© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, welcome to the BioGaia Q2 report 2021. Today, I am pleased to present CEO, Isabelle Ducellier; and CFO, Alexander Kotsinas. [Operator Instructions] Speakers, please begin.
Thank you for the introduction, and welcome back from holiday or I hope you are on your holiday, you're still on holiday. So welcome to our interim management statement Q2 2021. In terms of net sales, we have a weak Q2 and for different reasons. The first one is that last year, we had our customer who order to prepare prior to the pandemic and wanted to make sure that the probiotics in their warehouse. So we had an extremely strong Q2 last year. So that's the first reason. The second reason is that Q1 2021, we had a lot of orders that were planned to be delivered in Q2 that have been shipped with the last week of Q1 and mainly to China, which make that our Q1 were particularly good. And I would say the last reason is the strong Swedish krona. So you could see that the total sales are minus 17%. But if you exclude the currency impact, it's only minus 8%. In terms of year-to-date sales, here as well, minus 5%, but if you exclude the currency impact, we end up having a plus 5% increase. A bit like last quarter, we have pretty big differences per region. So we have the Americas overperforming. We have APAC back on track, and we are still suffering in EMEA. And in EMEA, the decrease is mainly due to the fact that we have a really premedical marketing approach. We sell mainly via OTC and pharmacy. And therefore, the pandemic has been impacting us dramatically, whereas in Americas, we have the omnichannel strategy, and therefore, the results are much better. In terms of product, the sales mainly decreased for Protectis tablets and the drops in the second quarter, and I will come back to that later. And I should anyway add perhaps that we have managed to maintain our EBIT margin at 34% as we -- that's our objective. And that's mainly thanks to careful management of our costs. Next page, please. Key events during this quarter, well, we add 1 new market. So now we are selling our probiotics in 110 countries, and Egypt joined the family BioGaia distributor in April. Then a very interesting, new randomized, double blind placebo controlled study has been published. Regarding upper respiratory tract infection in children. And here, that's really for a new avenue. In terms of product development, Pediatrics are our key areas. We have already the network. We have the knowledge. And now we have two published, very strong clinical study in upper respiratory tract infection. And that -- we see that as very interesting strategic new avenue for us. On 20th of May, we announced that we've taken over Finland. We start working with Verman and we have created our own distributing company. Now we have recruited a Managing Director, Mina, that has already started. And so we are very, very happy because for the first time, we're going to have the BioGaia brand available in Finland because before Verman was only selling its own brand, RELA. So that's a very good news for us. Then finally, on the 2nd of July, we announced that we acquired the remaining share. So we owned fully our research company, MetaboGen. And we are here as well, very happy about it because, as you know, we are dealing with an aerobic strain, which is a very interesting research avenue within probiotics.Next page, please. In terms of launches, we managed anyway to launch 8 -- to have 8 launches despite the pandemic. Worth to mention that a lot of product -- of countries have decided to launch the product plus vitamin D and that's mainly because the consumer knows that to strengthen your immune system, Vitamin D helps together with probiotics. So you could see out of these 8 launches, we have 3 containing vitamin D. And then worth to mention as well that we are expanding our leadership on all Probiotics with Prodentis in this quarter. So we launched in Australia and in Czech Republic. Next page, please. So to come back to the sales, obviously, minus SEK 17 million for the quarter, we are not really satisfied with that. Having said that, as I mentioned in my indicative summary, on the year-to-date, we are at minus 5%, and if you will exclude the currency that will be plus 5% in year-to-date. Pediatric sales has been impacted more now this quarter even if the drops plus vitamin D has increased, but not the total drops. And it's probably because pediatric products are really dependent on recommendation from the health care professional. Obviously, if it's your first baby, as a mother, you will ask your pediatrician what you should do. And as the contract with health care professional and the visit to pharmacies has been reduced by the pandemic, we do believe that has affected the pediatric more, whereas on the adult self, you dare to buy, even if you don't have had a recommendation from your doctor. So that might be one of the reasons why. Next page, please. Per market, per region. So here, for the one following BioGaia carefully. When I joined the company, I said that I wanted to have a better split of sales per region, and it's actually happening. Obviously, I would have preferred it to happen with EMEA still growing, but if you look now year-to-date end of the quarter, the split between EMEA, APAC and Americas, which is much more April than it was when I started. So I'm very happy with the evolution in Americas and APAC. Now we can really minimize the risk by being strong in the 3 regions. To come back to EMEA, which is really our problem this year. We have large markets such as Italy and Spain that are still suffering. I think it's going to recover, because now with both waves of the COVID and those in Italy and recovers in Spain. We agreed on a very intensive online strategy. So I think that's going to pay back. But of course, it takes time. So we are still suffering there. Worth mentioning anyway on the positive side, I'm [indiscernible] because I'm French, but that France is doing very well. And I do think that at the end of the year, that might be one of our leading market in EMEA. So it's a satisfactory news. In terms of -- I mean, if you look at APAC, so it's back on track. For the quarter, it's stronger year-to-date. This quarter, we could flag the good sales in Australia. So we had a couple of launches and it's doing very well, both with Nestle and with our own brand via our distributor. In year-to-date, Japan is increasing as well. Despite a pretty strong lockdown that has affected our dental clinic. So we are happy with the results and a strong increase in Vietnam and Korea. I mean, it's driven by online retail. And in China, we had a bit of decrease, but that's mainly due to the fact that we were out of stock, which is not satisfactory, of course, because we would have prepared months to have any out of stock and that's why we had that well order ending in the end of Q1 to value the stock, but we didn't manage it. But this -- the demand is still there from the consumer. And Americas, it's really the nice part of the presentation, both in Latin America and in U.S. and Canada. All these markets are doing very well. As stated in the quarterly report that you might have read already, we are so happy to be -- for the first time in our history, the #1 probiotics brand in Brazil. Here, Aché has been a fantastic job and even digitalized all the way of working. So we passed on [indiscernible] for the first time. In the region, LatAm region, we are now #2. And that's here as well because most of the -- our competitor has decreased the investment whereas we maintain our investment in terms of INP. And we launched Gastrus pretty successfully. It took us a lot of time to get it validated by the regulatory authorities, but now it's done, it's launched and it works very well as we opened 3 new markets, Uruguay, Ecuador and Argentina. Next page, please. Gross margin, not a lot of things to comment. Year-to-date, [indiscernible], very stable. During the Q2, we had a slight increase on the asset sales, but just because we have some royalty in Japan. So I don't think we take much more than that. So we're happy to be able to maintain this very high level of gross margin. Next page, please. And then I will ask Alex to go through the financials.
Yes. Thank you. So if we move on to Slide #9, which is OpEx. So if you go through our OpEx here, you can see that our OpEx has been basically flat. It's 3% down versus the previous year for the quarter. And the reason is that we have basically kept the activity level at a lower level and flat compared to 1 year ago. So sales costs are basically flat, R&D costs are slightly higher, and that is due to some clinical studies that were previously delayed or postponed that have started now. Then we have the line item, other costs, which is mainly a negative currency effect, which is somewhat lower negative currency effect this quarter than 1 year ago. As for the noncore OpEx, this is MetaboGen and Ewopharma, subsidiary. As per those costs, they are also slightly lower than in the same quarter last year. So overall, our OpEx is basically flat. So if we move on to the P&L, Page 10. It's basically then a summary of what we have said previously. Our sales decreased with 17%, OpEx decreased with 3% and that led to an EBIT of SEK 69 million versus SEK 100,000 1 year ago, a decrease of 31%. And as Isabelle said, this is an EBIT margin of 34% in the quarter according to our financial target. If we move on to the next slide, called cash flow. You see that our cash flow from operating activities increased to SEK 55.8 million versus SEK 37.8 million in the same period last year. Cash flow from investing activities was basically 0 and cash flow from financing activities, SEK 71 million. This is the dividend. And all in all, this led to a cash flow for the period of SEK 16.2 million versus minus EUR 38.7 million, same period last year. And that leaves us with the cash at hand of SEK 1.47 billion. So with that, I hand over back to Isabelle.
Yes. And to conclude this presentation. I would just summarize the 4 bullet points to say that as expected, we had a challenging Q2 compared to a very strong Q2 last year, driven by pandemic, build-up from our distributor and some large orders shipped last week of Q1 this year, as I explained in my introduction plus the currency impact. And yes, I just want to state that we are, any way being able to manage our P&L pretty carefully and managed to maintain the EBIT margin of 34%. We can really see a reinforcement of the sales trends per region, with Americas overperforming. EMEA is not recovering, while APAC is back on track. What we've been doing, we -- I mean we stayed -- we follow our strategy, and we keep really focused on our journey towards DGT. So both in terms of organization. So we have created BioGaia digital. So we have a new entity reporting directly to me, to drive our digital agenda, both in terms of marketing, but in term of sales as well. And the same -- so -- and that's something, I mean, I keep repeating to the team. We have a new marketing B2C, aided by Linda and we've recruited a lot of people for social media, content management. So there is a lot of activity, and they all start on next Monday. So we have a new team coming on and you're going to see much more happening on the market. So I would like to conclude by saying that thanks to our new product launches, where you see Gastrus in Latin America, as an example, and Prodentis KIDS in the U.S., which are based on the current strengths, but as well our proactive research effort to our new strain and indication, and you've seen the upper respiratory infections. We have a long-term consumer trend promoting food supplement intake to prevent being sick and we have a clear and consistent B2C strategy. So we remain confident for the future of the company and I understand that you might be slightly disappointed by the Q2. But I mean, at least I remain very confident. I think we have the right strategy, we have the right consumer trend out there, and we are very well equipped to seize the coming opportunities. Thank you for your attention, and I will be happy to take questions.
[Operator Instructions] Our first question comes from the line of Kristof Liljeberg of Carnegie.
My question is much related to Europe. I think sales in EMEA is probably now the lowest for the first half since 2014. So first, I wonder why there's such a big impact from the pandemic it seems here in the second quarter when Europe has been opening up. Is it so that this is more of a structural problem? I think you mentioned that a little bit that you to rely on here on physical pharmacies. And you mentioned also the new online strategy for Europe. If you could maybe explain a little bit more what you're doing and how soon you think that will start the sales?
Yes. Hi, Kristofer. Well, indeed, in EMEA, we have -- I mean, there is a lot of reasons. The first one is that in every European market where our indication are more towards, I would say, treatment of problem like colic or diarrhea or that kind of stuff, that's where we've been impacted. And that's exactly what has happened in Italy and Spain, where people take probiotics when they take antibiotics. And during the COVID-19, people have not have [indiscernible] COVID, but they have not been exposed to flu, they have not been exposed to anything. So there was no antibiotic treatment. But if you take the case of France, that's why we're flagging that before. France has had a different strategy. France has always been working with midwives at the prevention. So what France is saying to pediatric in that case, our distributor is that to be at first day of life, you have to take the drops for your babies to avoid the baby to have problem, gastro problem and colic program and so on and so forth. In that market, we see double-digit increase whereas in own fashion markets like Italy, where it's taken when you have a problem, then the market totally collapsed. And it's not only us, I mean, the whole Italian market is down by 35%. So we are not doing better, which I could have hoped for. But I mean, the all market is collapsing and -- we don't communicate directly the turnover for market, but Italy, I mean that was one of these markets selling for SEK 60 million. So when a big market like that is suffering, then all EMEA suffer. And we could do the calculation and we've done that internally. If we exclude Italy, then the picture is different, even in EMEA because France is doing well, South Africa is doing well. Turkey is doing well. But with -- I mean, we lost a lot of the Italian business, and that's why it looks so bad. So now -- so we have 2 distributors in Italy, NOOS and the [indiscernible] and especially work [indiscernible], they have recruited all new team as well to take care of their online. So now you can find our products on Amazon in Italy, they are helping the pharmacy to sell more online. So -- but they started so -- I mean, 9 months too late. And so -- but they understand that. And NOOS does understand it, they might not have the similar quality of digital talent in their company. But here as well, they have recruited a new sales director. And they understand that, okay, I mean, online is not the enemy, online is just a complementary channel and basically, it's up to the consumer to decide how they want to purchase. But if you're not there, then you're sure that you are not going to meet your consumer. So that's a bit kind of the perfect storm, but I see a better outcome coming from this market. And I see France really booming and South Africa, we don't know, but the pandemic, what's going on, but just now, it's doing very strongly.
And you mentioned Italy. Is it the same, more or less in Spain, which has also been weak during the pandemic?
Yes, it's the same, but it's not as bad because the distributor is a bit more reactive and the market was a poorer percentage of our total turnover. So it's not fantastic, but it's not too dramatic either.
Okay. At this point, would you be happy to maybe provide some outlook for sales for the group here in the second half of the year here? You were growing 5% first -- first off, do you expect full year sales to be up more than those 5% that you have been growing so far?
I mean, I will not change the rules, and I will not disclose any figures. But in terms of trends. If you look at last year per quarter, you will see a strong Q1, extremely strong Q2. We have SEK 245 million of sales. And then if you look at Q3 and Q4, they are really, really low. So then you can do your own calculation, and I know you will do that. So that's why I remain very confident because, I mean, Q3 and Q4 last year, I mean, nonexistent last year. So -- and I see all the initiatives that we've been implemented under Q1 and Q2, they are going to pay back in Q3. We have this immune boost launch in the U.S. And we do believe with the staff. I mean school starts, we have a strong school start campaign in a lot of countries towards children, and where they are going to go out, they are going to have a cold and they are going to have problems. So I mean, I'm not super worried, but I will not give you any figures. I will leave you doing that calculation for us.
[Operator Instructions] Our next question comes from the line of Mattias Häggblom of Handelsbanken.
Mattias, you might be on mute, or I don't hear you at least.
Okay, it would appear that we have lost Mattias. At this stage, we have no further audio questions. I'll hand back to the speakers.
Okay. So if we lost Mattias, Mattias if you hear me, you can call me afterwards, that's fine. But thank you for your attention and looking forward to presenting Q3 in a couple of months. Have a very nice day. Bye-bye.
This now concludes our presentation. Thank you all for attending. You may disconnect your lines.