Continued sales growth in both segments

In the second quarter, Oriola’s net sales grew by 13% to EUR 439 million, driven by both Distribution and Wholesale segments. Profitability improved from the previous year and was EUR 5.1 (3.4) million. Profitability improvement was supported by net sales growth, lower operating expenses compared with the previous year, and lower freight costs. When excluding the impact of the Swedish dose dispensing business, the adjusted EBIT improved to EUR 4.9 (4.2) million. Oriola’s financial position has remained strong with interest-bearing debt decreasing by 63.4 EUR million from the previous year.

In the Distribution segment, net sales grew by 16% to EUR 358 million driven by the steady market value growth in Sweden and Finland. Profitability improved to EUR 4.0 (3.1) million, supported by net sales growth and a lower cost base compared with the previous year, offsetting a negative impact due to lower volumes and the move of clinical trials under the management of advisory services in Wholesale segment. Our market share was stable in Finland, while we saw a slight decline in market share in Sweden. In the second quarter, we have successfully renewed important distribution agreements and also implemented price increases, which will have a positive impact in the second half of this year.

In the Wholesale segment, net sales grew by 3% to EUR 82 million with a wider product portfolio in Sweden and growth in all customer segments. Profitability improved to EUR 2.3 (1.7) million. The profitability improvement was mainly related to an increase in advisory services due to the move of clinical trials under the management of advisory services. In accordance with our strategy to grow the wholesale business, we have developed our capabilities in the warehouses to better serve and meet the needs of the strongly growing e-com sales channel in Sweden.

At the end of April, the Swedish Competition Authority announced that it prohibits the sale of Svensk dos AB to Apotekstjänst Sverige AB due to negative effects on competition in the market. We still think the agreement with Apotekstjänst Sverige AB makes sense and that the decision taken by the authorities was not justified and based on weak argumentation. The decision has been appealed by Apotekstjänst Sverige AB and Oriola, and the process can take up to six months. We still see the agreement with Apotekstjänst Sverige AB as the most viable option and think we have a strong case. This means we will not communicate any alternatives before we have a clear ruling in early Q4.

We have continued the implementation of our refined strategy, which was launched at the end of last year. An important part of the strategy is the ERP (enterprise resource planning) and warehouse management renewal project, which has proceeded according to plan in the second quarter. Investment related costs recognised in the income statement during the second quarter were in total EUR 0.6 million and capital expenditure was EUR 0.5 million. We are reaching the end of the design phase and moving towards the build phase in the second half of this year. Our focus in the strategy rollout is also to actively engage with employees and develop leadership. We held our annual cross company Values Day and CEO roadshows covering our main sites in the second quarter.

In the joint venture company, Kronans Apotek, e-commerce continued to grow steadily, while brick-and-mortar is stabilising. Kronans Apotek continues to develop its customer experience and product range, both in physical and digital stores. The focus remains on long-term profitability improvement, integration activities and business development. The new management has put new measures in place to improve the business. In 2024, Kronans Apotek’s profitability is expected to be positively impacted by new legislation on pharmaceutical compensation. Kronans Apotek is an important strategic partner for us, and we will actively support its value creation as a major shareholder. Kronans Apotek expects its full profit potential to materialise by the end of 2025.

I am pleased to see that we have continued our stable performance in the second quarter. Our strategy is clear, and we continue on our path to become a highly efficient company in our distribution business, to grow our share of the high-margin wholesale and advisory businesses, and to further develop our customer value proposition to deliver enhanced customer experience. As we move forward into the second half of the year, I wish to express my sincere gratitude to everyone at Oriola for their dedication, commitment, and hard work during the second quarter.

Katarina Gabrielson is the CEO of Oriola Corporation. This text was published in the Half-Year Report January-June 2024 on 18 July 2024. The complete report can be downloaded from the link below.