GENOMMA LAB GENOMMA LAB INVESTOR DAY Safe Saf e Harbor Harbor - - PowerPoint PPT Presentation

GENOMMA LAB GENOMMA LAB INVESTOR DAY

This presentation may contain certain forward-looking statements and information relating to the Company that reflect the current views and/or expectations of the Company and its management with respect to its performance, business and future

• events. Forward looking statements include, without limitation, any statement that may

predict, forecast, indicate or imply future results, performance or achievements, and may contain words like “believe,” “anticipate,” “expect,” “envisages,” “will likely result,”

• r any other words or phrases of similar meaning. Such statements are subject to a

number of risks, uncertainties and assumptions. We caution you that a number of important factors could cause actual results to differ materially from the plans,

• bjectives, expectations, estimates and intentions expressed in this presentation and in
• ral statements made by authorized officers of the Company. Readers are cautioned not

to place undue reliance on these forward-looking statements, which speak only as of their dates. The Company undertakes no obligation to update or revise any forward- looking statements, whether as a result of new information, future events or otherwise.

Saf Safe e Harbor Harbor

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Today’s Presenters

• 14 years at LABB

Prior Experience:

• COO, Head of

International

• Launched Argentina,

Brazil and US

• perations
• Joined Dec 2015

Prior Experience:

• CCO Cydsa
• CFO Grupo LALA
• Strat. & Financial

Planning PEPSICO

• McKinsey & Co
• Joined April 2014

Prior Experience:

• EVP Sales P&G
• +20 years of

experience in consumer goods

• Recently joined

Prior Experience:

• Global President J&J
• CEO & Board

Member in Venture Capital and Private Equity -backed PC and Beauty Cos. GL GL. . PRES PRESIDENT IDENT

OF OF BRANDS NDS

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Genomma Lab’s Key Imperatives

Shareholder value creation Balanced geographic reach / International expansion Sustainable business model & enduring brands

4

Cor Core Compete e Competencies ncies

Mexico: sell-in International: sell-

• ut, EBITDA, FCF

Talent Demand generation POS execution Growth

Before Today Future

Demand generation Developing online Talent + Demand generation Win online Continue attracting global talent ++ Better POS execution Best POS execution Sell-out, EBITDA, FCF EBITDA, FCF and ROIC Sustainable growth and brands Sustainable growth and brands

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Agenda Agenda

LAB Highlights: Then and Now Sustainability Financial Results and Outlook Me Mexico: T xico: The he Tur urnar naround

• und

Brand Equity Commercial Strategy Innovation

1 2 3 4

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CAGR + 10.8%

Growth wth Achie hieved in O ed in OTC an C and PC d PC Since Since 201 2010

OTC PC

Sales Sales by by Ca Cate tegor gory

(Million MXN)

OTC PC Generics

11,287 6,264

2010 3Q16 YTD

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Significant Geog Significant Geographic Div phic Diver ersifica sification tion

100% 100%

Mexico International

Revenue enue Mix Mix by by Region gion

15 countries 20 countries

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Rights Rightsizing the izing the Or Organ ganiza ization tion

514 XXX Emplo Employees ees

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CAGR: +10.8% + 14.6% + 9.9%

Gr Growth Fu wth Fueled eled by Or by Organ ganic Br ic Brand ands s and and Str Strate tegic Acquisitions gic Acquisitions

Organic Brands Acquired Brands

6,264 11,287

Examples of Organic Brands Examples of Acquired Brands

(Million MXN)

• 2,000

4,000 6,000 8,000 10,000 12,000

2010 3Q16 LTM 83% 79% 17% 21%

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New Mana New Managemen gement F t Focus

• cused

ed on

• n

Gene Generating ting Cash Cashflo flow

Conso Consolida lidated ted Cash Cash Con Conver ersion sion Cy Cycle in le in Days Days New Management

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Agenda Agenda

LAB Highlights: Then and Now Sustainability Financial Results and Outlook

Me Mexico: T xico: The he Tur urnar naround

• und

Brand Equity Commercial Strategy Innovation

1 2 3 4

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500 600 700 800 900 1000 1100 1200 1300

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16

Sell Sell-in in Con Conver erging ging with Sell with Sell-out:

• ut:

Succ Successful Destoc essful Destocking king Pr Proce

• cess

ss

Sell-out Sell-in

Destocking completed Sell-in & sell-out converging

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True Demand ue Demand Suppor upported ted by the Str by the Strength ength

• f
• f ou
• ur Br

r Brand ands

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2014 2015 2016

Actions taken to offset significant media inflation:

• Reduction of 60% in GRP’s vs YAGO
• Budget reallocated to optimize advertising expense

*Real terms: adjusted by inflation. Sell-out affected by fill-rate. Base 100: 1Q14

GRPs Sell-out*

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2014 2015 2016

Index 100

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Agenda Agenda

LAB Highlights: Then and Now Sustaina Sustainability bility Financial Results and Outlook Mexico: The Turnaround

Brand Equity Commercial Strategy Innovation

1 2 3 4

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BUSINE USINESS SS SEG SEGMEN MENTS TS

PC

OTC

• Sizable markets
• Growth potential
• Latin America
• U.S. Hispanic market
• Well-recognized leading

brands

LAB LAB Par articipa ticipates i tes in At n Attr tractiv active and e and Gr Growing Bu wing Business siness Segment gments

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Genomma is a Leading Genomma is a Leading OTC C Play Player er within its Mar within its Markets ets

Significant Significant Gr Growth wth Oppor pportunit tunity Top

• p Two
• Countr

Countries ies Highl Highly Fragmented gmented

Position: Position: Position: Position: Position: Position: Position: Position:

Mexico Argentina

Position:

Total OTC Hispanic OTC

USA Brazil Chile Ecuador Peru Central America Colombia

0.45%

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0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%

3Q14 YTD 3Q15 YTD 3Q16 YTD 68.2% 89.0% 92.7% 31.8% 11.0% 7.3%

Incr Increas eased P ed Pene enetr tration tion of

• f Co

Core Br e Brand ands

Revenue enue Mix Mix in Me in Mexico xico

Core Brands Non-Core Brands

• Better product

rotation in the POS

• Higher profitability

than non-core brands

~ 95% of sales in our international operations come from core brands.

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Agenda Agenda

LAB Highlights: Then and Now Sustaina Sustainability bility Financial Results and Outlook Mexico: The Turnaround

Brand Equity

Commercial Strategy Innovation

1 2 3 4

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Our P Our Path to De th to Developing Me eloping Mega gabr brands ands

Two Me Mega gabr brands ands > US $100 > US $100 million million

Product Line Extensions

Asepxia Caps Caps Neutral soap Anti-acne soap Powder makeup Liquid makeup BB cream Facial cleansing wipes Anti-acne wipes Gel Anti-scar Gel Makeup BB cream Body cream Eye cream Stretch mark Anti-aging SPF Mexico Global Mexico Global

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Our F Our Focu

• cus on P

s on Power Br er Brand ands Driv s Drives es Ca Cate tegor gory Gr y Growth wth

Antimycotics

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“100 Secrets” Home-made “recipes” of Pomada de la Campana Mix with natural ingredients to obtain different skin benefits (exfoliation, hydration, etc.).

Genomma’s DNA: Disruptive Marketing Strategies to Grow Brands

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Sustaina Sustainabl bly Successful Successful Launc aunch Model

• del
• 90 years of tradition
• Quality & heritage
• Launch into mass

facial skin lotions segment

• Unique trend

ingredient

• Expansion into body

lotion segment

• Design relaunch
• “Anti-wrinkle”

innovation

• New sizes

Winning Strategy:

• Relevant Concept
• Value Offering & Innovation
• POS Execution

Teatrical: Developing a Power Brand

2013 2014 2015 2016 $35 $164

4.6x Sales

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14.5 57.4 43.1

6 11 31 43 53

Acquired in 2012 from Andrómaco

Cream, spray, powder, lotion & gel

Source: Cid Latina – CT D01A OTC.

‘12 ‘13 ‘14 ‘15 Aug’16

Acqu Acquir ired Br ed Brand and T Transf ansfor

• rmed

med into a into a Loc Local P al Power Br er Brand and

Market Share in Units

(%)

Sales in Million AR Pesos

43.1

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17.8 39.07 25.74 20.69 Acquired in 2012 from Sidus

OTC and Rx product portfolio

‘12 ‘13 ‘14 ‘15 Aug’16

Market Share in Units (%) Sales in Million AR Pesos

Source: Cid Latina – N02B + M01A.

23 37 77 133 285

Acqu Acquir ired Br ed Brand and T Transf ansfor

• rmed

med into a into a Loc Local P al Power Br er Brand and

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Supplements OTC Personal Care

Str Streng engthe thening ning our

• ur Pr

Produ

• duct

ct Por

• rtf

tfolio

• lio

Ca Cate tegor gory Mi y Mix in x in the U the U.S. .S.

*Percentage points.

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Top Br

• p Brand

ands Sho s Showing Str wing Strong

• ng Gr

Growth wth in th in the U e U.S. .S.

(Million USD)

2012 2013 2014 2015 YTD 2016

0.9 1.4 5.0 10.3 14.0

2012 2013 2014 2015 YTD 2016

0.4 4.5 6.1 8.4 10.7

2014 2015 YTD 2016

1.2 4.5 6.2

2012 2013 2014 2015 YTD 2016

1.8 6.1 7.0 8.2 9.1

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Source: U.S. Census Bureau county population datasets / PEW Research Center.

Hispanic Hispanic Popula

• pulation Expanding thr

tion Expanding throughout the U

• ughout the U.S.;

.S.; Genomma Genomma is is Br Broadening

• adening its

its Pr Presence esence

New Clients New E-commerce Clients LAB’s POS Hispanic Population Expanding Rapidly in Non-Traditional Markets

58,370 75,438 2015 2016

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• Optimize Assortment
• Integrate Signage Elements
• Marketing Campaign

Results in k esults in key c ey clients in the U lients in the U.S. .S.

OTC Set 660 stores Beauty Set 900 stores

End-Caps 1,679 stores Side-Kicks 2,269 stores

• 23 SKUs in the Top 30 list

Results esults with K with Key Clients in the ey Clients in the U U.S. .S.

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Agenda Agenda

LAB Highlights: Then and Now Sustaina Sustainability bility Financial Results and Outlook Mexico: The Turnaround

Brand Equity

Commercial Strategy

Innovation

1 2 3 4

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Commer Commercial cial Key V ey Varia ariables bles

• Traditional Channel
• New Customers
• Channel Mix
• Cicatricure
• Asepxia
• OTC

Channel Channel & & Customer Expansion Visibility isibility

• Shelf
• Displays
• Featuring

POS POS Ex Execution ecution

• Trade Terms Reduction
• Payment Behind

Performance

Go Go-To To-Mar Market et

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Drug Stores 7% Beauty Care 8% Modern Trade 37% Traditional 48% +108 New Customers* +27,612 New Stores*

11% of Total Sales*

Chan Channel and nel and Customer Expansion (Global)

*From March 2014 to date.

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50 100 150 200 250 300 350 400 450 500 20,000 40,000 60,000 80,000 100,000 120,000 140,000

2012 2015 2016 est

Sold as an SKU Deployed at mom-and-pop Botiquín Abarrotes Supporting distribution expansion

Chan Channel and nel and Customer Expansion (Global)

15,000 Independent Drug Stores in Mexico by YE 2016

Botiquín Farmacia

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75% of Supermarket Stores in Mexico with Off-Shelf Visibility.

Asepxia Cicatricure Zan Zusi

Visibility isibility

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Department Stores 25% of Pharmacy Chains

Cicatricure Asepxia & Cicatricure Sanborns

Visibility isibility

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POS POS Ex Execu ecution tion

59% 61% 60% 62% 70% 69% 72% 74% 72%

ene.-16 feb.-16 mar.-16 abr.-16 may.-16 jun.-16 jul.-16 ago.-16 sep.-16 Aug.-16 Jan.-16 Apr.-16

% of in-store perfect execution.

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Cuernavaca San Pablo Supercenter Arboledas Observatorio

POS POS Ex Execu ecution tion

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Soriana Sendero Soriana Solidaridad Mega Pilares Fuentes del Valle San Mateo

POS POS Ex Execu ecution tion

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Supercenter Tepeyac Supercenter Toreo Supercenter Plaza Texcoco Supercenter Lago de Guadalupe Supercenter Querétaro

POS POS Ex Execu ecution tion

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Agenda Agenda

LAB Highlights: Then and Now Sustaina Sustainability bility Financial Results and Outlook Mexico: The Turnaround

Brand Equity Commercial Strategy

Innovation

1 2 3 4

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New Formulation

Perfect balance Technology + Natural Ingredients

New Design

Modern image, focus on functional benefits

Makeup Product Line Evolution

Asep Asepxia xia: 360 : 360 De Degree ee Relaun elaunch and and Ex Execu ecution tion

Cream & Powder BB in entire makeup product line 8 benefits in one

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A New Se A New Segment f gment for SU

• r SUER

EROX +75% SELL +75% SELL-OUT OUT

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New Globa New Global Mar l Marketing and Inno eting and Innova vation tion Pr Proce

• cess

ss

• Category & brand strategy
• Brand footprint
• Communication ideas
• Innovation
• Lead Markets
• Creative
• R&D

From:

• Federation of

20 countries

To:

• Global Approach

43

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Two Y

• Year Inn

ear Innova vation on Cor tion on Core Br e Brand ands s and and Base Base Busines Business Upg s Upgrade ade

Antimycotic

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Agenda Agenda

LAB Highlights: Then and Now Sustainability

Financial Results and Outlook

Me Mexico: T xico: The he Tur urnar naround

• und

Brand Equity Commercial Strategy Innovation

1 2 3 4

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• 200

400 600 800 1,000 1,200 1,400 1,600 1,800

3Q15 YTD 3Q16 YTD 17.4% 19.8%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%

• 200

400 600 800 1,000 1,200 1,400 1,600 1,800 3Q15 YTD 3Q16 YTD

• 1,000

2,000 3,000 4,000 5,000 6,000

3Q15 YTD 3Q16 YTD 69.8% 71.0%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%

• 1,000

2,000 3,000 4,000 5,000 6,000

3Q YT 3Q YTD 20 D 2016: Gr 16: Growth in T wth in Top Line

• p Line

Pr Profita

• fitability a

bility and F nd FCF CF

(Million MXN)

Gross Profit

5,837 6,112 4.7%

• 1,000

2,000 3,000 4,000 5,000 6,000 7,000 8,000

3Q15 YTD 3Q16 YTD

Net Sales

8,367 8,612 2.9%

• 200

400 600 800 1,000 1,200 1,400

3Q16 YTD

FCF

1,294

EBITDA*

1,458 1,707 17.1%

*Adjusted due to non-recurring severance payments.

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Str Stronger P

• nger Polici
• licies and Di

es and Disc sclosur losure

• Strengthening of corporate policies and procedures

resulted in one-off effects, primarily non-cash, in 4Q and FY 2015 results.

• Tightened policies and procedures with additional
• versight to support future strategy.
• Smooth and incident-free SAP implementation improves

transparency and controls.

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BALA ALANCE NCE SHEET SHEET

As of 3Q’16

(Million MXN)

Cash and equivalents Inventories Other current assets Fixed, intangible and other LT assets Suppliers Other current liabilities Non-current liabilities Shareholders’ equity Bonds and banking debt Total Liabilities + Shareholders’ Equity Total Assets

9,575 9,755 1,192 2,304 1,592 3,540 114 5,881 1,431 1,020

Accounts receivable

18,203 18,203

2.9 B in Intangible Assets Under review

NON CASH Intangibles Under Review

2,900 6,675 9,575

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La Latest test News: News: LAB LAB Now

• w Runn

unning ing

• n
• n

* Gartner. ** Swiss Property - SAP Capital Markets.

• SAP launched S/4 HANA in February 2015

(biggest technological change* in over two decades, replacing classical R/3 ERP)

• 1Q’16 - First worldwide S/4 HANA

implementation is announced**

• 3Q’16 - LAB Mexico goes live in S/4 HANA
• First implementation in Latin America
• Not an upgrade; no disruption
• LAB developed Global Template
• Journey for other countries in 2017
• Full benefits expected to be captured in 2017

49

Ev Evolution

• lution of
• f Net De

Net Debt bt

(Million MXN)

50

Ca Capital pital Alloca Allocation tion Conc Concept ept

* Non-Gaap measure defined as Operating Cash Flow less maintenance Capex.

Higher Lower

(than in 2016)

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M&A M&A Str Strate tegy

• Non-transformational
• Focus on big geographies, mainly Mexico and the U.S.
• Mainly OTC
• Brand heritage and growth potential
• OPEX synergy opportunities
• Focus on ROIC

Accretive Inorganic Growth

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COGS R COGS Reduc eduction tion

• Four last quarters intensive analysis
• Scale: filling, bottles, raw materials
• Quality
• Fill-rate
• Attracted GM’s talent from the best generics and PC producers in Latam
• Mexico has one of the lowest production costs in the world
• Business model sustainability

New Production Capabilities Rationale

• Up to MXN $800 million
• EBITDA savings: 700 bps to 910 bps
• ROIC: > 30%

Investment Opportunity (24 months)

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Guidanc Guidance e 2017 2017

Net Sales Growth (MXN): + 7% EBITDA Growth (MXN): + 14% FCF (billion MXN): > $1.8 ROIC Objective: ~ 30% Net Debt/EBITDA Target: < 2X

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ANA MARÍA YBARRA – IRO BARBARA CANO – MBS Value Partners inversion@genommalab.com

• Tel. (55) 5081-0000 ext. 4016

www.genommalab.com/inversionistas

INVEST INVESTOR RELA OR RELATIONS CONT TIONS CONTACT CT: :

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