Kursad Duman Head of Investor Relations and Capital Markets

Transcription

1 Kursad Duman Head of Investor Relations and Capital Markets

2 Forward-Looking Statements Some of the Some of the information in this presentation is not historical in nature and may constitute forward-looking 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 Selcuk Ecza At-A-Glance Pharmaceutical Market Reference Pricing Scheme & Reimbursement Selcuk Ecza Financial Review Operational Review A New Scope: Toiletries Ownership Appendices 3

4 Selcuk Ecza At-A-Glance TRL 4.9 billion in revenues in FY10 Two segments: Pharmaceutical Distribution & Toiletry Products Distribution FY10 Net Income TRL 184 million More than employees, over vehicles and over 100 warehouses across the country shares and 20% free float Headquartered in Istanbul-TURKEY 4

5 Contents Selcuk Ecza At-A-Glance Pharmaceutical Market Reference Pricing Scheme & Reimbursement Selcuk Ecza Financial Review Operational Review A New Scope: Toiletries Ownership Appendices 5

6 Global Market 2011: Pharmerging still continues to lead the growth... Pharmerging markets include: 17 countries New Definition China, Brazil,Russia, India, Venezuela, Poland, Argentina, Turkey, Mexico, Vietnam, S. Africa, Thailand, Indonesia, Romenia, Egypt, Pakistan, Ukranie Source: IMS 2011 Market Prognosis Report October 6,

7 2011 Forecasted Global Market Shares 2011 Forecasted Global Market Shares by Region (%) Pharmerging 19.9% Japan 9.1% Rest of the World 2.7% U.S. 36.1% North America 39.4% Europe 29.0% Top 5 Europe 21.8% Source: IMS 2011 Market Prognosis Report Announcement October 6,2010 7

8 US$ PPP Demographic Advantage of Turkey Population Over Age of 50 Years in Turkey % 20.0% Total (Public + Private) Health Expenditure per capita, OECD Countries, % 22.0% 26.0% 30% 25% 20% 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 E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E Source: Turkstat (TUIK) 50+ years age (mn people) 50+years age (% of total population) Slovak Rep. Mexico 15% 10% 5% 0% Turkey 8

9 US$ PPP US France Healthcare Expenditures in Turkey Germany Austria Greece Sweden Italy Spain UK Ireland Norway Slovak Rep. Hungary Czech Rep. Poland Korea Mexico OECD avg. Turkey US Norway Austria Ireland Germany France Sweden UK Spain Italy Greece Korea Czech Rep. Slovak Rep. Hungary Poland Mexico 7, ,003 3, ,793 3, ,696 3, ,129 2,902 2,870 2, ,801 1, ,738 1, , OECD avg. Turkey Total Expenditure on Health % of GDP (2008) Source: OECD U.S. Luxenbourg Switzerland Norway Iceland Canada France Austria Belgium 8,000 Total (Public + Private) Health Expenditure per capita, OECD Countries, , Netherlands Germany Denmark Australia Sweden Ireland 6,000 5,000 4,000 3,000 2,000 1,000 0 Per Capita Expenditure on Health, USD, PPP (2008) OECD U.K. Italy Japan Finland Source: OECD Greece Spain New Zealand Portugal Czech Rep. Hungary Korea Poland Slovak Rep. Mexico 3,036 Turkey 586 9

10 US$ PPP Hungary Slovak Rep. Pharmaceutical Expenditures in Turkey Greece Korea Poland Mexico Czech Rep. Spain Italy Canada France Belgium Germany Finland Iceland Sweden Austria US UK Netherlands Switzerland N. Zealand Denmark Norway Ireland Estonia OECD avg. Turkey Pharmaceutical Expenditure % of Total Expenditure on Health (2008) 28 Source: OECD, Worldbank Stats U.S. Luxenbourg Switzerland Norway Iceland Canada France Austria US Total (Public + Private) Health Expenditure per capita, OECD Countries, 2004 France Japan Belgium 566 Greece Canada 557 Spain 503 Germany Belgium Netherlands Germany Denmark Australia Sweden Ireland Portugal Australia Italy Netherl UK Poland Turkey* OECD U.K. Italy Japan Per Capita Pharmaceutical Consumption in 2009 (USD) Finland Greece Spain New Zealand Portugal Czech Rep. Hungary Korea Poland Slovak Rep. Source: OECD, Pharmaceutical Manufacturers Association of Turkey (IEIS) *2010 figure Mexico Turkey 10

11 Prescription Drugs Market in Turkey Boxes (Billion) 9.0% 10.8% 16.2% 7.5% 10.2% 4.4% 3.1% 2.8% % 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% G r o w t h R a t e s ( % ) Value (Billion TL) 31.1% 23.5% 10.2% 11.5% 17.1% 9.0% 16.4% -1.2% % 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% G r o w t h R a t e s ( % ) Source: Pharmaceutical Manufacturers Association of Turkey (IEIS), IMS Sustainable growth...ims anticipates a typical annual growth rate of 4-5% in volume for Turkish market US$10 bn. market size with app. 10% belongs to OTC (Non-prescription drugs) products group 11

12 Originals vs. Generics in Turkey 51.5% 48.5% 49.5% 50.5% 49.6% 50.4% 48.6% 51.4% 49.3% 50.7% 48.3% 51.7% 48.2% 51.8% 48.7% 51.3% 48.6% 51.4% 69.5% 30.5% 67.8% 32.2% 65.6% 34.4% 65.3% 34.7% 67.2% 32.8% 66.6% 33.4% 65.2% 34.8% 64.9% 35.1% 62.9% 37.1% 55.0% Boxes 80.0% Value 70.0% 60.0% 50.0% 50.0% 40.0% 45.0% 30.0% 20.0% 10.0% 40.0% Originals Generics 0.0% Originals Generics Source: Pharmaceutical Manufacturers Association of Turkey (IEIS), IMS 12

13 Imported vs. Domestic in Turkey 10.4% %89,6 11.6% %88,4 12.7% %87,3 14.1% %85,9 15.8% %84,2 17.9% %82,1 20.2% 79.8% 21.2% 78.8% 22.6% 77.4% 33.5% 66.5% 37.3% 62.7% 37.1% 62.9% 41.0% 59.0% 45.2% 54.8% 47.9% 52.1% 50.1% 49.9% 51.5% 48.5% 51.0% 49.0% Boxes Value 100.0% 70.0% 80.0% 60.0% 50.0% 60.0% 40.0% 40.0% 30.0% 20.0% 20.0% 10.0% 0.0% % Imported Domestic Imported Domestic Source: Pharmaceutical Manufacturers Association of Turkey (IEIS), IMS 13

14 Market Structure-Suppliers Turkish Pharma Market Suppliers Shares (%) 332 Companies 295 Domestic 37 Multinationals IBRAHIM NOVARTIS BILIM Manufacturers 28 Domestic 15 Multinational 12 Raw Mat. Producers 31 Importers PFIZER EASTPHARMA GLAXOSMITHKLINE SANOFI-AVENTIS BAYER ASTRAZENECA SANOVEL OTHERS Fragmented market: Largest player with a market share of 7.9% Top 10 market share app.: 47% No original product development, local firms develop their own generics, manufacture licensed products and subcontract from international firms Source: Republic of Turkey Ministry of Health, IMS, as of 30th April,

15 Market Structure-Distributors Nationals Multinationals Cooperatives Aliance Boots, UK has got the controlling stake and will increase its share in a 2-year term purchasing process (70% share recently) App. 300 Distributors ;15 of which economically meaningful size. Small distributors have little room to increase their market share, given the financial strength and economies of scale of the large players. Multinationals High Barriers for New Entrants. Top 2 have approximately 70% market share Regionals 15

16 Market Structure-Retailers Pharmacies ~ 24,119 pharmacies across the country 1 per 2,965 population 5,065 in Istanbul, 2,095 in Ankara and 1,820 in Izmir ~ 500 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 the pharmacists is allowed by the regulation 16

17 Contents Selcuk Ecza At-A-Glance Pharmaceutical Market Reference Pricing Scheme & Reimbursement Selcuk Ecza Financial Review Operational Review A New Scope: Toiletries Ownership Appendices 17

18 Reference Pricing Scheme: Mark-ups & Reimbursement Reference Pricing Scheme: Prices are determined according to (5 to 10) EU member reference countries announced by the Ministry of Health. Reference Countries for 2011: France, Italy, Spain, Portugal, Greece (Not Changed) Pricing Table (in TRL) Producer Price Distributor Mark-up Distributor Price Pharmacy Mark-up Pharmacy Price (excld.vat) Retail Price (incld. VAT) A = % Aa = A x % Aaa = Aa x 1.25 Aaaa = Aaa x 1.08 B = % Bb = B x % Bbb = Bb x 1.25 Aaaa = Bbb x 1.08 C = % Cc = C x % Ccc = Cc x 1.25 Aaaa = Ccc x 1.08 D = % Dd = D x % Ddd = Dd x 1.16 Aaaa = Ddd x 1.08 E = 200-X 2% Ee = E x % Eee = Ee x 1.12 Aaaa = Eee x 1.08 Prices in TL terms adjusted if the change at 90-day moving average of official /TRL exchange rate announced by CBT exceeds +/-5% of the offical range, of which the floor of the range is the available reference /TRL currency and the ceiling is 10% higher. (current reference exchange rate: 1 = TL valid since April 2, 2009) Price ratio of Generic to Original 66% (Max.) (Valid since December 4, 2009); reimbursable margin for generics between the cheapest and the most expensive one in a given bioequivalence group is 15% Co-payment is 20% for employees and 10% for seniors Pharmacies are directly reimbursed by the Government (via Social Security Institution-SGK) 18

19 Contents Selcuk Ecza At-A-Glance Pharmaceutical Market Reference Pricing Scheme & Reimbursement Selcuk Ecza Financial Review Operational Review A New Scope: Toiletries Ownership Appendices 19

20 Selcuk Ecza - Over 50 years being a milestone in Turkish pharmaceutical market... Selcuk Ecza celebrated its 50th anniversary Selcuk Ecza went public by a free-floating rate of 20%. Became the first publicly-owned company in its sector Selcuk Ecza s sister company AS Ecza was established Selcuk Ecza, started to take orders by phone calls which drives the business to even very small locations Selcuk Ecza was established as a small local company for distributing pharmaceuticals to its small neighborhood in Konya province Selcuk Ecza established its first branch in the business center of Turkey, Istanbul Selcuk Ecza improved its technology and network and started to serve in many locations in the western side of Turkey

21 Value Chain- Selcuk Ecza: A strong link... Pharma Suppliers Pharma Wholesalers Pharmacies Abdi Ibrahim Novartis Bilim Pfizer GSK Selcuk Ecza (36.02% as of 1Q11 ) Hedef-Alliance Cooperatives Nevzat >App. 24,000 pharmacies across the country owned and run by pharmacists Pharmacy chains are not allowed OTC drugs cannot be sold through other retail channels Rely on wholesalers for financing Top 2 wholesalers control approximately 70% of the total market. (Top 3 > 85%) Top 10 pharma suppliers get approximately 47% of the market. Approximately 24,000 pharmacies throughout Turkey. A pharmacy typically works with 2 or 3 distributors (Differentiation: quality and speed of service, close follow-up, payment terms and product campaigns) Approximately 20,000 clients countrywide (as of 1Q11) 115 (27 main + 88 regional) warehouses with a total storage area over 130,000 m 2. Can reach 75% of customers within 30 minutes, and 95% within 90 minutes. 21

22 Contents Selcuk Ecza At-A-Glance Pharmaceutical Market Reference Pricing Scheme & Reimbursement Selcuk Ecza Financial Review Operational Review A New Scope: Toiletries Ownership Appendices 22

23 New Hopes for (TRL in millions except EPS) As of March 31, Chg. Revenues 1, , % Gross Income % Gross Margin 6.87% 7.90% pts.. EBITDA % EBITDA Margin 2.87% 3.98% pts. Net Income % Net Income Margin 2.98% 4.07% pts. EPS % 23

24 We have a track record of strong revenue growth... TL Billions 13% CAGR /3 2007/3 2008/3 2009/3 2010/3 2011/3 24

25 ...That We Have Leveraged into higher Income TL millions 17% CAGR /3 2007/3 2008/3 2009/3 2010/3 2011/3 25

26 Working Capital Developments FY05 FY06 FY07 FY08 FY09 FY10 1Q11 A/R 1,064 1,209 1,303 1,502 1,538 1,538 1,607 Inventories A/P ,043 1,234 1,228 1,362 1,413 WC WC/Sales 17.70% 19.88% 17.83% 18.21% 14.20% 14.70% 14.15% 26

27 OpEx Improvement FY05 FY06 FY07 FY08 FY09 FY10 1Q11 Revenue 2,756 3,151 3,628 4,047 5,029 4,902 1,317 # of WHs # of Employees 4,926 4,694 4,554 4,600 4,893 5,162 5,214 OpEx / Sales 4.85% 4.84% 4.49% 4.57% 3.93% 4.28% 4.40% Personnel / Sales 2.76% 2.86% 2.69% 2.64% 2.39% 2.66% 2.70% Employee per WH Revenue per Employee (TL) 559, , , ,676 1,027, , ,262 27

28 OpEx Breakdown OPERATIONAL EXPENSES Q % Q % Personnel expense 35,586, % 30,766, % Fuel expense 4,907, % 4,126, % Transportation expense 2,881, % 2,350, % Outsourcing expense 2,740, % 3,138, % Depreciation expense 2,186, % 1,783, % Other 1,772, % 1,524, % Repair and maintenance expense of motor vehicles 1,460, % 1,471, % Rent expense 1,444, % 1,305, % Communication expense 1,300, % 1,081, % Insurance expense 1,124, % 869, % Promotion expenses 712, % 315, % Stationery expense 608, % 578, % Tax expense 534, % 449, % Representation and host expenses 498, % 251, % Advisory and audit fees 147, % 297, % Donations and aids 44, % 175, % Employment termination benefit expense % 59, % Total 57,950,400 50,546,811 28

29 Contents Selcuk Ecza At-A-Glance Pharmaceutical Market Reference Pricing Scheme & Reimbursement Selcuk Ecza Financial Review Operational Review A New Scope: Toiletries Ownership Appendices 29

30 Sustainable growth to Market Leader Position... Market Share (%) 33.80% 33.40% 34.40% 36.09% 35.41% 36.02% Q 30

31 A progressive network across the Country by over 100 warehouses Main Warehouses Regional Warehouses Total Selçuk Ecza As Ecza Group Total

32 Operational Stats I Warehouses Vehicle Fleet ,282 1,074 2,173 2,037 2,049 2,0301,970 1,948 1,483 2,200 32

33 Operational Stats II Employment Size 5,214 4,926 4,893 5,162 4,694 4,600 4,554 Market Share (%) ,224 1, ,738 1,836 3,432 3,043 2,825 2,584 3,

34 Contents Selcuk Ecza At-A-Glance Pharmaceutical Market Reference Pricing Scheme & Reimbursement Selcuk Ecza Financial Review Operational Review A New Scope: Toiletries Ownership Appendices 34

35 A New Scope:Toiletry Products Selcuk Ecza has started to sell/distribute toiletry products (personal care products, cosmetics etc.) by June 1, 2009 and expanded it to all of its warehouses The market size in Turkey for toiletry products is approximately as of US$7.5 bn And almost US$ mn of it is pharmacies share Selcuk Ecza estimates an additional turnover of 4-5% for 2011 for this segment amounting to 250 mn TRL. while medium term target is around 500 mn TRL Using the same distribution network, while by using the avalaible spare capacity in warehouses lead to an insignificant increase in CAPEX Higher gross margin around 15% compared to 7-8% from pharma segment Strategy to expand business to all clients through out Turkey by promoting this segment aggressively 35

36 Contents Selcuk Ecza At-A-Glance Pharmaceutical Market Reference Pricing Scheme & Reimbursement Selcuk Ecza Financial Review Operational Review A New Scope: Toiletries Ownership Appendices 36

37 Ownership Ahmet & Nezahat Kelesoglu Foundation (51%) Ahmet Kelesoglu (39.20%) Nezahat Kelesoglu (9.80%) 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 % As Ecza 37

38 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 38

39 Contents Appendices Appendix-1: Reimbursement Schedule Appendix-2: Reference Pricing Scheme Appendix-3: The New Regulation Appendix-4: Summary Financials: Income Statement & Balance Sheet 39

40 Appendix-1: Reimbursement Schedule REIMBURSEMENT to PHARMACIES by THE SSI Dispensing Application to SSI Reimbursement First Day of Month Average 15 Days Last Day of Month 15 Days 15th of the Following Month Max 60 Days 40

41 Appendix-2: Reference Pricing Scheme Reference Countries France Italy Spain Portugal Greece 100% = Original Price (If its generic does not exist in the market) 66% = Original Price (If its generic exists in the market 66% = Generic Price REIMBURSEMENT Generic Drugs in the Same Bioequivalence Group p n t j y 15% higher than the cheapest price* *The government has changed the regulation on the reference pricing mechanism and lowered the ratio of both originals and generics to 66% of the reference price on Sept.16, 2009 which is valid since Dec.4, ** The government recently lowered the price ceiling from 22% to 15% for the reimbursement price of generic drugs (which is applied over the lowest price of the generic product in the market; the lower 15% limit came into force from August 1, 2009). z q x 1.00 p & n NOT reimbursed 41

42 Appendix-3: The Last Amendment: Major Regulation Changes The price ceiling for original drugs has been reduced to 66% of the reference price, which is determined according to lowest price in the five reference EU member countries (France, Italy, Spain, Portugal, Greece), if the original drug has a generic substitute in the market, although the price ceiling remained at 100% for original drugs that do not have generic substitutes. The price ceiling for generics has also been lowered from 80% to 66% of the reference price. The drugs which stay on the market more than 20 years and with a price lower than TL6.79, all drugs with prices lower than TL3.56, OTC drugs (without prescription), blood products, infant food, radiopharmaceutical products, enteral feeding products, and all other products that are not stated in public reimbursement list will not be priced according to this new regulation. The exchange rate mechanism used to determine drug prices has also been changed. According to the new mechanism, the exchange rate may only be revised if the 90-day moving average of EUR/TRL exchange rate exceeds/falls below the periodic EURO value band by +/-5%; while the upper end of this band is estimated as 10% higher of the EUR/TRL exchange rate in effect for calculation of drug prices. (The official EUR/TRL rate is since April 2009) The Notice period for amending the Reference Countries List by the MoH has been reduced from 4 months to 2 months. 42

43 Appendix-4: Summary Financials: Income Statement-Consolidated Income Statement TL Million Mar. 31, 2011 Mar. 31, vs Volume Net Sales 1, , % Cost of sales (-) (1,226.64) (1,102.27) 11.28% GROSS PROFIT % OPEX (57.95) (50.55) 14.65% Other operating income/exp.(net) % EBIT % EBIT (exc.other) % Finance income /Exp.(Net) % Income before minority Int.& Tax % Minority interest (0.00) (0.00) % Income tax expense (9.96) (12.34) % Net Income / (Loss) % EBITDA % EBITDA (exc.other) % Gross Margin 6.87% 7.90% EBIT Margin 2.70% 3.83% EBIT Margin (exc.other) 2.47% 3.68% EBITDA Margin 2.87% 3.98% EBITDA Margin (exc.other) 2.63% 3.83% 43

44 Appendix-4: Summary Financials: Balance Sheet Balance Sheet (TL million) Assets Mar. 31, 2011 Dec. 31, 2010 Liabilities & Equity Mar. 31, 2011 Dec. 31, 2010 Cash and cash equivalents 1, , Short-term debt 1, , Accounts rec.& due from related parties 1, , Accounts payable & due to related parties 1, , Inventories Provisions & other current liabilities Other current assets Total Current Liabilities 2, , Total Current Assets 3, , Long-term debt PP&E Provision for Employee Benefits & Other Liabilities Intangible Assets(Including Goodwill) Deferred tax liability Other non-current assets Other liabilities Deferred tax assets Total Non-Current Liabilities Total Non-Current Assets Shareholder's equity & minority interest 1, , Total Assets 3, , Total Liabilities & Equity 3, ,

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