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The performance of Olainfarm Group in Q1 2021 is convincingly resilient
“We have started the year with a targeted momentum despite the impact of the Covid-19 pandemic, and this is also reflected in the company's financial results. The new marketing strategy was the driving force behind maintaining the position of our products and services in our markets. We are committed to our strategy and invest in production, product development, IT and digitalisation. Our care for patients with health problems related to pain, inflammation, cardiovascular disease, mental health and other conditions remains unchanged," said Jeroen Weites, Chairperson of the Management Board of JSC Olainfarm.
Operating environment
In Q1 2021, the Group's business environment was still affected by the Covid-19 pandemic: restrictions introduced, decrease in buying power of consumers leading to reduction of purchased products in medication and retail segment. It encouraged the Group to work actively to achieve the defined targets and move forward in line with the approved long-term strategy.
In contrast to the declining volume of pharmaceutical markets Olainfarm medicines continued growing and gaining market share in Q1 with remarkably good performance in Ukraine, Uzbekistan, Latvia, Kazakhstan, Georgia, and Russia. One of the reasons for growth is the successful implementation of the new business model in Ukraine, Russia, and Kazakhstan and a professional and well-established marketing team in Latvia. Despite weak OTC and food supplement market results in Q1 2021, Olainfarm products have shown strong demand due to product mix, brand recognition and renewed marketing strategy.
The group successfully provides continuous supplies of goods in all operating markets. Central nervous system franchise (Neiromidin, Adaptol, Noofen) driven by Neiromidin and Adaptol in Russia, Latvia, and Uzbekistan demonstrated growth in sales amount by 2 124 thousand EUR. Increased days of therapy in neuropathia and post-COVID asthenia provided for demand for these products. Furamag is ahead of the last year by 922 thousand EUR driven by performance in Russia, Ukraine, Kazakhstan, and Georgia. Etacizin is above prior year Q1 by 985 thousand EUR.
Financial results
In the reporting quarter, the group's sales volume amounted to 33 499 thousand EUR, exceeding the 2020 figure by 3%. Gross profit was EUR 18 911 thousand, which shows an increase of 524 thousand EUR or 2.8% compared to the same time period last year. The gross profit margin in the reporting period is 56.5 %, which is a 0.3 p.p. drop compared to 56.8 % reached the same period last year.
The Group’s EBITDA figure for three months 2021 was EUR 7 226 thousand, which is 16 % or EUR 1 403 thousand EUR less than the result of the same period of 2020. The EBITDA margin of the Group is 21.6%.
Group’s net profit for the reporting period reached 5 149 thousand EUR, representing an increase of 3 036 thousand EUR or 144% against the previous year's figure.
The impact of Covid-19
During the reporting period, the Group continued to secure the precautionary measures in the production premises, the administration and sales structures, ensured organizational and hygiene requirements, the possibility of carrying out work duties remotely, where it is possible, providing informational and other activities.
Several of the Group companies used the opportunity provided by the Latvian State to receive financial support for Covid-19 crisis mitigation and the motivation of medical personnel. In total, in the 1st quarter of 2021, the Group companies have received Latvian State financial support amounting to EUR 85 thousand.
Pandemic penetration left an impact on Group subsidiaries’ results. A significant reduction in demand in retail sales was caused by legislative restrictions on the organizational procedures for physical visits and trading areas in ambulatory institutions, shopping centers.
The largest changes in demand were experienced by the compression product segment, which carries products meant to be used after performing medical manipulations.
Significant impact comes from the drop in demand for the leading product category in health-enhancing – products for the treatment of cold symptoms. Cough and Cold markets are declining across all countries driven by Covid-19 constraints and low acute respiratory viral infection (ARVI) incidence in 2021. In the vast majority of countries demand for cough and cold products significantly decreased due to mask wearing control and work from home that meant less physical contact between people. In addition, the focus in OTC and food supplements consumption is on vitamin D, immune supporting vitamins, and antivirals.
Investments and development
During the reporting period, investments were made in the development of active pharmaceutical ingredients production technologies and in the development of new products - finished dosage forms, including the EU co-financed project “Active Pharmaceutical Ingredients Research” and the Investment and Development Agency of Latvia innovation voucher support service.
During the reporting period, investments were made in pre-clinical and clinical trials of medicines, including the implementation of the European Union (EU) co-financed project “Pre-clinical and Clinical Trials of medicines”.
In the 1st quarter of 2021, the planning of four Phase 3 clinical trials was performed and the necessary actions for the initiation of trials, which were planned to be started in 2021, in accordance with the limitations and risks related to the implementation of the Covid-19 pandemic.
In 2021, work has started on the project for upgrading the plant's wastewater treatment system - prepared and approved technical task for the development of a technology project for wastewater treatment equipment. The aim of this project is to set up a new, fully automated, closed-type sewage treatment system technology in Olaine.
During the reporting period the investments mainly made in production, product development, IT and digitalization. Covid-19 pandemic restrictions and economic consequences significantly influenced the possibilities of the Group to realize planned investment receiving and expenditure, and partly to postpone it to the second half of 2021. Total realized CAPEX in the first quarter of 2021 was 36% of the budgeted amount.
Olainfarm, a part of Olainfarm Group, is one of the leading pharmaceutical companies in the Baltic States offering high quality medicine and chemical pharmaceutical products. The Group’s business strategy “FORWARD” highlights the main company’s vision – to become one of the TOP10 Central and Eastern European manufacturing companies by 2025.
With nearly 50 years of expertise, Olainfarm Group delivers sustainable healthcare products and services with added value to patients in more than 50 countries all over the world via its key subsidiaries – pharmaceutical company Olainfarm, food supplements & medical devices producer Silvanols, elastic & compression material producer Tonus Elast, pharmacy chain Latvijas Aptieka and healthcare & diagnostics centres DiaMed & OlainMed.
Additional information:
Jānis Dubrovskis
Investor Relations Advisor of JSC Olainfarm
Phone: +371 29178878
Email: janis.dubrovskis@olainfarm.com
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