Operational and financial stability are priorities of Olainfarm Group

• Sales and profit in the 1^st quarter of 2020 were lower than a year ago due to extraordinary revenues at the end of 2019.
• During the 1^st quarter of 2020 EBITDA was EUR 4.581 million and EBITDA margin was 14 %.
• During the reporting period profit reached EUR 2.113 million and was negatively affected by volatility in currency rates.
• Successful operations allowed to accumulate EUR 20.192 million in cash that will ensure stable operations and development.

“The first quarter of the year has been a dynamic time in which business in Latvia and in the world have had many challenges. Today, business resilience is crucial – how to safeguard employees and the company as a whole, effectively overcoming the challenges of this crisis and continuing the company’s success. Olainfarm is ready for these challenges – we have maintained the set revenue and net profit forecast for 2020, despite the Covid-19 consequences around the world. We are working on a new ambitious five year strategy, including new initiatives such as in  cooperation with the Latvian Institute of Organic Synthesis we are researching the possibilities of production technology for the synthesis of the active pharmaceutical ingredient to limit the spread of Covid-19,” said Jeroen Weites, Chairman of the Management Board of JSC Olainfarm.

During the first quarter of 2020 the Group’s sales reached EUR 32.393 million, which is a decrease by 7% or EUR 2.352 million compared to the first quarter a year ago. Gross profit, in turn, was EUR 18.387 million, which shows a decline by 13% or EUR 2.867 million since the same period last year. Gross profit margin dropped from 61% in the first quarter of 2019 to 57% in the same quarter of 2020.

Looking at financial indicators for the last 12 month period (1 April 2019 – 31 March 2020) sales were EUR 134.867 million, which is an increase by 5% compared to a similar period a year before, EBITDA reached EUR 27.574 million that is by 9% higher and net profit was EUR 17.481 up by 10%.

Group’s sales in the main markets in the 1^st quarter of 2020 resulted in the following breakdown of revenues: Latvia with a 36% share (+7 p.p.), Belarus with 17% (+2 p.p.), Russia with 14% (-11% p.p.), Central Asian countries with 11% share (+3 p.p.), the EU countries with 10% share (+2 p.p.), the Ukraine with 6% (-3 p.p.), Other countries with 4% (unchanged) and Caucasian countries with 2% (+1 p.p.).

In the 1^st quarter of 2020, pharmaceutical products worth EUR 16.217 million were sold, which is a decline by 20% or EUR 3.942 million if compared to the same quarter of 2019. Final dosage forms segment share in the Group’s total revenue in the 1^st quarter of 2020 dropped by 8 p.p. to 50%.

During the reporting period, sales of JSC Olainfarm main final dosage forms declined relative to the same quarter a year ago and to the last quarter of 2019. This happened due to extra sales of EUR 6 million that were executed at the end of 2019. The share of the best sold product Noofen increased to 22% that is by three percentage points more than the year before. The share of Furamag/Furasol increased to 18% (+2 p.p.) and Adaptol’s share increased to 16% (+4 p.p.). At the same time the share of Neiromidin declined to 12% (-3 p.p.).

Pharmacy segment in the 1^st quarter of 2020 generated a revenue increase of 12% compared to the same quarter of 2019 and reached EUR 7.411 million. This segment’s share in the Group’s total revenue during the reporting period increased to 23% (+4 p.p.) compared to the 1^st quarter of 2019.

Compression material segment’s revenue in the 1^st quarter of 2020 was EUR 1.953 million that is 1% more than the year before. This segment’s share in the Group’s total revenue in the 1^st quarter of 2020 was 6% (unchanged).

Revenue of the wholesale segment from external customers was EUR 2.018 million, which is an increase by 43% or EUR 0.611 million. This segment’s share in the Group’s total revenue during the reporting period rose to 6% (+2 p.p.).

Chemical segment’s income in the 1^st quarter of 2020 was 1% higher than in the same quarter of 2019 and reached EUR 1.589 million. This segment’s share in the Group’s total revenue during the most recent quarter did not change and was 5%.

Other segments generated EUR 3.205 million in revenue in the 1^st quarter of 2020 and is 4% more than in the same quarter of 2019. This segment’s share in the Group’s total revenue during the reporting period increased by 1 pp and was 10%.

The Group’s EBITDA figure in the reporting period was EUR 4.581 million, which is 57% or EUR 5.960 million less than the result of the same quarter of 2019. EBITDA margin of the Group is 14%.

Group’s net profit in the 1^st quarter of 2020 was EUR 2.113 million, which is 74% or EUR 6.147 million less than the net profit of the 1^st quarter of 2019. The Group’s net profit margin also declined, and it was 7% instead of 24% a year earlier.

The reporting period profit was favorably affected by decrease in selling expense by EUR 2.013 million, due to review of marketing model in the main sales markets and by net increase in other operating income by EUR 0.69 million.

The largest negative factor resulted from fluctuation in foreign exchange rates. Gains in the first quarter of 2019 were substituted by losses and overall impact during the 1^st quarter of 2020 was in the amount of EUR 5.6 million. Due to lower revenue and different product mix in the beginning of 2020 the gross profit was lower by EUR 2.867 million than a year ago. At the same time Administrative expenses increased by EUR 0.367 million with energy related and other miscellaneous costs being the main drivers.

Most of the Group’s segments operated with profit in the 1^st quarter of 2020. The largest profit before tax was generated by the medicine and chemical segment, which earned EUR 4.355 million, in wholesale the figure was EUR 0.831 million, retail (pharmacies) made EUR 0.513 million, in other segments the profit before tax was EUR 0.146 million.

The Group’s financial position during the 1^st quarter of 2020 continued to improve. The Group’s successful operations allowed it to accumulate EUR 20.192 million in cash at the end of March 2020. This is a significant precondition to limit the effect of uncertainty within the sales markets as well as allows to safeguard supply of raw materials in order to maintain stable operations. Also accumulated cash allows continued financing for fixed asset investments as well as investments into research and development activities linked to completing clinical trials.

The Group’s Debt service coverage ratio (DSCR) in the 1st quarter of 2020 continued to improve and was 3.6 due to the drop in the amount of serviced debt in the last twelve months. Net Debt-to-EBITDA ratio was essentially NIL due to rapidly rising cash balances.

Condensed Consolidated Statement of  Financial Position

		Group
		31.03.2020	31.12.2019
		EUR '000	EUR '000
	ASSETS
NON-CURRENT ASSETS
Intangible assets		39 057	38 422
Property, plant and equipment		42 004	42 442
Right-of-use assets		7 113	7 069
Investment property		244	253
Other long-term investments		803	782
	TOTAL NON-CURRENT ASSETS	89 221	88 968
CURRENT ASSETS
Inventories		29 491	28 247
Receivables		32 421	36 225
Cash		20 192	15 230
	TOTAL CURRENT ASSETS	82 104	79 702
TOTAL ASSETS		171 325	168 670
	EQUITY AND LIABILITIES
EQUITY
Share capital		19 719	19 719
Share premium		2 504	2 504
Reserves		(502)	(12)
Retained earnings		107 411	105 298
	TOTAL EQUITY	129 132	127 509
LIABILITIES
Non-current liabilities
Borrowings and lease liabilities		11 757	12 177
Deferred income		3 744	3 194
	Total Non-Current Liabilities	15 501	15 371
Current liabilities
Borrowings and lease liabilities		8 446	9 568
Trade payables and other liabilities		17 740	15 727
Deferred income		506	495
	Total Current Liabilities	26 692	25 790
	TOTAL LIABILITIES	42 193	41 161
TOTAL EQUITY AND LIABILITIES		171 325	168 670

Consolidated statement of comprehensive income

	Group
	Q1 2020	Q1 2019
	EUR '000	EUR '000
Revenue	32 393	34 745
Cost of goods sold	(14 006)	(13 491)
Gross Profit	18 387	21 254
Selling expense	(6 268)	(8 281)
Administrative expense	(6 700)	(6 333)
Other operating income	699	462
Other operating expense	202	(255)
Share of profit of an associate	15	78
Financial income	18	1 563
Financial expense	(4 219)	(161)
Profit Before Tax	2 134	8 327
Corporate income tax	(31)	(67)
Deferred corporate income tax	10	-
PROFIT FOR THE REPORTING PERIOD	2 113	8 260
Other comprehensive (loss) / income for the reporting period, net of tax	(490)	155
Total comprehensive income for the reporting period, net of tax	1 623	8 415
Total comprehensive income attributable to:
The equity holders of the Parent Company	1 623	8 415
Non-controlling interests	-	-
Basic and diluted earnings per share, EUR	0.15	0.59

JSC Olainfarm is one of the biggest pharmaceutical companies in Latvia with more than 45 years of experience in production of medication and chemical and pharmaceutical products. A basic principle of company's operations is to produce reliable and effective top -quality products for Latvia and the rest of the world. Products made by the Group are being exported to more than 50 countries and territories of the world, including the Baltics, Russia, other CIS, Europe, Asia, North America and Australia.

Additional information:  
Jānis Dubrovskis
Investor Relations Advisor of JSC Olainfarm
Phone: [phone]
Email: [e-mail]

Attachment

• Olainfarm_l_2020_consolidated FS_ENG