“We have started the year with a focused approach, despite the impact of the Covid-19 pandemic, and this is reflected in the company’s financial results. The new marketing strategy was the driving force to maintain our products and services in the markets. We are committed to the strategy’s goals and We invest in manufacturing, product development, IT and digitization. Our concern for patients with health problems related to pain, inflammation, cardiovascular disease, mental health and other illnesses is constant, “emphasizes Jerūns Veitess, JSC” Olainfarm ” Chairman of the Board.
Operating environment
In the 1st quarter of 2021, the Group’s business environment was still affected by the Covid-19 pandemic – restrictions imposed, decline in the purchasing power of the population, which reduced the demand for goods in the pharmaceuticals and retail segment. This facilitated the Group’s active efforts to achieve the set goals and move forward in accordance with the approved long-term strategy.
Contrary to the general decline in the pharmaceutical market, sales of Olainfarm products continued to grow, increasing market share in the first quarter with significant results in Ukraine, Uzbekistan, Latvia, Kazakhstan, Georgia and Russia. One of the reasons for the growth is the successful implementation of the new business model in Ukraine, Russia and Kazakhstan, as well as a professional and well-organized marketing team in Latvia. Despite the low performance of the over-the-counter and food additive market in the first quarter of 2021, Olainfarm products have shown strong demand due to the diversity of the product range, brand awareness and a new marketing strategy.
The Group successfully ensures continuous supply of goods in all operating markets. Central nervous system funds franchise (Neuromidine, Adaptol, Noofen) with the main drivers Neuromidine and Adaptol in Russia, Latvia and Uzbekistan generated sales growth of 2,124 thousand. EUR. Increased treatment days for neuropathy and post-COVID asthenia contributed to the demand for this drug. Furamags exceeds the previous year’s result by 922 thousand. EUR with performance in Russia, Ukraine, Kazakhstan and Georgia. Etacizine exceeds the result of the 1st quarter of the previous year by 985 thousand EUR.
Financial results
In the reporting quarter, the Group’s sales amounted to 33,499 thousand. EUR, exceeding the 2020 figure by 3%. Gross profit amounted to 18 911 thousand. EUR, which is an increase of 524 thousand. EUR or 2.8% compared to the same period last year. The gross profit profitability in the reporting period is 56.5%, which is a decrease of 0.3 pp compared to the 2020 indicator of 56.8%.
The Group’s EBITDA indicator in the three months of 2021 was 7,226 thousand. EUR, which is by 16% or 1 403 thousand. EUR less than for the same period in 2020. The Group’s EBITDA margin was 21.6%.
The Group’s net profit for the reporting period has reached 5,149 thousand. EUR, which is 3 036 thousand. EUR or 144% increase compared to the previous year.
Effects of Covid-19
During the reporting period, the Group continued to implement precautionary measures both in the plant and in the administrative and sales structures, provided organizational and hygiene requirements, the possibility to perform work duties remotely, where the specifics of the work allow, took informative and other measures.
Several Group companies used the opportunities provided by the Latvian state to receive financial support to mitigate the effects of Covid-19 and to motivate medical personnel. In total, in the 1st quarter of 2021, the Group companies have received financial support from the Latvian state in the amount of 85 thousand. EUR.
The spread of the pandemic affected the results of the Group’s subsidiaries. In retail trade, a significant decrease in demand was caused by the restrictions on the organization of physical visits and retail space in outpatient institutions and shopping centers imposed by legislation.
The segment of compression products, which has products that can be used after medical manipulations, experienced the most changes in demand.
The drop in demand for the leading product category of health-promoting products – products for the treatment of cold symptoms – has a significant impact. Sales of cold and cough products will decline in all countries due to Covid-19 restrictions and low incidence of acute respiratory viral infections (ARVIs) in 2021. In most countries, demand for cough and cold products fell sharply as the use of masks was controlled and working from home meant less physical contact between people. In addition, over-the-counter (OTC) and dietary supplements focus on vitamin D, immune-boosting vitamins and antivirals.
Development and investment
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 European Union (EU) co-financed project “Active Pharmaceutical Ingredients Research” and the Latvian Investment and Development Agency “Innovation Voucher Support Services”.
During the reporting period, investments were made in pre-clinical and clinical trials of medicinal products, including the implementation of the EU co-financed project “Pre-clinical and Clinical Trials of Medicinal Products”.
In the 1st quarter of 2021, four Phase 3 clinical trials were planned and the necessary actions were initiated to launch the trials, which were planned to start in 2021, taking into account the limitations and risks related to the implementation of the Covid-19 pandemic.
In 2021, work was started on the modernization project of the company’s wastewater treatment plant – a technical task for the development of the wastewater treatment plant technology project was prepared and approved. The aim of this project is to create a new, fully automated, closed-type wastewater treatment plant technology in Olaine.
In the reporting quarter, investments were mainly made in manufacturing, product development, IT and digitization. The limitations and economic consequences of the Covid-19 pandemic have significantly affected the Group’s ability to realize the receipt and execution of planned investments and to partially postpone their implementation to the second half of the year. The total realized investments in the 1st quarter of 2021 accounted for 36% of the plan.
JSC “Olainfarm”, part of the Olainfarm Group, is one of the leading pharmaceutical companies in the Baltic States, offering high quality medicines and chemical pharmaceutical products. The company’s business strategy “FORWARD” marks its vision – to become one of the TOP10 manufacturers in Central and Eastern Europe by 2025.
With almost 50 years of expertise, the Olainfarm Group delivers sustainable value-added healthcare products and services to more than 50 countries around the world. The group includes – pharmaceutical company “Olainfarm”, manufacturer of food supplements and medical equipment “Silvanols”, manufacturer of flexible and compression materials “Tonus Elast”, pharmacy chain “Latvijas aptieka”, healthcare and diagnostic centers “DiaMed” and “OlainMed.”
AS “Olainfarm”
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