Swedencare Q3 reporting. My name is Håkan Lagerberg. I'm the CEO of Swedencare, and with me I have Jenny Graflind, our CFO.
Yeah. We will have a presentation, and then at the end of the presentation, we will have a Q&A session for the questions that we have received, and after that we will have a live chat.
Okay, let's get going. Q3 2021. The quarter can be defined as record sales and profit, however, a bit lower margin, and there were more sales to be done. I will come back to that. Our organic growth was flat and impacted by major orders to Asia that had been postponed, and also some other things that I will explain. Vetio, our big acquisitions from 1st of July included, and what we would like to highlight is that Jenny and I was finally able to travel over to the Atlantic and visit the team up in Vetio North, Canada. We have had lots of different projects internally and externally concerning supply, production, and other project business activities that I will describe.
Finally, we concluded the quarter with a small acquisition. A company focused on logistics for e-commerce. Yes. Let's see, key highlights. As I've described previous quarters, we have many activities with bigger business opportunities. It's you can say that it's different projects. It's all from lots of online projects, of course, that we handle internally. We have lots of discussions with bigger companies regarding different markets, and we have also different, more, let's say bigger opportunities with chains and clinics and buying groups. All of that is mainly due to our new composition of the group, that we have a fantastic product offering and brand offering.
There's lots of interest from the market for Swedencare and all of our different brands. We have had a very good quarter, even though it started off a bit slow due to the COVID situation, as you all know, impacted us. That it came back during the summer and lots of events were postponed or handled digitally. Nevertheless, several of our group companies had their best quarter for 2021. Swedencare U.K., our Nordic company, our Spanish company, Pet MD Brands, our online company in the U.S., and Stratford, our veterinary-focused company in down in Florida. We've had some challenges with that all companies have dealing between the U.K. and the EU, and we managed to solve that excellently due to our setup.
We have, as you all know, our Irish warehouse and logistics facility and production facility down in southern Ireland that has been able to handle E.U. exports from our newly acquired company, Nutravet, for the E.U. exports and vice versa. Since we have production in Ireland for the U.K. market, we've been able to ship large shipments to Swedencare U.K. and Nutravet so that they can bulk up and don't have to send small shipments because there's lots of different administrative assignments you have to do when trading between U.K. and E.U. Hopefully that will get better, but we have managed to solve that excellently, and that has had a positive impact on our sales.
Online keeps on growing for us in basically all markets, and as I've stated previously also that we do see an excellent return on investment when it comes to sales and marketing activities online. We keep on building our different brands online and in different platforms. As of now, it's been mainly, if you look at Europe, it's of course zooplus and Amazon. If we look at U.S., it's Amazon and Chewy. Now, and especially one of the reasons why we acquired FAV is really that there are so many platforms in the U.S. where we haven't been present, and with them, we can easily get our products listed in lots of different platforms.
Vetio, our biggest acquisition ever, as you might recall, they're a contract production development partner. We buy some raw products from them, but we are in process of transferring more and more production to Vetio. They had some issues this quarter, unfortunately. First of all, the Q3 of Vetio is normally a bit slower due to the focus on dermatology products in Vetio South. However, it was further hampered by a hurricane issue, so the power outages affected our production. Then we had some COVID issues with key staffing being hit by COVID.
Then finally, there were some challenges with raw material costs that we couldn't push further to our customers during the quarter. However, we have started that process, so from Q4 some of our price increases have kicked in, and it will all be done by January 1, 2022. I would like to underline that Vetio still had a good quarter, and you can look forward to completely different deliveries from them going forward. We have also had a huge project in Vetio South, expanding the production and a completely new facility for supplements and soft tube production. That was finalized end of Q3.
We actually managed to have one project starting and invoiced, but that was a small project, but that was a good way of showing that the team and all of the parties involved in Vetio is really dedicated in delivering good results to the group. Now in Q4 we will start production, and from Q1 2022, it will be full production. We really have long line of both external and internal customers, especially for the soft tube production that will be set up is ongoing right now. Regarding Vetio North, that has development and production for pharma products, they closed several important deals during the quarter, and those will start in 2022 and onwards.
Many of the Vetio North projects are projects that are for a long period of time, from three to 10 years the agreements could be. It's first development of the product and then starting production. As I've said in last report is that as of now they have several development projects, but production will kick off during 2022. We've also continued to make improvements in our setup when it comes to solving both the, let's say, administrative and practical flows within the group, but also of course from a cost perspective. We have moved the warehouse facility for Holden2 to our Pet MD Brands to the same facility where we have Stratford and Animal Pharmaceuticals.
That has really improved the flow from the Pet MD Brands and also given them capability of handling their orders better. Animal Pharmaceuticals, that has had some. One of the key group companies that have had some issues with supply, they now we have transferred all of their derma products to Vetio. So from end of September, and really now in October really starting to go up to high volumes. They are getting their derma products, so we can supply Amazon and Chewy all of the back orders that we mentioned, and we're really looking forward to the development for the sales online for Animal Pharmaceuticals.
PetMD brand we introduced in Amazon U.K. for a couple of products, around 5-7 products and they have developed really well and continue to grow month by month. One new feature that we sent out as a press release was the Dr. Pol license agreement. Dr. Pol is a famous veterinarian, having a TV show on National Geographic and other channels. Really popular figure, and he has selected Swedencare from several bidders to work with a complete range of supplement products. We've started with a couple of products, and it's really been launching this and last week we started to make a soft launch.
It will continue to grow and the product will be out both on our special website for Dr. Pol, but mainly on the big platforms. We have also had interest from pet retail physical stores and chains. So we will keep on launching this project in Q4 and all of 2022. We have made plus 35 films together with the National Geographic film crew and we will release on social media and elsewhere new films every second week in 2022. Production of dermatology products for the European market is getting closer in our Irish facility. There's lots of testing and as regards to stability and getting all of the trade secrets from the Vetio team.
We're looking forward to having the production and hopefully in Q4, but definitely in Q1. Now going over to some financial figures, Jenny.
Yes. This quarter we had net revenue of 221 million SEK. That's a change in revenues of 218% compared to last year. As Håkan mentioned, we had negative organic growth of 1%. I will explain that or what's behind that. First of all, we had a delay in a couple of the Asian orders that we expected in Q3, which are now coming in Q4. Remember that Q3 last year was a very strong quarter because it was actually when the whole COVID situation was unleashed that we had a record quarter in many of our markets.
It's also important to know that in the organic growth, it does not include the growth of our acquired companies which have had very strong growth organically during the quarter if you compare to Q3 last year. For example, Rx and Nutravet both had more than 25% organic growth, which is then not included in our organic growth. Another thing that impacts the organic growth, just to explain that a little bit more, is that we have moved sales around between our group companies to best optimize the group. Sales which happened in Q3 last year might be included in an acquired company this quarter. It has an impact on our net revenue, but not on our organic growth.
Moving over to EBITDA, we have an operating EBITDA of SEK 57 million, an EBIT margin of 25.6%. This is built from a gross margin which is at 56%. This is a little bit lower than last year where we were at 62%. It's due to a little bit lower margin in Vetio and PetMD, but in line with our expectations. As Håkan mentioned, it's also impacted by the increased raw material prices that we have seen, which we are then pushing to our customers now in Q4 and Q1. The operating EBIT is adjusted for acquisition cost. During the quarter, we had acquisition costs for the Vetio acquisition of SEK 14 million. So that's what the difference between the operating EBIT and the EBITDA is. A couple of things on the balance sheet.
We have had strong cash flow from the operating activities of SEK 35 million. The cash is also impacted by the payment of Vetio that we did this quarter, while we did the directed share issue last quarter to get the capital increase. We have also invested more in our product production facilities throughout the group. Year to date, we have net revenues of SEK 515 million, that's including an organic growth of 21%, which is in line with our expectations. Operating EBITDA SEK 138 million, again, adjusted for acquisition cost with total of almost SEK 16 million for the year. If you look at the circle in the middle, the rolling twelve-month revenue, it's SEK 616 million. That excludes pro forma for all our acquired companies.
That is the pure rolling twelve-month. If we include the pro forma for the acquired companies, we have SEK 922 million. This is to show if we look all the way to the left, you have Swedencare, and this is our Q3 report, basically, SEK 616 million with SEK 158 in EBITDA. Then we have the pro forma, which is including the acquisitions that we have done for the last twelve months, which is not included in our numbers yet. For example, you would have Rx for two quarters, and you would have Holden2 for one quarter.
The reason for the lower EBITDA margin on the pro forma numbers is that before we acquired Rx, they did a lot of cleanup in their financials, which impacted, I would say, their result before we acquired them. That's why that is quite low. On the consolidated basis going forward, SEK 936 million with a 22%, 24% EBITDA margin. I also want to note that I have not included FAV here due to the fact that we have not purchased this company for their financials. We have bought it for their, let's say, the operating logistics. The growth in the group is of course included here, but it's also negatively impacted by exchange rate and also the Vetio.
Let's move over to sales per region for the quarter. The biggest change of course, if you look at the sales per region last year to this region or to this quarter, is North America. This part has grown to 75% of our revenue, compared to 50% last year. Of course, this is heavily impacted by the acquisitions that we have done in North America. This market has grown 480% compared to last year. Year to date, it's 68% of our total revenue. U.K. and Ireland, we have done the acquisition of Nutravet, so this part of the total growth or total revenue is about the same as it was last year. Asia, if I look, it's 32% growth versus last year.
Year to date, it's 4% of our total revenue. I can also include, for the first nine months, all regions have had growth of more than 20% compared to last year. This is sales per product category. The one that sticks out a little bit is the new category called Pharma. This is due to the fact that Vetio has basically two business models. They are both doing contract development and manufacturing in pharmaceuticals, and that's what that 8% is. The second leg they have is production of dermatology products, which is then included in the topicals and dermatology part, which is 44% of our total revenue. PlaqueOff is affected by the lower sales in powder, but all the other ProDen PlaqueOff products are growing with more than 60% this quarter.
In the other category, we also have human products which has had an increase this quarter from Rx. I also want to say that as Håkan mentioned, we have some delays in production, and so we continue to compensate this by investing in our own facilities. We started already in Q2 with the production of the ProDen PlaqueOff powder in Texas. We have increased it more with Vetio, and we continue to increase this part. This is the year-to-date sales per product. Pharma again sticks out as the new category with 3%, and this is a product group that will definitely increase a lot going forward because all the big volume production projects start now in 2022 in Montreal. For the year, ProDen PlaqueOff had a growth of 23%.
The big difference I would say is the share. Last year, ProDen PlaqueOff had 66% of total revenue, and now the split is much more even between the PlaqueOff, topical dermatology, and nutraceuticals. This is sales per brand. There's a couple of developments here. One of them is in private and co-label. Håkan has already mentioned the Dr. Pol, which is our first license agreements, which would fall into this category. But we have also seen other development in private and co-label. We have several customers who are broadening and replacing their existing products with our brands. We can also mention that Animal Pharmaceuticals is growing because they are launching on Amazon. We had the PetMD in Europe, like Håkan mentioned.
There's a lot of development in our brands on various markets and various channels. This is our rolling four quarters. You have the green line, which is our revenue, SEK 616 million. You have the dark blue, which is our EBITDA of 158, and the 175 million, it's the operating EBITDA, so it just adjusted for acquisition costs.
Okay, some highlights about FAV. As I said, we acquired by October first. Why did we do that? Yes, we, as you all know, want to focus more and more, or at least add on more direct sales to end consumer and both from our own sales, but also from different platforms where you can have solutions. One key element to get products out on different platforms is really the application process and all of the administration around that.
FAV has a fantastic network and agreement with lots of platforms, so they have a listing process that is much smoother, and they have that due to the fact that they have the capabilities of drop shipment for sales on these different platforms. The end consumer they don't see a difference that they order the product, for example, on Amazon, but the product is shipped from FAV's warehouse, not from the different Amazon warehouses. That makes it also easier for us to invest in different marketing and sales activities because as you all know, there's a big stress on the big platforms' warehousing facilities.
There is limitations on how many products you are allowed to ship into their different fulfillment centers. We could be a bit cautious in making big campaigns because if we can't supply the products, then you have an issue with all of the listings. Now, when we have secured drop shipment from FAV, we can handle both orders from or being shipped directly from Amazon, but also drop shipped from FAV, so that's a big advantage for us. They also, as I said, lots of different platforms where we're not present at the moment for different products and that is not to say that all of our brand is going out on all of the different platforms.
Now we have a possibility to strategically choose which platforms we want to be on. Also timing-wise, it's a much faster process, so we can add products within a short period of time, and we can also add as many products as we want. Another feature is that we get access for the same setup for Amazon Canada and Amazon Mexico, where we haven't been present, and we are about just this week or next week we will have many new products up in Canada, and Mexico will start in Q4 as well. Another feature is that we will be able to make bundle offerings from different group products on the different platforms.
That, that's an issue or a feature that we can't do as of now and that also could create the attractive deals for the end consumer. We will also move FAV into our fulfillment center in Florida, that means also that we don't have to ship products between our group companies and makes it much easier for FAV to help the different group companies. Then priorities going forward for 2021 and 2022, it's much the same as we've had all year. It's really integration of the acquired companies and the process is really great. As I've said, we have lots of internal projects, but the internal projects don't take the upper hand on the external ones.
We're really focused on growing all of the companies, growing the sales, but of course there are so many opportunities between our group companies. One important feature was, as I wrote in my comments for the report, really a project like Dr. Pol. We wouldn't really been able to handle that without the setup that we have. It's an integral project being handled by key staff in Stratford, in PetMD Brands, and now in FAV as well. It's really creating a completely new feature and as we now will evaluate this project in 2022, we do have lots of interest from other projects for these kind of licensing agreements. We will increase our marketing.
As I've said, we have excellent return on investment, and we see that we keep on building the brand, different brands and different products. We are just in the start of really adding different group products to other group brands, and there's lots of interest for that. Looking at key markets, we have started export of some of our newly acquired companies and the brands, and we have lots of interest for that. Some has been, of course, a bit slower due to the restrictions on traveling, but still, we work a lot with Teams and Zoom, and now that we are finally able to travel again, it will be much easier for us to get products out around the world.
M&A opportunities, we have been very active, and I often get questions about that. We have an excellent setup where we are very strict. The companies that we acquire are really self-going and want to keep on growing within the group. We don't have to go in and make lots of different structural arrangement and put in key personnel and management. I do see that we, going forward, will be active in the M&A field. We do get more and more contacts, being contacted by different companies and of course different players in the M&A sector wanting to help us. We're scrutinizing the opportunities and we are not in a hurry.
Of course, if there are good opportunities for us, we won't hesitate to act on that. As we've communicated previously, we will come back from the board with a review of the financial targets that we presented for the 2025, and that will be presented before year's end.
Great. We have received a couple of questions beforehand. Let's do them first, and then you will also have a chance to ask questions in the chat after. The first questions come out as this. Introduce.se has listed that one of the biggest risk for Swedencare is that the patent of the PlaqueOff formula runs out in 2021 in most markets. How do you see the risk playing out, and what do you do to minimize the impact of the patent running out, Håkan?
Oh, we have been working with this for the last three to four years with the brand-building activities with ProDen PlaqueOff and the expansion of the product range. The patent has actually already expired in September. We're in a new situation, and I'm happy to say that we are, as Jenny said, growing the ProDen PlaqueOff sales, the brand. The only product we didn't grow in Q3 was the powder, and that was due to the Asian orders. If you're looking at individual markets, we grew the powder sales in the U.S., we grew the powder sales in most of the markets in Europe.
It's really a long process and strategy for handling this, and we have also secured the unique key ingredient in ProDen PlaqueOff from the supplier we've been working with for 20 years. It's really a big setup. We haven't been that alarmed as many others since we had the patent for around half of all of our countries where we were selling PlaqueOff. We knew that we could cope with a non-patent environment and I'm convinced that we will keep on growing the ProDen PlaqueOff brand in this new setup.
Great. The next question is about Vetio. Vetio contributed with sales of about SEK 60 million for the quarter. If we adjust for the COVID outbreak, the clouding visibility, how would you describe the seasonality in the company by quarter now and when the Florida facility is up and running?
Yes. As I said, the Vetio South activity has some seasonality, Q3 being a bit slower than the other quarters. However, with the new facility that we are adding in Vetio South with supplements and soft chews, that will be phased out, and if looking at Vetio North, it's not really a seasonality. I think, going forward for 2022, I don't see that much of a seasonality going forward.
Okay, next question. You have seen several delays in orders now in Q3 to Q4 due to the COVID outbreak, expedition delays and supply chain issues. If you add all these factors together, how would you say will be the total sales that have been over to Q4?
I would say that we would've been able to sell for around $3 million more. $10 million in delayed sales and orders due to supply or $10 mil-
10
... $1 million. A bit over $1 million for the Vetio South downtime in August. Then,
The supply chain issues.
Yeah, the supply
About SEK 1 million
About SEK 1 million, yeah, more. It's important also to know that is not to say that we are just adding SEK 3 million in Q4, because it's also the fact that supply chain issues, for example, for Pet MD Brands from their supplier not being able to have the product up on Amazon, then of course the high percentage of those customers looking for that product probably buy a competing product at that point of time. I would say that it's a fair amount being transferred over to Q4, and we have seen a very strong start of October.
As I said, the o ne of the group companies most affected by back orders has been Animal Pharmaceuticals, and there we're starting to get really high volume deliveries from Vetio end of September and now all of October, and we are shipping those orders out as fast as we can. We will have a better situation going out of Q4 than we had in Q3.
Very good. We have two more questions. Is it possible to quantify the sales you had during the quarter that has been pure cross-selling between your different acquired companies?
I leave that to you, Jenny.
Okay. I would say that it's not really possible. We have not quantified it. There's a lot of cross-selling between the various entities, where for example, I'll give you a couple examples. nutravet has started their nutraplaque, which is the ProDen PlaqueOff in a different format. We have the Derma sales being sold in the U.S. pet retail channel. There's a lot of cross-selling, but we have not quantified them. There is a lot going on, and there is a lot more coming, I would say. Your depreciation and amortization increased about SEK 7.3 million in the quarter, mainly due to Vetio. Is it possible to say anything about what you expect in terms of CapEx and depreciation going forward to the group?
Well, the majority of the CapEx we have now included in Q3, because a lot of the Vetio ones were related to the new production facility in the south. I would say when it comes to CapEx, of course, now we have much more production facilities, so our CapEx is going to increase compared to what it was last year. However, the majority of it's done per the ongoing plans. Let's do this. Okay, now we are back. Now we're gonna have a live chat that's gonna start in five minutes. Håkan, I don't know if you have any final words.
No. Thank you for listening to us, and finally, I can just end up by saying that we're so glad that we will be able to have a group management meeting in Florida in early December, meeting up with all of the new group companies, and the board will come in as well, and it will really be a fantastic opportunity for us to meet in real life and discuss and plan for lots of new business activities. That will be a highlight for the year for us as a group, definitely.
Great.
Okay. Thank you.
Thank you very much, and again, if you have any questions, then we will be available in a couple of minutes.
Thank you. Bye.
Bye.