Report on review of ITR of September 30, 2017

Transcription

1 (A free translation of the original in Portuguese) KPDS

2 Contents 1 Management report Report on review of Quaterly Information - ITR Balance sheets Statements of income Statements of comprehensive income Statements of shareholders equity Statements of cash flows Statements of value added Notes to the quarterly information

3 Hypermarcas grows 17.7% in 3Q17, with Net Revenue of R$954.6 million; Continuing Operations Net Income reaches R$219.4 million, or 19.3% above 3Q16 São Paulo, October 27, Hypermarcas S.A. (BM&FBovespa: HYPE3; Reuters: HYPE3.SA; Bloomberg: HYPE3 BZ; ISIN: BRHYPEACNOR0; ADR: HYPMY) announces its financial results for the third quarter of Financial data disclosed here are taken from quarterly financial information of Hypermarcas S.A., prepared in accordance with norms of the Brazilian Accounting Pronouncement Committee (CPC) and International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). Highlights Net Revenue of R$954.6 million in 3Q17, a 17.7% increase over 3Q16 Continuing Operations Net Income of R$219.4 million in 3Q17, a 19.3% increase over 3Q16 Continuing Operations EBITDA of R$292.0 million, up 14.3% over 3Q16 and margin of 30.6% Table 1 (R$ million) 3Q16 % NR 3Q17 % NR % p.p. 9M16 % NR 9M17 % NR % p.p. Net Revenue % % 17.7% - 2, % 2, % 11.8% - Gross Profit % % 17.1% -0.4 p.p. 1, % 2, % 11.8% 0.0 p.p. S,G&A (ex-marketing) (136.7) -16.9% (168.8) -17.7% 23.5% -0.8 p.p. (415.8) -17.0% (477.5) -17.5% 14.9% -0.5 p.p. Marketing (227.1) -28.0% (254.6) -26.7% 12.1% 1.3 p.p. (591.0) -24.2% (660.9) -24.2% 11.8% 0.0 p.p. Continuing Operations EBITDA % % 14.3% -0.9 p.p % % 10.3% -0.5 p.p. Continuing Operations Net Income % % 19.3% 0.3 p.p % % 48.6% 6.5 p.p. Continuing Operations Earnings per Share % % - Operating Cash Flow % % -21.2% -9.0 p.p % % 3.0% -2.3 p.p. 3

4 Operating Scenario In the third quarter of 2017, Hypermarcas Net Revenue increased 17.7% compared to the same period of the prior year, reaching R$954.6 million. This result reflects the expansion of the sell-out demand for the Company s products, as well as the recovery of the order backlog of about R$35,0 million from 2Q17. In 9M17, Net Revenue growth was 11.8%. The sell-out demand for the Company s products increased 12.6% in the quarter, according to IMS Health data, or 1.5 p.p. above market growth, which was 11.1%. It is worth highlighting that the Branded businesses, which include the Branded Prescription and Consumer Health units, increased 13.3% in this period, or 3.0 p.p. above the market, which advanced 10.3%. The analgesic Alivium and Mantecorp Skincare dermocosmetics were highlights in the quarter. In operational terms, Continuing Operations EBITDA reached R$292.0 million in 3Q17, a 14.3% growth compared to 3Q16, with 30.6% margin. The operating result growth led the Continuing Operations Net Income to increase 19.3% compared to 3Q16, to R$219.4 million in the quarter. In terms of cash generation, the Company reached Cash Flow from Operations of R$174.7 million in 3Q17, ending the quarter with a net cash position of R$742.3 million, even after the distribution of R$821.9 million related to the capital reduction completed in July. Innovation remains one of the Company s key focuses, as it recently opened its new innovation center, known as Hynova, which should significantly contribute to greater assertiveness of launches, aiming at accelerating the expansion of the Company s portfolio in its three business units. In the quarter, Research & Development Expenses reached a level of 2.5% of Net Revenue, up 0.5 p.p. compared to 3Q16, and the innovation index - which measures the percentage of Net Revenue derived from products launched over the past five years - climbed to 31.4%, the highest level in the Company s history. 4

5 Earnings Discussion Income Statement The following table is a summary of Hypermarcas Income Statement: Table 2 (R$ million) 3Q16 % NR 3Q17 % NR % 9M16 % NR 9M17 % NR % Net Revenue % % 17.7% 2, % 2, % 11.8% Gross Profit % % 17.1% 1, % 2, % 11.8% Marketing Expenses (227.1) -28.0% (254.6) -26.7% 12.1% (591.0) -24.2% (660.9) -24.2% 11.8% Selling Expenses (101.3) -12.5% (121.6) -12.7% 20.0% (300.8) -12.3% (338.7) -12.4% 12.6% General and Administrative Expenses (35.4) -4.4% (47.2) -4.9% 33.4% (115.0) -4.7% (138.8) -5.1% 20.8% Other Operational Net Expenses (5.1) -0.6% (15.5) -1.6% 203.1% % % -54.4% Equity in Subsidiaries % (0.0) 0.0% % % -69.8% Continuing Operations EBIT % % 13.9% % % 9.8% Net Financial Expenses % % % (199.2) -8.1% % - Income Tax and CSLL (57.2) -7.1% (63.8) -6.7% 11.4% (148.6) -6.1% (245.9) -9.0% 65.5% Continuing Operations Net Income (Loss) % % 19.3% % % 48.6% Net Income from Discontinued Operations % (42.0) -4.4% % (154.5) -5.6% - Net Income (Loss) % % -12.4% 1, % % -59.9% Continuing Operations EBITDA % % 14.3% % % 10.3% 5

6 Net Revenue Graph 1 Graph 2 Net Revenue (R$ mm) Net Revenue (R$ mm) Δ 3Q17 vs 3Q % Δ 9M16 vs 9M % , , Q16 3Q17 9M16 9M17 Table 3 (R$ million) 3Q16 3Q17 % 9M16 9M16 % Net Revenue % 2, , % Net Revenue grew 17.7% compared to 3Q16, mostly driven by volume increases in all three-business units and by the fulfillment of the remaining order backlog from 2Q17. In 9M17, the expansion was 11.8%, with the Branded Prescription and Consumer Health businesses as highlights. 6

7 Gross Profit Graph 3 Graph 4 Gross Profit (R$ mm) 3Q17 vs 3Q % Gross Margin (%) 3Q17 vs 3Q p.p. 75,0% 74,6% 3Q16 3Q17 3Q16 3Q17 Graph 5 Graph 6 Gross Profit (R$ mm) 9M17 vs 9M % 2, ,826.9 Gross Margin (%) 9M17 vs 9M p.p. 74.7% 74.7% 9M16 9M17 9M16 9M17 Table 4 (R$ million) 3Q16 % NR 3Q17 % NR % p.p. 9M16 % NR 9M17 % NR % p.p. Gross Profit % % 17.1% -0.4 p.p. 1, % 2, % 11.8% 0.0 p.p. Gross Margin reached 74.6% in 3Q17, a 0.4 p.p. reduction compared to 3Q16, but remained stable in 9M17 compared to the same period of the prior year, at 74.7%. 7

8 Marketing Expenses Table 5 (R$ million) 3Q16 % NR 3Q17 % NR % 9M16 % NR 9M17 % NR % Marketing Expenses (227.1) -28.0% (254.6) -26.7% 12.1% (591.0) -24.2% (660.9) -24.2% 11.8% Advertisement and Consumer Promotion (89.6) -11.1% (103.0) -10.8% 14.9% (218.3) -8.9% (250.4) -9.2% 14.7% Trade Deals (49.3) -6.1% (57.5) -6.0% 16.8% (125.3) -5.1% (144.8) -5.3% 15.6% Medical Visits, Promotions and Samples (88.2) -10.9% (94.1) -9.9% 6.7% (247.5) -10.1% (265.7) -9.7% 7.4% Marketing Expenses had nominal increase of 12.1% compared to 3Q16, reaching 26.7% of Net Revenue in the quarter. In 9M17, the increase was 11.8%, to 24.2% of Net Revenue, same level reported in the same period of the prior year. Selling Expenses Table 6 (R$ million) 3Q16 % NR 3Q17 % NR % 9M16 % NR 9M17 % NR % Selling Expenses (101.3) -12.5% (121.6) -12.7% 20.0% (300.8) -12.3% (338.7) -12.4% 12.6% Commercial Expenses (65.0) -8.0% (76.2) -8.0% 17.3% (189.2) -7.7% (211.3) -7.7% 11.7% Freight and Logistics Expenses (20.0) -2.5% (21.5) -2.3% 7.7% (66.1) -2.7% (60.9) -2.2% -7.8% Research & Development (16.3) -2.0% (23.8) -2.5% 46.2% (45.6) -1.9% (66.4) -2.4% 45.8% Selling Expenses increased 0.2 p.p. in 3Q17 compared to 3Q16 and 0.1 p.p. in 9M17 compared to the same period of Research & Development Expenses corresponded to 2.5% of Net Revenue in the quarter, a 0.5 percentage point increase compared to 3Q16. In 9M17, these expenses reached 2.4% of Net Revenue. General and Administrative Expenses & Other Operating Revenues / Expenses, net Table 7 (R$ million) 3Q16 % NR 3Q17 % NR % 9M16 % NR 9M17 % NR % General & Administrative Expenses (35.4) -4.4% (47.2) -4.9% 33.4% (115.0) -4.7% (138.8) -5.1% 20.8% Other Operating Revenues (Expenses) (5.1) -0.6% (15.5) -1.6% 203.1% % % -54.4% G&A Expenses increased 0.5 p.p. compared to 3Q16, mostly as a function of greater weight of corporate expenses after the sale of the Disposable Products business. It is worth stressing that such expenses reached its lowest level in 2016 during 3Q16. 8

9 Continuing Operations EBITDA Graph 7 Graph 18 EBITDA (R$ mm) Δ 3Q17 vs 3Q % EBITDA Margin (%) Δ 3Q17 vs 3Q p.p ,5% 30,6% 3Q16 3Q17 3Q16 3Q17 Graph 9 Graph 10 EBITDA (R$ mm) Δ 9M16 vs 9M % EBITDA Margin (%) Δ 9M16 vs 9M p.p. 35,6% 35,1% 9M16 9M17 9M16 9M17 Table 8 - Continuing Operations EBITDA Reconciliation (R$ million) 3Q16 % NR 3Q17 % NR % 9M16 % NR 9M17 % NR % Net Income % % -12.4% 1, % % -59.9% (-) Net Income from Discontinued Operations (18.7) -2.3% % - (909.2) -37.2% % - (+) Income Tax and CSLL % % 11.4% % % 65.5% (+) Net Interest Expenses (0.7) -0.1% (9.4) -1.0% % % (49.4) -1.8% - Continuing Operations EBIT % % 13.9% % % 9.8% (+) Depreciations / Amortizations % % 21.6% % % 18.6% Continuing Operations EBITDA % % 14.3% % % 10.3% Continuing Operations EBITDA reached R$292.0 million in 3Q17, a 14.3% growth compared to 3Q16, with margin of 30.6% of Net Revenue. There was a 0.4 p.p. EBITDA Margin contraction compared to 3Q16 mainly as a result of a combination of lower Gross Margin and higher SG&A (ex-marketing) and Other Operating Expenses, as percentage of Net Revenue, which was only partially offset by lower Marketing Expenses. 9

10 Net Financial Expenses Table 9 (R$ million) 3Q16 % NR 3Q17 % NR R$ 9M16 % NR 9M17 % NR R$ Net Financial Expenses % % 8.7 (199.2) -8.1% % Net Interest Expenses % % % % 82.2 Cost of Hedge and FX Gains (Losses) (3.5) -0.4% (1.8) -0.2% 1.7 (62.0) -2.5% (10.2) -0.4% 51.8 Debt Pre-Payment Expenses (4.7) -0.6% % 4.7 (105.2) -4.3% % Other (8.1) -1.0% (7.5) -0.8% 0.5 (36.1) -1.5% (26.8) -1.0% 9.3 Net Financial Income amounted to R$9.4 million in the quarter, mostly because of a combination of absence of debt pre-payment expenses in 3Q17, compared to R$4.7 million reported in 3Q16, and reduction of hedge costs and FX variation, from R$3.5 million in 3Q16 to R$1.8 million in 3Q17. Net Income Table 10 (R$ million) 3Q16 3Q17 % 9M16 9M17 % Continuing Operations EBIT % % (-) Net Financial Expenses % (199.2) (-) Income Tax and Social Contribution (57.2) (63.8) 11.4% (148.6) (245.9) 65.5% Continuing Operations Net Income % % (+) Discontinued Operation Net Income 18.7 (42.0) (154.5) - Net Income % 1, % EPS % % Continuing Operations Net Income increased 19.3% compared to 3Q16, to R$219.4 million, as a consequence of the improvement of operational and financial results in the same period. 10

11 Cash Flow (Continuing and Discontinued Operations) Graph 11 Graph 12 Cash Flow from Operations (R$ mm) Cash Flow from Operations (R$ mm) Δ 3Q17 vs 3Q Δ 9M16 vs 9M ,5 3Q16 3Q17 9M16 9M17 Graph 13 Graph 14 Free Cash Flow (R$ mm) Δ 3Q17 vs 3Q Free Cash Flow (R$ mm) Δ 9M16 vs 9M16-1, , , Q16 3Q17 9M16 9M17 Table 11 (R$ million) 3Q16 3Q17 9M16 9M17 Cash Flow from Operations Net Purchase of Property, Plant and Equipment (46.8) (57.4) 1, Purchase of Property, Plant and Equipment (59.1) (25.9) (122.1) (123.1) Sale of Property, Plant and Equipment 12.3 (31.6) 1, Purchase of Intangible Assets (7.0) (11.9) (29.2) (31.4) (=) Free Cash Flow , ,341.7 Cash Flow from Operations was R$174.7 million in 3Q17, compared to R$221.8 million in 3Q16. This result was impacted in the quarter by the early payment of media expenses related to the sponsorship of Globo TV s soccer programming in 2018, in the approximated amount of R$50.0 million. 11

12 Net Debt Table 12 (R$ million) Balance on The Company has maintained a robust net cash position even after the R$821.9 million capital reduction carried out in early July By the end of 3Q17, this position amounted to R$742.3 million. 3Q17 Loans and Financing (638.3) Notes Payable (20.0) Gross Debt (658.3) Cash and Cash Equivalents 1,400.6 Net Cash / (Debt)

13 Investor Relations Agenda Earnings Conference Call Portuguese English Date: October October Time: 11:00 (Brasília) 11:00 (Brasília) 09:00 (New York) 09:00 (New York) Phone: +55 (11) (646) (866) (USA only) Code: Hypermarcas Hypermarcas Webcast: Click here Click here Replay: +55 (11) (866) (USA only) +55 (11) Replay Code: Hypermarcas Hypermarcas Contact Information Phone: +55 (11) Website: Table 13 Upcoming events nov Bradesco CEO Forum New York nov JP Morgan Brazil Opportunities Conference São Paulo 4-dec HYPE Day São Paulo jan J.P. Morgan Healthcare Conference San Francisco 12-jan Morgan Stanley Latin America Executive Conference Key Biscayne 13

14 Disclaimer This release contains forward-looking statements that are exclusively related to the prospects of the business, its operating and financial results, and prospects for growth. These data are merely projections and, as such, based exclusively on our management's expectations for the future of the business and its continued access to capital to fund its business plan. These forward-looking statements substantially depend on changing market conditions, government regulations, competitive pressures, the performance of the Brazilian economy and the industry, among other factors, as well as the risks shown in our filed disclosure documents, and are therefore subject to change without prior notice. In addition, unaudited information herein reflects management's interpretation of information taken from its quarterly information and their respective adjustments, which were prepared in accordance with market practices and for the sole purpose of a more detailed and specific analysis of our results. Therefore, these additional points and data must also be analyzed and interpreted independently by shareholders and market agents, who should carry out their own analysis and draw their own conclusions from the results reported herein. No data or interpretative analysis provided by our management should be treated as a guarantee of future performance or results and are merely illustrative of our directors' vision of our results. Our management is not responsible for compliance or accuracy of the management financial data discussed in this report, which must be considered as for informational purposes only, and should not override the analysis of our audited consolidated financial statements or our reviewed quarterly information for purposes of a decision to invest in our stock, or for any other purpose. 14

15 Income Statement (R$ thousand) Table 14 3Q16 3Q17 9M16 9M17 Net Revenue 811, ,620 2,445,408 2,734,838 Cost of Goods Sold (202,360) (242,043) (618,548) (691,922) Gross Profit 608, ,577 1,826,860 2,042,916 Operating Income (Expenses) Selling and Marketing Expenses (328,386) (376,224) (891,850) (999,587) General and Administrative Expenses (35,385) (47,195) (114,951) (138,840) Other Operating Income (Expenses) (5,099) (15,453) 3,907 1,781 Equity in Subsidiaries 572 (2) 1, Operating Income Before Equity Income and Financial Result 240, , , ,753 Net Financial Expenses 688 9,404 (199,165) 49,404 Financial Expenses (53,364) (23,341) (411,659) (90,891) Financial Income 54,052 32, , ,295 Profit Before Income Tax and Social Contribution 241, , , ,157 Income Tax and Social Contribution (57,225) (63,751) (148,591) (245,896) Net Income from Contining Operations 183, , , ,261 Net Results from Discontinued Operations 18,661 (42,015) 909,233 (154,497) Income for the Period 202, ,341 1,387, ,764 Earnings per Share R$

16 Balance Sheet (R$ thousand) Table 15 Assets 31/12/ /09/2017 Liabilities and Shareholders' Equity 31/12/ /09/2017 Current Assets 5,351,683 3,811,736 Current Liabilities 1,741,233 1,082,825 Cash and Cash Equivalents 1,348,008 1,400,579 Suppliers 124, ,819 Accounts Receivables 1,227,872 1,461,336 Suppliers' Assignment of Receivables 173, ,295 Inventories 379, ,500 Loans, Financing and Debentures 176, ,973 Recoverable Taxes 158, ,216 Salaries Payable 138, ,523 Financial Derivatives 359, Income Tax and Social Contribution 13,482 7,018 Other Assets 183, ,695 Taxes Payable 42,950 62,836 Assets Held for Sale 1,695,406 14,334 Accounts Payable 164, ,504 Related Parties 0 0 Dividends Payable Capital Reduction Payable 0 17 Notes Payable 47,402 19,996 Financial Derivatives 18,222 4,754 Liabilities Held for Sale 841,988 59,076 Non-Current Assets 6,133,733 6,117,061 Non-Current Liabilites 933, ,503 Long Term Assets 359, ,919 Loans, Financing and Debentures 684, ,296 Deferred Income Tax and Social Contribution 139,906 20,995 Deferred Income Tax and Social Contribution 56, ,010 Recoverable Taxes 75, ,838 Taxes Payable 100 6,901 Financial Derivatives 2,891 1,731 Other Accounts Payable 1,599 14,498 Other Assets 141, ,355 Provisions for Contingencies 181, ,798 Financial Derivatives 10,014 0 Investments 5,774,187 5,835,142 Shareholders' Equity 8,810,602 8,035,469 Investments 3,318 3,801 Capital 5,270,726 4,448,817 Investment Properties 60, ,430 Capital Reserve 1,457,291 1,291,040 Other Investments Equity Valuation Adjustments (254,900) (255,055) Property, Plants and Equipments 943, ,064 Profit Reserves 1,998,408 1,998,408 Intangible Assets 4,765,716 4,783,283 Proposed Additional Dividends 409,831 0 Treasury Stock (70,754) (3,505) Deferred Charges 0 0 Income for the Period 0 555,764 Total Assets 11,485,416 9,928,797 Total Liabilities and Shareholders' Equity 11,485,416 9,928,797 16

17 Cash Flow Statement (R$ thousand) Table 16 3Q16 3Q17 9M16 9M17 Cash Flows from Operating Activities Income (Loss) Before Income Taxes including Discontinued Operations 255, ,561 1,985, ,874 Depreciation and Amortization 13,684 18,322 51,320 58,050 Asset Impairment (9,114) 1,348 (9,348) 6,840 Gain on Permanent Asset Disposals 13,294 60,043 (1,449,556) 187,421 Equity Method 13,217 (1,231) 12,191 (2,559) Foreign Exchange (Gains) Losses 4,588 1,869 85,691 11,773 Interest and Related Expense (4,122) (11,238) 137,193 (55,518) Stock Option Expense 429 4,910 1,143 5,671 Provisions (Delinquency, Inventories and Contingencies) (5,468) (2,803) 42,560 19,256 Adjusted Results 281, , , ,808 Decrease (Increase) in Assets (774) (172,434) 80,372 1,784 Trade Accounts Receivable (22,242) (138,010) 95, ,823 Inventories (22,029) (4,904) (79,629) (21,295) Recoverable Taxes (1,073) (9,442) 48,817 5,290 Judicial Deposits and Others (1,384) 4,570 (3,725) (5,967) Other Accounts Receivable 45,954 (24,648) 19,609 (96,067) Increase (Decrease) in Liabilities (59,336) 55,318 (233,858) (237,132) Suppliers 17,594 29, ,273 (6,328) Suppliers' Assignment of Receivables (46,838) (29,463) (186,558) (127,792) Financial Derivatives (36,601) (6,875) (57,330) (35,971) Income Tax and Social Contribution Paid (7,588) (10,277) (8,998) (20,813) Taxes Payable (3,965) 5,158 (293) 18,130 Salaries and Payroll Charges 27,690 29,666 32,814 24,753 Accounts Payable (44,341) 34,326 (151,436) (65,624) Operations Interest Paid 14,327 3,619 (14,673) 13,505 Other Accounts Payable 20,386 (310) 40,343 (36,992) Net Cash Provided by Operating Activities 221, , , ,460 Cash flows from Investing Activities Acquisitions of Subsidiaries, Net of Cash Acquired 1 0 (18,636) 0 Acquisitions of Property, Plant and Equipment (59,116) (25,864) (122,085) (123,071) Intangible Assets (7,021) (11,879) (29,183) (31,445) Proceeds from the Sale of Assets with Permanent Nature 12,338 (31,553) 1,968, ,730 Interest and Others 34,148 18, ,031 92,348 Net Cash Used in Investing Activities (19,650) (50,890) 1,944, ,562 Cash Flows from Financing Activities Borrowings (76) 0 16,817 0 Treasury Stock Purchase / Sale (85,903) 3,809 (85,903) (111,756) Repayment of Loans - Principal (591,477) (8,847) (3,577,959) (265,716) Repayment of Loans - Interest (43,859) (8,845) (356,534) (99,723) Dividends Paid (158,050) 3 (316,109) (409,828) Capital Restitution 0 (821,892) 0 (821,892) Loan Derivatives (2,609) (2,727) 72, ,464 Net Cash Used in Financing Activities (881,974) (838,499) (4,247,228) (1,381,451) Net Increase (Decrease) in Cash and Cash Equivalents (679,835) (714,724) (1,599,910) 52,571 Statement of Increase in Cash and Cash Equivalents, Net Cash and Cash Equivalents at the Beginning of the Period 1,836,063 2,115,303 2,756,138 1,348,008 Cash and Cash Equivalents at the End of the Period 1,156,228 1,400,579 1,156,228 1,400,579 Change in Cash and Cash Equivalent (679,835) (714,724) (1,599,910) 52,571 17

18 Other Information Cash Conversion Cycle - Continuing Operations Table 17 (Days) 3Q16 4Q16 1Q17 2Q17 3Q17 Receivables (1) Inventories (2) Payables (2) (3) (129) (118) (101) (109) (96) Cash Conversion Cycle (R$ million) 3Q16 4Q16 1Q17 2Q17 3Q17 Receivables 1,196 1,228 1,369 1,299 1,461 Inventories Payables (3) (290) (298) (263) (260) (258) Working Capital 1,303 1,310 1,439 1,379 1,553 % of Annualized Net Revenue 40% 39% 39% 40% 41% (1) Calculated based Continuing Operations Gross Revenue, Net of Discounts. (2) Calculated based on Continuing Operations of COGS (3) Includes Suppliers Assignment of Credit Starting on 3Q17, Receivables Days will be calculated based on Gross Revenue, net of discounts. Information on earlier quarters shown here have been adjusted under this new standard for comparison reasons. Goodwill Amortization for Fiscal Purposes / Tax Credits The Company holds R$714.2 million in goodwill to be amortized for fiscal purposes over the coming years, generating a cash effect of R$242.8 million, according to the following table: Table 18 Period R$ million 4Q Total Tax Rate 34% Cash Effect Source: Hypermarcas In addition, the Company holds the following tax credits: i) Federal Recoverable Taxes: R$258.8 million (please refer to Explanatory Note 13 of the Quarterly Financial Information); ii) Cash effect of Income Tax and Social Contribution Losses Carryforward: R$937.3 million (please refer to Explanatory Note 23(a) of the Quarterly Financial Information). 18

19 KPMG Auditores Independentes Avenida Deputado Jamel Cecílio, Quadra B-22, Lote 04-E Salas A-103 a A Jardim Goiás Edifício New Business Style Goiânia/GO - Brasil Caixa Postal CEP Goiânia/GO - Brasil Telefone +55 (62) , Fax +55 (62) Report on review of Quarterly Information - ITR To The Board of Directors and Shareholders Hypermarcas S.A. São Paulo - SP We have reviewed the accompanying individual and consolidated interim financial information of Hypermarcas S.A. ( The Company ), comprised in the Quarterly Information Form - ITR for the quarter ended, comprising the balance sheet as at and the respective statements of income, comprehensive income for the three and nine-month period then ended and statements of changes in shareholders equity and cash flows for the nine-month period then ended, including the footnotes. Management is responsible for the preparation of the individual interim financial information in accordance with the Technical Pronouncement CPC 21(R1) - Interim Financial Information, and the consolidated interim financial information in accordance with CPC 21(R1) - Interim Financial Information and IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), such as for the presentation of these information in accordance with the standards issued by the Brazilian Securities Commission - CVM, applicable to the preparation of the Quarterly Information - ITR. Our responsibility is to express a conclusion on these interim financial information based on our review. Review scope We conducted our review in accordance with the Brazilian and International standards on reviews of interim information (NBC TR Review of Interim Financial Information Performed by the Independent Auditor of the Entity and ISRE Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim information consists of making inquiries primarily of the persons responsible for the financial and accounting matters and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the audit standards and, consequently, does not enable us to obtain assurance that we would became aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. KPMG Auditores Independentes, uma sociedade simples brasileira e firmamembro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative ( KPMG International ), uma entidade suíça. KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. 19

20 Conclusion on the individual interim financial information Based on our review, nothing has come to our attention that causes us to believe that the individual interim financial information included in the Quarterly Information - ITR referred to above has not been prepared, in all material respects, in accordance with CPC 21(R1), applicable to the preparation of Quarterly Information - ITR, and presented in accordance with the standards issued by the Brazilian Securities Commission - CVM. Conclusion on the consolidated interim financial information Based on our review, nothing has come to our attention that causes us to believe that the consolidated interim financial information included in the Quarterly Information - ITR referred to above has not been prepared, in all material respects, in accordance with CPC 21(R1) and IAS 34, issued by IASB, applicable to the preparation of Quarterly Information - ITR and presented in accordance with the standards issued by the Brazilian Securities Commission - CVM. Other matters Interim information of the value added The individual and consolidated statements of value added for the quarter ended, prepared under the responsibility of the Company's management, and presented as supplementary information for the purposes of IAS 34, were submitted to the same review procedures followed together with the review of the Company's interim financial information. In order to form our opinion, we evaluated whether these statements are reconciled to the interim financial information and to the accounting records, as applicable, and whether their form and content are in accordance with the criteria set on Technical Pronouncement CPC 09 - Statement of Value Added. Based on our review, nothing has come to our attention that causes us to believe that the accompanying statements of value added mentioned above are not prepared, in all material respects, in accordance with the individual and consolidated interim financial information taken as a whole. Goiânia, October 27, 2017 KPMG Auditores Independentes CRC GO /O-2 F-GO Original report in Portuguese signed by Wagner Bottino Accountant CRC 1SP196907/O-7 KPMG Auditores Independentes, uma sociedade simples brasileira e firmamembro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative ( KPMG International ), uma entidade suíça. KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. 20

21 Balance sheets In thousands of reais Assets 30, 2017 Parent company Parent company 31, 2016 Liabilities and shareholders' equity Current assets Current liabilities Cash and cash equivalents (Note 10) 1,248, ,450 1,400,579 1,348,008 Suppliers (Note 20) 390, , , ,901 Accounts receivable (Note 11) 1,464,387 1,232,555 1,461,336 1,227,872 Suppliers assignment of receivables (Note 21) 3,396 3, , ,386 Inventories (Note 12) 44,690 57, , ,992 Loans, financings and debentures (Note 22) 294, , , ,110 Related parties (Note 32) 1, Salaries/wages payable 92,680 85, , ,386 Recoverable taxes (Note 13) 271,749 60, , ,136 Related parties (Note 32) 4,998 7, Derivative financial instruments (Note 4(f)) - 358, ,025 Income tax and social contribution payable - 3,525 7,018 13,482 Dividends receivable - 63, Taxes payable (Note 24) 40,264 23,597 62,836 42,950 Other assets (Note 14) 249, , , ,244 Notes payable (Note 26) 19,996 27,631 19,996 47,402 Assets held for sale (Note 15 (a)) 5,986 1,683,026 14,334 1,695,406 Proposed dividends ,285,492 4,327,095 3,811,736 5,351,683 Restitution of capital payable Derivative financial instruments (Note 4(f)) ,754 18,222 Accounts payable (Note 25) 158, , , ,396 Liabilities held for sale (Note 15(a)) 54, ,587 59, ,988 1,058,575 1,376,340 1,082,825 1,741,233 Non-current assets Non-current liabilities Long-term receivable Loans, financings and debentures (Note 22) 178, , , ,048 Deferred income tax and social contribution (Note 23 (a)) - 124,262 20, ,906 Related parties (Note 32) Related parties (Note 32) Taxes payable (Note 24) 6, , Recoverable taxes (Note 13) 59,448 56, ,838 75,439 Deferred income tax and social contribution (Note 23 (b)) 243, ,010 56,589 Derivative financial instruments (Note 4(f)) 1,731 2,891 1,731 2,891 Provisions for contingencies (Note 27) 142, , , ,231 Other assets (Note 14) 121, , , ,310 Derivative financial instruments (Note 4(f)) - 10,014-10, , , , ,546 Accounts payable (Note 25) 14, ,498 1, , , , ,581 Shareholders' equity Share Capital (Note 28 (a)) 4,448,817 5,270,726 4,448,817 5,270,726 Investments (Note 16) 1,319,510 1,384,145 3,801 3,318 Capital reserves 1,291,040 1,457,291 1,291,040 1,457,291 Investment properties (Note 17) 157,430 60, ,430 60,887 Equity valuation adjustments (255,055) (254,900) (255,055) (254,900) Other investments Profit reserves 1,998,408 1,998,408 1,998,408 1,998,408 Property, plant and equipment (Note 18) 93, , , ,702 Proposed additional dividends - 409, ,831 Intangible assets (Note 19) 4,639,824 4,643,778 4,783,283 4,765,716 Treasury shares (3,505) (70,754) (3,505) (70,754) 6,210,677 6,288,483 5,835,142 5,774,187 Profit for in the period 555, ,764-6,393,839 6,586,307 6,117,061 6,133,733 8,035,469 8,810,602 8,035,469 8,810,602 Total assets 9,679,331 10,913,402 9,928,797 11,485,416 Total liabilities and shareholders' equity 9,679,331 10,913,402 9,928,797 11,485,416 21

22 Statements of income Periods ended 30 In thousands of Reais, except when indicated otherwise July 1, 2017 to 30, 2017 January 1, 2017 to 30, 2017 July 1, 2016 to 30, 2016 Parent company January 1, 2016 to 30, 2016 Continuing operations Net revenue (Note 29) 988,706 2,825, ,400 2,520,850 Cost of sales (Note 30) (371,183) (1,004,870) (308,183) (854,987) Gross profit 617,523 1,820, ,217 1,665,863 Selling and marketing expenses (Note 30(a)) (352,069) (932,828) (304,640) (817,639) General and administrative expenses (Note 30(a)) (41,171) (116,730) (29,408) (95,311) Other operating (expenses) income, net (Note 30(b)) (8,617) 24,944 (5,127) 3,566 Equity accounting (Note 16(b)) 35,902 68,925 28,143 18,469 Income before financial income and expenses 251, , , ,948 Financial income (Note 30(c)) 29, ,627 45, ,333 Financial expenses (Note 30(b)) (16,600) (63,896) (33,298) (336,862) Net financial income (expenses) 12,604 52,731 12,502 (158,529) Income before income tax and social contribution 264, , , ,419 Income tax and social contribution (Note 23(c)) (44,816) (207,297) (46,834) (138,611) Net income from continuing operations 219, , , ,808 Discontinued operations Net income from discontinued operations (Note 15) 42,015 (154,497) 18, ,233 Net income for the period 177, , ,514 1,387,041 Income per share Basic income per share (in R$) Diluted income per share (in R$) Income per share - Continuing operations Basic income per share (in R$) Diluted income per share (in R$)

23 Statements of income Periods ended 30 In thousands of Reais, except when indicated otherwise January 1, 2016 to 30, 2016 July 1, 2017 to 30, 2017 January 1, 2017 to 30, 2017 July 1, 2016 to 30, 2016 Continuing operations Net revenue (Note 29) 954,620 2,734, ,048 2,445,408 Cost of sales (Note 30) (242,043) (691,922) (202,360) (618,548) Gross profit 712,577 2,042, ,688 1,826,860 Selling and marketing expenses (Note 30(a)) (376,224) (999,587) (328,386) (891,850) General and administrative expenses (Note 30(a)) (47,195) (138,840) (35,385) (114,951) Other operating (expenses) income, net (Note 30(b)) (15,453) 1,781 (5,099) 3,907 Equity accounting (Note 16(b)) (2) ,598 Income before financial income and expenses 273, , , ,564 Financial income (Note 30(c)) 32, ,295 54, ,494 Financial expenses (Note 30(b)) (23,341) (90,891) (53,364) (411,659) Net financial income (expenses) 9,404 49, (199,165) Income before income tax and social contribution 283, , , ,399 Income tax and social contribution (Note 23(c)) (63,751) (245,896) (57,225) (148,591) Net income from continuing operations 219, , , ,808 Discontinued operations Net income from discontinued operations (Note 15) (42,015) (154,497) 18, ,233 Net income for the period 177, , ,514 1,387,041 Income per share Basic income per share (in R$) , , ,19475 Diluted income per share (in R$) , , ,16079 Income per share - Continuing operations Basic income per share (in R$) Diluted income per share (in R$)

24 Statements of comprehensive income Periods ended 30 In thousands of Reais, except when indicated otherwise Parent company January 1, 2016 to 30, 2016 July 1, 2017 to January 1, 2017 to 30, 2017 July 1, 2016 to 30, 2016 Net income for the period 177, , ,514 1,387,041 Other comprehensive income Items that will be reclassified to income Cash flow hedge - actual portion of the changes in fair value (247) 2,624 Standstill of depreciation/amortization of assets held for sale - - (2,981) - Income tax and social contribution on other comprehensive income (117) (80) 1,097 (892) Other comprehensive income, net of income tax and social contribution (2,131) 1,732 Comprehensive income for the period 177, , ,383 1,388,773 July 1, 2017 to January 1, 2017 to July 1, 2016 to 30, 2016 January 1, 2016 to 30, 2016 Net income for the period 177, , ,514 1,387,041 Other comprehensive income Items that will be reclassified to income Cash flow hedge - actual portion of the changes in fair value (247) 2,624 Standstill of depreciation/amortization of assets held for sale - - 2,981 - Income tax and social contribution on other comprehensive income (117) (80) 1,097 (892) Other comprehensive income, net of income tax and social contribution (2,131) 1,732 Comprehensive income for the period 177, , ,383 1,388,773 24

25 Statements of changes in shareholders equity In thousands of reais Capital reserves Profit reserves Capital Goodwill on the issuing of shares Share purchase options Debentures subscription bonus option Equity valuation adjustments Legal reserve Government subsidy reserve Profit retention reserve Proposed additional dividends Treasury shares Retained earnings Overall On January 1, ,270,726 1,367,612 54,890 50,244 (256,562) 89,105 1,435, ,681 (11) - 8,030,455 Share purchase option - - 1, ,143 Proposed additional dividends (18,681) - - (18,681) Interim dividends (291,210) (291,210) Result on sales of treasury shares - (17,014) (17,014) Sales of treasury shares (Note 28(b)) ,066-34,066 Acquisition of treasury shares (Note 28(b)) (94,257) - (94,257) Net income for the period ,387,041 1,387,041 Other comprehensive income Gains or losses from derivatives, net of tax , ,732 On 30, ,270,726 1,350,598 56,033 50,244 (254,830) 89,105 1,435, (60,202) 1,095,831 9,033,275 On January 1, ,270,726 1,350,598 56,449 50,244 (254,900) 147,834 1,850, ,831 (70,754) - 8,810,602 Decrease in share capital (821,909) (821,909) Share purchase option - - 5, ,671 Result on sales of treasury shares - (171,922) (171,922) Sales of treasury shares (Note 28(b)) , ,517 Acquisition of treasury shares (Note 28(b)) (250,268) - (250,268) Payments of dividends (409,831) - - (409,831) Income for the period , ,764 Other comprehensive income Gains or losses from derivatives, net of tax (155) (155) On 4,448,817 1,178,676 62,120 50,244 (255,055) 147,834 1,850, (3,505) 555,764 8,035,469 25

26 Statements of cash flows Periods ended 30 In thousands of reais 30, 2017 Parent company 30, , , 2016 Cash flows from operating activities Income before income tax and social contribution, including discontinued operations 694,783 1,981, ,874 1,985,432 Adjustments Depreciation and amortization 19,113 12,473 58,050 51,320 Decrease to recoverable value of assets (Impairment) - (240) 6,840 (9,348) Results of the sale of permanent assets 166,068 (1,477,406) 187,421 (1,449,556) Equity accounting (47,329) 14,376 (2,559) 12,191 Foreign exchange (gains) losses (241) 60,278 11,773 85,691 Interest and related expenses (income) (43,839) 122,871 (55,518) 137,193 Costs of stock options 4, ,671 1,143 Provisions (Doubtful accounts, Inventories and Contingencies) 16,248 45,541 19,256 42,560 Adjusted income 809, , , ,626 Changes in asset and liability accounts Trade accounts receivable 209, , ,823 95,300 Inventories 25,494 (12,337) (21,295) (79,629) Recoverable taxes (2,523) 117,144 5,290 48,817 Deposits in court and others (5,288) (2,811) (5,967) (3,725) Other accounts receivable (88,058) 22,196 (96,067) 19,609 Suppliers (114,912) (8) (6,328) 112,273 Suppliers assigment of receivables 148 (5,310) (127,792) (186,558) Accounts payable (83,854) (146,554) (65,624) (151,436) Taxes payable 10,486 3,096 18,130 (293) Salaries/wages and payroll charges 6,068 11,970 24,753 32,814 Interest on the transaction (34) (2,883) 13,505 (14,673) Derivative financial instruments (9) (22,886) (35,971) (57,330) Income tax and social contribution paid - - (20,813) (8,998) Other accounts payable (52,698) 33,297 (36,992) 40,343 Net cash provided by operating activities 713, , , ,140 Cash flows from investment activities Acquisition of subsidiaries (18,636) Capital (increase)/decrease in subsidiaries/affiliated companies (27,720) (220,000) - - Purchase of property, plant and equipment (5,962) (14,729) (123,071) (122,085) Purchase of Intangible assets (2,349) (18,527) (31,445) (29,183) Proceeds from sale of assets of a permanent nature 1,067,507 1,721, ,730 1,968,051 Interest from operations 73, ,760 92, ,031 Dividends received 78, Loans receivable (949) Net cash provided by investment activities 1,182,195 1,588, ,562 1,944,178 Cash flows from financing activities Purchase of treasury shares (257,350) (94,257) (257,350) (94,257) Sales of treasury shares 145,594 8, ,594 8,354 Proceeds from loans taken out - 16,817-16,817 Payment of loans - principal (238,658) (3,473,292) (265,716) (3,577,959) Payment of loans - interest (96,144) (325,823) (99,723) (356,534) Loan derivatives 327,464 72, ,464 72,460 Dividends paid (409,828) (316,109) (409,828) 316,109) capital repayment (821,892) - (821,892) - Borrowings (2,569) (29,224) - - Net cash used in financing activities (1,353,383) (4,141,074) (1,381,451) (4,247,228) Net increase/(decrease) in cash and cash equivalents 542,794 (1,688,739) 52,571 (1,599,910) Cash and cash equivalents at beginning of year 705,450 2,382,926 1,348,008 2,756,138 Cash and cash equivalents at end of year 1,248, ,187 1,400,579 1,156,228 Change in cash and cash equivalents 542,794 (1,688,739) 52,571 (1,599,910) Transactions not involving cash ,296 52,367 Acquisition of property, plant and equipment ,296 12,367 Acquisition of subsidiaries ,000 26

27 Statements of value added Periods ended 30 In thousands of reais Parent company 30, , 2016 Gross income Sales of goods and products, including discontinued operations 2,971,703 3,966,280 3,028,510 3,724,464 Other income (145,407) 1,733,191 (162,755) 1,719,705 Income related to the construction of own assets 1,438 8,485 60,694 63,942 Allowance for doubtful accounts (6,023) (28,805) (6,122) (28,514) 2,821,711 5,679,151 2,920,327 5,479,597 Inputs acquired from third parties Costs of materials, goods and services sold (950,792) (1,721,731) (507,070) (1,124,236) Materials, power, third-party services and others (1,013,591) (1,345,659) (1,206,392) (1,541,557) Losses of asset amounts (31,211) (41,643) (34,633) (33,710) (1,995,594) (3,109,033) (1,748,095) (2,699,503) Gross added value 826,117 2,570,118 1,172,232 2,780,094 Depreciation and amortization (19,113) (12,473) (58,050) (51,320) Net added value produced by the Company 807,004 2,557,645 1,114,182 2,728,774 Transferred added value received Equity accounting 47,329 (14,376) 2,559 (12,191) Financial income 118, , , , , , , ,700 Total added value to be distributed 973,302 2,730,156 1,264,151 2,939,474 Distribution of added value Personnel and charges 325, , , ,935 Direct remuneration 273, , , ,182 Benefits 37,417 44,722 81,675 93,001 FGTS 15,306 17,387 28,260 30,752 Taxes, fees and contributions (2,472) 628,886 1, ,150 Federal 146, , , ,908 State (149,962) (21,245) (235,391) (174,364) Municipal 1, ,620 1,606 Interest 69, ,426 97, ,054 Rents 24,213 28,665 28,559 31,294 Retained earnings 555,764 1,387, ,764 1,387,041 Added value distributed 973,302 2,730,156 1,264,151 2,939,474 (*) The Statement of added value is not an integral part of the consolidated quarterly information in conformity with IFRS, 27

28 Contents 1 General Information 2 2 Description of significant accounting policies 3 3 Critical accounting estimates and judgments 3 4 Financial risk management 4 5 Capital management 8 6 Estimate of fair value () 9 7 Hedge accounting 10 8 Financial instruments by category () 12 9 Credit quality of financial assets Cash and cash equivalents Accounts receivable Inventories Recoverable taxes Other assets Discontinued operations Investments Investment properties Property, plant and equipment Intangible Assets Suppliers Suppliers assignment of receivables Loans, financing and debentures Deferred income tax and social contribution Taxes payable Accounts payable Notes payable Contingencies Share capital Revenue Breakdown of income accounts Insurance coverage Transaction with related parties 44 1

29 Notes to the quarterly information report (In thousands of Reais, except when indicated otherwise) 1 General Information Hypermarcas S.A. ("Company"), headquartered in São Paulo, SP, is a Brazilian Company of health and well-being products, with operations focused on pharmaceuticals. The Company holds one of the most comprehensive portfolios in the country, with presence in the major Pharmaceutical segments of the Brazilian market and leadership in non-prescription (OTC) drugs and, in categories in which it competes, in generics and branded generics, in addition to an outstanding position in prescription products. Its main brands include Addera D3, Alivium, Benegrip, Biotônico Fontoura, Doril, Engov, Episol, Epocler, Histamin, Lisador, Polaramine, Predsim, Rinosoro, Torsilax and Neo Química. The production of goods is carried out mainly in the subsidiaries Brainfarma Indústria Química e Farmacêutica S.A. and Cosmed Indústria de Cosméticos e Medicamentos S.A., located in the State of Goiás. Its main distribution center is located in Anápolis - GO. The Company also has a wide sales and distribution structure with national coverage. Its products are distributed throughout Brazil, directly to retailers or indirectly, via distributors and wholesalers. For a decade (from 2001 until 2011), Hypermarcas acquired a number of companies with attractive assets and strong brands, in a position of leadership in their markets of operation. The main targets in this period were mainly family businesses or non-strategic assets of multinational groups in Brazil. Since 2011, after a phase of rapid consolidation of the Pharmaceutical and Consumer Goods markets in Brazil, the Company directed its focus towards taking advantage of synergies from the integration of the businesses acquired and the quest for greater operational efficiency. As from 2017, the company has been exclusively focused on the Pharmaceutical market, after a round of divestments started in 2015 and that resulted in the sale of its cosmetics business (completed on February 1, 2016), Condoms business (completed on October 4, 2016) and Disposable Products business (completed on March 6, 2017). Therefore, these three businesses are now reported as Assets held for sale and Discontinued Operations as from fiscal year Currently the strategy of Hypermarcas is focused on sustainable growth with continual value creation for its shareholders, based on strong brands, efficient low-cost operations and streamlined organization focused on results and increasing relevance of innovation. 2

30 2 Description of significant accounting policies The main accounting policies applied in the preparation of these individual and consolidated Quarterly Information have not changed materially with respect to the policies presented in the financial statements for the year ended. In cases where the notes to these quarterly information reports are not presented in full, due to redundancy of information in relation to that presented in the financial statements, the complete information should be read in the corresponding note to the annual financial statements. Certain new accounting standards in force for 2017, as disclosed in the annual financial statements for 2016 have had no impact on the accounting policies adopted previously. Assets held for sale and discontinued operations Discontinued operations arising from components that were written off or classified as held for sale are disclosed in the financial statements, separately from the rest of the Company s operations: (i) (ii) Statement of Income - The income and expenses from discontinued operations and the gains and losses resulting from the write-off of assets held for sale are presented under a single heading "Net Income from Discontinued Operations, net of the effects of income tax and social contribution. The assets and liabilities related to discontinued operations are presented in current assets and liabilities separately from the other assets and liabilities in the balance sheet. The detailed description of these discontinued operations is presented in Note 15. Preparation basis The individual interim financial information was prepared in accordance with the CPC 21 (R1) - Interim Financial Reporting and the consolidated interim financial information was prepared in accordance with CPC 21 (R1) and IAS 34, issued by the IASB for the preparation of Quarterly Information (ITR) and presented in accordance with the standards issued by the Brazilian Securities Commission, applicable to the preparation of the Quarterly Information (ITR). The present quarterly information was approved by the Board of Directors on October 27, Critical accounting estimates and judgments Accounting estimates and judgments are evaluated on an on-going basis and are based on experience and other factors, including expectations of future events that are considered reasonable under the circumstances. The estimates and critical accounting judgments of these quarterly information have not been changed in relation to that published in the annual financial statements of