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Revenue growth in Americas and Asia offset by decline in Europe; slightly improved profitability
- First quarter revenue of EUR 147.6 million was -0.2% at CER and +2.8% in EUR versus prior year
- Regional revenue patterns were unchanged with growth in North America and a decline in EMEA with its challenging environment; APAC shows growth again overcoming the effect of the Japan tsunami in 2011
- Implant systems growth was flat at 0% (CER), NobelProcera was -1% (CER) as copings continued to decline
- EBIT margin of 14.1% slightly improved due to continued disciplined cost management
- Net profit was at EUR 13.7 million reflecting a net margin of 9.3%; operating cash flow improved to EUR 16.6 million
Richard Laube, CEO: "Our Q1 results were in line with our expectations, and our sales have been stable for about nine months. We are not yet satisfied with our performance, but we are making significant progress in driving our strategy to improve our customers' experience with Nobel Biocare. Our 'Value-Added Selling' is being implemented broadly and our innovation program is forming on track. Our recent launches were well executed, and we are reaching more customers. We are also making numerous changes and improvements through our operation to serve our customers more efficiently and effectively."
In Q1 2012, revenue at constant exchange rates (CER) declined by 0.2% reflecting a continued stable development for the third sequential quarter. Thanks to a favorable exchange rate impact, revenue in euro increased by 2.8% to EUR 147.6 million. While implant systems revenue development was flat (0.0%), revenue from NobelProcera is moving closer to growth (-1.0%). NobelActive including the 3.0 mm small-diameter line extension continues to grow at double-digit rates. While revenue for NobelReplace has been positively impacted by the recent introduction of the new conical connection (CC) and platform-shifting (PS), softness continues in the standardized abutment segment. In NobelProcera, growth in high-end prosthetics was offset by expected declines in copings, small-unit bridges and scanners. Profit from operations (EBIT) in the first quarter was EUR 20.8 million (Q1 2011: EUR 19.0 million excluding exceptionals) reflecting an EBIT margin of 14.1% as reported or 13.5% at CER (Q1 2011: 13.2% excluding exceptionals). Continued disciplined cost management and a slightly favorable currency translation impact have more than offset a lower gross margin. Net profit was EUR 13.7 million compared with EUR 12.9 million a year ago.
As indicated, Nobel Biocare has continued its transformation to better respond to patient and customer needs. A new organization and processes to drive innovation and pipeline progress, as well as to facilitate sales force effectiveness and further improve the customer experience are being implemented. Furthermore, successful programs from countries where Nobel Biocare is building market share are being reapplied to other markets. The increased customer focus is allowing Nobel Biocare to develop more effective solutions to help customers grow and provide superior patient care.
Serving customers better is also based on a unique product portfolio with innovative products such as NobelActive. This implant has been growing at double-digit rates since its introduction in May 2008. The offer has recently been significantly augmented with a 3.0 mm small-diameter version, which was developed for safe placement in areas with limited space in the anterior region. As with other NobelActive implants, it is designed to enhance initial stability, and the implant position can be adjusted for optimal restorative orientation. Composed of commercially pure, cold-worked, grade 4 titanium, it is very strong despite its small diameter.
The NobelReplace product family, which contributes the highest share to the implant segment, was recently expanded with NobelReplace Conical Connection and NobelReplace Platform Shift to expand the restorative options for the proven NobelReplace tapered implant body. NobelReplace Conical Connection includes an advanced, third-generation internal conical connection and platform shifting to help achieve healthy soft tissue, while NobelReplace Platform Shift combines the tri-channel connection with platform shifting to enhance soft tissue volume and maintain NobelReplace's ease-of-use.
Nobel Biocare symposia - As the pioneer and innovator in the industry, Nobel Biocare shares a unique heritage in the field of osseointegration. To celebrate the landmark dates - 60 years since the discovery of osseointegration and 30 years since its international acceptance at the landmark conference in Toronto - Nobel Biocare is hosting a series of six scientific symposia in selected cities in Europe and North America. The first meeting in Gothenburg was attended by over 1,000 dental professionals and featured an unannounced live appearance by Prof. Per-Ingvar Brånemark, the discoverer of osseointegration.
Regional business performance
A new segment "the Americas", which reflects new management structures, has been reported since 1 January 2012. As previously announced revenue of LatAm/RoW has now been included into other regions, mainly into North America. For better comparison, the following table also shows historic revenue information adjusted to the new regional segment definition.
In Europe, Middle East and Africa (EMEA), revenue (CER) in the first quarter declined by 4.4% to EUR 60.6 million. The pattern across this region was unchanged with weakness in the markets in Southern Europe (Italy and Spain), where Nobel Biocare traditionally has a high market share and a high contribution to the region. In Germany, the first quarter comparison was impacted by the high base of the prior year with the biennial IDS in Cologne. Market conditions in Sweden remain difficult; however, Nobel Biocare has been able to strengthen its market share. France was slightly up for the quarter. Good growth was achieved in the UK, Russia and Eastern European markets.
In the Americas, revenue (CER) in the first quarter increased by 2.7% to EUR 55.4 million. Growth in North America was 1.6% reflecting an expected volatile pattern after a strong finish to the prior year and a high prior-year comparison base in Q1 2011. However, run rates have been at or slightly above prior quarter levels, and business flow was solid during the reporting period. Overall, market conditions remain favorable. The company saw high interest in the Nobel Biocare events and the booth at the recent Academy of Osseointegration (AO) and Chicago Dental Society (CDS) meetings. In Latin America, the company continued its growth trend.
In the Asia/Pacific region, revenue (CER) in the first quarter was up 3.8% to EUR 31.6 million. Japan is slowly rebuilding momentum and returned to modest growth (2.1%) following the tsunami in mid-March last year that affected the prior year comparison. APAC excluding Japan was up 6.8%. While Australia was weak during the quarter, strong growth in China, India and Taiwan was reported.
Alpha-Bio Tec (ABT), which targets customer groups with larger price sensitivity and simpler product and solutions needs, continued double-digit growth in the first quarter 2012.
Financial performance update
Gross profit in the first quarter was 111.3 million (Q1 2011: EUR 109.1 million), reflecting a gross margin of 75.4% (Q1 2011: 76.1%). The positive impact from an improving NobelProcera gross margin and currencies was offset by a lower implant systems margin. The latter was due to an unfavorable mix and a lower average selling price.
Operating expenses in the reporting period were EUR 90.5 million (Q1 2011: EUR 94.0 million). Excluding exceptional costs of EUR 3.6 million in 2011, the underlying cost basis was EUR 2.0 million lower at CER than in the previous year. This reflects the high cost discipline throughout the entire Group as well as the fact that some of the planned investments for sales, innovation and IT programs will come later in 2012.
Profit from operations (EBIT) for the first quarter was EUR 20.8 million (Q1 2011: EUR 15.1 million or, EUR 19.0 million excluding the abovementioned exceptionals), reflecting an operating margin of 14.1% (Q1 2011: 10.5% or 13.2%, respectively). Cautious spending in all areas, as described above, was able to compensate a slightly lower gross margin in the reporting period. The EBIT margin - slightly ahead of the full year guidance - is expected to be adversely impacted once the costs for various projects and activities come through in the upcoming quarters.
Currencies - While the development of some currencies, mainly the US dollar and the Japanese yen, had a positive impact on the Group's top line (300 bps) in the first quarter, costs continued to be driven slightly higher by the strong Swiss franc. Nevertheless, the currency impact on gross margin (30 bps) and EBIT margin (60 bps) was slightly positive in the first quarter.
The net financial result for the first quarter was EUR -2.0 million (Q1 2011: EUR 2.2 million). The reduction of interest expenses was more than offset by the non-recurrence of hedging gains reported in Q1 2011. The FX result for Q1 2012 was flat, even including some adverse effects from emerging market currencies.
Taxes - Tax expenses in the first quarter amounted to EUR 5.1 million versus EUR 4.4 million a year ago. Based on full-year profit expectations, this reflects a base tax rate of about 27.0% for the current year compared with 25.5% in the prior year.
Net profit for the first quarter was EUR 13.7 million (Q1 2011: EUR 12.9 million), reflecting a net profit margin of 9.3% (Q1 2011: 9.0%). Higher operating profit was partially offset by a lower financial result and slightly higher taxes.
Cash flow from operating activities for the quarter totaled EUR 16.6 million (Q1 2011: EUR 0.8 million). This higher cash flow is due to exceptional taxes paid in early 2011, but caused in 2010. Excluding these exceptional tax payments, the operating cash flow was unchanged versus 2011. Cash & cash equivalents at the end of March 2012 were at EUR 117.5 million, compared with EUR 227.1 million a year ago prior to the refinancing of the maturing convertible bond. Net financial debt amounted to EUR 17.8 million compared with EUR 2.5 million a year ago.
Shareholders at the annual general meeting (AGM) on 29 March 2012 approved all proposals of the Board of Directors, including a dividend of CHF 0.15 per registered share, a total of EUR 15.3 million, which was paid out of free reserves on 5 April 2012.
Nobel Biocare maintains its cautious outlook on the global dental implant market for 2012 with low single-digit percent growth estimated.
Reflecting this environment and the first quarter results, the full year 2012 outlook for the company remains unchanged. At constant exchange rates (CER) Nobel Biocare targets modest revenue growth and an absolute profit from operations (EBIT) in line with 2011.
This media release contains forward-looking statements based on beliefs of Nobel Biocare's management. When used in this media release, words such as "anticipate", "believe", "estimate", "expect", "intend", "plan" and "project" are intended to identify forward-looking statements. They may involve risks and uncertainties, including technological advances in the medical field, product demand and market acceptance, the effect of economic conditions, the impact of competitive products and pricing, foreign currency exchange rates and other risks. These forward-looking statements reflect the views of Nobel Biocare as of the date made with respect to future events and are subject to risks and uncertainties. All of these forward-looking statements are based on estimates and assumptions made by management of the company and are believed to be reasonable, though are inherently uncertain and difficult to predict. Actual results or experience could differ materially from the forward-looking statements. Nobel Biocare disclaims any intention or obligation to update these forward-looking statements.
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