CEO's review

In 2012 we made good progress towards our goals, especially in our important markets in Sweden and in Russia.

From Sweden I would like to highlight the pharmaceutical retail business where Oriola-KD reached a clear improvement in profitability. That was driven mainly by the good increase in sales of traded goods and OTC. In Russia, we made very good progress in both pharmaceutical wholesale and pharmaceutical retail. In pharmaceutical retail we finished our restructuring of the pharmacy chain, and in pharmaceutical wholesale we managed to increase the regional sales significantly, double our hospital sales and also increase our efficiency and reliability. I would also like to raise the good performance in Finnish pharmaceutical wholesale, where we had a record year.

In the Swedish pharmaceutical wholesale market we did have success in making the agreement with 4 other pharmacy chains for a purchasing cooperation in traded goods and OTC. However, the operating performance and profitability of our Swedish pharmaceutical wholesale business was below our expectations. The good work we did in 2012 should help us achieve better results in the future.

For the year 2013, we have 3 clear focus areas. The first one is to continue to improve our profitability. The second one is the big project we have in Russia; a new distribution center for our Russian pharmaceutical wholesale in Moscow. There we will combine our two existing distribution centers under one roof and implement a very modern, automated process. Our third focus area is in Sweden. The 3-year lock-up period after the Swedish state auctioned the pharmacies is ending, and we expect the market to consolidate. Our goal is to actively participate in the changes in the Swedish market.

The good work we did last year gives us a very solid platform for the future. I’d like to take this opportunity to thank all our shareholders, customers and employees for a successful year 2012.

Eero Hautaniemi, President & CEO