2011-02-11 07:30:00 CET
2011-02-11 07:30:40 CET
REGULATED INFORMATION
Oriola-KD Oyj - Annual Financial Report
Oriola-KD Corporation's Financial Statements for 1 January - 31 December 2010
Oriola-KD Corporation Stock Exchange Release 11 February 2011 at 8.30 a.m.
This review presents financial information on the continuing operations of the
Oriola-KD Group (hereinafter Oriola-KD) for the year 2010. Oriola-KD acquired a
nation wide pharmacy chain in Sweden on 19 February 2010, and the 03 Apteka
pharmacy chain in Russia on 31 August 2010, following which dates their figures
have been included in Oriola-KD's figures. On 24 February 2010, Oriola-KD also
acquired the remaining 25 per cent holding in Oriola-KD Holding Russia Oy, which
owns the pharmaceutical retail and wholesale companies in Russia. On 31 May
2010, Oriola-KD sold its Healthcare Trade business to Mediq N.V., and on 28
October 2010 it sold its Dental Trade business to Lifco AB. The figures for the
Healthcare Trade and Dental Trade businesses are reported under discontinued
operations. The financial statements for 1 January - 31 December 2010 have been
prepared in accordance with the calculation principles of the IAS 34 standard.
In addition, new IAS/IFRS standards have been adopted in 2010, the most
important of which are IFRS 3 (revised) and IAS 27. The figures have been
audited.
Key figures for the continuing operations for 1 January - 31 December 2010
* Net sales increased by 23 per cent to EUR 1,929.4 million (2009: EUR
1,569.2 million).
* Operating profit decreased 81 per cent to EUR 9.8 million (2009: EUR 52.6
million).
* Operating profit excluding one-off costs was EUR 22.5 million (2009: EUR
52.6 million).
* Net profit was EUR 3.5 million (2009: EUR 39.1 million), while net profit
including discontinued operations was EUR 102.1 million (2009: EUR 48.6
million).
* Earnings per share were EUR 0.02 (2009: EUR 0.27), while earnings per share
including discontinued operations were EUR 0.68 (2009: EUR 0.34).
* Net cash flow from operations was EUR 88.7 million (2009: EUR 100.9
million).
* The return on equity was 1.2 per cent, while return on equity including
discontinued operations was 33.7 per cent (2009: 22.1 per cent including
discontinued operations).
* Oriola-KD's net sales is expected to be higher and operating profit from
continuing operations excluding one- off items clearly better than in 2010.
* The Board proposes to the Annual General Meeting that a dividend of EUR
0.05 per share (EUR 0.12 per share) is paid for 2010, and EUR 0.13 per share
is distributed from the invested unrestricted equity reserve as repayment of
equity, totalling EUR 0.18 per share (EUR 0.12 per share) in distributed
assets.
* The Board also proposes to the Annual General Meeting that the Board is
authorised to decide on the payment of additional dividend from retained
earnings and/or the distribution of assets from the reserves of unrestricted
equity as repayment of equity up to EUR 0.10 per share in total.
Key figures for continuing operations for 1 October - 31 December 2010
* Net sales increased by 19 per cent to EUR 527.8 million (Q4/2009: EUR 443.5
million).
* The operating profit was EUR 7.3 million (Q4/2009: EUR 23.3 million), which
includes EUR 1.1 million in one-off costs.
* Net profit was EUR 5.5 million (Q4/2009: EUR 17.9 million)
* Earnings per share were EUR 0.04 (Q4/2009: EUR 0.13)
President and CEO Eero Hautaniemi: "Oriola-KD's focus is, in accordance with its
strategy, on pharmaceutical retail and wholesale in Northern Europe and Russia.
In 2010 we acquired a nation wide pharmacy chain in Sweden, the remaining
holding in the Russian pharmaceutical retail and wholesale companies and the 03
Apteka pharmacy chain in Russia, and sold the Healthcare Trade and Dental Trade
businesses. We recorded a profit of EUR 92 million from the sale of these
businesses. The net sales of Oriola-KD's continuing operations increased 23 per
cent to EUR 1.9 billion, and operating profit excluding one-off costs decreased
to EUR 22.5 million because of the very challenging market in Russia. Business
in Finland and Sweden developed positively."
Financial performance
The financial performance figures refer to continuing operations and do not
include the Healthcare Trade and the Dental Trade businesses, unless otherwise
stated.
Oriola-KD's net sales in 2010 were EUR 1,929.4 million (EUR 1,569.2 million) and
operating profit was EUR 9.8 million (EUR 52.6 million). Operating profit
includes EUR 12.7 million in one-off costs in 2010: a write-off of a EUR 1.7
million receivable in Sweden relating to the bankruptcy of a pharmaceutical
company, a EUR 1.1 million provision in the fourth quarter on the restructuring
of the pharmaceutical wholesale business in Sweden, a write-off of a EUR 2.1
million trade receivable in Russia relating to the bankruptcy of a pharmacy
chain, and a write-off of EUR 7.9 million in Russia as a result of recognising
purchase-related discounts on stock value. Profit after financial items came to
EUR 4.5 million (EUR 50.6 million) and net profit to EUR 3.5 million (EUR 39.1
million). Oriola-KD's earnings per share in 2010 were EUR 0.02 (EUR 0.27).
Fourth-quarter net sales came to EUR 527.8 million (EUR 443.5 million) and
operating profit to EUR 7.3 million (EUR 23.3 million), which takes into account
EUR 1.1 million in one-off costs. Profit after financial items came to EUR 5.6
million (EUR 23.0 million) and net profit to EUR 5.5 million (EUR 17.9 million).
Earnings per share in the fourth quarter were EUR 0.04 (EUR 0.13).
Oriola-KD's financing expenses in 2010 were EUR 5.3 million (EUR 2.0 million).
Taxes amounted to EUR 0.9 million (EUR 11.5 million). Taxes corresponding to the
result for continuing operations for 2010 are entered under this figure.
The return on capital employed for continuing operations was 2.1 per cent (18.7
per cent including the discontinued operations), and return on equity was 1.2
per cent (22.1 per cent including the discontinued operations) in 2010.
Balance sheet, financing and cash flow
Balance sheet, financing and cash flow figures include the Healthcare Trade
business figures up to 31 May 2010, the Dental Trade business figures up to 28
October 2010 and also the profit from corporate divestments. The Swedish
pharmaceutical retail business has been consolidated with Oriola-KD's figures
since 19 February 2010, and the figures for the 03 Apteka pharmacy chain
acquired in Russia have been consolidated with Oriola-KD since 31 August 2010.
On 19 February 2010, Kronans Droghandel Retail AB completed the acquisition of
100 per cent of the share capital of a Swedish pharmacy company with 170
pharmacies nationwide. The price of the acquisition was EUR 161.5 million.
Oriola-KD holds an 80 per cent share of the Swedish pharmacy chain, while
Kooperativa Förbundet has a 20 per cent holding. Oriola-KD has the obligation
and right to acquire Kooperativa Förbundet's minority share after a long period
of cooperation. This obligation has been recognised in Oriola-KD's balance sheet
under interest-bearing long-term debt in conjunction with the acquisition of the
pharmacies.
On 24 February 2010, Oriola-KD acquired the remaining 25 per cent holding in
Oriola-KD Holding Russia Oy, which owns the pharmaceutical retail company (OOO
Vitim) and the pharmaceutical wholesale company (OOO Moron) operating in Russia.
The price of the 25 per cent holding was EUR 65.0 million. The total price of
this acquisition in Russia was EUR 153.7 million. On 31 August 2010, Oriola-KD
acquired a 100 per cent ownership in the 03 Apteka pharmacy chain, which
operates in the Moscow area, at a price of EUR 11.9 million.
The Healthcare Trade business was sold for approximately EUR 85 million to Mediq
N.V on 31 May 2010, and a profit of about EUR 54 million was entered for the
transaction in the second quarter of 2010. The Dental Trade business was sold
for some 69 million to Lifco AB on 28 October 2010, and a profit of some EUR 38
million from the transaction was recorded in the fourth quarter of 2010.
Oriola-KD's balance sheet total on 31 December 2010 stood at EUR 1,192.6 million
(EUR 923.1 million). Cash assets were EUR 187.8 million (EUR 133.7 million),
equity was EUR 352.7 million (EUR 254.2 million) and the equity ratio was 30.8
per cent (29.2 per cent).
Interest-bearing debt at the end of 2010 was EUR 178.3 million (EUR 149.7
million), interest-bearing net debt was EUR -9.5 million (EUR 16.0 million) and
the gearing ratio was -2.7 per cent (6.3 per cent). Oriola-KD has hedged the
interest rate risk on the long-term interest-bearing debt associated with the
Swedish pharmaceutical retail business. Interest-bearing debt consists of long-
term debt financing, use of the issued commercial paper programme, advance
payments from pharmacies in Finland and the estimated discounted value of the
minority share of the Swedish pharmacy company that Oriola-KD is obliged to
acquire.
Oriola-KD's committed long-term credit facilities of EUR 103.5 million and EUR
42.3 million in short-term credit account facilities with banks stood unused at
the end of the review period. A total of EUR 4.9 million of Oriola-KD's EUR
150.0 million commercial paper programme was in use. The terms of the financial
covenants were met with a wide margin at the end of 2010.
Net cash flow from operations in 2010 was EUR 88.7 million (EUR 100.9 million),
of which changes in working capital accounted for EUR 73.4 million (EUR 37.9
million). In the Swedish pharmaceutical wholesale business, the trade
receivables sales programme was continued during 2010.
Net cash flow from investments was EUR -104.7 million (EUR -28.0 million), which
includes the acquisition of the pharmacy chain in Sweden, the acquisition of the
25 per cent minority share in Russia, the acquisition of the 03 Apteka pharmacy
chain, operational investments, and the sale of Healthcare Trade business and
Dental Trade businesses. Cash flow after investments was EUR -16.0 million (EUR
72.9 million) in 2010.
Oriola-KD paid EUR 18.1 million in dividends for 2009, i.e. EUR 0.12 per share
(2008: EUR 0.08 per share) during the second quarter of 2010.
Investments
Gross investments for 2010 came to EUR 196.9 million (EUR 47.4 million). They
include the EUR 161.5 million acquisition of the pharmacy chain in Sweden, the
EUR 11.9 million acquisition of the 03 Apteka pharmacy chain and EUR 23.5
million in operational investments, mostly in the growth of pharmacy operations
and improving the efficiency of wholesale operations.
Personnel
On 31 December 2010, Oriola-KD's continuing operations had a payroll of 5,381
(3,870) employees, 8 per cent (11 per cent) of whom worked in Finland, 27 per
cent (8 per cent) in Sweden, 63 per cent (78 per cent) in Russia and a total of
2 per cent (3 per cent) in the Baltic countries. The payroll grew as a result of
the acquisition of the pharmacy chain in Sweden, the establishment of new
pharmacies, the acquisition of the 03 Apteka pharmacy chain and the opening of
new regional logistics centres in Russia.
Changes in the Group Management Team
As of 2 November 2010, Oriola-KD's Group Management Team was composed of:
* President and CEO Eero Hautaniemi:
* Henry Fogels, Vice President, Pharmaceutical Trade, Russia
* Thomas Gawell, Vice President, Pharmaceutical Wholesale, Sweden
* Anne Kariniemi, Vice President, Logistics and Sourcing
* Cecilia Marlow, Vice Director, Pharmaceutical Retail, Sweden
* Jukka Niemi, Vice President, Pharmaceutical Wholesale, Finland and the
Baltics
* Kimmo Virtanen, Executive Vice President & CFO
The Group also has an Extended Group Management Team, composed of the Group
Management Team and the heads of Group functions: human resources, legal
affairs, treasury, finance, IT administration, and corporate communications and
investor relations.
Henry Fogels, General Director of Oriola-KD's Pharmaceutical Retail business in
Russia was appointed, in addition to his current duties, to the position of
acting General Director of Oriola-KD's Pharmaceutical Wholesale business in
Russia as of 2 November 2010. Vladimir Knyazev, member of Oriola-KD's Group
Management Team and General Director of Oriola-KD's Pharmaceutical Wholesale
business in Russia resigned on 2 November 2010. Ilari Vaalavirta, who was a
member of the Group Management Team and Vice President of the Healthcare Trade
business, transferred to Mediq with the sale of the Healthcare Trade business on
31 May 2010.
Business segments
In accordance with its organisational structure and internal reporting, Oriola-
KD's business segments are, as of 28 October 2010, Pharmaceutical Trade Finland,
Pharmaceutical Trade Sweden, Pharmaceutical Trade Russia and Pharmaceutical
Trade Baltics. As of the first quarter of 2011, the figures of Pharmaceutical
Trade Finland and Pharmaceutical Trade Baltics will be reported as one business
segment in line with Oriola-KD's organisation and internal reporting.
Pharmaceutical Trade Finland
Invoicing of Pharmaceutical Trade Finland in 2010 came to EUR 1,003.1 million
(EUR 1,019.7 million), net sales to EUR 417.4 million (EUR 505.1 million) and
operating profit to EUR 20.3 million (EUR 18.1 million). The decline of the
pharmaceutical market and changes made from stock owned by Oriola-KD to
consignment stock, as agreed with pharmaceutical companies, contributed to the
decline in net sales during the review period. Oriola-KD signed an extended
five-year agreement with Orion to distribute pharmaceuticals and food
supplements, which will enter force on 1 July 2011, and a new distribution
agreement with Eli Lilly, which entered into force on 1 January 2011. Wyeth's
products have not been distributed by Oriola-KD since the end of 2010. Orion
accounts for some 10 per cent of the value of pharmaceutical wholesaling in
Finland, Eli Lilly some 2 per cent and Wyeth some 2 per cent. (source: IMS
Health)
Fourth quarter invoicing came to EUR 257.0 million (EUR 266.2 million), net
sales to EUR 103.3 million (EUR 125.8 million) and operating profit to EUR 4.9
million (EUR 4.4 million).
The pharmaceutical market declined by 1.5 per cent (0.0 per cent) in Finland in
2010. Oriola-KD's market share in the Finnish pharmaceutical wholesale market
was 46.0 per cent (46.9 per cent) in 2010 (source: IMS Health)
At the end of 2010, 420 (418) people were employed by Pharmaceutical Trade
Finland. Oriola-KD's logistics centres are located in Espoo and Oulu.
Pharmaceutical Trade Sweden
Pharmaceutical Trade Sweden's net sales in 2010 were EUR 908.7 million (EUR
548.3 million), of which the retail business accounted for EUR 402.7 million
(EUR 0.0 million). The acquired pharmaceutical retail business has been
consolidated with Oriola-KD's figures as of 19 February 2010. The invoicing of
the wholesale business was EUR 1,239.1 million (EUR 1,113.9 million) and net
sales EUR 554.9 million (EUR 548.3 million). Oriola-KD signed a new distribution
agreement with Abbot, which enters into force in February 2011. Since October
2010, Oriola-KD no longer distributes MSD's products, and will no longer
distribute Meda's products from July 2011. Abbot's market share of the value of
Swedish wholesale pharmaceutical sales was some 3 per cent, MSD's some 3 per
cent and Meda's some 2 per cent.
Pharmaceutical Trade Sweden's operating profit in 2010 was EUR 12.5 million
(loss EUR 5.0 million). The costs associated with the preparations made for
pharmacy business in Sweden during 1 January to 19 February 2010 were EUR 2.2
million (EUR 11.7 million in 2009). The operating profit includes a write-off of
a EUR 1.7 million receivable in the third quarter relating to the bankruptcy of
a pharmaceutical company and a EUR 1.1 million provision in the fourth quarter
associated with the restructuring of the pharmaceutical wholesale operations. In
addition, planned depreciation of EUR 1.3 million was recognised for 2010 on the
fair value allocation of a retail trade acquisition.
The efficiency of the wholesale business will be improved by centralising
pharmacy distribution to the Enköping distribution centre and pharmaceutical
warehousing and pharma supplier cooperation to Mölnlycke. As a result, the
number of personnel will decrease by about 70 at Mölnlycke and increase by about
30 at Enköping in early 2011.
Fourth-quarter net sales of Pharmaceutical Trade Sweden came to EUR 246.8
million (EUR 159.3 million), of which retail accounted for EUR 120.3 million
(EUR 0.0 million). Wholesale invoicing was EUR 330.6 million (EUR 284.7 million)
and net sales EUR 140.8 million (EUR 159.3 million). Pharmaceutical Trade
Sweden's operating profit was EUR 3.3 million (operating loss EUR 2.2 million),
including EUR 1.1 million in one-off costs.
On 19 February 2010, Kronans Droghandel Retail AB completed the acquisition of
100 per cent of the share capital of a pharmacy company, with 170 pharmacies
nationwide, at a price of EUR 161.5 million. In 2009, the pro forma net sales of
the acquired pharmacy chain were SEK 4.6 billion (2008: SEK 4.4 billion) and pro
forma operating profit including average central overhead costs of Apoteket AB
was SEK 205 million (2008: SEK 183 million). On 30 September 2010, Kronans
Droghandel Retail AB merged with the newly acquired pharmacy company Kronans
Droghandel Apotek AB. At the end of 2010, Oriola-KD had 189 pharmacies in
Sweden. Oriola-KD's logistics centres are located in Mölnlycke and Enköping.
The Swedish pharmaceutical market grew by 1.1 per cent (2.4 per cent) in 2010.
Oriola-KD's market share in the Swedish wholesale market was 39.7 per cent (41.2
per cent) in 2010. Oriola-KD's market share in the Swedish pharmaceutical retail
market was some 14 per cent. (source: IMS Health)
Pharmaceutical Trade Sweden had 1,483 (306) employees in the end of 2010, of
whom 1,190 (0) were employed in retail and 293 (306) in wholesale.
Pharmaceutical Trade Russia
Pharmaceutical Trade Russia's net sales in 2010 were EUR 572.4 million (EUR
480.7 million), of which retail accounted for EUR 106.6 million (EUR 98.7
million) and wholesale EUR 518.4 million (EUR 439.2 million). The figures for
the 03 Apteka pharmacy chain acquired in Russia have been consolidated with
Oriola-KD's figures since 31 August 2010.
The operating loss was EUR 18.1 million (operating profit EUR 44.5 million). The
operating loss includes EUR 10.0 million in one-off costs: a write-off of a EUR
2.1 million trade receivable relating to the bankruptcy of a pharmaceutical
chain and a EUR 7.9 million stock value write-off due to an extremely tough
market environment. In Russia the amount and significance of purchase-related
discounts grew during 2010, and as a result Oriola-KD has made a stock write-off
by recognising purchase-related discounts in the stock value in the third
quarter. In addition, planned depreciation of EUR 1.0 million was recognised for
2010 on the fair value allocation of the acquisitions.
The ruble-denominated growth in the Russian pharmaceutical market was some 3 per
cent (approx. 20 per cent) in 2010. The slower than forecasted growth and the
pharmaceutical price regulation have led to very intense competition. Oriola-
KD's net sales increased by some 9 per cent (some 40 per cent) in Russian rubles
in 2010.
Fourth-quarter net sales came to EUR 169.6 million (EUR 148.2 million), of which
retail accounted for EUR 33.7 million (EUR 27.5 million) and wholesale EUR
148.9 million (EUR 136.8 million). Operating profit was EUR 0.1 million (EUR
21.6 million).
Oriola-KD acquired a 100 per cent holding in the Russian pharmaceutical retail
company OOO 03 Apteka on 31 August 2010. The chain had 70 pharmacies in the
Moscow area. The purchase price was EUR 11.9 million. The acquired company had
no interest-bearing debt. The pharmacy chain's net sales in 2009 were about EUR
40 million, and the operating profit was about 5 per cent of net sales. The
company employs about 350 people. At the end of 2010 Oriola-KD had 254 (175)
pharmacies in the Moscow area, of which 181 (175) operated under the Stary Lekar
brand and 73 under the 03 Apteka brand.
In addition to its main logistics centre in Moscow, Oriola-KD has eleven
regional logistics centres in Russia, of which the logistics centres in
Yekaterinburg and Novosibirsk were opened in September 2010.
In 2011, the operational focus will be on strengthening the organisation, retail
growth and improving wholesale efficiency.
Pharmaceutical Trade Russia had 3,381 (3,025) employees at the end of 2010, of
whom 1,734 (1,403) were employed in retail and 1,647 (1,622) in wholesale.
Pharmaceutical Trade Baltics
Pharmaceutical Trade Baltics' net sales in 2010 were EUR 31.3 million (EUR 35.7
million) and operating profit was EUR 1.1 million (EUR 0.9 million). Fourth-
quarter net sales came to EUR 8.3 million (EUR 10.3 million) and operating
profit to EUR 0.4 million (EUR 0.3 million). Pharmaceutical Trade Baltics had
97 (120) employees at the end of 2010.
Related parties
Related parties in the Oriola-KD Group are deemed to comprise the parent company
Oriola-KD Corporation, the subsidiaries and associated companies, the members of
the Board and the President and CEO of Oriola-KD Corporation, other members of
the Group Management Team of the Oriola-KD Group, the immediate family of the
aforementioned persons, the companies controlled by the aforementioned persons,
and the Oriola Pension Foundation. The Group has no significant business
transactions with related parties, except for pension expenses arising from
defined benefit plans with the Oriola Pension Foundation. Oriola-KD Corporation
has given internal loans mainly to the holding companies of the Swedish and
Russian businesses. Oriola-KD Corporation has given no significant sureties on
behalf of Group companies, with the exception of a parent company guarantee for
a loan given to Kronans Droghandel Apotek AB.
Oriola-KD Corporation shares
Trading volume of the Oriola-KD Corporation's Class A and B shares in January-
December 2010:
Trading volume 2010 2009
class A class B class A class B
Trading volume, million 5.9 93.6 7.2 104.5
Trading volume, EUR million 25.7 379.8 19.5 298.5
Highest price, EUR 5.47 5.49 4.41 4.43
Lowest price, EUR 3.09 3.07 1.29 1.30
Closing quotation, end of period, EUR 3.19 3.19 4.39 4.40
In the review period, the traded volume of Oriola-KD Corporation shares,
excluding treasury shares, corresponded to 65.9 per cent (76.0 per cent) of the
total number of shares. The traded volume of class A shares amounted to 12.5 per
cent (14.9 per cent) of the average stock, and that of class B shares, excluding
treasury shares, 90.5 per cent (105.8 per cent) of the average stock.
Oriola-KD Corporation's market capitalisation on 31 December 2010 was EUR 482.5
million (EUR 665.1 million).
Pursuant to the authorisation granted to it by the Annual General Meeting of 13
March 2007, the Board of Directors of Oriola-KD Corporation decided on 8 March
2010 on a directed bonus issue, in which a total of 209,300 class B shares held
by the company were assigned to the company's President and CEO and to certain
other members of Oriola-KD Corporation's Group Management Team and Extended
Group Management Team, as part of the 2007-2009 share-based incentive scheme for
the Group's management. These shares were about 0.14 per cent of the total
number of company shares, representing about 0.02 percent of total votes.
Pursuant to the authorisation granted to it by the Annual General Meeting of 13
March 2007, the Board of Directors of Oriola-KD Corporation decided on 28 June
2010 on a directed bonus issue, in which a total of 37,350 class B shares held
by the company were assigned to certain key personnel of the Oriola-KD Group as
part of the 2007-2009 share-based incentive scheme for the Group's management.
These shares were about 0.02 per cent of the total number of company shares,
representing about 0.0035 percent of total votes.
The company has 96,822 treasury shares, all of which are class B shares. These
account for 0.06 per cent of the company's shares and 0.009 per cent of the
votes.
At the end of 2010, the company had 151,257,828 shares (151,257,828), of which
47,163,160 were class A shares (47,667,359) and 104,094,668 were class B shares
(103,590,469). Pursuant to article 3 of the Articles of Association, a
shareholder can request that class A shares be converted to class B shares.
During 2010, a total of 504,199 (1,024,844) class A shares were converted into
class B shares.
The Board of Directors of Oriola-KD has further specified the earning criteria
for the share incentive scheme for the Group's key personnel for the years
2010-2012, stating that any payment for the 2010 earning period will be based on
Oriola-KD's earnings per share (EPS) and return on capital employed (ROCE).
On 28 October 2010, the Board announced that it will not use the authorisation
granted to it by the Annual General Meeting of 7 April 2010 regarding payment of
an additional dividend from undistributed profits and/or distribution of funds
from the company's non-restricted equity reserves.
Risks
The Board of Directors of Oriola-KD has approved the company's risk management
policy, in which the risk management operating model, principles,
responsibilities and reporting are specified. The Group's risk management seeks
to identify, measure and manage risks that may threaten Oriola-KD's operations
and the achievement of goals set. The roles and responsibilities relating to
risk management have been determined in the Group.
Oriola-KD's risks are classified as strategic, operational and financial. Risk
management is a key element of the strategic process, operational planning and
daily decision-making at Oriola-KD.
Oriola-KD has identified the following principal strategic and operational risks
in its business:
* growth in number of pharmacies outperforms growth in the market, leading to
intense competition
* competition for market share in pharmaceutical wholesale in a consolidating
market
* ensuring cost efficiency, flexibility and quality
* development of processes and infrastructure required by strategic expansion
* requirements and restrictions on pharmaceutical retail and wholesale imposed
by the authorities, especially price regulation
* commitment of key employees
The major financial risks for Oriola-KD involve currency exchange rates,
liquidity, interest rates and credit. Expansion of operations into new business
areas and new markets has increased the financial risks. Currency risks are the
most significant financial risks in Russia and Sweden, as changes in the value
of the Russian ruble or the Swedish krona will have an impact on Oriola-KD's
financial performance and equity.
Goodwill and intangible rights are subject to annual impairment testing, which
may have a negative effect on Oriola-KD's financial performance.
Near-term risks and uncertainty factors
Intense competition and changes in the price control system for pharmaceuticals
have a material impact on Oriola-KD's near-term outlook in Russia. The
development of the Swedish pharmaceutical wholesale and retail markets are
subject to uncertainties, which may have a significant effect on Oriola-KD's
business in Sweden.
Decisions of the Annual General Meeting
The Annual General Meeting of Oriola-KD Corporation, held on 7 April 2010,
confirmed the 2009 financial statements and discharged the Board members and the
President and CEO from liability for the financial year ending 31 December
2009. The Annual General Meeting resolved that the sum of EUR 0.12 per share be
paid as dividend on the basis of the balance sheet adopted for the financial
year ending 31 December 2009.
In accordance with the Board's proposal, the Board was authorised to decide on
the payment of an additional dividend from undistributed profits and/or
distribution of funds, in one or more batches, from the company's invested non-
restricted equity funds or both so that the amount of the additional dividend
and/or return of capital paid under the authorisation would not exceed EUR 0.05
per share. The authorisation will be in force until the next annual general
meeting.
The Annual General Meeting confirmed that the Board comprises eight members. Re-
elected as Board members were Harry Brade, Pauli Kulvik, Outi Raitasuo, Antti
Remes, Olli Riikkala, Jaakko Uotila and Mika Vidgrén, and Per Båtelson was
elected as a new member. Olli Riikkala was elected to continue as Chairman of
the Board. The Annual General Meeting confirmed that the Chairman of the Board
will receive EUR 48,400 in remuneration for his term of office, the Vice
Chairman EUR 30,250 and the other members of the Board EUR 24,200 each. Of the
annual fees, 60 per cent will be paid in cash and 40 per cent in company shares
in such a way that after the release of the company's interim report for the
first quarter of 2010, Oriola-KD Corporation class B shares would be acquired on
the market for Board members, and the cash portion of the annual fee will also
be paid. The Chairman of the Board will receive an attendance fee of EUR 800 for
each meeting, and the other Board members EUR 400 per meeting. Attendance fees
will also be paid in the same manner to members of any committees set up by the
Board of Directors or the company. The Chairman of the Board will also have a
company-paid phone. Travel expenses will be paid in accordance with the travel
policy of the company.
The Annual General Meeting re-elected PricewaterhouseCoopers Oy as auditor for
the company, with Heikki Lassila APA as principal auditor, for the 2010
financial year. The auditor will be remunerated according to invoice.
The Annual General Meeting resolved that article 12 of the Articles of
Association, on the time of the notice of general meeting, be amended.
The Board was authorised to decide on the purchase of Oriola-KD Corporation
class B shares in accordance with the Board's proposal. Pursuant to the
authorisation, the Board is authorised to decide on the purchase of no more than
fifteen million (15,000,000) of the company's own class B shares, corresponding
to approximately 9.92 per cent of the total number of company shares. The
authorisation can only be used in such a way that the company and its
subsidiaries together would hold no more than one tenth (1/10) of the total
number of company shares at any one time. The purchase authorisation would
remain in force no longer than eighteen (18) months following the decision of
the General Meeting. The authorisation repeals the Annual General Meeting's
decision of 16 April 2009 authorising the Board to decide on the purchase of
Oriola-KD Corporation class B shares.
The Board was authorised to decide on a share issue against payment in one or
more batches in accordance with the Board's proposal. The authorisation includes
the right to issue new class B shares or to assign class B shares held by the
company. The authorisation covers no more than thirty million (30,000,000) of
the company's class B shares in total, which corresponds to approximately 19.83
per cent of the total number of company shares. The authorisation granted to the
Board includes the right to deviate from the pre-emptive subscription right of
shareholders, provided that there are financial grounds considered important
from the company's perspective for such a deviation. The authorisation will
remain in force for eighteen (18) months following the decision of the General
Meeting. The authorisation cancels the share issue authorisations previously
received by the Board, with the exception of the authorisation granted to the
Board by the Annual General Meeting of 13 March 2007, under which the Board may
decide on arranging a directed bonus issue of no more than 650,000 class B
shares for the purpose of implementing the 2007-2009 share-based incentive
scheme for management.
The Board was also authorised to decide on granting Oriola-KD Corporation shares
to the company itself in one or more batches under a bonus issue, in accordance
with the Board's proposal. The maximum amount of the company's new class B
shares issued under this authorisation is 1,200,000, which was 0.79 per cent of
the company's total shares and 0.11 per cent of total votes. The purpose of the
authorisation is to allow the use of treasury shares as laid out below in the
new share-based incentive scheme for Oriola-KD key persons. The Board was also
authorised to issue class B shares in deviation from the pre-emptive
subscription rights of shareholders, in accordance with the Board's proposal.
The class B shares issued may be either new or treasury shares. The total amount
of shares under the authorisation is 1,200,000 class B shares. The share issue
may be a bonus issue. These shares represent approximately 0.79 per cent of the
total number of company shares and approximately 0.11 per cent of the total
number of votes. The Board may use this authorisation in the new 2010-2012
share-based incentive scheme for Oriola-KD key persons. The authorisations
remain in force for no more than four (4) years following the decision of the
General Meeting.
Decisions of the organisational meeting of the Board
At the organisational meeting held immediately after the Annual General Meeting,
the Board re-elected Antti Remes as Vice Chairman of the Board. The composition
of the Board's Audit and Compensation Committees was confirmed as follows.
Audit Committee:
Antti Remes, Chairman
Harry Brade
Outi Raitasuo
Mika Vidgrén
Compensation Committee:
Olli Riikkala, Chairman
Pauli Kulvik
Jaakko Uotila
The Board of Directors has evaluated the independence of its members and found
that all the members are independent of both the company and its major
shareholders.
On 29 October 2010, the Board of Directors of Oriola-KD Corporation appointed
the following persons as members of the company's Nomination Committee:
Harry Brade
Timo Maasilta
Risto Murto
Olli Riikkala
Timo Ritakallio
Into Ylppö, Chairman
According to the rules of procedure of the Nomination Committee approved by the
Board of Directors, the committee is a body established by the Board of
Directors whose duty is to prepare and make a recommendation to the Board of
Directors on a proposal to the Annual General Meeting regarding the composition
and compensation of the Board of Directors.
Oriola-KD's long-term targets and dividend policy
The long-term targets and dividend policy of the Oriola-KD Group were confirmed
by the Board of Directors of Oriola-KD Corporation on 24 November 2010. The
targets are based on growth, profitability (ROE) and balance sheet figures. The
new long-term targets and dividend policy replace the targets and dividend
policy published on 1 November 2006.
Oriola-KD's long-term targets
Growth: To grow faster than the relevant markets
Profitability: ROE (return on equity) target is over 15 per cent
Balance sheet: Long-term average gearing ratio is between 40-60 per cent
Oriola-KD's dividend policy:
Oriola-KD will seek to pay out annually as dividend approximately 50 per cent of
the earnings per share. The company's strategy and financial position shall be
taken into consideration when determining the annual dividend payout ratio.
Events after the review period
On 1 February 2011, the Nomination Committee of Oriola-KD Corporation presented
to the Board of Directors its recommendation on the proposal to the 2011 Annual
General Meeting concerning the composition of the Board of Directors as follows:
* The number of members of the Board of Directors would remain eight.
* Of the present members of the Board of Directors, Mr. Harry Brade, Mr Per
Båtelson, Mr. Pauli Kulvik, Ms. Outi Raitasuo, Mr. Olli Riikkala and Mr.
Mika Vidgrén, would be re-elected.
* Mr. Jukka Alho and Mr. Ilkka Salonen would be elected as new members of the
Board of Directors.
* Mr. Olli Riikkala would be re-elected as Chairman of the Board of Directors.
Mr. Antti Remes, vice chairman of the Board, and Mr Jaakko Uotila, member of the
Board, will leave the office of Board of Directors after the 2011 Annual General
Meeting.
The Nomination Committee also announced as its recommendation that the following
remunerations be paid to the members of the Board of Directors:
* Chairman of the Board: annual fee of 48,400 euros, attendance fee of 800
euros per meeting, telephone as a fringe benefit.
* Vice chairman of the Board: annual fee of 30,250 euros, attendance fee of
400 euros per meeting.
* Other members of the Board: annual fee of 24,200 euros, attendance fee of
400 euros per meeting.
* Attendance fees would be paid respectively also to members of company or
Board committees.
* Of the annual fee, 60 per cent would be paid in cash and 40 per cent would
be used to acquire Oriola-KD Corporation's class B-shares for the members
Board of Directors from the NASDAQ OMX Helsinki Stock Exchange on 20 April
2011.
* Travel expenses would be reimbursed in accordance with the travel policy of
the company.
The Nomination Committee stated that its recommendation on board remunerations
is not given to the Board of Directors, but the matter will be proposed by a
shareholder at the 2011 Annual General Meeting.
Distribution proposal
Oriola-KD's parent company is Oriola-KD Corporation, whose distributable assets
on 31 December 2010, based on the balance sheet, were EUR 184.5 million (EUR
96.2 million).
The Board proposes to the Annual General Meeting that a dividend of EUR 0.05 per
share (EUR 0.12 per share) is paid for 2010, and EUR 0.13 per share be
distributed from the invested unrestricted equity reserve as repayment of
equity, totalling EUR 0.18 per share (EUR 0.12 per share) in distributed assets.
The Board also proposes to the Annual General Meeting that the Board is
authorised to decide on the payment of additional dividend from retained
earnings and/or the distribution of assets from the reserves of unrestricted
equity as repayment of equity up to EUR 0.10 per share in total.
Annual General Meeting
Oriola-KD Corporation's Annual General Meeting will be held on 6 April 2011 at
5.00 p.m. at the Helsinki Fair Centre. The matters specified in article 10 of
the Articles of Association and other possible proposals of the Board of
Directors will be dealt with at the meeting. The Board of Directors will decide
on the notice of the Annual General Meeting and the proposals contained in it at
a later date. The notice of the Annual General Meeting will be published in the
Helsingin Sanomat newspaper on 13 March 2011 at the latest.
Publication of the annual report
Oriola-KD Corporation will publish its annual report for 2010 on 7 March 2011 at
the latest.
Corporate governance statement
The company's Corporate Governance Statement has been prepared in accordance
with Recommendation 54 of the Finnish Corporate Governance Code. The Corporate
Governance Statement is not part of the Report of the Board of Directors. The
statement is available at www.oriola-kd.com.
Outlook
Oriola-KD's outlook for 2011 is based on external market forecasts, supplier and
customer agreements and management assessments. In the period 2011-2014 the
pharmaceutical market is expected to grow by some 3 per cent in Finland, 2-3 per
cent in Sweden, and 11-13 in Russia, measured in local currencies (source: IMS
Health). The Russian pharmaceutical market is expected to show growth below the
longer term trend in 2011 and the tough competition to continue. However, the
visibility in Russian pharmaceutical market development is still poor.
Competition in the Swedish retail market is expected to continue to be stiff as
a result of the deregulation.
Oriola-KD's net sales is expected to be higher and operating profit from
continuing operations excluding one- off items clearly better than in 2010.
Tables
Consolidated Statement 1 Oct - 31 1 Oct - 31
of 1 Jan - 31 Dec 1 Jan - 31 Dec Dec Dec
Comprehensive Income
(IFRS),
EUR million 2010 2009 2010 2009
--------------------------------------------------------------------------------
Continuing operations
Net sales 1,929.4 1,569.2 527.8 443.5
Cost of goods sold -1,668.2 -1,363.8 -448.7 -379.3
--------------------------------------------------------------------------------
Gross profit 261.2 205.4 79.1 64.1
Other operating income 4.8 2.1 1.6 0.5
Selling and
distribution expenses -214.7 -129.2 -62.0 -35.2
Administrative
expenses -41.5 -25.8 -11.4 -6.2
--------------------------------------------------------------------------------
Operating profit 9.8 52.6 7.3 23.3
Financial income 13.0 7.9 4.6 1.2
Financial expenses -18.3 -9.9 -6.4 -1.5
--------------------------------------------------------------------------------
Profit before taxes 4.5 50.6 5.6 23.0
Income taxes*) -0.9 -11.5 -0.1 -5.1
--------------------------------------------------------------------------------
Profit for the period
from continuing
operations 3.5 39.1 5.5 17.9
Discontinued
operations
Profit for the period
from discontinued
operations 98.6 9.5 37.9 2.1
--------------------------------------------------------------------------------
Profit for the period
including discontinued
operations 102.1 48.6 43.4 20.0
Other comprehensive
income
Hedge of a net
investment in a
foreign operation 5.1 -2.0 1.4 0.8
Cash flow hedge 1.2 - 1.2 -
Income tax relating to
other comprehensive
income -1.0 0.4 -0.3 -0.2
Translation difference 20.0 1.3 4.8 2.0
--------------------------------------------------------------------------------
Total comprehensive
income
for the period
including discontinued
operations 127.4 48.4 50.6 22.6
Attribution of profit
for the period
from continuing
operations
--------------------------------------------------------------------------------
To parent company
shareholders 3.5 40.1 5.5 18.8
--------------------------------------------------------------------------------
To non-controlling
interest - -0.9 - -0.9
--------------------------------------------------------------------------------
Attribution of profit
for the period
including discontinued
operations
--------------------------------------------------------------------------------
To parent company
shareholders 102.1 49.5 43.4 20.0
--------------------------------------------------------------------------------
To non-controlling
interest - -0.9 - -0.9
--------------------------------------------------------------------------------
Attribution of total
comprehensive
income for the
period (including
discontinued
operations)
--------------------------------------------------------------------------------
To parent company
shareholders 127.4 49.3 50.6 23.5
--------------------------------------------------------------------------------
To non-controlling
interest - -0.9 - -0.9
--------------------------------------------------------------------------------
Earnings per share
from continuing
operations
Basic earnings per
share, EUR 0.02 0.27 0.04 0.13
Diluted earnings per
share, EUR 0.02 0.27 0.04 0.13
Earnings per share
(including
discontinued
operations)
Basic earnings per
share, EUR 0.68 0.34 0.29 0.14
Diluted earnings per
share, EUR 0.68 0.34 0.29 0.14
*) The tax expense for
the period
corresponds to the
taxes calculated from
the
profit for the
financial year.
Consolidated Balance Sheet (IFRS),
EUR million
ASSETS 31 Dec 2010 31 Dec 2009
--------------------------------------------------------------------
Non-current assets
Property, plant and equipment 68.0 53.3
Goodwill 266.1 141.7
Other intangible assets 79.3 39.5
Investments in associated companies 0.0 30.7
Other non-current assets 10.6 7.5
Deferred tax assets 3.3 2.5
--------------------------------------------------------------------
Non-current assets total 427.2 275.2
Current assets
Inventories 287.5 287.1
Trade and other receivables 290.1 227.1
Cash and cash equivalents 187.8 133.7
--------------------------------------------------------------------
Current assets total 765.4 647.8
ASSETS TOTAL 1,192.6 923.1
--------------------------------------------------------------------
EQUITY AND LIABILITIES 31 Dec 2010 31 Dec 2009
--------------------------------------------------------------------
Equity
Share capital 36.2 36.2
Other funds 52.1 50.9
Retained earnings 264.5 156.4
Equity of the parent
company shareholders 352.7 243.4
Non-controlling interests - 10.8
--------------------------------------------------------------------
Equity total 352.7 254.2
Non-current liabilities
Deferred tax liabilities 22.2 13.6
Pension obligations 5.7 4.9
Provisions - 0.0
Interest-bearing non-current liabilities 124.5 0.2
--------------------------------------------------------------------
Non-current liabilities total 152.5 18.8
Current liabilities
Trade payables and other current liabilities 633.6 500.5
Interest-bearing current liabilities 53.7 149.5
--------------------------------------------------------------------
Current liabilities total 687.4 650.1
EQUITY AND LIABILITIES TOTAL 1,192.6 923.1
--------------------------------------------------------------------
Consolidated
Statement
of Changes in
Equity (IFRS)
Equity
of the
parent
company
Non-
Share Hedge Other Translation Retained share- controlling
EUR million capital fund funds differences earnings holders interest Total
--------------------------------------------------------------------------------
Equity
1 Jan 2009 36.2 - 30.1 -30.1 148.2 184.4 1.0 185.5
--------------------------------------------------------------------------------
Dividends
paid - - - - -11.3 -11.3 - -11.3
Share issue - - 20.7 - - 20.7 - 20.7
Change in
non-
controlling
interest - - - - - 0.0 10.7 10.7
Share-based
payments - - - - 0.3 0.3 - 0.3
Net profit
for the
period - - - - 49.5 49.5 -0.9 48.6
Other
comprehensive
income:
Hedge of a
net
investment in
a
foreign
operation - - - -2.0 - -2.0 - -2.0
Income tax
relating to
other
comprehensive
income - - - 0.4 - 0.4 - 0.4
Translation
difference - - - 1.3 - 1.3 - 1.3
--------------------------------------------------------------------------------
Equity
31 Dec 2009 36.2 0.0 50.9 -30.4 186.8 243.4 10.8 254.2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Equity
1 Jan 2010 36.2 0.0 50.9 -30.4 186.8 243.4 10.8 254.2
--------------------------------------------------------------------------------
Dividends
paid - - - - -18.1 -18.1 - -18.1
Change in
non-
controlling
interest - - - - - 0.0 -10.8 -10.8
Net profit
for the
period - - - - 102.1 102.1 - 102.1
Other
comprehensive
income:
Hedge of a
net
investment in
a
foreign
operation - - - 5.1 - 5.1 - 5.1
Cash flow
hedge - 1.2 - - - 1.2 - 1.2
Income tax
relating to
other
comprehensive
income - - - -1.0 - -1.0 - -1.0
Translation
difference - - - 20.0 - 20.0 - 20.0
--------------------------------------------------------------------------------
Equity
31 Dec 2010 36.2 1.2 50.9 -6.3 270.8 352.7 0.0 352.7
--------------------------------------------------------------------------------
Consolidated Cash
Flow Statement *) 1 Jan - 31 Dec 1 Jan - 31 Dec
(IFRS), EUR million 2010 2009
--------------------------------------------------------------------------------
Operating profit 17.1 65.4
Depreciation 11.5 9.4
Change in working capital 73.4 37.9
Cash flow from financial
items and taxes -18.1 -13.3
Other adjustments 4.8 1.5
Net cash flow from
operating activities 88.7 100.9
Net cash flow from
investing activities -104.7 -28.0
Net cash flow from
financing activities 61.2 14.5
Net change in cash
and cash equivalents 45.2 87.4
Cash and cash equivalents
at the beginning of the period 133.7 46.5
Foreign exchange rate differences 8.9 -0.2
Net change in cash
and cash equivalents 45.2 87.4
Cash and cash equivalents
at the end of the period 187.8 133.7
--------------------------------------------------------------------------------
*) Includes net cash flow of Healthcare Trade
until 31 May 2010 and net cash flow of Dental
Trade
until 28 October 2010.
Change in Property,
Plant and Equipment, 1 Jan - 31 Dec 1 Jan - 31 Dec
EUR million 2010 2009
--------------------------------------------------------------------------------
Carrying amount at the
beginning of the period 53.3 54.5
Increases through acquisitions
of subsidiary shares 9.7 -
Increases 14.3 6.0
Decreases -5.2 -1.8
Depreciation -7.6 -6.5
Foreign exchange
rate differences 3.4 1.1
--------------------------------------------------------------------------------
Carrying amount at
the end of the period 68.0 53.3
--------------------------------------------------------------------------------
1 Jan - 31 Dec 1 Jan - 31 Dec
Key Figures 2010 2009
--------------------------------------------------------------------------------
Equity ratio, % 30.8% 29.2%
Equity per share, EUR 2.33 1.61
Return on capital employed
(ROCE) from continuing operations, % 2.1% 18.7%
Return on capital employed
(ROCE) incl. discontinued operations, % 23.3% 18.7%
Return on equity from
continuing operations, % 1.2% 22.1%
Return on equity incl.
discontinued operations, % 33.7% 22.1%
Net interest-bearing debt,
EUR million -9.5 16.0
Gearing, % -2.7% 6.3%
Earnings per share from
continuing operations, EUR 0.02 0.27
Earnings per share incl.
discontinued operations, EUR 0.68 0.34
Average number of shares,
1000 pcs 151,164 147,034
Key figures for 2009 include discontinued
operations.
Derivatives, Commitments
and Contingent Liabilities
31 December 2010
Positive fair Negative fair Nominal values of
EUR million value value contracts
Derivatives recognised as
cash flow hedges
Interest rate swaps 1.2 - 111.5
Derivatives measured at
fair value through profit or loss
Foreign currency forward
and swap contracts 0.1 - 58.0
31 December 2009
Positive fair Negative fair Nominal values of
EUR million value value contracts
Derivatives recognised
as cash flow hedges
Foreign currency forward
and swap contracts 1.4 - 50.9
Derivatives measured at
fair value through profit or loss
Foreign currency forward
and swap contracts 0.1 - 11.7
Contingencies for Own Liabilities,
EUR million 31 Dec 2010 31 Dec 2009
-------------------------------------------------------------------------
Guarantees given 125.4 36.8
Mortgages on land and buildings 2.0 2.0
Mortgages on company assets 2.3 2.0
Other guarantees and liabilities 0.5 2.1
-------------------------------------------------------------------------
Total 130.3 42.9
-------------------------------------------------------------------------
Leasing-liabilities (operating liabilities) 0.9 0.3
Rent contingencies 66.5 33.8
1 Jan - 31 Dec 1 Jan - 31 Dec
Net Sales by Operating Segments,
EUR million 2010 2009
-------------------------------------------------------------------------
Pharmaceutical Trade Finland 417.4 505.1
Pharmaceutical Trade Sweden 908.7 548.3
Pharmaceutical Trade Russia 572.4 480.7
Pharmaceutical Trade Baltics 31.3 35.7
Net sales to other segments -0.5 -0.5
-------------------------------------------------------------------------
Continuing operations total 1,929.4 1,569.2
Discontinued operations 65.3 145.1
Net sales to other segments -1.6 -1.2
-------------------------------------------------------------------------
Group Total 1,993.1 1,713.1
Operating Profit by Operating Segments, 1 Jan - 31 Dec 1 Jan - 31 Dec
EUR million 2010 2009
-------------------------------------------------------------------------
Pharmaceutical Trade Finland 20.3 18.1
Pharmaceutical Trade Sweden 12.5 -5.0
Pharmaceutical Trade Russia -18.1 44.5
Pharmaceutical Trade Baltics 1.1 0.9
Group Administration and Others -6.0 -5.9
-------------------------------------------------------------------------
Continuing operations total 9.8 52.6
Discontinued operations 99.3 12.8
-------------------------------------------------------------------------
Group Total 109.0 65.4
Continuing operations
Average number of personnel 4,893 3,923
Number of personnel
at the end of the period 5,381 3,870
Group total
Average number of personnel 5,063 4,373
Number of personnel
at the end of the period 5,381 4,299
Net Sales by
Operating
Segments,
EUR million Q4/2010 Q3/2010 Q2/2010 Q1/2010 Q4/2009 Q3/2009 Q2/2009 Q1/2009
--------------------------------------------------------------------------------
Pharmaceutical
Trade Finland 103.3 103.8 105.9 104.5 125.8 120.6 132.0 126.8
Pharmaceutical
Trade Sweden 246.8 239.5 241.4 181.0 159.3 132.1 130.5 126.4
Pharmaceutical
Trade Russia 169.6 147.8 132.8 122.1 148.2 118.6 106.6 107.2
Pharmaceutical
Trade Baltics 8.3 7.4 7.3 8.3 10.3 8.0 8.8 8.6
Net sales to
other segments -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.2
--------------------------------------------------------------------------------
Continuing
operations total 527.8 498.5 487.3 415.7 443.5 379.2 377.8 368.8
Discontinued
operations - - 30.9 34.4 43.4 31.9 34.9 35.0
Net sales to
other segments - - -0.5 -1.1 -0.3 -0.3 -0.3 -0.3
--------------------------------------------------------------------------------
Group Total 527.8 498.5 517.7 449.0 486.5 410.8 412.3 403.5
Operating Profitby
Operating
Segments,
EUR million Q4/2010 Q3/2010 Q2/2010 Q1/2010 Q4/2009 Q3/2009 Q2/2009 Q1/2009
--------------------------------------------------------------------------------
Pharmaceutical
Trade Finland 4.9 5.9 5.0 4.5 4.4 4.9 4.9 3.9
Pharmaceutical
Trade Sweden 3.3 4.9 5.6 -1.4 -2.2 -0.4 -2.0 -0.4
Pharmaceutical
Trade Russia 0.1 -15.7 -2.0 -0.4 21.6 6.6 8.6 7.6
Pharmaceutical
Trade Baltics 0.4 0.3 0.2 0.3 0.3 0.2 0.2 0.1
Group
Administration
and Others -1.4 -1.2 -1.9 -1.6 -0.8 -1.5 -2.0 -1.6
--------------------------------------------------------------------------------
Continuing
operations total 7.3 -5.8 6.9 1.3 23.3 9.8 9.8 9.6
Discontinued
operations 37.9 1.3 57.1 2.9 3.6 2.8 3.7 2.8
--------------------------------------------------------------------------------
Group Total 45.2 -4.5 64.0 4.2 26.9 12.6 13.5 12.4
1 Jan - 31 Dec 1 Jan - 31 Dec
Net Sales by Market,
EUR million 2010 2009
---------------------------------------------------------
Finland 417.6 509.9
Sweden 902.8 539.8
Russia 572.4 480.7
Baltic countries 30.5 35.7
Other countries 6.2 3.2
---------------------------------------------------------
Continuing operations total 1,929.4 1,569.2
Net Sales by
Market,
EUR million Q4/2010 Q3/2010 Q2/2010 Q1/2010 Q4/2009 Q3/2009 Q2/2009 Q1/2009
--------------------------------------------------------------------------------
Finland 103.5 102.6 106.5 105.0 126.3 125.1 131.9 126.6
Sweden 245.1 238.7 239.5 179.4 157.7 125.2 130.5 126.4
Russia 169.6 147.8 132.8 122.1 148.2 118.6 106.6 107.2
Baltic countries 7.8 7.0 7.3 8.3 10.3 8.0 8.8 8.6
Other countries 1.9 2.2 1.2 0.9 1.0 2.2 - -
--------------------------------------------------------------------------------
Continuing
operations total 527.8 498.5 487.3 415.7 443.5 379.2 377.8 368.8
DISCONTINUED OPERATIONS
Income Statement 1 Jan - 31 Dec 1 Jan - 31 Dec
(IFRS), EUR million 2010 2009
---------------------------------------------------------------------------
Discontinued operations
Net sales 65.3 145.1
Cost of goods sold -46.6 -100.3
---------------------------------------------------------------------------
Gross profit 18.6 44.8
Other operating income 92.2 2.2
Selling and
distribution expenses -15.0 -35.4
Administrative expenses -1.0 -2.8
Profit from
associated companies 4.4 3.9
---------------------------------------------------------------------------
Operating profit 99.3 12.8
Financial income 0.1 0.0
Financial expenses -0.1 -1.4
---------------------------------------------------------------------------
Profit before taxes 99.3 11.5
Income taxes*) -0.7 -2.0
---------------------------------------------------------------------------
Profit for the period from
discontinued operations 98.6 9.5
Attribution of profit for the period
from discontinued operations
---------------------------------------------------------------------------
To parent company shareholders 98.6 9.5
---------------------------------------------------------------------------
To non-controlling interest - -
---------------------------------------------------------------------------
Earnings per share
from discontinued operations
Basic earnings per share, EUR 0.65 0.06
Diluted earnings per share, EUR 0.65 0.06
*) The tax expense for the period
corresponds to the taxes calculated from the
profit for the financial year.
Cash Flow Statement 1 Jan - 31 Dec 1 Jan - 31 Dec
(IFRS), EUR million 2010 2009
---------------------------------------------------------------------------
Net cash flow from operating activities 6.7 -3.5
Net cash flow from investing activities -0.9 -1.9
Net cash flow from financing activities 0.2 5.4
---------------------------------------------------------------------------
Net change in cash and cash equivalents 6.1 -0.1
Impact of sale of Healthcare Trade and
Dental Trade businesses on the Group's financial position
1 Jan - 31 Dec 1 Jan - 31 Dec
EUR million 2010 2009
---------------------------------------------------------------------------
Non-current assets 52.3 53.8
Current assets 49.3 32.5
Non-current liabilities -8.0 -0.4
Current liabilities -31.5 -17.2
---------------------------------------------------------------------------
Assets and liabilities total 62.1 68.7
Consideration received in cash 154.1
Cash and cash equivalents of the sold company -6.1
-------------------------------------------------------------
Cash flow impact 148.0
Healthcare Trade business of Oriola-KD is sold to
Mediq N.V. as of 31 May 2010.
30 percent holding in the associated company Lifco Dental International AB
is sold to Lifco AB as of 28 October 2010.
BUSINESS COMBINATIONS DISCLOSURE
Acquisition of national pharmacy chain in Sweden (Pharmacy Company Sweden 2 AB)
Oriola-KD announced in November 2009 that it would acquire 100 per cent of the
shares of Pharmacy Company Sweden 2 AB, a national pharmacy cluster with 170
pharmacies. The transaction was executed as of 19 February 2010. The acquired
pharmacy business covers only retail activities. The transaction does not
include any contingent considerations. Entering the pharmaceutical retail
business in Sweden is an important part of Oriola-KD's strategy to expand the
operations from pharmaceutical wholesale to retail.
The business of the acquired pharmacy chain has been integrated into the
business of Kronans Droghandel Apotek AB, from which Oriola-KD owns 80 per cent.
The acquisition cost is calculated on the basis of the company's provisional
balance sheet as of 19 February 2010 prepared in accordance with IFRS and the
Oriola-KD Group's accounting principles in respect of all material elements.
The acquisition is accounted for using provisional values as permitted under
IFRS 3R (revised). Over the 12 months following the acquisition, Oriola-KD will
make necessary adjustments to these provisional values. The fair value of the
identifiable fixed assets was EUR 8.6 million and inventory EUR 22.4 million.
These figures are provisional figures and the values might be adjusted during Q1
2011.
The fair value of trade receivables and other receivables was EUR 50.9 million
and it does not include any material risk.
The initial purchase price allocation calculated in Swedish crowns has been
translated into euros by using the exchange rate of the acquisition date.
The income statement and the balance sheet of the acquired company has been
consolidated into the Oriola-KD Group from the acquisition date, i.e. 19
February 2010.
Business combinations disclosure under IFRS 3 (revised)
The EUR 101,3 million goodwill arising from the acquisition is primarily
representing the strong market position, growth expectations, opportunities
after monopoly deregulation and experienced existing personnel as well as
expected synergies with Oriola-KD's wholesale operations in Sweden. None of the
goodwill recognised is deductible for income tax purposes.
The following table summarises the consideration paid for the pharmacy cluster
and the fair values of the assets acquired and liabilities assumed recognised at
the acquisition date.
Consideration as of 19 February 2010
Fair value, EUR million
Cash 161.5
Total consideration 161.5
Acquisition-related costs
-included in administrative expenses in the
consolidated income statement for 2009 1.2
-included in administrative expenses in the
consolidated income statement for 2010 0.5
Recognised amounts of identifiable assets
acquired and liabilities assumed
Cash and cash equivalents 2.4
Property, plant and equipment 8.6
Pharmacy licences and rental agreements
(included in intangible assets) 25.4
Inventories 22.4
Trade receivables 44.0
Other receivables 6.8
Trade and other payables -42.8
Deferred tax liabilities -6.7
Total identifiable net assets 60.2
Goodwill 101.3
The pro forma net sales of the acquired pharmacy cluster were EUR 465.6 billion
and pro forma operating profit including overhead costs was EUR 8.7 million in
2010.
Net sales of Kronans Droghandel Apotek AB, which are included in the Group
income statement as of 19 February 2010, were EUR 402.7 million. The operating
profit of KD Apotek AB for this period was EUR 9.1 million.
Acquisition of 03 Apteka pharmacy chain with 70 pharmacies in Moscow (OOO 03
Apteka)
Oriola-KD announced on 31 August 2010 that it acquires 100 per cent of the
shares of 03 Apteka, a pharmacy chain with 70 pharmacies in Moscow area. The
acquired pharmacy business covers only retail activities. The transaction does
not include any contingent considerations. The acquisition of 03 Apteka supports
Oriola-KD's strategy to expand its pharmaceutical retail operations in Moscow.
In addition this acquisition supports the growth of Oriola-KD's pharmaceutical
wholesale business in Russia. After the acquisition,
Oriola-KD has some 250 pharmacies in Moscow area.
The acquisition cost is calculated on the basis of the company's provisional
balance sheet as per 31 August 2010 prepared in accordance with IFRS and the
Oriola-KD Group's accounting principles in respect of all material elements.
The acquisition is accounted for using provisional values as permitted under
IFRS 3R (revised). Over the 12 months following the acquisition, Oriola-KD will
make the necessary adjustments to these provisional values. The fair value of
the identifiable fixed assets was EUR 0.4 million and inventory EUR 2.2 million.
These figures are provisional figures and the values might be adjusted by the
end of August 2011.
The fair value of trade receivables and other receivables was EUR 0.6 million
and it does not include any material risk.
The initial purchase price allocation calculated in Russian roubles has been
translated into euros by using the exchange rate of the acquisition date.
The income statement and the balance sheet of the acquired company has been
consolidated into the Oriola-KD Group from the acquisition date, i.e. 31 August
2010.
Business combinations disclosure under IFRS 3 (revised)
The EUR 11.7 million goodwill arising from the acquisition is primarily
representing the strong market position, growth expectations, and experienced
existing personnel as well as expected synergies with Oriola-KD's retail and
wholesale operations in Russia. None of the goodwill recognised is deductible
for income tax purposes.
The following table summarises the consideration paid for the pharmacy chain and
the fair values of the assets acquired and liabilities assumed recognised at the
acquisition date.
Consideration as of 31 August 2010
Fair value, EUR million
Cash 11.9
Total consideration 11.9
Acquisition related costs
-included in administrative expenses in the
consolidated income statement for 2010 0.2
Recognised amounts of identifiable assets
acquired and liabilities assumed
Cash and cash equivalents 0.3
Property, plant and equipment 0.4
Pharmacy licences and rental agreements
(included in intangible assets) 3.3
Deferred tax assets 0.4
Inventories 2.2
Trade receivables 0.5
Other receivables 0.1
Trade and other payables -6.3
Deferred tax liabilities -0.7
Total identifiable net assets 0.3
Goodwill 11.7
Net sales of the 03 Apteka pharmacy chain in 2010 were some EUR 34.0 million and
operating profit was negative.
Net sales of OOO 03 Apteka, which are included in the Group income statement as
of 31 August 2010, were EUR 11.9 million, and the operating profit for this
period was EUR 0.1 million.
Espoo, 10 February 2011
Oriola-KD Corporation's Board of Directors
Oriola-KD Corporation
Eero Hautaniemi
President and CEO
Kimmo Virtanen
Executive Vice President and CFO
Further information:
Eero Hautaniemi
President and CEO
tel. +358 (0)10 429 2109
e-mail: eero.hautaniemi@oriola-kd.com
Kimmo Virtanen
Executive Vice President and CFO
tel. +358 (0)10 429 2069
e-mail: kimmo.virtanen@oriola-kd.com
Pellervo Hämäläinen
Vice President, Communications and IR
tel. +358 (0)10 429 2497
e-mail: pellervo.hamalainen@oriola-kd.com
Distribution
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Oriola-KD Corporation
Corporate Communications
Orionintie 5
FI-02200 Espoo, Finland
www.oriola-kd.com
[HUG#1487908]
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