Q3 2026 Swedencare AB PLC Pre-Close Earnings Call
Speaker #1: A short presentation followed by a Q&A, so please raise your hand if you have any questions. Over to you, Håkan.
Speaker #2: Thank you very much, Emma. Håkan Lagerberg is my name, and today I will not be joined by Jenny, who is having a nice week of sailing in Croatia.
Speaker #2: We'll be back next Monday. So, today I will walk you through the quarter's highlights that we know of today, go through different segments, and also close with our expectations for the quarter's financials.
Speaker #2: Bear in mind, it is two-thirds of the quarter done when we have compiled this notice, but we will give our insights. We will also have time for questions at the end, as Emma said.
Speaker #2: So, let me start with the governance item: we press-released today, after 12 years, that I have decided to retire from Swedencare as CEO. I informed the board of my decision this morning, and I have a 12-month notice period, so there's ample time for an orderly transition, and I remain fully committed to the agenda we're executing.
Speaker #2: The decision has matured over the summer, as it often does, and I have come to the conclusion that, from a personal view, it's 100% the right timing.
Speaker #2: And from the professional side, I think it's very advantageous to get some new leadership in for what's next for Swedencare over the next 3 to 5 years.
Speaker #2: We have a group that has a majority of pieces that consistently over-deliver, and a couple where we have had—and have—some challenges. These challenges are about to be resolved, so I will be able to hand over the reins of a strong group in the animal health space.
Speaker #2: I do not envision any new operative roles for me, but will, of course, be open to board and advisor positions when my role here has ended.
Speaker #2: I will not start thanking anyone at this moment; that will have to wait for the actual end date of my term. So, let's go over the highlights of the business.
Speaker #2: First, market trends overall: Europe and the rest of the world remain very strong—or strong—while North America has been somewhat softer than expected.
Speaker #2: For the market as a whole, and also for us, especially on the dermatology side and somewhat in supplements, it has not been close to double-digit growth for North America. This year, it's been closer to mid-single-digit growth.
Speaker #2: We haven't had any market findings on the reasons for this, but of course, there is a lot of turmoil in the world, and especially internally in the US with rising gas prices, etc.
Speaker #2: Online continues to outperform the other channels, and it keeps on growing the percentage it has of total supplement sales. I've read some new findings that it has around 75% of all supplements being sold online, and that was expected in 2028, but I can't confirm that's really the case.
Speaker #2: Second, high commercial activity: we participated in several trade shows across the globe—China, Europe, South America, and the US—and we see this as very important for both existing partners and, of course, finding new partners and new market entries.
Speaker #2: Third, our proprietary AR Marketing AI marketing solution for Proton Plakov is showing generally interesting results. It's proving its value, and we plan to roll it out across multiple group brands from 2027 and onwards. We are planning and building an internal team for this.
Speaker #2: So, hopefully, we can start with that early next year. And finally, we're increasingly focused on larger projects with several partners—predominantly in markets where we're not present, but also in the US, where we have some new opportunities for very interesting collaborations with new partners.
Speaker #2: And this is also due to the fact—due to two reasons: that we have a unique group with manufacturing capabilities combined with strong online capabilities, and, of course, that we are not as M&A focused as we have been in the past.
Speaker #2: We are now looking for more strategic collaborations, compared to outright M&A activities. The different segments: North America is the one region still tracking below expectations.
Speaker #2: Demand has been softer than planned overall, and the Nature Vet and Medicated Liquids business is the main drag for us. However, we do expect both will pick up at the end of the year.
Speaker #2: Most of the challenges we've had with Nature Vet have now been overcome. We have shifted focus to ROI and profitability, already seen this quarter.
Speaker #2: Rather than growth at a high cost, growth is picking up, but at a slower pace than I expected. However, the trend is positive, and from next quarter we expect to be in line with expectations.
Speaker #2: The actions are clear: Nature Vet is a legacy brand with high credibility, and we are seeing new customers being added and older ones returning. The new sales teams are having fruitful meetings with many major players in the sector, and I expect a very different 2027, with growth, increased shelf space, and new outlets.
Speaker #2: The new big box private label customer that was pushed into Q3 has now launched successfully in this quarter. High and steady sales out the door after just a couple of weeks.
Speaker #2: Proton Plakov continues its impressive growth journey, both online and in physical stores. The new cat cream will be launched in early 2027 in the US, and we already have many customers asking for it since we launched in Europe.
Speaker #2: We expect the region to improve decisively in Q4, both due to comps being lower and also that we see continued clawback, and we expect that trend to continue.
Speaker #2: But we're not calling a turn yet. Europe and Rest of the World online essentially posted strong numbers for every region in Europe. The UK, Germany, Italy, and Spain all delivered strong double-digit growth, and we continue to build out the product catalog on Amazon, Zooplus, and TikTok.
Speaker #2: TikTok has moved up as a very important channel for us this year in total. And especially Germany is interesting, with very strong growth, but from a low base. Size-wise, Germany is basically the same market size as the UK, and for us, we have less than 10% of our sales in—10% of the UK sales are delivered in Germany, and at the start of the year it was under 5%. So it's been strong growth in Germany, and we see the trajectory increasing month on month.
Speaker #2: So it will be very interesting to see how the German figures will look in 2027. Pet retail: we are launching Nature Vet by Swedencare.
Speaker #2: This fall will not happen much in this quarter, but early Q4, in October. We are launching with the biggest pet retailer in the UK, and then we expect to add other regions as opportunity arises.
Speaker #2: End of this year and also all of 2027. Rest of the world continues to add new markets for Proton Plakov, and we're in dialogue on other brands in several additional markets, especially Asia.
Speaker #2: We have dialogues up and going from the trade show in China, but also in other markets. For present markets, it's been another strong export quarter for Swedencare—not the record that was in Q2, but probably the second best quarter ever in our group's history.
Speaker #2: Veterinary: Summit Vet—we made a press release about Summit Vet. It is first to market with soft shoe specials in the UK farmer veterinary channel, with first sales orders already trickling in. In the veterinary channel otherwise, our UK-focused vet brand NutraVet has had a number of well-received product launches in the quarter, leading to double-digit growth also this quarter.
Speaker #2: Production: Momentum continues in pharma, with two new MSAs signed and a continued healthy flow of new RFPs—perhaps too healthy. The team in Montreal are working very long hours for all of these new RFPs, and we actually have to select a bit between them. But the momentum is very high for our CDMO activities in Montreal.
Speaker #2: In the UK, we launched a new major pan-European contract manufacturing client in August at record speed, and many of the leading brands are now customers of ours, especially with regards to soft chews in Europe.
Speaker #2: In the US, Venture South had its SQF inspection last week with a verbal approval. For those of you that remember, we got the SQF certification for Nature Vet in the first half of the year, and why this is important is that SQF means that all of the, let's say, major retailers—not pet retailers, but major retailers—they demand the SQF inspection or grade. That's a food-grade inspection compared to feed-grade.
Speaker #2: So it's even stricter regulatory rules, basically the same as manufacturing human food. So we're very proud of having two facilities approved with this certification.
Speaker #2: New capabilities: common stream from Q4 into Q1 2027, so lots of work with that. In Q3, not giving us any revenue, but very interesting capabilities that we are building out at the Veture South facility in Florida.
Speaker #2: It's predominantly as, let's say, first half year we will only manufacture internal demand, but that then will be expanded with external customers second half of 2027.
Speaker #2: I will be able to inform you about this capability—that we have launched the products in the market—probably in Q1 2027. And during Q4, we will have transferred the last volume of extruded products in the US, previously made by external partners, into our own facilities.
Speaker #2: It's good both for margin and control of the product and quality. So, as you know, we have around 90% of all the products that we sell out on the market under our brands being manufactured by ourselves, and that will probably—when these two capabilities have been, or this new capability plus the return of the last extruded products—we will probably be close to 95% of internal manufacturing.
Speaker #2: Looking at the expected financials after two-thirds of the quarter, we expect a similar trend for the segment as last quarter: strong European and production sales despite Veture South being soft.
Speaker #2: North America is still too weak. Organic growth is similar to Q2—single digit—and not supporting our double-digit annual target. So, we need to have a strong Q4 to reach that target.
Speaker #2: Gross margin is similar to Q2, around 59 to 60%. EBITDA—here's the highlight of this quarter—I expect it to be the best quarter for the year, with over a 20% margin. Where it ends, we still have to wait and see, but I feel confident that it will be the strongest quarter for the year, profitability-wise. We have been working hard on getting the profitability up.
Speaker #2: Much comes with volume, but also other things that we control have improved. Net debt to EBITDA is lower than Q2, expected to be under 3.
Speaker #2: The Summit earn-out due within 12 months is still impacting, of course, and it remains to be seen how they perform in the last quarter for that earn-out.
Speaker #2: So we measure that earn-out up until the end of last March. So that brings us to Q&A. Emma?
Speaker #1: Yes, your first question comes from Adrian. Please go ahead.
Speaker #3: Hi Håkan. Good afternoon. I'll just first start off by saying thanks for the cooperation over the years. It was very nice working with you. But I suppose that we'll see you for some time still, as you said yourself—we'll see when you actually leave the company. But thank you.
Speaker #3: Just a few questions from my side. Firstly, can we have any update on the distribution merger in the US of the distributors? Has this had any effect yet here in Q3, and is this partially why you have seen some softer performance in the US?
Speaker #2: Yes, good question. I could have mentioned that. Yes, that merger has been, at least as I heard, at least, was that it is going to go through.
Speaker #2: No impediments with the actual merger, and we have seen from that merger that the orders that we expected in Q2, when the launches—those will products, the main products will be launched—several products will be launched in Q4.
Speaker #2: So we will have some uptake in this quarter, but the majority of those deliveries from our side will be early Q4.
Speaker #3: Okay, very clear. And another status update, I suppose: regarding the rogue sellers on Amazon. And the follow-up question to that is, are you starting to see your marketing spending yielding growth yet?
Speaker #2: Yes, yeah, exactly. So, rogue sellers are definitely, I would say, as good as it gets. There will always be someone popping up, but it's at the normal level.
Speaker #2: We do see some let's say some let's say smaller distributors selling out all of the let's say old label products. There are still those around in the distributor some smaller distributors, and that creating some issues.
Speaker #2: But I mean, overall, I would say that we now focus on having transparency programs on the majority of our products so they cannot be delivered into Amazon from rogue sellers.
Speaker #2: So, where we now have some issues is just from other online platforms selling at lower prices, and then the Amazon algorithms react. But I would say it's under control, and we definitely see that our marketing spend will have better ROI, as I said.
Speaker #2: We've seen it already this quarter, and that will continue to improve in Q4.
Speaker #3: Okay, thanks for that. Last question from my side: Could you confirm how large the new big-box private label contract has added in terms of sales, or at least give any indication of the magnitude?
Speaker #2: I can't confirm the actual sales out the door, but what I can say is that the trend is still only new customers buying the product.
Speaker #2: It's a big-size product, only one SKU, and so their returning customers for that product won't be shown until October. But for us, if it continues with this out-of-door sales as it has now, it will be a multi-million customer for us.
Speaker #3: Okay, perfect. That was all from me. Thank you, Håkan. Have a good weekend.
Speaker #2: Thank you.
Speaker #1: Thank you, Adrian. I don't see any more raised hands, so it looks like that covers all the questions for today. The result of a great presentation.
Speaker #1: Oh, here's Adrian again.
Speaker #3: Am I still unmuted?
Speaker #2: We are.
Speaker #3: Yeah, very good. Then if I'm the only one asking the question I can take one more question. Sorry. Just one quick one. The trade shows that you've had during the quarter, do you have any indication of kind of how much that has costs?
Speaker #2: I would say similar to last year, and I don't have the actual cost, but they do cost. Sorry, I don't have that.
Speaker #2: But it's not more—we haven't spent more this Q3 than last year on trade shows.
Speaker #3: Okay, perfect. Thank you again, Håkan.
