Investor Relations & Capital Markets

Transcription

1 Investor Relations & Capital Markets

2 Forward-Looking Statements Some of the information in this presentation is not historical in nature and may constitute forwardlooking statements, which are made pursuant to the safe harbor provisions of Code of Capital Markets of Turkey. These statements may be identified by the use of forward-looking terminology such as believes, expects, anticipates, may, will, should, seeks, approximately, intends, plans, estimates, or the negative of these words or other comparable terminology. The discussion of financial trends, strategy, plans or intentions may also include forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied by such statements. Although it is not possible to predict or identify all such risks and uncertainties, they may include, but are not limited to, those described in the Company s annual, quarterly and current reports as filed and furnished with the regulations of Capital Markets Board of Turkey (CMB). You are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date such statements were first made. To the degree financial information is included in this presentation, it is in summary form only and must be considered in the context of the full details provided in the Company s most recent annual, quarterly or current report as filed or furnished with the CMB. The Company s IFRS reports are available at under the Investors tab. Except to the extent required by law, the Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events. 2

3 Contents Turkish Pharmaceutical Market Market Size Market Structure Major Regulatory Items Market Prospects Selcuk Ecza At a glance Market Share Business Model Operational Facts Financial Figures Expanding the ScopeToiletries Ownership Appendices Pricing in Detail-Recent Changes in regulations Basic Health and Demographics Statistics 2016 Summary Financials 3

4 350, US$ PPP , , , , , U.S Japan 4077 China 3966 Germany 3331 France 3165 U.K. Turkish Pharmaceutical Market 16 th Largest in the World, 6 th in Europe 3159 Italy Canada Spain Brazil Russia India S.Korea Australia Turkey Poland Greece Netherlands Belgium Venezuela The Largest 20 Pharmaceutical Market 100,00 0,00 Total (Public + Private) Health Expenditure per capita, OECD Countries, U.S. Luxenbourg Switzerland Norway Iceland Canada France Austria Belgium Netherlands Germany Denmark Australia Sweden Ireland OECD U.K. Italy Japan Finland Greece Spain New Zealand Portugal Czech Rep. Hungary Korea Poland Advanced Developing Turkey Slovak Rep. Mexico Turkey Source: IMS Market Prognosis, May 2012, Importing Prices 4

5 Market Structure Overall Suppliers Government/Reimbursement Patient/private insurance Wholesalers Pharmacies 5

6 Market Structure: Suppliers Turkish Pharmaceutical Market Suppliers' Shares (%) 332 Companies 295 Domestic 37 Multinationals 56,03 IBRAHIM NOVARTIS BILIM PFIZER EASTPHARMA SANOFI GLAXOSMITHKLINE BAYER ASTRAZENECA SANOVEL OTHER 8,18 5,40 2,90 4,96 4,40 3,89 3,72 3,71 3,71 3,10 64 Manufacturers 49 Domestic 15 Multinational 12 Raw Mat. Producers 31 Importers Fragmented market: Largest player with a market share of 8.2% Top 10 market share app.: 44% No original product development, local firms develop their own generics, manufacture licensed products and subcontract from international firms Source: IMS Health Pharmaceutical Companies Market Data, Cumulative

7 Market Structure: Wholesalers Nationals Nationals Multinationals Cooperatives Regionals App. 300 Distributors 15 of which have economically meaningful size Small distributors have little room to increase their market share, given the financial Multinationals strength and economies of scale of the large players High Barriers for New Entrants Top 2 have approximately 70% market share 7

8 Market Structure: Pharmacies ~ 24,119 pharmacies across the country 1 per 2,965 population ~ 250 newcomers for a typical year. Owned and run by pharmacists Pharmacy chains are NOT allowed OTC drugs can NOT be sold through other retail channels Rely on wholesalers for financing Typically work with 2 or 3 distributors Substitution by pharmacists is allowed by the regulation 8

9 Major Regulatory Items-I PRICING Producer Price International Reference Price Exchange Rate Reference Price Factor International refrence price is determined according to (5 to 10) EU member reference countries announced by the Ministry of Health (MoH). Reference Countries: France, Italy, Spain, Portugal, Greece (Not Changed) Euro prices are converted to TL with a fixed currency rate, which is disclosed in the first five days of every year by the pricing commision of ministry of health, as 70% of the the avarage currency rate of the previous year. The announced currency rate comes into effect in 45 days after announcement. Prices of the branded products that have their generics available in the domestic market shall be max 60% of their reference prices, whereas branded products without generics available in the domestic market shall be max100 % of their reference prices There shall be a price cap of 80% of the reference prices for branded products which have stayed on the market over 20 years and wholesale prices over 7,32 TRL Discounts, premiums, bonuses are not considered. 9

10 Major Regulatory Items-II MARGINS Producer Price Distributor Mark-up Distributor Price Pharmacy Mark-up Pharmacy Price (excl. VAT) Retail Price (incl. VAT) A = % Aa = A X % Aaa = Aa X 1.25 Aaaa = Aaa X 1.08 B = % Bb = B X % Bbb = Bb X 1.25 Bbbb = Bbb X 1.08 C = % Cc = C X % Ccc = Cc X 1.25 Cccc = Ccc X 1.08 D = % Dd = D X % Ddd = Dd X 1.16 Dddd = Ddd X 1.08 E = X 2% Ee = E X % Eee = Ee X 1.12 Eeee = Eee X

11 Major Regulatory Items-III REIMBURSMENT Reimbursement Price International Reference Price Reference Price Factor* (Institutional Discount)* Upper Limit for Reimbursement Price Government applies additional public discounts over the wholesale prices for its reimbursements; changing depending on their price levels, whether it s a branded or generic drug or stay on the market over 20 years (see appendix) Co-payment is 20% for employees and 10% for seniors The government recently removed price ceiling from 10% to 0% for the reimbursement price of generic drugs in the same bioequivalance group,which is applied over the lowest price of the generic product in the market Pharmacies are directly reimbursed by the Government (via Social Security Institution-SGK) *For current referance price factors and institutional discounts please refer to appendices REIMBURSEMENT to PHARMACIES by THE SSI First Day of Month Dispensing Average 15 Days Last Day of Month Application to SSI 15 Days 15th of the Following Month Reimbursement Max 60 Days 11

12 Market Prospects Favorable Demographics (see appendix) Growing population Increase in senior and infant population Decrease in deaths per total births Increasing access to healthcare services Still lagging behind major OECD countries in healthcare expenditure per capita (see appendix) Government budget constrains Regulatory change, upside-downside (???) 12

13 Recent Regulatory Changes Euro currency conversion rate was fixed to 1,95 TL/ in 2009, and it has been increased to 2,00 TL/ by a decision taken in May first increase since In June 2015, with an amendment to relevant regulation, a new methodology of determining the Euro conversion rate was introduced. According to this new regulation the rate shall be disclosed in the first five days of every year by the pricing commision of ministry of health, as 70% of the the avarage currency rate of the previous year. The announced currency rate comes into effect in 45 days after announcement. First implementation was in place by September 2015 and the conversion rate has increased to 2,078 TL/. For 2017 the rate is announced as 2,34 TL/. 13

14 Contents Turkish Pharmaceutical Market Market Size Market Structure Major Regulatory Items Market Prospects Selcuk Ecza At a glance Market Share Business Model Operational Facts Financial Figures A New Scope: Toiletries Ownership Appendices Pricing in Detail Basic Health and Demographics Statistics 2016 Summary Financials 14

15 Selcuk Ecza - Over years being a milestone in Turkish pharmaceutical market... 15

16 Sustainable Position as the Market Leader Market Share (%) 33,40% 34,40% 36,09% 35,41% 35,69% 34,40% 35,10% 38,96% 39,97% 40,19%

17 Value Chain- Selcuk Ecza:Trust, Balance and Stability Top 2 wholesalers control approximately 70% of the total market. (Top 3 > 80%) Almost 10% ahead of the strongest competitor as per marketshare (Differentiation: quality and speed of service, close follow-up, payment terms and product campaigns) Business Model: Wholsale+DistributionTwo segments: Pharmaceuticals& Toiletry Products Distribution High stock avaliabality Wide distribution channels Strong cash position 17

18 A wide distribution network across the country... Main Regional Warehouses Warehouses Total Selçuk Ecza As Ecza Group Total

19 Operational Stats Employment Size Vehicle Fleet

20 Focused on Profitability... As of Dec 31, Chg Revenues 8.643, ,34 15,55% Gross Income 661,96 526,53 25,72% Gross Margin 7,66% 7,04% +0,62 pts EBITDA 281,22 205,74 36,69% EBITDA Margin 3,25% 2,75% +0,50 pts Net Income 243,62 190,70 27,75% Net Income Margin 2,82% 2,55% +0,27 pts EPS 0,392 0,307 27,69% 20

21 Sustainable Growth (TRL in millions except EPS) NET SALES (TL,bn) As of Dec. 31, Chg Revenues 5, , % 10,00 8,00 Gross Income % 6,00 Gross 4,00 Margin 7.95% 8.25% -0.3 pts 2,00 EBITDA % 0, EBITDA Margin 3.15% 3.32% pts Net Income % Net Income Margin 2.91% 3.02% pts EPS % 21

22 Financial Review- Net Income Margin Stability NET INCOME (TL,bn) 250,00 200,00 150,00 100,00 50,00 0,

23 What Matters Most Market share Discounts given/taken, premiums collected/paid, Providing finances to pharmacies terms/interest rates Control over OPEX Financial Income WC Management No major role of CAPEX 23

24 Margins 12,00% 10,00% 8,00% 6,00% 4,00% 2,00% 0,00% Gross Margin 10,64% 10,04% 9,58% 9,31% 8,73% 9,06% 7,81% 8,25% 7,95% 7,33% 7,07% 7,66% 7,04% Gross Margin Net Margin 5,00% 4,00% 3,00% 2,00% 2,52% 3,41% 3,09% 4,36% 3,97% 4,61% 3,75% 2,73% 3,02% 2,91% 2,59% 2,56% 2,82% Net Margin 1,00% 0,00%

25 OpEx Improvement FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY2016 Revenue (mn.) # of WHs # of Employees OpEx / Sales 4,49% 4,57% 3,93% 4,28% 4,74% 5.37% 5,13% 4,74% 4,70% 4,97% Personnel / Sales 2,69% 2,64% 2,39% 2,66% 2,79% 3,23% 3,05% 2,84% 2,91% 3,20% Employee per WH Revenue per Employee

26 OpEx Breakdown OPERATIONAL EXPENSES FY2016 % FY2015 % 2016 vs 2015 Personnel expense ,34% ,78% 27,23% Depreciation expense ,93% ,86% 23,89% Fuel expense ,79% ,73% 2,04% Communication expense ,40% ,71% 0,29% Transportation expense ,80% ,46% 7,53% Repair and maintenance expense of motor vehicles ,71% ,87% 11,79% Rent expense ,23% ,74% -0,69% Outsourced benefits and services ,06% ,09% 21,24% Tax expense ,84% ,90% 15,07% Insurance expense ,54% ,20% 41,47% Stationery expense ,21% ,13% 31,09% Representation and host expenses ,76% ,05% -11,61% Advisory and audit fees ,34% ,25% 62,80% Donations and aids ,24% ,59% -49,75% Health sector fair expenses ,70% ,07% 59,16% Promotion expenses ,25% ,35% -12,61% Other ,85% ,23% 7,97% ,17% 26

27 Working Capital Management mn. FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 A/R Inventories A/P WC WC/Sales (%) 17,83 18,21 14,20 14,70 15,57 18,84 18,16 15,78 15,94% 14,43% 27

28 Selcuk Ecza: A precious link to sustainable value creation Attractive markets Demographics drive long-term demand Public policy agenda supports greater access and improved efficiency Well-positioned businesses Solid operating profit and cash flow strength from distribution segment Nationwide network built over mutual commercial interests Steady track record of delivering results and a balanced approach to capital deployment Strong balance sheet and solid liquidity position Experienced and tenured management team 28

29 Toiletry Segment: A significant catalyst... Selcuk Ecza has started to sell/distribute toiletry products (personal care products, cosmetics etc.) by June 1st, 2009 and expanded it to all of its warehouses The market size in Turkey for toiletry products is approximately as of US$11 bn. And almost US$1,5 bn. of it is pharmacies share Using the same distribution network, while by using the avalaible spare capacity in warehouses lead to an insignificant increase in CAPEX Strategy to create a steady amount of additional revenue from this segment in order to support a sustainable profit level Higher gross margin around 10-11% compared to 7-8% from pharma segment 29

30 Ownership Ahmet & Nezahat Kelesoglu Foundation (51%) Ahmet Kelesoglu (19.6%) Nezahat Kelesoglu (29.4%) x = 7.58% Selcuk Ecza Holding A.S. Free Float* Gurgen Family x = 30.31% 77.32% 20.01% 2.67% 0.51x = 39.43% Selcuk Ecza Deposu Ticaret ve Sanayi A.S. *Selcuk Ecza Holding A.S. hasacquired 5% of free float, total ownership of the company has increased to 82,32% % As Ecza 30

31 Contents Turkish Pharmaceutical Market Market Size Market Structure Major Regulatory Items Market Prospects Selcuk Ecza At a glance Market Share Business Model Operational Facts Financial Figures A New Scope: Toiletries Ownership Appendices Pricing in Detail Basic Health and Demographics Statistics 2016 Summary Financials 31

32 20 Years Branded Appendix-1: Reference Pricing Scheme and Discunt Factors International Ref. Price Reference Price Factor Institutional Discount Factor* Without Generics ,0% With Generics 60 28,0% Generics 60 28,0% > 7,32 TRL, has Ref. Price 80 28,0% > 7,32 TRL, does not have Ref. Price 40,0% *There has been an amendment in the regulation about institutional discount factors. The table gives the most updated rates. for previous rates, please send an inquiry to 32

33 Appendix-2 Basic Health Statistics 88 Life Expactancy at Birth for Females

34 Finland Japan Portugal Slovenia Sweden Czech Republic Norway Korea Spain Estonia Denmark Germany Italy Belgium France Israel Greece Ireland Netherlands Switzerland Austria United Kingdom Poland Hungary Slovak Republic United States Chile Turkey 2010 Mexico Turkey 2002 Appendix-2 Basic Health Statistics 35 Deaths per total births

35 Appendix-2 Basic Health Statistics Thousands of persons over 65 years old % of total population over 65 years old

36 Appendix-2 Basic Health Statistics United States Netherlands France Germany Canada Switzerland Denmark Austria Portugal Belgium Greece New Zealand Spain Sweden United Kingdom Japan Norway Iceland Italy Ireland Australia Slovak Republic Slovenia Finland Chile Luxembourg Hungary Czech Republic Israel Korea Poland Estonia Mexico OECD avg. Turkey US$ PPP Total (Public + Private) Health Expenditure per capita, OECD Countries, Total Expenditure on Health % of GDP (2010 or the nearest year) U.S. Luxenbourg Switzerland Norway Iceland Canada France Austria Belgium Netherlands Germany Denmark Australia Sweden Ireland OECD U.K. Italy Japan Finland Greece Spain New Zealand Portugal Czech Rep. Hungary Korea Poland Slovak Rep. Mexico Turkey 9 6 Source: OECD Health At A Glance Oct. 29, 2012 Update 36

37 Appendix-2 Basic Health Statistics United States Norway Switzerland Netherlands Luxembourg Denmark Canada Austria Germany France Belgium Sweden Ireland Australia United Kingdom Iceland Finland Spain Japan New Zealand Italy Greece Portugal Slovenia Slovak Republic Israel Korea Czech Republic Hungary Poland Estonia Chile Mexico 916 OECD avg. Turkey US$ PPP Per Capita Expenditure on Health, US$, PPP (2010 or the nearest year) Total (Public + Private) Health Expenditure per capita, OECD Countries, U.S. Luxenbourg Switzerland Norway Iceland Canada France Austria Belgium Netherlands Germany Denmark Australia Sweden Ireland OECD U.K. Italy Japan Finland Greece Spain New Zealand Portugal Czech Rep. Hungary Korea Poland Slovak Rep. Mexico Turkey Source: OECD Health At A Glance Oct. 29, 2012 Update 37

38 Appendix-2 Basic Health Statistics Hungary Mexico Slovak Republic Greece Poland Estonia Korea Japan Czech Republic Slovenia Portugal Ireland Spain Italy Canada France Belgium Iceland Germany Australia Finland Sweden Austria United States United Kingdom Chile Switzerland Netherlands New Zealand Luxembourg Denmark Norway Israel OECD avg. Turkey US$ PPP Pharmaceutical Expenditure % of Total Expenditure on Health (2010 or the nearest year) Total (Public + Private) Health Expenditure per capita, OECD Countries, U.S. Luxenbourg Switzerland Norway Iceland Canada France Austria Belgium Netherlands Germany Denmark Australia Sweden Ireland OECD U.K. Italy Japan Finland Greece Spain New Zealand Portugal Czech Rep. Hungary Korea Poland Slovak Rep. Mexico Turkey Source: OECD Health At A Glance Oct. 29, 2012 Update 38

39 Appendix-2 Basic Health Statistics United States Canada Ireland Greece Germany France Japan Belgium Spain Slovak Republic Australia Hungary Austria Iceland Italy Switzerland Portugal Netherlands Sweden Slovenia Finland Korea Luxembourg Norway Czech Republic United Kingdom Denmark Poland New Zealand Estonia Mexico Chile OECD Sample avg. Turkey* US$ PPP Per Capita Pharmaceutical Consumption in US$, PPP, (2010 or the nearest year) Total (Public + Private) Health Expenditure per capita, OECD Countries, U.S. Luxenbourg Switzerland Norway Iceland Canada France Austria Belgium Netherlands Germany Denmark Australia Sweden Ireland OECD U.K. Italy Japan Finland Greece Spain New Zealand Portugal Czech Rep. Hungary Korea Poland Slovak Rep. Mexico Turkey *2011 figure Source: OECD Health At A Glance Oct. 29, 2012 Update, Pharmaceutical Manufacturers Association of Turkey (IEIS) 39

40 Appendix-3: Summary Financials: Income Statement-Consolidated Income Statement Volume Net Sales 8.643, ,34 Cost of sales (-) (7.981,45) (6.953,81) GROSS PROFIT 661,96 526,53 OPEX (429,89) (358,56) Other operating income/exp.(net) 64,47 52,83 OPERATING PROFIT 296,53 220,80 Income/Expense from investment 15,37 20,43 Finance income /Exp.(Net) (6,83) (2,21) EBIT 260,01 188,62 EBIT (exc.other) 232,06 167,97 Income before minority Int.& Tax 305,07 239,02 Minority interest 0,00 0,00 Income tax expense (61,45) (48,32) Net Income / (Loss) 243,62 190,70 EBITDA 281,22 205,74 EBITDA (exc.other) 253,27 185,09 Gross Margin 7,66% 7,04% EBIT Margin 3,01% 2,52% EBIT Margin (exc.other) 2,68% 2,25% EBITDA Margin 3,25% 2,75% EBITDA Margin (exc.other) 2,93% 2,47% 40

41 Appendix-3: Summary Financials: Balance Sheet Balance Sheet (TL million) Assets Liabilities & Equity Cash and cash equivalents 210,22 176,62 Short-term debt 43,35 89,11 Accounts rec.& due from related parties 2.640, ,67 Accounts payable & due to related parties 2.335, ,22 Inventories 943,11 856,72 Provisions & other current liabilities 74,63 56,52 Other current assets 94,67 84,14 Total Current Liabilieties 2.453, ,85 Total Current Assets 3.888, ,15 Long-term debt 0,00 0,00 Provision for Employee Benefits & Other PP&E 420,13 362,48 Liabilities 31,06 24,30 Intangible Assets(Including Goodwill) 32,10 32,47 Deferred tax liability 20,40 16,25 Other non-current assets 42,81 24,72 Other liabilities 0,00 0,00 Deferred tax assets 26,65 24,53 Total Non-Current Liabilieties 51,46 40,55 Total Non-Current Assets 521,69 444,21 Shareholder's equity & minority interest 1.904, ,96 Total Assets 4.410, ,36 Total Liabilities & Equity 4.410, ,36 41

42 Selcuk Ecza Deposu A.S. Investor Relations & Capital Markets Division Istanbul Stock Exchange: SELEC.IS Head Bloomberg: of Investor SELEC.TI Relations & Capital Markets Tel: Reuters: SELEC.IS Tel: Fax: