pires Oliveira Dias

26,21%

Tantra P i i

41,36%

MONTH JUNE 10

Participações Ltda

10,3% 1IBOVESPA DROG3

2,8% 12,9%

Year 2010

Nota:

1. Tantra –Lafer Galvão Family (100%)2. Oliveira Dias Family (100%)

Regimar Comercial S.A9,40%

0 55%

Treasury5,36%

Members of Board-Pires Family

6,78%2

5

ibovespa DROG3-5,5% 19,1%

3. Stock Option total of 605,264 shares. ( June 2007) . Stocks Option Exercized: 346,200 shares.

4. Share Price: R$33,35 (June 21, 2010))

0,55%Executive Directors

3

5. Buy Back completed: total de 3,706,696 shares in October 08, 2008. Quantity as of March 10, 2010: 3,367,136 shares.

Number of Outstanding Shares:59.406 M shares

Market Cap: R$ 1,981.1M 429

DROG3: ENTERPRISE VALUE

30

Dividends & I.O.C.

33%

38%

35%36%34%

35%35%

40%

R$ 24 000

R$ 27.000

33%31%

29%30%

35%

R$ 18 000

R$ 21.000

R$ 24.000

24 64020%

25%R$ 15.000

R$ 18.000

24.640

19.422

10%

15%R$ 9.000

R$ 12.000

21 1%14.4%

5.7505.0225.4504.500

10.0055.931

3 3662 8482 3542 8245%

10%

R$ 3.000

R$ 6.00021.1%

3.3662.8482.3542.8240% R$ 0

31

IOC & Dividends ( R$000) % NET PROFIT

DROGASIL: Sell –Side Estimatives and Research CoverageValues ( R$000)

Gross Sales Net Profit EBITDA T.P.2010 2011 2010 2011 2010 2011 2010

BRADESCO 2.203 2.760 94.000 122.000 153.000 200.000 R$ 43,0

FATOR 2.249 2.882 83.000 108.000 136.000 183.000 R$ 35,2

ITAU 2 221 2 754 89 000 114 000 148 000 185 000 R$36 6ITAU 2.221 2.754 89.000 114.000 148.000 185.000 R$36,6

BTGPACTUAL 2.245 2.822 93.000 117.000 151.000 194.000 R$35,3

M. STANLEY 2.189 2.618 81.000 101.000 143.000 177.000 R$32,2

SAFRA 2.139 2.515 86.000 100.000 136.000 161.000 R$ 36,9

RAYMOND James 2.248 2.864 92.000 120.000 152.000 200.000 R$ 34,0avg 2.213 2.745 88.286 111.714 145.571 185.714 R$ 37,3

BANK/BROKER RESEARCH Phone E-Mail ReportsANALYST In

BRADESCO Ricardo Boiati/Rodrigo Santoro (5511) 2178‐5326 [email protected] English

last update: 6/21/2010

ITAU Juliana Rozenbaum /Marcio Osako (5511) 3073‐3040 juliana.rozenbaum@itau‐unibanco.com.br English

MORGAN STANLEY Javier Cerdan/ Esteban Schreck (+1) (212)761‐4542 [email protected] English

FATOR Iago Whately (5511) 3049 9480 iwhately@bancofator com br Portuguese/EnglishFATOR Iago Whately (5511) 3049‐9480 [email protected] Portuguese/English

BTG PACTUAL Fabio Monteiro/Carlos Vasques (5511) 3383‐2006 [email protected] English

SAFRA BANK Erick Guedes/ Felipe Rotenberg (5511) 3175‐7821 [email protected] English

RAYMOND JAMES Daniela Bretthauer/Guilherme Assis (+5511)3513‐8706 [email protected] English

32

2010: Starting a New Year of Accomplishments2010: Starting a New Year of Accomplishments....

• Drogasil joined the “Campanha do Agasalho” – Solidarity Fund of S.Paulo State . Drogasil started the campaign on May 31 in all Drugstore chain.Drugstore chain.

• Drogasil in the Solidarity Exchange Campaign with AACD(children impaired association) Cash Exchange in theAACD(children impaired association). Cash Exchange in the cashier can be donated automatically to AACD and a coupon is issued in the amount donated to Drogasil customer.

33

Thank You.

D il S AD il S ADrogasil S.A.Drogasil S.A.

AvenidaAvenida CorifeuCorifeu de Azevedo Marques, nº 3.097de Azevedo Marques, nº 3.097Avenida Avenida CorifeuCorifeu de Azevedo Marques, n 3.097de Azevedo Marques, n 3.097Vila Butantã Vila Butantã –– São PauloSão Paulo

0533905339‐‐900900http://www.drogasil.com.br/irhttp://www.drogasil.com.br/ir

Roberto Roberto ListikListikInvestorInvestor RelationsRelations OfficerOfficerPhonePhone (+5511)3769(+5511)3769‐‐56705670rlistik@drogasil com brrlistik@drogasil com [email protected]@drogasil.com.br

Claudio Roberto ElyClaudio Roberto ElyCEO &CEO & InvestorInvestor RelationsRelations DirectorDirectorCEO & CEO & InvestorInvestor RelationsRelations DirectorDirector

AddAdd DROG3 IR site to DROG3 IR site to youryour mobilemobile: : http://mobile.droghttp://mobile.drogasil.com.brasil.com.br

34CITI - 3RD Annual Brazil Equities Conference–June 2010- DROG3

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