Oriola Oyj

Welcome to Listen Oriola's half-year financial report presentation. We are here at very sunny Espoo office, and here with me, CEO Katariina Gabrielsson and CFO Sari Pohjonen. My name is Tuula Lehto, Vice President of Communication and Sustainability of Oriola. During the presentation, you can start already writing your questions to the chat. And after the presentation, we will go through those. But now, please, Katariina.

Thank you, Tuula. Good morning and welcome on my behalf also. I'm Katarina Gabrielsson, the CEO of Aureola. And like Tulla said, we will also have presentations from Sari Pohjoinen today. We will do this presentation in the same way as we did for quarter one. It's based on the continuing operations and the discontinued operations. The continuing operations combined the old businesses areas, pharma and retail in Finland and Sweden, into the new Aureola services segment. And these continued operations consist of the consumer segment, including the pharmacy operations in Sweden. In the second quarter, Aureola had a solid performance in both continuing operations and discontinued operations. The total net sales increased by 8% and invoicing by 4%. The comparable adjusted EBIT increased to 8.6 million euros, which is 111% higher than in 2021. Continuing operations adjusted EBIT clearly improved, reaching EUR 5.5 million and that is plus 170%. The result was driven by continuing high market demand and increased sales in all areas, particularly in Finland. The discontinued operations, Oreola Consumer, continued solid performance despite of the inflation pressure. The net sales decreased 3%, but in constant currency basis net sales increased by 1%. The inflation that started late in 2021 has further accelerated and has reached all-time high numbers in many markets. Our overall cost savings have been supporting to mitigate the inflationary pressure. Aureola's business is affected by increasing fuel, energy and labour costs, as well as weakening consumer confidence. Also, we must again pay attention to increasing infection levels of COVID-19 that we can see all around us. Our turnaround actions, especially in operational efficiency, product pricing and portfolio management, have been progressing well. These actions are even more important now, when we are witnessing the increasing inflation. At the end of June, we also received positive news from the Swedish Competition Authority in Swedish Konkurrensverket, as they approved a planned merger of Aureolas Kronans Apotek and Jora Apotekas Apoteksgruppen's pharmacy business in Sweden. The preparations for the completion of this merger are ongoing, and the completion of the merger is expected to take place early October 2022. Let's now look deeper on our figures. And if we start with the continuing and discontinued operations, you can say that our invoicing increased by 3.5% to 1,019 million euro compared to 1,001 million euros previous year. The net sales increased by 7.8% to 504 million euro compared to 468 million euro in Q2 2021. The adjusted EBIT was 15.3 million euros compared to 4.1 million euros previous year and it should be noted also that the adjusted EBIT includes a positive impact of 6.8 million euros in quarter two from lower depreciations as discontinued operations non-current assets are classified as held for sales and not depreciated. The comparable adjusted EBIT excluding the positive impact from depreciations was 8.6 million compared to 4.1 million euros last year. The improved performance compared to earlier years were driven by improved market environment, net sales growth as well as progressing turnaround actions in all businesses. If we then look at our operating environment, we can see that the consumer confidence has weakened during this quarter, and it has also been all-time high inflation. And this has changed the consumer behaviour, and especially consumer spending, and also will probably continue to change in the long run. Also, energy and fuel prices as well as labour costs are increasing. The high inflation that started in the end of 2021 has been accelerating after the heavy sanctions against Russia. And when we then look at the Aureola services markets, we can see that the pharmaceutical wholesale market has been recovered compared to previous year. And when we look at the value development at the wholesale prices in Sweden, the growth was around 9% in Swedish krona in the second quarter. In Finland, the market value grew by 5.6%. Based on our estimates, Aureola's share of the pharmaceutical wholesale market remains at the same level as previous quarters. In dose dispensing business, Aureola offers pharmaceuticals and dose dispensing for private and public healthcare sectors. The total market size for dose dispensing was unchanged in both markets. The number of patients that Aureola is serving in the dose dispensing business has been staying stable in Sweden at approximately 105,000 patients and are slightly growing in Finland to about 30,000 patients. If we then look at the pharmacy side, the pharmacy market value in Sweden grew by 5.5% in quarter two. The total online pharmacy market growth was stabilizing from 21. The growth was 4% in the second quarter. The online pharmacy shares of the total pharmacy market remained at the same level. Oriola's online sales growth was also stabilizing and it grew by 7%. The market share for Oriola in the Swedish pharmacy market in Q2 was unchanged. Then if we start to go through our segments and how the development has been in the segments. Let's start with the continuing operations, that is, the Oriola services and RP Pharmacies. Both the pharmaceutical markets' value and volume grew in Q2 in both Sweden and Finland. The Q2 invoicing increased by 3.7% to 904 million euros compared to 872 million. The net sales grew by 9.5% to 395 million compared to 360 million. This growth was driven by the market growth as well as new customer agreements in the pharmaceutical distribution and growth in dose dispensing. The adjusted EBIT increased to 7.5 million euros compared to 4.2 million, driven by the market and net sales growth and other turnaround actions. However, cost inflations and production challenges, partly related to an external supplier, limited the EBIT improvements. If we then look at the discontinued operations, the consumer segment, the consumer net sales decreased by 2.5% to 202.3 million euros compared to 207.5 million euros. In constant currency, the growth was 0.7%. Our online channel grows slightly faster than the market in the second quarter. When we exclude the positive impact from depreciations, the comparable adjusted EBIT was 3.1 million euros compared to 2 million previous year. And the performance was driven by increased sales and turnaround actions. Now, let's take a deeper look at our financial details, and that will be taken then by our CFO, Sari Poyanen.

Thank you, Katariina, and good morning also on my behalf. If we first take a look at our profit for the period and EPS, you can see that both of them improved significantly compared to the previous year, and our profit for the period, if we think about the year-to-date numbers, stood at 20 million, and EPS for the quarter was seven cents. Even paying attention to the fact that as we have classified Oriola consumer as discontinued operations, there are certain depreciations which are not done, but even taking that into account, our profit for the period has improved considerably from the previous year. Looking at our operating cash flow, I'm very pleased at the development, which we had again during the second quarter. So both the second quarter and especially if we take a look at the year-to-date number, we have been able to improve significantly compared to 2021. There are two sources for this improvement. Obviously, our result development is key there, but we have also paid a lot of attention to working capital management, which is part of our turnaround agenda. However, it's good to know that in our business, it's very typical for working capital to fluctuate a lot from quarter to quarter. As you can see from the historical data, there's a lot of deviation from one quarter to the other. That happens in our business, but regardless of that, I think we can conclude that we have been able to improve a lot during the first half of this year. And as you can see from the right-hand side, our overall cash position remained extremely strong at the end of the quarter. Then looking at our net debt development, on this one, I would like to point out that the numbers and the graphs, they include only the continuing operations. So for continuing operations, our net debt was actually negative, minus 10 million at the end of June. If we do include the discontinued operations as well, the same number was 41 million. Even the 41 million is a 70 million improvement compared to the previous year, which is of course a significant change and significant decrease in the net debt. On the right-hand side, there are more details on the numbers. They are not fully comparable, as 22 numbers include only continuing operations. Most notably, there's a difference in the lease liabilities, but as said, the total net debt, including discontinued operations, was 41 million. And then looking at our equity ratio, which stood at 19.8% at the end of the quarter, these numbers are comparable to the previous year. And then also on the right-hand side, our gearing, which was negative for the continuing operations, but on a more comparable basis, if we include also the discontinued operations, our gearing, including both continuing and discontinued, was 18.7%. Also, there is a significant improvement compared to the previous year. And then just a reminder of our outlook for this year, the comparable adjusted EBIT is estimated to increase from the previous year's level. And once again, reminding everyone that the outlook is based on our current group structure, so including continuing and discontinued operations. And now handing back to Katariina.