2012-10-25 07:30:00 CEST
2012-10-25 07:30:51 CEST
REGULATED INFORMATION
Oriola-KD Oyj - Interim report (Q1 and Q3)
Oriola-KD Corporation's Interim Report for 1 January - 30 September 2012
Oriola-KD Corporation Stock Exchange Release 25 October 2012 at 8.30 a.m.
Key figures for 1 January - 30 September 2012
* Net sales increased by 11.3 per cent to EUR 1,766.7 million (1-9/2011: EUR
1,587.2 million).
* Operating profit excluding one-off items was EUR 17.2 million (1-9/2011:
operating profit excluding one-off items EUR 7.4 million).
* One-off item of a receivable write-off of EUR 1.1 million associated with
the bankruptcy of Swedish cash transport company Panaxia AB was recognised
in the third quarter.
* Operating profit was EUR 16.1 million (1-9/2011: operating loss EUR 26.0
million including an EUR 33.4 million impairment charge related to the
Russian Stary Lekar brand).
* Net cash flow from operations was EUR -9.3 million (1-9/2011: EUR -2.4
million).
* Net profit was EUR 5.5 million (1-9/2011: EUR -28.2 million) and earnings
per share were EUR 0.04 (1-9/2011: EUR -0.19).
* Return on equity was 2.4 per cent (1-9/2011: -11.8 per cent).
* Revised outlook for 2012 issued on 25 October 2012: Oriola-KD's net sales
are expected to increase 10-15 per cent and operating profit excluding one-
off items is expected to come to EUR 24-28 million in 2012. (Previous
outlook for 2012 issued on 26 July 2012: Oriola-KD's net sales are expected
to increase 10-15 per cent and operating profit excluding one-off items is
expected to come to EUR 23-33 million in 2012.)
Key figures for 1 July - 30 September 2012
* Net sales increased by 12.4 per cent to EUR 586.1 million (7-9/2011: EUR
521.6 million).
* Operating profit excluding one-off items was EUR 7.5 million (7-9/2011: EUR
3.4 million).
* A one-off item of a receivable write-off of EUR 1.1 million in Sweden was
recognised during the quarter.
* Operating profit was EUR 6.4 million (7-9/2011: operating profit EUR 3.4
million).
* Net profit was EUR 2.3 million (7-9/2011: EUR -0.6 million) and earnings per
share were EUR 0.02 (7-9/2011: EUR -0.00).
President and CEO Eero Hautaniemi's comments regarding the interim report:"Oriola-KD's net sales increased by 11.3 per cent to EUR 1,766.7 million and
operating profit excluding one-off items was EUR 17.2 million in January-
September 2012. Pharmaceutical Trade Sweden's operating profit excluding one-off
items improved from EUR 8.0 million to EUR 11.7 million and Pharmaceutical Trade
Russia's operating loss excluding one-off items decreased from EUR 12.8 million
to EUR 5.3 million. The wholesale business in Finland performed positively. In
the Swedish retail business, the growth in the relative share of sales of traded
goods, the OTC assortment and parallel imports has increased the gross margin,
and costs related to the implementation of IT systems no longer affected profit
in 2012. In the Swedish wholesale business the low level of invoicing and
preparation costs of EUR 0.6 million associated with the start-up of OTC
products and traded goods purchasing and logistics service for pharmacy chains
reduced profit significantly compared to previous year. Delivery of purchasing
and logistics services to five pharmacy chains has started according to plan at
the beginning of October. The profitability of the Russian retail business
improved as a result of the actions to boost the efficiency of operations and
the growth in sales of individual pharmacies. The operating loss of the Russian
wholesale business decreased as a result of increased regional and hospital
sales, intensified operations and improved delivery reliability. We will
systematically continue our planned measures to boost profitability."
Financial performance
The Oriola-KD Group's (hereinafter Oriola-KD) net sales in January-September
2012 were EUR 1,766.7 million (EUR 1,587.2 million), and the operating profit
excluding one-off items was EUR 17.2 million (EUR 7.4 million). Pharmaceutical
Trade Sweden's operating profit excluding one-off items improved from EUR 8.0
million to EUR 11.7 million and Pharmaceutical Trade Russia's operating loss
excluding one-off items decreased from EUR 12.8 million to EUR 5.3 million.
Operating profit was EUR 16.1 million including a one-off item recognised in the
third quarter of a EUR 1.1 million receivable write-off associated with the
bankruptcy of cash transport company Panaxia AB in Sweden (operating loss EUR
26.0 million including an EUR 33.4 million impairment charge related to the
Russian Stary Lekar brand). Profit after financial items came to EUR 9.2 million
(EUR -33.1 million), net profit was EUR 5.5 million (EUR -28.2 million) and
earnings per share came to EUR 0.04 (EUR -0.19). Oriola-KD's financial expenses
were EUR 6.9 million (EUR 7.1 million), including a EUR 0.7 million accrual cost
of an arrangement fee for a loan repaid in connection with the renewal of bank
loans during the first quarter. Taxes amounted to EUR 3.7 million (EUR 4.9
million positive). Taxes corresponding to the result for the January-September
period 2012 are entered under this figure.
Third-quarter net sales came to EUR 586.1 million (EUR 521.6 million) and
operating profit excluding one-off items to EUR 7.5 million (EUR 3.4 million).
Pharmaceutical Trade Sweden's operating profit excluding one-off items improved
from EUR 3.8 million to EUR 4.8 million and Pharmaceutical Trade Russia's
operating loss decreased from EUR 5.5 million to EUR 2.0 million compared with
the third quarter of 2011. Operating profit was EUR 6.4 million (EUR 3.4
million) including a one-off item of a receivable write-off of EUR 1.1 million
associated with the bankruptcy of Swedish cash transport company Panaxia AB that
was recognised in the third quarter. Profit after financial items came to EUR
4.2 million (EUR 0.3 million) and net profit was EUR 2.3 million (EUR -0.6
million). Earnings per share in the third quarter were EUR 0.02 (EUR -0.00).
Return on equity was 2.4 per cent (-11.8 per cent) in January-September 2012.
Balance sheet, financing and cash flow
Oriola-KD's balance sheet total on 30 September 2012 stood at EUR 1,276.9
million (EUR 1,136.6 million). Cash assets were EUR 88.6 million (EUR 114.8
million), equity was EUR 305.8 million (EUR 283.8 million) and the equity ratio
was 24.5 per cent (25.6 per cent).
Oriola-KD's group goodwill of EUR 279.7 million has been allocated in impairment
testing to the operating segments i.e. cash-generating units: EUR 118.5 million
to the Swedish pharmaceutical retail business, EUR 28.2 million to the Swedish
pharmaceutical wholesale business, EUR 89.1 million to the Russian
pharmaceutical wholesale business and EUR 43.9 million to the Russian
pharmaceutical retail business. During the second quarter of 2012, goodwill
related to Russia of EUR 133.0 million was allocated to the Russian
pharmaceutical retail and Russian pharmaceutical wholesale operating segments in
relation to future cash-flow forecasts.
Interest-bearing debt at the end of September 2012 was EUR 147.8 million (EUR
149.9 million), interest-bearing net debt was EUR 59.2 million (EUR 35.1
million) and the gearing ratio was 19.3 per cent (12.4 per cent). Interest-
bearing debt consisted mainly of the 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 facility of EUR 100.0 million and EUR
43.7 million of short-term credit account limits with banks were unused at the
end of September 2012. A total of EUR 101.5 million (EUR 0.0 million) of
Oriola-KD's EUR 150.0 million commercial paper programme was in use at the end
of the review period. In February 2012, Oriola-KD renewed all long-term external
loan agreements by signing a multi-currency revolving credit agreement with four
banks amounting to EUR 100.0 million that will mature in April 2014.
Net cash flow from operations in January-September 2012 was EUR -9.3 million
(EUR -2.4 million), of which changes in working capital accounted for EUR -14.9
million (EUR -6.2 million). In the Swedish pharmaceutical wholesale business,
the trade receivables sales programme was continued during 2012. Sold trade
receivables were EUR 49.4 million (EUR 59.1 million) at the end of the review
period. Net cash flow from investments was EUR -16.1 million (EUR -17.7
million).
Investments
Gross investments for January-September 2012 came to EUR 15.0 million (EUR 20.3
million) and consisted of investments relating to the establishment of new
pharmacies, information systems and improvements in logistics efficiency.
Personnel and management team
On 30 September 2012, Oriola-KD had a payroll of 4,823 (4,981) employees, 10 per
cent (10 per cent) of whom worked in Finland and the Baltic countries, 27 per
cent (25 per cent) in Sweden, and 63 per cent (65 per cent) in Russia. Personnel
numbers include the members of staff in active employment.
Changes to the Oriola-KD Group Management Team: Lars Birkeland, M.Sc. (Econ.)
(b. 1964) was appointed new Managing Director of Kronans Droghandel Apotek AB
starting as of 9 January 2012. Konstantin Minin (b. 1974), Doctor, who was
previously Commercial Director of Oriola-KD's Stary Lekar and 03 Apteka pharmacy
chains in Russia was appointed Vice President, Pharmaceutical Retail Russia as
of 1 March 2012. As of 1 March 2012 Henry Fogels has been in charge of Oriola-
KD's wholesale business in Russia. Kimmo Virtanen was appointed Executive Vice
President of Oriola-KD's pharmaceutical wholesale businesses in Finland, Sweden
and the Baltics and Managing Director of Oriola Oy as of 15 May 2012. Tuomas
Itkonen, M.Sc. (Econ.) (b. 1968) was appointed CFO of Oriola-KD Corporation and
member of the Group Management Team. He will start on 1 November 2012.
Jukka Niemi, Vice President, Pharmaceutical Wholesale, Finland and Baltics
resigned from the Group and from his position as Managing Director of Oriola Oy
on 1 May 2012.
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
* Thomas Gawell, Vice President, pharmaceutical wholesale, Sweden
* Tuomas Itkonen, CFO (as of 1 November 2012)
* Konstantin Minin, Vice President, pharmaceutical retail, Russia
* Teija Silver, Vice President, HR
* Kimmo Virtanen, Executive Vice President and Vice President, pharmaceutical
wholesale, Finland, Sweden and the Baltics
Reporting segments
Oriola-KD's reporting segments are Pharmaceutical Trade Finland and Baltics,
Pharmaceutical Trade Sweden and Pharmaceutical Trade Russia. Oriola-KD has
formed its reporting segments by combining its operating segments. The
Pharmaceutical Trade Finland and Baltics reporting segment comprises the Finnish
pharmaceutical wholesale, 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
The net sales of Pharmaceutical Trade Finland and Baltics in January-September
2012 were EUR 342.2 million (EUR 309.1 million), and its operating profit was
EUR 16.2 million (EUR 16.2 million). Invoicing of the pharmaceutical wholesale
business in Finland in January-September 2012 was EUR 770.0 million (EUR 725.1
million) and net sales were EUR 283.1 million (EUR 249.6 million). Net sales of
pharmaceutical wholesale in the Baltic countries were EUR 26.0 million (EUR
25.4 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,
were EUR 33.4 million (EUR 34.4 million).
The Finnish pharmaceutical market grew by 2.5 per cent (1.0 per cent) in
January-September 2012. Oriola-KD's market share of the Finnish pharmaceutical
wholesale market was 47.2 per cent (45.6 per cent) in January-September 2012.
(source: IMS Health)
The net sales of Pharmaceutical Trade Finland and Baltics in the third quarter
of 2012 were EUR 108.7 million (EUR 101.8 million) and its operating profit was
EUR 6.3 million (EUR 5.9 million). Invoicing of the pharmaceutical wholesale
business Finland in the third quarter came to EUR 251.8 million (EUR 239.6
million) and net sales to EUR 89.5 million (EUR 82.7 million). Net sales of the
pharmaceutical wholesale business in the Baltic countries were EUR 8.8 million
(EUR 8.2 million), while net sales of the Consumer Health business were EUR
10.6 million (EUR 11.1 million).
The Finnish wholesale business offers effective distribution of pharmaceuticals
and innovative services for pharmaceutical companies and pharmacies. The quality
and efficiency of the picking automation line that was taken into use at the
main distribution centre in Espoo during the first quarter was increased to the
target level at the end of the third quarter. The wholesale business in Finland
performed positively. Competition in the Consumer Health business has increased
from the previous year. All operating countries within Pharmaceutical Trade
Baltics made an operating profit.
Pharmaceutical Trade Finland and Baltics had 476 (496) employees at the end of
September 2012.
Pharmaceutical Trade Sweden
Pharmaceutical Trade Sweden's net sales in January-September 2012 were EUR
768.9 million (EUR 783.5 million) and its operating profit excluding one-off
items was EUR 11.7 million (EUR 8.0 million).
Operating profit excluding one-off items improved as a result of increased
profitability in the retail business. In the retail business, the growth in the
relative share of sales of traded goods, the OTC assortment and parallel imports
has increased the gross margin, and costs related to the implementation of IT
systems no longer affected profit in 2012. In the wholesale business, the low
level of invoicing and preparation costs of EUR 0.6 million associated with the
start-up of OTC products and traded goods purchasing and logistics service for
pharmacy chains reduced profit significantly from the previous year. Wholesale
invoicing was EUR 1,016.0 million (EUR 1,083.6 million) and net sales were EUR
432.6 million (EUR 465.9 million). Net sales of the retail business were EUR
376.3 million (EUR 361.6 million).
The operating profit including one-off items was EUR 10.6 million (EUR 8.0
million). A one-off item of a receivable write-off of EUR 1.1 million associated
with the bankruptcy of cash transport company Panaxia AB and collected cash in
hand from the pharmacies that was not received as a consequence was recognised
in the third quarter. Kronans Droghandel Apotek AB had terminated its
cooperation with Panaxia at the end of August, five days before the company
filed for bankruptcy. The bankruptcy has resulted in significant losses for over
5,000 retailers in Sweden and a total of approximately EUR 70 million is
missing.
The Swedish pharmaceutical market declined by 1.6 per cent (grew 2.8 per cent)
in January-September 2012. Oriola-KD's market share of the Swedish
pharmaceutical wholesale market was 35.9 per cent (38.7 per cent) and 13.6 per
cent (13.1 per cent) of the retail market in January-September 2012. (source:
IMS Health) The increase in sales of parallel imports and generic medicines in
Sweden reduced Oriola-KD's market share in the pharmaceutical wholesale
business.
The net sales of Pharmaceutical Trade Sweden in the third-quarter of 2012 were
EUR 254.1 million (EUR 249.6 million) and its operating profit excluding one-off
items was EUR 4.8 million (EUR 3.8 million). The operating profit including a
one-off item of a receivable write-off of EUR 1.1 million was EUR 3.7 million
(EUR 3.8 million). Wholesale invoicing was EUR 336.0 million (EUR 337.8 million)
and net sales were EUR 140.4 million (EUR 148.4 million). Net sales of the
retail business were EUR 126.9 million (EUR 115.3 million).
In 2012, the retail business will focus on improving pharmacies'
competitiveness, developing purchasing operations, expanding the selection of
traded goods and OTC assortment and opening some 15 new pharmacies. Seven (13)
pharmacies have been opened during 2012, and at the end of September there were
216 (202) pharmacies in total. The establishment of new pharmacies in Sweden
slowed down during 2012.
In 2012, the focus areas in the wholesale business are the improvement of
distribution services provided to pharmaceutical companies and the development
of logistics services provided to pharmacy chains. In June 2012, the wholesale
company Oriola AB signed agreements with Apoteksgruppen, DocMorris, Medstop and
Vårdapoteket on the purchasing, warehousing and pharmacy distribution of OTC
products and traded goods. The combined purchases under the agreements are
expected to come to approximately EUR 130 million annually from 2013. Oriola AB
is also responsible for the purchasing, warehousing and pharmacy distribution of
Kronans Droghandel Apotek AB's OTC products and traded goods. The purchasing and
logistics service started up according to plan at the beginning of October; the
financial benefits of the service will be felt in full as of the second half of
2013. The purchasing and logistics service is expected to increase the
profitability of the wholesale and retail businesses as a result of greater
delivery volumes and improved purchasing conditions. The new freight agreement
that Oriola AB signed during the second quarter of 2012 will lower freight costs
and assist in the fulfilment of quality criteria related to the purchasing and
logistics service.
Pharmaceutical Trade Sweden had 1,314 (1,254) employees at the end of September
2012, of whom 1,055 (1,002) were employed in retail and 259 (252) were employed
in wholesale.
Pharmaceutical Trade Russia
Pharmaceutical Trade Russia's net sales in January-September 2012 were EUR
655.8 million (EUR 494.9 million) and operating loss was EUR 5.3 million
(operating loss EUR 46.2 million including an EUR 33.4 million impairment charge
related to the Stary Lekar brand and operating loss excluding impairment charge
EUR 12.8 million). The profitability of the retail business improved as a result
of the growth in sales of individual pharmacies due to actions to boost
efficiency and the changes in pricing implemented in summer 2011. Net sales of
the wholesale business in Russia were 565.9 million (EUR 426.0 million) and net
sales of the retail business were EUR 107.3 million (EUR 96.6 million). In the
wholesale business, net sales of the regional distribution centres outside
Moscow increased by some 67 per cent in January-September 2012, and in addition
to this, sales of pharmaceuticals to hospitals almost tripled on the previous
year. The operating loss of the wholesale business decreased as a result of
increased regional and hospital sales, increased efficiency and improved
delivery reliability.
Payment times have increased in the wholesale business in Russia, which has led
to an increase in credit loss risks. According to its customer credit policy,
Oriola-KD books an accrual for credit loss when a trade receivable is more than
180 days overdue and there is no separate guarantee associated with the trade
receivable. In January-September 2012, the wholesale business has booked a total
of EUR 1.9 million credit loss accruals relating to the trade receivables; the
collection of these trade receivables is actively continuing. In order to
minimise credit loss risks, the Russian wholesale business has shortened its
term of payment to its customers, clarified the trade receivables collection
process and strengthened collection department.
The Russian ruble-denominated growth of the pharmaceutical market in Russia was
22.5 per cent (9.9 per cent) in January-September 2012 (source: Pharmexpert).
Net sales of Oriola-KD's wholesale business grew by 30.6 per cent (17.3 per
cent) and the retail business grew 9.2 per cent (34.8 per cent) in Russian
rubles in January-September 2012. Oriola-KD's total net sales increased by 30.3
per cent (25.0 per cent) in Russian rubles in January-September 2012.
Pharmaceutical Trade Russia's third-quarter net sales in 2012 came to EUR 223.3
million (EUR 170.3 million), of which retail accounted for EUR 34.2 million (EUR
31.5 million) and wholesale EUR 194.3 million (EUR 145.7 million). The operating
loss of the retail and wholesale businesses was EUR 2.0 million (operating loss
EUR 5.5 million). The profitability of both businesses improved on the previous
year.
In 2012 the retail business will focus on developing the pharmacy portfolio,
improving the competitiveness of individual pharmacies and strengthening the
product assortment. At the end of September 2012, Oriola-KD had 237 (264)
pharmacies in the Moscow area, of which 167 (189) operated under the Stary Lekar
brand and 70 (75) under the 03 Apteka brand. Eight pharmacies were opened and
20 were closed during January-September 2012. In June 2012, Oriola-KD completed
its project to close down unprofitable pharmacies. The retail business achieved
positive EBITDA during 2012, despite the challenging competition situation..
In 2012, unprofitable products in the assortment of the warehouse business will
be eliminated, logistics intensified and delivery reliability improved by
developing the internal operating processes. Projects have been started in
Russia to implement a new warehouse management system at the start of 2013 and
to establish a new automated main logistics centre in Moscow at the beginning of
2014. The wholesale business has twelve regional logistics centres in addition
to its main logistics centre in Moscow.
At the end of September 2012, Pharmaceutical Trade Russia had 3,032 (3,231)
employees, of whom 1,316 (1,585) were employed in retail and 1,717 (1,646) in
wholesale.
Related parties
Related parties in the Oriola-KD Group are deemed to comprise the members of the
Board and the President and CEO of Oriola-KD Corporation, the 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 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.
Oriola-KD Corporation shares
Trading volume of the Oriola-KD Corporation's class A and B shares in January-
September 2012:
Trading volume Jan-Sep 2012 Jan-Sep 2011
class A class B class A class B
Trading volume, million 4.3 24.4 2.1 58.2
Trading volume, EUR million 8.5 46.7 6.5 163.2
Highest price, EUR 2.44 2.15 3.83 3.74
Lowest price, EUR 1.77 1.70 1.76 1.57
Closing quotation, end of period, EUR 2.08 2.05 1.79 1.69
Oriola-KD Corporation's market capitalisation on 30 September 2012 was EUR
311.5 million (EUR 260.3 million).
In the review period, the traded volume of Oriola-KD Corporation shares,
excluding treasury shares, corresponded to 36.6 per cent (39.9 per cent) of the
total number of shares. The traded volume of class A shares amounted to 18.1 per
cent (4.5 per cent) of the average stock, and that of class B shares, excluding
treasury shares, 44.9 per cent (56.0 per cent) of the average stock.
At the end of September 2012, the company had a total of 151,257,828 shares
(151,257,828), of which 47,148,710 were class A shares (47,163,160) and
104,109,118 were class B shares (104,094,668). 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 2012, no class A shares were converted into class B shares (0
shares).
On 10 February 2010, Oriola-KD Corporation's Board of Directors decided on a
share incentive scheme for the Group's key personnel for the years 2010-2012. No
bonuses have been paid under the incentive scheme for the 2010 and the 2011
earning periods. The Board of Directors of Oriola-KD has determined the earnings
criteria for 2012. Any payment for the 2012 earning period will be based on the
attainment of business-specific strategic targets.
Decisions of the 2012 Annual General Meeting
The Annual General Meeting of Oriola-KD Corporation, held on 26 March 2012,
adopted the 2011 financial statements and discharged the members of the Board of
Directors and the President and CEO from liability for the financial year ending
31 December 2011. According to the decisions of the AGM, the company paid a
dividend of EUR 0.05 per share and distributed EUR 0.03 per share as repayment
of equity on 12 April 2012.
The AGM re-elected Jukka Alho, Harry Brade, Per Båtelson, Pauli Kulvik, Outi
Raitasuo, Olli Riikkala (Chairman), Ilkka Salonen and Mika Vidgrén as Board
members. The AGM confirmed a term of office fee of EUR 48,400 for the Chairman,
EUR 30,250 for the Vice Chairman, and EUR 24,200 for the other members of the
Board. The Chairman receives an attendance fee of EUR 800 per meeting, and the
other Board members EUR 400 per meeting. In accordance with the decision of the
AGM, 40 per cent of the term of office fee was used to acquire Oriola-KD
Corporation's class B shares for the Board members on the NASDAQ OMX Helsinki
Stock Exchange on 13 April 2012, and 60 per cent of the fee was paid in cash on
20 April 2012.
PricewaterhouseCoopers Oy was re-elected as auditor for the company, with APA
Heikki Lassila as principal auditor.
The AGM authorised the Board to decide on repurchasing up to fifteen million of
the company's own class B shares. Shares may be repurchased also in a proportion
other than in which shares are owned by the shareholders. The authorisation is
in force for eighteen months following the decision of the AGM.
The AGM 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 shares held by the company. The authorisation covers a combined maximum
of fifteen 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.
At its constitutive meeting held immediately after the AGM, the Board of
Directors of Oriola-KD Corporation elected Outi Raitasuo as Vice Chairman of the
Board. The Board appointed from among its members Outi Raitasuo (Chairman),
Harry Brade, Ilkka Salonen and Mika Vidgrén to the Board's Audit Committee, and
Olli Riikkala (Chairman), Per Båtelson and Pauli Kulvik to the Board's
Remuneration Committee.
In addition to the above mentioned members, the Board appointed Harry Brade to
the Remuneration Committee at its meeting held on 29 August 2012. 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.
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.
During the third quarter of 2012, Oriola-KD updated the 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 a rapid increase in the number of pharmacies. The number of pharmacies
may continue to grow, which means that the fierce competition could
continue.
* 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 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 major 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 or the Swedish krona will have an impact on Oriola-KD's financial
performance and equity.
Goodwill and intangible rights are subject to impairment testing at least once
every year. 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 of the goodwill of the
Russian cash-generating units, in particular, is 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.
Outlook
Oriola-KD's outlook for 2012 is based on external market forecasts, agreements
with pharmaceutical companies and pharmacies, and management assessments. In the
period 2012-2016, the pharmaceutical market is expected to grow on average per
year by 0.3 per cent in Finland, 0.5 per cent in Sweden, and 11.1 per cent in
Russia, measured in local currencies (source: IMS Health 09/2012).
Revised outlook for 2012 issued on 25 October 2012:
Oriola-KD's net sales are expected to increase 10-15 per cent and operating
profit excluding one-off items is expected to come to EUR 24-28 million in 2012.
Previous outlook for 2012 issued on 26 July 2012:
Oriola-KD's net sales are expected to increase 10-15 per cent and operating
profit excluding one-off items is expected to come to EUR 23-33 million in 2012.
Tables
The interim report for 1 January - 30 September 2012 has been prepared in
accordance with the recognition policies of the IAS 34 standard. Oriola-KD
adopted new IAS/IFRS standards in January-September 2012: IFRS 7 (amendment) and
IAS 12 (amendment). The changes in the standards had no impact on Oriola-KD's
result. The figures are unaudited.
Consolidated
Statement of
Comprehensive 1 Jan - 30 1 Jan - 30 1 July - 1 July - 1 Jan - 31
Income (IFRS), Sep Sep 30 Sep 30 Sep Dec
EUR million 2012 2011 2012 2011 2011
--------------------------------------------------------------------------------
Net sales 1,766.7 1,587.2 586.1 521.6 2,146.0
Cost of goods sold -1,508.9 -1,355.0 -499.9 -447.9 -1,830.1
--------------------------------------------------------------------------------
Gross profit 257.8 232.2 86.2 73.7 315.9
Other operating
income 1.8 2.0 0.7 0.5 2.6
Selling and
distribution
expenses -201.2 -186.7 -66.1 -59.2 -250.9
Administrative
expenses -41.2 -40.1 -13.4 -11.6 -54.4
--------------------------------------------------------------------------------
Operating
Profit/Loss before
One-off items * 17.2 7.4 7.5 3.4 13.2
One-off items** -1.1 -33.4 -1.1 - -33.4
--------------------------------------------------------------------------------
Operating
Profit/Loss 16.1 -26.0 6.4 3.4 -20.2
Financial income 15.6 7.5 11.4 2.0 10.7
Financial expenses -22.5 -14.7 -13.6 -5.1 -19.4
--------------------------------------------------------------------------------
Profit/Loss before
taxes 9.2 -33.1 4.2 0.3 -28.9
Income taxes *** -3.7 4.9 -1.9 -0.9 4.8
--------------------------------------------------------------------------------
Profit/Loss for the
period 5.5 -28.2 2.3 -0.6 -24.1
Other comprehensive
income
Cash flow hedge -0.7 -1.2 -0.8 -1.7 -1.3
Income tax relating
to
other comprehensive
income -0.5 0.9 -0.4 0.8 0.4
Translation
difference 14.1 -13.2 10.2 -16.0 -1.2
--------------------------------------------------------------------------------
Total comprehensive
income
for the period 18.4 -41.7 11.4 -17.5 -26.3
Attribution of
Profit/Loss for
the period
--------------------------------------------------------------------------------
To parent company
shareholders 5.5 -28.2 2.3 -0.6 -24.1
--------------------------------------------------------------------------------
Attribution of
total comprehensive
income for the
period
--------------------------------------------------------------------------------
To parent company
shareholders 18.4 -41.7 11.4 -17.5 -26.3
--------------------------------------------------------------------------------
Earnings per share
for the period
from continuing
operations
Basic earnings per
share, EUR 0.04 -0.19 0.02 -0.00 -0.16
Diluted earnings
per share, EUR 0.04 -0.19 0.02 -0.00 -0.16
*) Including
depreciation, EUR
million -13.7 -11.1 -4.7 -3.9 -16.1
**) Receivable
write-off in Sweden
Q3/2012 and Stary
Lekar -brand
impairment in
Russia Q2/2011, EUR
million -1.1 -33.4 -1.1 - -33.4
***) The tax
expense for the
period
corresponds to the
taxes calculated
from the
profit for the
financial period
Consolidated Balance Sheet (IFRS),
EUR million
ASSETS 30 Sep 2012 30 Sep 2011 31 Dec 2011
--------------------------------------------------------------------------------
Non-current assets
Property, plant and equipment 78.9 69.2 74.0
Goodwill 279.7 255.5 266.8
Other intangible assets 53.5 51.1 52.1
Other shares and shareholdings 0.0 0.0 0.0
Other non-current assets 9.4 9.3 9.4
Deferred tax assets 7.0 5.2 7.6
--------------------------------------------------------------------------------
Non-current assets total 428.6 390.4 410.0
Current assets
Inventories 362.2 309.4 379.8
Trade and other receivables 397.5 322.1 329.7
Cash and cash equivalents 88.6 114.8 153.8
--------------------------------------------------------------------------------
848.3 746.2 863.3
Non-current assets held for sale 0.0 - 0.0
--------------------------------------------------------------------------------
Current assets total 848.4 746.2 863.4
ASSETS TOTAL 1,276.9 1,136.6 1,273.3
--------------------------------------------------------------------------------
EQUITY AND LIABILITIES 30 Sep 2012 30 Sep 2011 31 Dec 2011
--------------------------------------------------------------------------------
Equity of the parent
company shareholders
Share capital 36.2 36.2 36.2
Funds 25.9 31.2 31.2
Retained earnings 243.7 216.4 231.9
--------------------------------------------------------------------------------
Equity total 305.8 283.8 299.3
Non-current liabilities
Deferred tax liabilities 15.6 14.5 15.1
Pension obligations 6.8 5.9 6.3
Borrowings 16.4 121.5 127.0
Other non-current liabilities 0.8 0.0 0.0
--------------------------------------------------------------------------------
Non-current liabilities total 39.6 142.0 148.4
Current liabilities
Trade payables and other current liabilities 800.2 682.4 779.7
Borrowings 131.3 28.4 46.0
--------------------------------------------------------------------------------
Current liabilities total 931.5 710.8 825.7
EQUITY AND LIABILITIES TOTAL 1,276.9 1,136.6 1,273.3
--------------------------------------------------------------------------------
Consolidated
Statement
of Changes in
Equity (IFRS)
Equity of the parent company
shareholders
Trans-
lation Re-
Share Hedge Contingency Other diffe- tained Equity
EUR million capital fund fund funds rences earnings total
--------------------------------------------------------------------------------
Equity
1 Jan 2011 36.2 1.2 30.0 20.9 -6.3 270.8 352.7
--------------------------------------------------------------------------------
Dividends paid and
return of equity - - - -19.7 - -7.6 -27.2
Net profit/loss for
the period - - - - - -28.2 -28.2
Other comprehensive
income:
Cash flow hedge - -1.2 - - - - -1.2
Income tax
relating to
other
comprehensive
income - - - - 0.9 - 0.9
Translation
difference - - - - -13.2 - -13.2
--------------------------------------------------------------------------------
Equity
30 Sep 2011 36.2 -0.0 30.0 1.2 -18.6 235.0 283.8
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Equity
1 Jan 2012 36.2 -0.0 30.0 1.2 -7.2 239.1 299.3
--------------------------------------------------------------------------------
Dividends paid and
return of equity - - -4.5 - - -7.6 -12.1
Share-based
payments - - - - - 0.2 0.2
Net profit/loss for
the period - - - - - 5.5 5.5
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
--------------------------------------------------------------------------------
Equity
30 Sep 2012 36.2 -0.8 25.5 1.2 6.5 237.2 305.8
--------------------------------------------------------------------------------
Consolidated Cash Flow Statement 1 Jan - 30 Sep 1 Jan - 30 Sep 1 Jan - 31 Dec
(IFRS), EUR million 2012 2011 2011
--------------------------------------------------------------------------------
Operating profit /loss 16.1 -26.0 -20.2
Depreciation 13.7 11.1 16.1
Impairment - 33.4 33.4
Change in working capital -14.9 -6.2 11.8
Cash flow from financial
items and taxes -18.7 -14.8 -15.1
Other adjustments -5.5 0.1 2.1
Net cash flow from operating
activities -9.3 -2.4 28.1
Net cash flow from investing
activities -16.1 -17.7 -27.1
Net cash flow from financing
activities -40.3 -52.5 -35.0
Net change in cash and cash
equivalents -65.7 -72.5 -34.1
Cash and cash equivalents
at the beginning of the period 153.8 187.8 187.8
Foreign exchange rate
differences 0.5 -0.5 0.1
Net change in cash and cash
equivalents -65.7 -72.5 -34.1
Cash and cash equivalents
at the end of the period 88.6 114.8 153.8
--------------------------------------------------------------------------------
Change in Property, Plant and
Equipment, 1 Jan - 30 Sep 1 Jan - 30 Sep 1 Jan - 31 Dec
EUR million 2012 2011 2011
--------------------------------------------------------------------------------
Carrying amount at the beginning
of the period 74.0 68.0 68.0
Increases 10.5 9.9 16.2
Decreases -0.7 -0.5 -0.6
Depreciation -8.0 -6.8 -9.6
Transferred to assets of
disposal
group classified as held for
sale - - -0.0
Foreign exchange rate
differences 3.1 -1.4 0.1
--------------------------------------------------------------------------------
Carrying amount at the end of
the period 78.9 69.2 74.0
--------------------------------------------------------------------------------
1 Jan - 30 Sep 1 Jan - 30 Sep 1 Jan - 31 Dec
Key Figures 2012 2011 2011
--------------------------------------------------------------------------------
Equity ratio, % 24.5 25.6 24.4
Equity per share, EUR 2.02 1.88 1.98
Return on capital employed
(ROCE), % 4.6 -7.2 -4.0
Return on equity (ROE), % 2.4 -11.8 -7.4
Net interest-bearing debt, EUR
million 59.2 35.1 19.2
Gearing, % 19.3 12.4 6.4
Earnings per share, EUR 0.04 -0.19 -0.16
Average number of shares, 1000
pcs 151,244 151,161 151,161
Derivatives, Commitments
and Contingent Liabilities
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
Interest rate risk relating to cash flow from Oriola AB's selling of trade
receivables has been hedged with interest rate swaps.
Internal loan of 1 billion Swedish crowns given to Kronans Droghandel Apotek AB
has been hedged using foreign currency swap contracts.
30 September 2011
Positive fair Negative fair Nominal values of
EUR million value value contracts
Derivatives recognised
as cash flow hedges
Interest rate swaps - -0.0 108.0
Derivatives measured at
fair value through profit and
loss
Foreign currency forward and
swap contracts - -0.0 2.2
Contingencies for Own
Liabilities,
EUR million 30 Sep 2012 30 Sep 2011 31 Dec 2011
--------------------------------------------------------------------------------
Guarantees given 34.5 117.0 138.6
Mortgages on land and buildings 2.0 2.0 2.0
Mortgages on company assets 2.5 2.3 2.4
Other guarantees and liabilities 0.6 0.6 0.7
--------------------------------------------------------------------------------
Total 39.7 121.8 143.7
--------------------------------------------------------------------------------
Leasing-liabilities (operating
liabilities) 3.0 0.7 0.6
Rent contingencies 66.7 61.9 61.9
Parent company guarantee of 1 billion Swedish crowns given by Oriola-KD Oyj to
secure Kronans Droghandel Apotek AB's external loan has expired during the first
quarter of 2012.
1 Jan - 30 Sep 1 Jan - 30 Sep 1 Jan - 31 Dec
Number of personnel 2012 2011 2011
--------------------------------------------------------------------------------
Average number of personnel 4,813 4,992 4,968
Number of personnel at the end
of the period 4,823 4,981 4,854
SEGMENT INFORMATION
1 Jan - 30 Sep 1 Jan - 30 Sep 1 Jan - 31 Dec
Net Sales, EUR million 2012 2011 2011
--------------------------------------------------------------------------------
Pharmaceutical Trade
Finland and Baltics 342.2 309.1 414.8
Pharmaceutical Trade Sweden 768.9 783.5 1,042.0
Pharmaceutical Trade Russia 655.8 494.9 689.4
Net sales to other segments -0.2 -0.2 -0.2
--------------------------------------------------------------------------------
Group total 1,766.7 1,587.2 2,146.0
1 Jan - 30 Sep 1 Jan - 30 Sep 1 Jan - 31 Dec
Operating Profit/Loss, EUR
million 2012 2011 2011
--------------------------------------------------------------------------------
Pharmaceutical Trade
Finland and Baltics 16.2 16.2 20.6
Pharmaceutical Trade Sweden 10.6 8.0 10.6
Pharmaceutical Trade Russia -5.3 -46.2 -46.0
Group Administration and Others -5.3 -4.0 -5.5
--------------------------------------------------------------------------------
Group total 16.1 -26.0 -20.2
Operating Profit/Loss excl. One-
off items, 1 Jan - 30 Sep 1 Jan - 30 Sep 1 Jan - 31 Dec
EUR million 2012 2011 2011
--------------------------------------------------------------------------------
Pharmaceutical Trade
Finland and Baltics 16.2 16.2 20.6
Pharmaceutical Trade Sweden 11.7 8.0 10.6
Pharmaceutical Trade Russia -5.3 -12.8 -12.6
Group Administration and Others -5.3 -4.0 -5.5
--------------------------------------------------------------------------------
Operating Profit/Loss excl. One-
off items 17.2 7.4 13.2
One-off items * -1.1 -33.4 -33.4
--------------------------------------------------------------------------------
Group total 16.1 -26.0 -20.2
*) EUR -1.1 million receivable
write-off in Pharmaceutical
Trade Sweden Q3/2012 and EUR
-33.4 million Stary Lekar -brand
impairment in Pharmaceutical
Trade Russia Q2/2011
Quarterly Net Sales, EUR
million Q3/2012 Q2/2012 Q1/2012 Q4/2011 Q3/2011 Q2/2011 Q1/2011
--------------------------------------------------------------------------------
Pharmaceutical Trade
Finland and Baltics 108.7 116.6 116.8 105.7 101.8 104.8 102.5
Pharmaceutical Trade
Sweden 254.1 255.9 258.9 258.6 249.6 268.6 265.3
Pharmaceutical Trade
Russia 223.3 217.3 215.2 194.5 170.3 162.2 162.4
Net sales to other
segments -0.0 -0.1 -0.0 -0.0 -0.0 -0.1 -0.1
--------------------------------------------------------------------------------
Group total 586.1 589.7 590.8 558.8 521.6 535.5 530.1
Quarterly Operating
Profit/Loss, EUR million Q3/2012 Q2/2012 Q1/2012 Q4/2011 Q3/2011 Q2/2011 Q1/2011
--------------------------------------------------------------------------------
Pharmaceutical Trade
Finland and Baltics 6.3 5.0 4.8 4.4 5.9 4.7 5.6
Pharmaceutical Trade
Sweden 3.7 3.4 3.4 2.6 3.8 1.9 2.3
Pharmaceutical Trade
Russia -2.0 -2.2 -1.1 0.2 -5.5 -39.1 -1.6
Group Administration and
Others -1.5 -2.0 -1.8 -1.4 -0.9 -1.9 -1.2
--------------------------------------------------------------------------------
Group total 6.4 4.3 5.4 5.8 3.4 -34.4 5.0
Quarterly Operating
Profit/Loss,
excl. One-off items, EUR
million Q3/2012 Q2/2012 Q1/2012 Q4/2011 Q3/2011 Q2/2011 Q1/2011
--------------------------------------------------------------------------------
Pharmaceutical Trade
Finland and Baltics 6.3 5.0 4.8 4.4 5.9 4.7 5.6
Pharmaceutical Trade
Sweden 4.8 3.4 3.4 2.6 3.8 1.9 2.3
Pharmaceutical Trade
Russia -2.0 -2.2 -1.1 0.2 -5.5 -5.7 -1.6
Group Administration and
Others -1.5 -2.0 -1.8 -1.4 -0.9 -1.9 -1.2
--------------------------------------------------------------------------------
Group total excl.
One-off items 7.5 4.3 5.4 5.8 3.4 -1.0 5.0
One-off items * -1.1 - - - - -33.4 -
--------------------------------------------------------------------------------
Group total 6.4 4.3 5.4 5.8 3.4 -34.4 5.0
*) EUR -1.1 million
receivable write-off in
Pharmaceutical Trade
Sweden Q3/2012 and EUR
-33.4 million Stary
Lekar -brand impairment
in Pharmaceutical Trade
Russia Q2/2011
1 Jan - 30 1 Jan - 30 1 Jan -
Sep Sep 31 Dec
Net Sales by
Market, EUR
million 2012 2011 2011
-------------------------------------------------
Finland 314.6 283.3 379.4
Sweden 746.2 762.3 1,013.0
Russia 655.8 494.9 689.4
Baltic
countries 25.1 24.4 32.6
Other
countries 24.9 22.4 31.5
-------------------------------------------------
Group total 1,766.7 1,587.2 2,146.0
Quarterly Net
Sales by
Market, EUR
million Q3/2012 Q2/2012 Q1/2012 Q4/2011 Q3/2011 Q2/2011 Q1/2011
--------------------------------------------------------------------------------
Finland 99.7 107.6 107.4 96.1 93.6 96.5 93.1
Sweden 244.7 249.3 252.2 250.7 241.8 262.1 258.4
Russia 223.3 217.3 215.2 194.5 170.3 162.2 162.4
Baltic
countries 8.6 8.1 8.4 8.3 8.0 7.7 8.7
Other
countries 10.0 7.4 7.5 9.1 8.0 6.9 7.5
--------------------------------------------------------------------------------
Group total 586.1 589.7 590.8 558.8 521.6 535.5 530.1
Espoo, 24 October 2012
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
Joni Ihantola
Vice President, Treasury and IR
tel. +358 (0)10 429 4386
e-mail: joni.ihantola@oriola-kd.com
Distribution:
NASDAQ OMX Helsinki Ltd
Key media
Released by:
Oriola-KD Corporation
Corporate Communications
Orionintie 5
FI-02200 Espoo, Finland
www.oriola-kd.com
[HUG#1652034]
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