• The Swedish pharmaceutical market grew at a modest level of 1.9% in 2003 compared to the previous year. The total market amounted to EUR 2,596 million.
• Tamro Sweden’s net sales amounted to EUR 1,516.9 (1,526.2) million, an increase of 2% (calculated in local currency) compared to the previous year.

Operating environment and markets

The Swedish pharmaceutical market was characterised by a modest market growth. The total pharmaceutical market amounted to EUR 2,596 million at pharmacy purchasing prices, an increase of 1.9 percent from the previous year. The slowdown in market growth was primarily caused by patent expirations for some top-selling essential drugs and the introduction of generic substitution, which resulted in reduced prices on patent-expired drugs.

The sales of parallel importers stabilised in 2003 and totalled EUR 230 million. The average share of parallel importers in pharmaceuticals remained at the previous year’s level of 9%.

Pfizer’s acquisition of Pharmacia was completed during 4Q. After an overall review of the company’s total distribution, Pfizer decided to divide the volumes evenly between the two existent distributors on the market. The new distribution agreement is planned to come into effect by April 2004.

Apoteket AB’s plans to establish distance pharmacies have progressed, and a fourth distance pharmacy opened and started operations in Falun during 4Q.

In December 2003, Tamro received a new exemption from the Swedish Competition Authority, which allows it to continue pharmaceutical distribution in a single channel environment. The permission is valid for a period of three years.

Financial performance and operations

In 2003, Tamro’s net sales amounted to EUR 1,516 (1,526.2) million. The weak sales growth was mainly a consequence of many of Tamro’s principals growing more slowly than the market on average. As a result, Tamro’s average market share decreased from 48.9% last year to 47.9% in 2003. Despite the decrease in sales, the operating profit exceeded the previous year’s level, mainly as a result of continuous cost monitoring and improved efficiency.

During the year, a number of improvement measures were taken to increase the overall efficiency of the organisation and to refine and optimise internal processes, as well as to boost the quality of operations.

Tamro conducted two large-scale customer satisfaction surveys in 2003. The customer ratings showed that the efforts to develop Tamro’s services have been successful and resulted in improved customer satisfaction.

The development of Tamro AB’s value-added Internet-based business information services continued. New versions were launched to assist customers in both developing their business operations and in improving efficiency.

In 2003, Tamro AB focused on human resources. In addition to the annual development discussions between employees and their superiors, a workplace atmosphere survey was conducted and the results were used to pinpoint development areas . On 20 October, Stefan Åkesson, the Managing Director for Tamro Sweden since 2002, resigned from his position. At the same time Tamro Group CEO Jo Langmoen took over as an acting Managing Director, until Hans Wahlén started as the new Managing Director for Tamro AB on 12 January.

Personnel

Tamro AB employed an average of 499 (478) people, of whom 49% are women. Almost half of the employees have been with Tamro for more than 10 years. A change in the method of calculating part-time employees explains the increase in personnel, whereas actually the number of fulltime employees has decreased.

Tamro’s human resource strategy is to support and contribute to the fulfilment of the overall strategic goals of the company. The cornerstone of the strategy is to develop and create conditions for the motivation, commitment and well-being of the personnel.

Outlook for 2004

The modest market development is expected to continue in 2004, and the growth of the pharmaceutical market is estimated to be about 2–3%.

The competitive situation in the wholesale trade is expected to remain tight. Tamro Sweden’s foremost aim in 2004 will be to concentrate on activities that strengthen its position as a customer-oriented company. It aims to provide effective and individualised logistics solutions and value added services that have a high knowledge content and are based on experience and solid knowledge.

One of the focal issues for the entire industry will be the future development of the market structure for pharmaceuticals in Sweden. Tamro follows this development very closely and intends to take an active role in adapting to future development.

In 2005, Apoteket AB is expected to continue establishment of distance pharmacies. The four distance pharmacies already in operation did not have a major impact on Tamro’s operations in 2003. However, it is unclear to what extent the distance pharmacies will affect Tamro and the industry as a whole in future.

In 2003 a number of initiatives were taken to improve operational quality. These efforts will continue also in 2004. An extensive investment programme that aims to develop operations and strengthen the company’s competitiveness will be carried out during 2004. At the same time, Tamro will continue to map every aspect of operations in search of possible efficiency gains, productivity enhancements and further quality improvement.

Tamro is committed to a strong internal communications culture. The company will continue to promote a culture with good communications practises where a shared vision and shared goals, shared knowledge, openness and integrity are paramount tools to achieve our business targets.