Probi AB
STO:PROB
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
188.7892
351
|
| Price Target |
|
We'll email you a reminder when the closing price reaches SEK.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Probi AB
You don't have any saved screeners yet
Hello, and welcome to the Probi AB Q1 2018 Report Call. [Operator Instructions] Today, I'm pleased to present CFO, Jörn Andreas. Please go ahead with your meeting, sir.
Thank you. Good morning, everyone, and thank you for joining us on Probi's Q1 2018 conference call. My name is Jörn Andreas, I'm the CFO of Probi. This morning, I will take you through a summary of today's announcement, and then I will be pleased to take your questions. Please move to the next slide. Before we start, please note that this conference call is subject to the disclaimer regarding forward-looking statements. Please also refer to the report on risks and opportunities, which you will find in our most recent annual report.Next slide, please. Before I start in on the quarter, let me take a moment to introduce to you Ole Søgaard Andersen, who has been appointed interim CEO of Probi. Ole is an accomplished and experienced leader in our industry, working over 30 years in nutritional ingredients, and most notably, led the sales, marketing and application function at DuPont Nutrition & Health as Global Vice President. We are excited to have him in our team until a new permanent CEO has been appointed. Ole, together with the rest of the Probi team, will now focus on accelerated commercial execution to unfold Probi's potential and bring Probi back to growth. I will come back to our key priorities later in the presentation, but first, let's take a look at the business figures for the first quarter 2018. For this, please turn to Page 4. I will start briefly by sharing with you the key highlights of our performance during the first quarter 2018 followed by a more detailed financial review. And after this, I'm going to wrap up with the 2018 outlook and framework, and then we will be happy to respond to your queries. Next page, please. Clearly, Q1 2018 was a challenging quarter for us. It had a lot of moving pieces. However, it was completely in line with our expectations. I also want to remind everyone that this quarter has a tough comparison because it is indexed against Q1 2017, which was the second best quarter ever in the history of the company and which included substantial overstocking and pipeline fill. Net sales for the first quarter of 2018 amounted to SEK 119 million, down 34% on a currency-neutral basis. EBITDA declined by 72% to SEK 17 million, which corresponds to an EBITDA margin of 40%. We had a significant impact in the quarter from the destocking program amounting to approximately SEK 62 million. Consistent with our communication in our guidance, our major customer, who introduced the destocking program has send us now new orders during the quarter and we are now expecting gradual ramp-up of deliveries and recovery by the end of the second quarter 2018, which has been a key priority for us. In our other U.S. business, we saw a slight slowdown in market activity beginning of the year after a very strong end to 2017. However, the U.S. market continues to be very healthy and we already see market growth resuming, in particular driven by the e-commerce channel. At the same time, we are proud to report about the achievement of important milestones in the commercialization of our innovation pipeline. We signed a long-term agreement with Cilag, a J&J company to co-develop an OTC probiotic product, and Probi also achieved a major success in its clinical trial program being the first probiotic showing significant evidence for a new probiotic concept in bone health and osteoporosis. This shows that we continue to be a diversified and better performing platform to become a strong leader and challenger in probiotics that we aim to be. Please turn to Page 6. In terms of sales performance by segment, issues in the quarter were localized to Consumer Healthcare. Sales decline in this area was largely attributable to the destocking effect and currency headwinds. Adjusted for destocking and currency effects, sales in Consumer Healthcare segment declined SEK 2 million and thus still below expectations due to weak demand in the U.S. at the beginning of the year. However, and as I said, we're pleased about the recent development of our order intake and our confidence that the U.S. consumer health market will resume to growth on a full-year basis. We are very pleased that our Functional Food segment returned to growth, up 7% compared to the first quarter 2017. It is this area where we have much bigger potential and we're seeing strong progress in the quality and quantity of our leads in our sales pipeline. Next page, please. Moving on to regional performance. Probi saw strongest sales growth in Asia Pacific, accounted in Rest of World with quarter-on-quarter increase of 95% or SEK 9 million. This trend was mainly driven -- mainly attributable to strong growth by new and existing customers in Australia and India as a result of our increased investment in sales and business development activities. We are now better positioned to capture market share in this region, which is also a strategic focus for 2018. Sales in Europe [indiscernible] declined to SEK 4.5 million, which was influenced by order failing and a big launch in pipeline fill last year. We believe the conditions for our success in Europe remain firmly in place, also demonstrated by our strong growth in Sweden, but we're also cognizant that we have a lot of work to do to diversify our customer portfolio further. Next page, please. The rapid growth in the probiotic segment has led to quite a lot of interest in probiotic product development among adjacent industries, and we always said that Probi is committed to taking advantage of those opportunities through joint probiotic development programs and strategic marketing alliances. And during the quarter, we delivered on this ambition by signing a strategic development agreement with J&J that we opened up the commercialization of our product in OTC with a strong partner. In addition, we also achieved a major milestone in the R&D collaboration with Symrise by launching the first jointly developed product. During the second quarter, Diana foods will launch a pet probiotic supplement in North America based on a unique formulation, and this shows our commitment to fully utilize the commercial potential of our product in the context of running our business for the long term. Please turn to the next page. As you know, Probi is executing its most comprehensive clinical trial program with the aim of expanding the product portfolio in both new and existing indication, in line with our ambition to be the first in probiotics. I'm pleased to report that we are now entering the bone health area based on a major success with a positive clinical trial. Based on the state-of-the-art study design and 250 post-menopausal woman included in the study, Probi has showed a significant reduction in age-dependent bone loss compared to placebo treatment, which is the first significant evidence shown by a probiotic supplement in this indication. We are now moving quickly to develop a new product concept to be launched later in 2018. But these results also make us confident about our R&D pipeline and reflect Probi's fundamental strength in premium probiotic content. Let us now turn to Page 11 for a more detailed review of our financial figures. Probi's net sales of the first quarter was SEK 119 million, which is a decrease in reported currencies of 36%. Organic growth was a negative SEK 63 million and currency translation had a negative impact of SEK 5 million on the sales of the first quarter. This means that excluding destocking and currency effects, net sales of the period was approximately at the same level compared to previous year. EBITDA in Q1 2018 amounted to SEK 17 million, representing EBITDA margin of 14%. And moving further down the P&L, net income for the period increased to SEK 3 million and EPS to SEK 0.29 per share. This is a significant decline compared to previous year, but an improved performance quarter-over-quarter. Please move to Page 12 for the reconciliation of net income and a more detailed explanation of the effect. In the first quarter, EBIT decreased SEK 44 million compared to prior year due to lower sales as a result of destocking program. Additionally, personnel-related provisions of SEK 4.5 million were charged to EBIT. Net income was negatively impacted by SEK 3 million in the financial results as we compare against the Q1 2017, which included a favorable gain or -- favorable realization of a hedging contract of the financial receivable. As a result, net income for the quarter amounted to SEK 3 million, down SEK 40 million compared to previous year and up SEK 2 million compared to Q4 2017. Let us take a look at the cash flow on the next Page 13. Despite the challenging quarterly performance, Probi delivered robust operating cash flow, reflecting our very resilient business model as well as our disciplined and tenacity on cash. Gross operating cash flow was SEK 20 million in the first quarter and group liquidity increased to SEK 160 million. Despite our continuous investments in R&D and also in working capital in anticipation of stronger quarter-over-quarter growth. Please now turn to Page 14, that shows the balance sheet. Probi continues to have a very strong and healthy balance sheet. Net debt further decreased to SEK 90 million and is now at a leverage ratio of 0.17x last 12 months trailing EBITDA. Total equity amounts to SEK 899 million at the end of the first quarter, which represents an equity ratio of 79%. Let me now wrap up with the outlook and framework for 2018, and for this, please turn to Page 16. The most important message is that Probi remains well-positioned in the markets we serve and we will carry on with our differentiated growth strategy. The backbone of our recovery and our efforts right now are all about stronger and improved commercial execution. We are deploying initiatives to put Probi back on organic growth by a more focused geographical expansion and more rapid commercialization of our innovation portfolio and by acting as a simpler and more nimble organization. As a consequence, we expect recovery of quarter-on-quarter organic growth for the second half of the year 2018. However, sales in the coming second quarter will be still lower compared to the preceding year. 2018 is an important year for us and we intend to continue demonstrating in the coming quarters by improved quarter-over-quarter performance that our new approach is working. That concludes my presentation today. Let me now open up the call for your questions.
[Operator Instructions] Our first question comes from Bjorn Rydell from Remium.
My first question is regarding the destocking effect from the big customer. Can you comment on the order intake from the big customer during Q2?
Yes. Thank you. So what we said is that our customer who introduced the destocking program has placed new orders and we see that we are ramping up now the deliveries by the end of the second quarter, which means that we will be back to a new normal, so to speak, in Q3. Of course, after the experience also we had from the destocking and how that took place over the last quarters, the new normal run rate will be lower than, of course, what we have generated with the customer on a full year basis in 2016 and '17. Nevertheless, besides the underlying volume growth of that product that we also see in the market, we have a full pipeline of [ a few deals ] with this customer, and we aim, of course, to further develop and grow over the customer also going forward.
Okay. And my second question is regarding the Ipsen agreement. When do you expect approvals for launch in China and Russia?
Yes, that is a good question. And you see also the little bit of an impact of the delay that we have in the registration of our products in key markets, reflecting -- reflected also in our posted figures of Q1 2018. So it's difficult to judge, of course, because it's not only entirely in our hands. When we get the feedback from the authorities, in particular, when it comes to China and Russia, for example. But we aim to make major progress during the course of this year and to be ready for launching the products in 2019.
[Operator Instructions] There appear to be no further questions. I will turn the conference back to you sir.
So thank you very much for your questions. So we have not received any further questions via e-mail. So this then, also, concludes the call for today. But, of course, if you do have any alternate questions, please, of course, do give us a call in the course of today or send us a note and we will be happy to answer your questions. So thank you very much, everyone, and have a great day.
Thank you. Ladies and gentlemen, this does conclude today's conference call. Thank you very much for attending. You may now disconnect your lines.