Good morning, and a warm welcome to Oriola's third-quarter results audiocast. I am Tua Stenius-Örnhjelm from Oriola's Investor Relations, and joining me today are our CEO, Katarina Gabrielson, and CFO, Mats Danielsson. We will start with Katarina, who will take us through the quarter, and Mats will then cover the financials. After that, we will open the Q&A. As a reminder, we will first focus on questions relating to Oriola's business and financial performance. You are welcome to submit your questions through the chat at any point during the presentation. Just a practical note, we are recording today's audiocast, and the recording will be available on our website later today. Before we get started, a quick look at our customer disclaimer. With that, Katarina, over to you.
Thank you, Tua, and also warm welcome on my behalf. If you look at the third quarter, we had a solid business performance and we continued to strengthen the profitable growth. I will come back a little bit later in this presentation with how we did it, but especially the commercial execution, operational improvements and infrastructure development was something that continued to strengthen the performance. The net sales was growing by 5%, and it was supported by continued high volumes in specialty flows, in sales growth in wholesales, and also strong sales in special-licensed medicines. Last quarter, we talked a lot about higher fuel prices and also how we could pass costs through to our customers. This is something that we have succeeded with in the third quarter, and I am really pleased to see that that has succeeded.
During the quarter, we also had a one-off inventory provision, and you will hear it more in this presentation going forward. That was on EUR 0.7 million, and that has affected the Group profitability, so we landed on last year's level. During the quarter, we also have stable supply chain operations. We have a lot of volumes in our warehouses, and to some extent, depending on the geopolitical situation that we have around us. That means that we have high inventory levels and also capacity pressures. During the quarter, we also announced that we have revisited our implementation strategy for the ERP and warehouse management programme. That has been revised based on the insights from the first deployment that we did in Sweden at the end of last year. Now the timeline allows us parallel core build and also direct deployment into Järvenpää.
We will also come back a little bit later to that in this presentation. One highlight for this quarter is, of course, Kronans Apotek. We can see another quarter of growth and profitability improvements from Kronans Apotek. It has mainly been by disciplined focus in the commercial performance and cost efficiency. This is also then based on the CMD discussions that we had earlier this year. I know that Mats will come back to the figures later on Kronans Apotek. With this going then now to the operating environment. In Oriola, we could see stable market shares in Finland and Sweden during the quarter. The pharmaceutical distribution Sweden with around 8%, while the growth in Finland remained low with only 0.5%.
The geopolitical development that I mentioned before, especially when it comes to fuel prices, inflationary pressures, is still there, and it contributes, of course, to an uncertain operating environment also going on in the future. We can see that the pharmaceutical companies are building the inventories to some extent based on this, because this is based on how you then ensure the availability onto pharmaceuticals in our markets. In advisory services, the geopolitical development is continuing also to have more cautious customer decision-making, like we also mentioned earlier this year, and that this means longer lead times for the new engagements. Consumer confidence in Finland and Sweden has been a little bit different in the different countries now during the third quarter.
In Finland, we can see that it's below the long-term average, while in Sweden, in the end of the quarter, it has been rising sharply and is now in line with historical average. If we go into the Services segments, I will start with the Services segment, which consists of the distribution of pharmaceuticals, the value-adding services, and parallel import in the Nordics. The segment we have here is also including the advisory services and commercial data solutions. Services segment had a net sales growth by 3.7% and landed on EUR 36.4 million. It has been supported especially by the volumes in the specialty flows. Specialty flows is then including the export business, vaccines, and also animal health. We can also see a solid development in the direct-to-pharmacy deliveries. The adjusted EBITDA was improved and landed on EUR 10.1 million.
The improved adjusted EBITDA was driven very much of this net sales growth that I mentioned before. If you now look back to what we talked about in the CMD, we talked a lot about in this segment about strengthen the customer and the joint account planning. This is something that we can see we have worked on a lot during the quarter and also during the full year. This is now also visible when we looked at extended key partnerships and also a healthy pipeline across the markets. We have now new key partnerships that will affect both the quarter four and the business from 2027. In advisory services, we can see that the sales has remained weak during the quarter, basically down on the longer lead times in the decision-making from the pharmaceutical company.
What we have worked on in advisory business is to further strengthen our customer engagement and also to work more on integrated businesses. That is done also in all the different companies that we have advisory services in. In Sweden, we launched AI-enabled commercial data service, and that is something that has also been bought by pharmaceutical companies, and this is covering the medical information that we have, and it's taking the data that we have in medical information and turn it into actionable product insights that is helping the pharmaceutical companies now in their decision making. If we continue with the Products segment, the Products segment consists of the wholesale of traded goods and over-the-counter products, and it's also our own brands and specialized medicines that we have in Finland and Sweden. The segment also includes the dose dispensing business that we have in Finland.
The net sales in this segment was growing by 8.8% and landed on EUR 16.8 million. It is especially the wholesale growth overall and also the strong sales of special-licensed medicines that has been part of this growth, as well as the dose dispensing business in Finland. I am also pleased to see that we have now started to sell to one new customer in Sweden, and that is a new specialty retail customer that we have got into our customer pipeline. The adjusted EBITDA was a little bit lower than last year. It landed on EUR 1.7 million. The reason for this is this one-off product inventory provision of EUR 0.7 million that I mentioned earlier that is then affecting this segment negative.
If we then look also here on what we talked about on the CMD, we also here talked about how to work with the customer, but also how we work with the product portfolio. In this segment, we have now continued to align the product portfolio, and also take the products to the growing sales channels. That is something that we then can see in the results, especially in the sales. We will continue now also to develop our own brands and have done that also during the quarter. That includes both how we price the products, how we do the offering to the customers, and also to strengthen the competitiveness in these product groups compared to our other competitors. We can continue to see that the recent launches have been received well and gained new listings with our customers.
Normally, we talk quite much about the big investments that we do in Oriola. I would now take the opportunity to also to talk a little bit about the continuous improvements that we do, in fact, every day in our business. We will today then focus a little bit here on what we do in the supply chain and the efficiency that we do here. Supply chain is one of the biggest cost, of course, that we have in Oriola, and it is super crucial that we everyday work on continuous improvements. Like I mentioned before, we also have higher volumes in our warehouses, and that is, of course, increasing the capacity pressure that we have in our warehouses.
What we do then to balance these volumes is, of course, to use external warehousing, and this is something that we work with to maximize the net income and the profitability that we have, and also how to handle new customers and growing stock levels. On top of this, we work a lot with the transport, and transport is one of the major cost elements that we have in Oriola, and that is, of course, super crucial to work with the route planning, deliveries accuracy, and also streamline the totes in the sorting processes, as well as looking at route optimization. Here we are mentioning the route optimization in Northern Sweden. If you look at the map, you can see that Northern Sweden doesn't have so many inhabitants, but there is a lot of roads and a lot of kilometers between different cities.
This is also a way of taking down the cost of the transportation. AI and digital tools is something that we mention and have mentioned quite much when it comes to advisory business, but this is also something that we use in the distribution or in our operations parts. Here in supply chain, we are working with the digital tools and AI, for example, to use in the inventory planning. This means that we can have the right product in the right volumes in the right sites to be able to have the picking accuracy up to our customers and also that will release the working capital in our balance sheets. With this, we will then go to what we normally talk about, and that is the strategic projects that we work with.
What we talked about in the CMD is that we should double the EBITDA by 2029 and strengthen the foundation for our future growth, and that this strategic project is a vital part of reaching that goal. During the quarter, we have now revised the time, updated the timeline about ERP and warehouse management programme, and I will secure here for you that this has not changed, that we, in 2029, still have this goal to double the EBITDA. It is still there. What we revised now in the ERP and warehouse management programme is that we have taken the learnings from the first deployment and then implemented the new program based on that, and also that we then have the Järvenpää distribution center in the end of this period. What we have done is to strengthen the program and the program governance. We are taking more into our own business.
The internal organization has been strengthened and taking more ownership of the total program. We have also appointed a new implementation partner in this process. The revised timeline has been extended to 2028 to also be balanced then with the Järvenpää distribution center, and we will take a direct deployment then into the Järvenpää distribution center. The investment has been now also revised and been landed on EUR 54 million, and previously it was EUR 35 million. But this enables us now a parallel core build in Sweden and in Finland, and then followed by what I said earlier about this phased implementation. On top of this ERP and warehouse management programme, of course, we are also doing some, in this scope, a little bit, maybe smaller projects with the Enköping automation upgrade.
This is something that is very crucial for Sweden, where we can see that we will have now the possibility that in the first quarter next year to get more volumes through Enköping, and that will support the growth in the business in both distribution and wholesale. I will also mention here that the Järvenpää distribution center is continuing to advance according to the schedule. With this, I conclude now the business highlights and leave the floor to Mats.
Thank you, Katarina, and welcome also from my side. We can start to talk about our net sales. We had a 5.1% increase in net sales this quarter, the graph in the middle top. This was driven by both the Products segment and the Services segment. Percentage-wise, Products segment was growing more, but also Services segment in EUR was delivering good growth in both segments. Invoicing for the quarter was +3.4%. If we look at the net sales for year-to-date, for the three quarters, we are at +1.6%. If we then eliminate the Swedish dose dispensing business that we still had in quarter one in 2025, the growth is 4.1%. Looking at so far this year, like Katarina said, we have had good growth in the distribution segment or the Services segment.
The distribution part, we have had specialty flows like export and vaccines, and we have had also good sale of value-added services. On the product side, there has been good development on the wholesale part, special- licensed medicines and also the dose dispensing in all areas in the Products segment has been growing fairly well, especially now in the third quarter. The invoicing for year-to-date is +5.6%. If we look at the EBITDA, we are on the quarter on the same level as last year. This includes the inventory provision of EUR -0.7 million coming from the specialized medicines. It is a one-off booking that we have but we are on the same level. If we look at the margin for the quarter, we are at 18.1% compared to 19%.
If we adjust the quarter with the provision, we would have been at 19.4% compared to 19%, so an improvement on that side. If you look at the year-to-date, we are slightly higher than last year. Of course, this is now impacted also by the provision. As you might remember, we also had increased freight cost due to the fuel in the second quarter. On a high level, if these two items are eliminated, we are showing a margin percentage that is close to 17% compared to 16.1% last year. So also the underlying EBITDA margin is growing compared to last year. If we go into the Services segment, we have had a bit of lower growth in the invoicing from our customers. However, the net sales has improved especially in quarter three, and this is much related to what was commented earlier.
It is export vaccine animal health growing, and we have also on the net sales, of course, it is the service fee for the value-added services that we sell. We have had in the quarter also some increased partnerships in Finland that have supported the growth. Advisory net sales is continuously lower than last year, affecting the development a bit negative. If we look at the adjusted EBITDA, we had a good quarter, good net sales growth, and also an improved EBITDA from EUR 9.6 million- EUR 10.1 million. Year-to-date, we are behind last year but still getting closer to last year. Of course, especially in the Services segment, the quarter to increase in fuel prices is affecting the EBITDA number. If we go to the Products segment, this was a good quarter in all areas. We had a good sale in the wholesale part.
We had in the dose dispensing part was good. Special- licensed medicines was good. A really good development, +8.8 percentage. Year-to-date, we are -3%, but if we eliminate the dose dispensing business in Sweden, the net sales grew by 4.6%. Looking at the EBITDA, we can see that the EBITDA is slightly lower than last year. But here we have included the provision for the inventory provision. If we look at the year-to-date EBITDA, we are improving despite this provision that we have had. If we look at the EBITDA percentage margin excluding dose dispensing, we are at 9.8% compared to 8.4%. If we also exclude the provision from the numbers, we are actually above 11% compared to 8.4% last year. So an underlying improvement in the Products segment.
If we look at the year-to-date net profit, would take out one part here and look at the share of the result of Kronans that is improving, of course, compared to last year, which is a good thing for us. We can also see that the profit for the period is actually EUR 8 million higher than last year. Then if we look at the cash flow, two things here. We have the change in working capital. We have a reduced factoring that you see from the numbers also. We had EUR 122 million end of last year, and it's below EUR 100 million now. So it's more than EUR 20 million affecting that. That's a one-off, of course, reducing the factoring volumes with the customer. Then we have an invoicing mix of customer changes now during the autumn that has affected this one.
Then, of course, the Products segment is growing, which is slightly affecting also, and then we have some FX differences. So there's a few big things that are affecting this. At the same time, we know that reducing the factoring will reduce our interest expenses. Despite the increased interest rates, we have reduced also our interest expenses in the quarter. Investments, EUR 8.5 million compared to last year, only EUR 1.8 million. We have now Järvenpää land area that we have acquired. It's in this investment. Then we have the automation part in Enköping that is also as an investment. So EUR -29.8 million free cash flow negative compared to last year, EUR +11.6 million. If we look at the net debt, it's fairly on the same level as last year, the same period, and has not changed from quarter two.
Here we can also see the big difference in the sold receivables, EUR 99.6 million compared to EUR 109 million last year in September. Also good to remember that it was EUR 122 million at the end of last year. Financial position, no big changes in gearing or equity ratio. Same level as previous quarter. Then we can go in and look at Kronans. I would say that this is now the result of not working with the integration anymore. You can see that the company is working with the right things. It's a big commercial focus, looking at the pharmacies, opening hours, efficiencies in pharmacies, campaigns, how can we sell additional products. On the other hand, there has been an organizational restructuring, looking at head office but also the working hours in the pharmacies. If we look at the adjusted EBIT, we are quite close to the last year's level.
But if you then look at the EBIT for the quarter, there's a big difference, and that of course then gives an impact on the result for the period, for the quarter also. Especially if we look at the same numbers for year-to-date, we can see that the integration costs were much higher last year compared to this year, and therefore we have almost a EUR 5 million difference in the net result for the year-to-date, which of course have a big impact on our numbers also. That was, the outlook still. Yes, the outlook is unchanged for the full year and to increase the EBITDA from the EUR 35.1 million.
Yes, then I will conclude with the key takeaways. If you look at this one, you can say that the net sales was growing by 5.1%, and both of the segments was growing on the net sales. We can see that the profitability has been resilient despite we have this one-off inventory that you have heard a lot about during this webcast. We have also had the possibility to pass through the higher fuel prices to our customers. We can also see that the customer partnerships has been extended, and new ones has been secured. That will be positive both for the end of this year but also next year. In the wholesale, we focus on the growth channels and also the products that is supporting the profitable growth.
We are also continuing with efficiency initiatives, both like when it comes to bigger investments and how they are improving, but also the smaller ones that we do every day. This has generated savings and improved the productivity and profitability, of course. We are now building the foundation for the growth, the ERP and WMS program, and also the Järvenpää distribution center remain to be the key enablers for our modernization to reach the double profitability by 2029. Like Mats just said here, we are reiterating the outlook. We can see that the sales growth is expected to continue across both the segments, and that is supported by a strong commercial momentum that we see now in the market. Also, the new distribution partnerships that we have are set to contribute positively, and already now in the fourth quarter, they will contribute.
Efficiency gains, actions to offset higher fuel costs and also to continue the cost discipline, support the profitability, and also that's one of the reasons why we are reiterating now the outlook for the year. With that, I think we conclude the presentation.
Yes. Thank you. Thanks, Katarina and Mats, for talking us through the quarter. We will now turn to your questions, and you can continue to submit them through the chat. As a reminder, we will focus first on questions relating to Oriola's business and financial performance. We already have quite a few questions, and I will do my best to group them per topic. There is a lot of questions relating to the ERP, so I will take those first and then continue with the other ones. Will the new ERP and WMS be live before Järvenpää starts operations in Q1 2028? If not, will you delay the move or open Järvenpää on the current system?
We can say it like this, like I said also, there will be phases in this implementation. In Sweden, the plan is to go before Finland. In that aspect, yes, it will be live before we go to Järvenpää. The plan here is then to take the new system directly into Järvenpää when we go in Finland.
Good. Thank you. Of the roughly EUR 29 million of ERP costs still to come, how much will be booked in 2027?
We will book still this year about EUR 5 million, so it will be EUR 15 million this year. It will be around EUR 15 million next year, and then the rest will be a bit less than EUR 10 million at the last 2028.
Okay. Then a follow-up. Could you describe the possibilities that ERP will now have concerning business efficiency and competitiveness of Oriola compared with if Oriola would have continued according to first deployment in Sweden?
I would say it like this, efficiency wise, it is not what we have changed in the program. The program is based to look at the processes, how we work, and so on, and that is still the same part of the scope. What we changed now is how we do the implementation, how we set up the program to take away risks in the total program part and be able then also to launch it in the phases where we believe is the best for the company. Still, like I said before, the platform and the part here is crucial for the business going forward, and it is also then very important for the total business plan and strategy that we have from 2028 onwards and the 2029 result.
Okay. Then could you comment whether Oriola will claim HCLTech to receive compensation for ERP project? If compensation is received, will it be handled as adjusting item? Just to comment that this is the previous partner that we had.
Implementation partner.
Yes.
We have not commented the contract on how we exactly do that. If there will be something, you will see that in the numbers.
Good. Those were, at the moment, the questions that were related to the ERP program. Let's continue now with the other questions. First, about the Services segment. Services EBITDA grew again despite advisory remaining weak. How should we think about the margin trajectory here going forward?
We see that the growth was good in quarter three, and we expect that to grow and to achieve the full year numbers. We need growth and profitability in that segment.
What we can see also in the Services segment is now that we mentioned here, we have more customers. We have onboarded customers in quarter three, and that will affect quarter four in a positive way. We have also work done with the profitability in each customer, so that's part of the guidance also, but also what we can see in this segment.
All right. Then a question relating to Products segment. What drove the underlying clear EBITDA improvement in products, and how repeatable is that?
I would say that it is repeatable because if you look at this, it's a lot about growth. It's net sales growth that we have in the main part of the businesses, and that has affected the adjusted EBITDA in a positive way. What we have done now is, like I said here, is to work with the basic part in this segment. When we are working with the products, we get new launches and so on. That will affect also the earnings coming forward.
Okay, good. A couple of questions related to the rest of the year, Q4 and guidance. Can you walk us through the key building blocks? How will you improve in Q4?
Mm-hmm. Overall, it's of course continue with the net sales growth and also the profitable growth that we have seen during quarter three, and to continue to build on that. We can also see that the new distribution partnerships that we just mentioned will contribute positively already in the fourth quarter. That's one part. We are working a lot with the costs and efficiency gains to offset the high fuel cost, both with the continuous improvements that we mentioned here before, but also on the daily cost control that we have overall. There's a lot of small things, but continue what we do in quarter three and improve from that.
Great. Thank you. Then a question related to the fuel prices. The fuel prices have increased again in the fall. Should we expect a negative impact in Q4 from that as was seen in Q2?
I will say that what we have now is to have the contracts in place. I don't see that quarter four should be affected in a negative way as we saw in quarter two. In quarter three now we have worked on that, and that should remain as it is in quarter four.
Okay, good. Those were all questions relating to Oriola, so we will now move on to questions about Kronans Apotek. Just a reminder that please submit your questions through the chat. There's always a slight delay before we see them, so that we can take them during the audio cast. The first question now is Kronans has had a new chairman for two months. Could you comment his thoughts concerning EUR +60 million EBITDA target in Kronans by 2029 presented in CMD? Is this doable according to him, or can we expect that this target is going to be changed?
Of course, I'm not Magnus Håkansson, and of course he should normally comment this himself, but I know that both him and the full board, including the management, is committed to what we presented in the CMD. There is no change on that, even though that we have done some changes in the board composition. The targets and also the actions and goals that we presented in the CMD is absolutely still valid.
Great. Oriola presented in CMD saving target EUR 20 million in Kronans by 2027. Could you comment how much of this has been achieved by Q3, and how much of it can we expect to see in Q4?
There is a part, of course, as you see in the numbers, is included in the quarter now. There will be more in Q4, and the rest of the program will be seen in the next year. The program is working.
Good. There is the final question. This is a little bit related to what you just said, Mats, but maybe open up a little bit. Kronans has improved now in Q2 and Q3. Are the efficiency measures presented at the CMD working?
They are working. They are working in all the areas that we presented also with the personnel costs, driving the pharmacies, and different activities they have around the sale in the pharmacies is working. They are focusing, and when the integration has ended, they have time and energy to work with that instead of integrating the two companies and the systems.
Basic retail.
Basic retail improvements.
Good. Thank you. That seems to be all the questions we have today. Thank you everyone for joining us today. If there is anything else you would like to discuss with us, please feel free to get in touch afterwards. Thank you again, and have a great rest of the week.