- Half-year revenue reached CHF 1.2 billion, growing 7.5% organically, achieving CHF 621 million or 11.7% in the second quarter
- Core EBIT margin at 26% in the first half year
- Acquisition of GalvoSurge, a manufacturer of medical devices for optimal cleaning of dental implants
- Yang Xu to join as Group CFO end of August
- Outlook 2023 confirmed: Organic revenue growth is expected in the high single-digit percentage range and profitability at around 25% including growth investments
All regions delivered very strong results, while the Asia Pacific region positively stood out due to the dynamic developments in China. The significant increase in volume compared to the previous second quarter was also due to the local COVID-19 lockdowns last year.
The implantology business kept its strong growth pace and digital solutions showed continued momentum, both contributed strongly to customer conversion.
Guillaume Daniellot, Chief Executive Officer, commented: “This excellent second quarter result reflects the exceptional efforts and dedication of our teams around the world to deliver on the high demand for our solutions. In addition, we made great progress in our strategic projects, particularly in the digital transformation programs and the innovation strategy through the acquisition of GalvoSurge. Despite isolated consumer weakness, we remain confident in reaching our full-year guidance.”
Revenue in Swiss francs was impacted by a negative currency development mainly related to the Euro, US Dollar, Chinese Renminbi, Turkish Lira, and Japanese Yen. Core EBIT margin reached 26%.
STRATEGIC PROGRESS SECOND QUARTER
Acquisition of GalvoSurge for optimal cleaning of dental implants
In June, the Group announced the acquisition of GalvoSurge, a Swiss manufacturer in the dental field. The company offers a medical device that helps to treat peri-implantitis and thus aims to protect patients from implant loss. The GalvoSurge dental implant cleaning system effectively treats patients with a wide range of implant systems. By removing the biofilm, the device is designed to support clinicians to treat peri-implantitis, without harming healthy soft and hard tissue.
ClearCorrect further enhances its ClearPilot software
In the second quarter, ClearCorrect further enhanced its ClearPilot software with new features to improve the user experience and streamline dental treatments.
ClearPilot enhanced the visualization and customization of bite ramps, allowing for precise adjustments. This improves esthetics, optimal patient comfort and the effectiveness of the ramps for successful treatment outcomes. The bite ramps feature is currently in the limited market release phase and a full market release is planned for the third quarter of 2023.
People announcements
Yang Xu will join the Group as Chief Financial Officer and Member of the Executive Management Board towards the end of August.
Rahma Samow, Head of Dental Service Organizations (DSO), has decided to leave the Group and join one of Straumann Group’s main business partners. The hiring process for a new DSO Head is ongoing.
The Science Based Targets initiative (SBTi) approved the Group’s net-zero targets
Within its sustainability framework, the Group has committed to care for the planet and society and set itself ambitious emissions reduction targets in line with climate science and a 1.5°C trajectory. The company’s targets to reduce 42% of their scope 1 and 2 emissions and 25% of their scope 3 emissions by 2030 as well as reach net-zero emissions by 2040 have been independently assessed and approved by the SBTi.
REGIONAL PERFORMANCES IN THE SECOND QUARTER
The Europe, Middle East, and Africa (EMEA) region remains primary revenue driver
The EMEA region generated CHF 273 million revenue in the second quarter, achieving organic growth of 8.8% compared to the same quarter in 2022. With this, the region continues to be the primary revenue driver for the Group. Growth was primarily fueled by the strong performance of key markets such as Germany, Turkey, the United Kingdom, Italy and Eastern Europe. Both, the premium and challenger implantology solutions continued to lead revenue growth supported by the remarkable success of intraoral scanners. Furthermore, the orthodontics business grew considerably, strengthening its position in the EMEA region.
North America revenue growth driven by digital innovation
The North America region reported revenue of CHF 173 million showing a solid 7% organic growth in the second quarter to which both, the US and Canada contributed. The implantology business performed well, with Neodent delivering strong results in the second quarter. Additionally, the intraoral scanners showed a good performance and orthodontics improved its value proposition by enhancing its service level.
Asia Pacific region showing exceptionally high growth rate
In the second quarter of 2023, the Asia Pacific region achieved revenue of CHF 122 million or 23% organic revenue growth compared to the same period in 2022 which was impacted by COVID-19 lockdowns. In addition, patient flow and thus volumes in China were driven by the pent-up demand caused by the effect of COVID-19 in the first quarter and the volume-based procurement process dynamics which accelerated in the second quarter. Japan, Australia and India performed strongly. Digital solutions and implantology, premium as well as challenger, grew significantly compared to last year’s second quarter.
Latin America delivers double-digit revenue growth for the ninth quarter in a row
The Latin American business achieved remarkable 20% organic revenue growth in the second quarter of this year, leading to CHF 53 million in revenue. Brazil remained the primary revenue contributor, showing strong demand for Neodent solutions. The region's market share expanded as it successfully attracted new customers through nationwide educational events. Chile and Argentina also demonstrated strong growth, contributing to the region's overall success. Digital solutions, particularly the Virtuo Vivo intraoral scanner, gained significant momentum in the market, further strengthening the company's position. Additionally, the orthodontics business had a positive impact on the region's performance.
OPERATIONS AND FINANCES
To facilitate a like-for-like comparison, the Group presents core results in addition to the results reported under IFRS. In the first six months of 2023, the following effects (after tax) were defined as non-core items:
- The amortization of acquisition-related intangible assets amounting to CHF 3 million.
- Restructuring costs in the APAC and LATAM regions of CHF 19 million.
Gross profit margin remains at high level
In the first six months of 2023, the Group’s strong topline growth led to a core gross profit of CHF 915 million which is a CHF 20 million increase in absolute terms. The corresponding margin of 75.2% remains high despite the changing portfolio mix and a decrease of 100 basis points due to a negative currency effect compared to 2022. Adjusted for currency effects, the Group was able to increase the margin by 20 basis points.
Core EBIT margin at 26%
Reflecting on the EBIT margin, the first half of the year is typically higher than the second. Compared to last year’s result, EBIT decreased by CHF 12 million amounting to CHF 317 million. The core EBIT margin reached 26% which is 190 basis points below the same period in the prior year and in line with our expectations. Currency fluctuations, driven by the weakening of the Euro, the US Dollar, the Chinese Renminbi and Turkish Lira, had a negative impact of 180 basis points on the core EBIT margin.
Core distribution expenses rose by CHF 5 million to CHF 215 million in 2023. This includes direct sales-force expenses and logistics costs. Core administrative expenses increased by CHF 29 million to CHF 388 million. This includes research, development, general overhead and marketing costs, especially from the direct-to-consumer business.
Core net profit reaches CHF 229 million
Core net financial expenses increased by CHF 30 million to CHF 36 million. This primarily reflects unrealized negative currency valuation impacts, mainly in emerging markets. Higher interest rates led to extended currency hedging costs and adjustments in earn-outs while the interest income on cash balances slightly increased. Income taxes amounted to CHF 47 million, resulting in an income tax rate of 17%. Core net profit reached CHF 229 million, resulting in a margin of 19%. Core basic earnings per share decreased from CHF 1.69 to CHF 1.43.
Free cash flow increased by CHF 34 million
Free cash flow generation at CHF 112 million, CHF 34 million higher compared to the same period of 2022, mainly driven by slower ramp-up of net working capital.
Capital expenditure in the first six months remained at a high level with CHF 86 million spent, demonstrating the Group’s commitment in production expansion initiatives.
The cash position on 30 June 2023 remained strong, at CHF 603 million.
OUTLOOK 2023 (BARRING UNFORESEEN CIRCUMSTANCES)
Despite isolated consumer weakness, the patient flow seen in the first half of the year is expected to remain at a dynamic level in most geographies.
Thanks to the differentiated value proposition within our strategic segments, combined with a strong quality of execution from all our team members worldwide, the Group remains confident that it will continue to gain market share within its estimated globally addressable market of CHF 19 billion. In the meantime, we will continue to invest in growth and transformation to keep our competitive edge in the coming future.
As a result, the Group confirms its full-year outlook and expects organic revenue growth to be in the high single-digit percentage range and profitability at around 25% including growth investments.
ANALYSTS’ AND MEDIA CONFERENCE CALL
Straumann will present its 2023 second-quarter results to representatives of the financial community and media in a webcast telephone conference call today at 10.30 a.m. Swiss time. The webcast can be accessed via www.straumann-group.com/webcast. A replay of the webcast will be available after the conference. If you intend to ask a question during the Q&A, we kindly ask you to pre-register for the conference call through this link “Conference call”. We also recommend that you download the presentation file in advance using the direct link in this media release before joining the conference call.
Presentation
The conference presentation slides are attached to this release and available on the Media and Investors pages at www.straumann-group.com.
Disclaimer
This release contains forward-looking statements that reflect the current views of management, and which are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Straumann Group to differ materially from those expressed or implied in this document. Statements are made on the basis of management's views and assumptions regarding future events and business performance at the time the statements are made. They are subject to risks and uncertainties including, but not confined to, future global economic conditions, pandemics, exchange rates, legal provisions, market conditions, activities by competitors and other factors outside Straumann's control. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual outcomes may vary materially from those forecasted or expected. Straumann is providing the information in this release as of this date and does not undertake any obligation to update any statements contained in it as a result of new information, future events or otherwise. This release constitutes neither an offer to sell nor a solicitation to buy any securities.
[1] The ‘core’ figures in this document exclude purchase-price allocation (PPA) amortization, impairments, restructuring expenses, legal cases, consolidation result of former associates, and other non-recurring incidents. Details and a reconciliation of the reported and core income statement are provided on pages 11ff.
