Oriola Oyj

Good morning, everyone, and a warm welcome to Oriola's Q1 results webcast. My name is Tuas-Denius Örnjälm, and I'm from Oriola's Investor Relations. With me today, I have our CEO, Katariina Gabrielsson, and CFO, Mats Danielsson. After the presentation, we open up for your questions, and please, you can already start to send in the questions through the chat. And as a reminder, we are also recording the webcast, and it will be available on the website later today. And then if we go to the next slide, here is our customer disclaimer that we all should be aware of. And without further ado, I would like to hand over to Katariina.

Thank you, Tuva. And this is the agenda for today. It's a quite traditional agenda that we have in these webcasts. We will start with the highlights, then the operating environment, segments, and then Mats will talk about the financial review before we come to the Q&As. Starting then with the highlights of the first quarter. I'm really happy to be able to see that we have a steady growth and also progress towards long-term goals that we have. The net sales in quarter one 2025 ended up at 447 million euros. It's 19% growth. The organic growth is 8% since we still have the positive effect of a change in the ownership stock from consignment stock to ownership stock that we announced in quarter three 2024. Also the sales margin improved. It improved to 41.3 million euros and the sales margin is supported especially by the distribution segments. The adjusted EBITDA declined though due to higher costs and we'll come back to that a little bit later in this presentation what the reason is. I can see that we have good progress towards the long-term goals. We have customer satisfaction that is an all-time high in both countries, and that is really something that we should benefit from for the future. During the quarter, we have also acquired Medinfo in Denmark. It's a small investment, but still it's an important step for us to be having a larger Nordic footprint in the advisory services. In quarter one, we also got the final decision from the competition courts regarding the Svensk Do sales to Apotekstjänst. And this sales was completed on the first of April this year. And that has been done a lengthy progress that has been taking around one and a half year for us to finalize. The ERP project we announced a little bit more than a year ago, and that is proceeding according to plan. And we are getting closer to the first deployment. That will happen in Sweden. So we will come back to date later on in this year. Kronans Apotek, our joint venture company, has strengthened the market share in both the e-commerce sector and in the physical pharmacies. In the e-commerce sector, we have double-digit growth, and we can also see that we are growing the market share in the physical pharmacies, and that is the first time for quite a while. We can also see that we have made major milestones in the integration in Kronans Apotek. For example, we have merged the legal companies to one company. And that is, of course, still some integrations to be done, but we can also see that it's going to be easier to manage this company for the future. Then looking at operating environments. What we can see really here is that the consumer confidence has been weak during the first quarter, and especially in Finland. We are clearly below the long-term average in the consumer confidence in Finland. Sweden is a little bit better, but we can see weakening signals also in Sweden. So let's see what's happening for the future in these areas. And of course, this is also affected by the current unstable geopolitical situation that we have, and we will not know exactly what that will happen. In this market, of course, we are more stable, but as any company, we are affected, of course, by what's happening with the tolls and other things in the surroundings. The cost inflation has slowed down with more normalized energy and fuel prices. We also start to know now where the salary cost will take for the coming years since the union negotiations start to be ready in both countries. Challenges in availability of medicines is something that we have talked about quite much during this webcast in the last years. There are still challenges in the market in Europe, and I can see that it's not worse, but it's not better either. And we can't see that it will be better for the coming months either. So this is something that we will continue to live with, like we have said also before. The value of the pharmaceutical distribution market has been growing, especially in Sweden. It has slightly declined in Finland, but in Sweden we can really see that the value has been much stronger than in Finland. Then going to our different segments. The distribution segment, if we start with that one, which consists of the pharmaceutical goods that we are distributing for the pharmaceutical suppliers to pharmacies and also veterinarians, has been growing by 22% to 359 million euros. We can see then solid volumes in Sweden and also weaker market in Finland that is impacting the sales in this segment. Like I said before, we have a change from the consignment stock to the ownership stock in Q3 and that is still positively impacting this segment, which means that organic growth landed on 8%. Profitability in this segment improved by 13%, which adjusted EBITDA reaching 7.1 million euros. And here we can see that net sales growth were impacting the profitability as well as a favorable product mix. We can also see that the OPEX has increased in this segment and that's due to customer ordering pattern. We are really dependent on a stable ordering pattern from our customers and if we don't get the stable ordering pattern that is affecting the cost quite fast. We can also see that especially in Sweden we have earlier seasonal vaccine deliveries and in this time of the year it's the tick vaccines that is mainly the deliveries that we do in vaccines. If we then go to the strategic focuses that we have in this segment, we can really see that the higher NPS is helping us and it will also help us for the future. And we have worked a lot with the customer, being close to the customer, the customer centricity and building strong partnerships. And this is something that we will continue to do also for the future. And being close to the customer in combination with high quality services that we do and really deliver on time in full to our customers is something that will help us also in this segment for the future. One example of the customers that we have succeeded with is the onboarding that we have now been doing of new customers in distribution segments. We have talked about that the last six months-ish and we can see now that it's really happening. And this is the time period that we normally have from closing a deal until we are then starting to deliver. I'm really happy to see also that we are in this segment utilizing also the wholesale segment and also the advisory services. So we can see that the new customers is going across market presence but also across the segments that we have. We are also continuing to develop the capabilities and also survey portfolio for the possible deregulation that we might see here coming in Finland. We will be ready for that whenever it comes. Then going to the wholesale segment and in the wholesale segment we have done the sales of traded goods and over-the-counter medicines like painkillers as well as parallel trading of medicines, specialised medicines and advisory services. The net sales in this segment was also growing. It's grown with 9% to €88 million. We could see especially growth in Sweden and also that the sales in Finland was impacted by the weaker market, but also some strikes that we have had in the retail channel, as well as some hoarding in the end of last year. We can see that profitability in this segment was declining by 34%, with adjusted EBITDA landed on 2.4 million euros. And this is mainly due to high OPEX, due to planned growth that we have had in this segment. The investments we have done is to be able to continue to grow for the future, and that is important that we continue with the growth, but also then stabilize the investments for the future. We have also had an unfavorable product mix in this segment that is taking up the costs. If we go down to the strategic parts of this segment, the long-term strategic goals is very much to grow the wholesale business. As we have announced before, the wholesale business have higher margin compared to the distribution segment and this is also the segment where we should grow most. We can see that the portfolio expansion and the collaboration with e-com customers across the markets has been proceeding well. And it's important for us to learn what we do in Sweden in e-com and also being able to utilize that knowledge in Finland. We have as well done a lot of things on the retail channel in Finland and that is also building for the future. So we have had strong focus both on finding new customers on the retail side as well as expanding the assortments to these customers. If we then go to advisory services, like I said here before, we have acquired Medinfo. It's a Danish company, but it's also doing business to Norway. So we have really strengthened the Nordic footprint in this area. And we can also see that in advisory services, we have continued to expand Aureola Insights. And Aureola Insights is a service where we take the digital data that we have in the company and package it especially towards pharmaceutical companies to make it easier for them to take decision in their businesses and help them to succeed with whatever they do. And this is something that the customers really appreciate and we can see an increasing demand for this service. With this, we have covered the part of the business side, so I will now let Mats in to be able to deep dive more in the financial review.

Thank you, Katarina. And good morning also from my side. Before we jump into the numbers, I will open up a bit of the changes that we have in the financial reporting from this year. We have not changed the reporting segments. They are still distribution and wholesale. However, we have some new financial indicators that we follow. and we will also report them to you. First of all, the sales margin, very important KPI for within Oriola to follow. And the sales margin is actually coming from the distribution and service fees that we invoice. It's also the part of the wholesale sale minus the cost of goods that we earn. And then it's of course also the advisory sales. So a combination of these three is the sales margin. Then we have changed from reporting adjusted EBIT to adjusted EBITDA. Reason for that is more or less that We have the ERP treated as a cost during this year and some other things that are affecting it. It will be easier to follow the EBITDA compared to the adjusted EBIT. We have added free cash flow in the reporting. On April 1st, we announced also that we have completed the sales of Svensk DOS. We have included Svensk DOS now in the numbers for 2024 and Q1 2025 have a very limited impact on the full year, 100,000 in 2024 and 200,000 plus in 2025. If we then move to the numbers, we had a good organic growth of 8% and the invoicing grew by 10%. Still, if we look at the net sales growth itself, there's an impact of the customer moving from consignment stock to inventory last year, but the organic growth was 8%. If we then move and look at the sales margin, the sales margin was driven by the distribution segment. We had growth from 40 million to 41 million, 4%, and we had a small decline in the sales margin on the wholesale side. If we then look on EBITDA, the reported EBITDA declined from 6.7 million to 6 million. Main reason for that is that we had more adjusting items this year than the last year. The adjusting items are mainly related to the new ERP. We had a cost of 1.3 million in quarter one. If we then look at the total adjusted EBITDA, 7.7 million compared to 7.5. Distribution adding to the profitability. Wholesale had a negative impact. And then we have from those Sweden still last year in the first quarter had a negative result and a slightly positive result in 2025 first quarter, which gives a positive impact also. So a small decline in adjusted EBITDA compared to last year. Then if we go into details on the adjusted EBITDA, you can see that though Sweden being a part of the distribution segment, if we take that impact from the quarter one out, it was, as said, 500 000 minus last year, now 200 000 plus, so the impact was 700 000. Then the distribution business itself added 100,000 and then we had a negative result on EBITDA level on the wholesale segment. And then we had some group items and we ended up on 7.5 million EBITDA adjusted. If we then move into the segments, as said, we had a good growth of 8% organic and invoicing grew by 10%. If we look at the If we look at the adjusted EBITDA in the distribution segment, we had a net sales growth, as said, and we had a very good product and service mix sold, so the result was good. Then, on the other hand, we had some more cost. For Oriola, it's optimal with a stable and predictable volume and workload. In that way, we can be very productive and efficient in our business. And now we had some fluctuations and volatility in the customer behavior. So that gave some more cost to us, which affected the cost base in a negative way. And then we had also those Sweden impact of 700,000 in this adjusted EBITDA for the distribution segment. If we look at the wholesale segment, good growth of 9%. We had especially good growth in Sweden. The Finnish wholesale, was affected by a weaker market. We had customers stockpiling in December and there was a strike in the retail sector for a few days in quarter one. So we had actually the first two months were a bit slower and then March was already much better. If you look at the adjusted EBITDA, there was a decline mainly related to the product mix and higher operating expenses. Part of those we have planned to invest for growth, but we can see that the result did not pass through due to the mix and the higher cost than earlier. If we then look at the group again, look at the net profit, we can see that the EBITDA lower than last year. That was mainly due to the higher cost in the ERP project compared to last year. When we sold the Svensk News business, there was an impairment write-down of 5.7 million in total, which affected the impairments. We had the EBIT was negative. Then we had financial expenses were lower than last year due to the lower debt level. Then we had a smaller loss in the joint venture in Kroonans. And that was mainly related to real cost savings, but also partly related to some facing of costs in the company. But a good development still. Then if we look at the free cash flow, we had, compared to last year, a very good positive change in working capital, so we had a free cash flow of 25 million compared to minus 10 last year. And that, of course, affects the net interest-bearing debt, 64 million, and we have a lower debt level than than last year and a cash equivalence of 135 million. We have a solid financial position, we have quite a lot of non-cash impact of impairments have had during the last year and the equity ratio is has declined to 14%, but on the other hand, with the good cash flow, so the gearing is minus 48% impacting that. Kronans Apotek, short about Kronans, had a good net sales growth, especially the e-comm growth was good, double digit growth in e-comm. As said, part of the profitability improvement is related to cost savings, partly phasing, but still a good quarter for Kronans Apotek. We also had the AGM on the 2nd of April and it was approved to combine the share classes and that has been done so now we have only one share class out on the market. We have also, the outlook is refined. We say we have now, it's just, we are not talking about the Svensk DOS anymore. So we have included and expect, included Svensk DOS in the numbers for last year and this year, first quarter. And we expect the EBITDA to increase from the previous year. And in 2024, it was 33.4 million. All right.