Oriola Corporation’s Interim Report 1 January–30 September 2019

Oriola Corporation stock exchange release 25 October 2019 at 8.30 a.m.

 

Oriola January 1– September 30, 2019

January–September 2019 highlights

  • Invoicing increased by 6.4% (increased 5.0%) to EUR 2,754.2 (2,589.2) million. On a constant currency basis invoicing increased by 8.7% and was EUR 2,815.0 million.                                        
  • Net sales increased by 10.1% (increased 2.2%) to EUR 1,274.6 (1,157.5) million. On a constant currency basis net sales increased by 12.8% and were EUR 1,305.9 million.
  • Adjusted EBIT was EUR 20.2 (31.7) million. On a constant currency basis the adjusted EBIT was EUR 20.8 million.
  • Profit for the period totalled EUR 9.6 (21.1) million and earnings per share were EUR 0.05 (0.12).
  • 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 a new automated distribution centre in Sweden started in February.
  • Business outlook was changed on 19 June 2019, and adjusted EBIT is estimated to decrease from the 2018 level.
  • Cooperation negotiations were completed on 30 September 2019, and the estimated annual cost savings will be approximately EUR 4.5 million in personnel costs.

July–September 2019 highlights

  • Invoicing increased by 8.7% (increased 2.6%) to EUR 917.3 (844.2) million. On a constant currency basis invoicing increased by 10.4% and was EUR 932.3 million.                                        
  • Net sales increased by 16.0% (decreased 2.0%) to EUR 429.0 (369.9) million. On a constant currency basis net sales increased by 18.1% and were EUR 437.0 million.
  • Adjusted EBIT was EUR 9.8 (17.5) million. On a constant currency basis the adjusted EBIT was EUR 10.0 million.
  • Profit for the period totalled EUR 2.6 (12.2) million and earnings per share were EUR 0.01 (0.07).
  • Ramp-up of the new automated distribution centre in Sweden has been slower than planned and is causing extra operational costs.
  • Cooperation negotiations were completed on 30 September 2019, and the estimated annual cost savings will be approximately EUR 4.5 million in personnel costs. Restructuring costs totalling EUR 5.3 million were recognised to the result for the period.
  • In July–September several distribution agreement negotiations with pharma companies were finalised in both operating countries. The agreements will come in force gradually by the end of the second quarter of 2020 at the latest.

 

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 third quarter of 2019:

“Oriola’s invoicing (EUR 917.3 million, +8.7%) and net sales (EUR 429.0 million, +16.0%) continued to grow strongly in the third quarter compared to the previous year. On a constant currency basis invoicing grew by 10.4% and net sales by 18.1%. Adjusted EBIT was EUR 9.8 million, 43.8% lower than in the previous year. Adjusted EBIT for the comparison period includes a settlement totalling EUR 9 million received from the provider of the new logistics and warehouse IT system as a contribution to costs incurred. The slower than planned ramp-up of the new distribution centre in Sweden was still impacting the quarterly profitability negatively.

Consumer net sales increased 4.6% year-on-year on a constant currency basis. Online sales grew by 33% and especially sales of prescription medicines was increasing. Consumers shift to online shopping has affected profitability. Brick and mortar pharmacy development and location optimization are increasingly important to attract consumers. As part of the pharmacy service development, we continue to open more Drop-in clinics to ensure people’s easy access to healthcare services. We plan to open eight clinics by the end of the year 2019. In September, as part of finalising the cooperation negotiations, we decided to close nine pharmacies.

Pharma continued strong growth in both operating countries. Invoicing increased 11.6% year-on-year and net sales increased 30.2% on a constant currency basis driven by the pharmaceutical market growth and changes in the current distribution agreements for pharmaceuticals. During the period we also signed new significant distribution agreements with pharmaceutical companies. In Finland, we renewed our distribution agreement with Orion and in Sweden, we signed a new distribution agreement with MSD. The Pharma result was still burdened by inefficiency of the Swedish distribution centre.    

Retail continued good growth during the third quarter. Net sales increased 16.8% year-on-year on a constant currency basis. Net sales was driven by the growing number of the dose patients. Year-on-year growth was 66%, and at the end of the period we served a total of more than 116.000 patients. Retail result was still burdened by inefficiency of the Swedish distribution centre.    

Oriola’s strategic programmes, 20by20 Excellence and Customer Experience, are progressing according to plan. In September, we finalised cooperation negotiations which were part of the 20by20 Excellence programme. Target of the programme is to deliver EUR 20 million annualised savings compared to the 2018 cost level. Savings are expected to materialise with full effect by the end of 2020. Customer experience has been systematically developed during the year and customer satisfaction has developed positively.”

Key figures 2019 2018 Change 2019 2018 Change 2018
EUR million 7-9 7-9 % 1-9 1-9 % 1-12
Invoicing 917.3 844.2 8.7 2,754.2 2,589.2 6.4 3,518.4
Net sales 429.0 369.9 16.0 1,274.6 1,157.5 10.1 1,552.2
Adjusted EBIT1 9.8 17.5 -43.8 20.2 31.7 -36.2 36.9
EBIT 4.5 16.5 -72.6 16.3 30.0 -45.5 22.0
Adjusted EBIT % 2.3 4.7   1.6 2.7   2.4
EBIT % 1.1 4.5   1.3 2.6   1.4
Profit for the period 2.6 12.2 -79.1 9.6 21.1 -54.4 12.7
Earnings per share, EUR 0.01 0.07 -79.1 0.05 0.12 -54.4 0.07
Net cash flow from operating activities 12.9 3.3   57.0 54.4   102.8
               
Gearing, %2       84.1 55.3   35.1
Equity ratio, %3       15.6 20.8   19.8
Return on capital employed (ROCE), %4     5.8 12.5   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 83.6 million and the decrease of retained earnings by EUR 5.7 million due to the application of IFRS 16. Excluding the impact of IFRS 16 gearing would have been 30.3%.
3 Equity ratio in 2019 is impacted by the decrease of retained earnings by EUR 5.7 million and increase of total assets by EUR 78.0 million due to the application of IFRS 16. Excluding the impact of IFRS 16 equity ratio would have been 17.5%.
4 Return on capital employed in 2019 is impacted by the increase of total assets by EUR 78.0 million due to the application of IFRS 16. Excluding the impact of IFRS 16 return on capital employed would have been 6.6%.

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 interim report.

Disclosure procedure

This stock exchange release is a summary of Oriola Corporation’s Interim Report January­­–September 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 Friday, 25 October 2019 at 10.00 a.m.  at Hotel Scandic Simonkenttä, meeting room Mansku, Simonkatu 9, 00100 Helsinki, Finland  

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