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GENOMMA LAB
INVESTOR DAY
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This presentation may contain certain forward-looking statements and informationrelating to the Company that reflect the current views and/or expectations of theCompany and its management with respect to its performance, business and futureevents. Forward looking statements include, without limitation, any statement that maypredict, forecast, indicate or imply future results, performance or achievements, andmay contain words like “believe,” “anticipate,” “expect,” “envisages,” “will likely result,”or any other words or phrases of similar meaning. Such statements are subject to anumber of risks, uncertainties and assumptions. We caution you that a number ofimportant factors could cause actual results to differ materially from the plans,objectives, expectations, estimates and intentions expressed in this presentation and inoral statements made by authorized officers of the Company. Readers are cautioned notto place undue reliance on these forward-looking statements, which speak only as oftheir 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.
Safe Harbor
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Today’s Presenters
- 14 years at LABB
Prior Experience:• COO, Head of
International• Launched Argentina,
Brazil and US operations
- 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 PrivateEquity -backed PC and Beauty Cos.
GL. PRESIDENT
OF BRANDS
3
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Genomma Lab’s Key Imperatives
Shareholder value
creation
Balanced geographic
reach / International
expansion
Sustainable business model
& enduring brands
4
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Core Competencies
Mexico: sell-inInternational: sell-out, EBITDA, FCF
Talent
Demand generation
POS execution
Growth
Before Today Future
Demand generation
Developing online
Talent +
Demand generation
Win online
Continue attractingglobal talent ++
Better POS execution Best POS execution
Sell-out, EBITDA, FCF EBITDA, FCF and ROIC
Sustainable growthand brands
Sustainable growthand brands
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Agenda
LAB Highlights: Then and Now
Sustainability
Financial Results and Outlook
Mexico: The Turnaround
Brand Equity
Commercial Strategy
Innovation
1
2
3
4
6
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CAGR
+ 10.8%
Growth Achieved in OTC and PC
Since 2010
OTC
PC
Sales by Category
(Million MXN)
OTC
PC
Generics
11,287
6,264
2010 3Q16 YTD
7
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Significant Geographic Diversification
100% 100%
Mexico
International
Revenue Mix by Region
15 countries 20 countries
8
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Rightsizing the Organization
514
XXX
Employees
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CAGR:
+10.8%
+ 14.6%
+ 9.9%
Growth Fueled by Organic Brands
and Strategic Acquisitions
OrganicBrands
AcquiredBrands
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%
10
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New Management Focused on
Generating Cashflow
Consolidated Cash Conversion Cycle in Days
New
Management
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Agenda
LAB Highlights: Then and Now
Sustainability
Financial Results and Outlook
Mexico: The Turnaround
Brand Equity
Commercial Strategy
Innovation
1
2
3
4
12
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500
600
700
800
900
1000
1100
1200
1300
3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Sell-in Converging with Sell-out:
Successful Destocking Process
Sell-out
Sell-in
Destockingcompleted
Sell-in & sell-outconverging
13
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True Demand Supported by the Strength
of our Brands
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
0
GRPs
Sell-out*
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2014 2015 2016
Index100
14
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Agenda
LAB Highlights: Then and Now
Sustainability
Financial Results and Outlook
Mexico: The Turnaround
Brand Equity
Commercial Strategy
Innovation
1
2
3
4
15
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BUSINESS
SEGMENTS
PCOTC
• Sizable markets
• Growth potential• Latin America• U.S. Hispanic market
• Well-recognized leadingbrands
LAB Participates in Attractive and
Growing Business Segments
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Genomma is a Leading OTC Player
within its Markets
Significant Growth Opportunity
Top Two Countries Highly Fragmented
Position:Position: Position:
Position: Position:Position: Position: Position:
Mexico Argentina
Position:
1e
r trim.
2º trim
.3e
r trim.
4º trim
.
Total OTC Hispanic OTC
USA Brazil
Chile Ecuador Peru Central America Colombia
0.45%
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18
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%
Increased Penetration of Core Brands
Revenue Mix in Mexico
Core Brands
Non-Core Brands
• Better productrotation in the POS
• Higher profitabilitythan non-core brands
~ 95% of sales in our international operations come from core brands.18
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Agenda
LAB Highlights: Then and Now
Sustainability
Financial Results and Outlook
Mexico: The Turnaround
Brand Equity
Commercial Strategy
Innovation
1
2
3
4
19
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Our Path to Developing Megabrands
Two Megabrands > US $100 million
Product Line Extensions
AsepxiaCaps
CapsNeutral soapAnti-acne soapPowder makeupLiquid makeupBB creamFacial cleansing wipesAnti-acne wipes
Gel Anti-scar
GelMakeupBB creamBody creamEye creamStretch markAnti-agingSPF
Mexico Global Mexico Global
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Our Focus on Power Brands Drives
Category Growth
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
22
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Sustainably Successful Launch Model
• 90 years of tradition• Quality & heritage
• Launch into massfacial skin lotionssegment
• Unique trendingredient
• Expansion into bodylotion 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
$1644.6x Sales
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14.5
57.4
43.1
611
31
43
53
Acquired in 2012 fromAndrómaco
Cream, spray, powder, lotion & gel
Source: Cid Latina – CT D01A OTC.
‘12 ‘13 ‘14 ‘15 Aug’16
Acquired Brand Transformed into a
Local Power Brand
Market
Share in
Units(%)
Sales
in Million
AR Pesos
43.1
24
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17.8
39.07
25.74
20.69
Acquired in 2012 from Sidus
OTC and Rx productportfolio
‘12 ‘13 ‘14 ‘15 Aug’16
Market
Share in
Units
(%)
Sales
in Million
AR Pesos
Source: Cid Latina – N02B + M01A.
2337
77
133
285
Acquired Brand Transformed into a
Local Power Brand
25
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Supplements
OTC
Personal Care
Strengthening our Product Portfolio
Category Mix in the U.S.
*Percentage points.26
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Top Brands Showing Strong Growth
in the U.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
4.56.1
8.4
10.7
2014 2015 YTD 2016
1.2
4.5
6.2
2012 2013 2014 2015 YTD 2016
1.8
6.17.0
8.29.1
27
27
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Source: U.S. Census Bureau county population datasets / PEW Research Center.
Hispanic Population Expanding throughout the U.S.;
Genomma is Broadening its Presence
New Clients
New E-commerce Clients
LAB’s POS
Hispanic Population Expanding
Rapidly in Non-Traditional Markets 58,370
75,438
2015 2016
28
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• Optimize Assortment • Integrate Signage Elements • Marketing Campaign
Results in key clients in the U.S.
OTC Set660 stores
Beauty Set900 stores
End-Caps1,679 stores
Side-Kicks2,269 stores
• 23 SKUs in the Top 30 list
Results with Key Clients in the U.S.
29
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Agenda
LAB Highlights: Then and Now
Sustainability
Financial Results and Outlook
Mexico: The Turnaround
Brand Equity
Commercial Strategy
Innovation
1
2
3
4
30
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Commercial Key Variables
• Traditional Channel• New Customers• Channel Mix
• Cicatricure• Asepxia• OTC
Channel &
Customer Expansion
Visibility
• Shelf• Displays• Featuring
POS Execution
• Trade Terms Reduction• Payment Behind
Performance
Go-To-Market
31
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Drug Stores7%
Beauty Care8%
Modern Trade37%
Traditional 48%
+108 New Customers*
+27,612 New Stores*
11% of Total Sales*
Channel and Customer Expansion
(Global)
*From March 2014 to date. 32
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0
50
100
150
200
250
300
350
400
450
500
0
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
Channel and Customer Expansion
(Global)
15,000 Independent DrugStores in Mexico by YE 2016
Botiquín Farmacia
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75% of Supermarket Stores in Mexico with Off-Shelf Visibility.
Asepxia CicatricureZan Zusi
Visibility
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Department Stores25% of Pharmacy Chains
CicatricureAsepxia & Cicatricure Sanborns
Visibility
35
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POS Execution
59%
61%
60%
62%
70%
69%
72%74%
72%e
ne
.-1
6
feb
.-1
6
mar
.-1
6
abr.
-16
may
.-1
6
jun
.-1
6
jul.
-16
ago
.-1
6
sep
.-1
6
Au
g.-1
6
Jan
.-1
6
Ap
r.-1
6
% of in-store perfect execution.
36
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Cuernavaca San PabloSupercenter Arboledas
Observatorio
POS Execution
37
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Soriana Sendero Soriana Solidaridad
Mega Pilares
Fuentes del Valle
San Mateo
POS Execution
38
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Supercenter Tepeyac Supercenter ToreoSupercenter Plaza Texcoco
Supercenter Lago de
Guadalupe
Supercenter Querétaro
POS Execution
39
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Agenda
LAB Highlights: Then and Now
Sustainability
Financial Results and Outlook
Mexico: The Turnaround
Brand Equity
Commercial Strategy
Innovation
1
2
3
4
40
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New Formulation
Perfect balance
Technology+
Natural Ingredients
New Design
Modern image, focus onfunctional benefits
Makeup ProductLine Evolution
Asepxia: 360 Degree Relaunch
and Execution
Cream&
Powder
BB in entire makeupproduct line
8 benefits in one
41
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42
A New Segment for SUEROX
+75% SELL-OUT
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New Global Marketing and Innovation
Process
• 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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44
Two Year Innovation on Core Brands
and Base Business Upgrade
Antimycotic
44
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Agenda
LAB Highlights: Then and Now
Sustainability
Financial Results and Outlook
Mexico: The Turnaround
Brand Equity
Commercial Strategy
Innovation
1
2
3
4
45
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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 YTD 2016: Growth in Top Line
Profitability and FCF
(Million MXN) Gross Profit
5,837 6,1124.7%
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
3Q15 YTD 3Q16 YTD
Net Sales
8,367 8,6122.9%
-
200
400
600
800
1,000
1,200
1,400
3Q16 YTD
FCF1,294
EBITDA*
1,458
1,70717.1%
*Adjusted due to non-recurring severance payments. 46
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Stronger Policies and Disclosure
• 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 oversight to support future strategy.
• Smooth and incident-free SAP implementation improves transparency and controls.
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BALANCE SHEET
As of 3Q’16
(Million MXN)
Cash and equivalents
Inventories
Other current assets
Fixed, intangible and other LT assets
SuppliersOther currentliabilities
Non-current liabilities
Shareholders’ equity
Bonds and banking debt
Total Liabilities + Shareholders’ EquityTotal Assets
9,575 9,755
1,192
2,304
1,592
3,540114
5,881
1,4311,020
Accounts receivable
18,203 18,203
2.9 B in Intangible Assets Under review
NON CASH Intangibles Under Review 2,900
6,6759,575
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Latest News: LAB Now Running
on
* Gartner.** Swiss Property - SAP Capital Markets.
• SAP launched S/4 HANA in February 2015(biggest technological change* in over twodecades, 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
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Evolution of Net Debt
(Million MXN)
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Capital Allocation Concept
* Non-Gaap measure defined as Operating Cash Flow less maintenance Capex.
Higher Lower(than in 2016)
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M&A Strategy
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 Reduction
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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Guidance 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 – IROBARBARA CANO – MBS Value Partners
[email protected]. (55) 5081-0000 ext. 4016
www.genommalab.com/inversionistas
INVESTOR RELATIONS CONTACT:
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