Q2 2023: Weak underlying market in the Americas and EMEA

Important events during the second quarter

• Net sales decreased by 18% (21% adjusted for currency effects) to SEK 144 m (175).
• The EBITDA margin amounted to 9% (26) and was burdened by items affecting comparability. Adjusted for these, the EBITDA margin was 17%.
• Approval of HEAL9™ in Thailand. Enables further expansion in APAC.
• Takeover of distribution of our own brand Probi® in Sweden and entry into Norway with new agreements with pharmacies.
• Exclusive distributor of BLIS K12™ and BLIS M18™ ingredients in the US and Canada as of August 1.
• New partnership with Clasado Biosciences for the development of synbiotics.

Important events after the end of the period

• Resignation of the CFO, Henrik Lundkvist. He will continue to work as CFO until a successor has been appointed or until the end of the year at the latest.

CEO Comments

Remediation program initiated in manufacturing

Sales in the first half of the year were down 4% (10% adjusted for currency effects) as a result of weaker underlying demand in the Americas and EMEA. The EBITDA margin was 19% for the first six months of the year. Profitability in Q2 was negatively affected by some major costs affecting comparability for establishment costs relating to the takeover of distribution in Sweden along with personnel-related restructuring costs. Furthermore, we have experienced challenges in our manufacturing, which also affected the results in the quarter. To address this, a remediation program has been initiated focusing on optimizing our manufacturing processes and achieving further efficiencies. Adjusted for the above effects, the EBITDA margin amounted to 17% in Q2 and 23% for the first half of the year. 

Our assessment is that net sales for the full year will be approximately on par with the previous year and that the reported EBITDA margin will be lower as a result of the additional cost connected to the initiated remediation program.

Both the Americas and EMEA declined in Q2 compared to the previous year and we saw a weaker underlying market with increased price sensitivity among end customers and a shift towards less premium priced products. Our customers also reduced their inventory levels, leading to lower order frequency. EMEA was affected by some major order delays and reduced buffer stocks at one of our larger customers.

On the positive side, we can state that the takeover of the distribution of our own brand in Sweden has been well received and had a consistently good impact. We also entered Norway with our own distribution and we see good opportunities for growth in that market. It is also very satisfying that during the quarter we secured a multiyear supply agreement with our largest American customer.

APAC is developing well and in the first half of the year saw 27% growth compared to the previous year, with Australia and China accounting for the greatest growth in the region. During Q2, we received approval for HEAL9™ a in Thailand, which means we can expand with our concepts Probi® Osteo and Probi Digestis® in the growing Thai market.

In the area of product development and innovation, we have started an exciting collaboration with Clasado Biosciences. We will take advantage of our respective portfolios within pre- and probiotics to develop new synbiotic products, a market segment expected to grow.

To achieve our goal of sustainable growth, it is crucial that we have talented and passionate employees and a healthy corporate culture with clear purpose, strategy and direction. Therefore, I have spent a lot of time reviewing the organization and in the quarter we have made changes in the organizational design to better meet our customer needs. At the same time, I regret that our CFO Henrik Lundkvist has decided to leave his position. He will remain until a successor has been appointed or until the end of the year.

It is the highest priority that the remediation program we have initiated for manufacturing quickly shows results and that we establish a strong and dynamic organization that will return us to growth and good profitability. I have a strong belief in Probi and what we do and am convinced that we will succeed in overcoming these challenges.

Anita Johansen
CEO

Invitation to teleconference

Probi's interim report for Q2 2023 will be published on July 18, 2023, at 8:00 a.m. On the same day at 10:00 a.m., a teleconference will be held with Anita Johansen, CEO and Henrik Lundkvist, CFO, who will present the report. The telephone conference can be accessed via the link https://conference.financialhearings.com/teleconference/?id=200845. The presentation is available at www.probi.com and www.financialhearings.com.

Contact
Anita Johansen, CEO, Tel: +46 (0)46 286 89 48, E-mail: anita.johansen@probi.com
Henrik Lundkvist, CFO, Tel: +46 (0)46 286 89 41, E-mail: henrik.lundkvist@probi.com

This information is information that Probi AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Swedish Securities Market Act. The information was submitted for publication, through the agency of the CEO and CFO, on July 18, 2023 at 08:00 CET. This is a translation of the Swedish version of the interim report. When in doubt, the Swedish wording prevails.

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