Welcome to the presentation of Swedencare's year-end reports, led by our CEO, Håkan Lagerberg, and CFO, Jenny Grafflind. We are pleased to have North America CCO, Brian Nugent, joining us with a presentation during today's webinar. As usual, we will have a Q&A after the presentation, so please raise your hand if you have any questions. Over to you, Jenny and Håkan.
Thank you very much, Emma. Håkan Lagerberg here, and Jenny in a snowy Malmö. Yes, Q4 2025. A disappointing end of the year when it comes to profitability, and I'm very displeased with myself for not being able to predict this. There were lots of uncertainties coming in at the very end, but I apologize, and we are doing everything we can to improve our internal processes and forecasting. Double-digit growth, happy with that, 11%, but of course, I expected a bit higher also when it comes to the organic growth. But overall, we're happy as long as it's double digit.
The lower profitability, mainly caused by one-offs, but of course, we have gone through everything in detail, and lots of follow-ups and action plans with the group companies that under-delivered. Lots of focus on profitability going into 2026. We should never have a quarter like this going forward. We have also made some organizational improvements end of last year and the beginning of this year, and I will be happy to present those later on in coming quarterly reports. We presented our new long-term financial targets. I will come back to that later in the presentation.
The board has proposed a dividend of 0.28 SEK per share, an increase compared to last year, and we will also come back to that in the financial, with the financial targets. But summarizing the end of the quarter when it comes to sales, of course, not all gloom. We're very happy that NaturVet really has taken off. Three percent growth in the quarter, albeit the quarter last year, Q4, was a weak quarter for NaturVet. But overall, we have 15% on a yearly basis for NaturVet, and as many of you know, the first half year was slow, dependent on the rebranding.
So we're happy that we were tracking at really high growth numbers for NaturVet. ProDen PlaqueOff continues to grow high double digits, 17% organic growth, 29% year-on-year. A bit lower in Q4, and that was mainly caused by, as many of you know also, the bit lumpiness in the international sales. So some larger international orders came in, we are delivering now in Q1. But overall, we're very happy with 17% growth also for the quarter. Looking at the different channels, it's online continue to grow a lot. Pet retail also solid, including the big box retailers there.
And also when we look at our branded products in the vet channel group, but a soft quarter for contract manufacturing, especially for liquid dermatology, and I'm coming back to that later on. Some explanations of the profitability hit in Q4, that was more of a one-off. Higher marketing cost on Amazon related to the transition of NaturVet and brand protection. We'll still have some impact in this first half year, but basically getting better month by month. One important thing is that we have started to implement the Transparency program for the major NaturVet SKUs here in Q1, and that will have a big impact on that. And Brian Nugent will later on describe that more in detail.
We had an ERP implementation in NaturVet. The cost of interruptions affected gross margin and volumes. No impact going forward. We're very happy with the ERP system as is right now. It started functioning really well end of Q4, and no issues now in Q1. So we're happy with the transition, but of course, the implementation caused more problems and took longer time than we expected. Marketing spend to support the big box partners, of course, we knew that was coming, and we have continued, let's say, implementing marketing spend, and we have seen results in increased sales, as you saw. But there was not enough, let's say, control of the actual marketing spend.
Going forward, we will definitely have better control on the spend going forward in 2026. Also, as you see on the picture here, we're very happy with the actual display campaign that we have launched in Walmart, over 2,000 stores. We are in the ordinary shelves in 1,400 stores, expanded to 2,000, to 600 more now in January. So we're happy with that. We're not happy with the outcome of the actual cost for the campaign. Not a big hit for the quarter, but still, there were some unexpected costs for delivering and setting that up. But all in all, happy with the outcome.
I will come back to that. Also, one of our pet retail-focused brands, Vet Worthy, also have been launching second half year of 2025. And, the outcome we're happy with, but not the actual cost for it. So, going forward, definitely spend will be aligned with sales growth going forward. Also, we ended up with some higher inventory write-offs than for the other quarters, and, we, like in 2024, we had a very average write-off, not nothing exceptional, and that is also what we expect going forward into 2026. Jenny, over to you.
Yes, some financial highlights. So revenue for the quarter amounted to SEK 682 million. So for the quarter, it was a 3% growth, which 11% was organic, and we had a negative 12% of currency impact for the quarter, and 4% was acquired growth. The large currency impact is coming from the stronger krona against the USD, which is the largest currency for the group. However, both the euro and the pound has also weakened quarter-by-quarter in 2025. The acquired growth came from Summit, which we acquired in April. So for the full year 2025, the net revenue amounted to SEK 2.7 billion. This is compared to SEK 2.5 billion last year. So we had an organic growth of 9% for the full year. The operational gross margin is at 56.8%.
There are two main reasons for the lower margin. Håkan mentioned a little bit of it. There was, first of all, additional write-offs this quarter compared to other quarters when it comes to inventory. This partly is due to discontinued product lines or products, for example, human products that we don't focus so much on anymore. There was some acquired inventory that we had to write off, and then, WelliChews is one of the brands which we'll be focusing much more on NaturVet by Swedencare in 2026. The second reason is this low-margin display campaign that you just saw the picture of, of Walmart. And so these two together, these two reasons, had an impact of about 1.5 percentage points.
So otherwise, we would have been slightly above 58%, which is the level that we have been at for the last, I would say, 2 years. The external cost is increasing, as we have mentioned before, with the growth of Amazon, there's costs which are directly linked to the sales. However, in addition, this quarter, there was also the significant marketing initiatives in connection with the big box launch. And there's also additional marketing costs linked to Black Week, which occurs in Q4. Personnel cost is stable, in line with the percentage of sales, for the full year of 2025. So as a result, at operational EBITDA, it amounts to SEK 109 million for the quarter. This is a decrease of 25% compared to the Q4 last year, and a margin of 15.9%.
For the full year 2025, operating EBITDA is SEK 511 million, and a margin of 19%. Cash and our net debt to EBITDA, our net debt to EBITDA is at 2.9% at year-end or 2.9 at the year-end. This is an increase both compared to a year ago, due to the acquisition that we made in Q2, this year, and it's also an increase compared to Q3, due to the fact that we had a lower EBITDA this quarter. Our cash conversion was at 41% for the quarter. There was only very minor changes to the working capital in the quarter. However, we have made larger tax payments this quarter, which is impacting this operating cash flow.
During the quarter, we have repaid 65 million on our external long-term debt loans, and for the full year, we have repaid 233 million. With the Cash Pool structure that we have in place, it's complete in the US, and we also have a good progress in Europe. We are able to operate with a lower cash level, so we have been able to reduce this by SEK 83 million during the year. So instead of this cash of having a large operating cash, we can now use it to decrease our debt level, which is, of course, resulting in lower financing cost. Our CapEx is below 2% of net sales, both for the quarter and for the full year. Rolling 4 quarters.
As you can see, the revenue for the rolling 12 months is increasing. However, both the operating EBITDA and the EBITDA has decreased due to this weaker profitability that we have in Q4. In 2025, the majority of the difference between the reporting EBITDA and the operational EBITDA is the fair market adjustment that we have made with acquired inventory for Summit. That amounts to SEK 48 million for the year. Product and brand split. These graphs are not. So the graphs and the amounts are not adjusted for acquisition or currency. However, as you can see, we have added a line below the graphs for organic growth because it's more of a fair comparison as everything has been basically a large negative currency impact this year.
So if we look to the left, you can see that there's a double-digit growth in nutraceuticals, partly due to the good private label sales. We also have good growth in dental, 23% organic, mainly Plaque Off, but there's also good improvements in both the toothpaste and the dental wipes. We get a decline in topicals. This is mainly linked to the decrease that we have in contract manufacturing business. Håkan will come back to that. In pharma, that has the largest increase in growth, which is due to the acquisition of Summit, but it has a decline in organic growth due to the delayed pharma projects. If you look on the right to the brand split, there's the same thing here. Gross is not currency adjusted, but the organic is, the organic one is, of course, currency adjusted.
So NaturVet, PlaqueOff, and Nutravet, and Riley's are the fastest growing brands in this group for the quarter. All has above 15% organic growth. Contract manufacturing has decreased due to its weaker vet channel and delayed pharma projects. Note, however, that the internal revenue in our manufacturing facility has increased with about 15% for the quarter. So when we move and we increase production in-house, this supports the other segments, but it affects the production segment's organic growth negative because it's eliminated on a group level. Private label has also had good growth this quarter, with larger orders at the end of the year. And the reason why other has strong growth but low organic is that the growth is coming from Summit. Now over to Håkan.
Yes, looking at the different segments, net sales for North America, 410 million SEK, 7% growth, not currency adjusted, and organic, 22%. So the strongest quarter for the year by far, and on a yearly average, on a yearly number, it's 12% growth for North America. So we're very happy that North America has started to bounce back at very high growth numbers. Predominantly online and pet retail, big business, big box retailers are the drivers. As we mentioned before, NaturVet, ProDen PlaqueOff, and Riley's all had very strong quarters.
The NaturVet big display campaign that we did send out in Q4 and had the cost and the sales didn't affect Q4, but we have seen an immediate impact on the out-the-door sales at Walmart. So almost doubling sales in store from first week of January, and the trend continues in Q4 or in February. So we're very happy with that, and also, of course, have made lots of influencers and social media campaigns about this, that we are available in even more Walmart stores. Vet Worthy, as I mentioned, now present in plus 500 retail stores and also, I think six or seven distributors nationwide. So lots of focus on that as well.
Not as costly when it comes to marketing, but still more focused on mom-and-pop stores, and we saw a gap in the market for a new brand or a relaunch of that brand. Private Label, as Jenny said, a strong quarter, and really focused on that as well, even out our, let's say, manufacturing capabilities. And going forward, we do have both concluded some new deals, and also are in negotiations. So we see Private Label as an important part of our product offering, and we do see it's an advantage when discussing branded products with bigger retailers and big box retailers. Treats interesting and keep on growing.
It's actually some of the products that we don't manufacture ourselves, so we have had some supply issues that could have been an even stronger quarter. So we are looking into widening our supply for these kind of organic treats. Europe has had a strong year overall, and also Q4 was double digit, 10%, and on an average for the year, 14%. I expect, going forward that Europe will continue to grow fast and actually a bit more than the 10%. But we're very happy with as long as it's double digit, as you know.
Overall, all of the group companies in UK, where we have Nutravet, we have Swedencare UK, focusing nowadays more on online sales, but also, they have joint projects together for the pet retail side, has been performing really, really well. We have kept on building out the Amazon team. The Amazon team in UK is responsible for all marketing and sales in the rest of EU as well. But, as some of you perhaps remember, we have satellites out in Europe. We think it's very important to have a local presence, so we have one or two based in different European countries, responsible for sales and marketing on social media and Amazon.
It has turned out as really good, and we will continue to look at different markets there. Italy had a very strong profitability, like always, basically, single-digit growth, basically growing at like the market, but the comps from last year was their strongest quarter last year. So, happy with that, even though it wasn't double-digit. Looking at here in the European sales, we also add our international export sales for mainly ProDen PlaqueOff. As I said previously, a bit weaker quarter, but some big orders came in late and will be shipped out in January, and February has been shipped out in January and will go out this quarter.
Yes, and then looking at production, 112 million SEK in sales. And the organic growth was -16%. And it's still a cautious pet market for contract manufacture. We do see some lowering in pre-booked orders and also pushing some orders. So we are working together with our major customers there. See an improvement later this year, and not already in Q1, but Q2 definitely picking up. So hopefully, we have been at the lowest market for that. But as Jenny said, we are also focusing a lot on internal projects, new launches there, and have agreed with some new customers for new product lines.
I will present that in next slide. Also, something that was the flavor of 2025, some delays in pharma project. Very annoying, but happy to say that we've now kicked off 2026 really well and expect all the quarters in the pharma sector to be a stronger quarter than last year. So we're very happy with that, and that's one of the entities where we made some organizational changes to better respond to the customer demand and from our internal, let's say, project planning. So looking forward to 2026 when it comes to pharma development and manufacturing.
On that topic, we have now in Q1 assigned two new material projects. One of them is the ophthalmic facility that we presented that we were investing in. That is on track, completed in Q1, Q2. First customer now signed. We had an understanding and an agreement for development, but now we also have signed for the tech transfer and the manufacturing that will start in end of Q2, hopefully, or early Q3. So, that's a big milestone for us. When we have started the manufacturing for this first project, we do have other customers in line and discussing this.
This seems to be a lack of, let's say, capacity on this when it comes to the pharma side. Also increase of internal revenue, 15% eliminated on group level, like Jenny said, and it's also relating to the growth we've had in our branded sales, but also preparing for 2026. Looking at next quarter, VetUK , Ireland, and North all bounce back with increased of external customers. And as I said, when it comes to the liquids, still a bit challenging, but looking a lot better from Q2, and we are trying to push some of those projects into Q1. Working hard on that. Lots of product launches when it comes to 2026.
I won't go through all of these, but wanted to highlight the Calmalia from Innovet. As many of you know, it's Innovet is our let's say most R&D-focused organization. Lots of IP and lots of clinicals in every launch there. So we have a new and innovative patented combination of tryptophan and PEA ultra-micronized, and have had really good clinicals on that. So we're eagerly awaiting the launch for that. And then also, I would like to highlight the stretch for completely new and improved Keto-C product line.
That's a legacy line with +15 different SKUs, and has always been a strong seller, both from a branded perspective, but also when it comes to private label solutions. And we have now been working in almost two years to improve that and adding a special ceramide solution called CeraGuard. Also with excellent clinicals, expanding the reach and the effectiveness of the product. And we have just started launch it with lots of interest from the market and have basically signed all of the major customers to revamp their private label solutions to this offering.
So that will have a big impact for us in 2026. As our new financial targets that we presented, we're adding another target. So we have an annual double-digit organic growth going forward. And also, we have said that we will establish an operative EBITDA margin above 26% midterm, and what midterm means is during 2028. We see these new financial targets as five-year plan from 2026. Dividend 40% of net profit adjusted for non-operating costs. And we will take into account, of course, consolidation and investment needs, liquidity, and financial position. Speaking about our dividends, since our first pay in 2021, historically, we have increased it annually between 5 and 25%.
This year's proposal of 0.28 SEK is 13% of the net profit adjusted for non-operating costs. Net debt to EBITDA being under 2, the long-term target with flexibility for acquisitions. And we do have room for utilizing our credit lines up to around 3.5. So, going forward, we will continue as we have. We have continued to amortize, so that will be one factor to getting the net debt down, of course. But also, like Jenny said, this quarter, where we went up from 2.7-2.9 was, even though we did amortize SEK 65 million, was due to the lower EBITDA.
What we see going forward is, of course, the increased EBITDA together with amortizations, we will be working towards 2.0. We are not stressed, but you should expect that we continue to get the net debt down. Structural key growth drivers for the coming years. Yeah, if we're looking at Swedencare as a group, you know, we've been very active when it comes to M&A up until 2022. Going forward, it is a bit more challenging for us to find interesting M&A targets. We do like to add unique companies and product lines to the group, like we did with the Summit Vet earlier 2025. But going forward, M&A will not be as important for growth driver as it has been.
So what we see in the coming years is definitely our pharma division. It's expected to be one of the fastest growing product groups, supported by a strong pipeline and good visibility from contracted projects. And it's basically that the manufacturing grows a lot. A couple of years ago, we were basically only doing development work with a very, very minor manufacturing capabilities. Now, we have built that out, and we continue to do that, and we see that this is a very good add-on to, of course, to our growth. The big box retailers, big channel opportunity, the same size as traditional pet retail. And we will continue to work on that. We have just started, and it's a long-term project.
So we see lots of opportunities there. Amazon will continue. D2C, what we call D2C, is when we sell direct to the consumer, not through the platforms. As you know, we are heavy on platforms, collaborations, Amazon, Chewy, Zooplus in Europe. We do investigate and see the D2C as a very interesting part as well, not only to increase sales, but also to get more direct contact with end consumers. Product portfolio and innovation. Of course, product portfolio expansion is one of the key elements for Swedencare, is that we take innovative, good products that we sell under one brand and expand that to other brands. And then, of course, continue to come out with new products and in a fast way, like we always have.
Then finally, pricing opportunities. We do see that selective pricing initiatives remain available, supported by strong brands and limited historical price increases. And also, I would like to say that comparing products, we do have, I would say on average, we do have high-quality products, mostly priced at a bit lower level than comparable competitors. So we do see opportunities for us there. And yeah, and go to Brian.
Good morning! I'm Brian Nugent, Chief Commercial Officer for Swedencare North America, and I have oversight of our North American veterinary and online operations. Today, we'll be discussing Swedencare North America's online division, PetMD. Swedencare's online mission statement, while seemingly wordy, can be simply summarized by saying: We will meet pet parents where it's convenient for them. Our North American online division is PetMD. Acquired by Swedencare in 2021, PetMD was founded by Ed Holden, who continues to manage both PetMD, the company, as well as the online sales of other Swedencare-owned brands. PetMD is coming off year-over-year online growth of 20%. It's important to note that the original PetMD team is still intact and continues to utilize its proprietary systems and in-house algorithms created to assess advertising and ad resource allocation, respectively. This consistency is important for maximum optimization.
PetMD primarily sells through leading online players like Chewy and Amazon, and to a lesser extent, D2C and other e-tailers. We also handle all the creative for PetMD and other Swedencare online brands in-house. This includes photos, videos, and all creative enhanced brand content. Our primary focus is to leverage Swedencare-owned brands and support the products that we manufacture within Swedencare, which of course, gives us the highest margin opportunity. We'll now run through the top Swedencare brands PetMD handles. The main brand, of course, is PetMD, which we acquired in 2021, as I said, and continues to grow year over year. The PetMD brand acts as the train tracks for Swedencare's other online brands. That is, we utilize all the PetMD systems that we built to manage our other Swedencare brands.
PetMD is mature, has great recognition, and it's important to note that this brand also has only been available online. It's never been sold in a retail outlet. We are, however, exploring options related to this in the near future. The next brand is ProDen PlaqueOff, Swedencare's core and flagship product. PlaqueOff is the premium oral healthcare product for pets, and it's a high-margin operator. Because of the uniqueness and high margin of PlaqueOff, great focus is paid on this brand. PlaqueOff grew 30% online year-over-year, and we expect it will continue with additional focus and support. Riley's is Swedencare's entry into the premium treat category. We acquired Riley's in 2024, and for good reason, as premium treats were a really interesting category to us because they have high reorder and subscribe and save rates.
The average premium treat buyer is purchasing 16 times a year. That high frequency drives strong customer lifetime value and extreme brand loyalty. Riley's also grew online 30% year-over-year. Rx Vitamins is unique in that it's original and a vet—its origin is in a veterinary brand that's sold in over 5,000 hospitals. It has unique evidence-based science formulations, which pet owners are very loyal to. Often, these pet owners want to reorder online, and as our simplified mission states noted, "We will meet the pet parents wherever they would like to meet," in this case, online. The Classics is a science-based line as well, and it was a brand that was acquired through the Garmon NaturVet acquisition. PetMD handles the online sales of Vet Classics, and it has a range of unique delivery forms consisting of powders, tablets, and soft chews.
Like Rx Vitamins, it is primarily sold through veterinary hospitals, as it was originally developed by a veterinarian. And finally, NaturVet. It's Swedencare's premium retail brand. It's currently sold in PetSmart, Petco, Walmart, Tractor Supply, as well as other national retailers, as Håkan previously said. The NaturVet range was previously sold on Amazon and Chewy via a third-party relationship. PetMD completed the takeover of Amazon sales in April of 2025. Full margins are now being fully recognized following the sell-through of the acquired inventory. But that's not to say we haven't had our challenges with NaturVet. While we were able to learn lessons from when we took over ProDen PlaqueOff, NaturVet provided some unexpected issues. Some of these issues we have sorted through, and some we are still sorting through. An example is the rebranding of old labels versus new labels.
When you're rebranding an Amazon listing, it's a very tedious process, and you wanna ensure that you keep your reviews and your ratings, as a lot of things can go wrong during the changeover process. We're happy to report that this process is now 98% complete. Another challenge is rogue sellers or third parties that purchase the product via distribution and attempt to sell on Amazon platform without conforming to MAP pricing. As of January, we have adjusted for 2026 MAP pricing increases, and of course, going back to third parties, we are just now implementing an Amazon anti-counterfeit program called Transparency, which Håkan mentioned previously. We are now in the middle of getting this program launched on the majority of NaturVet products, and this will ensure that there will be no third parties or counterfeit sellers of NaturVet products on the Amazon platform.
PetMD's continued initiatives: to market and to grow the Swedencare brands online, with a focus on launching internally manufactured products under existing brands via line extensions. Also, to continue to be selective and acquire brand assets when opportunities arise. Once acquired, we can quickly plug those acquired assets into the PetMD model in order to scale growth. It's the plug-and-play model, similar to what was achieved with Riley's. And finally, we're gonna continue the optimization of advertising efficiency, aiming to scale online brand sales while efficiently monitoring ad spend. And with that, I'll turn it back to Håkan and Jenny. Thanks for your time.
Thank you, Brian. And by that, we are open for questions, and your first one comes from Johan. Please go ahead.
Yes, good morning, Håkan and Jenny. Thank you for taking my questions, and thank you, Brian, as well, for the presentation. A few ones from my side. First off, if we continue on the topic of NaturVet's Amazon account. So, what happened during Q4 specifically? You took over the account earlier this year, and sort of what went wrong specifically in Q4 that hurt your margin so badly? And if possible, could you quantify the loss in both in terms of revenue and margins in the quarter?
I can start, and then you can fill in, Brian, if you have anything. It's mainly related to, like Brian said, the rogue sellers coming in, and when we establish programs, launch, or promoting the trademark, the actual brand, then we take the cost for that and expect to get the top-line sales for all of those marketing initiatives. Amazon has different programs. You have a certain percentage that you pay when you sell a product, and that's fine. But since we are owning the brand, we're owning the product line, we make investments and programs, and then all of a sudden, someone comes in and lowers the price, and gets the so-called Buy Box .
If we want to get the Buy Box back, then we need to lower our prices, and then you're in a, let's say, spiraling down project. So it it's been very tedious and tough and a lot tougher in Q4 than the previous quarters for different reasons. Could be that some distributors were selling products out to rogue sellers that didn't do that during Q2 and Q3, and yeah, otherwise. But to quantify, I don't want to quantify it, but it has had a substantial impact on our profitability. I would like to say that. I don't know if you have anything to add, Brian?
No, Håkan, so Håkan said it. I think that we've bottomed on that, and as I said, we're just now in the process of setting up the Transparency program , which will help eliminate third parties from being able to do that in the future.
Okay, got it. Got it. So 98% of the products are relabeled, so the only sort of issue, so to speak, should be the rogue sellers going forward, right? Do you have any sort of timeline on the Transparency program ? And again, what kind of margin drag do you expect from this coming quarters?
Yeah, yeah, the program as such as it works is that when we have launched a Transparency code on a product, a special SKU, then the same products that are in the Amazon warehouses, they are allowed to be sold out, but they are not allowed to be shipped any new ones in. And we don't have full access of the volumes. We for some we can see the volumes, but I would expect that the programs will have come into full force in Q2, not in Q1, but we will see improvements in Q1.
Okay, cool. Got it. And on the NaturVet, the big box Walmart launch, yeah, you stated that sales almost doubled in January, which of course is impressive, but says very little to us outsiders, as we don't know from what base. So to give some depth to that statement, what kind of sales contribution from Walmart thus far are we talking about?
I mean, it's second half year of 2025, we sold a bit over SEK 3 million, 3.5, I think, so roughly to Amazon. And to calculate how much they have sold, we don't have that exact number. But half year plus SEK 3 million of sales for second half year for Swedencare to Walmart.
Okay, got it. Cool. Thank you. Our third question actually is on the gross margin. So you quantify the impact from low-margin display campaigns and inventory to roughly 1.5 percentage points in the quarter. The latter, of course, you stated was non-recurring, but how will this sort of negative mix effect from the display campaigns impact your gross margins in Q2 and Q1?
How the display campaign is gonna impact in Q1? It's not gonna impact in Q1. It's done.
So that was only product relating to Q4 sales. That-
Yes.
There are full contribution margin from, from Q1.
Yes, it was just a specific campaign. It was just more expensive to both produce and to ship those, you know, the nice picture that we showed you.
Okay, got it. So all else being equal, then, we should see gross margins in 2026 recovering to the sort of adjusted gross margin level that we saw in 2025?
Yes.
Got it. And continuing, another question for you, Jenny, perhaps, any chance that you could break down the external cost increase in the quarter? How much of external cost in the quarter were relating to marketing, for example?
No, not but, I mean, the majority of the increase, it's linked to marketing. It's both linked to this, Amazon marketing, as I was mentioning, for example, the Black Week, for example, it would have more... It's more expensive to market on Amazon in Q4, and then it's this additional marketing initiatives with big box .
Okay. So how should one think about your marketing spend coming quarters, then?
Well, the marketing spend, we're not gonna have this one-off campaign in Q1. However, marketing spend to big box is gonna continue to increase. However, we are expecting the volume to be more matched. We didn't have the volume, we didn't have the revenue to match the campaigns. However, marketing is gonna continue.
Okay, got it. And then the final one, if I may. So production segment sales fell by 16% in Q4, partly due to contract manufacturing, but also postponement of pharma projects into 2026. Focusing on pharma here specifically, you sound very optimistic on the conference call, and of course, you've stated that this is a key top line and margin driver in 2026. But given that we saw another postponement here in Q4, what makes you confident that 2026 will be different?
It is that we have already started a couple of big projects in Q1, and they will continue in Q2. As I said, the ophthalmic project that we have, that we are in the process of getting all set there, we also have signed a contract with a customer that is in, let's say, in a hurry. They want us to start manufacturing as soon as we can, so we're working really hard on that. So there are no external factors that could change those facts.
Okay, got it. And on sort of the timing of those projects, the ones that you started in Q1, what sort of—what time frames are we talking here before we can see a contribution to sales?
In the pharma for Veterinary North, you will see a strong performance already in Q1 compared to last year, when it comes to sales, definitely.
Got it. Lovely. Thank you. If I may, one final just clarification on your targets. You stated during the call that the midterm targets are for midterm, which implies five years, but you then said in the same sentence that you expect to reach your margin target by 2028. So just to clarify, is your-
What I meant with midterm, midterm of the five years.
Okay, so the 2028 doesn't-- It's a 2030 target?
No, I expect the-
It's a five-year plan.
It's a five-year plan, but from 2028, I expect us to be on that target.
Okay, got it.
Sorry.
No, no. Thank you for clarifying. Those were all my questions for now.
Thank you, Johan. Your next question comes from Adrian. Please go ahead.
Hi, guys. Good morning. It's almost not morning, but pleased to meet you, and a few questions from me as well, please. Just wanna begin here with 2026. It looks like a strong year in when it comes to the growth rate, with everything going on here. But I guess the recent deviation here, at least in recent history, has been in terms of margins, right? You kinda explain that a lot of these margins are kinda one-off-ish. But you know, how can you... How... Like, what should we expect for the cost or when it comes to the margin when looking into 2026?
Like, how confident can you be that you don't you know meet any other you know short-term marketing campaigns that you have to do? You know, how can we have confidence in basically the cost you know remaining low here?
I mean, it's this, as I explained a couple of these, it's been. Some of these launch campaigns, of course, has been needed to do, and we did that in Q4. We don't have the same launches first half next year. We, as Jenny said, will continue to market and collaborate with our customers, but it will be in line with the sales in a much better way than we did, we're able to do in Q4. And it's a combination of the actual projects.
It's a combination of, as I said, we made some organizational changes, better control, and some of this, like you said, it was promo campaigns that we needed to do for the agreements that we did, that we have with our customers. But those launch campaigns are done for 2025. We don't foresee them in 2026, the first half year, at least. Then it dependent on if we sign any new major customers, then we have learned the lesson how we handle this quarter. And I would like to add also that, the there there...
I mean, it was a quarter that, as I said, I'm very disappointed how we handled it when it comes to the cost structure, and it won't be repeated. We are going through everything, and we have lots of cost initiatives when it comes to projects and increased profitability. So the team is really motivated, and we are on it a lot better than we did. We definitely failed in Q4, and we now have to rebuild the trust, and the way to rebuild that trust is that we show a couple of quarters with improved margins and improved EBITDA, of course.
Yeah, right. Exactly. So, kinda a follow-up question here: like, what visibility do you have for the marketing budget throughout the entire year? Do you know already today what the marketing budget will be throughout 2026, or can there be unexpected, you know, marketing investments during, you know, a short-term time frame?
The only unexpected I would say is if sales grow even faster than we anticipate in our budgets, then, of course, the marketing spend will increase, but it will be in line with profitability. So we will grow with keeping the targeted profitability, what we have set for this year.
Yeah, perfect. And another question here. You mentioned that you doubled sales here in January, right? And I kinda assume that some of this is driven, at least by this, you know, low gross margin display campaign. You explained that you took the cost in Q4, and that the gross margin going ahead should be good. But when this campaign runs out, I expect you should see some difficult comps from that, maybe on a sequential basis. Could you give us any color on sort of the normal sort of Walmart release here, excluding the one-time display thing?
Yeah.
How that has been performing.
Yeah, display campaigns are important, of course, because when looking at retailers in the U.S., you put up products, most of the retailer does. They put up products under a therapy area. So joint product is lumped together with all of the different brands. Then you have dental products, all of the different brands, et cetera. The problem when launching a new brand into retailer is, of course, to get the customers to see your product. And of course, display campaign, like you saw on the picture, is extremely important. And we are very happy, and it's not an easy thing to get an agreement with Walmart for such a big display.
So it's a big display, but on a different part of in the stores, showing all of the products that we have in the ordinary assortment. All of those products are in the display. So, like you said, it's, it's we do it because we want to really enlighten the customers that we are present at Walmart, buy our product there. So if they take a product from the display campaign, next time when they come back, 2 months later, the display is not there, but then they will find exactly the same product in the ordinary shelves. So that's the whole reasoning by these display campaigns. Then coming back to what Jenny said, next time we will make a display campaign, it won't have such a big impact on the gross margin.
We will make it smarter and better next time.
Fair enough. Another question here on the inventory write-offs. You know, they were kind of bigger than expected, I suppose. Could you confirm that these are non-recurring and kind of what happened there that made them such, you know, a deviation from your expectations?
Well, there's always going to be some level of write-offs every year, and every quarter. It's just that this year, about 50% of the inventory write-off came in Q4. There was a couple of product lines, there was a couple of acquired inventory that we have to write off. So it was just a higher level this quarter than we normally have in Q4.
That became visible very late in the quarter.
Yeah.
That's the-
You mean the 50% of the year inventory write-off?
Yes.
Right. Okay, last question, if that's fine. So, going back to the midterm operational, the EBITDA margin here of some 26%, you mentioned the timeline here, but could we have some color on kind of the contribution? Like, where do we expect the margin to come from? Is this really driven by the production segment, which is, you know, margin accretive or the gross margin, or how should we think about it?
No, I would say that coming back to normal margins from our biggest brand, NaturVet, that has had a big impact for us in 2025. So just by coming back to ordinary margins than what we expect for NaturVet, that's the biggest driver, I would say short term, the coming two years. And then, of course, getting our Amazon sales in line with the expected profitability, that's, since online sales is now well over $100 million, I mean, there was $25 million, and it will grow even more in 2026. Of course, every % we improve profitability when it comes to our online sales, primarily on Amazon, has a huge impact.
But then we have our, let's say, smaller entities, including pharma, where we have significantly higher margin compared to, let's say, group average. That is, of course, very accretive to our overall profitability increase, when we manage to grow those, let's say, smaller entities into higher growth targets. Numbers, sorry.
All right, that was all for me. Thank you very much.
Thank you, Adrian. And your next question comes from, Adela. Please, go ahead.
Thank you. Adela from Jefferies. I guess I'm also going to stay on this track, trying to figure out what exactly happened in Q4. I'm assuming that you had some sort of marketing budget set ahead of the year, ahead of the quarter. So was this just... I mean, how was this not flagged on a group level earlier? And is this an individual team that was in charge of this, and it just went sideways? And what, I guess reporting, what type of measures are you now implementing so that this never happens again?
Yeah, yeah, I mean, it's a couple of, let's say, things affecting. Like Brian explained, the problem for us that hit. It is mar- you could call it marketing, but when selling on Amazon, when we get a higher cost there, we can't just shut it off because it's our brand. If we shut down, let's say, the branded marketing for our products, then competing brands will take those sales. So we can't really shut that down, and that's-- or we can, but then we will lose sales both on a short term, but also definitely on a longer term.
So, even though you have a budget and linked to the metrics when it comes to Amazon sales, it is very tough when getting hit with all of these rogue sellers . So, that's harder to, let's say, forecast and foresee. When it comes to the launch campaigns linked to the big box retailers, it's definitely that there was a lack in control in the organization on the actual spend linked to the sales orders and all of that. So, we took immediate effect with some organizational changes, and then we have also implemented and following up a lot closer when it comes to spend.
I'm confident going forward that we now have the organization that is not only focused on sales and marketing, but very much linked to the actual profitability of the brand. But coming back to that, we need to show it, and that's what we intend to do going forward.
Thank you, Håkan. But just to clarify then, so there has been changes to the organization, and then the team has been replaced?
... Yeah, not the whole team, but there has been changes, yes, and improvements.
Okay. All right. There's already been a lot of questions answered, so I'll just stop there.
Thank you.
Thank you. Our last question comes from Christian. Please go ahead.
Yeah, good morning, Håkan and Jenny, and thank you for taking my questions. I'm not sure if I captured if you mentioned the amount of one-off items in Q4. So, would it be possible to disclose the underlying operational EBITDA margin in Q4, excluding these one-off items?
No, no, we're not going to do that. We're not going to adjust for it because part of it is operational. So, no, and for example, like I said, even though the marketing spend has been high, yes, we have, we have mentioned in the gross margin how much the display campaign affected gross margin and the inventory as well. However, the marketing on the big box , it will continue. It's just that we are expecting more sales connected to it. So it's not like a one-off marketing spend on big box . It will continue.
Okay, great. And you also mentioned that the ERP implementation caused disruptions that affected the gross margin and volumes. Could you quantify the impact on Q4 sales?
Again, it's difficult to quantify when you have disruptions, and you have things that takes a little bit longer time. But of course, if we did not have this ERP change in Q4, we probably would have get out a lot of more orders in the beginning of October, which would have expected to have reorders from those kind of customers already in Q4. So, now we didn't get those because there was delays due to the implementation of the ERP. A lot of people were busy with it, and there's, you know, a learning curve, et cetera. But it's not going to be quantified.
Okay, got it. Thank you very much.
Thank you. It seems like Adela have one more question. Please go ahead.
Yes, thank you. Just a follow-up on marketing spend. You mentioned, Håkan, earlier, that the only reason marketing spend could be significantly higher again in 2026 is if you have higher volumes, higher than what you're expecting. Could you just, I guess, explain that reasoning? Like, if you already are seeing good growth, good numbers, then why do you need to spend more on marketing?
No, what I meant, I don't mean more in percentage of the sales. I mean, in actual dollars or kronor, it will be higher.
That could be linked to, for example, if we get another new retailers, et cetera, as well.
Okay. All right, thank you.
Thank you. That concludes our Q&A session. So back to you guys for any closing comments.
Thank you so much. I just want to close out with underlining our, let's say, disappointment with the quarter when it comes to profitability. And rest assured that you all know that the board and many lots in the organizations are important shareholders of Swedencare, and we're very focused on shareholder value and creating that. So we're disappointed but are actively working very hard and looking over everything, and we will try to come back and surprise the market this year. So stay tuned, and I thank you for your support, and as I want, I want to underline once again, we are very focused on improving profitability going forward.
Thank you very much.
Thank you. Bye.
Bye.
Thanks.