CEO's Review
Continuing good results
Tamro’s year 2006/07 was characterised by a challenging business environment. However, we continued to improve our result and maintained our position as the leading pharmaceutical wholesaler in our territory, in the Nordic countries and in the Baltic countries.
As in many other European markets, innovative pharmaceuticals and the aging population contributed to the market growth. This is partially offset by various regulatory measures launched by authorities in order to reduce medicine costs. Another factor influencing market development especially in the Nordic countries was the growing demand for affordable generics entering the market after patent expirations of original drugs. This trend accelerated price competition. By following our strategy based on cost leadership and customer satisfaction, we have overcome the challenges and succeeded in improving our operations.
Last year was the first one when Tamro operated as a full-line wholesaler in the large Polish market. We appear on this market with the acquired company PHOENIX Pharma Polska, which was enlarged by an acquired pre-wholesaler last year. Although the Polish market is anticipated to grow modestly also this year, we nonetheless believe that the country offers significant growth potential in the long run.
We are pleased by high growth rates in the Baltic countries, although the volumes are rather low. Our strategy of participating in vertical integration in order to secure our wholesale market position has proved to be successful. We are continuing to invest in retail activities in deregulated markets. In spite of the good performance in our Baltic markets, certain factors such as a high inflation rate, fierce competition and unpredictable government actions put pressure on profitability.
Tamro will continue to focus on its core business: pharmaceutical distribution and retailing wherever appropriate. In line with this strategy, we divested Tamro MedLab to the Finnish private equity investor CapMan last year. Along with the retail expansion, we aim to strengthen our wholesale market share in certain countries. A 42.5% ownership of our Russian associated company ZAO ROSTA gives us more freedom than ever to follow the huge wholesale market’s development also in Russia.
We expect that the demanding market situation – with a growth rate of some 4% in the Nordic countries and 1% in Poland – will continue also in 2007/08. The Baltic markets, though, are estimated to grow by 10–15%, but our profitability in these countries is limited due to the variable and developing nature of the market.
As before, we will also during the ongoing year concentrate on our key success factors, which are cost leadership and customer satisfaction. Operational improvements in our business units are ongoing, and we are constantly looking for attractive expansion alternatives.
After closing the year 2006/07 it is time to thank our capable personnel as well as all business partners across our market areas. We all contributed to Tamro’s good result by commitment to and trust in our operations. A steady and strong platform for future profitable growth is now being built.
Jo Langmoen
President and CEO |
