Probi battles e-commerce headwinds in Q2 results

16 Jul 2021 --- Probi’s Q2 2021 results have revealed the Sweden-based probiotic company has faced financial hinderances, especially in the Americas. It notes that changes to customers’ product portfolios and e-commerce have both had an impact.

“After a strong start to the year, the second quarter was not in line with our expectations. Currency-adjusted growth was -3 percent and nominal net sales decreased by 12 percent over the quarter,” says CEO Tom Rönnlund.

The EBITDA margin was 25 percent, lower than the “unusually strong” Q2 figure last year. Lower sales volumes were a major factor behind Q2’s lower EBITDA margin.Lower sales volumes in the US affected profitability in Q2. 

Assessing the Americas
In the Americas, net sales decreased by 17 percent (-5 percent adjusted for currency effects). This was mainly attributable to a few of Probi’s larger customers where sales have not occurred. This was due to delayed orders but also to changes in customers’ product portfolios.

“Some of this is related to e-commerce, where a couple of customers – following a very strong 2020 – have not been able to maintain the same momentum into 2021,” Rönnlund shared in a teleconference.

Probi also lost a competitive bid for a product with a different customer, not in the e-commerce field. Rönnlund anticipates that the American market will develop more slowly throughout 2021 than 2020 as the prior year saw COVID-related increased demand. 

However, developments with Probi’s largest customer in the Americas were positive after the upgrade of its product range last year, and Rönnlund sees the potential for further growth with it in the future.

Weighing up other regions
The EMEA region equaled its record level from Q1 and saw growth of 7 percent despite a strong quarter last year. The roll-out of Perrigo is going according to plan and has contributed significantly to the performance in the region, Probi notes.

“We have also started an exciting collaboration with Oriflame on a joint product that will be launched in their Wellness category. During Q2, we also signed an agreement with a new customer in Italy for Probi Ferrosorb and its potential looks promising,” says Rönnlund.

Meanwhile, APAC saw net sales decrease by 15 percent. Nonetheless, Rönnlund says that the trend is moving in the right direction. Probi is highlighting a host of strategic partnerships entered into during Q2. 

“The stock accumulation at the customer level last year means that the comparative figures were tough in this quarter, but seen over the past three years, it was one of our strongest quarters in the region,” he details. 

“It is particularly pleasing that we have signed a three-year agreement with a large Korean customer, which is expected to contribute with net sales of around SEK 10 m during the current year.” 

Future targets
Probi continues to have “considerable ambition” to grow both organically and through acquisitions. 

“After the end of the quarter, we made an investment in the New Zealand company Blis Technologies. The investment is part of a long-term strategic partnership and an important piece of the puzzle to grow in new health areas and increase profitability through greater capacity utilization of our production resources,” says Rönnlund.

He continues that Probi is fully focused on achieving its long-term financial targets. The company will intensify its work with customers during the second half of the year as its sales teams are expected to be able to start traveling again. 

At the same time, many of the important agreements and strategic collaborations it has had in place during the first half of the year will not see visible results until 2022.

“After a challenging year marked by the pandemic, we are beginning to see a return to normalization on several levels. We can meet our customers and consumers and can again shop at pharmacies and stores. The underlying demand for our products remains strong, and we will benefit from this,” Rönnlund concludes. 

Earlier this month, Chr. Hansen also revealed no organic growth in its Health and Nutrition segment for the quarter. This was “as expected” due to higher comparables as customers built safety inventories during lockdowns throughout the pandemic.

By Katherine Durrell