Swedencare AB (publ)

margin and operating cash flow improved to 78 million SEK. Looking at our three segments, the growth profile is clearly mixed. Europe and production were really strong with organic growth of 19 and 25% respectively, while North America was down 3% organically due mainly to delayed FDMC or big box launch deliveries and temporary effects in the US veterinary channel. However, the North American segment would have been around middle single digit without this and that is still not where we should be. So improvements to come. Export markets delivered their strongest quarter to date with China rebounding sharply. End of quarter I visited China and we are planning to widen the production offering of protein black golf. and are also looking at the opportunities to launch more brands there. The interest is high, but the regulatory framework for imports is complicated, and we are now in discussions with potential manufacturing partners to facilitate new brand launches. Proden Packoff had another exceptional quarter and delivered more than 30% growth. Pharma delivers as expected, high growth numbers, both in manufacturing and development. and the activity level is high for the years to come. Strategically, the quarter also moved the business forward with new offerings, product offerings from under many of our brands and corporations and product launches. Interzoo was also an important event, of course, it's every second year. the biggest trade show in the world. So new market is opening up for Pearl and Black Off, of course, new smaller markets since we're already present in plus 60 countries, but really nice to see new opportunities there. And for other group brands, some big opportunities are in discussions with the relevant distributors. We also had the first capital markets day and strengthened the visibility around the group's priorities the coming years, and we are grateful that the event was fully attended and lots of interesting discussions with participants. We had a new board elected at the AGM, including Thomas Eklund as new chairman, providing continuity with refreshed governance. The message is that the group is still growing organically above market 9% first half year. Cash generation is improving and we have been working hard to prepare for a better and stronger second half year. Over to you, Jenny.

Yes, some financial highlights. So revenue amounted to 670 million for the quarter. This represents 4% growth. 7% was organic growth and we had a negative 3% of currency impact. It's the first quarter since 2019 where we don't have any acquired growth because the most recent acquisition, Summit Vest, has been part of the group now since Q2 last year. So it's included in the organic growth. The currency impact is coming from the dollar, euro and pound, which has all weakened against the crown compared to the second quarter this year. As Håkan said, we did expect another quarter with double-digit growth, and this is also what we communicated on our pre-closed call on the June 17th. And that was based on the information we had at that point. However, some unexpected things happened the last month, and mainly in the second half of that month, including a delayed order from the new big box customers. And that resulted in that we came in at 7%, and that's the same level as we were in Q2 last year. As Håkan mentioned, the year-to-day organic growth is 9%. Our reported growth margin is 61%, and there's no adjustments this quarter between operating and reported growth margin or EBITDA. This is the strongest growth margin we have had since 2020. It came in stronger than expected, driven by a continuous stronger growth in Europe, where margins are higher compared to the other segments, as well as some inventory build-up. And of course, Summit Vets also contributed with a record quarter and also strong margins. The external costs have increased compared to the last quarter. We continue to have strong growth on Amazon, both in the US and in Europe, and that contributes to higher sales-related costs. In addition to that, it's been enhanced marketing initiatives this quarter, mainly online with Prime Day, for example, which occurred in June this year. Last year, it was in July. But also, we have had product launches and intensified efforts to grow the NatureVet Amazon account and also win back some bestseller batches on Amazon. Personnel cost is stable. However, it did include 3 million of severance costs for the quarter, mainly for the final step of the IRB organization that we had at NatureVet. Operational EBITDA, same as the reported EBITDA, as there's no adjustments, amounted to 129 million for the quarter. This is an increase of 5% compared to last year. and a margin of 19.3%. Again, this is below the expectations and that's mainly impacted by this lower sales. However, it's a small increase compared to last year when the margin was 19.0%. Net debt to EBITDA has increased to 3.1. This increase is due to the expected earn-out payment that we are planning for Summit VET, which is included in the calculation from this quarter, because this payment is now due within the next 12 months. It also is impacted by the dividend payout that we did this quarter of 44 million. Our cash conversion increased to 60% for the quarter. It's mainly higher inventory value at the close, which impacted the operating cash flow for the quarter. During the quarter, we have also started the VerioSouth expansion. Hence, CapEx was 4% of sales for the quarter, and year-to-date, it still remains at 3%. Regarding our loans, we repaid 5 million on our external loans this quarter, and in total, we have repaid 55 million year-to-date. Rolling for quarters. On the left, you can see the rolling 12 months trend for which you can see revenues up slightly, but impacted by the negative currency impact and also an improvement of the reporting EBITDA. On the right hand side, you can see the trend of the Q2s. You can see that there's no change between the report and operating EBITDA this quarter.

Turning to North America. This remains the group's largest segment representing 55% of total net revenue and had a minus 3% organic growth. The key point is that the decline is not a broad loss of competitiveness. We knew that North America would be our weakest segment this quarter. In May we noted basically for the first time in many months a softer consumer demand. It was both in pet retail and online affecting all brands. However, June bounced back nicely and even though the turmoil in the Middle East is back and gas prices rising, we have not seen any new weakness in early July. So hopefully May was a bump in the road and not coming back. The major factor why we came in in minus 30 was, as we've said, the private label launch delivery to a new big box customer was delayed because of substantial quality controls implemented by the customer, but performed by a third party just before ship out. Production was approved by the end of the quarter, but the shipment couldn't move out in current quarter. Second, the merger of the two largest U.S.-Vietnamese disputers led to lower inventory levels during the discovery process. We knew about that, but we still had and expected some bigger POs than was delivered in the quarter. hopefully that process will end soon. As said, we are expecting a stronger second half year and when it comes to both sales growth and profitability for North America. There are important positives also. Proden Black Off remained very strong even with a weaker May also for Proden. New private label veterinary delivery started to leading partners, albeit with smaller shipment than expected. These are expected to continue to grow month by month going forward. The NatureVet sales reorganization was completed and Amazon sales badges have been restored for a couple of NatureVet products and also PetMD took back some lost badges. This has been The implementation is that Q2 was a weak North American quarter, but the underlying channel work is in place for a stronger second half, especially online. All the new big box partners, the ones we started last year, continue to grow and we take market share from others. And veterinary partnerships together with a bounce back in the traditional pet retail with a partly new sales team at NatureVet. Europe was one of the clear strengths in the quarter, as said, 90% organic growth and the region now represents 25% of group net external revenue and of course handles more than 90% of the group's internal manufacturing. The growth was broad-based. The majority of companies in the European segment delivered double-digit growth. Dental was the fastest-growing product group, fueled by Amazon mainly, while export sales through distributor markets also contributed strongly. China was an important highlight. As said, sales during the quarter exceeded last year's full-year level. Operationally, this was also a high-activity quarter. NatureVet by Swedencare was launched in Europe online, just started, and delivers to pet retailers will start in Q3. Worth noting is that we're very happy to announce that the leading pet retailer in the UK will be launching the full line in Q3. The Amazon transition was completed across all European markets and that has also had an effect on our profitability with the build-up of this operation and going forward we expect it to contribute at the same level as the Group. Vetner brands continue expanding on present and into new markets. Looking at the different regions, UK, Italy and Nordics are and export markets were the champions this quarter. The main takeaway for Europe is momentum. Europe is combining strong demand, channel execution, digital expansion and pharma growth with Summit Vet. And with SummitWet, we are also expecting second half year to be able to launch soft shoes with Pharma products. And that will be completely unique to the market. So we're expecting a nice demand for that. And also Europe will continue to lead the group's organic growth profile going forward. The production segment delivered the highest organic growth in Q2, 25%, and the segment accounted for 20% of group net revenue. Growth was mainly driven by contract manufacturing in Europe and strong pharma manufacturing and development in Europe. in VetioNorth. This performance is particularly impressive because demand in dermatology remains softer than expected. In other words, the segment is growing strongly despite some weakness in one major area. As said, the demand picture is strongest in the EU and North America Pharma, supported by both existing customers and new customer inquiries. That is why we are investing in additional capacity and organization. The pipeline also supports the outlook Over to you, Jeff.