Probi’s net sales slumps in Q1 2022 fueled by “price hikes and growing inflation,” company exec details

26 Apr 2022 --- Probi has released results for the first quarter of 2022, featuring a decrease in net sales by 10% to SEK 155 million (US$15.9 million). The company notes this decrease was impacted by the Russian-Ukrainian war, growing inflation, the continuing effects of the COVID-19 pandemic and consumer purchasing behaviors in the Americas.

“The start of 2022 was particularly turbulent. We see a terrible war in our European neighbor Ukraine, which affects us all in different ways,” says Tom Rönnlund, CEO at Probi.

“At the same time, the pandemic is far from over and in China, restrictions are very extensive, among other places. Macroeconomic indicators point to greater turbulence, price increases and rising inflation.”

The reduction in Probi’s net sales in Q1 2022, when adjusted for currency effects, was 10% and 16%, respectively, which may be attributable to the performance in the Americas region.

“We look forward with confidence to the rest of 2022. If there is one thing we have learned in the last two years, changes can occur quickly. It has made us more agile and adaptable – something we will benefit from in the future. Our focus for 2022 is to regain momentum and get back on track toward growth,” adds Rönnlund.

Recently, the company unveiled it generated SEK 83.1 million (US$8.8 million) in earnings in 2021, the company’s second-best year in terms of sales. Although the APAC market recovered after a pandemic-affected 2020, the firm’s largest territory, the US, was not as successful as this year.

Unmet expectations in Americas
Probi’s profitability decreased due to the lower volumes, Rönnlund notes.

The decrease in sales was linked to the Americas being affected by consumers’ purchasing behaviors, which contributed to a weaker quarter.“Our EBITDA margin was 25%. Developments in the Americas region did not meet our expectations during Q1, and net sales decreased by 9%,” he adds. “Order patterns for some of our larger customers in the region contributed to the lower outcome in the quarter.”

Interest in the company’s products and probiotics, in general, remains high, with many upcoming projects ahead with both new and existing customers, Rönnlund underscores.

“An important focus area going forward is to increase sales of ClinBac in the region and we have set ambitious goals for this. Our assessment is that we will see more stable development in the region in the short term, with levels corresponding to the previous year,” Rönnlund explains.

APAC region and NPD
Rönnlund acknowledges that the APAC region’s net sales were the same as the previous year, a reasonably strong quarter.

“Our customer Sinopharm Foreign Trade has completed the launch of Probi Defendum according to plan. Subsequently, the launch of Probi Osteo is planned for Q2, followed by Probi Ferrosorb later in 2022.”

“During the quarter, an important step in the technological transfer of Blis Technologies products was achieved when we completed the first production batch of BLIS K12. The transfer has gone in the best possible way due to our investments in fermentation technology through our upgrade program.”

Probi aims to increase sales of ClinBac in the Americas region.The company expects to see initial revenues from Blis products, produced at Probi’s facility, during the second half of this year.

To add to this, Probi appointed Anita Johansen as the new vice president within R&D, who began in this role in April.

Three of Probi’s ClinBac concepts were previously launched in China due to a strategic partnership with the Chinese pharmaceutical company China National Pharmaceutical Foreign Trade Corporation.

Perrigo launch strengthens EMEA region
The EMEA region had a particularly good quarter, Probi says. Although net sales were 15% lower than the previous year, this could be due to milestone-related revenue from last year’s Perrigo launch, Rönnlund explains.

The premium-positioned probiotics leveraged Probi’s strains for digestive and immune health benefits in 14 European countries.

“We saw good development in the region and Perrigo’s rollout continues. Our collaboration with Oriflame has gained momentum and saw a launch in a couple of markets during the second half of 2021,” he adds. “Oriflame is greatly exposed to Russia and Ukraine, which affects their operations. This will mean delays in launches in these markets and instead, there will be a focus on other regions.”

Previously, Probi’s net sales declined 8% to SEK 170 million (US$18.5 million) in the fourth quarter of 2021, owing to challenges in the Americas market.

Edited by Nicole Kerr