Interim report Q1 2021
January – March
- Revenues amounted to MSEK 713.0 (793.6), corresponding to a decrease of -10% for the period.
- The organic growth* during the first quarter was -16%. The currency impact in the quarter was -1% while the acquisitions of the product portfolios Proct® from Leo Pharma and Pevaryl® from Johnson & Johnson generated growth of +7%.
- EBIT (Operating Profit) amounted to MSEK 128.1 (104.1), corresponding to growth of 23%.
- EBITDA* amounted to MSEK 259.8 (209.3) corresponding to growth of 24%.
- The gross margin, defined as gross profit divided by revenues, was 60.9% (53.9%) for the quarter. The margin was affected positively by the acquired product portfolios, the divested Hospital Supply business and by realized synergies in production and distribution of products.
- Cash flow from operating activities amounted to MSEK 34.2 (-9.8).
- Earnings per share was SEK 0.24 (0.39), before and after dilution.
* Alternative Performance Measures (APM), note 4 for further information.
Comments by CEO Christoffer Lorenzen
Karo Pharma realized a negative revenue growth of 10% during the first quarter of 2021. The organic growth was down 16% but the acquired Proct® and Pevaryl® businesses contributed positively by 7%. Currencies accounted for -1%. The negative organic growth is explained primarily by challenging comparable financials: In March 2020 Karo saw a sales spike as consumers stockpiled, and wholesalers and pharmacies increased inventories in connection with the COVID-19 outbreak in Europe. A secondary for the negative growth was the divestment of the Hospital Supply business at the end of the year 2020.
In terms of brand categories, Karo saw increases in the categories positively impacted by M&A, such as intimate care (+24%) and foot care (+54%). The dermatology category (+26%) was also impacted by M&A, but has also seen positive impact from COVID-19 induced changes to consumer behaviors (in this case, particularly the increased use in products to address dry hands and skin). Conversely, we see declines in the pain, cough & cold category as common cold and flu has seen very low prevalence and as this was the category with the highest impact from inventory build-up in Q1 2020. We also see decline in the ‘other’ category explained by the previously mentioned divestment of the Hospital Supply business.
In terms of revenue developments by geography, we see that Swedish and Norwegian markets decline.
These markets had the highest exposure to the pain, cough & cold category, as well as the Hospital Supply business, respectively. We see expansion in Karo’s business outside of the Nordic markets; the business outside of these home markets has grown from from 30% of total sales in Q1 2020 to 44% this year, which serves as a testament to Karo’s internationalization strategy.
Through the period EBITDA amounted to MSEK 259.8, equivalent to a 24% increase compared to the year prior. This is a result of gross margin improvements across the business, cost controls as result of COVID-19 and reduced costs associated with M&A (non-recurring expenses). In terms of production costs, Karo realized an improvement of the gross margin from 53.9% to 60.9%, the result of improved product mix as well as the implementation of strategic tech transfer projects and optimization of our supply chain and logistics set-up. In terms of operating costs, we also saw an improvement versus the year prior. Our organization and general & admin expense levels have grown as a direct reflection of our acquisitions and related geographical expansion. However, we have tightly managed our commercial demand generation spend (advertising and promotion) and – combined with reduced non-recurring expenditures (related to M&A) and exchange differences from operations – this explains a decline in operating expenses of 5% during the first quarter.
We expect to turn up investments in sales and marketing as the COVID-19 pandemic eases its grip on societies. Such increased expenditure will be required to defend and grow market shares – particularly to address the on-going consumer shift to online channels – and will play an important part in executing Karo Pharma’s continued growth strategy.
On February 3, 2021, Karo Pharma announced the acquisition of a portfolio consumer healthcare brands from Teva Pharmaceuticals for MEUR 84. The acquisition transferred ownership of Flux®, Decubal®, Lactocare®, Apobase®, Dailycare® and Fludent® from Teva to Karo Pharma.
Interim report Jan-Jun 2021 Jul 22, 2021
Interim report Jan-Sep 2021 Oct 28, 2021
Year-end report 2021 Feb 16, 2022
The Annual Report 2020 was released March 30, 2021 and the Annual General Meeting will be held April 21, 2021.
For further information, please contact
Christoffer Lorenzen, CEO
+46 73-501 76 20
Jon Johnsson, CFO
+46 73-507 88 61
About Karo Pharma
Karo Pharma offers “Smart choices for everyday healthcare”. We own and commercialize reliable original brands within prescription drugs and over over-the-counter consumer products. Our products are available in over 60 countries with the core in Europe and the Nordics region. The headquarter of Karo Pharma is in Stockholm and the company is listed on Nasdaq Stockholm, Mid Cap.
This information is information that Karo Pharma AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above, on April 21, 2021 at 13.00 CET.