CEO's review

Dear shareholders, employees and business partners

Jo Langmoen

During the entire fiscal year, starting from the first interim report, Tamro kept lowering its estimate for the full-year market growth. At the same time Tamro’s net sales showed the same declining growth trend. The market slow down was mainly due to the increasing consumption of generics and the expiring of patents for some major branded drugs, with huge price reductions and revisions.

Despite the market decrease, Tamro was again able to significantly improve its result from the previous year. The full-year pre-tax profit rose to over EUR 69.0 million. EPS was EUR 0.41 (+ 0.26%).

The growth of the Nordic pharmaceutical market slowed down remarkably from the previous years’ level of 8-10% to a level of 2-6% p.a. per country, leading to an average growth of 4% in the Nordic countries.

In addition, the year 2003 brought some changes, which had a clear impact on Tamro’s nature as a publicly listed company.

Change in the ownership structure of Tamro

The changes started in August. The share purchase agreement between Tamro’s major shareholder, the pan-European PHOENIX Group, and the Swedish pharmacy monopoly, Apoteket AB, on 16 August 2003 led PHOENIX to make a public offer to buy the shares and options of the remaining shareholders, pursuant to Tamro’s Articles of Association. This public offer, for its part, triggered the redemption processes laid down in the Finnish Securities Market Act and the Companies Act. At year-end PHOENIX’s holding in Tamro had already exceeded 99%.

Tamro’s position within its industry in Europe changed, because, through these redemption processes, Tamro became a subsidiary of the PHOENIX Group. Tamro’s role as a publicly listed company is expected to change as well, although, Tamro’s operational structure and position in its own business in the Nordic countries and the Baltic States will remain unchanged. Tamro is the leading Northern European pharmaceutical distributor with an average market share of 47% of the Nordic markets.

Search for continuous improvement

Tamro’s continuous search for a better market position and better profitability in all its business units led to some changes in the management. In early 2004 a new managing director with long experience in the industry was appointed in Sweden. The management also changed in Latvia and Lithuania. These changes are a clear example of the increasingly demanding role of the pharmaceutical distributor and wholesaler in the logistics chain of products and services from industry to pharmacies and consumers.

As a middleman in the pharmaceutical logistics and service chain, it is the role of the wholesaler to be constantly aware of what is happening at both ends of the chain and react earlier and faster every year. This strategic approach to our business is characterised by the continuous benchmarking of all our activities. Tamro Group has its major shareholder PHOENIX to thank for this approach. Sometimes, unfortunately, dramatic cuts are needed, as we saw more than a year ago in Finland, last year in Norway and now in March 2004 in Sweden.

Although pharmaceutical distribution is a local business, and knowledge of the local business environment is the key to the success of the business unit, it is extremely important - even crucial - for our future success that we follow closely the pan-European trends in our business. Tamro's new position as an important part of the second largest pharmaceutical wholesaler in Europe, the PHOENIX Group, gives it an outstanding opportunity and clearly distinguishes it from its local competitors. We are able to follow closely also global trends and are therefore in a better position to meet these changes and the challenges involved.

Thanks to our employees and business partners

This is an excellent occasion to thank both our employees and our business partners for their contribution to the successful year that Tamro had in 2003, as reported in this Annual Web Report. The Group result reflects the performance of our business units, and in 2003 the majority again shows improving profitability compared to previous years. The most significant financial improvement was achieved in Norway.

Tamro starts the year 2004 with modest expectations for market growth. Further improvement in our competitiveness and profitability in the future will mainly come from cost reduction. Therefore we will have to pay special attention to efficiency gains during the year. At the same time we are very carefully monitoring government initiatives in our markets, especially in Sweden, since the basic rules of our business can be changed easily.