Karo Pharma Quarterly report Q3 2021

HUDDINGE, Sweden, Oct. 28, 2021 /PRNewswire/ -- July – September

• Revenues amounted to MSEK 738.5 (679.1), corresponding to an increase of +9% for the period.
• The organic growth^[1] during the third quarter was +13%. The currency impact in the quarter was 0% while the divestments generated an effect of -4%.
• EBIT (Operating Profit) amounted to MSEK 99.5 (43.7), corresponding to an increase of 127%.
• EBITDA¹ (Operating Profit after depreciation and amortization) amounted to MSEK 234.5 (174.8) corresponding to an increase of 34%.
• The gross margin¹, defined as gross profit divided by revenues, was 56.4% (57.8%). The margin was affected negatively by product mix in the quarter.
• Cash flow from operating activities amounted to MSEK 100.3 (63.2).
• Earnings per share was SEK 0.26 (-0.01), before and after dilution.
• During the period Karo Pharma divested 12 brands to Evolan. (Citodon^®, Morfin Special, Sincon^®, Bamse^®, Oliva^®, Karbasal^®, Complete^®, Nazamer^®, Ferromax^®, Tussin^®, Samin^® and Conotrane^®). The transaction closed on July 1, 2021. The portfolio had a turnover of MSEK 62 and the effect on the result is not significant on the period.

^[1] Alternative Performance Measures (APM),
see page 21 for further information.

Comments by CEO Christoffer Lorenzen

Q3 was a quarter where we maintained the momentum from Q2 and recorded organic growth of 13% (9% including divested businesses and currencies). Year-to-date we are back to growth of 2% (1% organic) for Karo, which reflects that the business has rebounded after a Q1 that was heavily impacted by tough comparable financials from Q1 2020. The Q3 growth was driven by the Norwegian, Danish and Western European businesses and we see that the C19 pandemic is easing its grip, which is beneficial for Karo's brands. Primarily more in-store traffic in physical channels, which has a broad impact across our portfolio, and increased social activity in societies, which drives up the needs for treatment in e.g., the Intimate Care and Pain, Cough & Cold categories.

In Q3 we saw an EBITDA growth of 34% and 11% when looking at the year-to-date number. The EBITDA is helped by improvements in gross margins across the year as cost-of-goods-sold is gradually improved over time as we improve our supplier network and contracts. As mentioned in connection with the Q2 report, we are investing more into growth, which reflects itself in increasing advertising & promotion spend (+8% vs LY Q3) as we develop our brands and increase our efforts to effectively position our brands with consumers. This is offset by efficiency gains in our admin functions as we realize the benefits of our scalable platform investments. The net operating expenditure is therefore stable at 46% of sales compared to last year. In terms of operating efficiencies, a focus point in Q4 is to reduce the net working capital tied up in the business. We are taking steps to improve our net working capital and expect these efforts to yield material improvements for the full year.

Our primary focus from Q3 and onwards is to drive organic growth. We will invest more into advertising and promotion in future quarters with a specific emphasis on our growth brands and on the digital/e-commerce channels. To drive the organic growth agenda, we are onboarding new commercial leaders to drive the next phase of Karo's development. Hence, we onboarded a new Head of Digital and e-commerce, Fredrik Thorsén, in Q2 and since then Matt Roberts as our new Chief Commercial Officer in August and Anna Hale as our Chief Marketing Officer in October. Matt and Anna join Karo from Johnson & Johnson and GSK Consumer Healthcare, respectively, and bring a wealth of experiences and practices that will accelerate the development of Karo' commercial strategies and the quality and speed of our execution across brands and markets in an increasingly international context. In addition, we continue to explore opportunities to acquire brands and portfolios that can enhance the profile of our business.

We are progressing our sustainability agenda and have neutralized Karo's direct CO₂ emissions in 2021. Our next step is focused on our indirect emissions. Here we are working closely with our contract manufacturers, third party logistics providers and other partners to significantly reduce our total CO₂ footprint. Our contribution to solving the global climate challenge is one of our highest priorities and a core element in our strategy moving forward. We will be reporting more on our progress in the coming months, particularly in our 2021 year-end report. We consider sustainability vital to delivering on our purpose of providing "smart choices for everyday healthcare".

Christoffer Lorenzen
CEO

Significant events in the report period January-September

On April 1, 2021, Karo Pharma closed the acquisition of a portfolio consumer healthcare brands from Teva Pharmaceuticals for MSEK 855. The acquisition transferred ownership of Flux^®, Decubal^®, Lactocare^®, Apobase^®, Dailycare^® and Fludent^® from Teva to Karo Pharma.

On July 1, 2021, Karo Pharma closed the divestment of a portfolio consisting of 12 brands to Evolan. (Citodon^®, Morfin Special, Sincon^®, Bamse^®, Oliva^®, Karbasal^®, Complete^®, Nazamer^®, Ferromax^®, Tussin^®, Samin^® and Conotrane^®). The portfolio had a turnover of SEK 62 million in 2020 with a growth of -4% versus the previous year. The divestment completes the efforts to refine and optimize Karo's portfolio after the acquisitions done over the last few years.

Financial calendar

The Annual Report 2020 was released March 30, 2021 and the Annual General Meeting was held April 21, 2021

Contact

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 October 28, 2021, at 08.00 CET.

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