July–September 2024 (third quarter)

• Net sales amounted to SEK 919 million (923), corresponding to growth of –0.4 percent (–2.2). The organic change in net sales was 2.6 percent (–8.0).

• Gross profit amounted to SEK 257 million (233), corresponding to a margin of 28.0 percent (25.2), and gross profit, before items affecting comparability, amounted to SEK 257 million (238), corresponding to a margin of 28.0 percent (25.7).

• Operating profit/loss amounted to SEK 32 million (9), corresponding to a margin of 3.5 percent (1.0), and operating profit/loss, before items affecting comparability, amounted to SEK 32 million (18), corresponding to a margin of 3.5 percent (2.0).

• Profit/loss for the period amounted to SEK 9 million (–18), corresponding to earnings per share of SEK 0.07 (–0.12) before and after dilution.

• Cash flow from operating activities amounted to SEK 42 million (87).

• Midsona has introduced a new organisation with central Marketing & Innovation, HR and Purchasing functions, as part of measures to increase coordination within the Group and create the right conditions for profitable growth.

January–September 2024 (nine months)

• Net sales amounted to SEK 2,766 million (2,790), corresponding to growth of –0.9 percent (–2.9). The organic change in net sales was 0.2 percent (–7.5).

• Gross profit amounted to SEK 791 million (711), corresponding to a margin of 28.6 percent (25.5), and gross profit, before items affecting comparability, was SEK 791 million (729), corresponding to a margin of 28.6 percent (26.1).

• Operating profit/loss amounted to SEK 92 million (10), corresponding to a margin of 3.3 percent (0.4), and operating profit/loss, before items affecting comparability, amounted to SEK 92 million (38), corresponding to a margin of 3.3 percent (1.4).

• Profit/loss for the period amounted to SEK 28 million (–56), corresponding to earnings per share of SEK 0.19 (–0.39) before and after dilution.

• Cash flow from operating activities amounted to SEK 44 million (186).

Significant events after the end of the reporting period

• Updated climate targets for Midsona were approved by the Science Based Target initiative (SBTi), which was an important step in the work contributing towards the Paris Agreement’s goal of limiting global warming.

Comment by the CEO

Last quarter can again be summarised as organic sales growth, strengthened margins and improved operating profit for Midsona. That we achieved this, despite challenging market conditions, is largely due to the started implementation of our new strategy which aims to drive growth with increased profitability over time. Over the period, inflation decreased and interest rates were lowered, but consumers remained somewhat cautious, which particularly affected the market for organic products, our largest product category. We believe that the underlying demand for our products is strong and that a gradual recovery take place as consumer confidence increases.

The journey of change has just begun
A lot of work lies ahead of us to reach our financial targets. Although we are at an early stage with the new strategy, we are seeing positive effects – with a new organisation in place, ongoing efficiency improvements and stronger product categories. Our financial targets are to achieve an EBIT margin above 8 percent by 2027, average annual organic growth of 3–5 percent and to keep net debt below 2.5 x adjusted EBITDA.

Strengthened profit and gross margin
The Group’s operating profit/loss for the period amounted to SEK 32 million (9), and operating profit/loss, before items affecting comparability, amounted to SEK 32 million (18). The improvement in earnings was mainly driven by a stronger gross margin, before items affecting comparability, of 28.0 percent (25.7), which was achieved despite a continued relatively high raw material price environment and an unfavourable sales mix. Profit/loss before tax improved during the period to SEK 19 million (–10), partly due to reduced interest expenses as a result of lower debt and market interest rates. Work on strengthening the balance sheet and optimising working capital is continuing. Our net debt-to-EBITDA ratio was well below the long-term target of not exceeding 2.5 x adjusted EBITDA.
All three divisions improved their operating profit/loss during the quarter compared with the same period last year.

Our categories performed well
Our strategy is very much about developing and refining the three product categories, for which we can see great growth potential in both existing and new markets.

– The organic products category accounts for just over 50 percent of Midsona’s total sales. Organic growth was 2 percent during the quarter, despite continued challenging conditions in some geographical markets. This was due to the strong performance of several brands, such as Helios and Davert, thanks to innovation and marketing. We also achieved a good level of growth in contract manufacturing, through several new profitable contracts. At the same time, we continued to phase out unprofitable products and contracts to arrive at a more profitable product mix.

– In the health food category, which includes brands such as Friggs, Gainomax and Earth Control, sales decreased by 4 percent. Friggs – the largest brand in the category – nevertheless continued to report strong growth. Health food sales decreased in the quarter, largely due to our decision to terminate unprofitable contracts linked to the Christmas season, mainly related to Earth Control and contract manufacturing. These cancelled contracts will also have a certain negative impact on sales in the fourth quarter.

– The consumer health products category, which offers nutritional supplements, performed very well during the period, with organic sales growth of 20 percent. An expanded major distribution contract in the Finnish market contributed to the increase, combined with a strong performance by several of our brands.

Organized for profitable growth
An important step in our strategic work is the implementation of our new organisation. New central Marketing & Innovation, Purchasing and HR functions were introduced during the quarter, to increase coordination within the Group and thereby create better conditions for profitable growth. As part of this process, we also began the recruitment of a Purchasing Director to coordinate strategic purchasing across divisions to achieve economies of scale.

Outlook
We believe that the outlook for 2024 is good overall and that we will achieve a stronger full-year result than last year. In our largest market, Sweden, lower inflation, interest rate cuts and tax cuts in early 2025 are likely to positively affect consumer demand in several of our product categories. The European market for organic products remains hesitant in many places. We continue to work methodically to strengthen our positions.

Peter Åsberg
President and CEO