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Oriola-KD Corporation's interim report for 1 January - 30 September 2010
28.10.2010
Oriola-KD Corporation Stock Exchange Release 28 October 2010 at 8.30 a.m.
This review presents financial information on the continuing operations of the
Oriola-KD Group (hereinafter Oriola-KD) for the period January-September 2010.
Oriola-KD's Healthcare Trade business was sold to Mediq on 31 May 2010, and its
figures are reported in the tables under discontinued operations. The figures
for the 03 Apteka pharmacy chain purchased in Russia have been consolidated with
those of Oriola-KD as of 31 August 2010. The interim report for 1 January-30
September 2010 has been drawn up in accordance with the calculation principles
of the IAS 34 standard and with Oriola-KD's 2009 annual report. In addition, new
IAS/IFRS standards have been adopted in 2010, the most important of which are
IFRS 3R and IAS 27. The figures are unaudited.
Key figures for continuing operations, 1 January - 30 September 2010
* Net sales increased by 24 per cent to EUR 1,401.5 million (Jan-Sep 2009: EUR
1,125.8 million)
* Operating profit decreased 79 per cent to EUR 6.8 million (Jan-Sep 2009: EUR
31.9 million)
* Operating profit includes EUR 11.7 million one-off costs: a write-off
provision on a EUR 1.7 million receivable in Sweden concerning a
pharmaceutical company bankruptcy; a write-off provision on a EUR 2.1
million trade receivable in Russia concerning a pharmaceutical chain
bankruptcy; and a EUR 7.9 million write-off by booking purchase-related
discounts into the stock value in Russia
* Operating profit excluding the one-off costs was EUR 18.5 million (Jan-Sep
2009: EUR 31.9 million)
* Net profit decreased by 90 per cent to EUR 2.4 million (Jan-Sep 2009: EUR
23.9 million)
* Earnings per share were EUR 0.02 (Jan-Sep 2009: EUR 0.16) and earnings per
share including discontinued operations EUR 0.39
* Net cash flow from operations was EUR 43.2 million (Jan-Sep 2009: EUR 6.4
million)
* Return on capital employed was 2.0 per cent (Jan-Sep 2009: 15.5 per cent
with inclusion of the Healthcare Trade business)
* Changed outlook: Oriola-KD's net sales from its continuing operations for
2010 are expected to be higher than in 2009 and operating profit is
forecasted to be clearly lower than in 2009
Key figures for continuing operations, 1 July - 30 September 2010
* Net sales increased by 31 per cent to EUR 498.5 million (Q3/2009: EUR 379.2
million)
* Operating loss was EUR -4.5 million (Q3/2009: operating profit EUR 10.7
million)
* Operating loss includes EUR 11.7 million one-off costs
* Operating profit excluding the one-off costs was EUR 7.2 million (Jan-Sep
2009: EUR 10.7 million)
* Net result was EUR -5.0 million (Q3/2009: EUR 8.6 million)
* Earnings per share were EUR -0.03 (Q3/2009: EUR 0.06)
President and CEO Eero Hautaniemi: "Net sales in Oriola-KD's continuing
operations for January-September 2010 were up by 24 per cent to EUR 1.4 billion.
Business in Finland and Sweden has developed well. Operating profit fell as a
result of the extremely difficult market environment in Russia and the one-off
costs of EUR 11.7 million in the third quarter. Oriola-KD's aim is to adjust its
Russian business in line with the tough market environment in the short term,
and to continue with business development and growth in line with its strategy
in the longer term. In August we completed the acquisition of 70 pharmacies in
Moscow and in September we opened two regional distribution centres in Russia."
Financial performance
The figures related to financial performance refer to continuing operations and
do not include the Healthcare Trade, unless otherwise stated.
Oriola-KD's net sales in January-September 2010 were EUR 1,401.5 million (EUR
1,125.8 million), and operating profit was EUR 6.8 million (EUR 31.9 million).
Operating profit includes EUR 11.7 million one-off costs: a write-off provision
on a EUR 1.7 million receivable in Sweden concerning a pharmaceutical company
bankruptcy; a write-off provision on a EUR 2.1 million trade receivable in
Russia concerning a pharmaceutical chain bankruptcy; and a EUR 7.9 million
write-off by booking purchase-related discounts into the stock value. In Russia
the amount and significance of purchase-related discounts has grown during
2010, and as a result Oriola-KD has made a stock write-off by booking purchase-
related discounts in the stock value. Profit after financial items came to EUR
3.2 million (EUR 30.2 million) and net profit to EUR 2.4 million (EUR 23.9
million). Earnings per share in January-September 2010 were EUR 0.02 (EUR 0.16).
Third-quarter net sales came to EUR 498.5 million (EUR 379.2 million), and the
operating loss was EUR -4.5 million (operating profit EUR 10.7 million)
including EUR 11.7 million one-off costs. The result after financial items came
to EUR -5.8 million (EUR 10.8 million), and the net result was EUR -5.0 million
(EUR 8.6 million). The third-quarter earnings per share came to EUR -0.03 (EUR
0.06).
Oriola-KD's financing expenses in January-September 2010 were EUR 3.6 million
(EUR 1.6 million). Taxes amounted to EUR 0.8 million (EUR 6.3 million). Taxes
corresponding to the result for continuing operations for January-September
2010 are entered under this figure.
The return on capital employed for continuing operations was 2.0 per cent (15.5
per cent with inclusion of Healthcare Trade) and return on equity 1.1 per cent
(18.9 per cent including the Healthcare Trade) in January-September 2010.
Balance sheet, financing and cash flow
The balance sheet, financing and cash flow figures include the Healthcare Trade
figures up to 31 May 2010 and also the operating profit from the corporate
transaction. The Swedish pharmaceutical retail business has been consolidated
with the Oriola-KD figures since 19 February 2010, and the figures for the 03
Apteka pharmacy chain purchased in Russia have been consolidated with Oriola-KD
since 31 August 2010.
Oriola-KD's balance sheet total on 30 September 2010 stood at EUR 1,144.3
million (EUR 855.5 million). Cash assets at the end of September 2010 stood at
EUR 89.5 million (EUR 52.3 million). Equity was EUR 302.5 million (EUR 219.7
million), and the equity ratio was 27.1 per cent (26.4 per cent). The sale of
the Healthcare Trade business increased Oriola-KD's equity and equity ratio and
decreased interest-bearing net debt and goodwill.
Interest-bearing net debt at the end of September 2010 was EUR 98.4 million (EUR
97.1 million), and the gearing ratio was 32.5 per cent (44.2 per cent). Oriola-
KD hedged the long-term interest-bearing debt associated with the Swedish
pharmaceutical retail against the interest rate risk during the third quarter of
2010. Interest-bearing net debt consists of long-term debt financing, use of the
issued commercial paper programme, advance payments from pharmacies and the
estimated discounted value of the minority share of the Swedish pharmacy company
that Oriola-KD is obliged to acquire.
The terms of the financial covenants were met by a wide margin at the end of
September 2010. Oriola-KD's committed long-term credit facilities of
approximately EUR 102.8 million and EUR 41.9 million in short-term credit
account facilities with banks stood unused at the end of the review period. A
total of EUR 36.5 million of Oriola-KD's EUR 150.0 million commercial paper
programme was in use.
Net cash flow from operations in January-September 2010 was EUR 43.2 (EUR 6.4
million), of which changes in working capital accounted for EUR 32.1 million
(EUR -26.2 million). On the Swedish pharmaceutical wholesale the trade
receivables sales programme was continued during the third quarter of 2010
Net cash flow from investments was EUR -166.3 million (EUR -29.6 million). Net
cash flow from investments includes the pharmacy chain acquisition in Sweden,
the acquisition of the 25 per cent minority share in Russia, operating
investments, the sale of the Healthcare Trade and the acquisition of the 03
Apteka pharmacy chain in Russia. During January-September 2010, cash flow after
investments was EUR -123.1 million (EUR -23.2 million).
On 24 February 2010, Oriola-KD acquired the remaining 25 per cent holding in
Oriola-KD Holding Russia Oy (formerly Foreti Oy), which owns the two Russian
pharmaceutical retail and wholesale companies OOO Vitim and OOO Moron. The price
of the 25 per cent holding was EUR 65.0 million. The total price of these
acquisitions in Russia was EUR 153.7 million, paid in cash.
On 31 August 2010, Oriola-KD acquired a 100 per cent ownership share in the 03
Apteka pharmacy chain operating in the Moscow area. The purchase price was EUR
11.9 million.
Oriola-KD paid EUR 18.1 million in dividends for 2009, i.e. EUR 0.12 per share
(2008: EUR 0.08 per share) during the second quarter.
Investments
Gross investment for January-September 2010 came to EUR 186.1 million (EUR 31.5
million). This includes the EUR 161.5 million Swedish pharmacy chain
acquisition, the acquisition of the EUR 11.9 million 03 Apteka pharmacy chain in
Russia and EUR 12.7 million operating investments. In January-September the
Healthcare Trade business was sold for approximately EUR 85 million.
On 19 February 2010, Kronans Droghandel Retail AB completed the acquisition of
100 per cent of the share capital of a Swedish pharmacy company with 170
pharmacies nationwide. Paid in cash, the price of this acquisition was EUR
161.5 million (SEK 1.59 billion). Oriola-KD has an 80 per cent holding in the
joint venture Kronans Droghandel Retail AB, with the remaining 20 per cent being
held by Kooperativa Förbundet. Oriola-KD has an obligation and right to acquire
a minority share in Kooperativa Förbundet after a long term cooperation. This
obligation was recognised in the Oriola-KD balance sheet under interest-bearing
long-term debt in conjunction with the acquisition of the pharmacies.
Personnel
On 30 September 2010, Oriola-KD had a payroll of 5,311 (3,817) employees, 8 per
cent (11 per cent) of whom worked in Finland, 27 per cent (7 per cent) in
Sweden, 63 per cent (79 per cent) in Russia and a total of 2 per cent (3 per
cent) in the Baltic countries. The numbers increased because of the acquisition
of the Swedish pharmacy chain in February 2010, which added some 930 employees
to Oriola-KD's payroll, and the acquisition of the 03 Apteka pharmacy chain,
which brought a further total of about 350 employees to Oriola-KD.
Business segments
In accordance with its organisational structure and internal reporting, Oriola-
KD's business segments after the sale of Healthcare Trade are, as of 1 June
2010, Pharmaceutical Trade Finland, Pharmaceutical Trade Sweden, Pharmaceutical
Trade Russia, Pharmaceutical Trade Baltics, and Dental Trade.
Pharmaceutical Trade Finland
Pharmaceutical Trade Finland's net sales in January-September 2010 were EUR
314.2 million (EUR 379.3 million), and its operating profit was EUR 15.3 million
(EUR 13.7 million). The changes made from stock owned by Oriola-KD to
consignment stock, as agreed with pharmaceutical companies, contributed to the
drop in net sales during the review period.
Third-quarter net sales came to EUR 103.8 million (EUR 120.6 million) and
operating profit to EUR 5.9 million (EUR 4.9 million).
The Finnish pharmaceutical market shrank by -0.9 per cent (0.0 per cent) in
January-September 2010. Oriola-KD held a 46.5 per cent (46.9 per cent) share of
the pharmaceutical wholesale market in Finland in January-September 2010
(source: IMS Health).
At the end of September 2010, 417 (410) people were employed by Pharmaceutical
Trade Finland. Oriola-KD's logistics centres are located in Espoo and Oulu.
Pharmaceutical Trade Sweden
Pharmaceutical Trade Sweden's net sales in January-September 2010 were EUR
661.9 million (EUR 389.0 million), of which retail accounted for EUR 282.4
million (EUR 0.0 million) and wholesale EUR 414.1 million (EUR 389.0 million).
The acquired pharmaceutical retail business has been consolidated with the
Oriola-KD figures as of 19 February 2010.
Pharmaceutical Trade Sweden's operating profit in January-September 2010 was EUR
9.1 million (EUR -2.8 million). The costs of preparations for pharmacy business
in Sweden in the period 1 January 2010 - 19 February 2010 came to EUR 2.2
million (Jan-Sep 2009: EUR 8.0 million). The operating profit includes a third-
quarter write-off provision on a EUR 1.7 million receivable in the wholesale
concerning a pharmaceutical company bankruptcy. In addition, planned
depreciation of EUR 1.0 million was recognised for January-September on the fair
value allocation of the acquisition.
Third-quarter net sales came to EUR 239.5 million (EUR 132.1 million), of which
retail accounted for EUR 116.1 million (EUR 0.0 million) and wholesale EUR
137.6 million (EUR 132.1 million). Operating profit was EUR 4.9 million
(operating loss EUR -0.4 million), which includes EUR 1.7 million one-off costs.
On 19 February 2010, Kronans Droghandel Retail AB completed the acquisition of
100 per cent of the share capital of a Swedish pharmacy company with 170
pharmacies nationwide. Paid in cash, the final price of the acquisition was EUR
161.5 million (SEK 1.59 billion). In 2009, the pro forma net sales of the
acquired pharmacy chain were SEK 4.6 billion (2008: SEK 4.4 billion) and pro
forma operating profit including average central overhead costs of Apoteket AB
was SEK 205 million (2008: SEK 183 million). Oriola-KD had 176 pharmacies in
Sweden at the end of September 2010. Kronans Droghandel Retail AB merged with
the acquired pharmacy company, Kronans Droghandel Apotek AB, on 30 September
2010. Oriola-KD's logistics centres are located in Gothenburg and Enköping.
The Swedish pharmaceutical market grew by 1.1 per cent (2.6 per cent) in
January-September 2010. Oriola-KD held a 40.5 per cent (41.4 per cent) share of
the pharmaceutical wholesale market in Sweden in January-September 2010 (source:
IMS Health). Oriola-KD's market share of the Swedish retail pharmaceutical
market in September 2010 was 14 per cent (source: IMS Health).
Pharmaceutical Trade Sweden had 1,455 (273) employees at the end of September
2010, of whom 1,143 (0) were employed in retail and 312 (273) in wholesale.
Pharmaceutical Trade Russia
Pharmaceutical Trade Russia's net sales in January-September 2010 were EUR
402.8 million (EUR 332.5 million), of which retail accounted for EUR 72.9
million (EUR 71.1 million) and wholesale EUR 369.5 million (EUR 302.5 million).
The 03 Apteka pharmaceutical retail business acquired has been consolidated with
the Oriola-KD figures as of 31 August 2010. One month's share of the annual EUR
0.4 million depreciation was recognised for September based on the fair value
allocation of the acquisition.
The operating loss in January-September 2010 was EUR -18.1 million (operating
profit EUR 22.8 million). The operating loss includes EUR 10.0 million one-off
costs: a write-off provision on a EUR 2.1 million trade receivable concerning a
pharmaceutical chain bankruptcy, and a EUR 7.9 million stock value write-off as
a result of an extremely tough market environment. In Russia the amount and
significance of purchase-related discounts has grown during 2010, and as a
result Oriola-KD has made a stock write-off by booking purchase-related
discounts in the stock value.
Growth in the Russian pharmaceutical market in January-September 2010, measured
in rubles, was about 3 per cent (approx. 20 per cent). This below-forecast
growth together with the price control system has lead to very intense
competition. Oriola-KD's net sales increased by about 9 per cent (40 per cent)
in rubles in January-September 2010.
Third-quarter net sales came to EUR 147.8 million (EUR 118.6 million), of which
retail accounted for EUR 25.4 million (EUR 21.4 million) and wholesale EUR
137.5 million (EUR 110.1 million). The operating loss was EUR -15.7 million
(operating profit EUR 6.6 million), which includes EUR 10.0 million one-off
costs.
Oriola-KD acquired a 100 per cent holding in Russian pharmaceutical retail
company OOO 03 Apteka on 31 August 2010. The pharmacy chain has 70 pharmacies in
the Moscow area. The transaction price was EUR 11.9 million and it was paid in
cash. The acquired company had no interest-bearing debt. The pharmacy chain's
net sales in 2009 were about EUR 40 million, and the operating profit was about
5 per cent of net sales. The company employs about 350 people. The acquisition
of the pharmacy chain supports Oriola-KD's strategy of expanding its
pharmaceutical retail business in the Moscow area and of increasing Oriola-KD's
pharmaceutical wholesale business in Russia. At the end of September, following
the acquisition, Oriola-KD had 251 (170) pharmacies in the Moscow area, of which
181 were operating under the Stary Lekar name.
In addition to its main logistics centre in Moscow, Oriola-KD has eleven
regional logistics centres in Russia, of which the centres in Yekaterinburg and
Novosibirsk were opened in September 2010. The regional expansion of the Russian
wholesale business and the organic growth of the retail business in the Moscow
area are continuing. The organisation in Russia will be further strengthened in
the latter part of the year, with the aim of developing the operating activities
and achieving business growth in line with the strategy.
Pharmaceutical Trade Russia had 3,336 (3,011) employees at the end of September
2010, of whom 1,730 (1,448) were employed in retail and 1,606 (1,563) in
wholesale.
Pharmaceutical Trade Baltics
Pharmaceutical Trade Baltics' net sales in January-September 2010 were EUR 23.0
million (EUR 25.4 million), and the operating profit was EUR 0.7 million (EUR
0.6 million).
Third-quarter net sales came to EUR 7.4 million (EUR 8.0 million) and operating
profit to EUR 0.3 million (EUR 0.2 million).
Pharmaceutical Trade Baltics had 103 (123) employees at the end of September
2010.
Dental Trade
Dental Trade's operating profit in January-September 2010 was EUR 4.4 million
(EUR 2.6 million). Third-quarter operating profit was EUR 1.3 million (EUR 0.8
million).
The dental trade businesses of Oriola-KD Corporation and Lifco AB were combined
in 2007. Oriola-KD holds a 30 per cent share of the Dental Trade business, while
Lifco has a 70 per cent holding. Oriola-KD's operating profit includes the post-
tax profit of the Dental Trade.
Related parties
Related parties in the Oriola-KD Group are deemed to comprise the parent company
Oriola-KD Corporation, the 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. Oriola-KD Corporation
has given internal loans mainly to the holding companies of the Swedish and
Russian businesses. Oriola-KD Corporation has given no significant sureties on
behalf of Group companies, with the exception of a parent company guarantee for
a loan given to Kronans Droghandel Apotek AB.
Oriola-KD Corporation shares
Trading volume of the Oriola-KD Corporation's class A and B shares in January-
September 2010:
Trading volume Jan-Sep 2010 Jan-Sep 2009
class A class B class A class B
Trading volume, million 4.5 68.8 6.1 83.6
Trading volume, EUR million 20.5 287.3 15.0 214.4
Highest price, EUR 5.47 5.49 4.15 4.20
Lowest price, EUR 3.30 3.30 1.29 1.30
Closing quotation, end of period, EUR 4.26 4.27 4.10 4.13
In the review period, the traded volume of Oriola-KD Corporation shares,
excluding treasury shares, corresponded to 48.6 per cent (61.7 per cent) of the
total number of shares. The traded volume of class A shares amounted to 9.5 per
cent (12.6 per cent) of the average stock, and that of class B shares, excluding
treasury shares, 66.6 per cent (86.1 per cent) of the average stock.
Oriola-KD Corporation's market capitalisation on 30 September 2010 was EUR
645.4 million (EUR 623.3 million).
On 8 March 2010, pursuant to the authorisation granted to it by the Annual
General Meeting of 13 March 2007, the Board of Directors of Oriola-KD
Corporation resolved that a directed bonus issue be made, in which a total of
209,300 class B shares held by the company were assigned to the company's
President and CEO and to certain other members of Oriola-KD Corporation's Group
Management Team and of its extended Group Management Team, as part of the
2007-2009 share-based incentive scheme for the Group's management. These shares
represent approximately 0.14 per cent of the total number of company shares and
approximately 0.02 per cent of the total number of votes.
On 28 June 2010, pursuant to the authorisation granted to it by the Annual
General Meeting of 13 March 2007, the Board of Directors of Oriola-KD
Corporation resolved that a directed bonus issue be made, in which a total of
37,350 class B shares held by the company were assigned to certain key members
of the Oriola-KD Group as part of the 2007-2009 share-based incentive scheme for
the Group's management. These shares represented approximately 0.02 per cent of
the total number of company shares and approximately 0.0035 per cent of the
total number of votes.
The company has 96,822 treasury shares, all of which are class B shares. These
account for 0.06 per cent of the company's shares and 0.009 per cent of the
votes.
At the end of September 2010, the company had a total of 151,257,828 shares
(151,257,828), of which 47,217,359 were class A shares (47,967,359) and
104,040,469 were class B shares (103,290,469). Under Article 3 of the Articles
of Association, a shareholder may demand conversion of class A shares into class
B shares. During January-September 2010, a total of 450,000 (724,844) class A
shares were converted into class B shares.
The Board of Directors of Oriola-KD Corporation has defined the earning criteria
for the share incentive scheme for the Group's key personnel for the years
2010-2012, and any payment for the 2010 earning period will be based on Oriola-
KD's earnings per share (EPS) and return on capital employed (ROCE).
In October 2010 the Board decided not to use the authorisation granted to it by
the Annual General Meeting of 7 April 2010 regarding payment of an additional
dividend from undistributed profits and/or distribution of funds from the
company's invested non-restricted equity funds.
Risks
The Board of Directors of Oriola-KD has approved the company's risk management
policy in which the risk management operating model, principles,
responsibilities and reporting are specified. The Group's risk management seeks
to identify, measure and manage risks that may threaten Oriola-KD's operations
and the achievement of goals set. The roles and responsibilities relating to
risk management have been determined in the Group.
Oriola-KD's risks are classified as strategic, operational and financial. Risk
management is a key element of the strategic process, operational planning and
daily decision-making at Oriola-KD.
Oriola-KD has identified the following principal strategic and operational risks
in its business:
* growth in number of pharmacies outperforms growth in the market, leading to
intense competition
* competition for market share in pharmaceutical wholesale in a consolidating
market
* ensuring cost efficiency, flexibility and quality
* development of processes and infrastructure required by strategic expansion
* requirements and restrictions on pharmaceutical retail and wholesale imposed
by the authorities, especially price regulation
* commitment of key employees.
The major financial risks for Oriola-KD involve currency exchange rates,
liquidity, interest rates and credit. Expansion of operations into new business
areas and new markets has increased the financial risks. Currency risks are the
most significant financial risks in Russia and Sweden, as changes in the value
of the Russian ruble or the Swedish krona will have an impact on Oriola-KD's
financial performance and equity.
Goodwill and intangible rights are subject to annual impairment testing, which
may have a negative effect on Oriola-KD's financial performance.
Near-term risks and uncertainty factors
Intense competition and the price control system for pharmaceuticals have a
material impact on Oriola-KD's near-term outlook in Russia. The development of
the Swedish pharmacy market is subject to uncertainties that may have a
significant effect on Oriola-KD's business in Sweden.
Decisions of the Annual General Meeting
The Annual General Meeting of Oriola-KD Corporation, held on 7 April 2010,
confirmed the 2009 financial statements and discharged the Board members and the
President and CEO from liability for the financial year ending 31 December 2009.
The Annual General Meeting resolved that the sum of EUR 0.12 per share be paid
as dividend on the basis of the balance sheet adopted for the financial year
ending 31 December 2009.
In accordance with the Board's proposal, the Board was authorised to decide on
the payment of an additional dividend from undistributed profits and/or
distribution of funds, in one or more batches, from the company's invested non-
restricted equity funds or both so that the amount of the additional dividend
and/or return of capital paid under the authorisation would not exceed EUR 0.05
per share. The authorisation will be in force until the next annual general
meeting.
The Annual General Meeting confirmed that the Board comprises eight members. Re-
elected as Board members were Harry Brade, Pauli Kulvik, Outi Raitasuo, Antti
Remes, Olli Riikkala, Jaakko Uotila and Mika Vidgrén, and Per Båtelson was
elected as a new member. Olli Riikkala was elected to continue as Chairman of
the Board. The Annual General Meeting confirmed that the Chairman of the Board
will receive EUR 48,400 in remuneration for his term of office, the Vice
Chairman EUR 30,250 and the other members of the Board EUR 24,200 each. Of the
annual fees, 60 per cent will be paid in cash and 40 per cent in company shares
in such a way that after the release of the company's interim report for the
first quarter of 2010, Oriola-KD Corporation class B shares would be acquired on
the market for Board members, and the cash portion of the annual fee will also
be paid. The Chairman of the Board will receive an attendance fee of EUR 800 for
each meeting, and the other Board members EUR 400 per meeting. Attendance fees
will also be paid in the same manner to members of any committees set up by the
Board of Directors or the company. The Chairman of the Board will also have a
company-paid phone. Travel expenses will be paid in accordance with the travel
policy of the company.
The Annual General Meeting re-elected PricewaterhouseCoopers Oy as auditor for
the company, with Heikki Lassila APA as principal auditor, for the 2010
financial year. The auditor will be remunerated according to invoice.
The Annual General Meeting resolved that article 12 of the Articles of
Association, on the time of the notice of general meeting, be amended.
The Board was authorised to decide on the purchase of Oriola-KD Corporation
class B shares in accordance with the Board's proposal. Pursuant to the
authorisation, the Board is authorised to decide on the purchase of no more than
15,000,000 of the company's own class B shares, corresponding to approximately
9.92 per cent of the total number of company shares. The authorisation can only
be used in such a way that the company and its subsidiaries together would hold
no more than one tenth (1/10) of the total number of company shares at any one
time. The purchase authorisation would remain in force no longer than eighteen
(18) months following the decision of the General Meeting. The authorisation
repeals the Annual General Meeting's decision of 16 April 2009 authorising the
Board to decide on the purchase of Oriola-KD Corporation class B shares.
The Board was authorised to decide on a share issue against payment in one or
more batches in accordance with the Board's proposal. The authorisation includes
the right to issue new class B shares or to assign class B shares held by the
company. The authorisation covers no more than thirty million (30,000,000) of
the company's class B shares in total, which corresponds to approximately 19.83
per cent of the total number of company shares. The authorisation granted to the
Board includes the right to deviate from the pre-emptive subscription right of
shareholders, provided that there are financial grounds considered important
from the company's perspective for such a deviation. The authorisation will
remain in force for eighteen (18) months following the decision of the General
Meeting. The authorisation cancels the share issue authorisations previously
received by the Board, with the exception of the authorisation granted to the
Board by the Annual General Meeting of 13 March 2007, under which the Board may
decide on arranging a directed bonus issue of no more than 650,000 class B
shares for the purpose of implementing the 2007-2009 share-based incentive
scheme for management.
The Board was also authorised to decide on granting Oriola-KD Corporation shares
to the company itself in one or more batches under a bonus issue, in accordance
with the Board's proposal. The maximum amount of the company's new class B
shares issued under this authorisation is 1,200,000, which is 0.79 per cent of
the company's total shares and 0.11 per cent of total votes. The purpose of the
authorisation is to allow the use of treasury shares as laid out below in the
new share-based incentive scheme for Oriola-KD key persons. The Board was also
authorised to issue class B shares in deviation from the pre-emptive
subscription rights of shareholders, in accordance with the Board's proposal.
The class B shares issued may be either new or treasury shares. The total amount
of shares under the authorisation is 1,200,000 class B shares. The share issue
may be a bonus issue. These shares represent approximately 0.79 per cent of the
total number of company shares and approximately 0.11 per cent of the total
number of votes. The Board may use this authorisation in the new 2010-2012
share-based incentive scheme for Oriola-KD key persons. The authorisations
remain in force for no more than four (4) years following the decision of the
General Meeting.
Decisions of the organisational meeting of the Board
At the organisational meeting held immediately after the AGM, the Board resolved
to elect Antti Remes to continue serving as Vice Chairman of the Board. The
composition of the Board's Audit and Compensation Committees was confirmed as
follows.
Audit Committee:
Antti Remes, Chairman
Harry Brade
Outi Raitasuo
Mika Vidgrén
Compensation Committee:
Olli Riikkala, Chairman
Pauli Kulvik
Jaakko Uotila
The company also has a Nomination Committee, the members of which will be
elected later.
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.
Outlook
Oriola-KD's outlook for 2010 is based on external market forecasts, supplier and
customer agreements, the order intake and management assessments. In the period
2011-2014 the pharmaceutical market is expected to grow by about 3 per cent in
Finland, 2-3 per cent in Sweden, and 11-13 in Russia, measured in local
currencies (source: IMS Health). The 2010 figures for the Russian pharmaceutical
market are expected to show growth below the longer term trend and the
continuation of tough competition. Competition in the Swedish retail market is
expected to continue to be stiff as a result of the deregulation.
Guidelines issued on 28 July 2010 concerning net sales and operating profit
Oriola-KD's net sales from its continuing operations for 2010 are expected to be
higher than in 2009 and operating profit is forecasted to be clearly lower than
in 2009. The operating profit of Pharmaceutical Trade Russia is expected to be
clearly lower than in 2009.
Revised guidelines issued on 28 October 2010 concerning net sales and operating
profit
Oriola-KD's net sales from its continuing operations for 2010 are expected to be
higher than in 2009 and operating profit is forecasted to be lower than in
2009. The operating result of Pharmaceutical Trade Russia, including the
recognised one-off costs in the third quarter, is expected to be negative.
Tables
1 Jan - 1 Jan - 1 July - 1 July - 1 Jan -
Consolidated Statement of 30 Sep 30 Sep 30 Sep 30 Sep 31 Dec
Comprehensive Income (IFRS),
EUR million 2010 2009 2010 2009 2009
--------------------------------------------------------------------------------
Continuing operations
Net sales 1,401.5 1,125.8 498.5 379.2 1,569.2
Cost of goods sold -1,219.5 -984.5 -439.6 -335.3 -1,363.8
--------------------------------------------------------------------------------
Gross profit 182.1 141.3 58.9 43.9 205.4
Other operating income 3.2 1.6 1.3 0.6 2.1
Selling and
distribution expenses -152.7 -94.0 -54.6 -30.8 -129.2
Administrative expenses -30.1 -19.6 -11.4 -3.9 -25.8
Profit from
associated companies 4.4 2.7 1.3 0.8 3.9
--------------------------------------------------------------------------------
Operating profit 6.8 31.9 -4.5 10.7 56.4
Financial income 8.4 6.7 5.0 2.1 7.9
Financial expenses -12.0 -8.3 -6.3 -2.0 -9.9
--------------------------------------------------------------------------------
Profit before taxes 3.2 30.2 -5.8 10.8 54.5
Income taxes*) -0.8 -6.3 0.8 -2.2 -11.4
--------------------------------------------------------------------------------
Profit from the continuing
operations
for the period under review 2.4 23.9 -5.0 8.6 43.0
Discontinued operations
Profit from the discontinued
operations
for the period under review 56.3 4.8 0.1 1.4 5.6
--------------------------------------------------------------------------------
Profit for the period under review
including discontinued operations 58.7 28.7 -4.9 10.0 48.6
Other comprehensive income
Hedge of a net investment in a
foreign operation 3.7 -2.7 -4.5 -0.1 -2.0
Cash flow hedge -0.0 - 0.4 - -
Income tax relating to other
comprehensive income -0.7 0.5 0.9 0.0 0.4
Translation difference 15.2 -0.7 -22.2 4.1 1.3
--------------------------------------------------------------------------------
Total comprehensive income for the
period
under review including discontinued
operations 76.8 25.8 -30.4 14.0 48.4
Attribution of profit from the
continuing
operations for the period under
review
--------------------------------------------------------------------------------
To parent company shareholders 2.4 23.9 -5.0 8.6 43.9
--------------------------------------------------------------------------------
To minority interest - - - - -0.9
--------------------------------------------------------------------------------
Attribution of profit for the period
under review
including discontinued operations
--------------------------------------------------------------------------------
To parent company shareholders 58.7 28.7 -4.9 10.0 49.5
--------------------------------------------------------------------------------
To minority interest - - - - -0.9
--------------------------------------------------------------------------------
Attribution of total comprehensive
income for the
period under review (including
discontinued operations)
--------------------------------------------------------------------------------
To parent company shareholders 76.8 25.8 -30.4 14.0 49.3
--------------------------------------------------------------------------------
To minority interest - - - - -0.9
--------------------------------------------------------------------------------
Earnings per share
from the continuing operations
Basic earnings per share, EUR 0.02 0.16 -0.03 0.06 0.30
Diluted earnings per share, EUR 0.02 0.16 -0.03 0.06 0.30
Earnings per share
for the period under review
(including discontinued operations)
Basic earnings per share, EUR 0.39 0.20 -0.04 0.07 0.34
Diluted earnings per share, EUR 0.39 0.20 -0.04 0.07 0.34
*) The tax expense for the period has been calculated as the proportional share
of the total estimated taxes for the financial year.
Consolidated Balance Sheet (IFRS),
EUR million
ASSETS 30 Sep 2010 30 Sep 2009 31 Dec 2009
--------------------------------------------------------------------------------
Non-current assets
Property, plant and equipment 62.8 53.6 53.3
Goodwill 260.3 127.7 141.7
Other intangible assets 74.6 38.6 39.5
Investments in associated companies 32.1 29.5 30.7
Other non-current assets 9.1 8.0 7.5
Deferred tax assets 8.6 2.9 2.5
--------------------------------------------------------------------------------
Non-current assets total 447.6 260.3 275.2
Current assets
Inventories 308.3 261.2 287.1
Trade and other receivables 298.9 281.8 227.1
Cash and cash equivalents 89.5 52.3 133.7
--------------------------------------------------------------------------------
Current assets total 696.7 595.3 647.8
ASSETS TOTAL 1,144.3 855.5 923.1
--------------------------------------------------------------------------------
EQUITY AND LIABILITIES 30 Sep 2010 30 Sep 2009 31 Dec 2009
--------------------------------------------------------------------------------
Equity
Share capital 36.2 36.2 36.2
Other funds 50.9 50.8 50.9
Retained earnings 215.4 132.7 156.4
Equity of the parent
company shareholders 302.5 219.7 243.4
Minority interest - - 10.8
--------------------------------------------------------------------------------
Equity total 302.5 219.7 254.2
Non-current liabilities
Deferred tax liabilities 23.8 13.8 13.6
Pension liabilities 5.3 4.5 4.9
Provisions - 0.0 0.0
Interest-bearing non-current liabilities 121.8 0.2 0.2
--------------------------------------------------------------------------------
Non-current liabilities total 150.9 18.6 18.8
Current liabilities
Trade payables and other current liabilities 624.8 468.1 500.5
Interest-bearing current liabilities 66.1 149.2 149.5
--------------------------------------------------------------------------------
Current liabilities total 690.9 617.3 650.1
EQUITY AND LIABILITIES TOTAL 1,144.3 855.5 923.1
--------------------------------------------------------------------------------
Consolidated Statement
of Changes in
Equity (IFRS)
Equity
of the
parent
company
Trans
Share Other lation Retained share- Minority
EUR differ
million capital funds rences earnings holders interest Total
--------------------------------------------------------------------------------
Equity
1 Jan 2009 36.2 30.1 -30.1 148.2 184.4 1.0 185.5
--------------------------------------------------------------------------------
Dividends paid - - - -11.3 -11.3 - -11.3
Share issue - 20.6 - - 20.6 - 20.6
Change in minority
interest - - - - 0.0 -1.0 -1.0
Share-based payments - - - 0.2 0.2 - 0.2
Net profit for the period - - - 28.7 28.7 - 28.7
Other comprehensive
income
Hedge of a net
investment in a
foreign operation - - -2.7 - -2.7 - -2.7
Cash flow hedge - - - - 0.0 - 0.0
Income tax relating to
other comprehensive
income - - 0.5 - 0.5 - 0.5
Translation difference - - -0.7 - -0.7 - -0.7
--------------------------------------------------------------------------------
Equity
30 Sep 2009 36.2 50.8 -33.0 165.8 219.7 0.0 219.7
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Equity
1 Jan 2010 36.2 50.9 -30.4 186.8 243.4 10.8 254.2
--------------------------------------------------------------------------------
Dividends paid - - - -18.1 -18.1 - -18.1
Share issue - - - - 0.0 - 0.0
Change in minority
interest - - - - 0.0 -10.8 -10.8
Share-based payments - - - 0.3 0.3 - 0.3
Net profit for the period - - - 58.7 58.7 - 58.7
Other comprehensive
income:
Hedge of a net
investment in a
foreign operation - - 3.7 - 3.7 - 3.7
Cash flow hedge - -0.0 - - -0.0 - -0.0
Income tax relating to
other comprehensive
income - - -0.7 - -0.7 - -0.7
Translation difference - - 15.2 - 15.2 - 15.2
--------------------------------------------------------------------------------
Equity
30 Sep 2010 36.2 50.9 -12.3 227.7 302.5 0.0 302.5
--------------------------------------------------------------------------------
1 Jan - 1 Jan - 1 Jan -
Consolidated Cash Flow Statement *) 30 Sep 30 Sep 31 Dec
(IFRS), EUR million 2010 2009 2009
----------------------------------------------------------------
Operating profit 9.7 38.5 65.4
Depreciation 8.4 7.1 9.4
Change in working capital 32.1 -26.2 37.9
Cash flow from financial
items and taxes -12.7 -13.1 -13.3
Other adjustments 5.8 0.1 1.5
Net cash flow from operating activities 43.2 6.4 100.9
Net cash flow from investing activities -166.3 -29.6 -28.0
Net cash flow from financing activities 71.5 28.6 14.5
Net change in cash and cash equivalents -51.6 5.5 87.4
Cash and cash equivalents
at the beginning of the period 133.7 46.5 46.5
Foreign exchange rate differences 7.4 0.3 -0.2
Net change in cash and cash equivalents -51.6 5.5 87.4
Cash and cash equivalents
at the end of the period 89.5 52.3 133.7
----------------------------------------------------------------
*) Includes net cash flow of
Healthcare Trade until 31 May 2010.
1 Jan - 1 Jan - 1 Jan -
Change in Property, Plant and Equipment, 30 Sep 30 Sep 31 Dec
EUR million 2010 2009 2009
----------------------------------------------------------------
Carrying amount at the beginning
of the period 53.3 54.5 54.5
Increases through acquisitions
of subsidiary shares 9.3 0.0 -
Increases 7.0 4.4 6.0
Decreases -4.1 -1.1 -1.8
Depreciation -5.6 -4.8 -6.5
Foreign exchange rate differences 2.9 0.5 1.1
----------------------------------------------------------------
Carrying amount at the end
of the period 62.8 53.6 53.3
----------------------------------------------------------------
1 Jan - 1 Jan - 1 Jan -
30 Sep 30 Sep 31 Dec
Key Figures 2010 2009 2009
----------------------------------------------------------------
Equity ratio, % 27.1% 26.4% 29.2%
Equity per share, EUR 2.00 1.46 1.61
Return on capital employed (ROCE), % 2.0% 15.5% 18.7%
Return on equity, % 1.1% 18.9% 22.1%
Net interest-bearing debt,
EUR million 98.4 97.1 16.0
Gearing, % 32.5% 44.2% 6.3%
Earnings per share, EUR 0.39 0.20 0.34
Average number of shares, 1000 pcs 152,080 145,812 147,034
Derivatives, Commitments
and Contingent Liabilities
30 September 2010
Nominal
Positive fair Negative fair values of
EUR million value value contracts
Derivatives recognised as
cash flow hedges
Foreign currency forward and swap
contracts - - -
Interest rate swaps - -0.0 109.4
Derivatives measured at
fair value through profit or loss
Foreign currency forward and swap
contracts 0.5 - 56.0
30 September 2009
Positive fair Negative fair Nominal
values of
EUR million value value contracts
Derivatives recognised
as cash flow hedges
Foreign currency forward and swap
contracts 0.5 - 45.2
Derivatives measured at
fair value through profit or loss
Foreign currency forward and swap
contracts - -0.0 23.1
Contingencies for Own Liabilities,
EUR million 30 Sep 2010 30 Sep 2009 31 Dec 2009
--------------------------------------------------------------------------------
Guarantees given 123.3 32.5 36.8
Mortgages on land and buildings 2.0 2.0 2.0
Mortgages on company assets 2.3 2.1 2.0
Other guarantees and liabilities 0.1 1.4 1.9
--------------------------------------------------------------------------------
Total 127.7 37.9 42.7
--------------------------------------------------------------------------------
Leasing-liabilities (operating
liabilities) 1.3 0.3 0.3
Rent contingencies 59.9 32.3 33.8
1 Jan - 30 Sep 1 Jan - 30 Sep 1 Jan - 31 Dec
Net Sales by Operating Segments,
EUR million 2010 2009 2009
--------------------------------------------------------------------------------
Pharmaceutical Trade Finland 314.2 379.3 505.1
Pharmaceutical Trade Sweden 661.9 389.0 548.3
Pharmaceutical Trade Russia 402.8 332.5 480.7
Pharmaceutical Trade Baltics 23.0 25.4 35.7
Net sales to other segments -0.4 -0.4 -0.5
--------------------------------------------------------------------------------
Continuing operations total 1,401.5 1,125.8 1,569.2
Discontinued operations 65.3 101.7 145.1
Net sales to other segments -1.6 -0.9 -1.2
--------------------------------------------------------------------------------
Group Total 1,465.2 1,226.6 1,713.1
Operating Profit by Operating
Segments, 1 Jan - 30 Sep 1 Jan - 30 Sep 1 Jan - 31 Dec
EUR million 2010 2009 2009
--------------------------------------------------------------------------------
Pharmaceutical Trade Finland 15.3 13.7 18.1
Pharmaceutical Trade Sweden 9.1 -2.8 -5.0
Pharmaceutical Trade Russia -18.1 22.8 44.5
Pharmaceutical Trade Baltics 0.7 0.6 0.9
Dental Trade 4.4 2.6 3.9
Group Administration and Others -4.6 -5.1 -5.9
--------------------------------------------------------------------------------
Continuing operations total 6.8 31.9 56.4
Discontinued operations 57.0 6.6 8.9
--------------------------------------------------------------------------------
Group Total 63.8 38.5 65.4
Continuing operations
Average number of personnel 4,728 3,947 3,923
Number of personnel at the end of
the period 5,311 3,817 3,870
Group total
Average number of personnel 4,955 4,403 4,373
Number of personnel at the end of
the period 5,311 4,254 4,299
Net Sales by Operating
Segments,
EUR million Q3/2010 Q2/2010 Q1/2010 Q4/2009 Q3/2009 Q2/2009 Q1/2009
--------------------------------------------------------------------------------
Pharmaceutical Trade
Finland 103.8 105.9 104.5 125.8 120.6 132.0 126.8
Pharmaceutical Trade
Sweden 239.5 241.4 181.0 159.3 132.1 130.5 126.4
Pharmaceutical Trade
Russia 147.8 132.8 122.1 148.2 118.6 106.6 107.2
Pharmaceutical Trade
Baltics 7.4 7.3 8.3 10.3 8.0 8.8 8.6
Net sales to other
segments -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.2
--------------------------------------------------------------------------------
Continuing operations
total 498.5 487.3 415.7 443.5 379.2 377.8 368.8
Discontinued operations - 30.9 34.4 43.4 31.9 34.9 35.0
Net sales to other
segments - -0.5 -1.1 -0.3 -0.3 -0.3 -0.3
--------------------------------------------------------------------------------
Group Total 498.5 517.7 449.0 486.5 410.8 412.3 403.5
Operating Profit by
Operating Segments,
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
EUR million 2010 2010 2010 2009 2009 2009 2009
--------------------------------------------------------------------------------
Pharmaceutical Trade
Finland 5.9 5.0 4.5 4.4 4.9 4.9 3.9
Pharmaceutical Trade
Sweden 4.9 5.6 -1.4 -2.2 -0.4 -2.0 -0.4
Pharmaceutical Trade
Russia -15.7 -2.0 -0.4 21.6 6.6 8.6 7.6
Pharmaceutical Trade
Baltics 0.3 0.2 0.3 0.3 0.2 0.2 0.1
Dental Trade 1.3 1.4 1.6 1.2 0.8 0.7 1.1
Group Administration and
Others -1.2 -1.9 -1.6 -0.8 -1.5 -2.0 -1.6
--------------------------------------------------------------------------------
Continuing operations
total -4.5 8.4 3.0 24.5 10.7 10.5 10.7
Discontinued operations 0.1 55.6 1.3 2.4 1.9 3.0 1.7
--------------------------------------------------------------------------------
Group Total -4.5 64.0 4.2 26.9 12.6 13.5 12.4
1 Jan - 30 Sep 1 Jan - 30 Sep 1 Jan - 31 Dec
Net Sales by Market, EUR million 2010 2009 2009
-----------------------------------------------------------------------------
Finland 314.1 383.6 509.9
Sweden 657.7 382.1 539.8
Russia 402.8 332.5 480.7
Baltic countries 22.6 25.4 35.7
Other countries 4.3 2.2 3.2
-----------------------------------------------------------------------------
Continuing operations total 1,401.5 1,125.8 1,569.2
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
Net Sales by Market, EUR million 2010 2010 2010 2009 2009 2009 2009
--------------------------------------------------------------------------
Finland 102.6 106.5 105.0 126.3 125.1 131.9 126.6
Sweden 238.7 239.5 179.4 157.7 125.2 130.5 126.4
Russia 147.8 132.8 122.1 148.2 118.6 106.6 107.2
Baltic countries 7.0 7.3 8.3 10.3 8.0 8.8 8.6
Other countries 2.2 1.2 0.9 1.0 2.2 - -
--------------------------------------------------------------------------
Continuing operations total 498.5 487.3 415.7 443.5 379.2 377.8 368.8
DISCONTINUED OPERATIONS
Comprehensive Income 1 Jan - 31 May 1 Jan - 31 Dec
(IFRS), EUR million 2010 2009
--------------------------------------------------------------------------------
Discontinued operations
Net sales 65.3 145.1
Cost of goods sold -46.6 -100.3
--------------------------------------------------------------------------------
Gross profit 18.6 44.8
Other operating income 54.3 2.2
Selling and
distribution expenses -15.0 -35.3
Administrative expenses -1.0 -2.8
--------------------------------------------------------------------------------
Operating profit 57.0 8.9
Financial income 0.1 0.0
Financial expenses -0.1 -1.4
--------------------------------------------------------------------------------
Profit before taxes 57.0 7.6
Income taxes*) -0.7 -2.0
--------------------------------------------------------------------------------
Profit from the discontinued operations
for the period under review 56.3 5.6
Attribution of profit from the discontinued
operations
for the period under review
--------------------------------------------------------------------------------
To parent company shareholders 56.3 5.6
--------------------------------------------------------------------------------
To minority interest - -
--------------------------------------------------------------------------------
Earnings per share
from the discontinued operations
Basic earnings per share, EUR 0.37 0.04
Diluted earnings per share, EUR 0.37 0.04
*) The tax expense for the period has been
calculated as the proportional share of
the total estimated taxes for the financial year.
Cash Flow Statement 1 Jan - 31 May 1 Jan - 31 Dec
(IFRS), EUR million 2010 2009
--------------------------------------------------------------------------------
Net cash flow from operating activities 6.7 -3.5
Net cash flow from investing activities -0.9 -1.9
Net cash flow from financing activities 0.2 5.4
--------------------------------------------------------------------------------
Net change in cash and cash equivalents 6.0 -0.1
BUSINESS COMBINATION DISCLOSURE
1. Acquisition of national pharmacy chain in Sweden (Pharmacy Company Sweden 2
AB)
Oriola-KD announced in November 2009 that it would acquire 100 per cent of the
shares of Pharmacy Company Sweden 2 AB, a national pharmacy cluster with 170
pharmacies. The transaction was executed in February 2010. The acquired pharmacy
business covers only retail activities. The transaction does not include any
contingent considerations. Entering the pharmaceutical retail business in Sweden
is an important part of Oriola-KD's strategy to expand the operations from
pharmaceutical wholesale to retail.
The acquisition cost is calculated on the basis of the company's provisional
balance sheet as per 19 February 2010 prepared in accordance with IFRS and the
Oriola-KD Group's accounting principles in respect of all material elements. The
provisional balance sheet and acquisition cost calculation are unaudited.
The acquisition is accounted for using provisional values as permitted under
IFRS 3R. Over the 12 months following the acquisition, Oriola-KD will make the
necessary adjustments to these provisional values. The fair value of the
identifiable fixed assets was 8.6 million euros and inventory 22.4 million
euros. These figures are provisional figures and the values might be adjusted
during 2010.
The fair value of trade receivables and other receivables is 50.9 million euros
and it does not include any material risk.
The initial purchase price allocation calculation calculated in Swedish crowns
has been translated into euros by using the exchange rate of the acquisition
date.
The financial result and the balance sheet of the acquired company has been
consolidated into the Oriola-KD Group from the acquisition date, i.e. 19
February 2010.
Business combinations disclosure under IFRS 3 (revised)
The 101,3 million euro goodwill arising from the acquisition is primarily
representing the strong market position, growth expectations, opportunities
after monopoly deregulation and experienced existing personnel as well as
expected synergies with Oriola-KD's sizeable wholesale operations in Sweden.
None of the goodwill recognised is deductible for income tax purposes.
The following table summarises the consideration paid for the pharmacy cluster
and the amounts of the assets acquired and liabilities assumed recognised at the
acquisition date, as well as the fair value at the acquisition date.
Consideration at
19.2.2010
Fair value
Carrying amount, allocations, EUR Fair value, EUR
EUR million million million
Cash 161.5 0.0 161.5
Total consideration 161.5 161.5
Acquisition related
costs
-included in
administrative expenses
in the
consolidated income
statement for 2009 1.2
-included in
administrative expenses
in the
consolidated income
statement for 2010 0.5
Recognised amounts of
identifiable assets
acquired and
liabilities assumed
Cash and cash
equivalents 2.4 0.0 2.4
Property, plant and
equipment 8.6 0.0 8.6
Pharmacy licences and
rental agreements
(included in
intangibles) 0.0 25.4 25.4
Inventories 22.2 0.2 22.4
Trade receivables 44.0 0.0 44.0
Other receivables 6.8 0.0 6.8
Trade and other
payables -42.8 0.0 -42.8
Deferred tax
liabilities 0.0 -6.7 -6.7
Total identifiable net
assets 41.3 18.9 60.2
Goodwill 101.3
The pro forma net sales of the acquired pharmacy cluster
was SEK 4.6 billion and pro forma operating profit including
average central overhead costs of Apoteket AB
was SEK 205 million in year 2009.
2. Acquisition of 03 Apteka pharmacy chain with 70 pharmacies in Moscow (OOO
03 Apteka)
Oriola-KD announced on 31 August 2010 that it acquires 100 per cent of the
shares of 03 Apteka, a pharmacy chain with 70 pharmacies in Moscow area. The
acquired pharmacy business covers only retail activities. The transaction does
not include any contingent considerations. The acquisition of 03 Apteka supports
Oriola-KD's strategy to expand its pharmaceutical retail operations in Moscow.
In addition this acquisition supports the growth of Oriola-KD's pharmaceutical
wholesale business in Russia. After the acquisition, Oriola-KD has 250
pharmacies in Moscow area.
The acquisition cost is calculated on the basis of the company's provisional
balance sheet as per 31 August 2010 prepared in accordance with IFRS and the
Oriola-KD Group's accounting principles in respect of all material elements. The
provisional balance sheet and acquisition cost calculation are unaudited.
The acquisition is accounted for using provisional values as permitted under
IFRS 3R. Over the 12 months following the acquisition, Oriola-KD will make the
necessary adjustments to these provisional values. The fair value of the
identifiable fixed assets was 0.4 million euros and inventory 2.2 million euros.
These figures are provisional figures and the values might be adjusted by the
end of August 2011.
The fair value of trade receivables and other receivables is 0.6 million euros
and it does not include any material risk.
The initial purchase price allocation calculation calculated in Russian Roubles
has been translated into euros by using the exchange rate of the acquisition
date.
The financial result and the balance sheet of the acquired company has been
consolidated into the Oriola-KD Group from the acquisition date, i.e. 31 August
2010.
Business combinations disclosure under IFRS 3 (revised)
The 11.7 million euro goodwill arising from the acquisition is primarily
representing the strong market position, growth expectations, and experienced
existing personnel as well as expected synergies with Oriola-KD's sizeable
retail and wholesale operations in Russia. None of the goodwill recognised is
deductible for income tax purposes.
The following table summarises the consideration paid for the pharmacy chain and
the amounts of the assets acquired and liabilities assumed recognised at the
acquisition date, as well as the fair value at the acquisition date.
Consideration at 31
August 2010
Fair value
Carrying amount, allocations, EUR Fair value, EUR
EUR million million million
Cash 11.9 0.0 11.9
Total consideration 11.9 11.9
Acquisition related
costs
-included in
administrative expenses
in the
consolidated income
statement for 2010 0.2
Recognised amounts of
identifiable assets
acquired and
liabilities assumed
Cash and cash
equivalents 0.3 0.0 0.3
Property, plant and
equipment 0.2 0.3 0.4
Pharmacy licences and
rental agreements
(included in
intangibles) 0.0 3.3 3.3
Deferred tax assets 0.4 0.0 0.4
Inventories 2.2 0.1 2.2
Trade receivables 0.5 0.0 0.5
Other receivables 0.1 0.0 0.1
Trade and other
payables -6.3 0.0 -6.3
Deferred tax
liabilities 0.0 -0.7 -0.7
Total identifiable net
assets -2.7 2.9 0.3
Goodwill 11.7
Net sales of the 03 Apteka pharmacy chain
were some EUR 40 million and operating profit
percentage of approximately 5 percentages in 2009.
Espoo, 28 October 2010
Oriola-KD Corporation's Board of Directors
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 Investor Relations
tel. +358 (0)10 429 2497
e-mail: pellervo.hamalainen@oriola-kd.com
Distribution
NASDAQ OMX Helsinki Ltd
Principal media
Published by:
Oriola-KD Corporation
Corporate Communications
Orionintie 5
FI-02200 Espoo, Finland
www.oriola-kd.com
[HUG#1456183]
