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.

Good. Then going to the key takeaways. And for the key takeaways, this is the three parts that we really would like you to remember. We can see that we have a steady progress towards our long-term goals. And we can really see that by the good sales growth and the sales margin that has improved during the first quarter. So this will be really like the fundaments for getting more sales growth and also margin and profitability for the future. We are remaining now on executing the refined strategy and also being really cost-conscious. So we are focusing really, of course, to deliver now on the outlook that you just saw. So that's the three key takeaways that we have. Now I know that there has been a lot of questions to us.

Yes, indeed. Thank you, Katariina and Mats, for your presentations. And as said, we open up now for your questions, and please do send them in through the chat to us. And there's quite a lot of questions at the moment, so I will try to group some of the questions, because they are related to, for example, the ERP project and the Oriola Insights. service, but let's first focus on the Q1 related questions that we have received. So there is a question about the OPEX and cost increases. So could you elaborate a little bit more on where those costs are coming from and also the impact of the strategic investments in the wholesale segment?

Well, at least I can start. I mean, it's a combination of investing in people. It's in wholesale. It's also in the digital part. And those have been planned. Then on the other hand, we have also more cost, as said, in the business itself. volatility in the ordering pattern and we have had to put in more people and it has been a bit unpredictable when the work has been done. So it costs a bit more than expected.

We can also say that when it comes to the wholesale part, it's very much the business people that we have expanded with. So that is also one part of the strategy. And we haven't done that last year. So when you compare the figures to what's last year on that part, it's not comparable. It can be important to spell that out also.

Good, thank you. And then if we think about growth, top line growth, so could you reflect a little bit on what kind of, why there is such good growth in the Q1?

I can start on that one. If you look at the distribution channel, of course, it's of course affected also by the market growth. Like you could see in the presentation, Sweden is growing more than Finland, and that is also following our growth in that aspect in the distribution segment. Then, of course, in wholesale, we have worked with more customers and channels, and also following the market's growth in that one. So following that, but also exceeding it, I would say. But we are working very much then with the customers. So I think from my perspective, it's also like when you can see that you're growing in customer NPSs and the confidence and working closer to them, this is one effect that you can see. And that's the first one of a positive science besides it.

Okay, and continuing on the top line growth and basically a little bit on the outlook. So what kind of, what is this the type of growth that we should expect throughout the whole 2025?

We have not lost any customers during quarter one. We have gained a few customers started now. So we expect the growth to continue. On what level? With a small uncertainty.

Okay, good. And then a question about the pharmaceutical market situation in Finland specifically. Could you elaborate on that one?

What you can see is of course that the pharmaceutical market has been declining now in the quarter one and also, if I remember right, a little bit in the end of last year. Normally, the market situation can fluctuate a little bit in the pharmaceuticals, but it's also taking off in the end. We can see that the surrounding factors that we have, like aging populations and all these kind of things, is affecting in a positive way. So it will come back. We can also see in the pharmaceutical market for quarter one that we had a change in the VAT in Finland first of January. And that is affecting because we had some hoarding on that one or like some bulk buys in the end of last year. That is affecting then also the market situation. So I can't really see that it will continue for the future. But it will stabilize and continue to go according to the growth path that we have put out as I see it.

Good. Then we have commented about the product mix and here's the question specifically for the wholesale segment where we had said that there was an unfavorable product mix. So can you please open up a little bit this one and the plans to mitigate this in the future?

If you remember the wholesale segment and the product part of that one, it's like traded goods, it's over-the-counter products like painkillers, for example. It's also parallel imported products in Sweden and special licensed medicines. All these different areas have different kind of margins, and I will not elaborate that more here now, but what we can say is that some part of this one have been growing faster and might not have the highest margin, the one that has grown fastest. And of course that's also our job to balance how we grow this segment and how we then also push the profitability in that one. So that's what's happening.

Okay, thank you. And then there is now jumping a little bit, but going back to the operating environment. So can you provide any further details on the potential impacts of the trade war?

I can say like this that of course we are affected like in every company in this one and of course there is also this discussion about will there be special tolls on medicines and so on. I think that like every company we need to monitor this one and especially now in quarter two and that's what will happen and how do we mitigate this one. There is an uncertainty of course but not more in this company than in other companies. I don't know if you want to add something Mats.

No I think we are we are among the others and most of the other companies are having the same challenges and uncertainty.

Okay, then a question to you, Mats. So, sales is not affecting to P&L, but the balance sheet in receivables and payables. What kind of effect in equity ratio does this have? Meaning, what would be balance sheet total if receivables and payables relating to sales would be calculated out of balance sheet?

Well, we have not simulated that, so I cannot give a really straight answer. It's affected by quite many factors if we own the inventory or if it's a consignment stock. So it would be quite an exercise to calculate that because the terms are quite different with the different types of inventory that we have. I haven't calculated that now, but it would be...

Okay, so let's move on then to questions relating to the ERP projects. And here I'm trying to group the questions because there are so many detailed ones. So there are questions on... kind of from a risk management point of view, that how we are managing the balance between running the current ERP systems and building slash testing the new ones, and then continuing still that there is a question about how we will be mitigating the risks once we are going live with the ERP.

I can start a little bit. If you look at the ERP project, it's like we call it here ERP project, but it's also a transformation project to really spell that out. For us, it's also about having the possibility to align the businesses between the countries. and that's a little bit what we are doing also so we look at the processes we can take the inbound processes for example how do we work in inbound in the different sites that we have and how do we then put that into the system later on and this is a work that we are doing also before we then start the building and that means of course that there will be changes in how we work as well as changes in the systems and that's that's important for you to understand this is part of the efficiency gain that we will have when they have gone through the project Some part of this is of course something that we can also gain from already beforehand in this one. So we are looking through the processes then we are seeing the special parts that we have in Sweden and special part that we have in Finland and then utilizing as much as common as we can. So this is the work that we have been doing and now we're going to the build phase where we are right now and then of course it's now so that we are starting to build and we are doing that in sprints and we're also testing these kind of things one by one and that's in the end of course it will be end-to-end testing to make sure that we are as secure as possible when we are going for the first deliveries. We also deploy, do deployment in phases. So we will make a smaller deployment in the beginning. And that is taking care of some part of the risk that we will have when we go for the deployment. And I know that this is more detailed than we normally have opened up, but now I took that decision. And I think it's good that we communicate this. Do you want to add something?

No, I think it's important to stress the fact that it's a... transformation and the harmonization project, and we will have the same system in both countries. We have already quite some knowledge of the technical system part, because we use the same in Finland currently, but it's an update from that. So we have people knowing how to develop this in-house also.

And we also, of course, I know that there is some comments quite often about, okay, do you take the knowledge about what happened in 2017 here in Finland? And yes, we do. We are not going to release here, like, how do we take that knowledge, and of course, and how do we mitigate the risk? But there is absolutely a risk mitigation and cutover projects in this one also.

Okay, thanks. And then there's a question about KPIs relating to the ERP, so how we are measuring or tracking the success post-implementation, and then also relating to this, so how will this ERP project support us in addressing the issues with medicine availability and also to improve customer service KPIs like picking quality. So about measuring the ERP.

Yeah, I mean, of course, it's easier to improve on one system than to have two old systems. So I think that the quality will, of course, improve. Then we have in all aspects, it's easier to drive one system and to have the same KPIs. And of course, we have quite a lot of the same customers in Finland and Sweden, so we will be more transparent in our communication and reporting to them also by having the same system.

Okay, good. And then a final question around the ERP, and that's relating to the costs and how we are treating it either as CAPEX or OPEX. So would you much like to recap on that?

Yeah, nothing has actually changed from the previous statement that we gave that most of the cash out will be booked as cost in the adjusting items. and we report that separately in the income statement and open that up on every quarter what we have.

All right, good. Thank you. And then we continue to the next topic where we have quite a few questions. So it's about the Oriola Insights service that is provided by the advisory business. So there's first a question about the margins and our expectations in revenue terms. So would you still like to comment on that? On that one at some level?

It's the same as when we take the traded goods and so on. Of course, we're not taking it completely, but you can say overall the advisory services is having a margin on double-digit level. So this is, of course, following that one.

Good. And any comments on customer feedback relating to Aurova Insights?

That we can take. You can see that, of course, it's a quite new service that we have, but also, like I told you before here in the presentation, that we have got quite much good feedback on this one, and I can also see and increasing demand of this service. And of course, we are developing this both by ourselves, but also together with the customers. So I can see both good progress and good, how to say, not protection, but projection for the future.

Great, thank you. And then there's a question relating to Svensk Dos. So what are you going to do with the money from selling Svensk Dos?

I can say like this, that like you heard here before, we have ERP projects that need to be paid since most of it is OPEX. We have other things that need to be done. So I'm sure we will use the money in a good way. And of course, hopefully that will also help to pay more dividend in the future.

And invest in the future.

Exactly.

And then a couple of questions relating to Kronan's Apotheek. So first, a near-term question. So will the integration-related milestones that have been achieved in Kronan's Apotheek start to affect integration costs slash profitability in the very near term?

Overall you can say that of course we have like announced 25 million by 25 and like we said here also we are not measuring in the same way now because it's also quite it's two and a half years since we did this joint venture and it's harder and harder to say what's really integration. What we can say here is that we can see that the major milestone, especially now merging the companies, that was really a major milestone. And the really big one that we have left is really to go to one ERP also in Kronan side. So with that one, I will say that we haven't, we're not focusing so much right now on the integration costs and that one. It's more like fill this and get the base business to really deliver where it should be.

Good, thank you. So just a reminder, because there's a lag between the live sending and where we are, so please send in your questions through the chat to us. And so another question relating to Kruunan Sapoteet, maybe a little bit on the longer term. So when can we expect to see Kruunan Sapoteet profitable, and what are OREOLA's plans for Kruunan Sapoteet?

Profitable? We don't normally say that like that, so I will not comment exactly what that is. Of course, it's like I said also last time I was standing here, that we have expected Kronas Apotek to be more profitable than it is now, and we are doing our best to really make that happen as soon as possible. And that is also something that Kronas is aware of. What we will do for the future, we have a long-term commitment in Kronans Apotheke, and that's what we communicate now, and there is no other decisions taken in this company.

And Kronans is a very important customer to us.

Yes, that's true.

Good. And then, for the time being, the last question that we have is relating to sustainability and the science-based targets that we have submitted for validation. So, when do you expect to get the validation and will it influence future infrastructure investments or logistics development? And here, of course, we have already externally communicated also that we are looking into.

We have, like you said, sent this in, and you never know exactly how long this will take. But I'm expecting, together with Toa, who is responsible for environmental parts, that this will happen then during the year. And of course, when we have had this... ...approvement, then of course we will continue to do the plans and also then see exactly how should we do the plans and how will it affect But we are already now working with environmental parts and we have like the gold medal in Eco Vadis that we're really proud of. We also have like reduced our carbon quite much from 2019. If I'm right, it's 90% that we're taking it down. So we are working on a steadily base with environmental parts. It's really important for us and should be a daily part of our business.

Great. Thank you. So at the moment there are no further questions in the chat. And I would like to thank everyone for joining us today and also for all the questions. That was really great. And our next event is the publication of the Q2 half-year report on 18th July. And until then, please don't hesitate to reach out to us if you have any further questions that you would like to discuss with us. So thanks everyone.

Thank you. Thank you.