Published: 2019-04-30 16:12:55 CEST
Olainfarm
Annual Financial Report

JSC Olainfarm Consolidated and Parent Company's Annual Report for Year 2018

Olainfarm’s revenues continue to increase; EBITDA margin improves

Audited consolidated revenues of JSC Olainfarm for 2018 exceeded 124 million euros. This represents an increase by 2% compared to sales of 2017 and is the new record in the company's history. The profit before tax of Olainfarm Group last year reached 11.4 million euros, which is 21% more than a year before.

Olainfarm Group sold its products in 54 countries. Besides smaller (by 10% or by 4.0 million euros) sales to Russia, all the other main markets demonstrated sales increases – Belarus (+52%), Tajikistan (+32%), Latvia (+23%), making the home market the second largest in terms of turnover after Russia. Major sales markets of the Group in 2018 were Russia, Latvia, Belarus and Ukraine reaching 79% of total sales. During the previous year, Olainfarm enhanced the product portfolios in already existing export markets as well as started the sale of chlorobutanol in China, and started export to new markets such as Portugal, Slovakia, Jordan, Bangladesh. Meldonium and Memantine became one of the Top 10 selling products, while shares of the most revenue generating products Noofen and Neiromidin were balanced.

Profit before tax, and before financial income, financial expense, depreciation and amortisation of intangible assets and property, plant and equipment (EBITDA) increased during the last quarter 2018, which improved trailing twelve months EBITDA to 21 million euros and EBITDA margin in 12 months period has also gained 2 pp to 17%. Both these indicators are the highest since early 2016. Net profit was 10.7 million euros, which is the same as in 2017.

By the end of 2018, Olainfarm Group managed to significantly decrease its interest-bearing debt to 25 million euros or by 16%. This is due to a fact that during 2018 no acquisitions occurred and the Group’s operating cash flow was sufficient to fund capital expenditures and repay bank borrowings. As at 31 December, 2018 net debt was 22.3 million euros or around 1.07 times EBITDA.

In 2018 operating cash flow before working capital changes improved by 2.2 million euros year-on-year or 14% to 18.3 million euros. During the same period changes in working capital and corporate income tax paid decreased net cash flows from operating activities by 2.0 million euros or 12% to 15.7 million euros.

Last year Olainfarm Group continued investments in intangible assets and property, plant and equipment. In total, almost 8 million euros were invested, which is by 1.1 million or 16% more than a year ago.

In 2018 Olainfarm paid close to 3 million euros or 0.21 euros per share in dividends from the net profit of 2017. Basing upon the results reflected in this annual report and upon the plans of the Group for 2019, the Management Board recommended the shareholders to decide on paying 1.4 million euros in dividends from earnings of 2018 or 0.10 euros per share.

Olainfarm’s newly established Business Development Division is tasked to draw up a long-term development strategy that will strengthen the competitiveness of the company at the global pharmaceutical market on the basis of strengths and knowledge of Olainfarm. Management of the Group is currently reviewing strategic options to further diversify revenues, boost profitability and to improve risk profile. This might result in starting operations in new segments either organically or through acquisitions.

During 2018, new registration processes for the Parent Company’s products were completed in Azerbaijan and Mongolia. Registration of two medicines produced by NPK Biotest in Belarus has also been completed. Registration processes are still ongoing in Turkey, Zimbabwe and Zambia.

The Parent Company by the end of 2018 completed four EU co-financed research projects in cooperation with Competence Centre of Pharmaceutical, Biomedical and Medical Technology: Drug safety and toxicokinetic study; Research of natural substances for development of new cosmetic product line; Development of a new anti-tuberculosis final dosage form; Development of new manufacturing technology for the racemic derivative of the Hinuclidine.

The Parent Company also continued implementation of EU co-financed project Experimental Technology Implementation for New Products Manufacturing in JSC Olainfarm with planned project completion in August, 2019. The main target of the project is the development of experimental production line with its supporting laboratory equipment for a new final dosage medicine for treatment of tuberculosis and other new products.

Although the overall number of sales markets is increasing and sales diversity is improving, achieving even greater variety in sales geography, diversification of the markets remains one of the main challenges for the Group. One of priorities in 2019 and further years is to conduct additional clinical and preclinical research of top products not only to secure the presence of existing products in existing markets, but also to make accessibility to other markets easies in future. Since this research program is rather sizeable, it will remain among company’s priorities for the next two years. The Parent Company has already started EU co-financed 3 years project on Pre-clinical and Clinical Studies of Medicinal Products in total amount of 3.4 million euros.

Consolidated Statement of  Financial PositionGroupParent company
  31.12.201831.12.201731.12.201831.12.2017
  EUR '000EUR '000EUR '000EUR '000
      
   ASSETS    
NON-CURRENT ASSETS    
Intangible assets  36 619   37 034   1 977   2 243
Property, plant and equipment  43 697   41 892   37 380   35 643
Investment properties  3 492   3 526   289   323
Other non-current assets  983   2 609   46 967   48 669
 TOTAL NON-CURRENT ASSETS  84 791   85 061   86 613   86 878
CURRENT ASSETS    
Inventories  25 794   24 161   17 945   17 551
Receivables  34 637   34 049   32 040   31 586
Cash  2 689   3 158   1 545   1 989
 TOTAL CURRENT ASSETS  63 120   61 368   51 530   51 126
TOTAL ASSETS  147 911   146 429   138 143   138 004
    
   EQUITY AND LIABILITIES    
EQUITY    
Share capital  19 719   19 719   19 719   19 719
Share premium  2 504   2 504   2 504   2 504
Reserves  (224)  (74)  40   40
Retained earnings  83 079   75 675   78 827   73 268
 TOTAL EQUITY  105 078   97 824   101 090   95 531
LIABILITIES    
Non-current liabilities    
Borrowings  1 793   15 878   1 525   14 805
Deferred income  2 878   2 347   2 852   2 309
 Total Non-Current Liabilities  4 671   18 225   4 377   17 114
Current liabilities    
Borrowings  23 236   14 013   21 696   13 247
Trade payables and other liabilities  14 540   15 892   10 614   11 714
Deferred income  386   475   366   398
 Total Current Liabilities  38 162    30 380   32 676   25 359
 TOTAL LIABILITIES  42 833   48 605   37 053   42 473
TOTAL EQUITY AND LIABILITIES  147 911   146 429   138 143   138 004
       


Consolidated statement of comprehensive incomeGroupParent company
 2018201720182017
 EUR '000EUR '000EUR '000EUR '000
Revenue  124 256   122 076   93 018   91 713
Cost of goods sold  (49 400)  (47 231)  (33 453)  (30 441)
Gross Profit  74 856   74 845   59 565   61 272
Selling expense  (37 291)  (38 125)  (28 449)  (29 329)
Administrative expense  (24 427)  (23 653)  (20 708)  (20 170)
Other operating income  2 559   2 697   1 524   2 342
Other operating expense  (1 726)  (4 427)  (1 278)  (4 564)
Share of profit of an associate  106   113   -    -
Dividends from subsidiaries and associates  -   -   1 004   1 619
Financial income  76   236   126   299
Financial expense  (2 788)   (2 299)  (2 552)  (1 930)
Profit Before Tax  11 365   9 387   9 232   9 539
Corporate income tax  (630)  (1 977)  (346)  (1 547)
Deferred corporate income tax   (4)  3 379   -   1 278
PROFIT FOR THE REPORTING PERIOD  10 731   10 789   8 886   9 270
Other comprehensive income for the reporting period  (150)  (114)   -   -
Total comprehensive income for the reporting period  10 581   10 675   8 886   9 270
Total comprehensive income attributable to:    
The equity holders of the Parent Company  10 581   10 675   8 886   9 270
Non-controlling interests  -   -   -   -
     
Basic and diluted earnings per share, EUR  0.76   0.77   0.63   0.66
      

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 60 countries of the world, including the Baltics, Russia, other CIS, Europe, Asia, North America and Australia.


Information prepared by:
       
Jānis Dubrovskis
Investor Relations Advisor of JSC Olainfarm
Ph.: +371 29178878
janis.dubrovskis@olainfarm.com

Attachment


Olainfarm_2018_Consolidated and Parent AR_ENG.pdf