CEO's Review

Fredrik Borg, the founder and first director of the present Tamro Corporation, knew already in 1895 that efficient and swift service to pharmacists was a formula for success. Mr Borg would probably be pleased to hear that his company cleared the EUR 1 billion turnover hurdle in Finland for the first time, in time for the company’s 110th anniversary.

Tamro Group continued its stable performance throughout the financial year 2005/2006. The year was marked again by moderate market growth and intense competition over market shares. We met this challenge by keeping sustained focus on cost-efficiency, customer orientation and business development.

Tamro Group net sales for the fiscal year 2005/2006 amounted to EUR 4,857 million, and the consolidated operating profit was EUR 117 (93) million. This satisfying result is due to good sales performance in Norway, stable sales growth across several countries and strong control of operating and financial expenses.

Increasing demands from the ageing population and new treatments remain the key growth drivers, although governments in our operating countries are striving to curb the associated costs by introducing regulatory measures, such as restrictions in the reimbursement schemes and price revisions.

Expansion into Poland

Tamro has developed favourably under the umbrella of the parent company PHOENIX Group. This international dimension has brought clear benefits to our international customers, who are increasingly requesting services across country borders.

Tamro’s business experience from its operations in seven countries has enriched our cross cultural heritage, which now will be put to work when Tamro starts operations in Poland and more than doubles its consumer base. While the fragmented Polish market is challenging, we believe we can build on the trust of our customers by enforcing the same principles of customer orientation, continuous improvement and cost-effectiveness.

Poland, with a population of 39 million, provides opportunities for long-term growth. The same is true for Russia, where we increased our stake in the Russian wholesaler ZAO Rosta from 18.5% to 42.5%. Russia represents an even greater and faster growing market, in which we are keen to participate as the country invests in healthcare and well-being. Mr Borg entered Russia already in 1918, so this is not the first time that the eastern dimension is on Tamro’s agenda.

Thanks to our employees and business partners

I would like to thank both our employees and our business partners for their contribution to the successful year that Tamro had in 2005/2006, as reported in this Annual Web Report. This success has provided the foundation for Tamro to expand into new markets and seek growth. The Group result reflects the performance of our individual business units, which in 2005/2006 again showed improving performance compared to previous years.

Outlook for the future

The effective cost-containment plans of the authorities will slow down sales growth in the Nordic countries, where most of Tamro’s sales are generated. While the Baltic countries are growing fast, and Poland provides new opportunities, it will take time before these countries reach European average levels of pharmaceutical consumption.

Therefore maintaining and developing our competitiveness and profitability will mainly come from cost reduction and increased efficiency. While many challenges lay ahead, we will continue to work hard to develop customer satisfaction and maintain cost leadership.