Oriola-KD Corporation

Tuomas Itkonen CFO Oriola-KD Corporation Joni Ihantola Vice President, Treasury & IR Oriola-KD Corporation

Roadshow with ABG Sundal Collier - Zrich 27 May 2013

Oriola-KD in Brief
Proforma 2012
2008

(incl. Medstop)

Distribution of net sales by business

7%

33%
93%

Wholesale 67% Retail

Wholesale Retail

16%
Distribution of net sales by country
35% Finland & Baltics Sweden Russia 27% 37%

35%

Finland & Baltics Sweden Russia

49%

Market share and position

Country Pharmaceutical wholesale Pharmaceutical retail

Russia

6.
Commercial market

7%

3.
Moscow area 40%

6-8%

Sweden

2. 2.

35%

3. 2.
Consumer Health

13%

Prescription medicines (Rx)

OTC and traded goods

9%

Finland

47%

Pharmaceutical wholesale
3

Key Milestones
Acquisition of Moscow based pharmacy chain and nation Wide wholesale company in Russia (75% share) Preparation of pharmacy business in Sweden Acquisition of nation-wide pharmacy chain in Sweden Demerger of Orion and preparation of Oriola-KD s stock listing Acquisition of remaining 25% share in Russia Sale of Healthcare Trade business to Mediq Stock listing Acquisition of 03 pharmacy chain in Russia Dental Trade joint venture with Lifco Sale of Dental Trade business to Lifco Pro-forma Group vision, mission and values Purchasing and logistics service to four pharmacy chains in Sweden Acquisition of remaining 20% minority share in Swedish retail Acquisition of Pharmacy chain Medstop (closing Q2/2013)

2006
Invest. Divest. 17 -

2007
32 -

2008
126 -

2009
27 -

2010
197 154

2011
29 -

2012
15 -

2013
176 -

TOTAL

619 M 154 M

Net sales development 2008-2013

3000

2500

2474
2000

Net sales, Me

2146 1929

1500

1426
1000

1569

500

369
0 2008 2009

416
2010

530

591

612

2011

2012

2013

Q1

Operating profit 2008-2013

60

50

52.6

Operating Profit, Me

40

30

26.3
20

26.8 22.5 13.2 9.6 5.0 2011 5.2 2012

10

1.3 2008 2009 2010

2.3 2013

Q1
6

Key Focus Areas in 2013

1. Continue planned measures to improve profitability.
Net sales, Me Q1 2013 Q1 2012 Year 2012 Operating profit, Me Q1 2013 Q1 2012 Year 2012 Status Wholesale Retail

Pharmaceutical Trade Finland and Baltics Pharmaceutical Trade Sweden Pharmaceutical Trade Russia Group administration Total, excluding non-recurring items
*)

108 274 231 612

117 259 215 591

460 1,061 953 2,474

4.8 3.8 -3.6 -2.6 2.3

4.6 3.4 -1.1 -1.8 5.2

20.8 16.2* -2.3 -7.8 26.8*

Operating profit excluding 1.1 Me write-off of receivable in retail Sweden

Key Focus Areas in 2013

2. New Distribution Center to Moscow
Prepare for successful implementation of new automated distribution center in Moscow during 2014.
Oriola-KD has signed a letter of intent on a 10-year lease agreement to transfer a new main logistics centre in Moscow region and on the logistics centre s automation solution. Go live of the new distribution center second half 2014.

Key Focus Areas in 2013

3. Active participation in market change in Sweden
Oriola-KD signed an agreement to acquire Medstop pharmacy chain in Sweden on 8 April 2013.
The total value of the acquisition is approximately 176 Me. Acquisition will increase Oriola-KD s market share up to 21 per cent of the Swedish pharmacy market.

Pharmaceutical Trade Finland and Baltics

10

Net Sales and Operating Profit 2009-2013

Net sales Operating profit

11

Pharmaceutical Wholesale Finland

Pharmaceutical distribution
820 pharmacies 1000 veterinaries Logistic centers in Espoo and Oulu Network covering the whole country within 24 hours

Consumer Health

Covering 95% of the groceries Strong position in chosen categories Food supplements Consumer tests Medical devices Skin care Pharmacy cosmetics
12

Pharmaceutical Trade Sweden

13

Net Sales and Operating Profit 2009-2013

Net Sales Operating Profit

Retail starting from 19 February 2010

Excluding non-recurring items of: Receivable write-off of EUR 1.1 million in the retail in Q3 2012 Provision of 1.1 Me of restructuring of wholesale operations in Q4 2010 Receivable write-off of 1.7 Me in the wholesale in Q3 2010 Operating result in 2010 includes 2.2 Me preparation costs for retail operations Operating result in 2009 includes 11.7 Me preparation costs for retail operations

14

Pharmacies in Sweden 31 March 2013

Apoteket (state) Apotek Hjrtat (Altor) Kronans Droghandel (Oriola-KD) Apoteksgruppen (private/state) Medstop (Segulah) Vrdapoteket (Priveq & Investor) DocMorris (Celesio) Cura Apoteket (ICA) Others
62 24 50 3 170 150 111 = 65 208 19 315 50 30 14 5-1 = 276 19 11 1= 376

20 10 3 = 222

5 3 = 158

2010 pharmacies 2010 established 2011 established 2012 established 2013 established Pharmacies +38%

929 192 121 32 9 1283 400

= 27
31 -4 2 = 79

30 11 7 4 = 52 12 20-4 = 28

100

200

300

Number of pharmacies
Source: Pharmacy association and Oriola-KD 04/13 15

Pharmacy Sales Split

Sweden 2010

80

10

10

Sweden 2012

75

13

12

Norway

60
0 20 RX 40 OTC 60

15
80

25
100

Traded Goods

16

Medstop Acquisition

17

Medstop Acquisition
The total value of the acquisition is estimated to be 176 Me, comprising of three separate items:
EUR 82 million cash payment. Net debt of the acquired company. Conditional earn-out payment payable on the basis of the consolidated 2015 EBITDA.

Oriola-KD will finance the acquisition with a bank loan. The transaction is expected to be completed in the second quarter of 2013 subject to the Swedish Competition Authority (Konkurrensverket) and Medical Products Agency (Lkemedelsverket) approvals.

18

Medstop in Brief
Medstop has 65 pharmacies.
Located in shopping centres and city centre locations in the Stockholm, Gothenburg and Malm areas.

Average sales per pharmacy is 34 MSEK p.a.

Kronans pharmacies average sales 20 MSEK p.a.

Average distance from a Kronans pharmacy to a Medstop pharmacy is 14 km. Key financial figures in 2012:
Medstop's market share ~7.5 per cent. Net Sales 273 Me. EBITDA, excluding non-recurring items, 11.6 Me. The net debt 75 Me end of December 2012. Employees 578 people.
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Pharmacies in Sweden
Apoteket (State)

(Proforma after 1 June 2013)

315 30 19 11 1 =376

Apotek Hjrtt & Vrdapoteket(Altor) Kronans Droghandel & Medstop (Oriola-KD) Apoteksgruppen (Private & State)

208

50

14

5-1

27

=303

170

19

20

10 3

65

=287

150

5 3 -2 =158

2010 pharmacies 2010 established

929 192 121 32 9

DocMorris (Celesio)

50

31

-4 1 =79

2011 established 2012 established

Cura Apoteket (ICA)

30

11 7

2 =52

2013 established 2013 acquired

Others 0

12

20

-4 =28 50 100 150 200

Pharmacies +38%
250 300 350

1283
400

Number of pharmacies Source: Oriola-KD 04/13

Swedish Retail and Wholesale Market Structure

(Proforma after 1 June 2013)
Retail

~21%

~35%

~25%

~19%

Wholesale

OTC & TG

~35%
RX

~35% ~65%
30 60

~25%

~5%

~35%
0
Oriola-KDs market share

Market share-%

100

21

Pharmaceutical Trade Russia

22

Pharmaceutical Market in Russia

Size of the market EUR 12 billion. Expected market growth in average 10-13% (2012- 2016).
Growth 2010-2012 in average 15%, before 2010 >20%.

In 2016 Russia is forecasted to be fourth biggest pharmaceutical market

in the world.

Consumption of pharmaceuticals per capita is 1/5 of European average. Western pharmaceuticals represent some 70% of value.

Russian and East European pharmaceuticals represent some 70% of volume.

Out-of-pocket retail market is some 65% of total pharmaceutical market

in value term.
market.

Retail market has been the main driver of the growth of the pharmaceutical

Currently price regulated pharmaceuticals represent some 49% of all

pharmaceuticals.

Source: IMS 04/13

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Top-10 Market Operators in Russia

Top 10 Pharmaceutical Wholesalers in Russia 2012
Protek Katren SIA Rosta Alliance Healthcare R-Farm Oriola-KD Pulse Biotec Imperia Pharma 0% 16.5% 15.0% 12.1% 11.0% 7.9% 6.6% 5.0% 4.8% 3.5% 2.2% 5% 10%

Top 10 Pharmacy Chains in Russia 2012

Rigla A5 36.6 Implozia Pharmacor Pharmimpex Raduga 1.3% 1.3% 1.2% 0.9% 0.9% 0.9% 0% 1% 1% 2% 2% 1.9% 2.5% 2.4% 2.4%

Top 10 ~85% of the Market

15% 20%
24

Oriola-KD Classic Vita

Top 10 ~16% of the Market

3% 3%

Source:DSM 04/13

Net Sales and Operating Profit 2009-2013

Net Sales Operating Profit

Excluding non-recurring items: 2011: Impairment charge of the 33.4 Merelated to the Stary Lekar brand 2010: Write-off of the 2.1 Me trade receivable and the EUR 7.9 million of stock value write-off

25

Pharmaceutical Wholesale Russia

The 7th largest wholesaler on the pharmaceutical market.

Market share of some 7% of commercial market.

All operations under Oriola brand.

Main distribution center in Moscow and 12 distribution centers in regions.

Key focus areas 2013

Project to establish a new main logistics centre in Moscow region and on the logistics centre s automation solution has been continued according to plan in 2013.

Project has been extended by 4 months, estimated completion summer 2014.

Implementation of the new warehouse management system.

The Operating loss in wholesale increased due to difficulties with deliveries in the Moscow region associated with the implementation of the warehouse management system during Q1 2013.

Increase of regional and hospital sales.

The net sales of the distribution centers outside Moscow continued to grow as planned during Q1 2013.
26

Improve the efficiency of logistics operations.

Pharmaceutical Wholesale Russia

Net Sales Net Sales Split by Channel

27

Pharmaceutical Market Growth and Oriola-KD Wholesales Net Sales Growth in RUB
45 40 35
Growth- %

42 37 31* 31 26 16 8 9
2008 2009 2010 2011

30 25 20 15 10 5 0

21 11 7

14

2012

Q1 2013

Oriola-KD wholesale
*) Oriola-KD s net sales growth in April-December 2008

Market growth in Russia**

**) Source: IMS 28

Pharmaceutical Retail Russia

239 pharmacies in Moscow and Moscow

region

Brands Stary Lekar and 03 Apteka Number 3 in Moscow Among top 10 in Russia

Key focus areas 2013

Development of pharmacy portfolio Improving the competitiveness of individual

pharmacies

Strengthening the product assortment

The retail business was profitable in Q1 2013

29

Pharmaceutical Retail Russia

Net Sales Number of Receipts per Pharmacy

Like-for-like pharmacies in Stary Lekar

30

Financials Q1 2013

31

Key Figures in January-March 2013

Q1 2013 Net sales, Me Operating profit, Me Profit for the period, Me Earnings per share, EUR Net cash flow from operations, Me Return on equity, % Gearing -ratio, % 612 2.3 0.7 0.00 -26.1 0.9 12.6 Q1 2012 591 5.2 1.3 0.01 -27.1 1.7 17.5 Change % 3.6 % -55.3 % -46.3 % -46.3 %

32

Cash Flow and Finance

Cash flow
Working capital increased by 30.6 Me (33.1 Me). Gross investments 5.8 Me (4.3 Me). Pharmacy establishments. Information systems. Improvements in logistics efficiency. Depreciations 5.1 Me (4.4 Me).

Me
0

-10

-5

-6

-20

-30

-27 -32

-26 -32

-40

Q1 2012

Q1 2013

Finance
Oriola-KD s committed revolving credit facility of 100 Me and short-term credit account limits of 44 Me with the banks were unused. 90 (86) Me of the 150 Me commercial paper programme was in use. A total of EUR 68.0 (56.6) million of trade receivables had been sold at the end of the review period.

Net cash flow from operating activities Net cash flow from investing activities Net cash flow after investing activities

33

Events after the Review Period

Oriola-KD signed an agreement on new financing arrangements in May
Total amount of approximately EUR 280 million consisting of revolving credit and term loan facility agreement. The revolving credit facility is split into a EUR 100 million five year and a EUR 20 million three year facilities. Swedish crown denominated approximately EUR 160 million amortized term loan facility will mature in three years. Will be utilized to refinance the EUR 100 million revolving credit facility and to finance the acquisition of the Medstop pharmacy chain. Financial covenants of the facility are based on the ratio between Oriola-KD's net debt and EBITDA and its gearing ratio. Mandated Lead Arrangers were Danske Bank A/S, Nordea Bank Finland PLC, Pohjola Bank PLC and Skandinaviska Enskilda Banken AB (publ).

34

Outlook of Net Sales and Operating Profit 2013

Oriola-KD estimates that net sales and operating profit excluding non-recurring items will increase from 2012 level.
Growth of the net sales of Pharmaceutical Trade Russia will slow down in the first part of the year and operating profit will be weaker than the previous year, as a result of challenges related to the implementation of the warehouse management system started in January 2013.

35

Long Term Targets and Dividend Policy

Growth
To grow faster than the relevant markets

Profitability
ROE (Return on Equity) target is over 15 per cent

Balance sheet
Long-term average gearing ratio target is 40 - 60 per cent

Dividend Policy
Oriola-KD will seek to pay out annually as dividends approximately 50 per cent of earnings per share The Company s strategy and financial position shall be taken into consideration when determining the annual dividend payout ratio

36

Key Focus Areas in 2013

1. Continue planned measures to improve profitability. 2. Prepare for successful implementation of new automated distribution center in Moscow during 2014. 3. Active participation in market change in Sweden.

37

Disclosure Aspects
The assumptions, opinions, estimates and views expressed in this presentation are solely the opinions and views of the company unless a reference to the source of the information is stated They reflect the current view of the company with regard to the discussed issues Several factors can however cause changes to these opinions and views Neither the company nor its management can answer for any future accuracy of the opinions or views expressed in this presentation or the actual occurrence of any forecasts

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Back-up Material

40

Global Pharmaceutical Market Update

Market
World market 2012 Specialty pharma 5 years growth Patent expiration 5 years impact Generics 5 years growth Pharmerging markets 5 years growth Developed and brand markets 5 years growth World market 2016

Size
700 BEUR +92 BEUR - 93 BEUR + 28 BEUR +116 BEUR +116 BEUR 990 BEUR

Orphan drugs Biopharmaceuticals Bio-similars

CAGR ~ 3-6%

Largest pharmaceutical markets 2012 (Be)

Russia Spain Brazil UK Canada Italy France Germany China Japan USA

In the period 2012- 2016, the pharmaceutical market is expected to grow: 0.3% in Finland 0.5% in Sweden 11.1% in Russia Russia is one of the fastest growing pharmaceutical markets in the world

100

200

300
41

Pharmacy Chains Profitability in Sweden

Gross margin, % EBITDA, %

*) 2010 based on proforma sales

Source: Annual reports and public sources

42

Players in Pharmaceutical Trade in Russia

There are many stakeholders on the Russian pharmaceutical market with ~ 900 acting wholesalers
Government
Federal Tariffs Service Federal Antimonopoly Service Roszdravnadzor Fed Fund for Mandatory Health Insurance

Production
Import #850 Domestic #400

Association of Pharma Producers

Pharmacy Associations

Retail segment #47,000

Pharmacy point 56%
Pharmacists

OTC Channel

Wholesalers
#900

Hospital segment #10,000

Medical Associations

Pharmacies 43%

Pharmacy kiosk 0,03%

Hospitals
Admin GP

Out-patient
Specialist

Patients Patients Advocacy Groups

43

Market Structure in Pharmaceutical Trade in Russia

Manufacturer Wholesaler Retailer

Contracts

B C

B C

E-auction s

A B C

44

E-auction Model
WS A
Price list

WS B
Price list

WS C
Price list

WS D
Price list

E-auction software

Consolidated price list

Price is adjusted with credit day s coefficient (e.g. 30 d = -1%; 60 d = -2%, etc.)

E-auction software is proposing from whom to order and what

Only criteria: lowest price
Orders Orders Orders Orders

WS A: 25%

WS B: 20%

WS C: 15%

WS D: 40%

Represents 80 90% of the wholesalers sales

45

Strategic and Operational Risks

Amendments to pharmaceutical market regulations may weaken Oriola-KD s profitability. In the Swedish retail business, the free establishment of pharmacies has led to increase in the number of pharmacies. The number of pharmacies may continue to grow, which could further increase the fierce competition. In the Russian retail business, tough competition resulting from the large number of pharmacies may lead to a further decrease in the gross margin and a rapid turnover rate of key personnel. Extra capacity ensuing from a change in the Swedish wholesale market will intensify competition, which may weaken the profitability of operations. The share of single channel distribution in the pharmaceutical wholesale market may decline rapidly, which may weaken the profitability of operations and lead to the restructuring of wholesale operations. As a result of the tough competition in the Russian wholesale business, the gross margin may decline further, which will lead to a continued need to intensify operations and restructure wholesale operations over the long term. The payment behaviour that is typical to the Russian market, combined with the regional expansion of operations may increase credit risks. Strategic development projects involve operational risks.
46

Other risks

The major financial risks for Oriola-KD involve currency rate, liquidity, interest rate and credit risks

Currency risks are the most significant financial risks in Russia and Sweden Changes in the value of the Russian ruble or the Swedish crown will have an impact on Oriola-KD s financial performance and equity

Goodwill and intangible rights are subject to impairment testing made at least once a year

Changes in cash flow forecasts based on strategic plans, or in the discount rate or perpetuity growth rate, can cause a goodwill write-down, which would weaken Oriola-KD s profit Especially the impairment test of the goodwill of the Russian cash-generating units is more sensitive than before to changes in the discount rate or cash-flow forecasts

Near-term risks and uncertainty factors

A decrease in gross margin resulting from intense competition and an increase in credit risks concerning customers may have an impact on the profitability of the wholesale business in Russia

47

Major shareholders 30 April 2013 Shares

Share A
1 2 3 4 5 6 7 8 9 10 Varma Mutual Pension Insurance Company Ilmarinen Mutual Pension Insurance Company Mandatum Life Insurance Company Limited Mariatorp Oy (controlled by Niklas Herlin) Wipunen varainhallinta oy The State Pension Fund Nordea Fennia Fund Mutual Fund Evli Select Medical Investment Trust Ltd Maa- ja Vesitekniikan Tuki ry. 3 600 500 2 464 256 0 2 000 000 1 000 000 0 0 247 157 1 300 000 1 659 860

Share B
2 727 500 3 801 536 4 386 778 2 000 000 2 000 000 2 000 000 1 870 000 1 548 937 425 450 0

Total number of shares

6 328 000 6.265.792 4 386 778 4 000 000 3 000 000 2 000 000 1 870 000 1 796 094 1 725 450 1 659 568

% of share capital
4.18% 4.14% 2.90% 2.64% 1.98% 1.32% 1.24% 1.19% 1.14% 1.10% 21.83%

% of votes
7.14% 5.07% 0.42% 4.01% 2.10% 0.19% 0.18% 0.62% 2.52% 3.17% 25.42%

Source: Oriola-KDs homepage

48