Olainfarm Group lays a strong foundation for sustainable development
- Olainfarm Group's profit in 2020 reached EUR 9.5 million and the parent company closed the year 2020 with 11.5 million EUR profit
- The Management Board will propose to approve a dividend payout of EUR 0.17 per share in the annual report of 2020, which is a total of EUR 2 394 463
- Significant investments are planned for research and development, as well as the acquisition of products and modernization and digitalization
“Covid-19 is having a significant impact on the global healthcare and pharmaceutical industries. Our values and care for the society remain unchanged in this difficult time, we strive to improve people's health and quality of life. In accordance with the Olainfarm Group's five-year strategy "Forward", in 2020 an unprecedented transformation of the Group was initiated with the goal of making internal processes more effective for sustainable growth. Despite the challenges caused by Covid-19 we have managed to build a strong foundation. Moving towards strengthening and expansion characterizes Olainfarm Group's approach for the year 2021 and beyond. This will be based on significant investments in research and development, in particular - by fostering the development and acquisition of FDFs,” says Jeroen Weites, Chairperson of the Management Board of JSC Olainfarm.
The year 2020 in a sign of transformation
In 2020, the Group's revenue reached EUR 122 million, which is 11% less than in the previous year. The parent company's revenue in 2020 was EUR 92 million, ensuring the fulfilment of previously forecasted revenues. Turnover in all of the Group's main markets, except Russia, increased compared to 2019. The Group's largest market in 2020 was Latvia showing consistency in operations, providing a 1% increase compared to 2019. Despite the global impact of the Covid-19 crisis, Olainfarm Group was able to ensure a continuous supply of goods in all of the Group's operating markets throughout the year. In 2020, a number of strategically important activities were carried out, affecting the financial results of Olainfarm Group's strategy.
JSC Olainfarm expanded its marketing team and renewed its business model in Ukraine where the existing legal structure served as a basis for changing the business model. The revenue in Ukraine has increased by EUR 746 thousand when compared to 2019, and the overall share of Ukraine in the Group's revenue reached 9.4%.
The Group's financial results for 2020 were affected by several events in the Russian pharmaceutical market. In 2020, JSC Olainfarm established a subsidiary in Russia as a long-term investment, which has been providing JSC Olainfarm product promotion activities in the Russian pharmaceutical market since September of last year. It ensures an even more accurate insight into the Russian pharmaceutical market, adjusting JSC Olainfarm supply according to customer demand. A survey carried out in the Russian pharmaceutical market confirms the effectiveness of JSC Olainfarm foreign market strategy – the recognition of the JSC Olainfarm brand has increased, thus providing a solid base for further development.
In 2020, a new medicine verification and traceability system was introduced in Russia, changing the usual delivery schedules. The Russian ruble depreciated against the euro by 32%, which had an impact on the sales and net profit of Olainfarm Group.
At the end of 2019, additional emergency deliveries of EUR 6 million were made to Russia for consumption in 2020. This reduced sales in Russia in 2020 compared to 2019.
Consolidated EBITDA in 2020 is EUR 25 million, which is a 17% decrease compared to the year 2019. EBITDA is affected by both sales revenue in certain markets and changes in operating models that result in a different cost structure than historically common.
Strategy “Forward 2020-2025”
One of the most important events of 2020 was the approval of JSC Olainfarm strategy "Forward", outlining a clear vision for the Group's future operations. The strategy intends on placing more emphasis on the development of the core business, supplementing and developing JSC Olainfarm's product portfolio by both using internal expertise and acquiring new products.
In 2020, JSC Olainfarm received the Russian Certificate of Good Manufacturing Practice (GMP), which confirms the company's efforts for maintaining the quality system and complying with the Russian market, including the requirements for production and quality control of medicines.
Although the overall impact of Covid-19 on Olainfarm Group is small, some of the ongoing product development projects have been postponed to 2021. As proposed by the European Medicines Agency, clinical trials during Covid-19 are not recommended. Therefore, the amount of Olainfarm Group's capital investments in 2020 was EUR 9.2 million, not reaching the levels forecasted. It should be emphasized that some of the projects are implemented with the co-financing of the European Union (EU).
During the reporting year, Olainfarm proved itself as a reliable partner in the implementation of significant capital investments. In 2020 the modernization of the Cold Station and distribution infrastructure took place, in which more than EUR 2.7 million were invested, including co-financing from the European Cohesion Fund in the amount of EUR 700 thousand. The implementation of this project ensures JSC Olainfarm contribution to the green economy and climate neutrality programs, with the projected savings of 1486.563 MWh/year and the reduction of greenhouse gas – CO2 emissions by 235.645 t/year.
In 2020, the Group's cash flow from operational activities was EUR 28.5 million, which has allowed it to significantly improve the Group's financial stability by both securing loan repayments and paying EUR 4.5 million in dividends to shareholders. Olainfarm's dividend policy states that JSC Olainfarm annually strives to pay shareholders a dividend of at least 20% from the previous year’s audited profit.
Forecast for 2021
For 2021, JSC Olainfarm as a parent company forecasted revenue of EUR 101 million. JSC Olainfarm consolidated revenue is planned at EUR 140 million, which is an increase of 14% if compared to 2020, in line with the five-year strategy reaching double-digit growth YoY.
"Strengthening research and development areas is a strategic priority for 2021. We focus on two main directions, firstly, R&D of new products, as well as the acquisition of already developed products, and secondly, investments in the modernization and digitization of technology and production equipment. In 2020, we concentrated our resources on the implementation of the strategy and have been able to significantly improve the marketing approach in the company's foreign markets. This will allow us to provide effective and targeted product promotion activities, expand the range of products in existing markets and achieve the projected revenue this year,” emphasizes Jeroen Weites, Chairperson of the Management Board of JSC Olainfarm.
The overall R&D costs are forecasted to be as much as 10% of JSC Olainfarm parent company's revenue in 2021, which is in line with the goals set within the new strategy. Investments of EUR 10.2 million are planned for these areas and will be directed to creating a new work environment and purchasing equipment, as well as continuing investments in order to position the existing product portfolio in new foreign markets. It is projected that not all R&D investments will be capitalized, so part of the research activities will have an impact on 2021 earnings.
In 2021, operating investments for Olainfarm Group are planned at EUR 13.8 million. In addition to investments in technology and modernization of the manufacturing facilities, the Group's priorities are to promote digitization and automation projects. In 2021, it is planned to introduce digital solutions for the improvement of customer service, as well as modernize and digitize core business processes. First and foremost, it is essential to introduce the laboratory information management system which will take several years to implement and will ensure not only improvements in the efficiency of internal processes but also compliance with the growing regulatory requirements.
The company plans to close the year 2021 with a profit of EUR 6.5 million, but the consolidated profit of the Group in 2021 is forecasted in the amount of EUR 8.6 million. JSC Olainfarm plans to achieve indicators forecasted in the strategy in 2025.
JSC 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 business strategy “FORWARD” highlights the company’s main 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 JSC Olainfarm, food supplement & medical device producer Silvanols, elastic & compression material producer Tonus Elast, pharmacy chain Latvijas Aptieka and healthcare & diagnostics centres DiaMed & OlainMed.
Investor Relations Advisor of JSC Olainfarm
Phone: +371 29178878
One Liberty Plaza - 165 Broadway
NY 10006 New York
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