Oriola Corporation’s Half Year Financial Report 1 January–30 June 2019

Oriola Corporation stock exchange release 17 July 2019 at 8.30 a.m.

Oriola Corporation’s Half Year Financial Report 1 January–30 June 2019

January–June 2019 highlights

  • Invoicing increased by 5.3% (increased 6.3%) to EUR 1,836.9 (1,745.0) million. On a constant currency basis invoicing increased by 7.9% and was EUR 1,882.6 million.                                        

  • Net sales increased by 7.4% (increased 4.3%) to EUR 845.6 (787.5) million. On a constant currency basis net sales increased by 10.3% and were EUR 869.0 million.

  • Adjusted EBIT was EUR 10.4 (14.2) million. On a constant currency basis the adjusted EBIT was EUR 10.8 million.

  • Profit for the period totalled EUR 7.1 (9.0) million and earnings per share were EUR 0.04 (0.05).

  • Two Group-wide strategic programmes kicked off: 20by20 Excellence to ensure operational excellence and cost efficiency and Customer Experience to strengthen customer trust and satisfaction.

  • New customer focused organisation with new business areas Consumer, Pharma and Retail as well as logistics and sourcing function Operations became effective as of 1.1.2019.

  • Ramp-up of new automated distribution centre in Sweden started in February.

April–June 2019 highlights

  • Invoicing increased by 5.1% (increased 6.2%) to EUR 942.5 (896.7) million. On a constant currency basis invoicing increased by 7.1% and was EUR 960.4 million.                                        

  • Net sales increased by 12.3% (increased 3.1%) to EUR 448.5 (399.4) million. On a constant currency basis net sales increased by 14.8% and were EUR 458.4 million.

  • Adjusted EBIT was EUR 6.4 (7.9) million. On a constant currency basis the adjusted EBIT was EUR 6.7 million.

  • Profit for the period totalled EUR 5.2 (5.4) million and earnings per share were EUR 0.03 (0.03).

  • Ramp-up of new automated distribution centre in Sweden is progressing, but slower than expected, and is causing prolonged extra operational costs.

  • Business outlook was changed on 19 June, and adjusted EBIT is estimated to decrease from the 2018 level.

  • Cooperation negotiations to improve operational efficiency were announced on 19 June. With the planned actions, target is to save approximately 4-6 million euros annually.

Business outlook for 2019

The adjusted EBIT on a constant currency basis is estimated to decrease from the 2018 level.

Oriola’s business outlook for 2019 is based on external market forecasts, agreements with pharmaceutical companies and pharmacies, and management assessments.

President and CEO Robert Andersson on the second quarter of 2019:

“Oriola’s invoicing (EUR 942.5 million, +5.1%) and net sales (EUR 448.5 million, +12.3%) continued to grow in the second quarter compared to previous year. On a constant currency basis invoicing grew by 7.1% and net sales by 14.8%. Adjusted EBIT was EUR 6.4 million, 18.8% lower than previous year. Changes in the Swedish consumer market as well as slower than expected ramp-up of new distribution centre in Sweden impacted profitability negatively.

Consumer net sales increased 0.6% year-on-year on a constant currency basis. Online sales grew by 36%, in line with market growth. Changes in consumer behaviour and strong price competition in online affected profitability negatively. We continue to develop omni-channel services in Consumer. Experiences from the first Drop-in clinics for healthcare services have been positive and we are widening our offering in the second half of the year.

Pharma continued to grow in both operating countries. Invoicing increased 9.3% year-on-year and net sales increased 30.9% on a constant currency basis driven by the pharmaceutical market growth and changes in the distribution agreements for pharmaceuticals. In Finland the efficiency of Operations was on a good level while inefficiency in the Swedish Operations burdened the Pharma result. Along with the traditional distribution business we are developing our expert services for pharmaceutical companies, whose demand for local expert services is growing.

Good development in dose dispensing business accelerated Retail business growth in the second quarter of the year. The total number of our patients has already grown to 115,000 and we are now the market leader in Sweden. Retail net sales increased 7.9% year-on-year on a constant currency basis. Inefficiencies in the Swedish Operations burdened the Retail result. We are continuing to renew our product assortment and services in Retail.

Our two strategic programmes, 20by20 Excellence and Customer Experience, are progressing according to plans. In June we announced cooperation negotiations and with the planned actions we estimate to save approximately 4-6 million euros annually. The target of 20by20 Excellence programme is to deliver EUR 20 million savings annually by the end of 2020.”

Key figures 2019 2018 Change 2019 2018 Change 2018
EUR million 4-6 4-6 % 1-6 1-6 % 1-12
Invoicing 942.5 896.7 5.1 1,836.9 1,745.0 5.3 3,518.4
Net sales 448.5 399.4 12.3 845.6 787.5 7.4 1,552.2
Adjusted EBIT1 6.4 7.9 -18.8 10.4 14.2 -26.9 36.9
EBIT 7.9 7.9 -0.4 11.8 13.5 -12.4 22.0
Adjusted EBIT % 1.4 2.0 1.2 1.8 2.4
EBIT % 1.8 2.0 1.4 1.7 1.4
Profit for the period 5.2 5.4 -4.4 7.1 9.0 -20.7 12.7
Earnings per share, EUR 0.03 0.03 -4.4 0.04 0.05 -20.8 0.07
Net cash flow from operating activities 69.6 18.4 44.2 51.1 102.8
Gearing, %2 94.4 57.1 35.1
Equity ratio, %3 15.3 19.3 19.8
Return on capital employed (ROCE), %4 6.2 8.9 6.9
1 Adjusting items are specified in table "Adjusting items included in EBIT"
2 Gearing in 2019 is impacted by the increase of net debt by EUR 94.0 million and the decrease of retained earnings by EUR 5.9 million due to the application of IFRS 16. Excluding the impact of IFRS 16 gearing would have been 34.0%.
3 Equity ratio in 2019 is impacted by the decrease of retained earnings by EUR 5.9 million and increase of total assets by EUR 88.1 million due to the application of IFRS 16. Excluding the impact of IFRS 16 equity ratio would have been 17.3%.
4 Return on capital employed in 2019 is impacted by the increase of total assets by EUR 88.1 million due to the application of IFRS 16. Excluding the impact of IFRS 16 return on capital employed would have been 7.3%.

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

Disclosure procedure

This stock exchange release is a summary of Oriola Corporation’s Half Year Financial Report January­­–June 2019. The complete report is attached to this release in pdf format and is also available on Oriola’s website at www.oriola.com.

Analyst and investor meeting

Oriola Corporation will organise a meeting for investors, analysts and the press on Wednesday, 17 July 2019 at 10.00 a.m. at Oriola head office, meeting room Oppi, Orionintie 5, 02101 Espoo, Finland.

The event can be followed as a live-webcast accessible through this link: https://oriola.videosync.fi/2019-q2-results

Further information:

Robert Andersson,
President and CEO
tel. +358 10 429 2109,
email: robert.andersson@oriola.com

Helena Kukkonen,
CFO
tel. +358 10 429 2112,
email: helena.kukkonen@oriola.com

Distribution:

Nasdaq Helsinki Ltd
Key media

Released by:

Oriola Corporation
Orionintie 5,
02200 Espoo
www.oriola.com