Oriola-KD Corporation's Financial Statements for 1 January - 31
December 2008
12.2.2009
Oriola-KD Corporation Stock Exchange Release 12 February 2009 at 8.30
a.m.
The figures for the Oriola-KD Group (hereinafter Oriola-KD) for the
period January - December 2008 have been prepared in accordance with
International Accounting Standard (IAS) 34, Interim Financial
Reporting, as adopted by the EU. The figures are audited. The retail
and wholesale businesses OOO Vitim & Co and OOO Moron, acquired in
Russia, have been consolidated into Oriola-KD's accounts as of 1
April 2008.
Key figures 1 January - 31 December 2008
* Invoicing came to EUR 2,882.3 million (1-12/2007: EUR 2,524.5
million) and net sales to EUR 1,580.8 million (1-12/2007: EUR
1,377.3 million)
* Operating profit was EUR 36.4 million (1-12/2007: EUR 29.1
million)
* Net profit was EUR 27.5 million (1-12/2007: EUR 23.7 million)
* Earnings per share were EUR 0.19 (1-12/2007: EUR 0.16)
* Return on capital employed was 13.5 per cent (1-12/2007: 14.2 per
cent)
* The Board proposes to the General Meeting that a dividend of EUR
0.08 per share (EUR 0.08 per share) be distributed for 2008.
President and CEO Eero Hautaniemi: "Oriola-KD's business developed in
line with our expectations in 2008. Net sales were up by 15 per cent
and operating profit was up by 25 on the previous year. The takeover
of the Russian companies went well. In 2009, we will continue
developing the Russian businesses and preparing for the possible
changes of Sweden's pharmacy market. The uncertainty of the financial
markets may also have an effect on Oriola-KD's business in 2009.
Financial performance
Oriola-KD's invoicing in January-December 2008 was EUR 2,882.3
million (EUR 2,524.5 million) and net sales were EUR 1,580.8 million
(EUR 1377.3 million). Fourth-quarter invoicing came to EUR 766,2
million (EUR 640,0 million) and net sales to EUR 449,1 million (EUR
331,6 million).
Operating profit for January-December 2008 came to EUR 36.4 million
(EUR 29.1 million) and profit after financial items came to EUR 34.6
million (EUR 31.0 million). During the review period, Oriola-KD
invested heavily in strategic growth ventures, the execution and
takeover of the Russian acquisition and in preparing for the business
opportunities offered by the potential deregulation of the Swedish
pharmacy market. The strategic growth ventures gave rise to
additional expenditure of EUR 3.3 million in the period under review.
Fourth-quarter operating profit came to EUR 15.8 million (EUR 7.0
million) and profit after financial items came to EUR 14.4 million
(EUR 7.4 million).
Oriola-KD's financing expenses in January-December 2008 were EUR 1.8
million. In the corresponding period in 2007, financing income was
EUR 1.9 million. The increase in financing expenses was mainly due to
the execution of the Russian acquisition in April 2008.
Taxes in the review period amounted to EUR 7.2 million (EUR 7.3
million). Taxes corresponding to the result for the period under
review are accounted as taxes. The tax rate for 2008 was lowered by
the deduction of deferred tax liabilities which was due to the
decrease of company tax rates in Sweden and Russia.
Net profit in January-December 2008 was EUR 27.5 million (EUR 23.7
million).
Oriola-KD's earnings per share in the review period were EUR 0.19
(EUR 0.16). Return on capital employed was 13.5 per cent (14.2 per
cent) and return on equity 14.1 per cent (12.0 per cent).
Balance sheet, financing and cash flow
Oriola-KD's balance sheet total on 31 December 2008 stood at EUR
790.6 million (EUR 645.4 million). Cash assets at the end of December
2008 were at EUR 46.5 million (EUR 131.0 million), and equity was EUR
185.5 million (EUR 203.6 million). Oriola-KD's equity ratio was 25.1
per cent (33.7 per cent). The equity was lowered by translation
effects due to lower Swedish currency (SEK) and Russian currency
(RUB) exchange rates.
At the end of the review period, interest-bearing net debt amounted
to EUR 62.2 million (EUR -90.0 million) and the gearing ratio was
33.5 per cent (-44.2 per cent). Interest-bearing debt stood at EUR
108.7 million on 31 December 2008 (EUR 41.0 million) and was made up
of drawings on the commercial paper programme, pharmacies' advance
payments in Finland, financial leasing debts and the estimated final
transaction price of the remaining 25 per cent holding in the Russian
companies. At the end of December, Oriola-KD had drawn EUR 29.4
million from the commercial paper programme. Credit facilities of
approximately EUR 78.1 million with banks to secure the programme
remained untapped at the end of the financial year.
Cash flow from operations in January-December 2008 was EUR -18.1
million (EUR 39.0 million), of which changes in working capital
accounted for EUR -52.2 million (EUR 6.8 million). The rise in
working capital is mainly attributable to the growth of the Russian
companies and changes in their terms of payment, and to changes in
Swedish receivables. The changes in the terms of payment will improve
the competitiveness and performance of the businesses in Russia. Cash
flow from investments was EUR -75.3 million (EUR -19.1 million).
During the review period, cash flow after investments was EUR -93.4
million (EUR 19.8 million). Cash flow from financing includes a
dividend of EUR 11.3 million paid in April 2008.
Investments
Investments in 2008 amounted to EUR 125.7 million (EUR 32.1 million)
and mainly concerned the business acquisition in Russia, the
acquisition of a 12.51 per cent minority holding in Kronans
Droghandel AB from Merck Sharp & Dohme (Sverige) AB, and operative
maintenance and PPE investments. The strong profit made by theRussian companies
during the fourth quarter augmented the additional
purchase price connected to the purchase of the 75 per cent holding
and based on the profit for 2008.
Personnel
At the end of the financial year, Oriola-KD had a payroll of 4,709
employees (1,302), 74 per cent of whom worked in Russia (0 per cent),
14 per cent in Finland (54 per cent), 8 per cent in Sweden (28 per
cent) and 4 per cent in the Baltic countries and Denmark combined (18
per cent).
Changes in the Group Management Team in 2008
On 31 December 2008, Oriola-KD Corporation's Group Management Team
was composed of:
Eero Hautaniemi President and CEO
Claes von Bonsdorff Vice President, IT Administration
Thomas Heinonen Senior Legal Counsel (as of 1 June 2008)
Pellervo Hämäläinen Vice President, Communications and IR
Anne Kariniemi Vice President, Logistics and
Sourcing
Cecilia Marlow Vice President, Pharmaceutical
Trade Sweden
(as of 1 November 2008)
Matti Lievonen Senior Advisor, Pharmaceutical
Trade Finland
(until 31 December 2008)
Jukka Niemi Vice President, Pharmaceutical
Trade Finland
Teija Silver Vice President, Human Resources
Ilari Vaalavirta Vice President, Healthcare Trade
Kimmo Virtanen Executive Vice President & CFO
CFO Kimmo Virtanen was appointed Executive Vice President and deputy
to the CEO of Oriola-KD Corporation effective 1 May 2008. His sphere
of responsibility comprises Group functions as well as finance.
Attorney at Law Thomas Heinonen was appointed Senior Legal Counsel at
Oriola-KD effective 1 June 2008 and General Counsel and Secretary of
the Board of Directors effective 1 January 2009. General Counsel
Henry Haarla retired on 1 June 2008.
Jukka Niemi was appointed Vice President of the Pharmaceutical Trade
Finland business effective 1 July 2008. Matti Lievonen, Director of
Pharmaceutical Distribution and Executive Vice President of Oriola Oy
retired at the end of 2008.
Cecilia Marlow was appointed Managing Director of Kronans Droghandel
AB (KD) and a member of the Oriola-KD Group Management Team as of 1
November 2008. Birgitta Gunneflo, Oriola-KD's Managing Director and
member of the Group Management Team, resigned from her post on 1
November 2008.
Business segments
Oriola-KD has two business segments: The Pharmaceutical Trade
business segment and the Healthcare Trade business segment, which
includes the share of profits from the associated dental trade
company.
In accordance with the resolution of the Board of Directors of
Oriola-KD Corporation on 11 February 2009, Oriola-KD's new business
segments as of the first quarter of 2009 are Pharmaceutical Trade
Finland, Pharmaceutical Trade Sweden, Pharmaceutical Trade Russia,
Pharmaceutical Trade Baltics, Healthcare Trade and Dental Trade. The
new segment structure is in line with the Group's new organisation
structure and internal reporting. The comparison data for 2008 will
be published in accordance with the new segment distribution before
the first interim report of 2009.
Pharmaceutical Trade business segment
The Pharmaceutical Trade business segment's invoicing in
January-December 2008 was EUR 2,682.1 million (EUR 2,253.4 million)
and net sales were EUR 1,425.6 million (EUR 1,135.8 million).
Fourth-quarter invoicing came to EUR 712.2 million (EUR 571.4
million) and net sales to EUR 406.4 million (EUR 270.7 million).
The January-December 2008 operating profit came to EUR 32.0 million
(EUR 17.4 million), which includes the Russian business' operating
profit of EUR 8.2 million from April-December. Fourth-quarter
operating profit came to EUR 14.8 million (EUR 2.7 million), which
includes the Russian business' operating profit of EUR 9.0 million
from the fourth quarter.
On 31 December 2008, the number of employees within the
Pharmaceutical Trade business segment was 4,321 (856).
Finland
The Pharmaceutical Trade business segment's invoicing in Finland in
January-December 2008 was EUR 1,047.9 million (EUR 973.8 million) and
net sales were EUR 533.9 million (EUR 468.1 million).
The pharmaceutical market grew by 6.7 per cent in Finland (5.4 per
cent excluding a single large batch of vaccines) in January-December
2008. Oriola-KD held a 47.6 per cent (45.9 per cent) share of the
pharmaceutical distribution market in Finland in January-December
2008 (source: IMS Health).
Oriola-KD took over the distribution of Wyeth products in Finland at
the beginning of 2008. Wyeth's share of the Finnish pharmaceutical
market is roughly two per cent (source: IMS Health). Oriola-KD
retained all its major pharmaceutical principals in Finland during
the period under review.
Based on the situation at the end of the review period, Oriola-KD's
estimated share of the pharmaceutical wholesale market in Finland
will be approximately 47 per cent in 2009.
Sweden
The Pharmaceutical Trade business segment's invoicing in Sweden in
January-December 2008 was EUR 1,270.3 million (EUR 1,242.2 million)
and net sales were EUR 536.1 million (EUR 634.9 million). The decline
in net sales in Sweden was the result of the increase of the relative
share of pharmaceutical manufacturers' consignment agreements in
2008.
The Swedish pharmaceutical market grew by 4.1 per cent (6.8 per cent)
in January-December 2008. Oriola-KD held a 43.8 per cent (42.0 per
cent) share of the pharmaceutical distribution market in Sweden in
January-December 2008 (source: IMS Health).
Oriola-KD took over the distribution of McNeil products in Sweden at
the beginning of 2008. McNeil's share of the Swedish pharmaceutical
market is roughly two per cent (source: IMS Health). Pharmaceutical
principals that will no longer be distributed by Oriola-KD are
Schering-Plough and Organon. As a consequence of this, Oriola-KD's
market share in the wholesale pharmaceutical trade at the beginning
of February 2008 will fall to around 40 per cent of what it was at
the end of 2008.
The Swedish Government has proposed the deregulation of the pharmacy
monopoly in mid-2009. In 2008, Oriola-KD continued to prepare for
this proposed change in the pharmacy market.
In June, Oriola-KD increased its shareholding in the Swedish Kronans
Droghandel AB (KD) from 85.62 per cent to 98.13 per cent by acquiring
a minority holding in Merck Sharp & Dohme (Sverige) AB. Merck Sharp &
Dohme (Sverige) AB held a 12.51 per cent minority in KD. The minority
holding in KD subsequent to the transaction consists of Organon AB's
1.87 per cent holding.
Russia
The retail and wholesale businesses Vitim and Moron that were
acquired in Russia have been consolidated into Oriola-KD's accounts
as of 1 April 2008. In April-December, the net sales of the acquired
companies grew by some 31 per cent in Russian rubles to EUR 318.9
million. The Russian retail and wholesale companies' operating profit
for April-December 2008 was EUR 8.2 million.
Net sales for October-December 2008 totalled EUR 127.3 million and
operating profit was EUR 9.0 million. During the fourth quarter,
Oriola-KD focused on improving the efficiency of operations and
profitability in Russia. Oriola-KD maintained 150 pharmacies in
Russia at the end of the financial year.
The business in Russia is typically seasonal in that performance in
the first and fourth quarters of the year is usually strong.
Historically speaking, performance in the fourth quarter of the year
has been the strongest by a clear margin, whereas the second and
third quarters have been weaker than the other quarters.
Oriola-KD confirmed the acquisition of the pharmacy and
pharmaceutical wholesale businesses of Vitim and Moron on 21 April
2008. The acquisition involved the establishment of a Finnish
company, Foreti Oy, which owns Vitim, a Moscow-based pharmacy retail
company, and Moron, a pharmaceutical wholesaler. Oriola-KD's holding
in Foreti Oy subsequent to the acquisition is 75 per cent while the
founders of the Russian companies, Igor Yankov and Oleg Yankov, hold
25 per cent. Oriola-KD has agreed to buy out the remaining 25 per
cent holding in 2010 for a consideration based on the companies'
performance in 2009.
The Boards of Directors of Foreti Oy, Vitim and Moron are made up of
Eero Hautaniemi (Chairman), Kimmo Virtanen, Christian Ramm-Schmidt,
Igor Yankov and Oleg Yankov.
Other countries
The Pharmaceutical Trade business segment's invoicing in the Baltic
countries in January-December 2008 was EUR 40.7 million (EUR 37.4
million) and net sales were EUR 36.7 million (EUR 32.7 million).
Healthcare Trade business segment
The Healthcare Trade business segment's invoicing in January-December
2008 was EUR 200.2 million (EUR 271.2 million) and net sales were EUR
155.3 million (EUR 241.5 million). Invoicing and net sales in the
Healthcare Trade business segment were reduced by the merger of the
Dental Trade business with and into Lifco Dental, by the sale of the
home distribution business in Sweden in 2007, and by changes in
principals in Finland. Fourth-quarter invoicing came to EUR 54.0
million (EUR 68.6 million) and net sales to EUR 42.7 million (EUR
60.8 million).
Operating profit in January-December 2008 was EUR 10.1 million (EUR
14.9 million). Fourth-quarter operating profit was EUR 2.6 million
(EUR 4.8 million).
The Healthcare Trade business segment had a payroll of 388 (446)
employees on 31 December 2008.
Finland
The Healthcare Trade business segment's invoicing in Finland in
January-December 2008 was EUR 85.4 million (EUR 86.9 million) and net
sales were EUR 76.7 million (EUR 81.7 million). Invoicing for 2008
was reduced by and profitability was weakened by two major suppliers
no longer being represented by Oriola-KD due to restructuring of
international distribution channels.
Sweden
The Healthcare Trade business segment's invoicing in Sweden in
January-December 2008 was EUR 102.0 million (EUR 135.5 million) and
net sales were EUR 65.8 million (EUR 113.4 million). The sale of the
home distribution business in Sweden in 2007 reduced both invoicing
and net sales. Profitability has improved in 2008 and the transition
from distribution to wholesaling business has proceeded according to
plan.
Other countries
The Healthcare Trade business segment's invoicing in the Baltic
countries and Denmark in January-December 2008 was EUR 12.8 million
(EUR 12.3 million) and net sales were EUR 12.7 million (EUR 10.9
million).
Dental Trade
Dental Trade contributed EUR 0.0 million (EUR 36.5 million) to the
segment's invoicing, EUR 0.0 million (EUR 35.6 million) to its net
sales and EUR 2.1 million (EUR 2.2 million) to the segment's
operating profit in January-December 2008. The merger of the dental
business with and into Lifco Dental was finalised on 2 January 2008
with the merger of the businesses in Estonia, Latvia and Lithuania.
Oriola-KD holds a 30 per cent share of the merged dental business
while Lifco has a 70 per cent holding. Operating profit in dental
trade has not met expectations largely because of poor profitability
in Finland and several one-off items related to corporate
acquisitions and terminations of business.
Board of Directors and auditor
In accordance with the company's corporate governance guidelines, the
Chairman of the Board is appointed by the General Meeting. The Deputy
Chairman of the Board is appointed by the Board of Directors. The
Board of Directors appoints Oriola-KD's President and CEO and decides
on the terms of his or her service relationship. The period of notice
of the President and CEO is six months and the compensation on
termination of employment is an amount corresponding to 12 months'
salary.
The Annual General Meeting of Oriola-KD Corporation held on 17 March
2008 confirmed that the Board would continue to comprise seven
members. Harry Brade, Pauli Kulvik, Outi Raitasuo, Antti Remes, Olli
Riikkala, Jaakko Uotila and Mika Vidgrén were re-elected to the
Board. Olli Riikkala continues as Chairman of the Board. The auditor
for the company, elected by the AGM, is corporation of public
accountants PricewaterhouseCoopers Oy with APA Heikki Lassila as
principal auditor. APA Kaj Wasenius was elected deputy auditor.
At the organisation meeting held immediately after the AGM, the Board
resolved to elect Antti Remes to continue serving as Vice Chairman of
the Board. The compositions of the Audit and Compensation Committees
were confirmed as follows.
Audit Committee:
Antti Remes, Chairman
Harry Brade
Outi Raitasuo
Mika Vidgrén
Compensation Committee:
Olli Riikkala, Chairman
Pauli Kulvik
Jaakko Uotila
On 21 November 2008, the Board of Directors of Oriola-KD Corporation
appointed the following persons as members of the Nomination
Committee:
Into Ylppö, Chairman
Harry Brade,
Risto Murto,
Olli Riikkala
According to the rules of procedure of the Nomination Committee
approved by the Board of Directors, the committee is a body
established by the Board of Directors whose duty is to prepare and
make a recommendation to the Board of Directors of a proposal to be
submitted to the Annual General Meeting regarding the composition and
compensation of the Board of Directors.
The Board of Directors has evaluated the independence of its members
and found that all the members are independent of both the company
and its major shareholders.
Related parties
Related parties in the Oriola-KD Group are deemed to comprise parent
company Oriola-KD Corporation, subsidiaries and associated companies,
the members of the Board and the President and CEO of Oriola-KD
Corporation, other members of the Group Management Team of the
Oriola-KD Group, the immediate family of the aforementioned persons,
the companies controlled by the aforementioned persons, and the
Oriola Pension Foundation. The Group has no significant business
transactions with related parties, except for pension expenses
arising from defined benefit plans with the Oriola Pension
Foundation. The notes to the financial statements of Oriola-KD
Corporation provide additional information on intra-Group liabilities
and sureties given on behalf of Group companies. The Oriola-KD
Corporation has given no significant sureties on behalf of Group
companies.
Oriola-KD Corporation share
Trading volume of the Oriola-KD Corporation's Class A and B shares in
January-December 2008:
Trading volume Jan-Dec 2008 Jan-Dec 2007
Class A Class B Class A Class B
Trading volume, million 5.6 41.3 12.1 71.6
Trading volume, EUR million 12.0 98.1 40.2 231.8
High, euros 3.10 3.10 3.70 3.68
Low, euros 1.22 1.20 2.64 2.57
Closing quotation on 31 Dec 2008, 1.30 1.30 3.00 3.00
euros
In the review period, the traded volume of Oriola-KD Corporation
shares, treasury shares excluded, corresponded to 33.0 per cent (59.2
per cent) of the total outstanding shares. The traded volume of Class
A shares in the period under review amounted to 11.2 per cent (23.1
per cent) of average outstanding stock and that of Class B shares,
excluding treasury shares, to 45.0 per cent (80.5 per cent).
Oriola-KD Corporation's market capitalisation on 31 December 2008 was
EUR 184.5 million (EUR 423.8 million).
At the end of 2008, the company had 141,907,828 shares (141,257.828)
of which 48,692,203 were Class A shares (51,245,405) and 93,215,625
were Class B shares (90.012.423). Under Article 3 of the Articles of
Association, a shareholder may demand conversion of Class A shares
into Class B shares. In January-December 2008, a total of 2,553,202
Class A shares were converted into Class B shares (5,049,235).
The resolutions of Oriola-KD Corporation's Board of Directors taken
on 20 February 2008 pursuant to the authorisation granted by the
Annual General Meeting on 13 March 2007, concerning a bonus issue to
the company and a private bonus issue within the share incentive
scheme, were executed during the period under review. Oriola-KD
Corporation issued to itself 650,000 new Class B shares in the bonus
issue. In addition, the Board resolved on a private bonus issue in
which 156,048 Class B shares held as treasury shares were assigned to
the company's President and CEO and other members of Oriola-KD
Corporation's Group Management Team as part of the Group's share
incentive scheme for top management.The share issues were executed
and registered in the period under review. In the context of the
private bonus issue, the company transferred 156,048 Class B shares
on 27 March 2008 into the book-entry accounts of persons covered
under the incentive scheme for management.
Subsequent to the share issues, the company holds 493,952 treasury
shares, all of which are Class B shares. These account for 0.35 per
cent of the company's outstanding stock and 0.05 per cent of the
votes in the company.
The portion of the votes produced by Oriola-KD Corporation's shares
held by Maa- ja Vesitekniikan Tuki ry and its subsidiary exceeded the
one twentieth (1/20) referred to in Section 9 Chapter 2 of the
Securities Markets Act subsequent to a transaction executed on 29
July 2008. Their ownership was 5.08 per cent of the total votes in
Oriola-KD on 29 July 2008.
Dividend distribution proposal
Oriola-KD's parent company is Oriola-KD Corporation, whose
distributable assets on 31 December 2008, based on the balance sheet,
were EUR 73.7 million (EUR 63.1 million). The Board proposes to the
General Meeting that a dividend of EUR 0.08 per share (EUR 0.08 per
share) be distributed for 2008.
Annual General Meeting
Oriola-KD Corporation's Annual General Meeting will be held on 16
April 2009 at 5.00 p.m. at the Helsinki Fair Centre. The matters
specified in Section 10 of the Articles of Association and other
proposals of the Board of Directors, if any, will be handled. The
Board of Directors will decide on the notice of the Annual General
Meeting and the proposals contained in it at a later date. The notice
of the Annual General Meeting will be published in the Helsingin
Sanomat newspaper by 30 March 2009 at the latest.
Publishing of annual report
Oriola-KD Corporation will publish its annual report for 2008 by 3
April 2009 at the latest.
Environment
Oriola-KD supports sustainable development in its operations and
takes environmental considerations into account by applying an
environmental management system that aims to minimise environmental
load. Transportation and the logistical management of large flows of
goods are a fundamental part of Oriola-KD's business. In order to
ensure that distribution is efficient and economical, a scheduled
network of routes is employed in which deliveries are timed in order
to minimise the number of deliveries. The amount of driving done is
thus optimised with an information system developed for this purpose.
Deliveries to regular customers are packed in reusable plastic boxes
that can be used hundreds of times. Large quantities are delivered in
recyclable cardboard packaging, on pallets and castor pallets.
Waste reduction, re-use, sorting and recycling are key principles in
waste management. Pharmaceutical and other toxic waste is sorted and
delivered to a toxic waste disposal plant as required by the
pharmaceutical and environmental authorities.
Risks
The Board of Directors of Oriola-KD has approved the company's risk
management policy in which the operational model, principles,
responsibilities and reporting in risk management have been
determined. The Group's risk management seeks to identify, measure
and manage risks that may threaten the operations of the company and
the achievement of goals set for them. The roles and responsibilities
relating to risk management have been determined in the Group.
Oriola-KD's risks are classified as strategic, operative and
financial. Risk management is a key element of the strategic process,
operative planning and daily decision-making at Oriola-KD.
Oriola-KD has identified the following most significant strategic and
operative risks in its business:
* changes in bargaining position vis-à-vis suppliers and customers
* impacts on business concepts from potential changes in the
structure of the Swedish market
* maintenance of cost-effectiveness and flexibility in costs
* provision of competitive products and services in expanding and
consolidating markets
* expansion-related risks in new markets and businesses
* commitment of key employees
The major financial risks for Oriola-KD involve currency exchange
rates, interest rates, liquidity and credit. The estimated
USD-denominated additional purchase price on the Russian business
acquisition and the USD-denominated purchase price of the remaining
25 per cent holding were hedged in July 2008 in accordance with the
Group's treasury policy.
Oriola-KD's exposure to risks relating to new markets and businesses
as well as financial risks increased in the second quarter as the
company expanded to the Russian pharmaceutical retail and wholesale
market. Currency exchange rate risks are the main financial risks
related to Russia: possible changes in the value of the ruble affect
Oriola-KD's financial performance Goodwill and intangible rights are
subject to annual impairment testing which may affect Oriola-KD's
financial performance.
Near-term risks and uncertainty factors
Factors with a material impact on Oriola-KD's near-term outlook are
the success of the takeover of the Russian acquisition, the
realisation of the growth potential of the Russia-based businesses,
general market trends in Russia and variations in the value of the
ruble. The possible changes of the Swedish pharmacy market is subject
to uncertainty factors that may have a substantial effect on
Oriola-KD's business. The uncertainty of the financial market may
also have an effect on Oriola-KD's near-term business especially in
Russia.
Events after the period under review
In its meeting held on 19 January 2009, the Nomination Committee of
Oriola-KD Corporation gave its recommendation to the Board of
Directors for the proposal to the Annual General Meeting on 16 April
2009 concerning the composition of the Board of Directors as follows:
- The Board of Directors should continue to have seven members
- Current members of the Board Harry Brade, Pauli Kulvik, Outi
Raitasuo, Antti Remes, Olli Riikkala, Jaakko Uotila and Mika Vidgrén
should be re-elected to the Board
- Olli Riikkala should be re-elected as Chairman of the Board.
The following remunerations are recommended to be paid to the Board
of Directors:
Chairman: Annual fee EUR 44,000, fee for each meeting EUR 800,
telephone as a fringe benefit
- Vice Chairman: Annual fee EUR 27,500, fee for each meeting EUR 400
- Other Board members: Annual fee EUR 22,000, fee for each meeting
EUR 400
- The annual fees shall be paid in cash no later than 5 May 2009
- Meeting fees should be paid in the same manner also to members of
the Board of Directors and the company's committees
- Travel expenses should be paid in accordance with the travel policy
of the company
Pursuant to the resolution of the Board of Directors of Oriola-KD
Corporation on 11 February 2009, as of 1 March 2009 Oriola-KD
Corporation's Group Management Team will be composed of:
Eero Hautaniemi President and CEO
Anne Kariniemi Vice President, Logistics and
Sourcing
Cecilia Marlow Vice Director, Pharmaceutical Trade
Sweden
Jukka Niemi Vice President, Pharmaceutical
Trade Finland
Ilari Vaalavirta Vice President, Healthcare Trade
Kimmo Virtanen Executive Vice President & CFO
The aim of the changes in the Group Management Team is to promote the
implementation of the Group's strategic projects and the direction of
the business units. Head of the Baltic countries and heads of Russian
businesses will report to President and CEO of Oriola-KD.
An extended Group Management Team, composed of the Group Management
Team and the heads of the Group functions, also operates in the
Group.
Outlook
Oriola-KD's outlook for 2009 is based on external market forecasts,
agreements with principals, cumulative orders and management
estimates. Long term fundamentals and growth prospects are deemed to
remain favourable in the healthcare market.
Oriola-KD estimates that the pharmaceutical market in Finland and
Sweden will grow by about 3-5 per cent annually over the next few
years, which is in line with the longer-term average growth rate of
these markets. The Russian pharmaceutical market is estimated to see
annual growth of approximately 15-20 per cent in Russian rubles in
the next few years. Growth in the market for healthcare equipment and
supplies in Finland and Sweden is estimated to outpace that of the
pharmaceutical market.
The introduction of the reference price system in Finland at the
beginning of April 2009 will hamper the growth of net sales of the
Pharmaceutical Trade Finland business in 2009. It is too early to
predict the revenue performance of the Pharmaceutical Trade Sweden
business due to changes caused by the possible changes of the
pharmacy market. The Pharmaceutical Trade Russia business is expected
to continue growing despite the weakened ruble. Oriola-KD's
comparable net sales in 2009 is expected to be higher than in the
previous year.
Due to the changes in the market environment it is too early to
estimate Oriola-KD's operating profit in 2009.
Tables
Income Statement, 1.1.- 1.1.- 1.10.- 1.10.-
EUR million 31.12.2008 31.12.2007 31.12.2008 31.12.2007
Net sales 1580.8 1377.3 449.1 331.6
Cost of goods sold -1370.0 -1232.0 -380.0 -294.6
Gross profit 210.8 145.2 69.1 37.0
Other operating
income 3.4 2.3 0.8 0.8
Selling and
distribution expenses -146.7 -104.5 -43.8 -27.5
Administrative
expenses -33.3 -14.9 -11.1 -4.2
Profit from
associated company 2.2 1.0 0.8 1.0
Operating profit 36.4 29.1 15.8 7.0
Financial income
and expenses -1.8 1.9 -1.4 0.4
Profit before taxes 34.6 31.0 14.4 7.4
Tax expense*) -7.2 -7.3 -2.0 -1.5
Profit for the period 27.5 23.7 12.4 5.9
of which available for:
Parent company
shareholders 27.4 23.3 12.4 5.9
Minority interest 0.1 0.4 0.0 0.0
Earnings per share:
Basic earnings
per share (EUR) 0.19 0.16 0.09 0.04
Diluted earnings
per share (EUR) 0.19 0.16 0.09 0.04
*) The tax expense for the period 2008
has been calculated as the proportional
share of the total estimated taxes
for the financial year.
Balance sheet,
EUR million 31.12.2008 31.12.2007
Non-current assets
Property, plant and equipment 54.5 56.3
Goodwill 105.1 33.9
Other intangible assets 41.9 4.5
Investments in
associates and
available-for-sale
investments 28.5 27.1
Other non-current
receivables 9.8 10.6
Deferred tax assets 0.8 0.2
Non-current
assets total 240.5 132.5
Current assets
Inventories 250.7 180.9
Trade and
other receivables 252.9 201.0
Cash and
cash equivalents 46.5 131.0
Current assets total 550.1 512.9
ASSETS TOTAL 790.6 645.4
Balance sheet,
EUR million 31.12.2008 31.12.2007
Non-current
liabilities
Share capital 36.2 36.2
Other funds 30.1 30.1
Retained earnings 118.1 129.2
Net assets of the
parent company
shareholders 184.4 195.5
Minority interest 1.0 8.1
Net assets total 185.5 203.6
Non-current liabilities
Deferred tax liabilities 16.5 8.7
Pension liability 4.2 4.4
Provisions 0.0 0.0
Interest-bearing
non-current liabilities 27.9 0.3
Other non-current
liabilities 0.0 0.4
Current liabilities
total 48.5 13.8
Current liabilities
Trade payables
and other current
liabilities 475.8 387.4
Provisions 0.0 0.0
Interest-bearing
current liabilities 80.8 40.7
Current liabilities
total 556.6 428.1
EQUITY AND
LIABILITIES TOTAL 790.6 645.4
Changes
in
shareholder's
equity:
Equity of
the parent
Share Other Translation Retained company Minority
EUR million capital funds differences earnings shareholders interest Total
Shareholder's
equity
1.1.2007 36.2 30.1 0.0 116.9 183.3 8.5 191.8
Translation
differences -2.5 -2.5 -0.4 -2.9
Dividend
Paid -8.5 -8.5 -0.4 -8.9
Hedge on
net
investment
in foreign
subsidiary
Change in
minority
interest
Other changes -0.4 -0.4 -0.4
Share based
payments 0.4 0.4 0.4
Taxes related
to items
booked
into equity
Items booked
into equity
Profit for
the period 23.3 23.3 0.4 23.7
Shareholder's
equity
31.12.2007 36.2 30.1 -2.5 131.7 195.5 8.1 203.6
Shareholder's
equity
1.1.2008 36.2 30.1 -2.5 131.7 195.5 8.1 203.6
Translation
differences -27.6 -27.6 -27.6
Dividend
distribution -11.3 -11.3 -11.3
Hedge on
net
investment
in foreign
subsidiary
Change in
minority
interest -7.1 -7.1
Other changes
Share based
payments 0.4 0.4 0.4
Taxes related
to items
booked into
equity
Items booked
into equity
Profit for
the period 27.4 27.4 0.1 27.5
Shareholder's
equity
31.12.2008 36.2 30.1 -30.1 148.2 184.4 1.1 185.5
Cash flow statement, 1.1.- 1.1.-
EUR million 31.12.2008 31.12.2007
Operating profit 36.4 29.1
Depreciation 9.8 10.4
Change in
working capital -52.2 6.8
Cash flow
from financial
items and taxes -6.8 -5.5
Other
adjustments -5.2 -1.9
Cash flow
from operating
activities -18.1 39.0
Cash flow from
investing activities -75.3 -19.1
Cash flow from
financing activities 10.5 -0.7
Net change in
cash and cash
equivalents -82.9 19.1
Cash and cash
equivalents at
beginning of period 131.0 112.9
Foreign exchange
difference -1.6 -1.0
Net change in cash
and cash equivalents -82.9 19.1
Cash and cash
equivalents at
end of period 46.5 131.0
Change in property,
plant and equipment
1.1.- 1.1.-
milj.EUR 31.12.2008 31.12.2007
Carrying amount at
the beginning of
the period 56.3 63.3
Increase through
acquisition of
subsidiary share 6.9 0.0
Additions 4.0 5.1
Disposals -2.2 -3.5
Depreciation -6.7 -7.3
Translation
differencies -3.7 -1.4
Carrying amount
at the end of the period 54.5 56.3
Key figures 1.1.- 1.1.-
and rations 31.12.2008 31.12.2007
Equity ratio, % 25.1% 33.7%
Equity per
share, EUR 1.30 1.38
Return on
capital employed
(ROCE), % 13.5% 14.2%
Return on
equity, % 14.1% 12.0%
Net interest
bearing debt, Me 62.2 Me -90.0 Me
Gearing, % 33.5% -44.2%
Earnings
per share, EUR 0.19 0.16
Average number
of share, tpcs 141 393 141 258
Forward contracts
and contingent
liabilities
31.12.2008
Positive Negative Nominal
fair fair values
EUR million value value of contracts
Currency forward
and swap contracts
under hedge
accounting 4.7 35.2
Other forward
and currency swap
ontracts 0.1 13.2
31.12.2007
Positive Negative Nominal
fair fair values
EUR million value value of contracts
Currency forward
and swap contracts
under hedge accounting
Other forward and
currency swap contracts -0.0 53.0
EUR million 31.12.2008 31.12.2007
Contingent for
own liabilities
Guarantees given 37.8 3.1
Real-estate
mortgages given 2.0 2.0
Mortgages on
company assets 2.2 21.9
Other guarantees
and liabilities 1.2 1.9
Total 43.2 28.9
Guarantees given
on behalf of
external parties 0.0 0.0
Leasing-liabilities
(operating liabilities) 0.4 0.3
Rent contingent 33.3 5.0
Invoicing by
business segment, 1.1.- 1.1.-
EUR million 31.12.2008 31.12.2007
Pharmaceutical Trade
business segment 2682.1 2253.4
Healthcare Trade 200.2 234.7
Dental Trade 0.0 36.5
Group Total 2882.3 2524.5
Oriola-KD has two business segments:
the Pharmaceutical Trade business segment
and the Healthcare Trade business segment,
which includes the share of profits from the
associated company.
Net sales by business 1.1.- 1.1.-
segment, EUR million 31.12.2008 31.12.2007
Pharmaceutical Trade
business segment 1425.6 1135.8
Healthcare Trade 155.3 205.9
Dental Trade 0.0 35.6
Group Total 1580.8 1377.3
Operating profit by
business segment, 1.1.- 1.1.-
EUR million 31.12.2008 31.12.2007
Pharmaceutical Trade
business segment 32.0 17.4
Healthcare Trade 7.9 12.6
Dental Trade 2.1 2.2
Group items -5.6 -3.2
Group total 36.4 29.1
Average number of personnel 3 807 1 432
Number of personnel at the end
of the period 4 709 1 302
Invoicing by
business segment, 10-12/ 7-9/ 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/
EUR million 2008 2008 2008 2008 2007 2007 2007 2007
Pharmaceutical
Trade
business segment 712.2 671.3 706.5 592.1 571.4 543.0 575.9 563.2
Healthcare Trade 54.0 44.8 49.7 51.6 67.3 52.1 56.7 58.6
Dental Trade 0.0 0.0 0.0 0.0 1.3 10.2 11.8 13.2
Group Total 766.2 716.2 756.2 643.6 640.0 605.2 644.4 634.9
Net sales by
business
segment, 10-12/ 7-9/ 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/
EUR million 2008 2008 2008 2008 2007 2007 2007 2007
Pharmaceutical
Trade
business segment 406.4 364.6 377.2 277.3 270.7 278.3 295.5 291.3
Healthcare Trade 42.7 33.8 38.1 40.6 59.5 45.6 49.2 51.7
Dental Trade 0.0 0.0 0.0 0.0 1.3 9.9 11.5 12.9
Group Total 449.1 398.4 415.4 318.0 331.6 333.8 356.1 355.8
Operating profit
by business
segment, 10-12/ 7-9/ 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/
EUR million 2008 2008 2008 2008 2007 2007 2007 2007
Pharmaceutical
Trade
business segment 14.8 7.0 4.3 5.9 2.7 5.0 4.6 5.1
Healthcare Trade 1.7 1.8 1.5 2.9 3.9 3.4 2.8 2.6
Dental Trade 0.8 0.3 0.4 0.6 1.0 0.1 0.2 1.1
Group items -1.6 -1.2 -2.0 -0.8 -0.5 -0.5 -1.2 -1.0
Group total 15.8 7.9 4.2 8.5 7.0 8.0 6.3 7.8
Net sales by market, 1.1.- 1.1.-
EUR million 31.12.2008 31.12.2007
Finland 618.2 570.1
Other Nordic
countries 592.4 756.5
Other Europe 51.1 49.1
Russia 319.0 0.1
Other countries 0.2 1.4
Total 1580.8 1377.3
Net sales by
market, 10-12/ 7-9/ 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/
EUR million 2008 2008 2008 2008 2007 2007 2007 2007
Finland 174.5 144.6 150.5 148.7 143.4 135.3 143.4 148.1
Other Nordic
countries 132.3 145.1 158.5 156.5 174.9 187.1 199.6 195.0
Other Europe 14.9 10.9 12.5 12.7 12.8 11.3 12.5 12.5
Russia 127.3 97.9 93.8 0.0 0.0 0.0 0.0 0.0
Other countries 0.1 0.0 0.1 0.0 0.5 0.1 0.7 0.2
Total 449.1 398.4 415.4 318.0 331.6 333.8 356.1 355.8
Consolidated Proforma net sales for the he retail and wholesale
businesses acquired in Russia was 96 EUR million and
consolidated
Proforma EBIT -0.8 EUR million for the period January to March
2008.
CORPORATE ACQUISITIONS
Acquisition of Vitim & Co and Moron Ltd
Oriola-KD announced in March that it would acquire 75 percent of a
Moscow-based pharmacy company (Vitim & Co) and of a pharmaceutical
wholesaler (Moron Ltd.) The transaction was executed in April. In
addition, Oriola-KD has agreed to buy out the remaining 25-percent
holding in 2010 for a consideration based on the companies'
performance in 2009. The additional purchase price relating to the
acquired 75-percent holding and the purchase of the remaining
25-percent holding are recognized as a liability, the magnitude of
which is based on the best estimate of management.
The acquisition cost is calculated on the basis of the companies'
provisional balance sheets as per 31 March 2008 prepared in
accordance with IFRS and the Oriola-KD Group's accounting principles
in respect of all material elements. The provisional balance sheets
and acquisition cost calculation are unaudited.
The acquisition is accounted for using provisional values as
permitted under IFRS 3. Over the 12 months following the acquisition,
Oriola-KD will make the necessary adjustments to these provisional
values.
The balance sheets of the acquired companies have been consolidated
into the Oriola-KD Group as of 1 April 2008 and the calculation below
includes the acquisition of both companies.
Provisional details on the net assets
and goodwill acquires are as follows:
Carrying Fair
amount Fair value value
EUR allocations EUR
million EUR million million
Tangible assets 5.0 1.8 6.9
Other intangible assets 5.4 41.5 46.9
Deferred tax assets 0.7 0.0 0.7
Inventories,
advances paid 69.2 0.0 69.2
Trade receivables 39.6 0.0 39.6
Other receivables 5.0 0.0 5.0
Cash and
cash equivalents 3.0 0.0 3.0
Deferred tax liabilities 0.0 -10.4 -10.4
Interest-bearing
non-current liabilities -8.8 0.0 -8.8
Trade payables and
other current
liabilities -108.5 0.0 -108.5
Interest-bearing
current liabilities -8.9 0.0 -8.9
Net indentifiable assets 1.7 32.9 34.7
Acquisition price
Purchase price -64.0
Additional purchase
price
and purchase of
the remaining 25% -47.7
Costs related to
acquisition -4.4
Goodwill 81.5
Purchase price
settled in cash -64.0
Costs related
to acquisition -4.4
Cash and cash
equivalents acquired 3.0
Cash outflow
on acquisition for 2008 -65.4
Estimated purchase
price payable -47.7
Total cash outflow
on acquisition -113.2
The remaining goodwill arising from the acquisition,
is based on synergy benefits and widened new
market area possibilities and benefits.
Espoo, 11 February 2009
Board of Directors of Oriola-KD Corporation
Oriola-KD Corporation
Eero Hautaniemi
President and CEO
Kimmo Virtanen
Executive Vice President and CFO
Further information:
Eero Hautaniemi
President and CEO
tel. +358 (0)10 429 2109
e-mail: eero.hautaniemi@oriola-kd.com
Kimmo Virtanen
Executive Vice President and CFO
tel. +358 (0)10 429 2069
e-mail: kimmo.virtanen@oriola-kd.com
Pellervo Hämäläinen
Vice President, Communications and IR
tel. +358 (0)10 429 2497
e-mail: pellervo.hamalainen@oriola-kd.com
Distribution:
NASDAQ OMX Helsinki
Key media
Released by:
Oriola-KD Corporation
Corporate Communications
Orionintie 5
FI-02200 Espoo, Finland
www.oriola-kd.com