Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Earnings increased by EUR8 million to almost EUR56 million, corresponding to an EBIT margin of 3.7%.
- Order volume increased in Germany and America, contributing to overall group order intake being above the prior-year level.
- Successful launch of new products such as the Vista 300 patient monitor and approval of Evita V600/800 ventilators in China.
- Significant improvement in operating cash flow due to better working capital management and lower cash-relevant investments.
- Equity ratio improved to almost 48% as of June 30, 2024.
Negative Points
- Net sales in the first half of 2024 were slightly below the prior-year level at around EUR1.5 billion.
- Order intake in the APAC region fell significantly due to the challenging market environment in China.
- Medical division's order intake decreased by around 2% due to a decline in ventilator demand in China and healthcare reform impacts.
- EBIT margin for the medical division decreased to minus 2.9% in the first six months.
- Free cash flow after six months remained slightly in negative territory.
Q & A Highlights
Q: Can you provide more color on the expected outlook for China for the full year, adjusting for ventilator base effects? Are we talking about a 5% decline or a double-digit decline? Also, what are your thoughts on the healthcare reform and stimulus works in China?
A: The healthcare reform mainly refers to the anti-corruption campaign, which is taking longer than expected. We anticipate a double-digit decline for the full year in China. Regarding the stimulus, we are not aware of any specific stimulus campaign for our business in China.
Q: Have you seen any benefits from Philips and Medtronic withdrawing from the ventilator market in the US?
A: We are well-positioned to benefit from the withdrawal of Philips and Medtronic from the ventilator market. We have the necessary approvals for our devices and are targeting the installed base and customers of these companies. However, we have not yet seen this reflected in our numbers.
Q: Are there any other market developments outside China that we should be aware of?
A: In Korea, doctors are on strike, which is affecting the medical market. Additionally, our business in Russia is declining due to the ongoing conflict, and it used to be very profitable. This decline is challenging to compensate for.
Q: Can you provide more details on the lower costs for unplanned field campaigns benefiting the gross profit margin? Is this a sustainable relief or a one-time benefit?
A: These costs are typically unplanned and occur when there is a necessity to address deficits in the field. We expect reduced costs for the full year and are working to maintain this level. However, there is some uncertainty as these are not planned campaigns.
Q: Why did you not specify the gross profit margin guidance to the upper half following the strong development in H1?
A: We did indicate that the EBIT margin would be in the upper half of the guided range. The first half of the year included one-time effects like the sale of a plot of land and a business, which we do not plan for the second half.
Q: Can you provide more information on the launch of the Vista 300 patient monitor and its impact on your competitiveness?
A: The Vista 300 patient monitor is a meaningful enhancement in the mid-size monitoring segment. Our organization is excited about this launch, and it will benefit us for quite a while. We are also working on further developments in the upper end of the monitoring portfolio, but these will take more time.
Q: Why is there no consistent success in controlling OpEx in the medical division despite lower revenues?
A: The growth in expenses is partly due to added resources needed to cover increased volume, particularly in the safety division. Additionally, there was a tariff increase negotiated with the trade union, which is now effective.
Q: Under what circumstances would you feel comfortable raising your guidance?
A: A more positive development in China, particularly in Q3, could lead to a more optimistic outlook. Continued strong development in the Americas and improvements in other regions could also contribute. We will provide a more concrete outlook if we see more clarity in Q3.
Q: Are there any more divestments planned, and what is the outlook for the safety division?
A: We do not expect any more sizable divestments that would significantly impact the overall business. The safety division continues to perform well, although the FFP mask business did not gain as much market share as expected post-pandemic.
Q: Has there been any change in market behavior from GE Healthcare since they became a listed independent company?
A: No, there has been no noticeable change in their market behavior since they became a listed independent company.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
