Oriola KD Corporation

Transcription

1 Oriola KD Corporation Tuomas Itkonen CFO Oriola KD Corporation Joni Ihantola Vice President, Treasury & IR Oriola KD Corporation Roadshow with ABG Sundal Collier Zürich 27 May 2013

2 Oriola KD in Brief 2008 Proforma 2012 (incl. Medstop) Distribution of net sales by business 7% 93% 33% 67% Wholesale Retail Wholesale Retail Distribution of net sales by country 27% 35% 37% 35% 16% 49% Finland & Baltics Sweden Russia Finland & Baltics Sweden Russia 2

3 Market share and position Country Pharmaceutical wholesale Pharmaceutical retail 6. 7% 3. Russia 6 8% Commercial market Moscow area 35% 40% Sweden % Prescription medicines (Rx) OTC and traded goods Finland 2. 47% 2. 9% Pharmaceutical wholesale Consumer Health 3

4 Key Milestones Invest. Divest. Demerger of Orion and preparation of Oriola KD s stock listing Stock listing Acquisition of Moscow based pharmacy chain and nation Wide wholesale company in Russia (75% share) Preparation of pharmacy business in Sweden Dental Trade joint venture with Lifco Acquisition of nation wide pharmacy chain in Sweden Acquisition of remaining 25% share in Russia Sale of Healthcare Trade business to Mediq Group vision, mission and values Acquisition of 03 pharmacy chain in Russia Sale of Dental Trade business to Lifco Purchasing and logistics service to four pharmacy chains in Sweden Acquisition of remaining 20% minority share in Swedish retail Pro forma Acquisition of Pharmacy chain Medstop (closing Q2/2013) 2013 TOTAL 619 M 154 M 4

5 Net sales development Net sales, Me Q1 5

6 Operating profit Operating Profit, Me Q1 6

7 Key Focus Areas in Continue planned measures to improve profitability. Net sales, Me Operating profit, Me Status Q Q Year 2012 Q Q Year 2012 Wholesale Retail Pharmaceutical Trade Finland and Baltics Pharmaceutical Trade Sweden , * Pharmaceutical Trade Russia Group administration Total, excluding non recurring items , * *) Operating profit excluding 1.1 Me write off of receivable in retail Sweden 7

8 Key Focus Areas in New Distribution Center to Moscow Prepare for successful implementation of new automated distribution center in Moscow during Oriola KD has signed a letter of intent on a 10 year lease agreement to transfer a new main logistics centre in Moscow region and on the logistics centre s automation solution. Go live of the new distribution center second half

9 Key Focus Areas in Active participation in market change in Sweden Oriola KD signed an agreement to acquire Medstop pharmacy chain in Sweden on 8 April The total value of the acquisition is approximately 176 Me. Acquisition will increase Oriola KD s market share up to 21 per cent of the Swedish pharmacy market. 9

10 Pharmaceutical Trade Finland and Baltics 10

11 Net Sales and Operating Profit Net sales Operating profit 11

12 Pharmaceutical Wholesale Finland Pharmaceutical distribution 820 pharmacies 1000 veterinaries Logistic centers in Espoo and Oulu Network covering the whole country within 24 hours Consumer Health Covering 95% of the groceries Strong position in chosen categories Food supplements Consumer tests Medical devices Skin care Pharmacy cosmetics 12

13 Pharmaceutical Trade Sweden 13

14 Net Sales and Operating Profit Net Sales Operating Profit Retail starting from 19 February 2010 Excluding non recurring items of: Receivable write off of EUR 1.1 million in the retail in Q Provision of 1.1 Me of restructuring of wholesale operations in Q Receivable write off of 1.7 Me in the wholesale in Q Operating result in 2010 includes 2.2 Me preparation costs for retail operations Operating result in 2009 includes 11.7 Me preparation costs for retail operations 14

15 Pharmacies in Sweden 31 March 2013 Apoteket (state) Apotek Hjärtat (Altor) = = 276 Kronans Droghandel (Oriola KD) = 222 Apoteksgruppen (private/state) = 158 Medstop (Segulah) Vårdapoteket (Priveq & Investor) DocMorris (Celesio) Cura Apoteket (ICA) Others = = = = = pharmacies established established established established 9 Pharmacies +38% Number of pharmacies Source: Pharmacy association and Oriola KD 04/13 15

16 Pharmacy Sales Split Sweden Sweden Norway RX OTC Traded Goods 16

17 Medstop Acquisition 17

18 Medstop Acquisition The total value of the acquisition is estimated to be 176 Me, comprising of three separate items: EUR 82 million cash payment. Net debt of the acquired company. Conditional earn out payment payable on the basis of the consolidated 2015 EBITDA. Oriola KD will finance the acquisition with a bank loan. The transaction is expected to be completed in the second quarter of 2013 subject to the Swedish Competition Authority (Konkurrensverket) and Medical Products Agency (Läkemedelsverket) approvals. 18

19 Medstop in Brief Medstop has 65 pharmacies. Located in shopping centres and city centre locations in the Stockholm, Gothenburg and Malmö areas. Average sales per pharmacy is 34 MSEK p.a. Kronans pharmacies average sales 20 MSEK p.a. Average distance from a Kronans pharmacy to a Medstop pharmacy is 14 km. Key financial figures in 2012: Medstop's market share ~7.5 per cent. Net Sales 273 Me. EBITDA, excluding non recurring items, 11.6 Me. The net debt 75 Me end of December Employees 578 people. 19

20 Pharmacies in Sweden (Proforma after 1 June 2013) Apoteket (State) =376 Apotek Hjärtät & Vårdapoteket(Altor) =303 Kronans Droghandel & Medstop (Oriola KD) =287 Apoteksgruppen (Private & State) = pharmacies established 192 DocMorris (Celesio) = established established 32 Cura Apoteket (ICA) = established acquired Others =28 Pharmacies +38% 1283 Source: Oriola KD 04/ Number of pharmacies

21 Swedish Retail and Wholesale Market Structure (Proforma after 1 June 2013) Retail ~21% ~35% ~25% ~19% Wholesale OTC & TG RX 0 ~35% ~35% ~35% ~25% ~5% ~65% Market share % 100 Oriola KD s market share 21

22 Pharmaceutical Trade Russia 22

23 Pharmaceutical Market in Russia Size of the market EUR 12 billion. Expected market growth in average 10 13% ( ). Growth in average 15%, before 2010 >20%. In 2016 Russia is forecasted to be fourth biggest pharmaceutical market in the world. Consumption of pharmaceuticals per capita is 1/5 of European average. Western pharmaceuticals represent some 70% of value. Russian and East European pharmaceuticals represent some 70% of volume. Out of pocket retail market is some 65% of total pharmaceutical market in value term. Retail market has been the main driver of the growth of the pharmaceutical market. Currently price regulated pharmaceuticals represent some 49% of all pharmaceuticals. Source: IMS 04/13 23

24 Top 10 Market Operators in Russia Top 10 Pharmaceutical Wholesalers in Russia 2012 Top 10 Pharmacy Chains in Russia 2012 Protek 16.5% Rigla 2.5% Katren 15.0% A5 2.4% SIA 12.1% % Rosta 11.0% Implozia 1.9% Alliance Healthcare 7.9% Pharmacor 1.3% R Farm 6.6% Pharmimpex 1.3% Oriola KD 5.0% Raduga 1.2% Pulse Biotec Imperia Pharma 4.8% 3.5% 2.2% Top 10 ~85% of the Market Oriola KD Classic Vita 0.9% 0.9% 0.9% Top 10 ~16% of the Market 0% 5% 10% 15% 20% 0% 1% 1% 2% 2% 3% 3% Source:DSM 04/13 24

25 Net Sales and Operating Profit Net Sales Operating Profit Excluding non recurring items: 2011: Impairment charge of the 33.4 Merelated to the Stary Lekar brand 2010: Write off of the 2.1 Me trade receivable and the EUR 7.9 million of stock value write off 25

26 Pharmaceutical Wholesale Russia The 7 th largest wholesaler on the pharmaceutical market. Market share of some 7% of commercial market. All operations under Oriola brand. Main distribution center in Moscow and 12 distribution centers in regions. Key focus areas 2013 Project to establish a new main logistics centre in Moscow region and on the logistics centre s automation solution has been continued according to plan in Project has been extended by 4 months, estimated completion summer Implementation of the new warehouse management system. The Operating loss in wholesale increased due to difficulties with deliveries in the Moscow region associated with the implementation of the warehouse management system during Q Increase of regional and hospital sales. The net sales of the distribution centers outside Moscow continued to grow as planned during Q Improve the efficiency of logistics operations. 26

27 Pharmaceutical Wholesale Russia Net Sales Net Sales Split by Channel 27

28 Pharmaceutical Market Growth and Oriola KD Wholesale s Net Sales Growth in RUB * Growth % Q Oriola KD wholesale Market growth in Russia** *) Oriola KD s net sales growth in April December 2008 **) Source: IMS 28

29 Pharmaceutical Retail Russia 239 pharmacies in Moscow and Moscow region Brands Stary Lekar and 03 Apteka Number 3 in Moscow Among top 10 in Russia Key focus areas 2013 Development of pharmacy portfolio Improving the competitiveness of individual pharmacies Strengthening the product assortment The retail business was profitable in Q

30 Pharmaceutical Retail Russia Net Sales Number of Receipts per Pharmacy Like for like pharmacies in Stary Lekar 30

31 Financials Q

32 Key Figures in January March 2013 Q Q Change % Net sales, Me % Operating profit, Me % Profit for the period, Me % Earnings per share, EUR % Net cash flow from operations, Me Return on equity, % Gearing ratio, %

33 Cash Flow and Finance Cash flow Working capital increased by 30.6 Me (33.1 Me). Gross investments 5.8 Me (4.3 Me). Pharmacy establishments. Information systems. Improvements in logistics efficiency. Depreciations 5.1 Me (4.4 Me). Finance Oriola KD s committed revolving credit facility of 100 Me and short term credit account limits of 44 Me with the banks were unused. 90 (86) Me of the 150 Me commercial paper programme was in use. A total of EUR 68.0 (56.6) million of trade receivables had been sold at the end of the review period. Me Q Q Net cash flow from operating activities Net cash flow from investing activities Net cash flow after investing activities 33

34 Events after the Review Period Oriola KD signed an agreement on new financing arrangements in May Total amount of approximately EUR 280 million consisting of revolving credit and term loan facility agreement. The revolving credit facility is split into a EUR 100 million five year and a EUR 20 million three year facilities. Swedish crown denominated approximately EUR 160 million amortized term loan facility will mature in three years. Will be utilized to refinance the EUR 100 million revolving credit facility and to finance the acquisition of the Medstop pharmacy chain. Financial covenants of the facility are based on the ratio between Oriola KD's net debt and EBITDA and its gearing ratio. Mandated Lead Arrangers were Danske Bank A/S, Nordea Bank Finland PLC, Pohjola Bank PLC and Skandinaviska Enskilda Banken AB (publ). 34

35 Outlook of Net Sales and Operating Profit 2013 Oriola KD estimates that net sales and operating profit excluding non recurring items will increase from 2012 level. Growth of the net sales of Pharmaceutical Trade Russia will slow down in the first part of the year and operating profit will be weaker than the previous year, as a result of challenges related to the implementation of the warehouse management system started in January

36 Long Term Targets and Dividend Policy Growth To grow faster than the relevant markets Profitability ROE (Return on Equity) target is over 15 per cent Balance sheet Long term average gearing ratio target is per cent Dividend Policy Oriola KD will seek to pay out annually as dividends approximately 50 per cent of earnings per share The Company s strategy and financial position shall be taken into consideration when determining the annual dividend payout ratio 36

37 Key Focus Areas in Continue planned measures to improve profitability. 2. Prepare for successful implementation of new automated distribution center in Moscow during Active participation in market change in Sweden. 37

38 Disclosure Aspects The assumptions, opinions, estimates and views expressed in this presentation are solely the opinions and views of the company unless a reference to the source of the information is stated They reflect the current view of the company with regard to the discussed issues Several factors can however cause changes to these opinions and views Neither the company nor its management can answer for any future accuracy of the opinions or views expressed in this presentation or the actual occurrence of any forecasts

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40 Back up Material 40

41 Global Pharmaceutical Market Update Market World market 2012 Specialty pharma 5 years growth Patent expiration 5 years impact Generics 5 years growth Pharmerging markets 5 years growth Developed and brand markets 5 years growth World market 2016 Size 700 BEUR +92 BEUR 93 BEUR + 28 BEUR +116 BEUR +116 BEUR 990 BEUR Orphan drugs Biopharmaceuticals Bio similars CAGR ~ 3 6% Largest pharmaceutical markets 2012 (Be) Russia Spain Brazil UK Canada Italy France Germany China Japan USA In the period , the pharmaceutical market is expected to grow: 0.3% in Finland 0.5% in Sweden 11.1% in Russia Russia is one of the fastest growing pharmaceutical markets in the world

42 Pharmacy Chains Profitability in Sweden Gross margin, % EBITDA, % *) 2010 based on proforma sales Source: Annual reports and public sources 42

43 Players in Pharmaceutical Trade in Russia There are many stakeholders on the Russian pharmaceutical market with ~ 900 acting wholesalers Government Federal Tariffs Service Federal AntimonopolyService Roszdravnadzor Fed Fund for Mandatory Health Insurance Production Import #850 Association of Pharma Producers Domestic #400 Pharmacy Associations Retail segment #47,000 OTC Channel Wholesalers #900 Hospital segment #10,000 Medical Associations Pharmacies 43% Pharmacy point 56% Pharmacy kiosk 0,03% Hospitals Out patient Pharmacists Admin GP Specialist Patients Patients Advocacy Groups 43

44 Market Structure in Pharmaceutical Trade in Russia Manufacturer Wholesaler Retailer A A A Contracts E auction s B B B C C C 44

45 E auction Model WS A WS B WS C WS D Price list Price list Price list Price list E auction software Consolidated price list Price is adjusted with credit day s coefficient (e.g. 30 d = 1%; 60 d = 2%, etc.) E auction software is proposing from whom to order and what Only criteria: lowest price Orders Orders Orders Orders WS A: 25% WS B: 20% WS C: 15% WS D: 40% Represents 80 90% of the wholesalers sales 45

46 Strategic and Operational Risks Amendments to pharmaceutical market regulations may weaken Oriola KD s profitability. In the Swedish retail business, the free establishment of pharmacies has led to increase in the number of pharmacies. The number of pharmacies may continue to grow, which could further increase the fierce competition. In the Russian retail business, tough competition resulting from the large number of pharmacies may lead to a further decrease in the gross margin and a rapid turnover rate of key personnel. Extra capacity ensuing from a change 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. 46

47 Other 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 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 made at least once a year Changes in cash flow forecasts based on strategic plans, or in the discount rate or perpetuity growth rate, can cause a goodwill write down, which would weaken Oriola KD s profit Especially the impairment test of the goodwill of the Russian cash generating units is more sensitive than before 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 47

48 Major shareholders 30 April 2013 Shares Share A Share B Total number of shares % of share capital % of votes 1 Varma Mutual Pension Insurance Company % 7.14% 2 Ilmarinen Mutual Pension Insurance Company % 5.07% 3 Mandatum Life Insurance Company Limited % 0.42% 4 Mariatorp Oy (controlled by Niklas Herlin) % 4.01% 5 Wipunen varainhallinta oy % 2.10% 6 The State Pension Fund % 0.19% 7 Nordea Fennia Fund % 0.18% 8 Mutual Fund Evli Select % 0.62% 9 Medical Investment Trust Ltd % 2.52% 10 Maa ja Vesitekniikan Tuki ry % 3.17% 21.83% 25.42% Source: Oriola KD s homepage 48