Welcome to Swedencare's pre-quarter update, where Jenny and Håkan will provide a short presentation followed by a Q&A. Please raise your hand if you have any questions. Over to you, Jenny and Håkan.
Thank you so much, Emma. Welcome to this quarterly update and new for this year. The reason why we have this is basically due to the fact that we normally have a separate analyst calls before entering into a silent period before the quarter ends. As many of you know, there's been discussions about these type of calls, not for us specifically, but we have decided in collaboration with our CA to try a new format. This call is primarily a short update, not giving away much. You will have to wait for the report.
Giving the analyst the possibility and others to post any questions that they might have, and we will answer as we see fit. A short. We will try this, and if it's appreciated, we will continue to have these on a quarterly basis. Agenda, follow-up from Q4 and update by segment, some financial comments. Here also I would like to take the opportunity to comment on the geopolitical and pet market update. Very short. Just as you know, Middle East is in turmoil right now, not really affecting us. No big markets for us, and when looking at transport from Asia and back and forth, we normally have flight transportation. No real impact from that either.
If we look at the market as such, we haven't seen any decline in demand either in Europe or U.S. or rest of the world. For us, it's like it's still business as usual, but we are of course following the happenings and also if it might affect any further, let's say, transportation costs if this war drags on. As of now, no real impact for Swedencare. Here, profitability hit in Q4, as we described in the Q4 report. We had four more or less one-offs, and that really affected our profitability in Q4. The higher marketing cost on Amazon related to transition of the NaturVet, and the brand protection.
As we communicated in Q4 report, we will still have some impact in first half year. It is improving month by month, so we are confident that we are really on the right track, and we have seen lots of good things happening. That will pan out over the first half year. ERP implementation caused interruptions and affected gross margin volumes. No impact going forward, actually improving our production at the NaturVet site, and we're really happy with the new system. Marketing spend to support big box partners, primarily Walmart and CVS, and it was primarily Walmart in Q4. Low margin display campaign in 2,000 Walmart stores, that was an investment we made in Q4, so won't happen now in Q1.
Going forward, we are, let's say, open to and would like to have these types of campaigns since we have seen a big uptake in sales, but of course, with a more planned margin effect when we decide to do it. With the launch in pet retail. As we said, we are now present in over 500 pet retailers. That launch has continued to go well in Q1, and we have also signed a new collaboration for a distribution partner. We will have probably even better numbers at least in Q2 when it comes to coverage.
The spend will be aligned with sales going forward when it comes to marketing spend. Inventory write-offs, no one-offs in Q1, and we follow it more diligently, of course, and we don't expect to have these types of big write-offs going forward in any quarter. The different segments. North America, very strong sales in online and multiple new product launches. However, as I said, a lower return on investment on NaturVet on Amazon still affected by H1, however improving month by month. We're encouraged by that.
The big thing here is also that we are, let's say, not being able to really push our, let's say, marketing campaigns that are doing a really good job for the rest of our brands. We need to be a bit more cautious until everything's settled. It is improving and we're also, as we described in Q4, we have started to get SKUs into the Transparency program, and that means that no rogue sellers can sell the same SKU. We will start seeing effect of that in quarter two. Pet retail and big box, solid demand and the continued week by week increase in with Walmart first two months of 2026.
That's also pushed by the display campaign, of course. That display campaign ended last week of February. Let's see how it progressed from here. We're happy that we saw continued growth week by week. Also, I would like to remind you here that Walmart was a big order going into Q4 and in Q1, and going forward, we are replenishing every week to Walmart, but of course not a major shipment like we had in Q4. Veterinary, solid demand for our branded products. Europe online, strong demand and growth, especially with Amazon and zooplus. Finally, we now have transitioned all of the Amazon markets in Europe run internally.
We get the full top-line sales and also be able to utilize our marketing programs as we see fit. Pet retail, solid demand all over Europe. Veterinary Italian market, strong start. As some of you remember, Italian market last year, Q1 was rather soft due to some customers pushing orders into Q2. The comps are a bit lower, but even without that, the Italian market has really had a good start for 2026. U.K., good B2C and trade with veterinary. We have softer private label solutions there, but that is expected to pick up in Q2. A strong start for production. Pharma, as we've been waiting for, that has started as we expected, and E.U. and U.K. as well. US supplements, solid demand.
U.S. derma liquids, still weak as it was in Q4, but expect to pick up in Q2. We have the orders for that. Finally seeing some improvement there. Jenny, over to you.
Some financial comments. As you know, we have our financial targets where we want to grow with double-digit on an annual basis. We expect this for Q1. Gross margin, we expect this to increase compared to Q4. If you remember, we had a gross margin of 56.8% in Q4, and for the full year, we were at 58.1%. We expect the gross margin to be improved compared to these two. EBITDA, and also just to mention on the gross margin, this is driven by both improved production and also, the fact that we have some partial impact of price increases hitting in Q1, but it will be fully recognized in Q2. With this, scalability, we expect an increased EBITDA compared to Q4. Again, reminder that we were about 16% in Q4 and 19% in 2025.
We expect to have improved profitability compared to Q4. No material one-offs are expected in the quarter, and Q1 is also a very busy quarter with expos. We always have that in Q1, but I just wanted to remind you all of that. Our net debt/EBITDA, we were at 2.9 in Q4, and we expect this to decrease compared to that, and we continue to amortize on our long-term debt.
Yep. Just a couple of shots from all of the activities we've done in Q1 and expected to do. Now I'm traveling to Global Pet Expo next week, the biggest pet retail show in the U.S. We have had lots of our different group companies and brands have had expos. So you see, we've had a busy quarter, and the whole organization is working really hard. With that, open for questions.
Yes. Your first one comes from Adrian. Please go ahead.
Okay. Perfect. Can you hear me, guys?
Yes.
Yep.
Yeah, very well. Good morning to you. It's Adrian Elmlund here from Nordea. Just a few questions from me, please. Maybe first off, we had some one-off costs, right? Quite a few of them in Q4, right? Just want to double-check, like, which one of these so-called non-recurring costs will not affect in Q1? You mentioned the ERP system is done now. Is that done as of first of January, or, like, did it occur in the quarter? Kind of just timelining what, you know, items should not affect the Q1.
Yeah, no. ERP should not affect, inventory write-offs should not affect.
I just want to say, of course, we're always gonna have some inventory write-offs, but it's not gonna have a big effect like it did in Q4.
Yeah. We're not gonna have the, let's say, over-marketing spend like we had in Q4. In line with sales.
Okay.
We are still affected by the rogue sellers and the Amazon transition, but as I said, improving month by month.
Perfect. Thank you. Another question is regarding the Walmart numbers. I think you said in the Q4 report that it doubled in January, right?
Yeah.
Do we have any further, trading update here, or like, has that continued? Was that like a short-term effect?
No, it's by end of February, it actually grew week by week. Definitely not doubling week by week, but increasing some let's say percentage every week. Trending in the right direction.
Perfect. Okay. Last question here from me, please. I don't know if I missed this perhaps, but could you just guide us a bit towards the revenue visibility here for the pharma segment in 2026? Like in terms of quarters, when are your biggest products hitting, you know, the revenues?
I mean, we will have a strong quarter from the pharma division in Q1. But we expect it to basically perhaps not grow quarter by quarter, but this is not the biggest quarter for the year.
Okay, perfect. That was all for me. Thank you very much.
Thank you. Your next question comes from Adela. Please go ahead.
Thank you. Good morning, Jenny and Håkan. Adela Dashian from Jefferies. A few questions from me as well. I appreciate all the comments around, you know, what caused the profitability at Q4 and what the expectations are going forward. Could you maybe walk us through if there's any sort of cost headwinds that are affecting your cost base in 2026? I appreciate the comments about business as usual. Is there any pockets where you are actually seeing spikes already now?
No, not already, but we of course monitoring the transportation cost. I mean, we don't have that much when it comes to freight by boat. Of course, transportation cost in the U.S. for the distribution there is something we cover in some of the customer contracts. Not the majority, but still, I mean, that's probably what I think would be most. If there's any new type of, let's say, hikes on packaging due to this crisis. We haven't seen it as of yet, and I don't expect it.
I see. You mentioned packaging here. I mean, I would assume that you have pretty local sourcing or do you have big exposures to some of these?
I would say it's local companies that source us. Many of those companies. If I'm talking about the US market, they also have lots of, let's say, manufacturing from Asia when it comes to packaging. We don't always know if the product comes from their Asian production or if it comes from a local US production. No indications as of yet changes in price for 2026, or other than normal price increases that we have calculated with.
Okay, I see. Then on your confidence of ROI improving meaningfully with Amazon and NaturVet and so on, what are, like, the underlying drivers of this? You mentioned the transparency program and fewer rogue sellers and so on, but is there anything else in maybe both the mix and the marketing intensity that gives you confidence in or-
Yeah, I mean, looking at. It's definitely when we can activate all of our marketing programs, then we're in full control of the ROI and how much we can spend. The problem is when we have to defend from rogue sellers. We see the trend here, as I said, it's increasing. Our sales on Amazon are increasing month by month, and it's still. We haven't activated all the programs that we would like to do. We're waiting for the Transparency program to get more or less full effect. But we do see an improvement with the number of rogue sellers. We do see an improvement with price, keeping the price from our other, let's say, online customers.
There were some effects in January as we described when we had the call that we made a price increase for NaturVet, and then it takes some time for the bigger retailers to adapt to those prices. That also had a bigger effect in January. Still, January was still better than Q4.
We're finally at a comfortable place and see the trends are moving in the right direction and looking forward to really be able to push the trigger on some of the marketing campaigns where we are certain that we will get the velocity and the pricing, the sales volumes hiking a bit more than it has in the last six months.
Okay, I see. Thanks for that. Maybe lastly as well, on the entry into big box, do you already have some sort of margin profile in mind? Like, is this, I know we've spoken about this before, but are you still is going to be accretive to your overall once you've reached some sort of steady state with the marketing intensity and campaigns, et cetera? Or do you still think that it will take maybe some time for it to actually generate better than group level profitability, if ever?
Yeah, I would say it's more down to, let's say volume, that volume increases within the big box. Margin-wise, it's good, but we would like. It is, as I've said, it's even better than for some retail channels due to the fact that we don't have to go through distribution and some other, let's say, historically set ups with the bigger pet retailers, demanding more costs for, let's say, for being, getting secondary placements in their stores. It's a bit different set up with the big box retailers. We are definitely happy with the margin set up we have in big box.
Now it's more getting the volumes up, and so we can really see the contribution to the group.
Okay, great. That's all for me. Thank you very much.
Thank you.
Thank you, Adela. Yeah, we got a question in the chat as well that says, "Can you expand on your contract manufacturing business, which had a weak performance in Q4? Projects were postponed to H2 2026. Please elaborate.
Yeah, I mean, as contract manufacturing is, we have contract manufacturing both in the pharma part and also for supplements. Contract manufacturing was actually strong for some of our units and weaker for others, like in the pharma sector in Q4. As I said, the year started really strong there, so it will definitely pick up. When we mentioned the segment production, that's basically contract manufacturing. As we said, pharma, UK, and EU has had a really strong start. The US a bit weaker, but we expect that to come back in Q2.
Contract manufacturing/private label solutions, that's really an integral part and important part for us going forward. We expect that division to have a solid year.
Perfect. That concludes our Q&A session. Back to you guys for any closing comments.
Thank you so much. We'll be working hard last couple of weeks to have a good end of the quarter. Looking forward to meeting you 23rd of April, when we release the Q1 report. Thank you. Bye.
Bye-bye.