Q3 2022: Weaker growth in US
Important events during the third quarter
- Net sales decreased by 9% (-22% adjusted for currency effects) to SEK 145 m (159) in Q3 and decreased by 3% (-13% adjusted for currency effects) to SEK 474 m (488) for the first nine months of the year.
- The EBITDA margin was 25% (27) in Q3 and 25% (26) for the first nine months of the year.
- Weaker development in the Americas region driven by changed order patterns and a more cautious market.
- Pilot study with 132 participants in mental health completed and results expected in Q4.
CEO Comments
Challenges in the Americas region
The third quarter did not meet our targets, largely explained by developments in the Americas region. In total, net sales decreased by 9% in the quarter and just under 3% for the first nine months of the year.
The EBITDA margin in Q3 was 25% (27), a result of lower net sales but also higher costs attributable to forward-looking investments to further strengthen our commercial organization. The quarter also contained costs related to business development activities, and adjusted for these, the EBITDA margin was 26%.
Sales in the Americas region were down 11% despite strong support from the dollar. Adjusted for currency effects, sales were down 28% in the quarter. For the first nine months of the year, sales in the Americas region have decreased by 3% in total. The American market had weak development in Q3, primarily in our LiveBac® range, where we are negatively affected by missed orders from a few larger customers. In our ClinBac™ range we on the other hand have several customers who are developing positively with our products. We have continued to strengthen our commercial organization in the region to accelerate this development. Sales cycles for ClinBac™ are generally longer but result in longer term customer contracts and higher margins over time. During the next six-month period, we estimate that two to three new ClinBac™ customers will be launched in the Americas.
In Q3 we experienced disruptions in the supply chain caused by temporary raw material shortages at our manufacturing facilities in the US. This led to disruption in certain customer deliveries. The raw material shortage was global but temporary, and we have increased stock levels and validated additional suppliers to ensure access to raw materials
The EMEA region is generally developing well and we see a positive trend with most of our customers in the region. In the quarter, two new customer agreements were signed for launches in the next few months. At the same time, we note that the European launch by Perrigo has not gone according to their expectations and the contribution from this contract is currently lower than expected.
Sales in the APAC region increased by 16% in Q3. We are pleased that Sinopharm is developing according to plan and they are now in the launch or pre-launch phase of four product concepts based on Probi's probiotics, three based on ClinBac™ and one on LiveBac®.
In Q4 we are expecting the results from a recently completed clinical pilot study in mental health. This is an area with great potential and although more studies are required in the field, we see good prospects in this market segment moving forward.
We have had a challenging year, particularly in the Americas region, and our expectation is that our net sales for the full year will be slightly below previous year. We have lost contracts which will be difficult to compensate in the short-term, but we are filling our pipeline with exciting launches in the coming year. We are cautiously optimistic about 2023 and are working intensively on growing organically but also evaluating acquisitions. Our financial position is strong, and we want to use it for strategic investments. We are determined that Probi will return to growth in 2023.
Tom Rönnlund
CEO
Invitation to teleconference
Probi's interim report for Q3 2022 is published on October 21, 2022, at 8:00 a.m. On the same day at 10:00 a.m., a telephone conference will be held with Tom Rönnlund, CEO and Henrik Lundkvist, CFO, who will present the report. The conference call can be accessed on +46 (0)8 56 64 27 06. The presentation is available at www.probi.com and www.financialhearings.com.
Contact
Tom Rönnlund, CEO, Tele: +46 (0)46 286 89 40, E-mail: [email protected]
Henrik Lundkvist, CFO, Tele: +46 (0)46 286 89 41, E-mail: [email protected]
This information is information that Probi AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the CEO and CFO, on October 21, 2022 at 08:00 CET. This is a translation of the Swedish version of the interim report. When in doubt, the Swedish wording prevails.
