BioGaia marks 42% sales increase in Q2, remains cautious over inflationary pressures on probiotics

22 Jul 2022 --- Swedish-based BioGaia delivered a “successful” second quarter this year, marking a 44% profit increase after tax, amounting to SEK78.5 million (US$7.7 million). Though the probiotics company says it is convinced the segment will remain resilient, inflationary pressures and the war are raising concerns over the impact on disposable income.

“Following a very strong first quarter, I am pleased to present yet another strong quarter with sales up 42% and an operating margin of 35% due to good cost control,” says Isabelle Ducellier, CEO at BioGaia. 

The company acquired Nutraceutics, where the acquisition stands for 7% of increased sales, equivalent to SEK29.4 million (US$2.9 million). Additionally, 27% of the operating expenses were due to the acquisition, resulting in SEK22.3 million (US$2.2 million).

“This successful quarter is a reflection of the recovery in Europe. EMEA grew 86%, where BioGaia has historically had its strongest base. In markets such as Italy or Spain, where our marketing is mainly to doctors and pharmacies, we have triple-digit sales growth,” says Ducellier.

Q2 delivered 26% organic growth, 42% increased sales equivalent to SEK85 million (US$8.3 million) excluding foreign exchange rates. Operating expenses increased 30%, amounting to SEK106 million (US$10.4 million). 

Probiotics standing strongIncreasing risk of spreading COVID-19 increases demand for probiotics.
Ducellier highlights that the return to “normal life” and increased traveling also increase the risk for COVID-19 infections. This increases the need for probiotics and antibiotics, “driving the consumers back.”

In the Americas, there was a 21% growth. “BioGaia USA’s sales fell slightly during the quarter, mainly due to strong comparative figures. During the second quarter of 2021, Nutraceutics’ (now BioGaia USA) sales were positively affected by campaigns,” Ducellier says. 

“Together with BioGaia USA, we are organizing the opening of BioGaia Canada in January 2023 to supplement coverage in North America. The growth rate in Latin America remains in double digits, driven by excellent work targeting HCP in Colombia, Peru and Chile, and our launch in Argentina was more successful than expected.”

However, the company also notes external environment uncertainties.

“The macroeconomic situation (inflation, disruption in the logistics chain, pandemic and war) is forcing us to remain cautious as the impact on disposable income should not be ignored. However, we are convinced that consumers will continue to focus on their health, and the probiotic category will demonstrate its resilience,” Ducellier explains.

Key happenings in Q2Inflation is forcing the company to remain cautious of the impact on disposable income.
The pediatric segment showed net sales of SEK161.1 million (US$15.7 million), a rise of 44%, amounting to SEK232.7 million (US$22.7 million) for 2022. The adult health segment increased by 33%, equivalent to SEK40.9 million (US$4 million), amounting to SEK54.2 million (US$5.3 million). 

During the second quarter, the company announced exclusive rights to sell probiotic drops for infants in South Korea. It also revealed that in 2023, products will be sold under the company name in the Canadian market.

The annual general meeting disclosed a split of company shares into five new shares, which increased the number of shares and votes. Earnings per share in Q2 amounted to SEK0.78 (US$0.076) before and after dilution. 

Half-year figures
The company released its half-year report along with the second quarter. The first half of 2022 presents net sales of SEK571.9 million (US$55.8 million), increased by SEK199.8 million (US$19.5 million). Organic growth resulted in 25%. 

Net sales in the pediatric segment were 41%, and adult health amounted to 44%. Total operating expenses were SEK208.3 million (US$20.3 million), showing an increase of 37%. Operating profit also increased, corresponding to a 34% operating margin. 

The profit after tax was reported at SEK154.8 million (US$15.1 million), an overall 47% increase.

By Beatrice Wihlander