Not all collagen is the same, it’s time to choose the right one Analyst Gathering February 2015 Table of Contents MACRO OVERVIEW 3 BUSINESS OVERVIEW 6 INDICATIVE 2014 RESULTS & 2015 OUTLOOK 14 Excellence in Execution 2 Not all collagen is the same, it’s time to choose the right one Section 1 Macro Overview Macro Overview 2014 Macro highlights 2015 Macro outlook Weakening Rupiah, but with less ASEAN Economic Community volatility Rupiah – US Dollar (Exchange Rates on Transaction) 12.5%* • International expansion opportunities • Non tariff barriers in pharma industry *based on average Rising inflation of 8.36% (yoy) Inflation reached 8.36% (y-o-y) triggered by Infrastructure improvement in longer term fuel price increase on Nov 2014 Political uncertainty 4 Legislative Election & Presidential Election Excellence in Execution Healthcare Industry The new national health insurance roll-out 2014 Highlights • JKN covered more than 133 million people, higher than targeted coverage of 120 million people 2015 Outlook • Integration of formal sector workers into JKN • Discussion of Coordination of Benefits(COB) JKN has been implemented since Jan 1, 2014. Increased health spending in 2015 government budget 67.5 71.1 JKN Coverage *in trillion Rp 3.5% of 52.7 46.6 Gov’t 41.0 Budget 33.0 2019 2015 Target Target 250 2014 170 million 133 million people million people 2010 2011 2012 2013 2014 2015 people (APBNP) (APBN) Excellence in Execution Not all collagen is the same, it’s time to choose the right one Section 2 Business Overview Strategic Intent We are an Innovative Health Care Business providing Health Care Products & Its WBAWI Related Services Mission To improve health for a better life To be the best Indonesian Global Health Care company driven by innovation, strong Vision brands and excellent management 1.Sustainable Growth Strategy 2.Innovation & Productivity 3.World Class Competence & Organization We believe in : Trust, Mindfulness, Innovation, Strive to be the Values best, Interconnectedness Excellence in Execution 7 Our Strategies 1. Strengthen business portfolio through innovation and M&A 2. Improve marketing and sales effectiveness CORPORATE BRANDING Morinaga Mall to Mall 2014, Diabetasol 3J Campaign attracting more than 288,000 & Healthy Activities in visitors World Diabetes Day Excellence in Execution 8 Our Strategies 3. Accelerate “Go Global” implementation 4. Develop future leaders with competence and “Kalbe Panca Sradha” character Kalbe Middle Kalbe Learning Management Center Program 5. Strengthen quality assurance, compliance, and corporate social responsibilities Excellence in Execution 9 2014 Key Achievements & Activities Strengthening production and distribution network Started commercial production of Upgraded distribution facilities oncology production facilities at Pulogadung Bandar Lampung Tangerang Increased production lines and capacities Surabaya Excellence in Execution 10 2014 Key Achievements & Activities Strengthening product portfolio through innovation New Product Launches Research & Development Stem Cell and Cancer Institute Excellence in Execution 11 2014 Key Achievements & Activities International expansion Fitbar TV Commercial Diabetasol Product Sampling Woods Winter Wholesale Displays Philippines South Africa Nigeria Myanmar Vietnam Extra Joss Cup Procold Booth & Sponsorship Mixagrip Store Mixagrip Taxi Branding Kalbe Ethical Product Booth - Branding Medical Forum Excellence in Execution 12 2014 Key Achievements & Activities Getting closer to our consumers Integrated Service to Consumers Direct to Consumer (DTC) Activities 2014 Kalbe Customer Care Kalbe Home Delivery Kalbe e-Store KALCare Experiential Store Kalbe Family Rewards Card Morinaga Entrasol Mobile Application Utilization KalbeMed Mommychi Diabetes Solution Fatigon Hydro Coco Mobile Application Mom & Child Center Mobile Mobile Application Application Excellence in Execution 13 Not all collagen is the same, it’s time to choose the right one Section 3 Indicative 2014 Results & 2015 Outlook Consolidated Sales Consistent Top Line Growth of Internal Kalbe Products Net Sales (in Rp Bn) +8.5% 31 Dec 2013 31 Dec 2014 (Audited) (Unaudited) 17,365 16,002 +20.8% +16.7% +11.9% -5.2% 5,836 5,531 4,581 3,869 4,329 3,792 2,505 2,924 Prescription Consumer Health Nutritionals Distribution & Consolidation Pharmaceuticals Logistics Excellence in Execution 15 Consolidated Operating Performance Stable Operating Margin Gross Profit Margin Operating Expenses to Net Sales Ratios + 10.4% 48.0% 48.8% 32.1% 32.9% 7,679 8,474 0.8% 0.8% 4.8% 5.2% Selling & Marketing 31 Dec 2013 31 Dec 2014 (Audited) (Unaudited) 26.4% 26.9% General & Operating Profit Margin Administrative + 8.0% Research & 15.9% 15.9% Development 2,549 2,754 31 Dec 2013 31 Dec 2014 (Audited) (Unaudited) • Intensive marketing efforts to drive brand awareness • R & D to support product development 31 Dec 2013 31 Dec 2014 (Audited) (Unaudited) Excellence in Execution 16 Consolidated Net Earnings Consistent Earnings Growth Income Before Tax Net Income (in Rp bn) (in Rp bn) + 7.0% 15.9% 16.1% +6.9 % 2,753 2,573 12.0% 11.8% 1,920 2,051 31 Dec 2013 31 Dec 2014 31 Dec 2013 31 Dec 2014 (Audited) (Unaudited) (Audited) (Unaudited) • Income before tax margin declined from 16.1% in FY 2013 • Net income margin declined from 12.0% in FY 2013 to to 15.9% in FY 2014 mostly due to higher interest expense 11.8% in FY 2014. and miscellaneous expenses. Excellence in Execution 17 Working Capital Management Improving Days of Inventory Improving inventory level due 158 to stabilizing raw material price No. of days in 2014 129 131 129 120 108 142 114 132 122 126 110 115 107 Net Operating Cycle has been decreased by 29 days from 158 50 48 48 49 days in 2008 to 129 days in 43 45 44 2014 45 57 50 38 35 41 27 End-to-end supply chain 31 Dec 2008 31 Dec 2009 31 Dec 2010 31 Dec 2011 31 Dec 2012 31 Dec 2013 31 Dec 2014 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Unaudited) management would be continuously implemented to Days of Account Receivables Days of Inventories overcome any fluctuation in Days of Account Payables Net Operating Cycle inventory Excellence in Execution 18 Solid Financial Position Rp 1.62 Trillion of Net Cash Position Total Debt and Gearing Ratio Cash & Net Cash Balance 2,291 2,151 1,919 1,902 1,877 1,860 1,623 1,562 1,655 1,426 600 15.0% 1,222 500 Total Debt in Rp Billion 7.9% 7.2% 843 400 Gearing Ratio 10.0% 300 2.3% 2.9% 3.2% 200 0.5% 5.0% 100 340 25 141 205 584 296 0 0.0% 2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014 (Audited) (Audited) (Audited) (Audited) (Audited) (Unaudited) (Audited) (Audited) (Audited) (Audited) (Audited) (Unaudited) Cash and Cash Equivalent in Rp Billion Net Cash in Rp Billion Dividend Payment Capital Expenditure * Capital Expenditure in Rp Billion 994 783 852 60% 20.0 51% 51% 80% 15.0 42% 60% 470 469 26% 10.0 19.0 19.0 40% 278 14.0 17.0 5.0 5.0 20% 0.0 0% 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 2014 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Unaudited) Cash Dividend* (Rp/share) Dividend Payout Ratio (%) *For Fiscal Year *Cash dividend are adjusted for stock split impact Excellence in Execution 19 Outlook 2015 Earnings Guidance 2015 * 1. Year-on-year Sales Growth 11% - 13% 2. Operating Profit Margin 16% - 17% 3. Earnings per Share growth of 14% - 16% 4. Dividend payout ratio minimum 50% * Excluding the impact of product recall Capex Rp 1 – 1.3 Tn for production capacity and distribution network expansion. Excellence in Execution 20 THANK YOU For further information: PT Kalbe Farma Tbk. Jalan Let.Jend. Suprapto Kav. 4 Jakarta 10510, Indonesia Tel. : 62-21-42873888 Fax. : 62-21-42873678 Email : [email protected] [email protected] [email protected] Website : www.kalbe.co.id Excellence in Execution 21.