- Tamro Group net sales
in February–October amounted to EUR 4,167
(4,042) million, up 3%.
- The profit before extraordinary items was EUR
93 (87) million, up 7%. Operating margin remained
at 2.3 (2.3)%.
- Market growth has been stronger than expected
mainly due to growth in the hospital sector in
several of our markets.
“Tamro’s financial performance
improved further during the third quarter despite
intense competition. However, the constantly
changing business environment necessitates continuous
development. Especially the scheduled liberalisation
in Sweden represents a major challenge for our
industry. We strive to develop new services
and improving the cost-efficiency of our operation.
Furthermore, Tamro is looking to expand into
less developed markets and further strengthen
its position as the leading pharmaceutical wholesaler
and retailer,” states Tamro’s President
& CEO Jo Langmoen.
Operating environment
The Nordic pharmaceutical market continued
its strong growth during the period February–October
2007. On average the market growth was 6.7%
compared to 3.8% for the same period last year.
However, fierce competition kept the margins
low. The wholesale margins are extremely modest
compared to the margins of the other parties
in the pharmaceutical value chain.
The Baltic markets continued to post good growth
as well. The average market growth was 17.6%.
These markets are characterised by higher inflation
and unclear economic growth. In spite of the
good growth, pharmaceutical consumption and
reimbursement is far below the EU average. The
Polish market grew by 10 %, however, political
uncertainties, also being manifested by new
challenging pharmacy legislation, tell the market
players that major measures still have to be
installed.
Operations in business units
Tamro Sweden
Total pharmaceutical sales for the period February–October
2007 were EUR 2,286 million in pharmacy purchase
prices (PPP), which represents growth of 7%
at constant exchange rates (CER) compared to
last year. During the first nine months of this
reporting period the net sales of Tamro Sweden
increased to EUR 1278 (1255) million. Tamro’s
average market share for February–October
remained at 53%.
Tamro Sweden’s share of the Group’s
net sales remained at 31%, and the company employed
an average of 445 (443) people.
The enquiry concerning the liberalisation of
the Swedish pharmacy markets is still ongoing
and the recommendation is expected to be ready
in early January 2008, targeting an implementation
as from 1 January 2009. The commission working
on these proposals has already announced that
it will suggest free establishment of new pharmacies,
permit vertical integration and multiple ownership.
It is being recommended, also by the current
state monopoly Apoteket AB, that Apoteket shall
sell out a majority of their pharmacies to reach
a more moderate (and non-dominant) market position,
if this is what is needed to be granted freedom
to act commercially in the market.
The authorities in Sweden have also presented
a legislative bill for deregulating the nicotine
treatment products. It is proposed that the
bill will take effect as of 1 March 2008. Recommendations
for a comprehensive OTC liberalisation will
be presented during the spring.
Nomeco, Denmark
The Danish pharmaceutical market has shown
a satisfactory development during the first
nine months. For the period February–October
2007, pharmaceutical sales through wholesalers
rose by 7% at CER versus the same period last
year to EUR 944 million in PPP.
The acquisition of the two other Danish wholesalers
by a major European competitor has simplified
the structure of the market. Now two national
full-line wholesalers cover the entire Danish
pharmaceutical market.
Nomeco maintained its strong market position
in Denmark, with average market share of 73%.
The company's February–October net sales
were EUR 1,125 (978) million, an increase of
15% from the previous year. Nomeco's share of
the Group net sales was 27%, and the company
employed an average of 617 (636) people.
Tamro Finland
The aggregate pharmaceutical sales in Finland
in February–October reached EUR 1371 million
in PPP. This amounts to growth of 6% over the
same period in the previous year, which is slightly
more than expected. The strong growth was mainly
driven by OTC and hospital sector products.
The Finnish National Agency for Medicines has
confirmed the tightening of the Good Distribution
Practise guidelines. These guidelines will come
into force at the beginning of year 2008 and
they concern e.g. storage, packing and logistics
of pharmaceuticals.
Tamro Finland’s February–October
net sales totalled EUR 760 (773) million. The
average market share of Tamro Finland was 54%,
down by 4 percentage points year-over-year due
to changes in distribution contracts in the
beginning of 2007. Still Tamro Finland is currently
operating close to its maximum capacity.
Tamro Finland's share of the Group net sales
was 18%. During February–October, Tamro
Finland employed an average of 331 (333) people.
Apokjeden, Norway
In February–October 2007, the total sales
on pharmaceuticals in Norway showed 7% growth
at CER, totalling EUR 1,231 million calculated
in PPP. The rise is mainly due to the high growth
in sales to hospitals and hospital pharmacies.
Apokjeden Group's February-October consolidated net sales in wholesale and retail grew by 6% to EUR 565 (535) million, mainly as a consequence of more foot traffic and prescriptions in the pharmacies.
Apokjeden’s market
shares, excluding hospitals and hospital pharmacies,
remained at 38% for retail while the wholesale
market share was 33%. Apokjeden's share of the
Group net sales was 14%.
During the third quarter, Apokjeden Group opened
five new pharmacies in Norway. The recruitment
of pharmaceutical personnel remains very challenging.
Apokjeden Group employed an average of 1,895
(1,798) people of which the majority worked
in the pharmacies.
Tamro Estonia
Total pharmaceutical sales in Estonia rose
to EUR 141 million in PPP during February–October
2007, up by 19% at CER from the same time last
year. Strong market growth continued in Estonia,
whilst no major structural changes occurred
in the wholesale market during this reporting
period. Our Apteek1 maintained its position
as the largest pharmacy chain in Estonia. Tamro's
net sales during February–October 2007
were increased by 20% to EUR 52 (43) million.
Tamro Estonia’s retail organisation Koduapteek
OÜ has strengthened its position in the
market and it is actively looking for new acquisitions.
Systematic work to improve operations in the
retail organisation continues, resulting in
improved customer loyalty and sales figures.
Tamro’s net sales in Estonia represent
1% of the Group net sales, and the company employed
an average of 277 (271) people.
Tamro Latvia
The Latvian pharmaceutical market has maintained
double-figure growth in recent years. In the
first nine months of this year, total pharmaceutical
sales in Latvia increased by 25% to EUR 192
million in PPP. The growth was attributed to
the increase in medicine prices combined with
considerable growth in the amount of reimbursed
medicines sold to pharmacies.
Tamro Latvia’s consolidated net sales
of pharmaceuticals during February–October
were EUR 86 (77) million, up by 12% compared
to the same period last year. The average retail
market share of Tamro Latvia’s own pharmacy
chains during the reporting period was 8%. The
average wholesale market share of pharmaceuticals
was 23%.
The share of Tamro’s Latvia operations
in the Group net sales remained at 2%, and the
company employed an average of 366 (304) people.
Tamro Lithuania
In February–October, the Lithuanian pharmaceutical
market rose by 13% to EUR 319 (281) million
in PPP. Market growth was driven by two equally
important factors: higher volumes and consumption
of more advanced and thus higher priced products.
Tamro Lithuania’s net sales during February–October
were flat at EUR 75 (75) million. The wholesale
market share during February–October was
down to 19%, which is a consequence of a major
retailer expanding its own wholesale operations.
This consolidation of the market makes consequently
the wholesale competition very tough. In order
to serve its suppliers better, Tamro expanded
its temperature-controled space. The market
share in retail business was 6%. Fierce price
competition between pharmacies and high personnel
costs are putting pressure on the profitability
of the overall pharmaceutical retail sector.
UAB Tamro’s share of the Group net sales
was 2%, and the Lithuanian operations employed
an average of 405 (426) people.
Phoenix Pharma Polska, Poland
In the first three quarters of 2007, Polish
pharmaceutical sales to pharmacies and hospitals
rose to EUR 3,568 million, an increase of approximately
10% compared to the same period last year. The
pharmaceutical market analysts expect market
growth to slow down, due to the state’s
refund policy, which favours less expensive
pharmaceuticals, and as a result of a strike
among the health care personnel.
Healthcare Service Act amendments came into
force during this reporting period. The most
important change influencing supplier services
is the prohibition to offer individual prices
or conditions to other wholesalers on refundable
products. According to the new law, pharmacists
should not receive non-justified benefits in
connection with sales of reimbursable prescription
products. Because of the uncertainty concerning
the interpretation of the new law, some competitors
started selling reimbursable prescription products
to pharmacies without rebates but lowered wholesale
prices. Phoenix Pharma Polska decided not to
change the sales conditions to pharmacies until
it becomes clear how the markets will react.
Company's market share in the competitive Polish
pharmaceutical wholesale market was approximately
3%. Tamro's net sales in Poland during February–October
were EUR 268 (259) million.
Tamro Poland's share of the Group net sales
was 6%, and the companies employed an average
of 360 (313) people.
During this reporting period Mr. Piotr Stopczyk
was appointed the President of the Polish Management
Board.
Group's financial performance
February–October
The Group’s February–October net
sales rose to EUR 4,167 (4,042) million, an
increase of 3.1% compared to the same period
last year.
The Group’s operating profit in February–October
was EUR 94 (92) million. The Group’s ordinary
profit before taxes was EUR 93 (87) million
and the profit margin was 2.2 (3.4)%. The net
profit for the period February–October
was EUR 70 (110) million. The apparent decline
in the net profit figures is fully explained
by the divestment of the Tamro MedLab division,
which was sold to private equity investor CapMan
in July 2006. Excluding extraordinary items
our comparable profit margin last year was 2.2%.
3Q August–October
The Group’s third quarter net sales amounted
to EUR 1,414 (1,355) million, up 4.3% from last
year’s figures.
The Group’s operating profit in August–October
was EUR 30 (32) million, down 4% from 3Q in
the previous year, mostly due to one-off capital
gains last year. The ordinary profit before
taxes was EUR 33 (31) million, up 7%, and the
profit margin increased to 2.4 (2.3)%. The net
profit for the period August–October was
EUR 25 (22) million.
Investments and divestments
The gross investments totalled EUR 23.6 (18.8)
million during February–October, up 25.5%.
Investments consisted mainly of investments
in operational assets and retail acquisitions.
In Norway and the Baltics Tamro invested in
pharmacies. In Finland, Tamro is currently upgrading
the distribution centre in Tampere, in order
to improve the quality of our operations.
Financing
The financial position of the Group remained
strong during the third quarter.
The interest bearing net debt amounted to EUR
64 (76) million at the end of October. The effective
net debt including as debt the sold receivables
of EUR 63 (143) million equalled EUR 127 (219)
million.
Cash and liquid assets amounted to EUR 18 (7)
million. The available limit in the revolving
credit facilities with core banks amounted to
EUR 200 (200) million, and the unused limit
in the securitisation programs was EUR 178 (98)
million.
Due to dividend income the net financial income
and expenses were positive and amounted to EUR
2.8 (-1.3) million during the third quarter.
The year to date net financial items were EUR
-1.1 (-4.6) million. The higher general interest
rate level will have a negative impact on the
net financial items on a yearly level.
Net gearing decreased to 14 (19)% compared
with the end of third quarter in 2006, and equity
ratio remained at the same level at 32 (32)%.
Free cash flow and net working capital
In the third quarter the operative cash flow
before changes in net working capital and investments
increased to EUR 39 (28) million. Increase in
net working capital produced a cash flow of
EUR -37 (-11) million, and net investments amounted
to EUR -11 (-3) million. The free cash flow
during the third quarter decreased to EUR -9
(14) million.
Year to date operative cash flow before changes
in net working capital and investments was EUR
109 (90) million. Changes in net working capital
resulted in a cash flow of EUR -157 (-97) million.
This increase in cash outflow compared to last
year is largely due to higher utilisation of
the securitisation programs in 2006. The net
cash flow effect of investments was EUR -19
(43) million. The net cash flow from investments
during the second quarter in 2006 included the
sales proceeds of MedLab -division to private
equity investor CapMan. On a year to date basis
the free cash flow was EUR -67 (35) million.
Personnel
The Group employed 4,787 (4,593) people at
the end of the reporting period. Of these, 2,512
(2,349) worked in retail and 2,275 (2,244) in
pharmaceutical wholesale.
On 20 November Tamro announced the appointment
of Ms. Terhi Kivinen, M.Pol.Sc. to become the
new Communications Director of the Group.
Outlook for the year
Tamro Group will continue its strategy based
on customer orientation and cost leadership,
and it aims to offset the low margin and tight
competition by continuous market and operational
improvements. With these measures we expect
even better profitability for the rest of the
financial year 2007/08 than first estimated.
The interim figures are unaudited.
Tamro Corporation
Board of Directors
|
