Good morning, everyone, and a warm welcome to Oriola's Capital Markets Day 2026. It's great to have you here with us in Helsinki and also everyone else following us online. I am Tua Stenius-Örnhjelm, and I'm delighted to moderate the event today. It's been a while since our last Investor Day, and as you know, a lot has happened in the world and also at Oriola. Over the past few years, Oriola has strengthened its underlying business and become a more focused service-led company. Now we felt it was the right moment to reconnect with you. We have a full agenda today and a strong lineup of speakers from our management team. You will hear how Oriola is moving from ambition to action and how we are translating our strategy to create profitable growth and value.
This will give you a clearer picture of our progress and our readiness to reach the new financial targets. We have two sessions today. In the first session, you will hear our CEO, Katarina Gabrielson, and our business heads, Satu Nylén and Katja Lundell. After the presentations, we have a joint Q&A with the speakers. In the Q&A, we will take questions from the live audience here in Helsinki and also questions online. For those of you following the webcast, you can start posting the questions through the webcast platform already during the presentations. At approximately 10:00 A.M., we will take a coffee break, and for the online audience, please note that the webcast will be paused during the break, and we will resume it when we start the second session.
After the break, we will continue with presentations by Tuomas Tiilikainen, who is heading our supply chain, and our CFO, Mats Danielsson. You will also hear an update on Kronans Apotek from Katarina. After the presentations, we will have our second Q&A session before we conclude the formal program. For those of you who are here with us today, I also want to highlight that we have several of our experts here today, and they are more than happy to discuss with you about our services and products. We also truly value your feedback, so during the day, we will ask you to provide your input to us and also for you in Helsinki and also you online. Before we kick off with the program, today's presentations may include forward-looking statements.
Here on the screen, you can see the disclaimer, and it's also included in your materials. Please take a note of that as we proceed. All right, now the formalities out of the way, let's get started. Once again, on behalf of the Oriola team, thank you for being here today. Now without further ado, I would like to hand over to our CEO, Katarina Gabrielson. Katarina, the floor is yours.
[Non-English content] . Let's now change to the English language since I'm not that used in Finnish, and I think it will be a better conversation to use English. When I started in Oriola for more than 10 years ago, I also started to travel between Sweden and Finland and all our sites on a weekly basis. With that in mind, I learned a lot about our markets, about our customers, and also about the surroundings that we have. With this, we've, a couple of years ago, made a strategy. The strategy that we have been having since this and also refining last year makes me believing that we will now go from the ambition that Tua talked about to the action that we have already started to deliver.
That's also why we can stand here today and be able to show you with the actions we have already done and actions that we will do for the future, how we will double our adjusted EBITDA during the strategy period. We have a positive momentum and have done a lot of things already now. Last year, we changed operating model, and we also did that to be more clear in what businesses we have. Last year, we divested the dose dispensing business to more be able to focus on our core businesses. We have also, in the management team, more commercial areas right now, and we are working much closer together with our customers. We can see that in improved NPS, which is the main measurement about our customer and what they think about us.
That means that we are working in close partnerships with a lot of them. We have also announced that we are now also investing in quite big ERP project and moving the site in Mankkaa to Järvenpää outside here in Helsinki. This is important for our future growth, but also for our efficiency. We have also announced that we will now also invest in the Swedish business in Enköping, and Tuomas will come back to these investments a little bit later. This is about building the continuing the growth that we have and building the profitability. Our market has been growing during the years, and there is, of course, uncertainties in the surroundings.
It's also important for us to understand that we are acting in a stable business where we also have a predictability for the future, and that is important for us. We are infrastructure critical company, and we take parts of the countries where we are doing our business. We have already now seen that underlying business is improving, and we will continue to improve. Our ambition is, of course, to continue the journey that we have, and we will do that. We have a service company fundamentally, and that's also why we have done the changes during the spring. You have seen that we are changing the way we are communicating our segments, but also the financial targets, and Mats will come back to that later today. A service company, you think, what is that?
Well, we have the distribution services that Satu will talk about later on. It's not only about the products that we are transporting, it's also about the different services that is adding on to this. It can be everything from the returners that we'll get from the pharmacies to the excess stock that we have in our sites. It's also about export business that is, in fact, a growing business as well as vaccine and veterinarian business. With these businesses, in combination with advisory services, where we help pharmaceutical companies as well as other companies to get more data and getting the products out to the market, we are a fundamental partner to work with. We have the wholesale business where we had the health and well-being product adding to the services.
We are a strategic service partner, and we are also working a lot with efficiency in the efficiency, we also take in the digital parts. We have a lot of data, we are using that, and we also have a lot of volumes that we are shaping every day. The digital part, the AI, is a fundament for us to be efficient in the future. This is also where the infrastructure project is coming in. The ERP project that we have announced and also made the first release of, as well as the big done investments in the new, updated supply chain areas. We are soon, or maybe we are already now, the leading wholesaler of pharmaceuticals and health and health products in Finland and Sweden. We have new financial targets that is stating this.
Both of them is saying there's two main targets in this one. There's the growth, it's also the cost per net sales ratio. The cost per net sales ratio is tackling the profitability parts. Mats will come back to that later today. What is it that set us apart? Well, we are an integrated service engine, we are working with a lot of volumes in our flows. We have the pharmaceutical distribution with integrating value-adding services that I mentioned before, also a growing wholesale offering, as well as a growing advisory business. In fact, all our businesses are growing, that is quite unique, as I say, when the landscape is like it is around us. We are also creating the value with close connection to our partners and customers.
We are not growing if we don't know that this is something that we can sell for the future. That means that when we do an investment, we know, for example, if you take the site now outside here Helsinki in Järvenpää, we are investing much more in cold chain because we can see that the clinical trials that is now underway, as well as the product launches, is quite much coming into the clinical into the cold chain areas. We, for the future, need to have more cold chain to be able to deliver the volumes. Efficiency and reliability is, of course, important in this one. When we do the investments, we are also doing that based on the volume improvements and the capacity and flexibility. For us, it's about investing in the structure.
It's about investing in our customers, being close with the customers, so we can generate cash. In the end, we are building the company by strong competitors. We are growing the company, we should generate a profit. The whole management who is here today, together with me, are committed to deliver now the double EBITDA in the end of the strategy period. I quite often get the questions about what is it that we are doing? We are taking out complexity for our customers. That's the main thing that is one of our reasons to be. Working close together with the customers and taking out the complexity. This is a picture who tries to visualize where we are and how we work.
You look at the oval part in the middle of this picture, this is where most of the people see where we are. It's about distributing medicine packs from the pharmaceutical companies and the suppliers to the customers that we have, like the pharmacies, the retailers, veterinarians, et cetera. This is one part of what we do. With this flow, we also get a lot of data. The data we are using to help our pharmaceutical customers to also be able to take other decisions. We are in fact using the data. We are using it in the digital tools, the AI tools, to help other companies then to succeed. We are believing that when we are growing, we are growing together with the customers, then we will also be profitable when they are more successful.
We have the whole flow, both the distribution, we have everything that you need to launch a product. Everything from helping the pharmaceutical companies to succeed in the R&D. We are doing clinical trials as a service for them, and also being able to launch the product. Some part of this you will hear later today, we will also today focus on the main businesses and where we see that we can grow. When the product is launched, we can see where what's happening. We help with the market launch. We also help them to get the products out to the patients and the customers. This is the flow where we're acting, and as you see, it's not ending somewhere.
When we are in one part, it's a natural part to go to the next one. The only thing we are not touching right now, not maybe for the future either, is the manufacturing. With this, we are a trusted Nordic partner to quite big industry leaders here in the Nordics, you see some of them here. There is also some of them here in the audience today, you will have the possibility then to talk to them later today. Oriola is acting on growing markets with solid also market drivers. What we can see is that both Sweden and Finnish market is growing. We also have a small part in the Danish market, not in the distribution side.
There is two main differences between Sweden and Finland, and that is that Sweden has chains. In Sweden, there is 1,400 pharmacies, and they are mainly in four different chains. In Sweden also, e-commerce is a really important factor for these chains. All chains have pure physical pharmacies as well as e-commerce. E-commerce parts in Sweden is more than 25% right now. Also in some segments, we can see that more than 40% of the volume is going via e-commerce. Sweden also have three pure e-commerce players, and that is, of course, also different compared to Finland. Finland has around 850 pharmacies and around 550 owners.
We have, I don't remember now how many pure e-commerce players, but there is some. Also the market share is much lower here in Finland. It's only around 2%. It's growing fast. Both e-commerce in Finland and in Sweden is growing with double digits. I think that this is also something coming for the future. We are now investing. We also make Oriola ready to be part of this. We are using the knowledge we have in Sweden to be able to also go and be better in these areas here in Finland. We're also working a lot with the specialty and cold areas like I touched before. It's growing. We are a part of that. We can see that as one macro trend.
Aging population, everyone here wants to be as old as possible, but you also want to be as healthy as possible, want to stay home as long as possible. Maybe even run a marathon when you are 70 or something like that, or maybe something else, climb a mountain. That means that also the health and beauty and preventive parts is growing heavily, and that's also why we're going into the wholesale businesses. E-commerce I already touched, the AI and automation parts is something where we use both when it's come to the efficiency in Oriola. We already started, for example, with the digital tools in supply chain, where we can now predict the inventory parts and demand better than before.
We're also doing it, starting to do it now to the business, in fact, to our customers. Then, of course, the sustainability and better responsible business. When we now, for example, investing in Järvenpää projects, we are taking that to BREEAM excellence standard. I will say that Oriola has the same strategy. It's refined last year, but we are now in a position where we can really get the effect out of the strategy. Strong partnerships, enhanced efficiency and portfolio and market expansion is something that we are still working with. We can see that it's giving a result, and we will continue now to take it to the next level. It's about improving the customer focus, continuing to do that, continuing to have high NPSs in our measurement and work in partnerships.
It's about the market expansion and do that together with our customers. It's about executing on the ongoing programs and succeed. The ERP program is not only an ERP program, it's a transformation program, so it's helping the whole company to reshape to the next level, for example. Efficiency we talked about before, so continuing with that. Like I said before, we will double the profitability through the execution during the strategy period. Last year, we had around EUR 35 million adjusted EBITDA, and we will, in the end of the strategy period by 2029, go up to EUR 65 million, and Mats will come back a little bit later today on exactly how that will happen. It's about organic growth, it's about investments, and it's about efficiency, around EUR 10 million in each area.
For me, this is the new Oriola, and continuing on what we have do. We have the strong market position. We have a relevance in that. We should remember also that we are infrastructure critical. It's give us the stability. We have a predictable demand. It's stable, it's predictable. Yes, we are affected about what happens in the global area around us. Of course we are, we're having that, but we're also able to balance it. We have an integrated service-centric business model that is building on each other. When we talk about distribution business, we also have the customers where we add on the distribution services. We also have the advisory services as well as the health, and wellbeing products, taking out complexity.
We had a clear levers, as I see it, for efficiency and growth. We have already started this journey, and we will continue on it. We will utilize the modern tools that we don't get and already starting to have. We have also a solid financial position and are generating cash. The new financial targets that we have is directly supporting the shareholder values that we are creating. We also have, also driving a disciplined growth and continue to improve the cost efficiency. With the actions we have and with this long-term targets, I will say that we are well fit for the future and to continue the journey that we've already started. Now you will go more to the action part. Let's take now the first business owners up here. Please, Satu Nylén.
Good morning, everyone, here in Helsinki and online. I'm very excited to have an opportunity to present to you today what Oriola services and products consist of today and what's the growth journey going forward. As Katarina said in her introduction, Oriola is a service company with the infrastructure critical mission. We operate on the Nordic markets that is operationally complex with multiple countries, strict regulation, and high demand on service levels. This complexity means to our customers more added risk, cost, and time to market. Oriola creates value by taking away that complexity with one integrated platform and integrated service offering, as Katarina was referring to. Also on the top of that, when we combine the pharmaceutical flow, non-pharmaceutical flow, and the different services we offer, we create cost efficiency and also solid base for a profitable growth.
This makes us the strategic partner for our customers. I'd like to take you closer to the distribution services. What's in it, why it matters, and how it creates value for shareholders and customers. We enable growth. We connect global pharmaceutical companies with Nordic patients. We have the ambition to be the Nordic solution for pharmaceutical companies, and also that it's value beyond the logistics. It's a mix of value-added services matched with the customer needs, all from one door. Oriola serves today with the distribution over 250 pharmaceutical and health product companies who wants a reliable, compliant, and cost-efficient access to Nordics. In healthcare, patient safety and availability are non-negotiable. We at Oriola don't just move boxes from A to B, we actually manage a regulated flow with high quality demands.
It's a pharmaceutical deliveries 24 hours from the order accurately, always the right temperature, and fully traceable. That volume is our bread and butter. That's where it's solid baseline that has a stable yearly growth. To be relevant on the market, we need to do that cost efficiently all times. Besides this volume, we need to be parallelly handling also specialty flows. While pharma market is moving to specialized therapies, higher priced products, that usually means more complex handling. Here that this specialty flow at the same time represents incremental opportunities for growth as well as margin quality. One example of this specialty flow is vaccines, as Katarina was referring earlier. Oriola in Sweden is the main distributor of vaccines with 65,000 deliveries yearly to 6,000 customers or delivery points and a business that is growing double digit.
On the top of these core services, we also have a wide set of additional value-added services, like the ones, for example, ensuring and protecting local availability of medicines. Excess storage, accelerated handling, managing scarcity situations, or giving data for efficient, demand supply planning.
To be relevant with our service portfolio going forward, we obviously need to understand our customers better. I'm really proud to say that our efforts in listening, learning, and executing, it shows also in our positive NPS development, one main driver being a better proactive partner. For our profitable growth journey going forward, we are focusing on commercial discipline in our account planning, in pricing models linked to contribution, optimizing the service mix and service penetration. We see increasingly need from pharmaceutical companies for a compliant and cost-efficient gateway to Nordics. This part of the business is growing strongly for us as well. We are scaling and developing that further in collaboration with our customers. I'm really happy to tell that we had, yes, last year 10% increase, growth in our distribution services, which is outperforming the market.
On the top of that, we have very strong sales funnel ahead of us. This we need to match with the capacity optimization and improved profit productivity, areas that Tuomas will cover in his presentation in the second half of this day. We also expand our service offering for stickiness of our services but also increase revenue per customer. To make all this more concrete, I'll want to show a concrete tangible customer example. MSD is global research-driven pharmaceutical company, discovering and developing innovative medicines and vaccines. I have pleasure to welcome distinguished guests from MSD, Emma Cerrone, managing director for Finland and Norway and Business Unit Director Pia Koskinen. Pia and Emma are willing to answer your possible questions over the break, and you can find them over there.
MSD has chosen Oriola as their strategic partner in Nordics. Oriola provides one operational interface, consistent service delivery, and visibility through analytics and advisory support, all this cutting complexity and operational risk for MSD. We do wide-scale collaboration and we have a long-term partnership. It's covering both markets, portfolios of both human health and animal health, different product flows, covering both volumes and specialty. This type of a partnership shows that Oriola's platform creates long-term partnerships and how this also translates into a defensible role in the supply chain. To sum up Oriola's distribution services, one platform, run with discipline, optimized mix. This translating into valued shareholders with stable cash generation and improved returns. Having said that, I will call in my colleague Katja, to cover the other part of Oriola services. Advisor services. Welcome Katja.
Good morning, everyone. I don't know how many times you can say good morning in one presentation, but it is still morning.
It is my utter pleasure to tell you a little bit more about Oriola Advisory Services, which we have not presented ever before in our Capital Markets Day, so it's a first one for us. Before we really take a deep dive into what this means for Oriola, I like to draw your attention to some of the macro trends that are happening in the pharmaceutical industry today 'cause what we're faced with within the industry is something if not one of, if not even the most disruptive era for the commercial pharmaceutical industry. Some of the macro trends that are really reshaping the marketplace today is those of you following pharma closer knows there's an impending patent cliff.
Between today and 2030, more than 200 blockbuster drugs will lose their patent cover. That of course puts an immense pressure on a lot of the companies, both those who are seeing really declining revenues, but it's also providing a platform for new companies with biosimilars and generics to enter the market. It also puts a lot of pressure on both the logistics sides and managing the supply chains. We're also seeing increased and very complex and multidimensional pricing pressures. Europe has traditionally been the most advanced when it comes to looking at reimbursement and the criteria and looking at efficacy and what patients are suitable for what treatment. We've seen that already last year we have now a more harmonized way within the European Union of looking at the reimbursement criteria.
That started last year with new compounds in oncology and will be rolled out by 2030 to cover all of the new compounds coming to the European market. Of course, what we are seeing now is increased pressure from the U.S. marketplace, and it's not just within the U.S. market, but also looking at the most favored nation pricing. What was unthinkable five years ago that a price published in, say, a small country like Finland would potentially have pricing pressures in the U.S., that seems to be the reality now that many companies are faced with, and it's really impacting their launch sequencing of their products. If we look also ahead, what's coming within the industry short and midterm, we are really seeing a sharp rise in specialty and rare disease compounds.
Last year in the U.S., more than 52% of the new products launch were either rare, orphan, or specialty drugs. That of course, it's not just from a cold chain perspective, quite complex. They're also incredibly complex to launch and requires a lot more data, especially on the efficacy and the pricing side. These are the global trends, but of course, those also have Nordic implications for us that we see. One of the trends that we saw sort of coming back, it's a little bit of a pendulum over decades, but we see a very strong Nordic clustering happening for many of the pharma companies that we worked with. Going from single country operations to either fully or partially being clustered in the Nordics or Nordic and Baltics in some degree.
What's a little bit of a paradox here is when we talk about that there is more global pricing, we see also the real rise of relevant real-world evidence that is very localized. Payers, for instance, in Europe, they really want to have country-specific data on what are the intended patients in the market and how can you measure the efficacy. The real-world evidence data is really getting a strong foothold. Of course, the Nordics are no different. We see a real influx in outsourcing. A lot of pharmaceutical companies are looking to outsource those non-core but still mandatory functions, and we are able to address those needs.
Now that you have a little bit more clear picture of how we look at the world, how do we position ourselves as advisory and part of the Oriola Group to be able to answer our client needs? We've started our advisory Nordic expansion already a couple of years ago with acquiring ICT in Sweden, closing in 2023. Last year, we closed a purchasing of a Danish legal entity. Today, we have more than 120 experts across those three core markets for us, and we're able to service all the Nordic markets and with some selected services, also the Baltics. What's the rocket fuel, our secret sauce?
Of course, it's AI enabling both our proprietary data, but also taking into account all the changes that it's also making it possible for us to roll out services that are faster and better through that. We have a unique position, but I'm going to come back to that in a little while to explain why we feel very strongly that we are in a very unique position when it comes to AI. We have a very clear path of growth for the next coming years. For us, it's really about accelerating Sweden and Denmark. We have a very strong, solid foundation in Finland, but we have immense opportunities to continue our growth across the Nordics, where we are somewhat a little bit more immature.
Looking at the Swedish and Danish markets per se, they have a lot of investigative, innovative pharmaceutical companies that are headquartered in either Sweden or Denmark. The opportunities for sure are there. Of course, growing with our AI, we'll come back to that, but we are also looking a little bit ahead for the long term. It's very important to us to also be able to scale through global partners because the world around us is becoming more and more visible, and for us, the growth would also come on a global scale. If we look at some of our key metrics from last year, Oriola Advisory, we had more than 200 pharma clients.
One fact that we are immensely proud of is that our NPS score is consistently around 70, which speaks to the fact that what we do, what we deliver, is really appreciated by our customers. We also have AI and data innovation. It's not just a vision or a pilot product for us. We are really already in production. We had 88% growth in our SaaS subscriptions last year, and we have nearly 100% renewal on the services. Before we get too happy about just about automation and AI, we have to remember that what we're dealing with is human health, human medicines that saves lives used the correct way. If you use them the incorrect way, it has detrimental impact.
For us, we use AI for our benefit and for our clients' benefit, but we will always be expert-led and have a human in the loop to make sure that we remain reliable and compliant and really delivering on the expertise that we have in-house. The way we do this as well, we don't want to be a generic company that comes out with some standardized reports that we send out. Our model of doing this is co-creation. We really want to be embedded in our customers, whether it's AI journey or their access journey, and tailor the solutions that suit them. If we jump over to our AI multiplier, and this is why we feel that we are really in a unique position. AI in itself enables a lot, but we all know it is very dependent on the data that it feeds from.
We have an incredible position to have access to Oriola distribution data, so we see half of the market volume on a granular level. This is something that most of our competitors don't have. We also are living in the Nordics, in the world's richest health data environments. We have national registries. We have decades of history of having that data available to us, and this is true for all of the Nordics. We started building this because, of course, it's a lot of data points, it's a lot of complex pipelines of acquiring that data, and we started building this already some years ago, so this is in function and in production already. Of course, we can combine that with our customer data assets.
Most of the global pharma companies have their own AI journey, and they sit on huge data lakes, and we can plug into those and then tailor that with combining the other data sources. That's really what is our platforms that we are driving. Oriola Insights platform is today something that's already in use and expanding, and we continue to iterate that. We had last year, we had more than 20 updates on it. It means that every second week almost, we come out with a new improved version of it, and it will continue to grow.
Our building blocks, we are on a strong growth strategy platform here, deepening our relationships in Finland, accelerating for Sweden and Denmark, scaling our data and AI capabilities, getting the foundations right in the new markets by being able to be strengthen our commercial excellence and visibility in our new markets, and also to scale with partners. I will conclude is that our ambition for advisory is that we will become the leading advisory partner for the pharmaceutical industry in the Nordics within this timeframe. I'm sure we can come back to this with questions in a little while, but I will hand over back to Satu for now.
Let's then next focus on product segment of Oriola business. Oriola product business actually builds upon. Let me see. Going back. Builds upon the same value creation principles, taking away complexity and enabling growth. Here, focus on multi-channel access and category execution. Product business actually builds on top of the existing distribution infrastructure. By combining the pharmaceutical and non-pharmaceutical flow, we actually create significant cost efficiencies and also provide a one-stop shopping for our customers. Let me give an example to animal health and veterinarians in Finland. Oriola Finland is the main distributor of animal pharmaceuticals in Finland.
Combining that with the non-pharmaceutical consumables for veterinary usage from wholesale business, we actually can serve over 800 veterinarians all over Finland, all from one door, meaning that the veterinarian can actually focus more on patient care instead of ordering products from several suppliers. Oriola Wholesale is enabling growth with one interface for suppliers and one integrated platform for different, across different retail channels. Health product categories are actually outperforming the traditional consumer goods categories in value and margin also in Nordics, and the demand is increasingly omni-channel. Suppliers wanting one door to the market, access to multiple channels with availability, content, and commercial execution. Having an ability to serve both Finland and Sweden is obviously an added value. We developed the wholesale business with focus, identifying the growth opportunities in customers, categories, and brands cross-market.
Also aligning our offering with the growing channels. We capture more value per unit by improved execution, building strong partnership upon the existing strong partnerships, and also optimizing the mix. You can say that Oriola Wholesale is a commercial hub connecting retailers and suppliers. Oriola's strong foothold and expertise on health also translates here into reliability and compliance on non-pharmaceutical products. We do get from the customer feedback on the NPS and input that they truly value the high quality and compliance of our health product offering. Also, we activate the portfolio and the sales with our own category team, sales and marketing team, and also can support our customers in commercial planning and execution. To have a disciplined growth path, we focus on the measurable, action-driven, and practical actions that are really directly linked to margin improvement.
Focusing where the growth happens, where we can structurally win, accelerate time to value, being relevant with the offering on the market, and not just build width of the assortment, but also differentiated offering through our own and exclusive brands. Using more strongly our strategic sourcing capabilities and dynamic pricing models to improve the margin quality. While expanding, keeping the cash discipline with an efficient inventory management and risk-sharing with our partners. Also here, I like to summarize the value creation through a customer example. In Sweden, as Katarina said, health product market is driven, the growth is driven by e-commerce and e-pharmacies. In Finland, the baseline is still fairly low, but the shift to e-com is accelerating here as well. I'm really pleased to present a customer who is contributing to that development.
Olo is the fastest growing e-pharmacy in Finland, and we share the same ambition for growth. I'm really happy to welcome the owner of Olo, Kenneth Forssell, and the managing director, Aleksi Routama, with us today, and both of them are willing to answer your questions over the break as well. We do really close collaboration with Olo. We from Oriola can provide to Olo a one-door solution with less complexity, cost, and risk, supporting their emerging business, the growth with wide renewing assortment, with less risk to test novelties, with smooth fulfillment, and a lot of joint commercial planning. We truly learn and co-create together, so Olo bringing their expertise from consumers and consumer insight, and Oriola from our part with our expertise in supply chain sourcing and supplier management. All this fed into portfolio development as well as commercial execution.
This type of a partnership really prepares a future-proof Oriola Wholesale. It also ensures our relevance for the growing channels going forward. To include another part of our product segment of Oriola's business is dose dispensing business in Finland, and that is a service provided to pharmacies. What happens in dose dispensing is that the patient gets from the pharmacy a medication for two weeks each time, packed in pouches with the date and the timing, which ensures you can check you have take your medication according to prescription. This business really much also reflects to the market of aging population and the cost pressure in healthcare sector. Oriola operates dose dispensing in a company under a company PharmaService, and a service brand Anja.
PharmaService does double-checks patient safety because their pharmacist actually check patients' overall medication to eliminate harmful combinations. It is also a service that actually saves money and supports a sustainable use of medicines while the old medicines don't pile at home. PharmaService gives incremental value to pharmacies with supporting the recurring customer visits when the patient needs to pick up their medication every two weeks. Here we also use the power of synergies because dose dispensing deliveries are combined with our pharmaceutical and non-pharmaceutical deliveries to pharmacies each day. To sum up, our product segment, it is at a complementary offering to our customers. It is also building upon an existing infrastructure from distribution and the customer network. All this bringing the total offering and integrated service alive. Thank you.
I think it's the time for Q&A.
Thank you, Katarina, Satu, and Katja for your presentations. Now we move on to the first Q&A session. We will take questions here from the live audience and also from you online. In the live audience, please wait until we bring you the microphone. Also we ask you to state your name and company before you ask the question. Online, I'd like to remind you to post your questions through the webcast platform. My colleague Tuija has the microphone, anyone with the first question.
Hi, this is Jerker Salokivi from Evli. Thank you for the presentations, regarding what Katja. Actually, Katja talked about the market trends. Could we maybe elaborate a bit more on a kind of Oriola level how you see especially maybe the pricing affecting your business in the patent cliff and market prices affecting your business potential in the future? Is it an opportunity or a threat?
Yeah, that is a very good question. I see it as an opportunity. The pharmaceutical industry is by no means going away. It is just reshaping, as we see. We see a real mix between volume and pricing. If you look at especially the new oncoming products, they are often incredibly expensive when we talk about rare diseases per patient. The market value per se, I do not see there is a decline or risk of that. The volume mix also as well will of course have an impact. Typically what you see when a pharmaceutical product comes off patent, the market expands and there is more patients that are available, so there is also a volume increase. There is nothing to say that it would go down. It is just a mix. At the moment, of course, this pricing insecurity gives a little bit of a delay.
We saw last week reported numbers that Europe is 35% lower in new launches in the last nine months than the previous nine months. There's a little bit of a holding pattern ongoing, but that will resolve itself over time. How much that will be impacted then on pricing will be because every member state still designs reimbursement criteria per member state. How that will float in and become a more coherent European pricing remains to be seen. There will be, of course, there will still be things that we have to look into, and we follow that market very closely to see and to be able to service our clients as well who have the same questions as you have. How will this impact my business?
Thank you.
Hi, this is Miika Ihamäki from DNB Carnegie. Thank you for the presentation. I have also a question for Katja on the advisory business and now talking about AI. I was wondering to what extent could this advisory business, which is likely one of the highest margin source of revenues for Oriola, be at risk if generalist AI tools enable pharma companies to perform these data analysis by their own, reducing reliance on Oriola's tools? You know, in light of, for example, the recent performance in Q1, I was wondering that this cautious decision-making, longer sales cycles, could this actually partly reflect clients reassessing their need for external advisory solutions? Could AI become a threat for this business?
Very good question again. What we see at the moment in the marketplace is less a reflection of companies looking to do their own AI. Of course, we have global huge companies. They have their own AI strategy, and they have their own data lakes. That's of course one part of the market equation. What we see at the moment, the holdback is more dependent on the pricing insecurities of when to launch, where to launch, and at what price level than a real not having a need for AI-driven services. For us, what we see is, it's more about the complexity because we are talking about human health. It's very important to keep the expert in the loop and to have that real deep level knowledge rather than a generic AI. ChatGPT, for instance, it's an excellent tool.
Claude is becoming much better, but it's still, it's quite far from understanding the local needs and also doesn't have access to that data 'cause it's not publicly available online. You still have to build your own data lakes, which we've started doing, and building those pipelines. I don't really see it as a threat that's coming from the internal market. Of course, we have global companies that are competing in the same marketplace, and I guess with everything with technology, the race is on. If we keep focused on really servicing our client pool, which is the pharmaceutical industry, and don't try to be too generalist and really focus in on the marketplace here, I think that is our winning strategy going forward.
Thank you.
Hi, good morning. Melker, Ennismore Fund . Given the difference in customer concentration you have across Sweden and Finland, can you say anything about the differences in margin that you have in the distribution business in both of the countries?
Yeah, I would come back to that. As I said in my presentation, it's obviously a mix of different volumes, volume and specialty flows and services added on the top of that. There's actually it's not as much of a differences per country, but it's actually how of course, the structure is what we offer and what's the need for the specific company.
One thing we can add, there is a difference, in fact, between Sweden and Finland in distribution side. It is also that, and this is no secret, so it is common open sources, we get paid both from the pharma companies and from the pharmacies in Finland. In Sweden, the pharmacies is not paying us for the distribution. It is only the pharma companies based on the regulations. That can be important to understand why the distribution business in Finland is on a higher margin level.
Yes, that's correct.
Hi. Rauli Juva from Inderes. You mentioned a few times that you are not just moving boxes or something like that. I was wondering if you can elaborate on the distribution side that how your revenue streams actually kind of form, how much is each is coming from directly from volume linked revenues and how much is something like more value added?
Well, that information we haven't disclosed publicly, of course, as maybe even here Katja was referring, the market growth is very much on value. Volumes are more flat, of course it's a mix again of services we do. Yeah, that's how the mix is built upon.
Okay. Then you mentioned this growth in like cold chain and other.
Yes
like more complex medicine. Is that structurally better business for you as well?
It's obviously, as said, taking of our more complexity, and that's generating us better margin quality. That's correct.
Yes. Okay. Thank you.
Any other questions? Yes. Here in the front. Yeah.
Hi. Sanna Perälä, Nordea. In advisory, you presented us the nice flowchart of your value chain, but what do you do the most at the moment? Is it R&D services or market entry or clinical trials, and which of these do you see growing the most in the future?
The way we are structured today, we have one could almost say three different business units. We have our operational backbone where we support pharma clients with their running of their current day-to-day business, and that is of course the most people intense, but also has some of the lower margins that we have in our advisory portfolio. We have our strategic arm, which is looking at supporting companies to gain reimbursement and gaining access to patients. We have our AI and our commercial data-driven business. We stand on those three legs and depends on if we look what part of the business do we look at. We see growth opportunities in all of them, but of course we are really steering with the commercial data and the strategic part of helping clients to have gain patient access.
Thank you. If you were to look at some of the possible bottlenecks in advisory services, what would they be? Is it demand or pricing or having the right offering or resources perhaps?
I think we are uniquely positioned is that we operate like a virtual pharma company, so you can outsource anything that you would do in a typical country affiliate organization. We can do all of them. We are very broad in our service offering. The bottlenecks at the moment comes from that the market being a little bit stale and kind of in that holding pattern, and we also see that there's an increased demand and it's putting a lot of efforts for us as well to look at, like, contract signing. Those periods are becoming longer and longer, and the procurement cycles are becoming less country driven by more towards global, and that usually means just a little bit longer cycles from that perspective.
Thank you. I kind of have the same question to product side as well. Which categories or category verticals would you rank the highest in priority when it comes to your growth ambitions?
Of course, we are in a growth journey building up this business, especially to Sweden. Finland, we have a longer journey with that. We obviously try to represent, to be representative in all the growth categories. If we would pick few out of the total, I would say vitamins and food supplements is one of those areas. The self-care overall, women's health included, and then also animal health to several different channels, not just veterinarians, which I covered earlier today.
Thank you. On the service side, this is my last question. What would you say is your competitive edge versus your peers?
I think it's integrated service offering, as was said here, combining the different services from Oriola, meet the customer holistically and their needs. I think that's one of the thing and stickiness. I think we have got a lot of feedback over the years, and from NPS as well, that we have a flexibility to also develop and co-develop services meeting customer specific needs. On the top of that, being harmonized for efficiency.
Thank you.
Okay, any other questions? I think we can take one more question before we wrap up this first session.
Thanks. It is me again from DNB Carnegie. Just to understand the scale of that service business, I understand that you haven't revealed the size of it, but how important it is for your financial targets to expand that EBITDA and to get that sales figures up? Would like to just get some flavor on the meaningfulness of this business.
If we start from advisory, yeah, it's correct, we don't report advisory as a separate, but as part of the servicing. We are a significant contribution distributor for our services portfolio, and we really see that growth in there. If we look at the strategic goals that we have through the commercial data, that is our highest margin product within advisory. We will continue on that significance without being able to reveal more.
Okay. Thank you
I maybe continue a little bit on that, on the distribution services, of course, asset, the specialty flows, and also the additional services built on the top of the core service. That, of course, generates a better margin for the future.
I think you can say even that the distribution service is the big volume one. Mats will come back to that a bit, little bit later. It's where we have the biggest volume, and of course, growing that will also make it possible to also then do the investments that, for example, Katja needs in advisory service and Satu needs in wholesale services. Yes, it's important, of course, that the base is there. It's also important that that base is stable, like we said here before. The distribution business, it's, like, stable. It's going there. There is long contracts in this business, so we have a foreseeable, predictable future, and I think that's important for us as a company and of course also for creating the value overall in the company.
Good. I think it's time for us to wrap up the first session now, and we will continue with more questions at the end of the second session. During the break, we kindly ask you to share your feedback to us on the first session. You can see the QR code here, and it's also available in your materials. I think we will be back around 10:30 A.M. Enjoy your break.
[Break]
Welcome back, everyone. I hope you enjoyed your coffee break, and I hope that those of you who are here in Helsinki also took the opportunity to taste the latest Dexal drink. Before we start the second session, I would still like to remind you that we really, really value your feedback on the sessions. Please use the QR code, and those of you online, you can use the poll that is visible in the webcast platform. Now we continue with the second session, and first you will hear from Tuomas Tiilikainen, who is heading our supply chain, and then from CFO Mats Danielsson, and Katarina will then give you an update on Kronans Apotek. After the presentation, we have then the second Q&A session. With that, Tuomas, over to you.
Hey, it's 10:30, so it's still good morning also on my behalf. I'm really happy and excited to be here to present to you both the audience here on the site but also on the line, Oriola supply chain. Today, I will show you how we are executing on our supply chain transformation and how it is enabling the scalable growth and the long-term profitability for Oriola. Our supply chain is truly a strategic asset for Oriola. As highlighted by Katarina and Satu earlier, we are part of the society's critical infrastructure. We operate in a regulated, highly complex, high-volume market, where the competitiveness is defined by reliability, efficiency and scalability. We are on a supply chain transformation journey. Our transformation is built on three pillars. Firstly, earlier this year, we have announced key strategic investments to modernize our physical infrastructure.
These are enabling us to increase our efficiency, enable the growth, and build sustained competitive advantage. We are also investing into technology and building a strong digital backbone to decouple the cost from the growth across the whole value chain. We have a clear road map to increased efficiency and profitability. Together, these form the foundation for the next phase of profitable growth. On the following slides, I will walk through these three pillars in a slightly more detail with some examples how these are creating value both for our customers, but also for our shareholders. Let's first start by walking through how we are executing our supply chain transformation step by step. If we look back couple of years, we at Oriola have made certain key strategic choices to simplify and focus our business and operations.
We have divested non-core operations, we have consolidated our distribution network, and we have been also working on process standardization and harmonization across our warehouses and also across the countries. Our current focus is to modernize and digitalize our infrastructure. We are investing both in Sweden and Finland into our physical infrastructure, but we are also building a strong digital backbone to decouple the cost from the growth. As we move forward, our focus will shift towards scaling and accelerating. This will enable us to further increase the efficiency, expand our service portfolio, and ensure that as we grow, the growth will translate to the bottom line. Overall, we are in a very interesting stage from our tansformation point of view.
The work that has been conducted is starting to pay out and when we look ahead, we have really interesting opportunities that will unlock additional value in the years to come. Let's start take a look at one of the most exciting initiatives that we have ongoing. Earlier this year, January 7th, we announced the strategic historical transformative investment to Finland, Järvenpää. This is one of the key cornerstones for us to build long-term value both for our customers and our shareholders in the coming years. There are three key messages that I want to leave you with regards to this investment. Let's first start with the profitability. This investment allows us to re-engineer our operating cost base. We are doubling up the level of automation. We are increasing the peak throughput capacity to enable better asset utilization. We are lowering our unit cost base.
This allows us to process higher volumes so that the growth translates directly to the bottom line. Secondly, Järvenpää is a key enabler for us to growth in Finland in the years to come. While we are investing across into the capacity across the different segments, we are investing the most into the cold chain, as highlighted already today earlier. This is the highest growing segment that we foresee. We are nearly doubling up the capacity for the cold chain, and we have a opportunity to triple it from that level in the future. This is a high value segment, complex, but as pointed out by Satu, also high margin segment for Oriola. If we look back at our operations in the Mankkaa facility, this is also an area where we have been very restricted to grow.
Our market share in Finland in the cold chain area is lower than what is our average. We see a major opportunity for Oriola to both increase our market share but also benefit from this growing segment in the future. Thirdly, with Järvenpää, we are also building sustainable competitive advantage for Oriola. I'll give you one example from here, and that is the sustainability area. We are designing the facility based on the BREEAM excellent standard. The facility will be 50% more energy efficient. It will consume more than 50% less water. It will support our own science-based targets but also our customers' science-based targets and our customers' supply chain decarbonization efforts. Sustainability is increasingly important criteria for our customer in their partner selection. With this investment, Oriola will be the preferred partner of choice from the sustainability point of view.
Our current phase with the investment is that we are constructing the site as we speak. Earth works are ongoing. We plan to start the operations during the Q1 of 2028, and we estimate to have the full P&L impact during the last quarter of 2028. We are truly extremely excited about the Järvenpää investment and the opportunities that it will bring us. We are excited about the Finland and the Järvenpää, we are as excited about the Sweden opportunities as well. In March this year, we announced a targeted EUR 5 million investment into our Sweden infrastructure in Enköping to increase our automation capacity. This is to enable growth and to increase our efficiency. Our starting point in Sweden is slightly different compared to Finland. We operate already relatively modern and highly automated infrastructure.
We have a great supply chain challenge in Sweden with growing customers. We have a high growth, organic growth from our existing customers. As pointed out by Satu, we have a really strong customer funnel as well of new customers. With this investment, we are enabling that growth. We will continue to invest into Sweden when required to enable this profitable growth. This is a really great opportunity for Oriola. Beyond our physical infrastructure, we are also investing into technology and digital infrastructure. This is to address our whole value chain, not just the supply chain, but all of the functions within Oriola. This is for us to decouple the cost from the growth across the whole value chain. We are deploying different technology depending on the use case where we get the shortest payback. You've heard some examples already today.
I'll give you two examples to build on what is being presented already today. First of all, as pointed out by Katarina, we have the ERP program ongoing. This is to harmonize our legacy systems and unify to SAP Digital Core. This will help us to increase our operating leverage across the whole value chain as we scale. We had the first successful go live end of last year. That gives us really good momentum to build on the next phases that we are planning at the moment. Secondly, we are deploying the AI across the organization, as pointed out already earlier today. We are using it to drive meaningful business insight. We are using it within supply chain. We use machine learning to predict the demand and have a better forecast in terms of the availability and our labor planning.
We are also using the AI to simplify our processes, automate manual tasks to reduce OpEx headcount and the administrative overhead across the whole value chain. As a summary, the strong digital backbone will ensure that as we grow and as we scale, we are able to keep our cost base controlled and efficient. Finally, let's have a look at our roadmap to increased efficiency. First, we have a strong track record from the last few years already if we look back. We have been able to deliver consistent year-over-year efficient increase, roughly 5% even in this inflationary environment. This has been mostly driven by our strong culture of continuous improvement. Looking ahead, we are unlocking additional structural efficiency gains on top of the continuous improvement that we are working on. Therefore, we do see further efficiency opportunities in the future years to come.
To conclude shortly, we are in the supply chain transformation journey at Oriola. Our transformation consists of three pillars. Firstly, we are modernizing our physical infrastructure to increase efficiency, enable growth, and build sustained competitive advantage. Secondly, we are also investing into technology to decouple the cost from the growth across the whole value chain. Thirdly, we have a clear roadmap to increased efficiency and profitability. Thank you very much. I'm handing over to Mats.
All right, hello from my side also. Now, it's not morning anymore. Now we will dive into the numbers and I will talk about profitability, emphasizing the future profitability and what is the outcome for the shareholders based on that. First, I will start by opening up a bit of the new reporting principles that we have. We have changed the definition of net sales has changed the numbers quite a lot. This is really mostly affecting the distribution business where we now have the income that is paid to us, that's our net sales. Then for the advisory and the wholesale and dose dispensing in Finland has no impact on the net sales there.
It's the distribution business and the income to us, that's our new net sales. This falls quite nicely into the new segments that we have. I will come back to that and explain a bit more in detail about those. We have the new financial targets, came out earlier last month. Growth at least 5%, and then a cost to net sales of 75% below that. We'll go into those also more in detailed. That, in the end, will bring us an EBITDA that is doubled from the current EBITDA and target is to strengthen the equity and to, this will, of course, support the future dividend payments also for the company.
There has been a lot of discussions, talked to a lot of you also about the difficulty to understand Oriola as a company and the numbers. I would actually dive into the new definitions and the segments and come down from the top and start to look at this way. We have the services segment and we have the product segment. If you look at the first the service segment, this is really services that we do. It's the distribution, it's a service, it's a high volume business where we have it's EUR 4 billion invoicing that we do for our customers. It's more than 300 million packs that we distribute per year. That's the really like Satu said, and this is the engine of all what we do.
This is the basis of what we build on. We have advisory filling out the value chain. Katja talked about that. In this segment, the net sales is the service fee that is paid to us. That is now the how we recognize net sales. Has also a balance sheet impact. We'll go back to that. The working capital in the services segment, and now we're mainly talking the distribution, it's negative with a limited risk. It's negative because we are not a bank. We are not financing. We are distributing. We are a company distributing goods and we are not a bank. Therefore, there's the working capital is negative. Limited risk.
Of course, the balance sheet is growing because we are selling, we are invoicing the products that we distribute and paying back to the mainly pharmaceutical companies. We'll look at the balance sheet a bit later. That's the logic behind this. We have the product segment where we have Satu talked about the wholesale and the dose dispensing business. Here we have the full business risk. We find, we source by put into inventory, and we sell the products. We do marketing and all what's needed for that. This is a normal risk for us as a company to do this. Net sales is the sales of the products naturally and with the working capital we have a business risk.
If a customer is not paying, no one is going to compensate us. Tuomas talked about the scalable infrastructure around this. This is the system that we have. We have synergies within the segments, and we have synergies across the segments from a financial point of view. Within the services segment, of course, many of the customers, they utilize our distribution services and the advisory services. There's a synergy in that. If we look at the product segment and the services segment, of course, we are distributing the distribution services that we do, it's a EUR 4 billion invoicing, meaning quite a lot of these green boxes that you saw in the pictures in the beginning.
Then we have the wholesale business where we have our own products that we can put into those boxes and ship them along. When we have the distribution, the transportation of the boxes, the cost of doing that is mostly related to the stops that you do. These trucks, they stop at the, for example, pharmacies or retail customers. They stop there anyway, so we can fill it up. There's a synergy on adding our own products into this package. We also can utilize Another example of benefits is, of course, when Tuomas is planning the activities in the different sites. Pharmaceuticals are normally ordered at certain times during the day.
In between those, there's not that or maybe not enough to do, and that during that time we can do now other things. We can fix the wholesale and the dose dispensing products so that they are ready to go when the trucks leave. That's the logic behind why we have fitted in these kind of types of fits so well into the system. On the right-hand side, you can also see the net sales by segment. The services fees are, this was last year's numbers, EUR 147 million, product EUR 66 million. Sales of product EUR 66 million. Roughly EUR 200 million in total the consolidated sales number. I will not go through now the Q1. We had a quite good Q1, good growth.
Main point being here talking about there has been a discussion also that, okay, the invoicing is growing. Is our net sales growing or not growing, and what is the kind of dependency there? We can say that in the services, we have 60% of the pricing in the agreements is related to a margin-based, so that will move along the invoicing or of what we do. Forty percent is more correlating to the transactions or the pieces that we move or the order lines and so on. We can have an invoicing that is going up, but it can also go down, and we can move slightly in a different way.
Of the product segment, we can also say that it's about 50% is dose dispensing Finland and the rest is wholesale, the other 50%. We had a 10.7% growth in the Q1 of which actually 2% was related to FX. The Swedish krona has been strengthening. If you look at the adjusted EBITDA, services had a slight decline related quite a lot to what Katja was talking about. The products part has been growing. We already said end of last year that now we have invested quite a lot last year, now we've got some traction. It has been doing really well now since the quarter four and the Q1 this year. The EBITDA was also slightly higher than last year.
Good start for the year. If you look at the balance sheet, here we also have some changes due to the fact that we are not the sales is the income that we get. We are then eliminating out the inventory of the goods that we are distributing. It's a service that we do. Invoicing is a service that we do for our customers to collect the money, and we bring the goods and collect the money back to them. We are taking down the inventory and the net that on the trade payables, it's done by customer by customer that kind of calculation. It, that's the way it goes.
You also see here when we look at our balance sheet, and you see the trade receivables and trade payables, that's actually a part of the service that we do to our customers. It comes into our balance sheet, and it goes out, but it's a service that we do, that's why we have it here. As I said in the beginning, the risk with this transaction is limited. It's not like, on the product side we have a full risk, but on this distribution part it's not a full risk in our balance sheet. A bit different from a normal company, so there's we are a bit different. If we go to the financial targets, 5% growth. This has two implications. It has three implications.
We need to grow. Every company needs to grow. The second one is that when we grow with a quite scalable and efficient cost base, we will have a profitable growth when we do so. We also have the negative working capital. When we grow, we will release cash on top of that. It will be the result plus, from the balance sheet there will be improved cash flow. That has got actually two implications. The cost to net sales, that's actually We have put this target. It's a bit sweet from the EBITDA %, but we want to look at it like this because this is how we do it.
The EBITDA percentage is an outcome because we need to keep the cost base in order in order to be able to deliver the EBITDA. The cost base will now be have a positive impact of all the investments that we have done: automation, AI, scalability in the sites, and so on. This will be a really good engine now for the future. We see also that the cost to net sales has been slightly declining already during the last years. What is then the end result of all of this? Like Katarina said that we did EUR 35 million last year. We see that we have been generating EUR 2 million-EUR 3 million EBITDA the last years. We could do that in the future also.
We have, of course, there will be a constraint with the capacity, so we would not be able to continue like this. We are running out of capacity both in Mankkaa here in Finland and in Sweden. We need to also to invest to be able to grow like this. We have then the kind of the organic growth based on will continue to deliver EUR 10 million on top of the EUR 35 that we have today. The investments that we do, we have Järvenpää, we have the ERP, and we have the investments in Sweden. Those will generate direct savings on how we work. There will be an impact in the sites based on the automation, for example, that we do.
Combining those two buckets that we are growing and we have invested will on top of that will bring the efficiency where we go down with the cost compared to the sales, and that will bring another EUR 10 million. These are a bit connected, interconnected, all these pieces, but the total will be that we go from EUR 35 million- EUR 65 million in, by 2029. What's then, what's the end game for the shareholders, the owners of the company? If you take now the last year's EBITDA. Net, sorry, net result was minus EUR 7 million, and with the EBITDA improvement now of 10 plus 10 plus 10, we will put on EUR 30 million.
We have also the ERP has been treated as a cost and not capitalized. We have had a negative effect in the profit and loss from that. That will, of course, stop when we have closed the project and we will have actually have nothing to depreciate after that from the project. That's about EUR 15 million that we had last year. We will of course have now for the coming years, we will have some more cost from the investments. Järvenpää, the leasing cost will come and we will have some depreciations. With all of this, we will end up in a net result of EUR 30 million.
Not audited numbers, by the way, so that you know, just that you know. It's roughly in the, in, on This is the scale. If you look at the what will this bring for the future and how do we then generate shareholder value, I mean, the improved net profit is the basis for all of this. We need to improve the net profit to That will give us opportunities to do more. We have quite heavy investments and initiatives ongoing, this will then for the future bring a good income. We have some investments that we need to do, they are still small in relation to what we have done now during recent years and what we will do now for year or two more.
We have a good cash conversion due to the fact that we have a cash flow from the negative working capital and the investments are fairly small. We are targeting an improvement of the equity ratio. We have said 15%- 20%. This is coming from the kind of regular income in the from the profit and loss, but also that we have Mankkila site that we will at some stage we will sell that. We had some additional kind of non-core assets that we are able to release also for that. The equity ratio still, if you look at, we have a quite a large balance sheet.
When we look at the balance sheet now, if it gets larger, it's actually positive, we have been selling more than we are doing today, so it has a kind of twofold effect. The risk is limited, as I said, with the receivables and in the balance sheet. We'll improve the equity ratio in the long term, this 20% could be even longer than just a strategy period. We have started a share buyback program. It's not very big, but we have started one. We have updated our dividend policy. It's an update. It's actually quite close to the old one. It's two third of the net profit to be paid out.
We have included the joint venture included in the policy but excluded from the calculation, the joint venture. A dividend payment is a cash event. The share of profit that we get from the JV is not really a cash event as such. Of course, we, as any company, when you pay out dividends, you need to look at your financial position and the business outlook. To conclude, we have changed the reporting. We hope this gives more transparency and understanding of what we are doing and how we are doing it and more kind of closeness to the numbers also.
We have set up the new target, financial targets and with this achieving these targets, this will actually generate a doubled EBITDA for 2029, which will give us also a strengthened equity and possibilities to look at the dividend payments according to the new policy. Thank you. If Katarina continues.
Now there is different slides there. Thank you. We will take some words now about Kronans Apotek. To start this one, I will first talk about what Oriola view is on Kronans Apotek, and then we'll get a little bit in on what Kronans Apotek is doing to correct the profitability levels where that needs to be on a different different level altogether. If we start with Oriola's view on Kronans Apotek, and let's start with the background to why there is a joint venture between Euroapotheca and Oriola regarding Kronans Apotek. The joint venture was started in October 2022, and the main reason for doing this joint venture was that Kronans Apotek at that point was number three in the market and Apoteksgruppen was number four.
By joining these two pharmacies, you got a clear number three on the market and could also be using the synergies of having bigger chain with assortments businesses, with assortment and private label, as well as a bigger pharmacy network. It was also about e-commerce that already then was seen as something that is growing, that's the main reason. Take out scale of efficiency and being a clear, more clear towards the customer. Euroapotheca has also been in the managing control in Kronans Apotek since the joint venture was started. If you look at then Kronans today, yes, it's clear that the integration took more time than it was anticipated. It was more difficult, it's now finalized in the end of last year. Currently, there is a stabilized environment, from here it's also possibility to build for the future.
The market dynamics is challenging. We can see that there is a strong e-com growth in Sweden, like I talked about before, but there's also opportunity in this one. There is a new business plan done in Kronans Apotek last year. Unfortunately, it's a little bit delayed since the integration was taking longer than it was anticipated, like I said earlier. For expectations is now to have the business fully on back in two years' time. When we say that, it's about market average that we are talking about. This is something both owner are committed to do.
For Oriola, Kronans Apotek is a strategic assets, for us it's most important right now to get the profitability levels up to a level where we can take a decision about should we keep Oriola or not Oriola, Kronans or should we sell Kronans? That's something that is important for us, absolutely, depending on also what happens in the Swedish market. First, the profitability levels needs to be on a decent level. If we look at Kronans Apotek, Kronans Apotek today is almost 500 pharmacies and a full scale e-commerce. The e-commerce is growing, more double digits and growing more than the market in the e-com in Sweden overall. Also, the physical pharmacies here mentioned as brick-and-mortar is also growing. It's also so that Kronans is having quite much effort in the private label.
Private label is a product group that has higher profitability, and Kronans doesn't has its fair share in this area. That is a focus and is of course, something that is positive for the future. Like I said earlier, Kronans Apotek last year did a business new business plan, and this is on top of building the base. During the last years, Kronans Apotek has focused a lot about building the basics. There is still some things to be done, but Kronans Apotek has a strong brand and also customer loyalty.
The customer club is around three to three million members. Building on that and getting the knowledge is something that Kronans is using to get the customers and the loyalty from them, going to both be in the omnichannels like the physical pharmacies and in the e-commerce to choose Kronans as a preferred partner. We're coming to the margins. I will come back now because we opened up already in the Q1 and said that Kronans will now also focus on the profitability gains. There is short-term initiatives in Kronans to accelerate the profitability and the saving targets for that should be done, achieved by 2027 is EUR 20 million, that is starting to realizing already now. There is mainly two parts in this one, two drivers.
One is the revenue and gross margin drivers, where Kronans is looking a lot on the assortments, which assortment should be sold, what assortment do you have in the pharmacies, as well as then developing the private label. It's also about the pricing and the campaign strategies to get the margins to the levels where it should be. The other driver is the costs. It's both about focusing on completing some part of the integration that is still left alone and hasn't been realized the full way, like looking at the head office functions to get that to a level where it should be, as well as looking at the pharmacy network. How many pharmacies should Kronans have in Sweden, and what's the format of them?
That is things that is ongoing, and this will be accelerated in the business plan to now start to get to the levels, to the profitable levels. This is the short-term initiatives that should gain them EUR 20 million. In the long run, there is EUR 40 million more in the business plan. Here you see the areas. It's about the shopping experience, it's about the cost customer offering, it's also about the operational improvements and also new business opportunities. Getting the basics in place, getting now, the fundamentals to work and on top of that, get the customers to start to use the omni-channel. It's the basics. These strategic initiatives is done, like I said earlier, going back to now starting with the short-term actions.
Kronans Apotek will get revenue growth across the channels, both in the brick-and-mortars pharmacies and the physical pharmacies, as well as in the e-commerce, and the e-commerce will continue to grow. While e-commerce is growing, there will also be more automation done in the e-commerce that will also then get efficiency up to new levels. The revenue growth across the channels is there. There is also a margin expansion on the way, working with assortment, working with the private label, and also improve the customer experience and the commercial execution is supporting this one. The cost base.
Having the right head office functions, getting the ERPs changed, getting the value out of that, as well as then also get the more efficient e-commerce scalability in Kronans will cut the OpEx quite heavily. As owners, I will say that both Euroapotheca and Oriola is committed now to be part of this journey. Like I said before, for us in Oriola, it's important to first now get the profitability to the level where we are. We will take a decision on what we will do in the future. Before we go into Q&A, I will also try to conclude this day.
Listening here to my colleagues in the sofa over here, I will say that I'm confident that we will now deliver the double EBITDA that we talked about or I talked about in the beginning and also Mats talked about. For us, it's about the actions now. It's not about planning and strategy, it's about actions. We are a service company, we truly are. We are streamlined to be able to be there for the customers and build up strong partnership as this service company. We have the distribution services, we have the advisory services that both Katja and Satu Nylén was talking about. On top of that, the wholesale and health and well-being products that also Satu Nylén mentioned.
The operational excellence are already there. We will build up on that with the investments that we do and that also what Tuomas was reflecting to. The ERP project is a lot about transformations. It's not only an ERP project. It's something that will help us to change the whole company to be able to get more efficiency out of the supply chain and have supply chain as a value driver. Then focus on the execution. Mats told earlier here today that when we are growing, we are also releasing cash. That will be a cash generation and also disciplined capital allocation by growing and also keeping control of our costs. I'm well committed, and also I know that the management is committed to deliver this profitability journey to reach the EUR 65 million in adjusted EBITA by the end of 2029.
With that, I think we conclude this day, so it's time, I think, for the Q&A.
Yes.
Tuomas and Mats, please.
Thank you, Katarina, Mats, and Tuomas for your presentations. Now it's time to move on to the second Q&A session. We take questions from the live audience here in Helsinki, as in the first session, and also from the webcast. We have a first question over there. Please state your name and company before the question. Thank you.
Okay, thanks. Sami Sarkamies, Danske Bank Markets. I have a question on your investment plans. There are quite a few areas where you will be investing, so can you somehow try to summarize the total CapEx plans for the coming years, their timing, and then maybe also talk about kind of like CapEx to sales metric that where this will be in the coming years, and where do you see it in the long, long term? Thanks.
Now, these have been handled all a bit differently in the. I mean, we have said that the ERP is a EUR 35 million investment that we are taking as a cost. We have now. That was 2025 and 2026 and 2027. That kind of will come as a cost, and then of course there will not be no, in a way, no depreciations after that. Then we have the Järvenpää that we have as a leasing contract, and that's the whole idea with the Järvenpää leasing that we will actually start to. The volumes are growing.
We are getting full in Mankkaa. When we move into the Järvenpää, we can start to fill up the kind of new capacity and gain more income. Also the cold chain with, for example, a higher margin. We will start to pay for the Järvenpää site at the time when we start using it. That will of course, I mean, it will be a 15-year agreement, so that will come at that stage. We have the EUR 5 million automation. That will probably be booked this year.
Partly this year, partly next year
Partly, yeah, partly this year and next year. The rest that was mentioned at EUR 20 million-EUR 30 million, we don't have detailed plans about that, but it will probably come during the coming years.
There is no decision on that yet, let's say.
No, it's.
It's in the plans, but there is no decisions.
Non-audited.
Are you able to talk about this in CapEx to sales metric that where are we sort of roughly now and what could be the level in the long term?
I can maybe comment. The especially the infrastructure investments that when we think about the Järvenpää case, of course there it's a totally new greenfield investment. It's a long-term investment for Oriola, which has also slightly longer payback time for us.
Yes.
We are talking about five to 10 years-ish. When we talk about the pure capacity add-on investments in Sweden, those are with the shorter payback as we can onboard additional customers and in addition to the efficiency gains, get the additional margin from the growth. There we are talking about a shorter payback.
Okay, thanks.
In the middle.
Miika Ihamäki from DNB Carnegie. My first question is that do you expect that you're able to improve your cost to net sales ratio every year, or should we expect some impacts from the transition to new distribution facilities simultaneously whilst you have the old one running?
I assume that we will do that. It's actually excluding if we have some adjusting items, so that's not included, like the ERP is not included in that one because otherwise it will go bananas. The, kind of, underlying cost to net sales will improve year-on-year.
I think we can say that we've already shown that we are improving.
Yeah
it every year.
Yeah.
Of course it's like when we talk about the big investments, that's one part of it. Tuomas also mentioned to some extent, but let's spell it out here. Tuomas and the whole Oriola is working every day on what we can do as continuous improvements.
That's part of our DNA to some extent. It might be so that it's so common for us, so we don't maybe say it, but we have a company with around 1,000 people, and we are emphasizing them to do something small every day, and that is in a way giving even more and bigger impact than these big investments, and that's something we have worked with for quite many years now. I don't know if you want to add something on that.
No, it's exactly that. We have a solid track record.
Mm. Mm
As shown on the roadmap to the profitability, we have been able to improve year after year after year.
We will continue to do that as we go forward. We like both supported by the investments, but also the culture of the continuous improvement.
Would you would you even accounting for the potential cost inflation ahead in the market given the oil prices, et cetera, you would still stand behind that statement?
I will say yes, when it come to that. Of course, we always need to swallow something, that's for sure, but if you take the oil and fuel prices, we also touched that during the Q1, and we have the possibility to also push that towards our customers in this case. We have more possibility to push costs out from us. Of course we also have the, in the plans to swallow some part of it. Yes.
My second question is a bit more on the sort of what's happening in the Finnish and Swedish market on the distribution side. You mentioned that your efficiency depends partly on trucks delivering to fixed locations, like pharmacies. In other words, the number of logistics stops. As you mentioned, e-commerce is vastly growing in both markets. Doesn't this structurally work against your stop cost efficiency model if this will fragment deliveries to individual addresses? We're seeing home deliveries improving in many segments in Finland, for example. How are you prepared to address the structural changes to online?
Yeah.
I-
Maybe I can comment on that.
Yeah, yeah.
and start from that. First of all, as you mentioned, we do have the different customers, downstream customers as we'll call them, have different distribution models depending on their structure. We have the direct to pharmacy, which is the dominant distribution model, as you mentioned already. Still today in both of the countries, we have the increasing amount of the e-tailers where it's a kind of, for us at the moment, it is a customer warehouse delivery model, not the direct to consumer model. With the Järvenpää, we have said, and it was already written there, that we are building it in a sense that we are ready for any of the distribution models in the future.
We will have the full flexibility to serve our customers depending on whether it's a direct to consumer or cross-dock or customer warehouse or direct to store delivery model. We are equipped and prepared for that shift in the future as well.
It's good to note also that, I mean, the transportation capacity, that's not owned by us. We buy that as a service.
If it goes down to, you know, from 2,000 stops to 1,000 stops, then it's a different cost also. Hopefully there's the same amount of products that they deliver.
Thank you.
Okay.
Hi. Thank you. Sanna Perälä, Nordea. I have a couple of questions regarding the growth target. Can you give us a rough split between segments or certain verticals which, how will they contribute to the 5% annual growth, or perhaps countries even given the different market structure?
We have not. This is a kind of we wanted to have one target, but of course we can say that the product segment is growing in our plans, is growing more than the services on average. We have had some good numbers right now, but during the strategic period, we believe that the products will grow even more than
Of course also advisory in the.
Absolutely, yes.
That segment will grow.
Yeah.
It's a balance. Like you said, Mats, we are not disclosing all of that.
Splitting that, no.
No, no. Unfortunately. Mm.
That's fair. Thank you. Well, that change of your revenue recognition to a net basis, Can you give us a color on what's your underlying pricing power and what drives the growth of that net revenue?
Well, I mean, if you compare this to the previous one that we had, that was actually the sales of our customers where we had no impact on anything. Here. Now we are just showing the prices that we can affect. It's, we can 100% affect the pricing of the services that we do.
How will you do that? How will you drive the growth of the fee, let's say that way?
Well, it's a, it is in that the combination of the mix that we have in us on, kind of what we do and what our customers want to have us to distribute, for example. If it's more cold, more expensive, products, then we need to be able to handle those, otherwise they will slip out of our hands and we will not be able to grow. That's a part of the growth story.
I would say one thing is the product mix that you're touching here, Mats, what kind of products do we have? Some of them has lower margin and some of them are higher margin. We are not touching it completely either. We are also, of course, in close discussions always with our customers about what's the right pricing, and that's the normal way. It doesn't matter if it's a service or if it's a product that we sell. It's always our job or our salespeople's job to, of course, get as much money into us as a company as we can and to, of course, also get costs under efficiency levels and the costs to be able to get the margin as high as possible.
I can say that during the last years I can see clearly improvements in how we are also taking these customers discussions.
Great. Thank you. I think you touched the EBITDA bridge quite well in your presentation, so I don't have any more questions on that. If you succeed in your strategy in the next three to four years, how does Oriola look like at the end of 2029?
That's a good question, but I will say that of course we have more bigger services outside also the distribution area. Since we're saying that both wholesale and advisory services have the potential to grow faster than the distribution segment, that is something we will see. Both advisory and wholesale has higher margins, of course the revenue recognition will look a little bit different, and that's also what to see. More, we also touched quite often here during the presentation the digital aspects, both digital and AI, and that is something that we're working with. You also know that of course the world around us is changing in this aspect. Exactly what that means I don't think anyone can say, and that's something we need to follow. Of course we will be more digital.
We will have less repetitive works and more also automation, overall in our company.
All right. Thank you. Then I have one more question regarding your working capital and, as a group you have a negative working capital, and then you mentioned that in the product segment it is a risk factor. How do you control your working capital flows on a group level and make sure it stays negative?
I mean, of course, that's, we have With the, with the products of course we have to, in the product segment, it's normal business that you negotiate and the working capital is maybe not negative there. On the, on the distribution side where we actually act as a distributor and we should not be a bank and finance someone else, I think that's a quite logical and well accepted kind of in this business that we are not-
The pricing should be totally different if we would start to take that risk and have a full working capital risk also. We are not negotiating, we are not selling, we are just distributing the products there.
Mm-hmm. When it comes to the wholesale segment, sorry, Mats, it's also about, yes, we should grow it, but you can grow it in different ways. Of course, you can say, "Now we take in 10,000 new products." That's a big risk because then we need to have it in the stock or we need to find other ways of doing it. Also what we said here, if we grow together with our partners, it's also a way of like diverting like or like take shared risks in that aspect. Also about having inventory control and how do we then take it to that level. I know that that's Satu mentioned for example Olo-apteekki, in that we are also of course co-creating what products would they like to have and how can we then find them.
There is different ways of leverage this one. Overall I would say that Tuomas and his team of course having control, where is the stock levels, not running out of shelf dates and so on, that's the inventory I would say is the biggest risk.
We are highly sophisticated in that area.
We are using AI, we are using machine learning to predict the demand. We are optimizing our working capital, our availability based on that.
We are that good at that we are also offering that as a service for our pharmaceutical principals and companies.
It's really a key kind of within the DNA of our supply chain to optimize that one.
Otherwise I would say, like Mats say, I don't see the risk in that aspect in the distribution side. I don't.
Thank you. The distribution is kind of the buffer.
In a way.
risk.
In a way.
Cool. Thank you. I don't have any further questions.
Okay. I think we have time for one more question, so Rauli, please go ahead.
All right. I have many, but I'll try to pick. Maybe I'll take the one on Kronans then. You had said earlier that you aim to, or you kind of hope that Kronans would hit the industry margins by end of 2027, and now you showed quite a few kind of initiatives that will take impact only in 2029. Has that timeline been extended somehow over too?
There was 2 part of initiatives I would say. The short-term initiatives we'll start to realize already now. We should see improvements already coming from now onwards. The EUR 20 million, the short-term significant initiatives, they are like I think in the material it says EUR 27 million, they will start already now.
The other ones will come after that. It's not so that of course it's waiting for the other ones either.
To focus and really get the synergies out, or like the efficiencies out, that's why we do it like that. You will not wait with all of them to 2029. Starting now.
Okay. All right. All right. Thank you.
Okay. Good. Thank you. Now we are coming to the end of the program. It's 11, a little bit past 11:30. For those of you who are here with us at the venue, we warmly welcome you to join us for lunch. Once again, thanks for your excellent questions. Before we conclude, once again, a reminder, please share your input on the sessions today. It's really important for us to understand how we are, how we did today. Thank you everyone for joining our Capital Markets Day today.