Release Date: October 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Getinge AB (GNGBF, Financial) reported a strong global market momentum with a 10% increase in order intake, including 7.4% organic growth.
- The company saw improved adjusted gross margins in life science and surgical workflows, indicating operational efficiency in these segments.
- Recent acquisitions, such as Paragonix Technologies and Intact Solution, are expected to contribute significantly to growth and align well with Getinge's existing product portfolio.
- The company's server ventilators received cybersecurity clearance from the US Defense Health Agency, enhancing their marketability within the US Department of Defense.
- Getinge AB (GNGBF) maintains a solid financial position with a leverage of 2x EBITA, despite recent acquisitions, indicating strong financial management.
Negative Points
- Net sales growth was modest at 3.5%, with organic growth flat compared to the previous year, indicating challenges in driving sales.
- The adjusted gross margin for the group decreased due to negative mix, inflation, and under-absorption, impacting overall profitability.
- Temporary supply chain challenges negatively affected net sales, particularly in acute care therapies, highlighting operational vulnerabilities.
- The CE certificate for the Cardiosave balloon pump remains suspended, potentially affecting future sales and market confidence.
- The company faces elevated quality-related costs, trending above SEK0.5 billion for the year, which could pressure margins.
Q & A Highlights
Q: In the report, you're seeing consumables down in balloon pumps and hardware down in ECMO. Is there an aspect of market share losses in these areas, or is it just purely comps?
A: (Mattias Perjos, CEO) It's definitely a comps effect. We have no information on any significant market share losses. We expect customers might find a second source for ECMO hardware, but nothing material in the quarter.
Q: How much of the strong order intake in ACT relates to ECMO consumables? Are customers looking to build safety stocks in Q4?
A: (Mattias Perjos, CEO) We haven't been able to supply enough for anyone to build safety stocks. We've gotten out of the backorder situation outside the EU markets, and we are now back to delivering with the new packaging solution to the CE market.
Q: How high were the costs related to quality and regulatory issues this quarter for ECMO balloon pump?
A: (Mattias Perjos, CEO) It's broadly in line with what we communicated. We don't detail everything we invest in upgrading products and fixing production changes, so nothing material to add.
Q: Orders in life science remain well above sales. Do you see organic sales growth in Q4? What product areas do you expect to grow strongly into 2025?
A: (Agneta Palmer, CFO) We anticipate a strong delivery quarter for life science in Q4. BetaBag sterile transfer, a high-margin product, has picked up, but growth is subject to product mix.
Q: Could you comment on the strong order growth in surgical workflows, particularly in the US?
A: (Mattias Perjos, CEO) The main positive contributions were from infection control and digital health. It's not a continued pandemic catch-up but rather large projects and good growth momentum in digital health.
Q: On the ACT restructuring costs, what functions are you reducing, and does this reflect a lower growth outlook for ACT in 2025?
A: (Agneta Palmer, CFO) We are rightsizing across supply chain, sales, and support functions. This is to address our cost base and should positively affect profitability, not reflect a lower growth outlook.
Q: Can you provide an update on the FDA letter and its impact on ECMO therapy?
A: (Mattias Perjos, CEO) No new updates from the FDA. We continue weekly meetings and align on product platform improvements. Customer concerns mainly relate to supply, and we expect them to develop alternative sources.
Q: Could you explain the rationale for not expecting margin improvement next year despite lower quality costs and good demand?
A: (Agneta Palmer, CFO) We expect a different mix with high growth in acquisition areas like surgical workflows, impacting overall margins. We also anticipate elevated quality costs to continue.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
