Oriola Oyj

Good morning ladies and gentlemen. Warmly welcome to Oriola's Q2 result presentation. My name is Tuula Lehto and I'm Oriola's Communication and Sustainability Director. Today we are hearing first Oriola's CEO and President Juko Hakala from our studio and secondly our CFO Helena Kukkonen, who is in this time joining circumstantially through remote connection. In the end of the webcast, we will go through your questions, which you can start typing already during our presentation to the message chat. But now it's time to welcome Juko Haakala to start our result presentation. Please, Juko.

Thank you, Tuula. Good morning and welcome to this presentation also on my behalf. My name is Jukko Hakala and I am the interim CEO of Oriola. To put it short, Q2 marked a quarter of recovery and also a quarter of progress in many areas for Oriola. During the quarter two, the impacts of the COVID-19 pandemic in Oriola's business started to ease both in Finland and in Sweden. This was true especially towards the end of the quarter with many temporary pandemic related impacts easing. However, some of them continued to affect Oriola's market environment. The most important example was the continued lower consumer traffic in Sweden. This applied especially to areas that traditionally have high consumer density, such as shopping centers, where Oriola's key pharmacies are located. Due to the improved pandemic situation, the demand for pharmaceuticals started also to recover. However, it did not yet reach the pre-pandemic levels. Swedish pharmacy market value grew by 7% in Q2 and pharmaceutical market increased by 7.2% in Sweden, as well as 8.4% in Finland. As always, we'll discuss the market developments in more detail later in this presentation. Respectively, our invoicing and net sales were up moderately in constant currency, growing by 5.9% and 3.3% respectively. Looking at these figures, it's important to keep in mind that the comparison period last year was very low. We also saw improvement in our profit as our adjusted EBIT increased to 4.1 million euros from minus 0.3 million euros of the very low comparison period. The positive development of profitability was due to the recovering, but still impacted consumer demand in Sweden. Moreover, our strongly performing dose dispensing business impacted positively to the profit. To wrap up our business segments and their contribution to group profit, we can conclude that in consumer we saw recovery, while in pharma the development was flat. I'm pleased to see that retail has improved its performance in many areas, not only in dose dispensing, which is currently the strong arm of that business area. As you remember, we launched a short-term initiative called Focus 21 in Q1 to steer our activities and reach our strategic and performance goals for the year. This initiative is central to Oriola's leadership and it's progressing well with a number of actions at full speed. Overall in Q2, we continued significant simplification of our project portfolio. We implemented operational efficiencies, such as closing down a service center in Jusdal in Sweden. We also took action in the value creation side. We sold part of our shareholding in Dr. Point SC for approximately 340 million Swedish crowns. This deal excuse me, yielded a multiple in excess of four times for Oriola's investment, and the sale improved Oriola's net cash flow from investing activities by 32.8 million euros, as well as increased our equity significantly by 44.8 million euros. Oriola's strategic cooperation with Doctor Point SE continues as per usual. In the second quarter, we also opened a new Annex warehouse in Brunna. I'll come back to that under the pharma segment and discuss it a bit more. And to conclude our key points here, at the same time with strong development activity taking place across Oriola, our operational performance has consistently been solid and customer feedback positive, especially in Finland. Then moving on to key financials. Reported invoicing increased by 9.7% to 984.5 million euros and reported net sales increased by 7.3% to 467.5 million euros. As mentioned on a previous slide, on a constant currency basing, invoicing increased by 5.9%. and net sales increased by 3.3% respectively. Both increases were mainly driven by the recovering market. And then let's have a closer look at our EBIT. Oriola's EBIT increased to 4.1 million euros. The positive development in EBIT was driven by increased consumer demand in Sweden, It is good to keep in mind that the demand did not fully recover in Q2, but was still impacted by the pandemic. But another important factor in our improved profitability was the continued strength of our dose dispensing business. However, at the same time, volume volatility continued to impact our operational efficiency negatively, and the performance of the expert services was lower. Also, general cost increase, mainly in salaries in Sweden, burdened our profit. As in Q1, we have also now in Q2 estimated the net negative impact of the COVID-19 pandemic in our adjusted EBIT to provide further transparency. For the second quarter, we estimate that this impact was in the range of one to two million euros. For the first half, then, the estimated impact was in the range of five to seven million euros. And this estimate compares Oriola's second quarter and first half performance to a normalized market environment, excluding the pandemic effect. Considering the segments and their impact on profitability, we can state mainly two things. First, all business areas contributed positively to the EBIT development. And secondly, retail supported by the continued strength of those dispensing business was a key contributor in this quarter, followed by consumer as a strong second. And then let's take a closer look at our markets. Regarding consumers markets, the pharmacy market in Sweden started to recover and grew by 7% compared with minus 0.8% in Q2 2020. The online pharmacy market segment kept growing at high pace at 16.7%. And Oriola's overall market share in the pharmacy market in Sweden in Q2 was at 16.4% compared with 17% in Q2 2020. Oriola's market share in the online segment was at 7.6% compared with 7.4% in Q2 2020. For pharma, the value of pharmaceutical market grew 8.4% in Finland and 7.2% in Sweden. Oriola's market share remained intact in Finland and nearly intact in Sweden with a one percentage point drop year on year. And then on retail markets, the market for over-the-counter pharmaceuticals and traded goods grew by 7.8% in Sweden compared with 3.6% a year ago. And Oriol's market share in the traded goods and over-the-counter pharmaceuticals supply for pharmacies in Sweden stayed stable at 25%. In those dispensing business, the total market size is now approximately 235,000 patients in Sweden and 75,000 patients in Finland in the end of June. And Oriola is the market leader in Sweden at 43% of the market and has grown its market share also in Finland to 37% of the market. And the number of pharmacies using Oriola staffing services in Finland increased slightly to 166, while the corresponding figure a year ago was 159. And then a bit more detail on the segments and starting with consumer, please. In the second quarter, the pandemic situation improved in our consumer markets, which impacted on the consumer behavior and their increased mobility in Sweden. However, the consumer traffic remained low in areas that normally have high consumer density. Shopping centers and border traffic between Sweden and Norway are examples of such areas. And these are also examples of areas where we have our key pharmacies located. Consumers' net sales grew roughly at the pace of the market by 6.9%, to 197.6 million euros in constant currency. That was driven by the recovering market and the continued growth in our online channel, which we are also strategically developing. In the Swedish pharmacy market, the competition of market shares in e-commerce is tight. The players utilize a range of mechanisms to grow their market shares in e-commerce, such as price attraction and significant online marketing spend. And so do we. We are strategically developing our online channel. And based on this, our online business continued to outgrow the market in Q2 with a growth of 19.8% versus a market growth of 16.7%. The segment's profitability improved, adjusted EBIT increased to 2 million euros, increased demand in physical pharmacies and improved profitability in online channel contributed to the profit positively. Also, general cost increase in Sweden related to salaries impacted the result negatively. Then on pharma. For pharma, market recovery was reflected in volumes that picked up, but continued volume volatility still affected our performance. With volumes picking up, pharma's invoicing grew almost at the rate of the market by 5.6% to €729.9 million in constant currency. The development was close to the growth of the market and reported figures outgrew the markets. Net sales stayed essentially flat, showing an increase of 0.9% at 234.9 million euros in constant currency. Adjusted EBIT remained flat at 2.2 million euros. Positive volume development supported profitability. However, the continued pharmaceutical demand volume volatility caused operational inefficiencies, which affected the profit as in Q1. Moreover, the lower performance in the expert services impacted the profit negatively. In Q2, we also opened a new annex warehouse in Brunna, Sweden. It focuses on business-to-business logistics services for e-commerce companies and retail chains. And when fully operational, the new warehouse will support our growing volumes, especially in these e-commerce company and retail chain deliveries. It also clarifies the role of the company's main distribution center in Enschöping to pharmacy deliveries. Could I have a glass of water, perhaps? Yeah, thanks. And then on to retail. As already mentioned, retail has progressed positively in many areas, and especially its dose dispensing business continues its strong performance. In Q2, demand increased in dose dispensing and parallel imports. Net sales increased moderately by 3.1 percent to 124.7 million euros in constant currency. The increase in the top line was driven by the growth of patient volumes in those dispensing mainly. Adjusted EBIT increased to 2 million euros, The improvement was mainly driven by two factors, the continued strength of the dose dispensing business and the improvements in customer agreements and product mix in health and well-being product category in Sweden. I'll just change the slide. And then on to financial review and Helena, our CFO, if you take this spot, please.

Hello. Thank you, Jukko. So hello also from my side. So as Jukko stated already earlier, Q2 was a quarter of progress for Oriola. Our invoicing and our net sales increased and driven by the recovering market. Moving into adjusted EBIT, Our EBIT increased to 4.1 million from the very low comparison period. To make it short, consumer was recovering, pharma remained flat and retail improved. Overall increase of 4.4 million from the comparison period. Looking at our profit for the period, It was impacted by one million negative adjusting item, which was related to write down of closing down the customer service center in Sweden in our retail business area. Our earnings per share for the quarter was one cent. Then on to cash flow. Our cash flow from operating activities was 28 million, improving from the previous quarter. Cashflow was driven by the change in networking capital where decrease in inventories drove the positive impact and then by depreciation. Our cash decreased from the end of the year 2020 by about 17 million. Our cashflow operating activities for the first half year was 14 million. Positive number in our investing activities was driven by the cashflow of 32.8 million from the sales of the shares in Doctor.se. And during the first half, we have reduced our bank loans and also paid out dividends in June. Then on to net interest bearing debt. It has decreased by 38 million euros since the end of March. This is driven by the less bank loans and more cash. Also, our gearing has improved, driven by the reduced net debt and increased equity, like Hugo said. So handing over now back to Juko and to Studio for the takeaways for the quarter.