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Oriola-KD Corporation's Interim Report for 1 January - 30 June 2012
26.7.2012
Oriola-KD Corporation Stock Exchange Release 26 July 2012 at 8.30 a.m.
Key figures for 1 January - 30 June 2012
* Net sales increased by 10.8 per cent to EUR 1,180.6 million (1-6/2011: EUR
1,065.6 million).
* Operating profit was EUR 9.7 million (1-6/2011: operating loss EUR 29.4
million including an EUR 33.4 million impairment charge related to the
Russian Stary Lekar brand and operating profit excluding impairment charge
EUR 4.0 million).
* Net cash flow from operations was EUR -8.1 million (1-6/2011: EUR -16.1
million).
* Net profit was EUR 3.2 million (1-6/2011: EUR -27.5 million) and earnings
per share were EUR 0.02 (1-6/2011: EUR -0.18).
* Return on equity was 2.2 per cent (1-6/2011: -16.8 per cent).
* Outlook for 2012 is unchanged: 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 April - 30 June 2012
* Net sales increased by 10.1 per cent to EUR 589.7 million (4-6/2011: EUR
535.5 million).
* Operating profit was EUR 4.3 million (4-6/2011: operating loss EUR 34.4
million including an EUR 33.4 million impairment charge related to the
Russian Stary Lekar brand and operating loss excluding impairment EUR 1.0
million).
* Net profit was EUR 1.7 million (4-6/2011: EUR -29.7 million) and earnings
per share were EUR 0.01 (4-6/2011: EUR -0.20).
President and CEO Eero Hautaniemi's comments regarding the interim report:
"Oriola-KD's net sales increased 10.8 per cent to EUR 1,180.6 million and
operating profit was EUR 9.7 million in January-June 2012. Pharmaceutical retail
in Sweden and Russian operations were primarily responsible for the growth in
operating profit. Pharmaceutical Trade Sweden's operating profit improved by EUR
2.7 million and Pharmaceutical Trade Russia's operating loss excluding
impairment charges decreased by EUR 4.1 million from the previous year. The
profitability of the Finnish wholesale business remained stable. The gross
margin of the Swedish retail business has increased compared to the comparison
period as a consequence of increased sales of traded goods and OTC products.
Operations have been intensified and costs related to the implementation of IT
systems did not affect the profit as was the case in 2011. In June, the Swedish
wholesale business signed agreements with four pharmacy chains on the
purchasing, warehousing and pharmacy distribution of OTC products and traded
goods, which is expected to increase net sales by approximately EUR 130 million
a year as of 2013. The profitability of the Russian retail business improved due
to the increase in sales as a result of the actions to boost the efficiency of
operations and the changes in pricing that were introduced in summer 2011. The
operating loss of the Russian wholesale business decreased as a result of
increased regional and hospital sales, increased efficiency of 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-June 2012
were EUR 1,180.6 million (EUR 1,065.6 million) and operating profit was EUR 9.7
million (1-6/2011: operating loss EUR 29.4 million including an EUR 33.4 million
impairment charge related to the Russian Stary Lekar brand and operating profit
excluding impairment charge EUR 4.0 million). Pharmaceutical Trade Sweden's
operating profit improved by EUR 2.7 million to EUR 6.9 million and
Pharmaceutical Trade Russia's operating loss excluding impairment charge
decreased by EUR 4.1 million to EUR 3.3 million from the previous year. Profit
after financial items came to EUR 5.0 million (EUR -33.4 million), net profit
was EUR 3.2 million (EUR -27.5 million) and earnings per share came to EUR 0.02
(EUR -0.18). Oriola-KD's financial expenses increased to EUR 4.7 million (EUR
4.1 million), due to a EUR 0.7 million accrual cost of an arrangement fee for a
loan repaid in connection with the renewal of bank loans. Taxes amounted to EUR
1.8 million (EUR 5.9 million positive). Taxes corresponding to the result for
January-June 2012 are entered under this figure.
Second-quarter net sales were EUR 589.7 million (EUR 535.5 million) and
operating profit was EUR 4.3 million (operating loss EUR 34.4 million including
an EUR 33.4 million impairment charge related to the Russian Stary Lekar brand
and operating loss excluding impairment charge EUR 1.0 million). Pharmaceutical
Trade Sweden's operating profit improved by EUR 1.5 million to EUR 3.4 million
and Pharmaceutical Trade Russia's operating loss excluding impairment charges
decreased by EUR 3.5 million to EUR 2.2 million from the second quarter of
2011. Profit after financial items came to EUR 2.2 million (EUR -36.5 million)
and net profit was EUR 1.7 million (EUR -29.7 million). Earnings per share in
the second quarter were EUR 0.01 (EUR -0.20).
Return on equity was 2.2 per cent (-16.8 per cent) in January-June 2012.
Balance sheet, financing and cash flow
Oriola-KD's balance sheet total on 30 June 2012 stood at EUR 1,199.5 million
(EUR 1,142.2 million). Cash assets were EUR 72.8 million (EUR 106.2 million),
equity was EUR 294.3 million (EUR 301.3 million) and the equity ratio was 25.1
per cent (27.0 per cent).
Oriola-KD's group goodwill of EUR 270.0 million has been allocated in impairment
testing to the operating segments, i.e. cash-generating units: EUR 114.2 million
to the Swedish pharmaceutical retail business, EUR 27.2 million to the Swedish
pharmaceutical wholesale business, EUR 86.9 million to the Russian
pharmaceutical wholesale business and EUR 41.9 million to the Russian
pharmaceutical retail business. Since March 2012 Russian pharmaceutical retail
and Russian pharmaceutical wholesale have been led by own general directors who
are members of Oriola-KD's Group Management Team. During the second quarter of
2012, goodwill related to Russia of EUR 128.7 million was allocated to the
Russian pharmaceutical retail and Russian pharmaceutical wholesale operating
segments in relation to future cash-flow forecasts. According to the impairment
tests conducted in July 2012, Oriola-KD has no need for goodwill write-offs.
Interest-bearing debt at the end of June 2012 was EUR 124.8 million (EUR 147.9
million), interest-bearing net debt was EUR 52.0 million (EUR 41.8 million) and
the gearing ratio was 17.7 per cent (13.9 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
42.8 million of short-term credit account limits with banks were unused at the
end of June 2012. A total of EUR 82.7 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-June 2012 was EUR -8.1 million (EUR
-16.1 million), of which changes in working capital accounted for EUR -19.7
million (EUR -17.9 million). In the Swedish pharmaceutical wholesale business,
the trade receivables sales programme was continued during 2012. Net cash flow
from investments was EUR -10.7 million (EUR -10.2 million).
Investments
Gross investments for January-June 2012 came to EUR 9.4 million (EUR 13.6
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 June 2012, Oriola-KD had a payroll of 4,776 (5,017) employees, 11 per cent
(11 per cent) of whom worked in Finland and the Baltic countries, 26 per cent
(26 per cent) in Sweden, and 63 per cent (63 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 Managing Director of Kronans Droghandel Apotek AB.
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. Virtanen will continue as the
CFO of Oriola-KD until a new CFO is appointed. 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 as of 30 June 2012:
* 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
* Konstantin Minin, Vice President, pharmaceutical retail, Russia
* Teija Silver, Vice President, HR
* Kimmo Virtanen, Executive Vice President, pharmaceutical wholesale, Finland,
Sweden and the Baltics and CFO
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-June 2012
were EUR 233.4 million (EUR 207.3 million) and its operating profit was EUR 9.9
million (EUR 10.3 million). Invoicing of the pharmaceutical wholesale business
in Finland in January-June 2012 was EUR 518.2 (EUR 485.5 million) and net sales
were EUR 193.6 million (EUR 167.0 million). Net sales of pharmaceutical
wholesale in the Baltic countries were EUR 17.3 million (EUR 17.2 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 22.8 million
(EUR 23.3 million).
The Finnish pharmaceutical market grew by 3.4 per cent (0.8 per cent) in
January-June 2012. Oriola-KD's market share of the Finnish pharmaceutical
wholesale market was 47.2 per cent (45.8 per cent) in January-June 2012.
(Source: IMS Health)
The net sales of Pharmaceutical Trade Finland and Baltics in the second quarter
of 2012 were EUR 116.6 million (EUR 104.8 million) and operating profit was EUR
5.0 million (EUR 4.7 million). Invoicing of the pharmaceutical wholesale
business in Finland in the second quarter came to EUR 262.0 million (EUR 245.1
million) and net sales to EUR 97.0 million (EUR 85.2 million). Net sales of
pharmaceutical wholesale in the Baltic countries were EUR 8.4 million (EUR 7.9
million), while net sales of the consumer health business were EUR 11.3 million
(EUR 11.8 million).
During 2012, pharmaceutical wholesale in Finland will focus on improving quality
and efficiency and on the development of value added services for pharmacies and
pharmaceutical companies. During the first quarter, a new picking automation
line, which is expected to improve the efficiency of logistics, was started up
at Oriola-KD's main distribution centre in Espoo.
Pharmaceutical Trade Finland and Baltics had 523 (509) employees at the end of
June 2012.
Pharmaceutical Trade Sweden
Pharmaceutical Trade Sweden's net sales in January-June 2012 were EUR 514.8
million (EUR 533.9 million) and its operating profit was EUR 6.9 million (EUR
4.2 million). Wholesale invoicing was EUR 679.9 million (EUR 745.8 million) and
net sales EUR 292.2 million (EUR 317.5 million). Net sales of the retail
business were EUR 249.3 million (EUR 246.3 million). The operating profit
increased due to improved profitability of the retail business. The
profitability of the wholesale business was weakened by the low invoicing figure
which was a result of the increase in the share of parallel imports and generic
pharmaceuticals in the Swedish market.
The Swedish pharmaceutical market grew by 4.1 percent (4.1 per cent) in January-
June 2012. Oriola-KD's market share of the Swedish pharmaceutical wholesale
market was 36.3 per cent (39.5 per cent) and 13.5 per cent of the retail market
(13.1 per cent) in January-June 2012. (Source: IMS Health)
The net sales of Pharmaceutical Trade Sweden in the second quarter of 2012 were
EUR 255.9 million (EUR 268.6 million) and its operating profit was EUR 3.4
million (EUR 1.9 million). Wholesale invoicing was EUR 341.4 million (EUR 374.3
million) and net sales were EUR 144.8 million (EUR 161.1 million). Net sales of
the retail business were EUR 124.6 million (EUR 122.7 million). The operating
profit improved as a result of the good performance of the retail business.
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 (10)
pharmacies have been opened during 2012 and there were in total 216 (199)
pharmacies at the end of June. The retail business has intensified pharmacy
operations and costs related to implementation of IT systems did not affect the
profit of the retail business as was the case in the previous year. The share of
traded goods, OTC products and parallel imported products sales increased and
this improved the gross margin. 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. On 29 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 market share of the
pharmacy chains included in the scope of the agreements is about 25 per cent of
the Swedish pharmacy market in 2011 (source: KPMG report 01/2012). The combined
purchases under the agreements are expected to come to approximately EUR 130
million annually from 2013. The cooperation will be launched during the last
quarter of 2012. In addition Oriola AB signed a new freight agreement during the
second quarter. The agreement will reduce freight costs and improve the service
provided to pharmacies.
Pharmaceutical Trade Sweden had 1,246 (1,305) employees at the end of June
2012, of whom 994 (1,064) were employed in retail and 252 (241) in wholesale.
Pharmaceutical Trade Russia
Pharmaceutical Trade Russia's net sales in January-June 2012 were EUR 432.5
million (EUR 324.6 million) and operating loss was EUR 3.3 million (operating
loss EUR 40.7 million including an EUR 33.4 million impairment charge related to
the Stary Lekar brand and operating loss excluding impairment charge EUR 7.4
million). The profitability of the retail business improved as a result of the
growth in sales due to the actions to boost efficiency and the changes in
pricing implemented in summer 2011. The operating loss of the wholesale business
decreased as a result of increased regional and hospital sales, increased
efficiency of operations and improved delivery reliability. Net sales of the
wholesale business in Russia were 371.6 million (EUR 280.3 million) and net
sales of the retail business were EUR 73.0 million (EUR 65.1 million). In the
wholesale business, net sales of the regional distribution centres outside
Moscow increased by some 79 per cent in January-June 2012, in addition to a
strong growth in sales of pharmaceuticals to hospitals.
The Russian ruble-denominated growth of the pharmaceutical market in Russia was
20.4 per cent (6.8 per cent) in January-June 2012 (source: Pharmexpert). Net
sales of Oriola-KD's wholesale business grew by 31.2 per cent (21.5 per cent)
and the retail business grew 11.1 per cent (37.6 per cent) in Russian rubles in
January-June 2012. Oriola-KD's total net sales increased by 31.8 per cent (28.0
per cent) in Russian rubles in January-June 2012.
Pharmaceutical Trade Russia's second-quarter net sales came to EUR 217.3 million
(EUR 162.2 million), of which retail accounted for EUR 35.8 million (EUR 31.8
million) and wholesale EUR 187.1 million (EUR 140.9 million). The operating loss
was EUR 2.2 million (operating loss EUR 39.1 million including an EUR 33.4
million impairment charge related to the Stary Lekar brand and operating loss
excluding impairment charge EUR 5.7 million). The profitability of the wholesale
and retail businesses improved compared to the previous year. The stock of the
wholesale business was at the target level at the end of June 2012.
In 2012 the retail business will focus on developing the pharmacy portfolio,
improving the competitiveness of individual pharmacies and strengthening the
product assortment. Oriola-KD had 235 (262) pharmacies in the Moscow area at the
end of June 2012, of which 167 (189) operated under the Stary Lekar brand and
68 (73) under the 03 Apteka brand. Five pharmacies were opened and 19 pharmacies
were closed during January-June 2012. In June 2012, Oriola-KD completed its
project to close down unprofitable pharmacies. During the years 2011 and 2012, a
total of 56 pharmacies were closed down in the Moscow area.
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.
Pharmaceutical Trade Russia had 3,007 (3,202) employees at the end of June
2012, of whom 1,306 (1,613) were employed in retail and 1,701 (1,589) 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 Foundation. The Group has no significant business
transactions with related parties, except for pension expenses arising from
defined benefit plans with the Oriola Pension Foundation.
Oriola-KD Corporation shares
Trading volume of Oriola-KD Corporation's class A and B shares in January-June
2012:
Trading volume January-June 2012 January-June 2011
class A class B class A class B
Trading volume, million 3.7 20.1 1.5 41.7
Trading volume, EUR million 7.2 38.3 5.1 131.3
Highest price, EUR 2.44 2.15 3.83 3.74
Lowest price, EUR 1.77 1.70 2.50 2.28
Closing quotation, end of period, EUR 2.03 1.94 3.13 2.66
Oriola-KD Corporation's market capitalisation on 30 June 2012 was EUR 297.7
million (EUR 424.5 million).
In the review period, the traded volume of Oriola-KD Corporation shares,
excluding treasury shares, corresponded to 15.7 per cent (28.6 per cent) of the
total number of shares. The traded volume of class A shares amounted to 7.8 per
cent (3.2 per cent) of the average stock, and that of class B shares, excluding
treasury shares, 19.3 per cent (40.1 per cent) of the average stock.
At the end of June 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 June 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 new
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 specified the earning
criteria for the earning period 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 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. 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.
Oriola-KD has identified the following principal strategic and operational risks
in its business:
* growth in the number of pharmacies outperforms growth in the market, leading
to intense competition
* competition for market share in pharmaceutical wholesale in a consolidating
market
* ensuring cost efficiency, flexibility and quality
* development of processes and infrastructure required by strategic expansion
* requirements and restrictions on pharmaceutical retail and wholesale imposed
by the authorities, especially price control
* commitment of key employees.
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 crown 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 0.5 per cent in Finland, 1 per cent in Sweden, and 11.5 per cent in
Russia, measured in local currencies (source: IMS Health 04/2012).
Oriola-KD's outlook for 2012 is unchanged:
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 June 2012 has been prepared in accordance
with the recognition policies of the IAS 34 standard. Oriola-KD adopted new
IAS/IFRS standards in January-June 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 April - 1 April - 1 Jan - 31
Income (IFRS), June June 30 June 30 June Dec
EUR million 2012 2011 2012 2011 2011
-------------------------------------------------------------------------------
Net sales 1,180.6 1,065.6 589.7 535.5 2,146.0
Cost of goods sold -1,009.0 -907.0 -504.2 -457.4 -1,830.1
-------------------------------------------------------------------------------
Gross profit 171.6 158.6 85.6 78.1 315.9
Other operating
income 1.0 1.4 0.5 0.6 2.6
Selling and
distribution
expenses -135.1 -127.4 -67.8 -64.4 -250.9
Administrative
expenses -27.8 -28.6 -14.0 -15.4 -54.4
-------------------------------------------------------------------------------
Operating
Profit/Loss before
Impairment * 9.7 4.0 4.3 -1.0 13.2
Impairment ** - -33.4 - -33.4 -33.4
-------------------------------------------------------------------------------
Operating
Profit/Loss 9.7 -29.4 4.3 -34.4 -20.2
Financial income 4.2 5.5 2.1 3.2 10.7
Financial expenses -8.9 -9.6 -4.2 -5.2 -19.4
-------------------------------------------------------------------------------
Profit/Loss before
taxes 5.0 -33.4 2.2 -36.5 -28.9
Income taxes *** -1.8 5.9 -0.5 6.8 4.8
-------------------------------------------------------------------------------
Profit/Loss for
the period 3.2 -27.5 1.7 -29.7 -24.1
Other
comprehensive
income
Cash flow hedge 0.0 0.4 - -0.4 -1.3
Income tax
relating to
other
comprehensive
income -0.1 0.0 -0.9 0.1 0.4
Translation
difference 3.9 2.9 -9.5 -3.5 -1.2
-------------------------------------------------------------------------------
Total
comprehensive
income
for the period 7.0 -24.2 -8.6 -33.5 -26.3
Attribution of
Profit/Loss for
the period
-------------------------------------------------------------------------------
To parent company
shareholders 3.2 -27.5 1.7 -29.7 -24.1
-------------------------------------------------------------------------------
Attribution of
total
comprehensive
income for the
period
-------------------------------------------------------------------------------
To parent company
shareholders 7.0 -24.2 -8.6 -33.5 -26.3
-------------------------------------------------------------------------------
Earnings per share
for the period
from continuing
operations
Basic earnings per
share, EUR 0.02 -0.18 0.01 -0.20 -0.16
Diluted earnings
per share, EUR 0.02 -0.18 0.01 -0.20 -0.16
*) Including
depreciation, EUR
million -8.9 -7.3 -4.5 -3.7 -16.1
**) Stary Lekar
-brand impairment,
EUR million - -33.4 - -33.4 -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 June 2012 30 June 2011 31 Dec 2011
-------------------------------------------------------------------------------
Non-current assets
Property, plant and equipment 76.3 69.0 74.0
Goodwill 270.0 267.5 266.8
Other intangible assets 52.0 49.9 52.1
Other shares and shareholdings 0.0 0.0 0.0
Other non-current assets 9.4 10.9 9.4
Deferred tax assets 7.7 4.9 7.6
-------------------------------------------------------------------------------
Non-current assets total 415.4 402.2 410.0
Current assets
Inventories 345.7 315.4 379.8
Trade and other receivables 365.6 318.5 329.7
Cash and cash equivalents 72.8 106.2 153.8
-------------------------------------------------------------------------------
784.1 740.0 863.3
Non-current assets held for sale 0.0 - 0.0
-------------------------------------------------------------------------------
Current assets total 784.1 740.0 863.4
ASSETS TOTAL 1,199.5 1,142.2 1,273.3
-------------------------------------------------------------------------------
EQUITY AND LIABILITIES 30 June 2012 30 June 2011 31 Dec 2011
-------------------------------------------------------------------------------
Equity of the parent
company shareholders
Share capital 36.2 36.2 36.2
Funds 26.7 32.8 31.2
Retained earnings 231.5 232.3 231.9
-------------------------------------------------------------------------------
Equity total 294.3 301.3 299.3
Non-current liabilities
Deferred tax liabilities 15.0 15.6 15.1
Pension obligations 6.5 5.7 6.3
Borrowings 15.6 122.3 127.0
Other non-current liabilities - - 0.0
-------------------------------------------------------------------------------
Non-current liabilities total 37.0 143.6 148.4
Current liabilities
Trade payables and other current
liabilities 758.9 671.6 779.7
Borrowings 109.2 25.6 46.0
-------------------------------------------------------------------------------
Current liabilities total 868.2 697.3 825.7
EQUITY AND LIABILITIES TOTAL 1,199.5 1,142.2 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 - - - - - -27.5 -27.5
Other
comprehensive
income:
Cash flow hedge - 0.4 - - - - 0.4
Income tax
relating to
other
comprehensive
income - - - - 0.0 - 0.0
Translation
difference - - - - 2.9 - 2.9
-------------------------------------------------------------------------------
Equity
30 June 2011 36.2 1.6 30.0 1.2 -3.4 235.7 301.3
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
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 - - - - - 0.1 0.1
Net profit/loss
for the period - - - - - 3.2 3.2
Other
comprehensive
income:
Cash flow hedge - 0.0 - - - - 0.0
Income tax
relating to
other
comprehensive
income - - - - -0.1 - -0.1
Translation
difference - - - - 3.9 - 3.9
-------------------------------------------------------------------------------
Equity
30 June 2012 36.2 - 25.5 1.2 -3.4 234.9 294.3
-------------------------------------------------------------------------------
Consolidated Cash Flow
Statement 1 Jan - 30 June 1 Jan - 30 June 1 Jan - 31 Dec
(IFRS), EUR million 2012 2011 2011
-------------------------------------------------------------------------------
Operating profit /loss 9.7 -29.4 -20.2
Depreciation 8.9 7.3 16.1
Impairment - 33.4 33.4
Change in working capital -19.7 -17.9 11.8
Cash flow from financial
items and taxes -5.9 -10.8 -15.1
Other adjustments -1.2 1.3 2.1
Net cash flow from
operating activities -8.1 -16.1 28.1
Net cash flow from
investing activities -10.7 -10.2 -27.1
Net cash flow from
financing activities -62.4 -55.3 -35.0
Net change in cash and
cash equivalents -81.2 -81.6 -34.1
Cash and cash equivalents
at the beginning of the
period 153.8 187.8 187.8
Foreign exchange rate
differences 0.1 -0.0 0.1
Net change in cash and
cash equivalents -81.2 -81.6 -34.1
Cash and cash equivalents
at the end of the period 72.8 106.2 153.8
-------------------------------------------------------------------------------
Change in Property, Plant
and Equipment, 1 Jan - 30 June 1 Jan - 30 June 1 Jan - 31 Dec
EUR million 2012 2011 2011
-------------------------------------------------------------------------------
Carrying amount at the
beginning of the period 74.0 68.0 68.0
Increases 6.6 6.8 16.2
Decreases -0.4 -0.4 -0.6
Depreciation -5.3 -4.5 -9.6
Transferred to assets of
disposal
group classified as held
for sale - - -0.0
Foreign exchange rate
differences 1.3 -0.8 0.1
-------------------------------------------------------------------------------
Carrying amount at the
end of the period 76.3 69.0 74.0
-------------------------------------------------------------------------------
1 Jan - 30 June 1 Jan - 30 June 1 Jan - 31 Dec
Key Figures 2012 2011 2011
-------------------------------------------------------------------------------
Equity ratio, % 25.1 27.0 24.4
Equity per share, EUR 1.95 1.99 1.98
Return on capital
employed (ROCE), % 4.3 -12.0 -4.0
Return on equity (ROE), % 2.2 -16.8 -7.4
Net interest-bearing
debt, EUR million 52.0 41.8 19.2
Gearing, % 17.7 13.9 6.4
Earnings per share, EUR 0.02 -0.18 -0.16
Average number of shares,
1000 pcs 151,237 151,161 151,161
Derivatives, Commitments
and Contingent
Liabilities
30 June 2012
Positive fair Negative fair Nominal values of
EUR million value value contracts
Derivatives measured at
fair value through profit
and loss
Foreign currency forward
and swap contracts - -0.4 191.3
Interest rate swaps - -0.1 114.0
Internal loan of 1 billion Swedish crowns given to Kronans Droghandel Apotek
AB has been hedged using foreign currency swap contracts.
30 June 2011
Positive fair Negative fair Nominal values of
EUR million value value contracts
Derivatives recognised
as cash flow hedges
Interest rate swaps 1.6 - 109.0
Derivatives measured at
fair value through profit
and loss
Foreign currency forward
and swap contracts 0.1 - 11.6
Contingencies for Own
Liabilities,
EUR million 30 June 2012 30 June 2011 31 Dec 2011
-------------------------------------------------------------------------------
Guarantees given 31.0 121.6 138.6
Mortgages on land and
buildings 2.0 2.0 2.0
Mortgages on company
assets 2.4 2.3 2.4
Other guarantees and
liabilities 0.7 0.5 0.7
-------------------------------------------------------------------------------
Total 36.1 126.4 143.7
-------------------------------------------------------------------------------
Leasing-liabilities
(operating liabilities) 3.2 0.8 0.6
Rent contingencies 67.1 62.8 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 June 1 Jan - 30 June 1 Jan - 31 Dec
Number of personnel 2012 2011 2011
-------------------------------------------------------------------------------
Average number of
personnel 4,795 4,959 4,968
Number of personnel at
the end of the period 4,776 5,017 4,854
SEGMENT INFORMATION
1 Jan - 30 June 1 Jan - 30 June 1 Jan - 31 Dec
Net Sales, EUR million 2012 2011 2011
-------------------------------------------------------------------------------
Pharmaceutical Trade
Finland and Baltics 233.4 207.3 414.8
Pharmaceutical Trade
Sweden 514.8 533.9 1,042.0
Pharmaceutical Trade
Russia 432.5 324.6 689.4
Net sales to other
segments -0.2 -0.2 -0.2
-------------------------------------------------------------------------------
Group total 1,180.6 1,065.6 2,146.0
1 Jan - 30 June 1 Jan - 30 June 1 Jan - 31 Dec
Operating Profit/Loss,
EUR million 2012 2011 2011
-------------------------------------------------------------------------------
Pharmaceutical Trade
Finland and Baltics 9.9 10.3 20.6
Pharmaceutical Trade
Sweden 6.9 4.2 10.6
Pharmaceutical Trade
Russia -3.3 -40.7 -46.0
Group Administration and
Others -3.8 -3.1 -5.5
-------------------------------------------------------------------------------
Group total 9.7 -29.4 -20.2
Operating Profit/Loss
excl. One-off costs 1 Jan - 30 June 1 Jan - 30 June 1 Jan - 31 Dec
and Impairment, EUR
million 2012 2011 2011
-------------------------------------------------------------------------------
Pharmaceutical Trade
Finland and Baltics 9.9 10.3 20.6
Pharmaceutical Trade
Sweden 6.9 4.2 10.6
Pharmaceutical Trade
Russia -3.3 -7.4 -12.6
Group Administration and
Others -3.8 -3.1 -5.5
-------------------------------------------------------------------------------
Operating Profit/Loss
excl. One-off costs
and Impairment total 9.7 4.0 13.2
One-off costs and
impairment - -33.4 -33.4
-------------------------------------------------------------------------------
Group total 9.7 -29.4 -20.2
*) Stary Lekar -brand
impairment EUR -33.4
million in Pharmaceutical
Trade Russia
Quarterly Net Sales, EUR
million Q2/2012 Q1/2012 Q4/2011 Q3/2011 Q2/2011 Q1/2011
-------------------------------------------------------------------------------
Pharmaceutical Trade
Finland and Baltics 116.6 116.8 105.7 101.8 104.8 102.5
Pharmaceutical Trade Sweden 255.9 258.9 258.6 249.6 268.6 265.3
Pharmaceutical Trade Russia 217.3 215.2 194.5 170.3 162.2 162.4
Net sales to other segments -0.1 -0.0 -0.0 -0.0 -0.1 -0.1
-------------------------------------------------------------------------------
Group total 589.7 590.8 558.8 521.6 535.5 530.1
Quarterly Operating
Profit/Loss, EUR million Q2/2012 Q1/2012 Q4/2011 Q3/2011 Q2/2011 Q1/2011
-------------------------------------------------------------------------------
Pharmaceutical Trade
Finland and Baltics 5.0 4.8 4.4 5.9 4.7 5.6
Pharmaceutical Trade Sweden 3.4 3.4 2.6 3.8 1.9 2.3
Pharmaceutical Trade Russia -2.2 -1.1 0.2 -5.5 -39.1 -1.6
Group Administration and
Others -2.0 -1.8 -1.4 -0.9 -1.9 -1.2
-------------------------------------------------------------------------------
Group total 4.3 5.4 5.8 3.4 -34.4 5.0
Quarterly Operating
Profit/Loss,
excl. One-off costs and
Impairment, EUR million Q2/2012 Q1/2012 Q4/2011 Q3/2011 Q2/2011 Q1/2011
-------------------------------------------------------------------------------
Pharmaceutical Trade
Finland and Baltics 5.0 4.8 4.4 5.9 4.7 5.6
Pharmaceutical Trade Sweden 3.4 3.4 2.6 3.8 1.9 2.3
Pharmaceutical Trade Russia -2.2 -1.1 0.2 -5.5 -5.7 -1.6
Group Administration and
Others -2.0 -1.8 -1.4 -0.9 -1.9 -1.2
-------------------------------------------------------------------------------
Group total excl.
One-off costs and Impairment 4.3 5.4 5.8 3.4 -1.0 5.0
One-off costs and impairment * - - - - -33.4 -
-------------------------------------------------------------------------------
Group total 4.3 5.4 5.8 3.4 -34.4 5.0
*) Stary Lekar -brand
impairment EUR -33.4 million
in Pharmaceutical Trade Russia
1 Jan - 30 June 1 Jan - 30 June 1 Jan - 31 Dec
Net Sales by Market, EUR
million 2012 2011 2011
-------------------------------------------------------------------------------
Finland 215.0 189.6 379.4
Sweden 501.5 520.5 1,013.0
Russia 432.5 324.6 689.4
Baltic countries 16.6 16.4 32.6
Other countries 14.9 14.4 31.5
-------------------------------------------------------------------------------
Group total 1,180.6 1,065.6 2,146.0
Quarterly Net Sales by Market,
EUR million Q2/2012 Q1/2012 Q4/2011 Q3/2011 Q2/2011 Q1/2011
-------------------------------------------------------------------------------
Finland 107.6 107.4 96.1 93.6 96.5 93.1
Sweden 249.3 252.2 250.7 241.8 262.1 258.4
Russia 217.3 215.2 194.5 170.3 162.2 162.4
Baltic countries 8.1 8.4 8.3 8.0 7.7 8.7
Other countries 7.4 7.5 9.1 8.0 6.9 7.5
-------------------------------------------------------------------------------
Group total 589.7 590.8 558.8 521.6 535.5 530.1
Espoo, 25 July 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#1629369]