Good morning, everybody. Welcome to Oriola's half-year financial report presentation. We are here at very sunny Espoo office, and here with me CEO Katarina Gabrielson and CFO Sari Pohjonen. My name is Tuula Lehto, Vice President of Communications and Sustainability of Oriola. During the presentation, you can start already writing your questions to the chat, and after the presentation, we will go those through. Now, please, Katarina.
Thank you, Tuula. Good morning, and welcome on my behalf also. I'm Katarina Gabrielson, the CEO of Oriola. Like Tuula said, we will also have presentations from Sari Pohjonen today. We will do this presentation in the same way as we did for quarter one. It's based on the continuing operations and the discontinued operations. The continuing operations combined the old business areas, pharma and retail in Finland and Sweden, into the new Oriola Services segment. Discontinued operations consist of the Consumer segment, including the pharmacy operations in Sweden. In the second quarter, Oriola had a solid performance in both continuing operations and discontinued operations. The total net sales increased by 8% and invoicing by 4%. The comparable adjusted EBIT increased to EUR 8.6 million, which is 111% higher than in 2021.
Continuing operations adjusted EBIT clearly improved, reaching EUR 5.5 million, and that is +170%. The results was driven by continuing high market demand and increased sales in all areas, particularly in Finland. The discontinued operations, Oriola Consumer, continued solid performance despite of the inflation pressure. The net sales decreased 3%, but in constant currency basis, net sales increased by 1%. The inflation that started late in 2021 has further accelerated and has reached all-time high numbers in many markets. Our overall cost savings have been supporting to mitigate the inflationary pressure. Oriola's business is affected by increasing fuel, energy, and labor costs, as well as weakening consumer confidence. Also, we must again pay attention to increasing infection levels of COVID-19 that we can see all around us.
Our turnaround actions, especially in operational efficiency, product pricing, and portfolio management, has been progressing well. These actions are even more important now when we are witnessing the increase in inflation. At the end of June, we also received a positive news from the Swedish Competition Authority, Konkurrensverket, as they approved the planned merger of Oriola's Kronans Apotek and Euroapotheca's Apoteksgruppen pharmacy business in Sweden. The preparations for the completion of this merger are ongoing, and the completion of the merger is expected to take place early October 2022. Let's now look deeper on our figures. If we start with the continuing and discontinued operations, you can say that our invoicing increased by 3.5% to EUR 1,019 million compared to EUR 1,001 million previous year.
The net sales increased by 7.8% to EUR 504 million compared to EUR 468 million in quarter two, 2021. The adjusted EBIT was EUR 15.3 million compared to EUR 4.1 million previous year, and it should be noted also that the adjusted EBIT includes a positive impact of EUR 6.8 million in quarter two from lower depreciation as discontinued operations' non-current assets are classified as held for sale and not depreciated. The comparable adjusted EBITs, excluding the positive impact from depreciation, was EUR 8.6 million compared to EUR 4.1 million last year. The improved performance compared to earlier years was driven by improved market environment, net sales growth, as well as progressing turnaround actions in all businesses.
If we then look at our operating environment, we can see that the consumer confidence has weakened during this quarter, and it has also been all-time high inflation. This has changed the consumer behavior and especially consumer spending, and also will probably continue to change in the long run. Energy and fuel prices, as well as labor costs are increasing. The high inflation that started in the end of 2021 has been accelerating after the heavy sanctions against Russia. When we then look at the Oriola Services markets, we can see that the pharmaceutical wholesale market has been recovered and compared to previous year then. When we look at the value development at the wholesale prices in Sweden, the growth was around 9% in Swedish krona in the second quarter. In Finland, the market value grew by 5.6%.
Based on our estimates, Oriola's share of the pharmaceutical wholesale market remains at the same level as previous quarters. In dose dispensing business, Oriola offers pharmaceuticals and dose dispensing for private and public healthcare sectors. The total market size for dose dispensing was unchanged in both markets. Number of patients that Oriola is serving in the dose dispensing business has been staying stable in Sweden at approximately 105,000 patients and are slightly growing in Finland to about 30,000 patients. If we then look at the pharmacy side, the pharmacy market value in Sweden grew by 5.5% in quarter two. The total online pharmacy market growth was stabilizing from 2021. The growth was 4% in the second quarter. The online pharmacy shares of the total pharmacy market remained at the same level.
Oriola's online share, online sales growth was also stabilizing, and it grew by 7%. The market share for Oriola in the Swedish pharmacy market in quarter two was unchanged. If you start to go through our segments and how the developments has been in the segments. Let's start with the continuing operations, that is then Oriola Services and our performances. Both the pharmaceutical markets value value and volume grew in quarter two in both Sweden and Finland. The quarter two invoicing increased by 3.7% to EUR 904 million, compared to EUR 872 million. The net sales grew by 9.5% to EUR 395 million, compared to EUR 360 million. This growth was driven by the market growth as well as new customer agreements in the pharmaceutical distribution and growth in dose dispensing.
The adjusted EBIT increased to EUR 7.5 million compared to EUR 4.2 million, driven by the market and net sales growth and other turnaround actions. However, cost inflations and production challenges, partly related to an external supplier, limited the EBIT improvements. If we then look at the discontinued operations, the Consumer segment. The Consumer net sales decreased by 2.5% to EUR 202.3 million compared to EUR 207.5 million. In constant currency, the growth was zero point 0.7%. Our online channel grows slightly faster than the market in the second quarter. When we exclude the positive impact from depreciations, the comparable adjusted EBIT was EUR 3.1 million compared to EUR 2 million previous year, and the performance was driven by increased sales and turnaround actions.
Now let's take a deeper look at our financials, details, and that will be taken on by our CFO, Sari Pohjonen.
Thank you, Katarina, and good morning also on my behalf. If we first take a look at our profit for the period and EPS, you can see that both of them improved significantly compared to the previous year, and our profit for the period, if we think about the year to date numbers, stood at EUR 20 million, and EPS for the quarter was EUR 0.07. Even paying attention to the fact that as we have classified Oriola Consumer as discontinued operations, there are certain depreciations which are not done. But even taking that into account, our profit for the period has improved considerably from the previous year. Looking at our operating cash flow, I'm very pleased at the development which we had again during the second quarter.
Both the second quarter and especially if we take a look at the year-to-date number, we have been able to improve significantly compared to 2021. There are two sources for this improvement. Obviously, our result development is key there, but we have also paid a lot of attention to working capital management, which is part of our turnaround agenda. However, it's good to know that in our business it's very typical for working capital to fluctuate a lot from quarter to quarter. As you can see from the historical data, there's a lot of deviation from one quarter to the other that happens in our business. Regardless of that, I think we can conclude that we have been able to improve a lot during the first half of this year.
As you can see from the right-hand side, our overall cash position remained extremely strong at the end of the quarter. Looking at our net debt development, on this one, I would like to point out that the numbers and the graphs, they include only the continuing operations. For continuing operations, our net debt was actually negative EUR 10 million at end of June. If we do include the discontinued operations as well, the same number was EUR 41 million. Even the EUR 41 million is a EUR 70 million improvement compared to the previous year, which is of course a significant change and significant decrease in the net debt. On the right-hand side, there are more details on the numbers. They are not fully comparable as 2022 numbers include only continuing operations. Most notably, there's a difference in the lease liabilities.
As said, the total net debt, including discontinued operations, was EUR 41 million. Looking at our equity ratio, which stood at 19.8% at the end of the quarter, these numbers are comparable to the previous year. Also on the right-hand side, our gearing, which was negative for the continuing operations. On a more comparable basis, if we include also the discontinued operations, our gearing, including both continuing and discontinued was 18.7%. Also there a significant improvement compared to the previous year. Just a reminder of our outlook for this year. The comparable adjusted EBIT is estimated to increase from the previous year's level. Once again reminding everyone that the outlook is based on our current group structure, so including continuing and discontinued operations.
Now handing back to Katarina.
Thank you, Sari. We have now mentioned the turnaround several times during this presentation. Let's still go through the key areas of the turnaround, and our focus area also in the coming months. Our turnaround short-term action plan consists of four key priority areas. It's the cost savings, it's efficiency network and capital management, it's excellent customer relationship management, and it's commercial excellence. When we look at the cost saving priority, Oriola is focused on three main areas. First, we have simplified our operating model and moved to a country-based model from the beginning of 2022. This is cutting our cost base with EUR 7 million from the first quarter onwards. To streamline our operations further, we have divested our pharmacy staffing business in Finland as of first of April this year. Secondly, we are focusing on reducing our operating costs.
High focus has been in our distribution centers, especially in Enköping. Third area is cost control. We have and we will continue to implement strict cost control, which is even more important now when we are witnessing the all-time high inflation figures. Furthermore, we have an ongoing improvement activities in network and capital that Sari just mentioned. This is to enhance the end-to-end sales and operations. This is done by enhancing the operating end-to-end sales operations planning and supply chain planning. Also, we are optimizing our assortment portfolio. These actions are leading to especially better warehouse management. For us, excellent customer relationship management and commercial excellence means improvements related to commercial management. During the second quarter, we have paid extra attention to these areas and gained good results. These activities are very important for us to mitigate the inflation impacts.
This short-term action plan is our key priority, and we know what to do and where to focus on these points. To wrap up, then the second quarter for Oriola, there are four important takeaways that I want you to bring with you. Firstly, we have a solid performance continued. Both net sales and invoicing increase. Also, the comparable adjusted EBIT increased to EUR 8.6 million from last year at EUR 4.1 million, and this was an increase of 111%. Secondly, we are currently witnessing an all-time high inflation, and that gives uncertainty for the coming quarters. In quarter two, we have managed to do cost savings to mitigate inflationary cost pressure. Inflation is mainly affecting our fuel and energy prices, but also our labor costs in the long run.
Thirdly, now when we are facing accelerating inflation numbers, it's even more important to take our rigorous turnaround action forward. Actions are progressing well as our efficiency is improving, and we have good product pricing and portfolio management in place. We continue to seek further measures and also to improve our profitability. Last but not least, we are now also speeding up the preparation to complete the planned pharmacy merger after the Competition Authority approval received in the end of June. This is our strong focus area on the second half of 2022, and it's important that we are, like, closing that deal, and then it's planned to be done in, you know, in the beginning of October 2022. I also want to take the opportunity now here to also express my thanks to all of our employees.
I'm really proud to work with all of you, and you have a really energetic way of fulfilling our purpose, Health for Life. You're doing that both for yourself but also to all our stakeholders every day. Without your everyday commitment, this would not have been possible to achieve what we have done now in quarter two and the first half year. With that, Tuula.
Thank you. Now we are ready to move to the questions that have started to float into the chat already. I think we could start with you, Sari. There is a question about guidance. This is coming from Nordea, Joni Sandvall, that your guidance appears very cautious given EUR 20.1 million compared to comparable adjusted EBIT after H1 of EUR 26.3 million.
Guidance is unchanged.
Does this mean?
Yes. Our guidance is unchanged.
Mm.
As said, we are expecting our comparable adjusted EBIT to increase from the previous year. Maybe to elaborate a little bit more on it, obviously, as mentioned so many times during this presentation or webcast also, the word inflation is impacting everyone's lives. There are certainly cost pressures around and as Katarina pointed out during her presentation, it's of course our task as management to try to mitigate them in the best possible manner. Yes, the outlook is unchanged, and I would still like to remind everyone that it includes both the continuing and discontinued operations. I think this is relating to Joni's next question, which goes to you, Sari, as well, that did Oriola have temporary cost savings during the Q2?
I wouldn't call the cost savings temporary. Of course, we are talking a lot about our turnaround actions. Those are hugely important for us and as already pointed out during the presentation, even more important now that the inflation is in a way hitting and hurting everyone. Obviously, overall, not only the turnaround actions, we need to be very clever with our spending and if needed, then take some measures even on a temporary basis. I would, in that perspective, say that the Q2 was a more normal quarter. There is nothing special that one could be highlighting about cost savings. Normal rigorous cost management and then also the turnaround actions that we have announced earlier.
One turnaround question here, to maybe you, Katarina. Can you open your portfolio management actions and new acquisition agreements mentioned in the report? Should we expect similar invoicing levels in Services going forward?
If I look for invoicing levels, it's really hard to say.
Mm.
Exactly what will happen on the markets. We know that we have a stable market. Of course, it's also depending on what the customers are doing. Like Sari said here before, that also, of course, is depending on the inflation point. We are working with all our contracts as we always do, and what we have done is then to like really put some effort in how do we do this work and processes around that.
Good. Thank you. To you also, Katarina, there is a question about this. In report, we mentioned these production challenges. Have these been resolved during the Q2, and how long you expect these to have effect on operations?
The challenges that I mentioned is resolved during Q2, most of it. I don't see that it will like, that kind of challenges will at least affect in the future. Of course, we never know if there will be other challenges, but it's also our job to minimize these challenges.
There's a following question more specifically related to Enköping efficiency. What can we say about that one?
I think it's also the management team's work to always work to be more efficient. That's something that also is part of the turnaround, and I will say that will not stop with the turnaround. It will be something that we always should work with. Efficiency will always be high on the agenda for the whole management team and of course, also the supply team.
Mm-hmm.
Maybe a little bit to add on that. There's been good improvement, and things are definitely going in the right direction, but there are still plenty of opportunities to improve.
Maybe to Sari to go through. There is a question related to consumer business that why the turnover in consumer is up only 1%, but market is up 6%, and market share is still the same. What can you elaborate that one?
Maybe it's a little bit good to remind, first of all, that we have closed some locations. The number of pharmacies in our case is not fully comparable. We have also put even more focus on developing further our online operations. That was reflected in the second quarter as well. There are always fluctuations even in the market and even in our sales from one quarter to the other. I wouldn't say that there was anything major, neither on the market nor in our own operations during the Q2.
Maybe, Pit, following that one then, what were the drivers to weakening the Consumer?
I wouldn't say consumer weakening because we were able to improve our result. In terms of net sales, I would just reiterate what I just said that we have been really focusing on further developing the online operations in our consumer business, and those were actually growing faster than the online channel on average during April to June.
One more question related to Consumer, the IFRS and depreciation. Can you explain a little bit how those are going?
Yes. When an asset or assets are classified as to be discontinued, then certain depreciations and amortizations are not done any longer. The impact of those all in all on a year-to-date basis is EUR 10.2 million to the result of the discontinued operations. That's just IFRS rules, which we are following.
Thank you. At least now I see one more question, and this goes to Katarina, and it's related to our CMD, that what is expected date for that one?
We are not putting out a date on that one now, and you see that also on the next events slide here. We have said that we will come back to that after the closing of the planned joint venture or merger with Apoteksgruppen and Kronans. The reason for that is that we have a lot of focus now to really get that taking place. We'll come back to that one as soon as we know more.
One more question was just floating in that, Sari. You could probably take this one. Could you please elaborate how much of the continuing operation growth were driven by price increases slash volume changes?
That we haven't quantified as such, but I would maybe as a general rule say that, first of all, it's kind of the total invoicing better reflects the overall situations. There can be some more fluctuations in the net sales. What we have seen on the markets is good demand, but obviously, as mentioned also earlier today, we have been looking into the pricing as well. It's always on the management agenda, but particularly in a situation where inflation is impacting all the companies. There are elements of both in the outcome.
Let's get back to depreciations actually. Now there's a couple of questions related to why the depreciation in Consumer were so different in Q1 and Q2, and what are we expecting Q3?
I would like to just remind everyone that we were announcing the planned merger in the early days of February. That is the time when it was classified as this kind of an asset. That's maybe the best thing to say about it.
Thank you. If there is no any other questions, and at least I do not see at this point, then we will thank you, our audience, and we will get back then with the Q3 result then on October.
We wish all a very pleasant summer.
Thank you.
Thank you.