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Orion's Wholesale and Distribution Division to improve operational efficiency

The planned rearrangements would enable Oriola Oy to reduce the number of regional wholesale centers in Finland by shutting down the sites of in Seinäjoki and Kuopio and by centralising the deliveries of pharmaceuticals and healthcare products as well as the main part of services into Espoo and Oulu. A negotiation proposal concerning the altogether 90 Oriola employees in Seinäjoki and Kuopio is given today to the personnel representatives, with a target to complete the negotiations by mid June 2006.   
The purpose is to further develop Oriola's services to pharmacies and principals by means of more efficient capacity utilisation and by introducing a second work shift in Oriola's warehouses in Espoo. The working time arrangements will allow higher level of services and generate further benefits for pharmacies e.g. in the form of longer open-hours for daily order intake. As benefits of more centralised operations, a better follow-up of the product flows can be achieved and overall efficiency will improve.  
The measures are further actions to those already accomplished and underway in order to increase productivity and cost efficiency in the Wholesale and Distribution Division. In the past three years, the profitability has been decreasing especially in the pharmaceutical distribution operations, which have experienced shrinking service fees due to the heavy competition for distribution contracts and market shares. At the same time, generic substitution and government-induced price cuts have resulted in lower wholesale prices of pharmaceuticals and slower market growth rates in Finland and Sweden.
The planned measures for improving efficiency and reducing the number of personnel will concern all personnel groups. The full action plan is aiming at annual cost savings of about EUR 5 million, with full impact as of 2007. The arrangements are estimated to cause about EUR 3 million in one-off items, most of which would occur in the second and third quarters of 2006. A more accurate estimate of the savings and costs can be made after the completion of the negotiations.
The Wholesale and Distribution Division of the Orion Group is formed by two pharmaceutical and healthcare wholesale companies: Oriola Oy, which has operations in Finland and the Baltic countries, and Kronans Droghandel AB (KD), which operates in Sweden. KD has already centralised its distribution operations as a measure to adjust the cost structure, and additional actions are being taken, including a further downsizing of the personnel by 20 employees. 
The total personnel in the Wholesale and Distribution Division is about 1,530 of which 1,100 are working in Oriola and 430 in KD. Altogether about 400 employees of Oriola are engaged in the logistic operations in Finland, the regional wholesale centers in Seinäjoki and Kuopio employing about 45 persons each. The centralisation of the Finnish distribution operations will lead to the creation of about 40 new jobs in Espoo. The employees becoming redundant in Seinäjoki and Kuopio will be prioritised to these opportunities. 
The Board of Directors of Orion Corporation emphasises that the measures now being undertaken in the wholesale business are necessitated by the current market and competitive situation and that they are not associated with the forthcoming demerger of Orion. The rearrangements would lead to clear savings and generate additional value to customers along with higher service level, ensuring a sound and sustained economic foundation for the further development of Oriola-KD Corporation.  
Orion Corporation
Jukka Viinanen                                        Olli Huotari
President and CEO                                  General Counsel
Contact person:
Eero Hautaniemi, President, Wholesale and Distribution Division of the Orion Group
phone +358 10 429 2109, gsm +358 50 429 2109
Helsinki Exchanges
Orion Corporation
Corporate Administration
Orionintie 1A, 02200 Espoo