Ultrapar Participacoes S.a. · BMFBOVESPA:UGPA3
Ultrapar Participacoes — Ultrapar Holdings — Shareholder Meeting (December 2013)
57 slides from Ultrapar Participacoes's shareholder meeting presentation, Dec 27, 2013
Slide 1: Manual for Shareholders' Participation
Manual for Shareholders’ Participation Extraordinary Shareholders’ Meeting of January 31, 2014
Slide 2: Slide 2
Slide 3: Economic-Financial Valuation Report of Imifarma
Ultrapar Participacoes S.A. Economic-Financial Valuation Report of Imifarma Produtos Farmaceuticos e Cosmeticos S.A., as of June 30, 2013 December 06, 2013 Reliance Restricted 1
Slide 4: EY cover letter to Ultrapar Board
Ernst & Young Assessoria Empresarial Ltda. Av. Presidente Juscelino Kubitschek, 1830 Torre 2 -- 4o. andar 04543-900 -- Sao Paulo -- SP Telephone: +55 11 2573-3086 Fax: +55 11 2573-5499 www.ey.com.br Reliance Restricted Sao Paulo, 06 December 2013 To Ultrapar Participacoes S.A. Board of Directors Ult
Slide 5: Summary
Summary 1. Executive Summary 4 1.1 General Considerations 5 1.2 Valuation Summary 7 2. Appraiser's Information 10 2.1 EY 11 2.2 The EY Quality Process 12 2.3 The team responsible for the Valuation 13 2.4 Credentials 16 3. Macroeconomic Overview 17 4. Market Analysis 19 5. Company Overview 24 5.1 Ext
Slide 6: Terms and Definitions
Terms and Definitions BACEN Banco Central do Brasil (Central Bank of Brazil) BR GAAP Brazilian Generally Accepted Accounting Principles BRL or R$ Brazilian Currency (Real) CAGR Compound Annual Growth Rate CAPEX Capital Expenditures CAPM Capital Asset Pricing Model Client Ultrapar Participacoes S.A.
Slide 7: Terms and Definitions (continued)
IRPJ or IR Imposto de Renda de Pessoa Juridica (Income Tax) LTM Last Twelve Months Management Refers to Ultrapar management, when not specified NFY Next Fiscal Year NOPAT Net Operational Profit After Tax NS Net Sales Reference Date June 30, 2013 Report This report dated December 06, 2013 Selic Siste
Slide 8: 1. Executive Summary
1. Executive Summary 1.1 General Considerations 5 1.2 Valuation Summary 7 6
Slide 9: Executive Summary: General Considerations
1. Executive Summary 1.1 General Considerations This report's purpose is to provide the Management and shareholders of Ultrapar with an estimate of the economic financial value of Extrafarma, to support the Company value at the Ultrapar Shareholders' General Meeting, in accordance with the requireme
Slide 10: Use and distribution of this valuation report
1. Executive Summary General Considerations about the use and distribution of this valuation report This document and the opinions and conclusions contained herein are for the use of Ultrapar. Thus, Ultrapar and its related parties may not distribute this document to other parties, except under the
Slide 11: Valuation Summary: Purpose and scope of work
1. Executive Summary 1.2 Valuation Summary Purpose and scope of work Considering the context of our work, its objective is to provide an estimate of the economic- financial value of Extrafarma, to support the Company value at the Ultrapar Shareholders' Meeting, in accordance with the requirements of
Slide 12: General Assumptions
1. Executive Summary General Assumptions [] Reference date: June 30, 2013; [] Value of Standard(1): the Extrafarma estimated economic-financial value was based on the concept/value of standard by which the participation in a company can be negotiated between interested parties, knowledgeable of the
Slide 13: DCF values in the context of the planned transaction
[GRAPHIC OMITTED] The values obtained by DCF method are relevant in the following context of the planned transaction: [] The profitability assumptions and value are in line with the historical data and the market where the Company operates and are consistent with financial indicators(4) of the peer
Slide 14: 2. Appraiser's Information
2. Appraiser's Information 2.1 EY 11 2.2 The EY Quality Process 12 2.3 The team responsible for Valuation 13 2.4 Credentials 16 12
Slide 15: EY History
2. Appraiser's Information 2.1 EY History This report was prepared by EY, a company linked to EY Global Network, one of the global leading audit, consultancy and business advisory company, resulting from the merger of accounting and advisory offices that have emerged in the United States in early 19
Slide 16: The EY Quality Process
2. Appraiser's Information 2.2 The EY Quality Process The reviewing process in EY is insightful and consists of several steps, in which qualified professionals of all hierarchical levels, that participated and did not participate in the work, are engaged. Specifically in the Valuation & Business Mod
Slide 17: The team responsible for the Valuation
2. Appraiser's Information 2.3 The team responsible for the Valuation Our approach considers that the human element is fundamental to reach the established goals. Thus, we seek to create a team with experience in the industry that Extrafarma operates. The project was led by professionals with experi
Slide 18: Andria de Brito Fuga, Partner
2. Appraiser's Information [] Andria de Brito Fuga (andrea.fuga @br.ey.com) -- Partner Independent Reviewer EY Valuation team leader, she is responsible for executing financial projects for middle market and global clients. Partner of the Capital Transformation group in the Transaction Advisory Serv
Slide 19: Felipe Miglioli, Executive Senior Manager
2. Appraiser's Information [] Felipe Miglioli (felipe.miglioli@br.ey.com) -- Executive Senior Manager Executive Senior Manager of Valuation & Business Modelling practice (V & BM) of the Transaction Advisory Services at EY. He is focused on companies economic and financial valuation projects for merg
Slide 20: Credentials
2. Appraiser's Information 2.4 Credentials The TAS department at EY provided services to clients from various sectors, confirming its technical capability. As our main services provided, we highlight the following: Economic and Financial Valuation, Privatization, Equity valuation, Financial Advisory
Slide 21: 3. Macroeconomic Overview
3. Macroeconomic Overview 19
Slide 22: Macroeconomic Overview: Economic Analysis
3. Macroeconomic Overview [GRAPHIC OMITTED] Economic Analysis The key information regarding the international and the Brazilian macroeconomic environment are presented below. The analysis below refers to the reference-date of this report, and has been prepared based on information from the Central B
Slide 23: 4. Market Analysis
4. Market Analysis Reliance Restricted 19
Slide 24: Market Analysis: Overview
4. Market Analysis [GRAPHIC OMITTED] Overview(7) The pharmacy sector presented a compound annual growth rate (CAGR) of 5.7% between 2007 and 2011. The Americas and Europe represent 2012 3.2% the largest markets, with 42.1% and 30.5% of the global market respectively. [GRAPHIC OMITTED] ---------- (7)
Slide 25: Market Analysis: Brazilian pharmaceutical market
4. Market Analysis [GRAPHIC OMITTED] In 2012, when analyzing the pharmaceutical market, the generics segment contributed to 19% of drug sales in Brazil. OTC accounted for 28%, and branded drugs represented 53% considering reference and other branded drugs. For 2013, the major chains continued the co
Slide 26: Branded and generic drugs
4. Market Analysis The forecast is that the market for branded drugs will present a nominal CAGR of 10.9% (10) in Brazil until 2018. Generic drugs The global market for generic drugs grows at approximately 10.8% (11) per year and accounts for more than US$ 150 billion turnover. Worldwide, the United
Slide 27: OTC drugs and healthcare products
4. Market Analysis The OTC drugs currently represent approximately 28% of the total pharmaceutical market, according to IMS Health. The expectation is a nominal CAGR of 13.3% (13) until 2018. Healthcare Products ("HPC") The personal care and cosmetics represent a considerable share of total sales of
Slide 28: 5. Company Overview
5. Company Overview 5.1 Extrafarma Business Description 25 5.2 Historical Financial Information 26 5.3 Projected Financial Information 27 26
Slide 29: Extrafarma Business Description
5. Company Overview 5.1 Extrafarma Business Description [GRAPHIC OMITTED] Extrafarma Operating since 1960, Extrafarma is one of the largest pharmaceutical distribution groups in the North and Northeast of Brazil. In the 90's, the group entered the retail segment, which in June 2013 was composed of 1
Slide 30: Historical Financial Information
5. Company Overview 5.2 Historical Financial Information [GRAPHIC OMITTED] ---------- (16) Reference year 2012. (17) Exhibit C. 28
Slide 31: Projected Financial Information
5. Company Overview 5.3 Projected Financial Information [GRAPHIC OMITTED] Extrafarma's Gross Sales (GS) derive from sales through the channels (1) Retail and (2) Wholesale: Between 1 and 2 Sales Wholesale Gross Sales years 1. Retail: represents approximately 85.0% of Extrafarmas's tot l sale on the
Slide 32: Projected sales mix and wholesale
5. Company Overview [GRAPHIC OMITTED] It is expected growth in all categories of products in the retail channel, with emphasis on generic 41.2% drugs, due to the expiring 41.4% patents scheduled for 41.5% the coming years(22) and 4 the 1 increased access for the end consumer. Based on this, the tren
Slide 33: Company Overview: projections
5. Company Overview [GRAPHIC OMITTED] 31
Slide 34: Operating expenses projections
5. Company Overview [GRAPHIC OMITTED] It is important to note that the fixed portions of the operating expenses for the retail channel were projected per store, according to the expansion plan previously presented, reflecting the increase in the structure to support the organic growth projected for
Slide 35: Expenses and corporate expenses
5. Company Overview Brazil, and the (ii) real growth(24), in order to reflect the conditions in the regional labor market; [] General and Administrative Expenses: refer to utilities and services, maintenance, outsourced services and other expenses. Considered 100.0% and adjusted by the expected infl
Slide 36: Projected financials
5. Company Overview [GRAPHIC OMITTED] ---------- (27) As a percentage of gross sales. 34
Slide 37: Projected financials (continued)
5. Company Overview ---------- (28) Exhibit A. 35
Slide 38: Maintenance CAPEX
5. Company Overview [GRAPHIC OMITTED] [] Maintenance CAPEX: considered the reinvestment of 100% of depreciation, in order to maintain the level of fixed assets over the years. Moreover, in order to support the business growth over the long term, for the purposes of calculating the perpetuity, the le
Slide 39: 6. Extrafarma Valuation
6. Extrafarma Valuation 6.1 Valuation Methodology Overview 36 6.2 Discounted Cash Flow (DCF) Implementation 37 37
Slide 40: Valuation Methodology Overview
6. Extrafarma Valuation 6.1 Valuation Methodology Overview For this economic-financial valuation, the Income Approach(32) was adopted, through the Discounted Cash Flow (DCF) method. According to the DCF method, the value of a business is equal to the present value of the expected cash flows availabl
Slide 41: Discounted Cash Flow (DCF) Implementation
6. Extrafarma Valuation 6.2 Discounted Cash Flow (DCF) Implementation Main parameters Discounted free cash flow(34) Extrafarma's cash flow was calculated according to the assumptions that were adopted in the projections of income statement, working capital and CAPEX previously presented in this repo
Slide 42: DCF valuation results
6. Extrafarma Valuation [GRAPHIC OMITTED] 40
Slide 43: 7. Conclusion
7. Conclusion Reliance Restricted
Slide 44: Conclusion
7. Conclusion [GRAPHIC OMITTED] The results obtained by the DCF method are relevant in the following context of the planned transaction: [] The profitability and value assumptions are in line with the historical data and the market where the Company operates and are consistent with the financial ind
Slide 45: 8. Appendix
8. Appendix A. Statement of Limiting Conditions 42 B. Main Valuation Approaches 44 C. Discount Rate Derivation 46 D. Selected Comparable Companies 48 43
Slide 46: A. Statement of Limiting Conditions
8. Appendix A. Statement of Limiting Conditions 1 In order to achieve this report's goal of economic-financial valuation, certain procedures were applied, always based on historical facts, economic and market conditions and prospects and Extrafarma's strategy prevailing at the reference date. The va
Slide 47: Statement of Limiting Conditions (continued)
8. Appendix 10 Our valuation is based on elements that are reasonably expected, therefore, does not take into account possible extraordinary and unforeseeable events (new regulation for the businesses, changes in tax laws, natural disasters, political and social events, nationalizations, etc.) ; 11
Slide 48: B. Main Valuation Approaches
8. Appendix B. Main Valuation Approaches Overview Business enterprises, tangible and intangible assets should be valued based on the appropriate application of the Market, Cost and Income Approaches. Although all three approaches should be considered in a valuation analysis, the fact pattern surroun
Slide 49: Main Valuation Approaches (continued)
8. Appendix time value of money and investment risk factors. Finally, the present value of the after-tax cash flows over the life of the asset is totalled to arrive at an indication of value. Discounted cash flow and capitalization methods are commonly used to estimate the value of businesses, intan
Slide 50: C. Discount Rate Derivation
8. Appendix C. Discount Rate Derivation The application of Discounted Cash-Flow Methods requires the determination of an appropriate discount rate. Discounted Cash-Flow Methods are applied under conditions of uncertainty. In common usage, the word risk refers to any exposure to uncertainty in which
Slide 51: Cost of equity calculation
8. Appendix The calculation for the cost of equity, as follows: KE = RF + B * MRP + aBR + SP, where KE = Expected market return RF = Risk-free rate of return B = Systematic risk of a single stock MRP = Equity risk premium -- general market aBR = Country-specific risk premium SP = Specific risk Start
Slide 52: D. Selected Peer Companies
8. Appendix D. Selected Peer Companies Description of the market participants(40) [] Brasil Pharma S.A. is a Brazilian pharmacy chain. In September 2012, it was operating 1,050 stores, including 681 sotres under the brands Big Ben, Guararapes, Drogaria Rosario Distrital, Sant'Ana and Mais Economica,
Slide 53: Selected Peer Companies (continued)
8. Appendix [] Profarma Distribuidora de Produtos Farmaceuticos S. A recently entered the retail channel with the acquisition of Drogasmil and Farmalife chains. It works with the distribution of pharmaceuticals, health and beauty products. The company primarily distributes vaccines and hospital prod
Slide 54: 9. Exhibits
9. Exhibits A. Discounted Cash Flow 51 B. Discount rate 52 C. Financial information from Peer Companies 53 52 Ultrapar Participa ç õ es S.A. Exhibit A Economic Financial Valuation of Imifarma Produtos Farmac êuticos e Cosm é ticos S.A. Reference Date: June 30, 2013
Slide 55: Exhibit A
Exhibit A [GRAPHIC OMITTED] 53 Ultrapar Participa ç õ es S.A. Exhibit B Economic Financial Valuation of Imifarma Produtos Farmac êuticos e Cosm é ticos S.A. Reference Date: June 30, 2013
Slide 56: Exhibit B
Exhibit B [GRAPHIC OMITTED] 54 Ultrapar Participa ç õ es S.A. Exhibit C Economic Financial Valuation of Imifarma Produtos Farmac êuticos e Cosm é ticos S.A. Reference Date: June 30, 2013
Slide 57: Exhibit C
Exhibit C [GRAPHIC OMITTED] Notes: EV: Enterprise Value; LFY: Latest Fiscal Year; NFY: next fiscal year; n/a: not applicable. (a) Total invested capital is defined as equity + debt items + preferred stock - cash and cash equivalents. (b) Negative multiples have been designated as not meaningful. 55
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