Good morning, everyone, and a warm welcome to Oriola's Q4 and full year 2022 results presentation. I am Tua Stenius-Örnhjelm from Oriola's Investor Relations. We have today two speakers, our CEO, Katarina Gabrielson, and CFO, Timo Leinonen. After the presentation, we open up for your questions. However, you may send in your questions already during the presentation. Kindly note that we are recording this webcast, and the on-demand version will be available later on today on our website. Before handing over to Katarina, here is the customary disclaimer that we all should be aware of. Now, without further ado, Katarina, please go ahead.
Thank you, Tua. Good morning, and welcome also on my behalf. Here you can see our agenda for today. I will also talk about now the business and operating environment, and our new CFO, Timo Leinonen, will then provide you with more detailed insights into our numbers. Let's start to talk now about the summary of the quarter four. Our financial performance improved for the full year. However, in the last quarter, we had some headwind. Market demand for pharmaceuticals continued to grow in Finland and Sweden, and our invoicing and net sales at constant currency increased in the fourth quarter. I will go more into details a bit later in my presentation regarding this. Despite good market demand and a strict focus on lowering our costs, Oriola's financial performance weakened in the fourth quarter compared to the tough comparison figures from previous year.
Our performance was burdened by the loss of public tenders and consequently patients loss in the dose dispensing business in Sweden, as well as a loss of some distribution customers during first half in Sweden, with an impact on the fourth quarter volumes. The severe inflationary environment continued, increasing the transportation related costs, which are reflected in our results. The performance was further weakened by the EUR 2 million loss from the joint venture in quarter four. We booked adjusting items of EUR 10 million, mainly related to an impairment of other tangible and intangible assets not yet available for use and which have been development in progress, and this was reflected in our earnings per share. The impairment consists of several earlier years process automation development, outdated information technology, and partially implemented projects that have been discontinued.
I would also like to emphasize on negative net debt, and I'm really happy about that, and Timo will provide more insight on this in his part. We completed the short-term turnaround plan that we have been discussing with you even over the recent quarters, and the cost savings were implemented as planned. This means improving efficiency, portfolio management, and product pricing. Looking ahead, our focus will be on the longer-term transformation of Oriola, aiming at creating an even more agile, efficient, and profitable company. As we all probably know, we finalized the combination of the pharmacy business in Sweden to Swedish Pharmacy Holding AB. This was a major milestone for us, as the transaction strengthened Oriola's business as a service provider to pharmaceutical companies and pharmacies, as well as simplified our structure.
Sustainability is really at the core of our business, and I would like to take this opportunity to share some of the highlights from last year. In the sustainability area, we have achieved good ratings of our sustainability performance from third-party agencies in the past two years. This time, I would like to highlight our recognition for the environmental work in the Carbon Disclosure Project. During 2022, we continued our environmental work, and compared to the base year 2019 level, our initiatives had reduced CO2 emission from our own operations by 70%. This has been driven by increasing the share of renewable electricity and switching to renewable district heating at our distribution center in Finland. As much as 91% of our total energy consumption now comes from renewable or carbon neutral sources.
The rate decreased slightly from 2021. This was mainly because of the excluding Kronans Apotek from the calculation. In addition to cutting the CO2 emissions, one of our main environmental goals is to decrease waste and also use then the materials more effectively and increase the recycling. In 2022, our company-wide recycling rate increased to 83% compared to 79 in 2021. I'm very pleased with these achievements and just showing that we are taking the steps in the right direction in the sustainability area. Today, we have also then announced the board's dividend proposal that you will then be able to see here. Oriola board is proposing that a dividend of EUR 0.06 per share will be paid out for the financial year 2022.
This compares to the EUR 0.04 per share that we paid for 2021. The annual general meeting will be held on 21st of March, and the dividend record date is the 23rd of March, and payment date is 14th of April. Next, I will talk about operating environment and the markets that we are working in. The operating environment can be summarized in the following way. Overall, there is good market demand, and that continued. In Finland, the market continued to grow, but on slightly slower pace than in the fourth quarter when comparing against the previous quarters. We can see no visible impact from the economic uncertainty on the market side.
Availability of pharmaceutical raw materials became tighter. This has implications on the supply of some medicine. That's in fact not only for Finland and Sweden, but that's Europe-wide. Let's take a closer look on how the market have been developing, and our also performance compared to this. If we first look at the pharmaceutical wholesale market, we saw that the market continued to grow in the fourth quarter compared to the previous year. We look at the value development at wholesale prices in Sweden, the growth was 8.3% in Swedish krona in the fourth quarter. In Finland, the market value grew by 1.9%. The growth slowed somewhat from the previous quarters of this year. Based on our estimate, Oriola's share of the pharmaceutical wholesale market was a bit lower in Sweden.
Oriola's growth was slightly less than the market growth due to the loss of some customer contracts during the first half of the year. That has impacted the fourth quarter volumes. The market share remained at the same level in Finland as in previous quarters. In the dose dispensing business, Oriola offers pharmaceuticals and dose dispensing for private and public healthcare sectors. The total market size for dose dispensing has increased slightly in both countries. The number of patients that Oriola is serving in the dose dispensing business was unchanged compared to the third quarter, when the number of patients declined year-on-year to approximately 75,000 patients in Sweden.
In Sweden, the regional customers organizes public tenders processes from time to time. Due to these processes, we lost some regional customers in dose dispensing, and therefore, the number of patients declined to about 75,000 patients compared to the 105,000 previous year. The dose dispensing business in Sweden is focusing on new customer segments to develop the business further. This is already materializing in new contracts. The number of patients in Finland remained at around 30,000 patients. With this market outlook and presentation, I'm now ready with my first part. I would like to hand over to Timo and his financial presentation.
Thank you, Katarina. Just to start to introduce myself, so I'm Timo Leinonen and have been now Oriola's Chief Financial Officer from the beginning of December. Basically glad to join the company, and this is now my first release with you and webcast as well, so very glad to be here as well. Just to begin to a little bit highlight what Katarina just said, so basically for quarter four has been kind of quarter of transformation for us. First of all, the joint venture where the Kronans Apotek and Apoteksgruppen's operations were combined was finalized. We got or announced a new operation model beginning from October in the company. Of course, impairment and going through some kind of balancing things has been kind of quite vital for us, as we have announced also before.
Let's go a little bit deeper in the financial and the numbers. First of all, if we see in our EBITDA or adjusted EBITDA for the last year, solid improvement in the 3 first quarters and went according to plans. Of course, Q4, a bit of the disappointment. As Katarina Gabrielson already told, there is kind of several reasons why we have that number in there, EUR 0.9 million. First of all, we booked from joint venture, minus EUR 2 million of our part of their losses in Q4. If seeing that, we announced in the preliminary numbers only EUR 800,000 losses, and the difference there is in purchase price allocations that came through when they were combining the accounting principles in the joint venture. That's about it.
There were those dose dispensing customers in Sweden that have a effect to our profitability in Q4. As we have stated or state also in our future outlook, impact will continue. As Katarina also mentioned, we are seeking new customers there and number of new customers are also improving in that business. Of course, inflationary environment and also foreign exchange rates for the Swedish krona has been a little bit challenging. They also with the business and the cost level of the business, we have mitigation going on, discuss with customers, discuss with subcontractors and so on.
When going to the deeper or in the bottom of the profit and loss account, again, solid performance first three quarters and of course, Q4 number shows to be quite different that it was in the beginning of the year. Losses EUR 8.1 million, including that impairment, roughly EUR 10 million. If you are excluding that one, we were around the zero level in profit for the danger period. When chasing that to the earnings per share, again, solid performance during three first quarters. We got EUR 0.07 of profit per share or earnings per share and -EUR 0.04 in Q4. If we are excluding that impairment, we were there on the zero level.
Kind of seeing from excluding that impairment, so earnings per share operationally was EUR 0.07, and our dividend proposal is EUR 0.06, so basically we are in the par there. One of the most positive things for the quarter was of course, and for the whole year, was the cash generation of the company, and I'm also very happy to see these numbers. When we started this year, so we had cash in our bank accounts and so on, about EUR 110 million, and now it's EUR 160 million. Of course, there is a big change in the balance sheet and also how this is generated when we have now only our continuous operations in our balance sheet as well.
Q4, they were kind of cash parts of the price of the kind of transfer in our consumer operations to the joint venture and so on, and it has some effect. At the end of the day also, the net working capital was very favorable for us during the Q4. Of course, coming from there to our net debt. It was negative at the end of the year. There were two reasons. Of course, our balance sheet is changing quite a lot when the consumer business or Kronans net debt items were taking out from our balance sheet. Cash and cash equivalents, EUR 160 million at the end of the year ended up so that our interest bearing debts were also EUR 23.7 million negative.
I have to say that in our business, so fluctuation of the net working capital might be quite high during the different periods. I cannot promise that it's always in the future or near future will be negative, our net interest bearing debts. Very positive on that one. When seeing the gearing ratio also, so when the net interest bearing debts are negative, so gearing is also negative. Few words about Swedish Pharmacy Holding in Q4 2022. Net sales of the company were EUR 293 million, adjusted EBIT minus EUR 2.8 million, and that includes those purchase price allocations I was talking earlier.
They were already during Q4 able to realize some EUR 1 million synergies, adjusting items, so what they had to kind of spend money or lose profit to start to dig out those synergies were EUR 1.9 million. EBITA, so earnings before interest, taxes, and amortizations was minus EUR 1.3 million. In this A, we have those purchase price allocations, how we have calculated. They have net debt of EUR 95.3 million or had it at the end of the year. As stated, we booked loss from the company EUR 2.0 million in Q4 last year.
When seeing where the company is, of course, the joint venture has now formed in the last quarter of 2022, the life of the company is really in the beginning. They are in the middle of integration, seeking out synergies which were promised and so on. We have to be a little bit patient to see when they are kind of performing optimally from our point of view as well. As said, Oriola is committed to the long-term ownership for the company and value creation would be also seen as a kind of long-term investment. Finally, coming to our outlook for this year. We are expecting that our adjusted EBIT, excluding the contribution from the joint venture, will remain the same level as it was last year.
The comparable number, as you see in the bottom of the slide, is 19.7 million EUR. When seeing which other things are affecting to our outlook, of course, the negative impact from our profitability or from the dose dispensing and lost public tenders and consequently our patients there will have effect for us. Of course, we are kind of quite carefully following the inflationary environment and also FX rates, how it is in Sweden or how it's performing. Hey, that's all from my part, and now back to Katarina.
Thank you, Timo. I will now conclude, as we have done during the previous quarter, by summarizing, and also talking about the key priorities for this year. To wrap up Oriola's fourth quarter, there are 5 important takeaways that I want you to remember. First, the demand continued on good level, while our profit was weakened by impairments. Our invoicing and net sales rose at constant currency. Secondly, we are still currently witnessing high inflation that gives uncertainty for the coming quarters. In quarter four, we managed partly to mitigate the inflationary cost pressure with our own savings from turnaround and other initiatives. Inflation is mainly affecting our transportation costs, but also the labor cost on the long term. Thirdly, our short-term turnaround activities were completed as planned..
All the actions related to our EUR 7 million cost savings target has been implemented in 2022 in both continuing and discontinuing operations. We have also progressed further in improving our efficiency, the portfolio management, and the product pricing. Fourth, the combination of the pharmacy business in Sweden to Swedish Pharmacy Holding AB was completed in October, and that was a very, was a major milestone for us. The transactions strengthen our focus as a service provider to pharmaceutical companies and pharmacies, as well as simplified our structure. Last but not least, our focus will be on the longer-term transformation of Oriola, aiming at creating an even more agile, efficient, and profitable company.
To conclude my presentation, I would like to use a slide that we presented during the investor days in November last year, to like, remind you about what we are now talking about for 2023. Our transformation continues, and our key priorities is profitable growth, efficiency, and culture. We will continue to be the preferred partner for our customers and to commit developing further our sustainability work in lowering the emissions and improving the circularity in our daily operations. We are focusing on our excellence in the distribution of pharmaceuticals and bringing value to customers through advisory services, and that will remain the core of our business. Also finally, I would really also like to thank all our employees for their commitment, and also all our customers for a good cooperation in this somewhat challenging environment that we are facing.
With this, we are now ready to take your questions. Tua, I think you are the one who should-
Yes
... like, fix this.
Thank you.
Yeah.
Thank you, Katarina and Timo, for your presentations. We have a couple of questions from the chat. Let's start with a question on the top line. Invoicing and net sales decreased in the fourth quarter while the markets were growing. What were the main drivers behind this?
Like I said before, at constant currency level, we in fact increased, the sales, the net sales. Then of course we are affected about like the inflationary parts and also about the dose dispensing business that we have then lost these contracts and also then the patients. This is like, of course affecting us very much in the quarter four, and you haven't seen it so much earlier this year. Do you want to add something, Timo?
No.
No?
That was good.
All right. Thank you. Then we have a couple of questions on the joint venture, but I will take, maybe take one of those, and then you can comment further how much we are commenting on that. How do you see the joint venture evolution in 2023 as you are guiding excluding JV's profit share?
I can say it like this, that we are not commenting on the joint venture. We are guiding our own profitability and the adjusted EBIT. If there are questions to the joint venture regarding their future outlooks, then that should be going to the management team overall.
All right. Good. Thank you. There's a question to Timo on impairment. Can you open up the impairments? Were they related to a specific business area or from various parts of the company?
They were in that sense, kind of attached to the various part of the company. There has been kind of development plans in different stages of the kind of recent history, so how we are going to improve Swedish operation and Finnish operation and what kind of computer or IT systems we would have there and so on. Actually, when time has gone past, basically we have kind of, or the kind of outlook for operations had changed and so on. That's the reason behind that. Several smaller different things, but when you are combining them together, we are in that kind of quite significant amount in euros.
All right. A question on the Q4. Why were results for continued operations so weak in Q4?
Like I touched a little bit before here, and also Timo, we can see in the continuous operations three major areas: the dose dispensing business, where we then have, like lost contracts and also in that way patients. We have, like, the volume. Even if we can see that the net sales in constant currency is growing, we are affected about FX rate, the Swedish krona. We have the inflationary environment. That has affected us. We have to some extent evened that out with the cost savings that we do, but we still are, like... We are not, like, say, immune to that one.
All right. We continue on to the CapEx. What kind of CapEx spending profile should we estimate in 2023?
Well, we have not stated that out yet, so basically. The CapEx in the continuous operations, so will be roughly on the same level that it has before. Not kind of very big changes on that one.
Okay.
Yeah. To say that, so of course we are now building or starting to build a new strategy as well and so on, so it might have effect to that one as well.
Okay. Good. Thank you. We move on to cost inflation. As seen in Q4, do you see continued pressure in H2 2023 equally spread over the full year or more weight on H1 2023?
I will say that's a hard one because it's like speculating what will happen in the whole environment around us. What we see now is of course, like, that we can see there's a weakened demand in still in both Sweden and Finland in the consumer, and how they, like, behave. If you look at the medicine side, we don't see as much as we do in other areas. But we can also see that there is signals on the market that it's going in the right direction. But I would like to not speculate on that because it's really, really hard and I think you need a crystal ball to really be able to say where it's going.
We are monitoring it and we are, like, taking the actions that we can take from our side.
Thank you. A question on the debt side. What is the average maturity profile of your interest bearing debt, and what kind of average interest rate do you currently have?
The current average interest rate is roughly 2.5%, including the commercial papers with short-term and so on. When seeing the maturity of the kind of long-term debt, so I think average is around 3% as currently.
Okay. A couple of more questions here. First we go on the distribution customers. How large distribution customers have you lost in Sweden?
It's not a significant amount. You can see that it's affecting the quarter four. We have also won some agreements now during the second half that will give, like, a balance for that, to some extent at least during the first quarters and first half of this year.
There's also a follow-up on that. What is the full year 2023 impact of those lost contracts, or how much was it in Q4?
I don't know, Timo.
Not specifically. We are not gonna comment on the individual customers of course and so on. Basically, there is no that kind of effect that we would say, for example, that there is significant, or outlook is that we are kind of significantly losing our revenues.
When we are-
Not that we know.
We can say it like this: when we are looking at the total, we can see that, like I said before, that we are balancing some lost customers with some new customers.
Mm.
Also the lost customer in dose dispensing is to some extent also balancing up, but with new customers from other areas and profitability in other areas. We are looking at the total, and we give guidance on the total side.
There's another follow-up question. Do you want to comment on what kind of large changes in distribution contracts are you foreseeing for 2023?
I don't think we should comment that because there is a tendering, like, or process always ongoing also in the distribution side, both with customers that we have and also potential new customers. That is the main daily business that we do, and that we always will do.
Good. We have a three-part questions on the dose dispensing. I will take each one of them separately. How many patients have you lost in dose dispensing in Sweden?
Like we said, during quarter three, we went from 155,000 patients to 75,000 patients. That is what we have, like, what we talked about.
Yeah. In Q-
In Q3
... Q4.
Yeah, Q4.
Q4.
Yeah. It happens in September, I think.
Yeah.
Okay. Then do you have any new dose dispensing contracts in the pipeline?
We are changing the, like, the market behavior, like, trying to find new segments in the dose dispensing business, and we can see that we are, like, succeeding with that. There is new tenders coming in. In the dose dispensing side, there is, like, these big tenders in Sweden, and we will continue of course to be part of this bidding also..
Okay. Then the last questions on the dose dispensing. What is really your ability to win those contracts?
That's a good question. I would say we have the same ability as the other part companies in this one. A public tender has a special kind of, like, business, how should I say, logic. We as well as the other ones are participating in these tenders in the best way.
Okay. Thank you, Katarina and Timo. It looks like there are no more questions on the chat for this time. If, however, there are any follow-ups or questions, please don't hesitate to contact us. The next scheduled events are the AGM on 21st of March, the Q1 report that we will release on 27th of April. Thank you everyone for joining today, and we wish you all a very good rest of the day.