Oriola Corporation’s Half-Year Report January-June 2024

Oriola Corporation Stock Exchange Release 18 July 2024 at 8.30 a.m. EEST

Oriola Corporation’s Half-Year Report January-June 2024

Continued sales growth in both segments

April-June 2024 highlights

• Invoicing increased by 5.3 % to EUR 952.2 (904.3). On a constant currency basis, invoicing increased by 5.5% and was EUR 954.4 million.
• Net sales increased by 13.0% to EUR 439.4 (389.0) million. On a constant currency basis, net sales increased by 13.3% and were EUR 440.6 million.
• Adjusted EBIT was EUR 5.1 (3.4) million. On a constant currency basis, the adjusted EBIT was EUR 5.1 million.
• EBIT was EUR 5.7 (3.2) million and included adjusting items of EUR 0.5 (-0.2) million mainly related to the implementation costs of the ERP investment and to dose dispensing business in Sweden. On a constant currency basis, EBIT was EUR 5.7 million.
• Profit for the period totalled EUR 2.0 (1.2) million and earnings per share were EUR 0.01 (0.01).

• From Q2 onwards, implementation costs in cloud computing arrangement relating to ERP investment, announced on 10 January 2024, are reported as adjusting items

Excluding Swedish dose business:

• At the end of April, the Swedish Competition Authority announced its decision to prohibit the sale of Svensk dos AB due to negative effects on competition in the market. Apotekstjänst Sverige AB and Oriola have appealed the decision. The appeal process can take up to 6 months. Oriola will communicate on the next steps early Q4. Oriola announced the sale of Svensk dos AB to Apotekstjänst Sverige AB in October 2023.
• Net sales were EUR 436.1 (384.7) million.
• Adjusted EBIT was EUR 4.9 (4.2) million.

January-June 2024 highlights:

• Invoicing increased by 5.6 % to EUR 1,860.6 (1,762.7). On a constant currency basis, invoicing increased by 5.9% and was EUR 1,866.8 million.
• Net sales increased by 8.7% to EUR 814.6 (749.4) million. On a constant currency basis, net sales increased by 9.1% and were EUR 817.4 million.
• Adjusted EBIT was EUR 9.8 (6.9) million. On a constant currency basis, the adjusted EBIT was EUR 9.8 million.
• EBIT was EUR 9.4 (6.7) million and included adjusting items of EUR -0.4 (-0.2) million mainly related to the implementation costs of the ERP investment and to the sale of dose dispensing business in Sweden. On a constant currency basis, EBIT was EUR 9.4 million.
• Profit for the period totalled EUR -0.3 (2.3) million and earnings per share were EUR -0.00 (0.01).

• From Q2 onwards, implementation costs in cloud computing arrangement relating to ERP investment, announced on 10 January 2024, are reported as adjusting items.

Excluding Swedish dose business:

• Net sales were EUR 808.3 (735.7) million.
• Adjusted EBIT was EUR 10.0 (8.1) million.

Key figures	2024	2023	Change	2024	2023	Change	2023
EUR million	4-6	4-6	%	1-6	1-6	%	1-12
Invoicing	952.2	904.3	5.3	1,860.6	1,762.7	5.6	3,587.7
Net sales	439.4	389.0	13.0	814.6	749.4	8.7	1,493.8
Adjusted EBIT1	5.1	3.4	52.5	9.8	6.9	41.9	16.7
EBIT	5.7	3.2	78.2	9.4	6.7	40.6	-5.3
Adjusted EBIT %	1.2	0.9		1.2	0.9		1.1
EBIT %	1.3	0.8		1.2	0.9		-0.4
Profit for the period	2.0	1.2	62.9	-0.3	2.3	-114.2	-20.7
Earnings per share, EUR	0.01	0.01	62.9	-0.00	0.01	-114.2	-0.11
Net cash flow from operating activities	17.8	19.2		6.5	-23.4		9.6
Gearing, %				-8.1	4.5		-12.1
Equity ratio, %				17.2	21.2		18.5
Return on capital employed (ROCE), %				7.3	3.9		-1.6

1 Adjusting items are specified in note Adjusting items.

In order to reflect the underlying business performance and to enhance comparability between financial periods, Oriola discloses certain performance measures of historical performance, financial position and cash flows, as permitted in the “Alternative performance measures” guidance issued by the European Securities and Markets Authority (ESMA). These measures should not be considered as a substitute for measures of performance in accordance with the IFRS. The calculation methods of these measures are provided under Key financial indicators in this Half-Year report.

Outlook for 2024

In 2024, the pharmaceutical distribution market is expected to continue to grow. A continuation of a weak consumer confidence might impact the wholesale market development. The recent overall inflationary environment and related cost pressures may have an impact on Oriola’s profitability. 

Oriola expects the adjusted EBIT, excluding the dose dispensing business in Sweden, for the year 2024 to increase from the adjusted EBIT for 2023 (EUR 19.5 million). 

CEO Katarina Gabrielson:

In the second quarter net sales grew from the previous year despite a softer market environment for pharmaceuticals. The value of the pharmaceutical distribution market continued a steady growth in the second quarter driven by a good demand for high-value pharmaceuticals, while volumes declined especially in the Finnish market.

In the second quarter, Oriola’s net sales grew by 13% to EUR 439 million, driven by both Distribution and Wholesale segments. Profitability improved from the previous year and was EUR 5.1 (3.4) million. Profitability improvement was supported by net sales growth, lower operating expenses compared with the previous year, and lower freight costs. When excluding the impact of the Swedish dose dispensing business, the adjusted EBIT improved to EUR 4.9 (4.2) million. Oriola’s financial position has remained strong with interest-bearing debt decreasing by 63.4 EUR million from the previous year.

In the Distribution segment, net sales grew by 16% to EUR 358 million driven by the steady market value growth in Sweden and Finland. Profitability improved to EUR 4.0 (3.1) million, supported by net sales growth and a lower cost base compared with the previous year, offsetting a negative impact due to lower volumes and the move of clinical trials under the management of advisory services in Wholesale segment. Our market share was stable in Finland, while we saw a slight decline in market share in Sweden. In the second quarter, we have successfully renewed important distribution agreements and also implemented price increases, which will have a positive impact in the second half of this year.

In the Wholesale segment, net sales grew by 3% to EUR 82 million with a wider product portfolio in Sweden and growth in all customer segments. Profitability improved to EUR 2.3 (1.7) million. The profitability improvement was mainly related to an increase in advisory services due to the move of clinical trials under the management of advisory services. In accordance with our strategy to grow the wholesale business, we have developed our capabilities in the warehouses to better serve and meet the needs of the strongly growing e-com sales channel in Sweden.

At the end of April, the Swedish Competition Authority announced that it prohibits the sale of Svensk dos AB to Apotekstjänst Sverige AB due to negative effects on competition in the market. We still think the agreement with Apotekstjänst Sverige AB makes sense and that the decision taken by the authorities was not justified and based on weak argumentation. The decision has been appealed by Apotekstjänst Sverige AB and Oriola, and the process can take up to six months. We still see the agreement with Apotekstjänst Sverige AB as the most viable option and think we have a strong case. This means we will not communicate any alternatives before we have a clear ruling in early Q4.

We have continued the implementation of our refined strategy, which was launched at the end of last year. An important part of the strategy is the ERP (enterprise resource planning) and warehouse management renewal project, which has proceeded according to plan in the second quarter. Investment related costs recognised in the income statement during the second quarter were in total EUR 0.6 million and capital expenditure was EUR 0.5 million. We are reaching the end of the design phase and moving towards the build phase in the second half of this year. Our focus in the strategy rollout is also to actively engage with employees and develop leadership. We held our annual cross company Values Day and CEO roadshows covering our main sites in the second quarter.

In the joint venture company, Kronans Apotek, e-commerce continued to grow steadily, while brick-and-mortar is stabilising. Kronans Apotek continues to develop its customer experience and product range, both in physical and digital stores. The focus remains on long-term profitability improvement, integration activities and business development. The new management has put new measures in place to improve the business. In 2024, Kronans Apotek’s profitability is expected to be positively impacted by new legislation on pharmaceutical compensation. Kronans Apotek is an important strategic partner for us, and we will actively support its value creation as a major shareholder. Kronans Apotek expects its full profit potential to materialise by the end of 2025.

I am pleased to see that we have continued our stable performance in the second quarter. Our strategy is clear, and we continue on our path to become a highly efficient company in our distribution business, to grow our share of the high-margin wholesale and advisory businesses, and to further develop our customer value proposition to deliver enhanced customer experience. As we move forward into the second half of the year, I wish to express my sincere gratitude to everyone at Oriola for their dedication, commitment, and hard work during the second quarter.

Disclosure procedure

This stock exchange release is a summary of Oriola Corporation’s Half-Year Report January-June 2024. The complete report is attached to this release in pdf format and is also available on Oriola’s website at www.oriola.com.

Analyst and investor meeting at 10.00 a.m. EEST

Oriola’s CEO Katarina Gabrielson and CFO Timo Leinonen will present the Half-Year Report at a live webcast meeting today at 10.00 a.m. EEST. Join the meeting: https://oriola.videosync.fi/q2-2024  

Financial reporting in 2024

Oriola’s next financial report, the Interim Report January-September 2024, will be published on 30 October 2024.

Further information:

Timo Leinonen
CFO
email: [email protected]

Mikael Wegmüller
VP, Communications and Sustainability
email: [email protected]

Distribution:
Nasdaq Helsinki Ltd
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