2013-10-24 07:30:00 CEST
2013-10-24 07:30:42 CEST
REGULATED INFORMATION
Oriola-KD Oyj - Interim report (Q1 and Q3)
Oriola-KD Corporation's Interim Report for 1 January-30 September 2013
Oriola-KD Corporation Stock Exchange Release 24 October 2013 at 8:30 a.m.
Financial performance July-September 2013
* Net sales increased by 11.6 per cent to EUR 654.4 (586.1) million.
* EBITDA excluding non-recurring items increased by 42.8 per cent to EUR 17.1
(12.0) million.
* Operating profit excluding non-recurring items was EUR 10.6 (7.2) million.
* Operating profit was EUR 8.6 (6.2) million.
* Profit for the period was EUR 2.3 (2.1) million and earnings per share were
EUR 0.01 (0.01).
Financial performance January-September 2013
* Net sales increased by 8.6 per cent to EUR 1,918.8 (1,766.7) million.
* EBITDA excluding non-recurring items increased by 12.3 per cent to EUR 33.8
(30.1) million.
* Operating profit excluding non-recurring items was EUR 16.6 (16.4) million.
* Operating profit was EUR 10.6 (15.3) million.
* Net cash flow from operations was EUR -21.0 (-9.3) million.
* Profit for the period was EUR 0.2 (5.0) million and earnings per share were
EUR 0.00 (0.03).
* Return on equity was 0.1 (2.2) per cent.
Key figures 7-9 7-9 Change 1-9 1-9 Change 1-12
EUR million 2013 2012 % 2013 2012 % 2012
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Net sales 654.4 586.1 11.6 1,918.8 1,766.7 8.6 2,474.4
EBITDA excl. non-recurring
items 17.1 12.0 42.8 33.8 30.1 12.3 45.6
EBITDA 15.1 10.9 38.5 27.8 29.0 -4.3 44.5
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Operating profit excl. non-
recurring items 10.6 7.2 47.0 16.6 16.4 1.5 26.8
Operating profit 8.6 6.2 40.2 10.6 15.3 -30.7 25.8
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Profit for the period 2.3 2.1 6.4 0.2 5.0 -96.8 16.4
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Earnings per share, EUR 0.01 0.01 0.00 0.03 0.11
Net cash flow from operations -21.0 -9.3 46.1
Return on equity (ROE), % 0.1 2.2 5.4
Gearing ratio, end of period,
% 80.9 19.7 2.1
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Outlook for 2013
* Oriola-KD estimates that net sales and operating profit excluding non-
recurring items will increase from the 2012 level. Pharmaceutical Trade
Russia's operating profit is estimated to be lower than the 2012 level.
President and CEO Eero Hautaniemi's comments regarding the interim report:"Oriola-KD's net sales increased by 8.6 per cent to EUR 1,918.8 million and
operating profit excluding non-recurring items increased from EUR 16.4 million
to EUR 16.6 million in January-September 2013. Operating profit excluding non-
recurring items includes project costs totalling EUR 2.7 million recognised in
the first half of 2013 which relate to the transformation of the Swedish
pharmacy market.
Operating profit of the Finland and Baltics business increased from EUR 15.6
million to EUR 16.1 million in January-September 2013. The improvement was
mainly the result of more efficient operations in wholesale.
Pharmaceutical Trade Sweden's operating profit excluding non-recurring items
increased from EUR 11.6 million to EUR 17.7 million in January-September 2013.
Profitability improved in both operating segments. Integration of the Medstop
acquisition proceeded according to plan during the third quarter and the merger
of the legal companies of the pharmacy chains will be put into effect in the
last quarter. Our aim is to achieve full synergy benefits of EUR 8-10 million
annually from 2015 onwards. An efficiency programme was started in the Swedish
wholesale business in the third quarter. The aim is to achieve a significant
improvement in operating profit gradually from 2014 onwards.
Operating loss of Pharmaceutical Trade Russia increased from EUR 5.3 million to
EUR 8.8 million in January-September 2013. Positive performance in the Russian
retail business continued and our operations were profitable during the first
nine months of the year. Oriola-KD's operating profit for January-September
2013 was significantly weakened by the increase in the operating loss of the
Russian wholesale business. The delivery problems in the Moscow region which
occurred after the implementation of the warehouse management system were solved
by the end of the second quarter. During the third quarter, we have continued
intensively our efforts to gain customers in the Moscow region, where we
experienced a temporary drop in our market share as a result of the delivery
problems. We have has also continued our efforts to increase regional sales and
sales to hospitals. The project plan of the new main logistics centre in Moscow
was revised during the third quarter. As a result, the overall project estimate
grew from EUR 17 million to between EUR 25 and 28 million, of which investments
account for EUR 15.7 million compared with EUR 12.0 million in the original
plan. According to our project plan, operations will be gradually transferred to
the new facilities and full production capacity will be reached by the end of
the first quarter in 2015."
Oriola-KD Corporation's Interim Report for 1 January-30 September 2013
The text section of this interim financial statements release focuses on the
January-September result. Unless otherwise stated, the comparative financial
information represents the data for the corresponding period in 2012 in
accordance with the International Financial Reporting Standards (IFRS). The
figures in this interim report are unaudited. The figures in the tables have
been rounded independently.
1-9 1-9 1-12
Key Figures 2013 2012 2012
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Equity ratio, % 19.5 24.2 24.5
Equity per share, EUR 1.84 1.99 2.05
Return on capital employed (ROCE), % 2.8 4.5 5.9
Return on equity (ROE), % 0.1 2.2 5.4
Net interest-bearing debt, EUR million 225.4 59.2 6.7
Gearing, % 80.9 19.7 2.1
Earnings per share, EUR 0.00 0.03 0.11
Average number of shares, 1000 pcs 151,161 151,161 151,248
Changes in the Group structure in 2013
Oriola-KD Holding Sverige AB, which is part of the Oriola-KD Group (hereinafter
referred to as Oriola-KD) has acquired the entire capital stock of Medstop Group
Holding AB. As of 1 June 2013, the company is included in the Pharmaceutical
Trade Sweden reporting segment.
In the Russian retail business, OOO Farmask was merged into OOO Vitim & Co in
September 2013. The change does not have any impact on the Group's result for
the period.
The Group's net sales and result for July-September 2013
Third-quarter net sales were EUR 654.4 (586.1) million. Operating profit
excluding non-recurring items was EUR 10.6 (7.2) million and operating profit
was EUR 8.6 (6.2) million for the period. Operating profit of Pharmaceutical
Trade Finland and Baltics decreased from EUR 6.1 million to EUR 5.7 million.
Pharmaceutical Trade Sweden's operating profit excluding non-recurring items
increased from EUR 4.8 million to EUR 8.6 million while Pharmaceutical Trade
Russia's operating loss decreased from EUR 2.0 million to EUR 1.9 million.
Profit after financial items was EUR 4.5 (4.0) million. Profit for the period
was EUR 2.3 (2.1) million and earnings per share were EUR 0.01 (0.01).
The Group's net sales and result for January-September 2013
Oriola-KD's net sales in January-September 2013 increased by 8.6 per cent to EUR
1,918.8 (1,766.7) million. Net sales of Pharmaceutical Trade Finland and
Baltics decreased by 7.7 per cent to EUR 316.0 (342.2) million, net sales of
Pharmaceutical Trade Sweden increased by 16.3 per cent to EUR 893.9 (768.9)
million and net sales of Pharmaceutical Trade Russia increased by 8.1 per cent
to EUR 709.0 (655.8) million.
Oriola-KD's operating profit excluding non-recurring items in January-September
increased by 1.5 per cent to EUR 16.6 (16.4) million. Operating profit was EUR
10.6 (15.3) million. Operating profit of Pharmaceutical Trade Finland and
Baltics increased by 3.7 per cent to EUR 16.1 (15.6) million, operating profit
of Pharmaceutical Trade Sweden excluding non-recurring items increased by 52.8
per cent to EUR 17.7 (11.6) million and operating loss of Pharmaceutical Trade
Russia increased to EUR 8.8 (operating loss 5.3) million. The Group's operating
profit excluding non-recurring items decreased as a result of project costs
totalling EUR 2.7 million relating to the transformation of the Swedish pharmacy
market that were recognised during the first half of the year.
Profit after financial items was EUR 1.5 (8.4) million and profit for the period
EUR 0.2 (5.0) million. Oriola-KD's financial expenses increased to EUR 9.1 (6.9)
million as a result of higher interest rate costs resulting from the acquisition
of Medstop and a foreign exchange loss accrual of EUR 1.1 million arising from
an intra-group loan granted to the Russian subsidiary. Earnings per share were
EUR 0.00 (EUR 0.03).
Return on equity was 0.1 (2.2) per cent in January-September 2013.
The comparative financial figures have been revised due to a change in the
calculation method for pension liabilities (IAS 19R (revision) Employee
benefits). The impact is explained under Revision of IAS 19 Employee benefits
standard.
Reporting segments
Oriola-KD's reporting segments are Pharmaceutical Trade Finland and Baltics,
Pharmaceutical Trade Sweden and Pharmaceutical Trade Russia. Oriola-KD has
formed the reporting segments by combining its operating segments. The
Pharmaceutical Trade Finland and Baltics reporting segment comprises the Finnish
pharmaceutical wholesale business, the Consumer Health and the Pharmaceutical
Trade Baltics operating segments. The Pharmaceutical Trade Sweden reporting
segment comprises the Swedish pharmaceutical retail and Swedish pharmaceutical
wholesale operating segments. The Pharmaceutical Trade Russia reporting segment
comprises the Russian pharmaceutical retail and Russian pharmaceutical wholesale
operating segments.
Pharmaceutical Trade Finland and Baltics
Key figures 7-9 7-9 Change 1-9 1-9 Change 1-12
EUR million 2013 2012 % 2013 2012 % 2012
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Net sales 96.0 108.7 -11.7 316.0 342.2 -7.7 460.5
Finnish wholesale 75.8 89.5 -15.3 253.9 283.1 -10.3 380.7
Baltics wholesale 9.9 8.8 13.4 30.2 26.0 16.1 36.1
Consumer Health 10.3 10.6 -2.2 32.2 33.4 -3.7 44.2
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EBITDA 6.5 6.9 -5.1 18.6 17.8 4.6 23.9
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Operating profit 5.7 6.1 -7.0 16.1 15.6 3.7 20.8
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Personnel at the end of the period 511 476 476
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July-September 2013
Net sales of Pharmaceutical Trade Finland and Baltics in the third quarter of
2013 were EUR 96.0 (108.7) million and operating profit was EUR 5.7 (6.1)
million. Invoicing of the Finnish wholesale business was EUR 244.7 (251.8)
million and net sales was EUR 75.8 (89.5) million. Net sales of the wholesale
business in the Baltic countries were EUR 9.9 (8.8) million and net sales of the
Consumer Health business were EUR 10.3 (10.6) million.
January-September 2013
Net sales of Pharmaceutical Trade Finland and Baltics in January-September 2013
were EUR 316.0 (342.2) million and the operating profit was EUR 16.1 (15.6)
million. Invoicing of the Finnish wholesale business was EUR 764.7 (770.0)
million and net sales were EUR 253.9 (283.1) million. Net sales of the wholesale
business in the Baltics totalled EUR 30.2 (26.0) million and net sales of the
Consumer Health business, i.e. consumer health products sold under Oriola-KD's
own brands or exclusive sales rights, totalled EUR 32.2 (33.4) million. More
efficient operations, increased sales of services and improved customer
profitability improved the profitability of the Finnish wholesale business. As
expected, the discontinuation of the distribution of AstraZeneca's products by
Oriola-KD caused a drop in the net sales of the Finnish wholesale business
during the third quarter. A slowdown in the growth of the Finnish retail
business has led to a decrease in the net sales of the Consumer Health business
in relation to the comparison period. Despite a challenging market situation,
the Consumer Health business managed to improve its profitability during the
third quarter. Oriola-KD's business in the Baltics grew positively during the
period and the start of pharmaceutical distribution and marketing cooperation
with MSD proceeded as planned.
The Finnish pharmaceutical market grew by 2.1 (+2.5) per cent in January-
September 2013. The decrease in pharmaceutical reimbursements and the 5 per cent
cut in the wholesale prices of patented pharmaceuticals in February 2013 had a
negative impact on the growth of the pharmaceutical market in Finland. Oriola-
KD's share of the Finnish pharmaceutical wholesale market was 46.6 (47.2) per
cent in January-September 2013. (source: IMS Health)
Pharmaceutical Trade Finland and Baltics had 511 (476) employees at the end of
September 2013.
Pharmaceutical Trade Sweden
Key figures 7-9 7-9 Change 1-9 1-9 Change 1-12
EUR million 2013 2012 % 2013 2012 % 2012
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Net sales 315.7 254.1 24.2 893.9 768.9 16.3 1,061.3
Retail 189.7 126.9 49.5 476.8 376.3 26.7 502.5
Wholesale 187.1 140.8 33.3 569.4 432.6 31.6 636.7
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EBITDA excl. non-recurring items 13.0 7.3 77.5 28.3 18.9 50.0 26.4
EBITDA 11.0 6.3 76.0 22.3 17.8 25.2 25.3
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Operating profit excl. non-
recurring items 8.6 4.8 80.9 17.7 11.6 52.8 16.2
Operating profit 6.6 3.7 79.5 11.7 10.5 11.3 15.1
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Personnel at the end of the period 1,871 1,314 1,324
Retail 1,598 1,055 1,064
Wholesale 273 259 260
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July-September 2013
Third-quarter net sales of Pharmaceutical Trade Sweden in 2013 were EUR 315.7
(254.1) million and operating profit excluding non-recurring items was EUR 8.6
(4.8) million. Net sales of the retail business totalled EUR 189.7 (126.9)
million. Invoicing of the wholesale business was EUR 361.0 (336.0) million and
net sales of the wholesale business were EUR 187.1 (140.8) million. The Medstop
acquisition boosted net sales of the retail business by EUR 60.8 million during
the third quarter.
January-September 2013
Net sales of Pharmaceutical Trade Sweden in January-September 2013 were EUR
893.9 (768.9) million and operating profit excluding non-recurring items was EUR
17.7 (11.6) million. Profitability was strengthened in both operating segments.
Net sales of the retail business totalled EUR 476.8 (376.3) million. Invoicing
of the wholesale business totalled EUR 1,136.1 (1,016.0) million and net sales
of the wholesale business were EUR 569.4 (432.6) million. The Medstop pharmacy
chain has been consolidated in the figures of Oriola-KD as of 1 June 2013. The
acquisition of Medstop increased the net sales of the retail business by EUR
81.7 million. The start of the centralised purchasing, warehousing and pharmacy
distribution service of OTC products and traded goods to pharmacy chains has
supported to increase the net sales of the wholesale business.
Development of the product assortment on offer boosted the operating profit of
the retail business. At the end of September 2013, Oriola-KD had a total of 295
(216) pharmacies in Sweden, of which 228 (216) operated under the Kronans
Droghandel brand and 67 under the Medstop brand. Oriola-KD opened a total of
11(7) pharmacies in January-September 2013. A total of 22 (13) new pharmacies
were established on the Swedish pharmacy market during the period. In January-
September 2013, Oriola-KD had a market share of 21 (14) per cent according to
management estimate in the retail business.
Integration of the Medstop acquisition proceeded according to plan during the
third quarter and the merger of the legal companies of the pharmacy chains will
be put into effect during the last quarter. The acquisition is expected to
generate full synergy benefits of EUR 8-10 million annually from 2015 onwards.
Net sales and operating profit in the Swedish wholesale business improved as
planned during the third quarter as a result of the stabilization of the
centralised purchasing, warehousing and pharmacy distribution service of OTC
products and traded goods offered to pharmacy chains. The relative share of
parallel imports and generic pharmaceuticals has remained high on the Swedish
pharmaceutical market, which has decreased net sales and operating profit in the
wholesale business. An efficiency programme was started in the Swedish wholesale
business during the third quarter. The aim is to achieve a significant
improvement in operating profit from 2014 onwards. In January-September 2013
Oriola-KD's share of the pharmaceutical wholesale market was 41 (36) per cent
according to management estimate. Oriola-KD will cease the distribution of
Sanofi-Aventis products by the end of 2013. Sanofi-Aventis has a market share of
about 1.5 percent on the Swedish pharmaceutical market (source: IMS Health).
The pharmaceutical market in Sweden decreased by 2.1 (-1.6) per cent (source:
IMS Health), while the retail market for OTC products and traded goods increased
by 6.1 (+3.9) per cent (source: Nielsen) in January-September 2013.
Pharmaceutical Trade Sweden had 1,871 (1,314) employees at the end of September
2013, of whom 1,598 (1,055) were employed in the retail business and 273 (259)
in the wholesale business. The acquisition of Medstop increased the number of
personnel in the pharmaceutical retail business by 534.
Pharmaceutical Trade Russia
Key figures 7-9 7-9 Change 1-9 1-9 Change 1-12
EUR million 2013 2012 % 2013 2012 % 2012
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Net sales 242.7 223.3 8.7 709.0 655.8 8.1 952.7
Retail 31.7 34.2 -7.3 106.9 107.3 -0.3 148.6
Wholesale 216.5 194.3 11.5 615.3 565.9 8.7 831.1
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EBITDA -0.7 -0.7 -2.8 -4.8 -1.2 -302.7 3.1
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Operating profit -1.9 -2.0 8.8 -8.8 -5.3 -65.4 -2.3
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Personnel at the end of the period 2,945 3,032 3,056
Retail 1,261 1,316 1,309
Wholesale 1,684 1,717 1,747
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July-September 2013
Net sales of Pharmaceutical Trade Russia in the third quarter of 2013 were EUR
242.7 (223.3) million and operating profit was EUR -1.9 (-2.0) million. Net
sales of the retail business totalled EUR 31.7 (34.2) million and the sales of
the wholesale business were EUR 216.5 (194.3) million.
January-September 2013
Net sales of Pharmaceutical Trade Russia in January-September 2013 totalled EUR
709.0 (655.8) million and operating profit was EUR -8.8 (-5.3) million. Net
sales of the retail business in Russia totalled EUR 106.9 (107.3) million and
net sales of the wholesale business were EUR 615.3 (565.9) million. Oriola-KD
booked EUR 0.4 million in accelerated depreciation from the current main
logistic centre in Moscow in January-September 2013.
Positive performance in the Russian retail business continued as a result of
more efficient operations and the development of the product assortment on
offer. The retail business posted a positive operating profit in January-
September 2013. At the end of September 2013, Oriola-KD had a total of 233 (237)
pharmacies in the Moscow region.
The growth of net sales in the wholesale business slowed down and the operating
loss increased as a result of the delivery problems in the Moscow region
following the implementation of the warehouse management system and as a result
of the challenging market conditions. The delivery problems in the Moscow region
were solved by the end of the second quarter. Intensive efforts to gain customer
were continued in the Moscow region during the third quarter where a temporary
drop in market share were experienced as a result of the delivery problems. In
addition efforts to increase regional sales and sales to hospitals were
continued. The sales of the distribution centres located outside Moscow
increased by 49 per cent in Russian rubles in January-September 2013. A write-
down of trade receivables of EUR 0.5 (1.9) million was recognised during the
period.
In June 2013, Oriola-KD signed a lease agreement on a new main logistic centre
in the Moscow region. The project plan of the new main logistics centre was
revised during the third quarter. As a result, the overall project estimate grew
from EUR 17 million to between EUR 25 and 28 million. The total investment
increased from the previously announced EUR 12.0 million to EUR 15.7 million
including a distribution centre automation solution, warehouse machinery and
equipment. According to the project plan, operations will be gradually
transferred to the new facilities and full production capacity will be reached
by the end of the first quarter in 2015. As a result of the investment decision,
Oriola-KD will book a total of EUR 0.5 million in 2013 and in 2014 in
accelerated depreciation relating to the machinery in the current main logistics
centre.
The Russian pharmaceutical market grew during the review period by 12.5 (+9.7)
per cent in Russian rubles (source: IMS Health). Oriola-KD's retail business
grew by 4.4 (+9.2) per cent and the net sales growth in the wholesale business
was 13.9 (+30.6) per cent in Russian rubles in January-September 2013.
Pharmaceutical Trade Russia had 2,945 (3,032) employees at the end of September
2013, of whom 1,261 (1,316) were employed in the retail business and 1,684
(1,717) in the wholesale business.
Non-recurring items
A non-recurring item is an item of income or expense arising from non-recurring
or rare events. Gains or losses from the sale or discontinuation of business
operations or assets, gains or losses from restructuring business operations,
and impairment losses on goodwill and other non-current assets are recognised by
the Group as non-recurring items.
Non-recurring items 7-9 7-9 1-9 1-9
EUR million 2013 2012 2013 2012
--------------------------------------------------------------------
Pharmaceutical Trade Sweden
Restructuring costs -2.0 - -2.8 -
Write-off of contract-based accrual - - -3.2 -
Receivable write-off - -1.1 - -1.1
--------------------------------------------------------------------
Non-recurring items included in operating profit -2.0 -1.1 -6.0 -1.1
--------------------------------------------------------------------
Non-recurring items in January-September 2013 comprise of restructuring costs
incurred by the Swedish wholesale business in connection with the efficiency
programme, restructuring costs arising in the Swedish retail business in
connection with the acquisition of Medstop and the write-off of the accrual
entered in the books in 2009 on the basis of the investment agreement between
Oriola-KD and Kooperativa Förbundet.
Oriola-KD's profit for the period includes a total of EUR 2.7 million in project
costs relating to the transformation of the Swedish pharmacy market that were
booked during the first half of the year. These expenses have not been treated
as non-recurring items.
Balance sheet, financing and cash flow
Total assets on Oriola-KD's balance sheet at 30 September 2013 totalled EUR
1,467.2 (1,271.7) million. Cash assets totalled EUR 95.7 (88.6) million and
equity EUR 278.5 (300.4) million. The equity ratio was 19.5 (24.2) per cent.
Oriola-KD's goodwill of EUR 389.4 million has been allocated in impairment
testing to the cash-generating units consisting of the Group's operating
segments. Oriola-KD prepares goodwill impairment testing twice a year, in
accordance with the timetable of its strategy and planning process. At the end
of September, a total of EUR 243.4 million of the goodwill was allocated to the
Swedish pharmaceutical retail business, EUR 27.5 million to the Swedish
pharmaceutical wholesale business, EUR 79.4 million to the Russian
pharmaceutical wholesale business and EUR 39.1 million to the Russian
pharmaceutical retail business. The acquisition of Medstop increased the
goodwill allocated to the Swedish pharmaceutical retail business by EUR 128.8
million at the date of the acquisition.
At the end of September 2013, interest-bearing debt totalled EUR 321.1 (EUR
147.8) million and interest-bearing net debt EUR 225.4 (59.2) million. The
gearing ratio was 80.9 (19.7) per cent. Interest-bearing long-term debt
consisted of the long-term bank loan raised for the acquisition of Medstop and
the conditional earn-out payment relating to the Medstop acquisition. Interest-
bearing short-term debt mainly consists of the use of the commercial paper
programme issued by Oriola-KD Corporation and advance payments by pharmacies in
Finland. Factoring programmes related to monthly trade receivables from Swedish
county councils and Apoteket AB were continued in the retail and wholesale
businesses in Sweden. By the end of September 2013, the sales of the trade
receivables totalled EUR 80.4 (49.4) million, including the EUR 10.3 million of
the receivables sales programme of the Medstop pharmacy chain acquired by
Oriola-KD.
Oriola-KD refinanced its existing financing solution by signing a new financing
agreement of approximately EUR 280 million with four banks in May 2013. The
financial covenants contained in the long-term financing agreement are based on
the ratio between Oriola-KD's net debt and rolling 12-month EBITDA and the
Group's gearing ratio. The ratio between the Group's net debt and the 12-month
rolling EBITDA, adjusted in accordance with the terms and conditions of the
financing agreement, stood at 4.22 at the end of September while the covenant
limit according to the agreement was 4.50. Oriola-KD's committed long-term
credit facilities of EUR 120.0 million and EUR 43.1 million in short-term credit
account facilities with banks were unused at the end of September 2013. A total
of EUR 114.0 (101.5) million of the commercial paper programme was in use at the
end of the review period.
Net cash flow from operations in January-September 2013 was EUR -21.0 (-9.3)
million, of which changes in working capital accounted for EUR -35.2 (-14.9)
million. Net cash flow from investments was EUR -88.8 (-16.1) million.
Investments
Gross investments in January-September 2013 totalled EUR 184.6 (15.0) million
consisting of the acquisition of the Medstop pharmacy chain at EUR 165.9
million, the establishment of new pharmacies, information technology investments
and investments aimed at improving the efficiency of logistics. Oriola-KD has
recognised EUR 0.4 (0.0) million in accelerated depreciations in connection with
the investment plan concerning to the logistics centre in Moscow in 2013.
Personnel
On 30 September 2013, Oriola-KD had a payroll of 5,327 (4,823) employees, 10
(10) per cent in Finland and the Baltics, 35 (27) per cent in Sweden, and 55
(63) per cent in Russia. Personnel numbers consist of members of staff in active
employment.
Administration
The Annual General Meeting (AGM) of Oriola-KD Corporation held on 20 March 2013
elected the following persons as members of the company's Board of Directors:
Jukka Alho (Chair), Harry Brade, Per Båtelson, Outi Raitasuo and Mika Vidgrén,
and elected Karsten Slotte as a new member. At its constitutive meeting held
immediately after the AGM, the Board of Oriola-KD Corporation elected Outi
Raitasuo as Vice Chairman of the Board. The Board of Directors appointed from
its members Outi Raitasuo (Chairman), Harry Brade, Karsten Slotte and Mika
Vidgrén to the Board's Audit Committee, and Jukka Alho (Chairman), Per Båtelson
and Harry Brade to the Board's Remuneration Committee.
The Board of Directors has assessed the independence of its members and
determined that all members are independent of both the company and its major
shareholders.
The AGM elected PricewaterhouseCoopers Oy as the auditor for the company.
Oriola-KD's Group Management Team:
* Eero Hautaniemi, President and CEO
* Lars Birkeland, Vice President, pharmaceutical retail, Sweden
* Henry Fogels, Vice President, pharmaceutical wholesale, Russia
* Tuomas Itkonen, CFO
* Konstantin Minin, Vice President, pharmaceutical retail, Russia
* Jukka Mäkelä, Vice President, Development (as of 1 April 2013)
* Teija Silver, Vice President, HR
* Kimmo Virtanen, Executive Vice President and Vice President, Pharmaceutical
Wholesale, Finland, Sweden and the Baltics
Oriola-KD applies the Finnish Corporate Governance Code which was issued by the
Securities Market Association on 15 June 2010 and which entered into force on 1
October 2010, with the exception that the company's Nomination Committee may
also have members who are not members of the company's Board of Directors. The
purpose of this deviation from Recommendation 22 of the Corporate Governance
Code (Appointment of members to the committees) is to allow the election of
major shareholders in the company to the Nomination Committee and thus to ensure
that their opinions are heard well before the Annual General Meeting. The
Nomination Committee is a body established by the Board for the purpose of
preparing and presenting to the Board a recommendation for the proposal to be
put to the Annual General Meeting concerning the composition and remuneration of
the Board. The Corporate Governance Statement and the Remuneration Statement for
2012 can be viewed on the company's website at: http://www.oriola-
kd.com/en/Corporate-Governance/.
Board authorisations
The AGM, held on 20 March 2013, authorised the Board to decide on repurchasing
up to fifteen million of the company's own class B shares, which may also be
carried out in a manner other than in proportion to the holdings of the
shareholders. The authorisation is in force for eighteen months following the
decision of the AGM.
The AGM, held on 20 March 2013, authorised the Board to decide on a share issue
against payment in one or more issues, including the right to issue new class B
shares or to assign class B treasury shares held by the company. The
authorisation covers a combined maximum of thirty million class B shares of the
company and includes the right to derogate from the shareholders' pre-emptive
subscription right. The authorisation is in force for eighteen months following
the decision of the AGM.
On 20 March 2013, the Board was also authorised to decide on a bonus issue of
class B shares to the company in one or more issues, and on a directed issue of
class B shares to implement the new share incentive scheme for the Oriola-KD
Group's management and the share savings plan for its key employees.
The maximum amount of the company's new class B shares issued under this
authorisation is 1,715,000, which is 1.13 per cent of the company's total
shares. The authorisation will remain in force for a maximum of five (5) years
following the decision of the AGM.
Dividend distribution
In accordance with the Board's proposal, the AGM decided to distribute EUR 0.05
per share in dividends from the 2012 financial year and EUR 0.04 per share in
repayment of equity, coming to a total of EUR 13.6 (12.1) million. The dividend
and repayment of equity were paid to those who, on the record date of 25 March
2013, were entered as shareholders of Oriola-KD Corporation.
Oriola-KD Corporation shares
Trading volume of Oriola-KD Corporation's class A and B shares in January-
September 2013:
Trading volume January-September 2013 January-September 2012
Class A Class B Class A Class B
--------------------------------------------------------------------------------
Trading volume, million shares 1.8 18.1 4.3 24.4
Trading volume, EUR million 4.2 42.7 8.5 46.7
Highest price, EUR 2.69 2.73 2.44 2.15
Lowest price, EUR 2.24 2.18 1.77 1.70
Closing quotation, end of 2.34 2.36 2.08 2.05
period, EUR
--------------------------------------------------------------------------------
Oriola-KD Corporation's market capitalisation on 30 September 2013 was EUR
356.0 (311.5) million.
In the review period, the traded volume of Oriola-KD Corporation shares,
excluding treasury shares, corresponded to 13.1 (36.6) per cent of the total
number of shares. The traded volume of class A shares amounted to 3.7 (18.1)
per cent of the average stock, and that of class B shares, excluding treasury
shares, 17.4 (44.9) per cent of the average stock.
At the end of September 2013, the company had a total of 151,257,828
(151,257,828) shares of which 47,148,710 (47,148,710) were class A shares and
104,109,118 (104,109,118) class B shares. 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.
Under Article 3 of the Articles of Association, a shareholder may demand
conversion of class A shares into class B shares. During the period 1 January-
30 September 2013, 0 (0) class A shares were converted into class B shares.
On 19 December 2012, Oriola-KD Corporation's Board of Directors decided on a new
share incentive scheme for the Group's senior management for the years
2013-2015. The scheme covers eight persons. The company's Board of Directors
will determine the earnings criteria for the earning period and the targets to
be set for these at the start of each earning period. The bonus for the 2013
earning period is based on the Oriola-KD Group's earnings per share (EPS) and
return on capital employed (ROCE). The maximum bonus for the 2013 earning period
is 1,077,500 shares. The Board of Oriola-KD Corporation approved the terms and
conditions of the key employees' share savings plan on 28 May 2013. A total of
about 50 key employees are participating in the plan. The savings period will
start on 1 October 2013 and end on 30 September 2014. The maximum and minimum
monthly savings amount to 10 and 2 per cent, respectively, of each participant's
fixed gross monthly salary. The accumulated savings will be used for purchasing
Oriola-KD's class B shares for the participants at market prices. About two
years after the start of the programme, the company will give the participants
two class B shares for every three shares purchased as part of the programme.
The shares given to the participants will be partially used for paying taxes.
Liquidity guarantee
There is no liquidity guarantee in effect for the shares of Oriola-KD
Corporation.
Flagging announcements
After the purchasing of shares by Ilmarinen Mutual Pension Insurance Company on
25 April 2013, its portion of the votes conferred by the shares of Oriola-KD
Corporation exceeded the one twentieth (1/20) limit referred to in Chapter 9,
section 5 of the Securities Markets Act. On 25 April 2013, the direct
shareholding of Ilmarinen Mutual Pension Insurance Company totalled 4.14 per
cent of Oriola-KD Corporation's shares and 5.07 per cent of the votes conferred
by the shares.
Risks
Oriola-KD's Board of Directors 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:
* Amendments to pharmaceutical market regulations may weaken Oriola-KD's
profitability.
* In the Swedish retail business, the free establishment of pharmacies has led
to an increase in the number of pharmacies. The number of pharmacies may
continue to grow, which could further increase the fierce competition.
* In the Russian retail business, tough competition resulting from the large
number of pharmacies may lead to a further decrease in the gross margin and
a rapid turnover rate of key personnel.
* Extra capacity ensuing from a change made in the Swedish wholesale market
will intensify competition, which may weaken the profitability of
operations. The share of single channel distribution in the pharmaceutical
wholesale market may decline rapidly, which may weaken the profitability of
operations and lead to the restructuring of wholesale operations.
* As a result of the tough competition in the Russian wholesale business, the
gross margin may decline further, which will lead to a continued need to
intensify operations and restructure wholesale operations over the long
term. The payment behaviour that is typical to the Russian market, combined
with the regional expansion of operations may increase credit risks.
* Strategic development projects involve operational risks.
The main financial risks for Oriola-KD involve currency rate, liquidity,
interest rate and credit risks. Currency risks are the most significant
financial risks in Russia and Sweden as any changes in the value of the Russian
ruble and the Swedish krona will have an impact on Oriola-KD's earnings and
equity.
Oriola-KD prepares goodwill impairment testing twice a year, in accordance with
the timetable of its strategy and planning process. Changes in cash flow
forecasts based on strategic plans, or in the discount rate or perpetuity growth
rate, can cause a goodwill write-off, which would weaken Oriola-KD's result. The
impairment test on the goodwill of the cash-generating wholesale unit in Russia
is particularly sensitive to changes in the discount rate or cash-flow
forecasts.
Near-term risks and uncertainty factors
A decrease in gross margin resulting from intense competition and an increase in
credit risks concerning customers may have an impact on the profitability of the
wholesale business in Russia. Oriola-KD's strategic development projects in the
Russian wholesale business and the operations in Sweden involve operational
risks which may have an effect on Oriola-KD's profitability.
Oriola-KD's long-term financing agreement contains financial covenants
concerning the ratio between Oriola-KD's net debt and rolling 12-month EBITDA
and the Group's gearing ratio. Weakening profitability of Oriola-KD's business
operations may affect Oriola-KD's ability to meet the financial covenants
contained in the financing agreement.
Financial covenants contained in the 31 Mar 2014
financing agreement 31 Dec 2013 30 Jun 2014
-------------------------------------------------------------------------------
Ratio between net debt and rolling 12- 4.25 4.00 4.00
month EBITDA
Gearing ratio 120% 120% 120%
Outlook
Oriola-KD's outlook for 2013 is based on external market forecasts, agreements
with pharmaceutical companies and pharmacies, and management assessments. During
the next five years (2013-2017), the pharmaceutical market is expected to grow
on average 1.4 per cent annually in Finland, while the Swedish market is
forecasted to decline on average 1.3 per cent annually and the Russian
pharmaceutical market is expected to grow on average almost 10 per cent annually
(source: IMS Health Market Prognosis 2013-2017).
Outlook for 2013
Oriola-KD estimates that net sales and operating profit excluding non-recurring
items will increase from the 2012 level. Pharmaceutical Trade Russia's operating
profit is estimated to be lower than the 2012 level.
Events after the review period
The Board of Directors of Oriola-KD Corporation has investigated possibilities
for developing Oriola-KD's capital structure. In this context, Oriola-KD has
investigated the preconditions for combining the current two share classes of
Oriola-KD, as well as for strengthening Oriola-KD's balance sheet with equity
financing. The conducted investigations do not currently give rise to any
further measure. Based on its investigations, the Board of Directors estimates
that it could not secure the consent from the majority of shares in the share
class whose rights would be reduced even if the shareholders with multiple votes
would be offered a market-term premium in conjunction with the combination. On
the basis of its investigations the Board of Directors also estimates that
currently Oriola-KD could not secure commitments from the Oriola-KD's largest
shareholders to take part, for example, in a rights issue during the year 2013.
Next interim report
Oriola-KD Corporation will publish its financial statements release for 2013 on
Friday 7 February 2014 at 8:30 a.m.
Oriola-KD Corporation's Interim Report for 1 January - 30 September 2013,
unaudited
Consolidated Statement
of comprehensive
Income (IFRS), 7-9 7-9 1-9 1-9 1-12
EUR million 2013 2012 2013 2012 2012
revised *** revised *** revised ***
----------------------------------------------------------------------------
Net sales 654.4 586.1 1,918.8 1,766.7 2,474.4
Cost of goods sold -551.7 -499.9 -1,632.1 -1,508.9 -2,117.8
----------------------------------------------------------------------------
Gross profit 102.7 86.2 286.8 257.8 356.6
Other operating income 1.1 0.7 3.7 1.8 2.3
Selling and
distribution expenses -73.9 -63.2 -214.9 -192.7 -263.9
Administrative expenses -12.8 -11.8 -41.8 -36.8 -49.3
----------------------------------------------------------------------------
EBITDA excluding non-
recurring items 17.1 12.0 33.8 30.1 45.6
Depreciation -6.5 -4.7 -17.1 -13.7 -18.8
----------------------------------------------------------------------------
Operating Profit before
Non-recurring items 10.6 7.2 16.6 16.4 26.8
Non-recurring items* -2.0 -1.1 -6.0 -1.1 -1.1
----------------------------------------------------------------------------
Operating Profit 8.6 6.2 10.6 15.3 25.8
Financial income 2.4 11.4 7.6 15.6 22.7
Financial expenses -6.5 -13.6 -16.7 -22.5 -28.0
----------------------------------------------------------------------------
Profit before taxes 4.5 4.0 1.5 8.4 20.5
Income taxes ** -2.3 -1.9 -1.4 -3.5 -4.1
----------------------------------------------------------------------------
Profit for the period 2.3 2.1 0.2 5.0 16.4
Other comprehensive
income
Items which may be
reclassified
subsequently to profit
or loss:
Translation difference -3.7 10.2 -20.0 14.1 11.4
Cash flow hedge 0.0 -0.8 1.1 -0.7 -0.9
Income tax relating to
other comprehensive
income 0.1 -0.4 0.2 -0.5 -0.2
----------------------------------------------------------------------------
-1.2 11.2 -18.5 17.8 26.7
Items which are not
reclassified
subsequently to profit
or loss:
Actuarial gains/losses
on
defined benefit plan - - - - 1.6
Income tax relating to
other comprehensive
income - - - - -0.4
----------------------------------------------------------------------------
Total comprehensive
income
for the period -1.2 11.2 -18.5 17.8 27.9
Attribution of Profit
for the period
----------------------------------------------------------------------------
To parent company
shareholders 2.3 2.1 0.2 5.0 16.4
----------------------------------------------------------------------------
Attribution of total
comprehensive
income for the period
----------------------------------------------------------------------------
To parent company
shareholders -1.2 11.2 -18.5 17.8 27.9
----------------------------------------------------------------------------
Earnings per share for
the period
Basic earnings per
share, EUR 0.01 0.01 0.00 0.03 0.11
Diluted earnings per
share, EUR 0.01 0.01 0.00 0.03 0.11
*) Restructuring costs
EUR -2.0 million in
Sweden Q3/2013,
restructuring costs EUR
-0.8 million and a
write-off of contract-
based accrual EUR -3.2
million in Sweden
Q2/2013 and a
receivable write-off
EUR -1.1 million in
Sweden Q3/2012 -2.0 -1.1 -6.0 -1.1 -1.1
**) The tax expense for
the period
corresponds to the
taxes calculated from
the
profit for the
financial period
***) Revised standard
IAS 19 Employyee
benefits has been
applied as of 1 January
2013
Oriola-KD has during
the second quarter of
2013 changed the
presentation of
consolidated statement
of comprehensive
income. The comparative
financial information
has been revised
accordingly.
Consolidated Balance Sheet (IFRS),
EUR million
ASSETS 30 Sep 2013 30 Sep 2012 31 Dec 2012
revised* revised*
------------------------------------------------------------------------------
Non-current assets
Property, plant and equipment 93.9 78.9 81.4
Goodwill 389.4 279.7 276.7
Other intangible assets 76.3 53.5 52.3
Other shares and shareholdings 0.0 0.0 0.0
Other non-current assets 6.3 3.8 6.6
Deferred tax assets 11.5 7.3 6.1
------------------------------------------------------------------------------
Non-current assets total 577.5 423.3 423.1
Current assets
Inventories 361.9 362.2 389.8
Trade and other receivables 432.0 397.5 415.2
Cash and cash equivalents 95.7 88.6 88.1
------------------------------------------------------------------------------
889.7 848.3 893.1
Non-current assets held for sale 0.0 0.0 0.0
------------------------------------------------------------------------------
Current assets total 889.7 848.4 893.1
ASSETS TOTAL 1,467.2 1,271.7 1,316.2
------------------------------------------------------------------------------
EQUITY AND LIABILITIES
------------------------------------------------------------------------------
Equity of the parent
company shareholders
Share capital 36.2 36.2 36.2
Funds 20.7 25.9 26.0
Other equity 221.6 238.3 248.4
------------------------------------------------------------------------------
Equity total 278.5 300.4 310.5
Non-current liabilities
Deferred tax liabilities 18.6 14.2 14.1
Pension obligations 10.1 8.3 9.7
Borrowings 171.0 16.4 0.4
Other non-current liabilities - 0.8 1.0
------------------------------------------------------------------------------
Non-current liabilities total 199.7 39.8 25.2
Current liabilities
Trade payables and other current
liabilities 836.2 800.2 886.1
Provisions 2.7 - -
Borrowings 150.1 131.3 94.3
------------------------------------------------------------------------------
Current liabilities total 989.0 931.5 980.5
EQUITY AND LIABILITIES TOTAL 1,467.2 1,271.7 1,316.2
------------------------------------------------------------------------------
*) Revised standard IAS 19 Employee benefits has been applied as of 1 January
2013
Consolidated
Statement
of Changes in
Equity (IFRS)
Equity of the
parent company
shareholders
Trans- Actu- Re-
Contin- lation arial tained
Share Hedge gency Other diffe- gains/ earn- Equity
EUR million capital fund fund funds rences losses ings total
--------------------------------------------------------------------------------
Equity
31 Dec 2011 36.2 -0.0 30.0 1.2 -7.2 - 239.1 299.3
--------------------------------------------------------------------------------
Change in
accounting
policy (IAS19) - - - - - -4.8 - -4.8
--------------------------------------------------------------------------------
Equity, revised*
1 Jan 2012 36.2 -0.0 30.0 1.2 -7.2 -4.8 239.1 294.5
--------------------------------------------------------------------------------
Comprehensive
income for the
period
Net profit for
the period - - - - - - 5.0 5.0
Other
comprehensive
income:
Cash flow
hedge - -0.7 - - - - - -0.7
Income tax
relating to
other
comprehensive
income - - - - -0.5 - - -0.5
Translation
difference - - - - 14.1 - - 14.1
--------------------------------------------------------------------------------
Comprehensive
income for the
period total - -0.7 - - 13.6 - 5.0 17.8
--------------------------------------------------------------------------------
Owners related
transactions
Dividends paid
and return of
equity - - -4.5 - - - -7.6 -12.1
Share-based
payments - - - - - - 0.2 0.2
--------------------------------------------------------------------------------
Owners related
transactions
total - - -4.5 - - - -7.4 -11.9
--------------------------------------------------------------------------------
Equity
30 Sep 2012 36.2 -0.8 25.5 1.2 6.4 -4.8 236.6 300.4
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Equity
31 Dec 2012 36.2 -0.7 25.5 1.2 3.9 - 248.9 314.9
--------------------------------------------------------------------------------
Change in
accounting
policy (IAS19) - - - - -0.0 -3.6 -0.8 -4.4
--------------------------------------------------------------------------------
Equity, revised*
1 Jan 2013 36.2 -0.7 25.5 1.2 3.8 -3.6 248.1 310.5
--------------------------------------------------------------------------------
Comprehensive
income for the
period
Net profit for
the period - - - - - - 0.2 0.2
Other
comprehensive
income:
Cash flow
hedge - 1.1 - - - - - 1.1
Income tax
relating to
other
comprehensive
income - -0.3 - - 0.5 - - 0.2
Translation
difference - 0.0 - - -20.0 - - -20.0
--------------------------------------------------------------------------------
Comprehensive
income for the
period total - 0.8 - - -19.5 - 0.2 -18.5
--------------------------------------------------------------------------------
Owners related
transactions
Dividends paid
and return of
equity - - -6.0 - - - -7.6 -13.6
Share-based
payments - - - - - - 0.1 0.1
--------------------------------------------------------------------------------
Owners related
transactions
total - - -6.0 - - - -7.4 -13.5
--------------------------------------------------------------------------------
Equity
30 Sep 2013 36.2 0.1 19.4 1.2 -15.7 -3.6 240.8 278.5
--------------------------------------------------------------------------------
*) Revised standard IAS 19 Employee benefits has been applied as of 1 January
2013
Comprised Consolidated Cash Flow Statement 1-9 1-9 1-12
(IFRS), EUR million 2013 2012 2012
------------------------------------------------------------
Operating profit 10.6 15.3 25.8
Depreciation 17.1 13.7 18.8
Change in working capital -35.2 -14.9 23.1
Cash flow from financial
items and taxes -13.1 -18.7 -20.3
Other adjustments -0.6 -4.7 -1.2
------------------------------------------------------------
Net cash flow from operating activities -21.0 -9.3 46.1
Net cash flow from investing activities -88.8 -16.1 -34.9
Net cash flow from financing activities 118.1 -40.3 -77.3
Net change in cash and cash equivalents 8.3 -65.7 -66.2
Cash and cash equivalents
at the beginning of the period 88.1 153.8 153.8
Foreign exchange rate differences -0.6 0.5 0.4
Net change in cash and cash equivalents 8.3 -65.7 -66.2
------------------------------------------------------------
Cash and cash equivalents
at the end of the period 95.7 88.6 88.1
------------------------------------------------------------
Notes
Principal accounting policies as of 1 January 2013 (IFRS)
This interim report has been prepared in accordance with IFRS standards (IAS
34). The accounting policies and calculation methods applied in the interim
report are the same as those in the 31 December 2012 annual financial
statements, excluding the standards and interpretation applied as of 1 January
2013 and presented below. However, the interim report does not include all of
the information and notes present in the annual financial statements.
Consequently, the interim report should be read with the company's financial
statements for 2012. The accounting policies of the 2012 and 2013 financial
years are comparable. The company has not discontinued any operations in 2012 or
2013 that it should report.
The same principles of calculation have been used for the indicators in this
interim report as for those of the annual financial statements.
The figures in the interim report have been rounded independently.
New amendments that have been applied since 1 January 2013:
* Amendement to the standard IAS1 Presentation of Financial Statements
(effective in financial years beginning on or after 1 January 2013).
* Amendment to the standard IAS 12 Income Taxes (effective in financial years
beginning on or after 1 January 2013).
* Amendment to the standard IAS 19R (revised) Employee Benefits (effective in
financial years beginning on or after 1 January 2013).
* IFRS 13 Fair Value Measurement (effective in financial years beginning on or
after 1 January 2013).
The impact of the amendment of standard IAS 19 Employee benefits on the
consolidated result has been itemised below. The amendments of the other new
standards referred to above have had minor impact on the Group.
Two new indicators have been introduced in the second quarter of 2013: EBITDA
excluding non-recurring items and EBITDA. EBITDA excluding non-recurring items
is calculated as follows: operating profit excluding non-recurring items plus
depreciation and impairment excluding non-recurring items. EBITDA is calculated
as follows: operating profit plus depreciation and impairment. The quarterly
indicator for return on investment (ROI) and return on equity (ROE) is
annualised as follows: ((1+quarterly earnings)^4)-1).
The figures in this interim report are unaudited.
Amendment of the IAS 19 standard Employee benefits
The Oriola-KD Group has applied the standard IAS 19 Employee benefits as of 1
January 2013. The amendment impacts the Oriola-KD Group's pension costs and
result and the pension assets and obligations and equity on the balance sheet.
As a consequence of the amendment, the 2012 consolidated profit and loss account
and balance sheet have been updated as required by the revised standard.
The key amendments of the standards IAS 19R (revised) Employee benefits are that
all actuarial gains and losses must be recognised immediately in other
comprehensive income and that expected yield from assets no longer depends on
investment distribution. The discount rate used in the calculation of pension
debt is used as the expected yield of investments. The corridor method will no
longer be used and financing expenditure will be the sum of net interest rates.
The net interest rate is the difference between the interest rate costs of
pension debt and the interest rate income from assets. Despite the amendment,
the Group has decided to recognise the sum of net interest rate in personnel
expenses.
With the implementation of the revised standard IAS 19 Employee benefits, the
Oriola-KD Group's operating profit excluding non-recurring items, operating
profit and profit for the financial year 2012 and, on the balance sheet, the
pension assets and equity are smaller and pension obligation is larger than when
calculated in accordance with the standard in force up to 31 December 2012. The
impact of the implementation on consolidated operating profit excluding non-
recurring items and operating profit for 2012 is EUR 1.0 million. The impact on
Group equity on the 2012 opening balance sheet is EUR -4.8 million and EUR -4.4
million on the 31 December 2012 balance sheet due to the recognition of
actuarial gains and losses and their tax effect on equity on the consolidated
balance sheet. The following tables present a summary of the key figures
following the amendment of the accounting policy.
1-3 1-6 1-9 1-12
EUR million 2012 2012 2012 2012
-------------------------------------------------------------------------
Operating profit excluding non-recurring items 5.2 9.2 16.4 26.8
Operating profit 5.2 9.2 15.3 25.8
Profit before taxes 2.5 4.5 8.4 20.5
Profit for the period 1.3 2.8 5.0 16.4
Comprehensive profit for the period 15.5 6.6 17.8 27.9
Earnings per share to shareholders of
the parent company on the profit for the period, EUR
Diluted, EUR 0.01 0.02 0.03 0.11
Adjusted for the dilution effect, EUR 0.01 0.02 0.03 0.11
1-3 4-6 7-9 10-12 1-12
EUR million 2012 2012 2012 2012 2012
--------------------------------------------------------------------------------
Operating profit excluding non-recurring items 5.2 4.0 7.2 10.5 26.8
Operating profit 5.2 4.0 6.2 10.5 25.8
Profit before taxes 2.5 2.0 4.0 12.0 20.5
Profit for the period 1.3 1.5 2.1 11.4 16.4
Comprehensive profit for the period 15.5 -8.8 11.2 10.1 27.9
Earnings per share for shareholders of
the parent company on the profit for the period, EUR
Diluted, EUR 0.01 0.01 0.01 0.08 0.11
Adjusted for the dilution effect, EUR 0.01 0.01 0.01 0.08 0.11
EUR million 31 Mar 2012 30 Jun 2012 30 Sep 2012 31 Dec 2012
--------------------------------------------------------------------------------
Non-current pension assets 4.3 4.1 3.8 6.6
Non-current pension obligations 7.8 7.9 8.3 9.7
Equity of the parent company's
shareholders 297.9 289.2 300.4 310.5
Change in Property, Plant and Equipment
1-9 1-9 1-12
EUR million 2013 2012 2012
-------------------------------------------------------------------
Carrying amount at the beginning of the period 81.4 74.0 74.0
Increases through acquisitions of subsidiary shares 9.0 - -
Increases 14.4 10.5 16.6
Decreases -0.1 -0.7 -0.5
Depreciation -9.9 -8.0 -11.1
Foreign exchange rate differences -0.8 3.1 2.4
-------------------------------------------------------------------
Carrying amount at the end of the period 93.9 78.9 81.4
-------------------------------------------------------------------
Derivatives, Commitments
and Contingent Liabilities
30 September 2013
Positive fair Negative fair Nominal values of
EUR million value value contracts
Derivatives recognised
as cash flow hedges
Interest rate swaps 0.1 - 46.2
Derivatives measured at
fair value through profit
and loss
Foreign currency forward
and swap contracts 2.3 - 122.4
30 September 2012
Positive fair Negative fair Nominal values of
EUR million value value contracts
Derivatives recognised
as cash flow hedges
Interest rate swaps - -0.8 47.3
Derivatives measured at
fair value through profit
and loss
Foreign currency forward
and swap contracts 3.4 - 161.7
Interest rate swaps - -0.2 118.3
Derivatives measured at fair value through profit and loss are mainly related to
hedging of group's
internal transactions. Fair values of the derivatives have been booked to
balance sheet in
gross amount as the derivatives contracts are related to credit events and
cannot be netted in financial
statements. The group has not given nor received collateral to/from
derivatives counterparties.
Fair value hierarchy
EUR million
30 Sep 2013 Level 1 Level 2 Level 3 Total
--------------------------------------------------------------------------------
Assets
Derivatives measured at fair value through
profit and loss - 2.3 - 2.3
Derivatives designated as hedges - 0.1 - 0.1
Liabilities
Contingent consideration - - 14.7 14.7
--------------------------------------------------------------------------------
EUR million
30 Sep 2012 Level 1 Level 2 Level 3 Total
--------------------------------------------------------------------------------
Assets
Derivatives measured at fair value through
profit and loss - 3.4 - 3.4
Liabilities
Derivatives measured at fair value through
profit and loss - 0.2 - 0.2
Derivatives designated as hedges - 0.8 - 0.8
--------------------------------------------------------------------------------
Level 1: Quoted prices (unadjusted) in
active markets for identical assets or
liabilities.
Level 2: Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices).
Level 3: Inputs for the asset or liability that are not based on observable
market data (i.e. unobservable inputs).
Reconciliation of financial liabilities recognised at fair value through profit
and loss according to the level 3 in the year 2013
EUR million
Carrying amount 31 Dec 2012 -
Bookings from contingent consideration 14.4
Bookings to financial expenses 0.3
--------------------------------------------
Carrying amount 30 Sep 2013 14.7
--------------------------------------------
Financial liabilities recognised at fair value through profit and loss (level
3) include estimated discounted fair
value of a contingent consideration related to the Medstop acquisition. Payment
of the contingent
consideration will be based on 2015 EBITDA of Oriola-KD's combined Swedish
retail businesses and will be
paid in first quarter of 2016. The fair value of the contingent consideration
has been calculated using discounted cash flow method. The discount rate used in
the valuation is determined using the weighted average cost of capital of the
Group.
Contingencies for Own
Liabilities
EUR million 30 Sep 2013 30 Sep 2012 31 Dec 2012
-----------------------------------------------------------------
Guarantees given 19.9 8.6 23.4
Mortgages on land and
buildings - 2.0 2.0
Mortgages on company assets 2.4 2.5 2.4
Other guarantees and
liabilities 0.8 0.6 0.8
-----------------------------------------------------------------
Total 23.1 13.7 28.7
-----------------------------------------------------------------
Leasing liabilities
(operating liabilities) 3.0 3.0 2.8
Rent liabilities 81.8 66.7 66.9
The most significant reported guarantees are bank guarantees against trade
payables in wholesale companies
in Russia and Sweden.Oriola-KD Oyj has also granted parent company guarantees of
EUR 24.3 (25.9) million
against subsidiaries' trade payables and EUR 157.0 (0.0) million against
external loan to Oriola-KD Holding Sverige AB.
Provisions
At 30 September 2013 Oriola-KD had in total of EUR 2.7 (0.0) million provisions
relating to restructuring costs incurred by the Swedish wholesale business in
connection with the efficiency programme and restructuring costs arising in the
Swedish retail business in connection with the acquisition of Medstop.
Related parties
Related parties in the Oriola-KD Group are deemed to comprise the members of the
Board of Directors and the President and CEO of Oriola-KD Corporation, the other
members of the Group Management Team of the Oriola-KD Group, the immediatefamily of the aforementioned persons, the companies controlled by the
aforementioned persons, and the Oriola Pension Fund. The Group has no
significant business transactions with related parties, except for pension
expenses arising from defined benefit plans with the Oriola Pension Fund.
30 Sep 30 Sep 31 Dec
Number of personnel 2013 2012 2012
-----------------------------------------------------------------
Average number of personnel 5,087 4,813 4,818
Number of personnel at the end of the period 5,327 4,823 4,856
SEGMENT INFORMATION
1-9 1-9 1-12
Net Sales, EUR
million 2013 2012 2012
-----------------------------------------------
Pharmaceutical Trade
Finland and Baltics 316.0 342.2 460.5
Pharmaceutical Trade
Sweden 893.9 768.9 1,061.3
Pharmaceutical Trade
Russia 709.0 655.8 952.7
Net sales to other
segments -0.0 -0.2 -0.0
-----------------------------------------------
Group total 1,918.8 1,766.7 2,474.4
1-9 1-9 1-12
Operating Profit, EUR
million 2013 2012 2012
-----------------------------------------------
Pharmaceutical Trade
Finland and Baltics 16.1 15.6 20.8
Pharmaceutical Trade
Sweden 11.7 10.5 15.1
Pharmaceutical Trade
Russia -8.8 -5.3 -2.3
Group Administration
and Others -8.4 -5.4 -7.8
-----------------------------------------------
Group total 10.6 15.3 25.8
Operating Profit
excl. Non-recurring
items, 1-9 1-9 1-12
EUR million 2013 2012 2012
-----------------------------------------------
Pharmaceutical Trade
Finland and Baltics 16.1 15.6 20.8
Pharmaceutical Trade
Sweden 17.7 11.6 16.2
Pharmaceutical Trade
Russia -8.8 -5.3 -2.3
Group Administration
and Others -8.4 -5.4 -7.8
-----------------------------------------------
Operating Profit
excl. Non recurring
items 16.6 16.4 26.8
Non-recurring items * -6.0 -1.1 -1.1
-----------------------------------------------
Group total 10.6 15.3 25.8
*) Restructuring
costs EUR -2.0
million in Sweden
Q3/2013,
restructuring costs
EUR -0.8 million and
a write-off of
contract-based
accrual EUR -3.2
million in Sweden
Q2/2013 and a
receivable write-off
EUR -1.1 million in
Sweden Q3/2012
Quarterly Net Sales,
EUR million Q3/2013 Q2/2013 Q1/2013 Q4/2012 Q3/2012 Q2/2012 Q1/2012
------------------------------------------------------------------------------
Pharmaceutical Trade
Finland and Baltics 96.0 112.5 107.5 118.3 108.7 116.6 116.8
Pharmaceutical Trade
Sweden 315.7 304.5 273.7 292.4 254.1 255.9 258.9
Pharmaceutical Trade
Russia 242.7 235.2 231.1 296.9 223.3 217.3 215.2
Net sales to other
segments 0.0 -0.0 -0.0 0.2 -0.0 -0.1 -0.0
------------------------------------------------------------------------------
Group total 654.4 652.1 612.3 707.8 586.1 589.7 590.8
Quarterly Operating
Profit, EUR million Q3/2013 Q2/2013 Q1/2013 Q4/2012 Q3/2012 Q2/2012 Q1/2012
------------------------------------------------------------------------------
Pharmaceutical Trade
Finland and Baltics 5.7 5.7 4.8 5.2 6.1 4.8 4.6
Pharmaceutical Trade
Sweden 6.6 1.3 3.8 4.6 3.7 3.4 3.4
Pharmaceutical Trade
Russia -1.9 -3.4 -3.6 3.1 -2.0 -2.2 -1.1
Group Administration
and Others -1.8 -4.0 -2.6 -2.4 -1.6 -2.0 -1.8
------------------------------------------------------------------------------
Group total 8.6 -0.3 2.3 10.5 6.2 4.0 5.2
Quarterly Operating
Profit,
excl. Non-recurring
items, EUR million Q3/2013 Q2/2013 Q1/2013 Q4/2012 Q3/2012 Q2/2012 Q1/2012
------------------------------------------------------------------------------
Pharmaceutical Trade
Finland and Baltics 5.7 5.7 4.8 5.2 6.1 4.8 4.6
Pharmaceutical Trade
Sweden 8.6 5.4 3.8 4.6 4.8 3.4 3.4
Pharmaceutical Trade
Russia -1.9 -3.4 -3.6 3.1 -2.0 -2.2 -1.1
Group Administration
and Others -1.8 -4.0 -2.6 -2.4 -1.6 -2.0 -1.8
------------------------------------------------------------------------------
Group total excl.
Non-recurring items 10.6 3.7 2.3 10.5 7.2 4.0 5.2
Non-recurring items * -2.0 -4.0 - - -1.1 - -
------------------------------------------------------------------------------
Group total 8.6 -0.3 2.3 10.5 6.2 4.0 5.2
*) Restructuring
costs EUR -2.0
million in Sweden
Q3/2013,
restructuring costs
EUR -0.8 million and
a write-off of
contract-based
accrual EUR -3.2
million in Sweden
Q2/2013 and a
receivable write-off
EUR -1.1 million in
Sweden Q3/2012
1-9 1-9 1-12
Net Sales by Market,
EUR million 2013 2012 2012
----------------------------------------------
Finland 284.7 314.6 422.4
Sweden 852.1 746.2 1,028.8
Russia 709.0 655.8 952.7
Baltic countries 28.7 25.1 34.6
Other countries 44.3 24.9 35.9
----------------------------------------------
Group total 1,918.8 1,766.7 2,474.4
Quarterly Net Sales
by Market, EUR
million Q3/2013 Q2/2013 Q1/2013 Q4/2012 Q3/2012 Q2/2012 Q1/2012
------------------------------------------------------------------------------
Finland 85.3 102.5 96.8 107.8 99.7 107.6 107.4
Sweden 303.5 289.5 259.0 282.6 244.7 249.3 252.2
Russia 242.7 235.2 231.1 296.9 223.3 217.3 215.2
Baltic countries 9.1 9.6 10.0 9.4 8.6 8.1 8.4
Other countries 13.7 15.3 15.4 11.0 10.0 7.4 7.5
------------------------------------------------------------------------------
Group total 654.4 652.1 612.3 707.8 586.1 589.7 590.8
ACQUIRED BUSINESSES 2013
Medstop pharmacy chain
Oriola-KD acquired the entire capital stock of Medstop Group Holding AB,
Sweden's fifth biggest pharmacy chain, on 3 June 2013. The Medstop pharmacy
chain had a total of 67 pharmacies located in shopping centres and city centre
locations in Stockholm, Gothenburg and Malmö. The business operations of the
pharmacy chain acquired by Oriola-KD only involve pharmaceutical retail business
and they are reported in the Pharmaceutical Trade Sweden segment.
The acquisition cost calculation is based on the company's preliminary balance
sheet on 31 May 2013, the essential parts of which have prepared in accordance
with the IFRS's accounting principles.
The acquisition has been entered in the books on a preliminary basis, as
permitted under IFRS 3R (revised). Oriola-KD will make the necessary adjustments
to these preliminary assessments during the 12 months following the acquisition
date.
The preliminary goodwill of the acquisition entered in the books is EUR 128.8
million. The euro-denominated goodwill is the value of Medstop's experienced
personnel, synergy benefits that can be achieved in purchasing operations,
storage and pharmacy distribution and growth expectations. The goodwill entered
in the books is not tax-deductible.
The original acquisition cost calculation made in Swedish krona (SEK) has been
converted into euros on the basis of the exchange rate of 31 May 2013. The
results and balance sheet of Medstop have been consolidated into Oriola-KD as of
1 June 2013.
The table below provides a summary of the consideration paid for the pharmacy
chain and the fair values of the assets and liabilities entered in the books on
the acquisition date.
Consideration, EUR million
Cash 79.2
Contingent liability 14.5
-------------------------------------------------------
Total consideration transferred 93.7
Recognized amounts of identifiable assets
aquired and liabilities assumed, EUR million Fair value
Property,plant and equipment 9.0
Intangible assets 28.1
Deferred tax assets 2.4
Inventories 18.3
Trade and other receivables 18.4
Cash and cash equivalents 8.9
-------------------------------------------------------
Assets total 85.1
Deferred tax liabilities 6.2
Trade payables and other current liabilities 30.3
Borrowings 83.8
-------------------------------------------------------
Liabilities total 120.2
Total identifiable net assets -35.1
Goodwill 128.8
Total 93.7
Acquisition-related costs are included in administrative expenses in the 2013
consolidated income statement.
The contingent consideration will be paid in the first quarter of 2016. Payment
of the contingent consideration is based on the estimate on Oriola-KD's combined
Swedish retail businesses 2015 EBITDA made by the management. The contingent
consideration has been booked in the balance sheet as financial liability
recognised at fair value through profit and loss and the fair value of the
contingent consideration has been calculated using discounted cash flow method.
The discount rate used in the valuation is determined using the weighted average
cost of capital of the Group.
The estimated net sales of the Group in the period 1 January-30 September 2013
would have been EUR 2,027.8 million (reported EUR 1,918.8 million) and the
operating profit excluding non-recurring items EUR 22.1 million (reported EUR
16.6 million) if the acquisition had been made at the start of 2013.
The impact of the acquired business on the Group's net sales in the period 1
June - 30 September 2013 is EUR 81.7 (0.0) million and on the operating profit
excluding non-recurring items EUR 1.3 (0.0) million.
The following tables include certain illustrative unaudited financial
information of Oriola-KD and Pharmaceutical Trade Sweden assuming that the
acquisition had taken place 1 January, 2012.
The unaudited illustrative financial information have been derived from the
audited Oriola-KD financial statements for the period 1 January-31 December
2012, audited Medstop Group Holding AB financial statements for the period 1
January-31 December 2012 and from the unaudited Oriola-KD interim report 1
January-30 September 2013 and from Medstop Group Holding AB unaudited financial
information for the five month period ending 30 May 2013.
Pharmaceutical Trade Pharmaceutical
Sweden excluding Medstop Adjustments Trade Sweden
Medstop, Group to including
revised * Holding AB acquisition Medstop
1-9 1-12 1-9 1-12 1-9 1-12 1-9 1-12
Income Statement,
EUR million 2013 2012 2013 2012 2013 2012 2013 2012
-------------------------------------------------------------
Net sales 812.2 1,061.3 190.6 260.2 - - 1,002.8 1,321.5
EBITDA excluding
non-recurring items 26.2 26.4 7.4 11.3 2.3 -2.3 35.9 35.4
Operating Profit
excluding non-
recurring items 16.8 16.2 4.9 8.4 1.5 -4.1 23.2 20.5
Operating Profit 10.8 15.2 4.0 7.2 1.5 -4.1 16.3 18.4
Oriola-KD Group Oriola-KD
excluding Medstop Adjustments Group
Medstop, Group to including
revised * Holding AB acquisition Medstop
1-9 1-12 1-9 1-12 1-9 1-12 1-9 1-12
Income Statement,
EUR million 2013 2012 2013 2012 2013 2012 2013 2012
-------------------------------------------------------------
Net sales 1,837.1 2,474.4 190.6 260.2 - 0.0 2,027.8 2,734.6
EBITDA excluding
non-recurring items 31.7 45.6 7.4 11.3 2.3 -2.3 41.3 54.6
Operating Profit
excluding non-
recurring items 15.7 26.8 4.9 8.4 1.5 -4.1 22.1 31.1
Operating Profit 9.7 25.8 4.0 7.2 1.5 -4.1 15.3 29.0
*) Revised standard IAS 19 Employee benefits has been applied as of 1 January
2013
Adjustments to acquisition include the additional depreciation charge relating
to the fair value adjustments of identifiable assets acquired as well as the
realisation of inventory fair value step-up in one month following the period of
acquisition. In addition, acquisition related costs have been considered in the
adjustments.
Espoo 23 October 2013
Board of Directors of Oriola-KD Corporation
Oriola-KD Corporation
Eero Hautaniemi
President and CEO
Tuomas Itkonen
CFO
Further information:
Eero Hautaniemi
President and CEO
tel. +358 10 429 2109
e-mail: eero.hautaniemi@oriola-kd.com
Tuomas Itkonen
CFO
tel. +358 46 876 5207
e-mail: tuomas.itkonen@oriola-kd.com
Joni Ihantola
Vice President, Treasury and IR
tel. +358 10 429 4386
e-mail: joni.ihantola@oriola-kd.com
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