Welcome everyone to Swedencare's Q3 report. My name is Håkan Lagerberg.
Jenny Graflind, the CFO.
We will run through the quarter. You can post questions over the chat during the presentation. We will try to answer them after the presentation is done. We'll start right now. Swedencare. We are a small nutraceutical company but with worldwide sales. We have sales in over 50 countries. We have had strong growth since we listed the company in 2016. We sell primarily products to dogs and cats, but we also have an equine section and to certain markets. We are a small company, as I said, with 64 employees, but we have different small entities all over the world in eight different countries. We have one unique product that Swedencare was based upon. It's called ProDen PlaqueOff, a world-leading oral care product for dogs and cats.
As I said, the company was founded around that product, but over the years we've grown the company, so now we have a full range of nutraceuticals to dogs, cats, and horses. We produce some of our products by ourselves in a state-of-the-art factory in Ireland, GMP-certified. We have lots of partners all over the world, in the U.S., France, Sweden, and other places with partners to us that produce our products. We have employees, 50% men and 50% women. We have grown the business, as I said, strongly but kept our high profitability over the years. Now going over to Q3 specifically. We came out from a first half year that was a bit different than the other years we've had since COVID had an impact on our business as well as lots of others.
We came out strong the end of Q2, as I hinted in that report, that we had very good momentum going into Q3, and now we can see the result of that. We have had a record quarter, 119% growth overall in sales. As I also wrote in the report, we knew that that was going to happen because we made a major acquisition at the start of this quarter by Stratford Pharmaceuticals, a nutraceutical company based in Florida, U.S. You can also see that the organic growth was 27%. Compared to Q2, where we had a flat, basically no organic growth or very small, we have really speeded up the growth this quarter. If we start with our major external markets, we've had very good growth there, shipped orders to all of our big countries, Brazil, Australia, Korea, China, Russia.
What's been a major focus this quarter, of course, was the integration of our newly acquired company, Stratford. We have had different projects to see how we should approach the market specifically. With Stratford, we got a really good organization to grow the veterinary channel in the U.S. primarily. Our sales in the U.S. has grown very rapidly over the years, but it has been primarily in the pet specialty sector. Now we really look forward to entering the veterinary sector strongly with our ProDen PlaqueOff product line. Also, of course, the other way around, to see what best-selling products that Stratford has developed that we can introduce to the pet specialty sector. Lots of, let's say, business integration and business development projects ongoing. Of course, also see where we can cut some costs, but primarily it's been focused on developing the business.
Since our approach to acquisitions is really we only want to acquire strong, independent companies that will continue to run as is. We will basically just focus on where we can add business and improve the business. If we look at different markets, what we cover ourselves is really U.S. and U.K. is really growing at full speed. It is of course, in the aftermath of COVID, and now it's starting again, it's really the online sales has been growing exceptionally well. We have partnerships with Chewy.com, the biggest online retailer for pet products, and they're based in the U.S. They cover U.S. and Canada. Of course, Amazon, where we've started more close cooperation with Amazon in Europe, and U.K. is the biggest country for Amazon for our sales, and it has really been impressive growth. We are launching it in different European countries now.
We started off with Italy and France, now we've added Germany as well, and U.K., of course. The, let's say, major event that we did during the quarter was actually to acquire two new companies, Animal Pharmaceuticals based in the U.S., also in Florida. A similar business line and business concept as Stratford. We also acquired nutravet, the number one nutraceutical company in the U.K., only focused on the vet sector. We managed to complete that end of last quarter, now as of 1st of October, they will be fully included in our reporting, we've started the integration work with those two companies. Going into 2021, we're a completely different company than compared to going into 2020, that's very exciting times for us. Sales per region, as I have mentioned before, of course, there's a big change.
All of our regions being presented here has grown compared to 2019, the percentage becomes a bit different now when we have the acquisition of Stratford. You can see that North America grows from 28% of our business compared to 58% now, even though our Swedencare USA organization has grown significantly, the sales there, the Stratford acquisition was really big for us. Of course, they are the major part of the U.S. sales right now. China is back on track, even though they came out of COVID a bit earlier, we've seen that they have been a bit slowing in recapping, it's been the general momentum in China for, let's say, all sales in all sectors, is that the consumers in China has been a bit more cautious. We see that the trend is on the right track right now.
Even though China has been growing our sales, not the same numbers as we were used to, but I had a meeting yesterday with our Chinese distributor, and he seems to be very confident that the Q4 will be the best quarter of the year. Rest of Asia is Korea, is a very important market for us, and also Japan. They have been growing this quarter as well. If we look at the different other, let's say, regions or countries that have had excellent growth, has been Greece, where we have our own company and our own sales force working. It's been very good development there. If we go over and look at the different products, there's of course a big change now if we compare to 2019, where the ProDen PlaqueOff line was 89% of our sales.
That will of course continue to change over the next quarter even more. This quarter it was just around half of our sales was ProDen PlaqueOff, and we have included a new definition or a new sector. It's topicals dermatology products that is really a big product sector for Stratford, and will be even stronger next quarter since also Animal Pharmaceuticals that we have acquired has very strong sales in that sector. nutraceuticals, also boosted by Stratford Pharmaceuticals, of course, and the other products is basically our Greek daughter company that sells a wider range of, let's say, veterinary hardware as well. They were included from Q4 2019. Going over to numbers, Jenny will take over.
As Håkan mentioned, we had the sales this quarter of 119% more than we did if you compare to Q3 last year. We reached almost SEK 70 million in sales this quarter. 27% of this was organic growth, as Håkan mentioned. The majority of the growth is coming from the Stratford acquisition, but also from the markets where we had high online sales, such as the U.K. and the U.S. Gross margin is a little bit lower compared to last year. We had gross margins of 62.6% this quarter, compared to 73.7% last year. This is due to the lower gross margin that we have in Stratford. If we look at operating cost, there's been, of course, less physical sales activities this quarter with the expos and travel, et cetera.
As we have done in the last, I will say, year, we have increased our marketing initiatives activities, both when it comes to our branding, but also with digital sales. In the quarter, we also did a study for cats, which is a group that is growing in more markets higher than dogs, and we will come back to that in the future. One other thing that affected EBIT this quarter was the exchange rate loss. We had an exchange rate loss of SEK 860,000 compared to a gain last year of SEK 476,000. That, of course, has an impact on EBIT. Overall, we had an EBIT of SEK 18.6 million for the quarter, an EBIT margin of 26.8%, and that includes acquisition cost of SEK 1.5 million.
If we do an adjusted operating EBIT, it will be at SEK 20 million, and we would have an EBIT margin of 29% for the quarter. If we look at cash flow and the balance sheet a little bit, we have increased our working capital, mainly due to large invoicing at the end of the quarter. As you know, we have done a new share issue in the end of September, where we brought in SEK 335 million to the company. We also took a bank loan of SEK 50 million. That's the reason why we have cash of SEK 409 million. October 1st, we paid the two new acquisitions of SEK 376 million. Just to mention a couple of things when it comes to year-to-date.
We are now, for the first three quarters, at SEK 140 million, a 50% growth compared to last year, 14% of organic growth this year so far. In the EBIT of SEK 35 million and an EBIT margin of 25%, it's including SEK 3 million of acquisition costs because we both have the Stratford one and nutravet and Animal Pharmaceuticals. If we exclude those exceptional costs, we would have an EBIT margin of 27.3%, which is well above our long-term target. In addition to that, I can just mention that operating cost, we have about SEK 9 million additional operating cost compared to last year due to the fact that we have Biovet and Stratford, which is included in the year-to-date numbers of 2020, and they were not last year. This is our rolling four quarters. As you can see, there's quite a big jump now in Q3.
The SEK 135 million that we had last year did not include the Stratford. Now we have revenues of SEK 174 million almost, and an EBIT that also jumped up to almost SEK 47 million for the rolling. Håkan?
Yes. As Jenny said, we've made two major capital increases. One when we acquired Stratford and one when we acquired nutravet and Animal Pharmaceuticals. The investor community has appreciated these acquisitions. We've been trading well above 200 after we presented the last two acquisitions. There's also been strong interest from institutional investors when we made the book building processes. We have a strong list of shareholders, long-term shareholders, that has been supporting us over these capital increases, and also lots of traction from this last year, I would say, from international investors from U.S., France, Germany, U.K. We appreciate that and really focused on creating shareholder value and growing the company these coming years. Priorities going forward. Of course, Q4 will be a new quarter of integration, nutravet and Animal Pharmaceuticals.
I would say the Animal Pharmaceuticals, as I said, a very close relationship if you compare the two companies, Stratford and Animal Pharmaceuticals. It happens to be also that the two organizations have a clear, let's say, division of their major customers. We see lots of opportunities in going forward. The organizations have already started to cooperate and integrate, so exciting times over in Florida. With regards to nutravet, they are really an excellent organization with everything from, let's say, product development, fulfillment, sales organizations, visiting veterinarian clinics, doing that, of course, a bit differently nowadays since the COVID shutdown in the U.K., since U.K. is the main market for nutravet, but they have handled that excellently. Going forward, we see that they keep on running their businesses, and we're just looking for new opportunities to grow the businesses even further.
Concerning nutravet, it's primarily taking the product range out in Europe and to other places in the world. Going into 2020, we're very focused in increasing marketing activities. Those include brand building, just streamlining and working, let's say, more professional than we have done. We still want to keep our entrepreneurial core. Really, we are growing in such speed. We need to streamline a bit more and organize a bit more. We have really come a long way this year. There are lots of big projects running right now that will be very, let's say, satisfying to present to the market. One area where what you can see already is that we have a bit different graphic layout. We will continue working with that.
Brand and product development, as I said, now we have excellent, well-run, and independent companies that all have, let's say, product development and brand building as their core. Now we're just looking where we can find exchanges concerning the competence and taking new products into the market. As of now, we're swamped with really good products and just interchanging between the companies and see what markets could be suitable for the different products and product lines. It's lots of work with that. Of course, if we look at different markets, North America will, of course, continue to be our focus market since we are now increasing our presence there a lot. Of course, that it will be essential that we continue to grow there and really succeed there.
That will be a focus market, when we will also continue to focus on, let's say, increased marketing activities and marketing spend in North America since we see that we get really good returns on our investments in that sector. China, I'd like to mention as well, since in the last year, it's still the fastest-growing major market in the world, and the spend there is going up a lot. There's lots of things to be done in China. As of now, we just launched the ProDen PlaqueOff, and we will over the years to come, launch a lot more product into the Chinese market.
Great.
As we also presented in the report, we set the new target and ambition financial goals last year, SEK 500 million in sales and with a 25% EBIT margin. As our chairman wrote in the press release when we presented the last two deals, is that we're really getting close to that with speed. We will present to the market new financial targets, and that will be presented at the latest at the Q4 reporting in early February.
Yes
Mid-February.
Mid-February.
Yeah.
Yeah. Great.
Okay.
Yeah.
Is there any questions?
We have received a couple of questions. I will read them. We will ask them. We have one question. Is it possible to get some information about the gross and EBITDA margin of Stratford during the quarter? The gross margin is, as I said, lower than our average business. It's about 50% gross margin, and we have about EBITDA margin in Stratford about 20%. Is it possible to get some indication on the development of nutravet and Animal Pharmaceuticals during Q3 in regards to growth and margin? When it comes to growth, they grow with about a speed of about 10%, and they have higher margins. We have released those margins in the press releases. We have nothing to add to that. How do you view the M&A possibilities going forward, Håkan?
Yes. Now, this has been an exceptional year for us, of course, but since I'm convinced that these three acquisitions will be a success for us, and we of course have had some training doing this. I would say that we will be looking at new acquisitions over the years to come. I do not expect any new transaction this quarter, but next year, it is absolutely possible. There's been lot more activities from the market contacting us than before. I guess that with these acquisitions that we made, the market has really taken notice of us. I would say yes, most probably.
Yeah. Have you started to realize some sales synergies between Swedencare and Stratford in the quarter?
Yes, we've shipped products to Stratford, our powder products, whole full range of powder products to Stratford, they've started to market it. Not so much sales in Q3, that will pick up in Q4. Absolutely. We're also looking at developing, let's say, special product based on ProDen PlaqueOff both for Stratford in the veterinary channel of the U.S. and also for nutravet that has a unique selling point to the veterinarian community in the U.K.
Good. Including the two recent companies, can you talk about the role for planning out cross-selling, which countries, timing, et cetera, and what effect do we expect on sales?
I would say that if we start with nutravet, they have a unique agreement with the largest veterinary clinic chain in Europe, where they have a private label product range being only sold as of now in the U.K. Even before our acquisition, they had started to plan for launching that out in the other European countries. That will, of course, be implemented and that will, of course, be fueled a bit faster now since we have a presence in lots of those countries. I would say that it perhaps will speed up the launch when it comes to nutravet. Looking at Animal Pharmaceuticals and Stratford, as I said, we're in full-time work, basically, just looking at what products that Stratford has that we can take to Europe and perhaps produce in our Irish factory, et cetera.
It's difficult for us to say in what countries, but I would say primarily starting off with the countries where we have presence, because it's easier for us to start up there. Then, of course, the Asian countries are very interesting for us to launch different product lines.
Very good. Let me just hold on here.
Sorry, I don't know when to stop. Shall we take the question again?
Yes. Maybe it was we got some information that it was mute.
Okay, sure. Yeah.
Yes
products. No, I haven't seen, let's say, a clinical saying that human-graded products are better than other products. I would say that the premium brands, premium dog and cat food, they have been using human-graded ingredients the last 5- 10 years. I think it's more of a sales. Some have picked up the sales argument. If you're saying that there's a trend of these raw food diets, but there's lots of different trends. There's raw food, there's grain-free, and the grain-free and gluten-free is going back a bit since there were some new clinicals saying that it wasn't really good for the pets getting gluten-free. That's also some trendy arguments. I would say that the pet food business as such, going up from medium range to premium, they all have human-graded ingredients, so I don't see that's a problem for us.
Great. Do you have anything else you want to add, Håkan? That you haven't touched on?
No, not really. I am just really proud that we managed to get such a good start with Stratford and really coming out in the Q3 really strong on all of our markets.
Yeah.
Heading on to Q4, of course, this is exciting times, adding two new companies with excellent organizations and just including to our, let's say, management team, two new very strong entrepreneurial guys that have really created these companies from start. I'm humbled that they want to join Swedencare and see such a potential joining our group. It's really exciting times.
Yep. Very good. Thanks everybody for joining, and we appreciate this and it will also be saved online on our website. Thanks a lot. Bye-bye.
Bye-bye.