bank of america merrill lynch global healthcare conference ... · pdf fileseptember, 2011 1...

September, 2011

1

Bank of America Merrill Lynch

Global Healthcare Conference 2011

2

The material that follows is a presentation of general background information about Cremer as of the date of the

presentation. It is information in summary form and does not purport to be complete. It is not intended to be relied

upon as advice to potential investors. No representation or warranty, express or implied, is made concerning, and

no reliance should be placed on, the accuracy, fairness, or completeness of the information presented herein.

This presentation contains statements that are forward-looking within the meaning of Section 27A of the

Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements

are only predictions and are not guarantees of future performance. Investors are cautioned that any such

forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors

relating to the operations and business environments of Cremer and its subsidiaries that may cause the actual

results of the companies to be materially different from any future results expressed or implied in such forward-

looking statements.

Although Cremer believes that the expectations and assumptions reflected in the forward-looking statements are

reasonable based on information currently available to Cremer’s management, Cremer cannot guarantee future

results or events. Cremer expressly disclaims a duty to update any of the forward-looking statement.

This presentation does not constitute an offer, or invitation, or solicitation of an offer, to subscribe for or purchase

any securities. Neither this presentation nor anything contained herein shall form the basis of any contract or

commitment whatsoever

Disclaimer - Forward Looking Statements

3

Cremer

Leading supplier of consumable healthcare products in Brazil (1)

Highlights Breakdown of Net Revenue

Founded in 1935

Healthcare product supplier

First aid, surgery, wound treatment and hygiene for professional

and domestic use

Traditional brand with solid reputation

Leadership in a fragmented market

Integrated business model with direct sales capability

National presence and logistic footprint (9 DC’s)

Large and diversified customer base in hospital, retail and dental

segments

4 business segments

Hospital: ~8K clients among hospitals, distributors, clinics and

labs

Retail: ~17K clients among drugstores, baby shops,

supermarkets and distributors

Dental: ~23K clients among dentists and dental clinics

Industrial: non core; serving industrial clients in the automotive,

shoe manufactures and white goods manufactures

(1) In terms of market capitalization, revenues and clients

(2) Operating Performance (OP) is EBITDA minus some extraordinary non-operating effects such as stock option plan and extraordinary provisions.

Breakdown of Operating Performace (2)

LTM 2Q11

58 MM

LTM 2Q11

392 MM

Hospital55%

Retail22%

Dental8%

Other Healthcare3%

Industrial13%

Hospital52%

Retail29%

Dental1%

Other Healthcare2%

Industrial17%

4

Product Portfolio

Gauze

Lap Sponges

Crepe Bandages

Plaster Cast

Cotton

Ear Swaps

Textile Platform

Latex Platform

Examination Gloves

Plastic Platform

Needles

Syringes

IV Sets

Probes

Collectors

Patches

Cirurgical Gloves

Hospital Retail

Adhesives Platform

Adhesive Bandages Microporous Tapes

Gauze

Crepe Bandages

Cloth Diapers

Plaster Cast

Cotton

Ear Swabs

Textile Platform

Latex Platform

Examination Gloves

Adhesives Platform

Adhesive Bandages

Patches

Microporous Tapes

Plastics Plant - SP

5

Integrated Business Model

We are a vertically integrated player acting in manufacturing, sales, and supply of healthcare consumable

products in Brazil

Manufacturing Sales Supply Chain

Leading manufacturer of surgical textiles

and adhesives

Solid reputation for quality and reliability

In-house research and development

capability

Integrated database with high

technology

Business Intelligence

Teared pricing capabilities / yield

management

Cross-selling

Low customer acquisition cost

Low cost sales channel

State-of-the-art call center

~10,000 calls/day

Over 1,200 orders/day

National field sales force

Unique national footprint with 9 distribution

centers

Differentiated service

Reliable and cost-efficient

~91% OTIF (On Time, In Full)

56,000 (approximately) clients served in

2010

Plastics Plant - SC

Manufacturing units (4)

Distribution centers (9)

Adhesives Plant - SC

Textile Plant - SC

Textile Platform

43%

Latex Platform

30%

Plastics Products Platform

17%

Others10%

Operating Performance

6

Hospital Business Unit

Highlights Financials (R$ MM)

Portfolio1 Key Initiatives

Represents 55% of Cremer’s revenue and 52% of performance

~8K clients served in 2010: Hospitals (private and government owned,

distributors, labs and clinics)

Sales force of 14 people on the field and 37 + call center operators

20% of the sales are to government owned clients and 80% are to

private clients

65% of the sales are to final clients (direct) and 35% are to

distributors (indirect)

Net Revenue

1) Based on 1H11 numbers

Acquisitions and Partnerships

Capture of synergies from business integrations

Revenue increase through cross-selling

Brand and Relationship

Increase client relationship based on technical sales

Stronger presence of sales force in the field

Innovation and Portfolio Management

Development and launch of new products

92.4101.3

119.1

1H09 1H10 1H11

11.2 12.3

19.0

12%12%

16%

1H09 1H10 1H11

7

Retail Business Unit

Highlights Financials (R$ MM)


Represents 22% of Cremer’s revenue and 29% of performance

~17k clients served in 2010: Drugstores, Supermarkets, Baby Shops,

Distributors

Sales force of 14 people on the field and 28 + call center operators

42% of the sales are to final clients (direct) and 58% are to

distributors (indirect)

Operating Performance Net Revenue

Textile Platform

58%

Adhesives Platform

27%Latex

Platform13%

Others2%


Increase Presence

Go-to-Market strategy review (appropriate use of distributors,

client segmentation, sales force adjustment, etc.)

Brand / trade marketing initiatives

Leverage of Topz´s client base and channel penetration

Portfolio Relevance

Portfolio enhancement through acquisitions

Development and launch of new products

39.4

41.8

44.0

1H09 1H10 1H11

8.4 8.6 8.3

21%21% 19%

1H09 1H10 1H11

0.71.4

0.8

5%

8%

5%

1H09 1H10 1H11

8

Highlights Financials (R$MM)

Operating PerformanceNet Revenue


Dental Business Unit

Represents 8% of Cremer’s revenue and 1% of Cremer’s operating

performance

Started in 2005

One of the largest dental distributors in Brazil

~23k clients served in 2010 among dentist and dental clinics


15.916.7

15.1

1H09 1H10 1H11

Business Unit Growth

Increase client base and reduce churn

Build strategic partnerships with clients associations and

suppliers

Increase web sales (www.dentalcremer.com.br)

Gain relevance besides latex platform

Profitability Enhancement

Pricing strategy and portfolio review

Sales cost improvement

Others38%

Latex Platform33%

Textile Platform

15%

Resins7%

Anesthesics7%

9

Strategic Guideline

Value

Employees

Values and Culture

Infrastructure

Promoting pride in

working for Cremer

HR &

Infrastructure

Internal

Processes

Market Shareholders

Brand and

Relationship

Regulatory

Competitive

Intelligence

Innovation and

Portfolio

Management

Operational

Excellence

Value Creation

Sustainable Profitable

Growth

ROIC

Cash Flow Generation

Built to Last

Hospital and other

health service providers

Retail

Vision: Reference in products that facilitate and improve healthcare in the areas of first aid,

surgery, treatment and hygiene for professional and domestic use

10

Additional Value Creation Opportunities

Go-to-market

Focus on key accounts

Closer relationship with distributors

Cross Selling

Improve mix and market share of existing

products

Operational Excellence

Continue manufacturing and supply chain

optimization

Product extension

New items for existing product lines

Product Innovation

New healthcare product lines ; Entrance into

new segments

Operations optimization

Manufacturing upgrade

Logistics optimization

Market Consolidation

Organic

M&A

Short and Mid-Term

Mid and Long-Term

Distributor 3Distributor 2Distributor 1

Regional Clients

Regional Clients

11

Fragmented Market

Clients /

Consumer

Cremer 2Q11 LTM Revenues was R$ 392MM, ~8% of Market Share

We estimate the market to be R$ 5.0 bn

Suppliers: niche competitors in each product category

Distributors: regional, family owned

Clients: largest chains have few stores compared to the number of players

Distribution

1,500+

Suppliers

500+

Hospitals

~6,500

Drugstores

~55,000

Dentists

100,000 +

12

Category Management (1/3)

* Net Revenue fromhealthcare products

Hospitalar

Retail

Dental

Other Healthcare

We have specific and detailed plans for each product category

- Review the technology and production process

Category Segment%

Net Rev.

2Q10 x

2Q11

Market

Share

Market

(R$ MM)Profitability Critical Success Factors

Textile Platform 39.9% 23.6% 21% 707

Gauze 38% 145- Increase products competitiveness

- Lower the production cost

Lap Sponges 31% 180- Profitability maintenance

- Production x Outsourcing

Cotton 35% 65- Accelerate growth in retail

- Gain productivity

Crepe

Bandages 39% 63- Recover market share

Diapers 29% 125- Market share defense

- Innovation / Packaging

Plaster Cast 36% 27- Recover profitability

- Export Issue

Other textiles N/A N/A- Niche Markets

- Product Innovation

Ear Swabs 2% 102- Gaining relevance

- Expand capacity

Latex Platform 23.0% 3.8% 20% 500

Gloves 20% 500- Profitability recovery

- Avoid price war

13




Hospitalar

Retail

Dental

Other Healthcare

Category Segment%

Net Rev.

2Q10 x

2Q11

Market

Share

Market


Adhesives Platform 11.4% 11.3% 4% 296

Adhesive

Bandages55% 74

- Market share defense

- Margins maintenance

Microporous

Tape22% 77

- Accelerate growth

- Profitability maintenance

Other Hospital

AdhesivesN/A N/A

- Gaining relevance

- Innovation

Patches 3% 145- Gaining relevance

- Innovation

Plastics Platform 10.3% 186.8% 15% 497

Needles and

Syringes2% 222

- Supply guarantee

- Gaining relevance

IV Sets 10% 140- Gaining relevance

- Ensure profitability

Collectors and

Probes25% 100

- Gaining relevance

- Ensure profitability

Women's

Health0% 35 - Develop platform

14



Hospitalar

Retail

Dental

Other Healthcare


Category Segment%

Net Rev.

2Q10 x

2Q11

Market

Share

Market


Chemicals Platform 0.2% -80.7% 0% 600

Infusion and

Cleaning Solutions0% 600

- Gaining relevance

- Profitability recovery

Nonwovens Platform 0.0% -100.0% 0% 2,806

Medical Scrubs 0% 106- Develop platform

- Change in the culture of consumption

Disposable

Diapers0% 2,700

- Revise strategy

- Brand issue (Mabesa)

Others 4.3% -30.3% 0% 0

Other Third Party N/A N/A- Continue the rationalization process

- Focus on dental

Beauty and

Hygiene N/A N/A

- Operate with own brand

- Develop platform

15

We are constantly pursuing new partnerships and acquisitions to increase our portfolio and to create value

to shareholders

Cremer’s

current

portfolio

Other

Products

Hospital and

Retail

demand for

disposables

and

consumables

products for

healthcare

Rational to introduce new products

Pros Cons

In-house

development

1. Don´t depend on third parties

2. Capture the chain´s entire value

1. Cremer doesn´t have the know-how

2. Implementation period

3. Brings another player to the market

4. Higher capital employed

Partnership

1. Little capital employed

2. Imediate start

3. Develop partneship with a

tradicional player

1. Don´t capture te entire value

2. Challenge to find the partner

OEM / Import

1. Less capital employed compared to

in-house development

2. Develop Cremer´s brand

1. Implementation period

2. Product quality

3. Brings another player to the market

M&A

1. Imediate start

2. Capture the chain´s entire value

3. No new competition

1. Integration risks

2. Challenge to find the target

16

Embramed Strategic Partnership (Sep/10)

Highlights Product portfolio

Deal Manufacturing facilities

Strengthens our plastic platform

Largest1 manufacturer of IV sets and probes in Brazil

Gross Revenue of ~R$ 76 MM in 09

Traditional brand (20+ years in the market)

Preferred commercialization agreement to have special

conditions:

R$ 5 MM (3-year amortization, Tax deductable)

Call and put options

1.7 MM shares or the equivalent payment in cash

(~R$ 30 MM)

Cremer has an american option and Embramed

has an european option (march/14)

17

Targa Strategic Partnership (Jan/11)



Strengthens our latex platform

Owner of “Lemgruber” brand

One of the largest importers/manufactures of examination

gloves in Brazil

Biggest manufacturer of Cirurgical Gloves in Brazil

Buy under special conditions and Import directly

Use the trademark "Cremer”

R$ 20 MM (7-year amortization, Tax deductable)

Option of shares subscription

Subscription warrant of at least 20% and not more than 40% of

Targa’s equity

5x LTM EBITDA

18

P. Simon Acquisition (Apr/11)



Strengthens our plastic platform

Manufacturing and commercialization company of

medical hospital products

collectors, flasks, drains, extenders and irrigators

Leadership in a niche market (~30% market share)

Regional presence (80% of sales in SP); Present in major

hospitals such as Einstein and Sírio Libanes

Greater synergy and complementarity with Embramed

Net Revenues of ~R$ 22 MM in 2010

Purchase of 100% of the capital of P. Simon

R$ 25 MM in three tranches :

1. R$ 15.2 MM at the closing date

2. R$ 5 MM 12 months after the closing date and

3. R$ 5 MM 24 months after the closing date

The tranches (2) and (3) may be reduced depending on

the future revenue for the years 2011 and 2012

19

Topz Main Assets Acquisition (Aug/11)


Deal

Strengthens our disposable textile and personal hygiene platforms

Company of Cosmetics and Personal Hygiene Products

Strong presence on food channel (supermarkets)

Gross Revenue of ~R$ 70 MM 2Q11 LTM

Acquisition of main operational assets of Topz as the brands

Salveloz, Salveped and others.

Total payment of ~R$ 73 MM

http://www.topzcosmeticos.com.br/

21.7%

18.3%

2Q10 2Q11

70.7

55.0

2Q10 2Q11

21.0%

17.4%

2Q10 2Q11

9.8

5.2

2Q10 2Q11

15.7

17.0

2Q10 2Q11

99.3

114.4

2Q10 2Q11

20

2Q11 Results (R$ MM)

Net Revenues EBITDA Net Income

Working Capital 1 Cash Cycle (days) ROIC2

1. Working Capital = Receivables – Suppliers + Inventory (% of 1H11 Annualized Net Revenues)

2. Annualized

21

Contacts

Rafael Salvador Grisolia

Chief Financial and Investor Relations Officer

+ 55 47 3321 8290

[email protected]

www.cremer.com.br/ir

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