Interim Report January-March 2018

Oriola Corporation published its Interim report 1 January-31 March 2018 on Friday, 27 April 2018 approximately at 8.30 a.m.

President and CEO Robert Andersson:

“In the first quarter of the year, our operations progressed as planned despite challenges in many areas. In the Services Business Area, we succeeded in improving our efficiency and stabilising our operations in Finland, which had been weakened by the introduction of the new ERP and warehouse management system. There is still need for improvement and we expect to normalise deliveries and efficiency in Finland in the second quarter of 2018, and further increase efficiency by the end of the year. Our Consumer business was still challenged by the increasing competition in the pharmacy market in Sweden, and the intensive start-up phase of the new Hehku chain during the first quarter. Despite all this, we managed to increase the Group’s net sales by 5.6% and invoicing by 6.4% compared to the corresponding period last year.

We are competing in the tightening Swedish pharmacy market, where consumers are increasingly moving to use online pharmacy services. By the end of the first quarter, online sales had risen to 9% (6%) of total pharmacy sales in Sweden. Oriola’s online sales continued to grow faster than the market. During the reporting period online sales accounted for 2.4% (1.9%) of Oriola’s Consumer sales in Sweden. Net sales of Consumer business in constant currency grew by almost 4%. However, the weak exchange rate negatively affected our comparable sales and result. In Finland, our joint venture Hehku launched 17 Hehku stores and an online store in the first quarter of the year. The Hehku chain, co-founded with Kesko, is a comprehensive wellbeing chain founded in response to the growing health and wellbeing market in Finland. The establishment of the chain will negatively affect the result of our Consumer business operations this year.

The operative result of our Services Business Area continued to suffer from the difficulties experienced with our new ERP and warehouse management system, implemented in the third quarter of 2017. The system’s delivery capability and efficiency have now improved considerably, and we have implemented many development projects that are important to the customer experience. With these restored capabilities, we have also been able to once again take over distribution of products that had been placed in multichannel distribution. Despite this, the deployment of the new system and the new processes resulted in additional costs of around EUR 2 million for the Services business area for the first quarter of 2018.

In the first quarter, our operations developed well in the Services Business Area in Sweden, helped by both growth in the pharmaceuticals market and the distribution agreements that were concluded last year. To maintain growth in Sweden, we are investing in expanding and automating our distribution centre in Enköping. The project is proceeding as planned, and the new distribution centre is expected to start deliveries in the fourth quarter of 2018.

There were also positive developments during the first quarter of 2018 in expert services as part of the Services Business Area. We provide our customers the widest range of services in the industry, throughout the medicine’s path from research to pharmaceutical guidance for consumers.     

Our Healthcare business grew strongly in the first quarter, making a positive result after four loss-making quarters. Net sales grew by  61% compared to corresponding period last year. Growth was particularly driven by the progress with dose dispensing in Sweden. Despite growing competition, business continued to be stable in Finland. Our dose dispensing services currently cover almost 70,000 patients. Ageing population and the society’s need to increase the proportion of home care are speeding up the development of dose dispensing operations in both Sweden and Finland.

We have made major changes to our Group Management Team during the first quarter of the year. At the beginning of January, Anders Torell started as Vice President of the Consumer business area, and I started as CEO in February. In March Helena Kukkonen took up the position of CFO for the Group and Charlotta Nyström was appointed CIO of the Group. I am confident that with this Group Management Team we can respond to the changing challenges of our operating environment.

The market is rapidly becoming more digital. This is especially evident in Sweden, with fast changes in the pharmaceuticals market both in online stores and in the service offerings of conventional pharmacies. In Finland, we are in the middle of both the debate around the pharmacy market regulations and the comprehensive reforms of the social and healthcare systems.   

We have made it through a difficult time, one that placed heavy demands on our customers and our staff. I want to warmly thank our customers for their loyalty and patience. I also want to thank all of our employees for their valuable work especially in maintaining and improving Finland’s pharmaceutical service capabiliity. Your commitment is tremendously valuable”.

Q1 2018