-- Continued strong sales growth across all regions, with North
America and Asia/Pacific accelerating in the second quarter
-- Enhanced profitability contributes to a 45% jump in operating
profit, with net profit up 42%
-- Further reduction in working capital, to 8% of sales
-- 102 new jobs created through continued investment in talent to
absorb and sustain growth
-- Management raises full-year sales growth expectation to 26% in
local currencies
WALDENBURG, Switzerland, Aug. 12, 2004 (PRIMEZONE) --
Straumann Holding AG, (Other OTC:SAUHF).
Key figures
Change in % Change in %
(in CHF million) H1, 2004 vs. H1, 2003 vs. H1, 2003
in l.c.
Net sales 217.2 32.9 32.1
Implants Division 206.0 26.1 25.3
In % of net sales 94.8
Biologics Division 11.2 5.1(1) 7.4(1)
In % of net sales 5.2
Operating profit
(EBIT) 67.2 45.2
Margin in % 30.9
Net profit 54.1 41.7
Margin in % 24.9
Earnings per share
(in CHF) 3.49 41.9
Net sales 2nd Quarter 109.3 30.5 31.1
Implants Division 103.6 23.6 24.2
Biologics Division 5.7 9.8(1) 12.4(1)
--------------------------------------------
(1) By comparison with sales published in 2003 by Biora
prior to its acquisition
With volumes growing strongly in both quarters, the Straumann Group again achieved record first-half results as sales climbed 33% in Swiss francs, or 32% in local currencies (l.c.), to CHF 217 million. Thanks to improved operational efficiency and cost reductions, operating profit grew faster than sales and rose 45% to CHF 67 million, with the operating margin improving to 31%. Net profit increased 42% to CHF 54 million, with the net margin expanding to 25%. On the basis of these results, management has raised its expectation for full-year sales growth to 26% in local currencies.
Sales driven by volume expansions in both quarters
For the most part, growth was organic as Straumann continued to win new customers and expand its existing business. Thus, 23% points of sales growth were generated by volume expansions; approximately 7% points were acquisition related, while price increases contributed 2% points. The remaining 1% point was due to currency translations as the positive impact of the Euro more than compensated for the negative effect of the US dollar.
On a divisional level, first-half sales growth was powered primarily by the core implant business, which generated 95% of Group revenues. The remainder came from the Biora business, which was acquired in June 2003 and was fully integrated into Straumann's Biologics Division by the end of the first quarter of the current year.
Implants booked a 26% (25% in l.c.) increase in first-half sales to CHF 206 million on the back of strong volume growth of approximately 24% in both quarters. The sustained success of the implant business is due to proven clinical benefits and continual optimization of the Straumann system to meet the needs of customers and their patients.
Biologics saw a marked acceleration in sales growth from 1% (3% in l.c.) in the first quarter to 10% (12% in l.c.) in the second, resulting in a first-half increase of 5% (7% in l.c.) to CHF 11 million. The growth reflects the transfer of the distribution organization, and momentum is expected to increase further over the second half as familiarity with the tissue regeneration product Emdogain(r) spreads.
Strong growth in major markets
Regionally, Europe continued to be the biggest source of revenue, contributing an unchanged 64% of Group first-half sales. European sales climbed 32% (28% in l.c.) to CHF 138 million, driven by particularly strong performances in Germany (+27% in l.c.), the Netherlands (+49% in l.c.), France (+36% in l.c.) and Spain (+30% in l.c.). Sweden posted a rise of 52% (l.c.) on top of a particularly strong first half in 2003, while Italy enjoyed a distinct acceleration (+24% in CHF), and Switzerland posted a 13% rise in sales.
North America, which continued to generate 25% of Group revenues, posted an impressive 43% jump in sales in local currencies to CHF 54 million, fuelled by a strong second quarter. Owing to the weakness of the US dollar, the increase was only 35% in Swiss francs.
The Asia/Pacific region also benefited from a strong second quarter to achieve a 29% rise in first-half sales to CHF 22 million, driven by increased momentum in Japan and Korea in addition to solid growth in Australia and New Zealand. The region's contribution to Group sales was 10%.
Revenues in the rest of the world amounted to CHF 3 million, up 83% from the previous first half.
EBIT margin expands to 31%
Continued optimization of inventory and supply-chain management contributed to an overall reduction in the cost of goods sold from 20% to 18% of sales. This and a slightly positive currency effect on sales expanded the gross margin to 82%.
Overall operating costs decreased to 69% of sales compared with 72% in the first half of last year. Selling costs rose from 36% of sales in the first half of 2003 to 38%, reflecting the Group's growth strategy.
Owing to the integration of Biora and the reorganization of administrative functions, certain items have been reallocated from research and development to general administrative costs both in the period under review and in the corresponding first half of 2003. General administrative costs remained constant at 9% of sales, whereas research and development costs decreased 2% points to 6% of sales but were maintained at the 2003 first-half level of CHF 13 million, underscoring Straumann's commitment to scientific innovation.
As a result of the favorable overall development of costs, operating profit grew faster than sales, rising 45% to CHF 67 million. The EBIT margin improved to 31%.
102 new jobs created
To absorb and sustain the current high level of growth, the Group has continued to invest in talent recruitment. In line with the Company's growth ambitions, 102 new positions were created in the first six months of 2004, bringing the total number of employees worldwide to 1,005 at the end of June. Approximately half of the new recruitments were in sales force positions, strengthening the field force by 22% to 247 representatives worldwide to support future growth. Consequently, personnel costs were up 40% from the previous first half to CHF 63 million. In relation to sales, however, personnel costs increased only slightly over proportionally by 1% point to 29%, while sales per employee still rose by CHF 15,000 to CHF 424,000.
Depreciation constant as a proportion of sales
Operating profit before depreciation and amortization (EBITDA) improved considerably by 43% to CHF 81 million, reflecting the aforementioned improvements in operating efficiency. As a result, the EBITDA margin expanded 2% points to 37% by comparison with the previous first half. Operating profit before amortization (EBITA) rose 49% to CHF 72 million, with the EBITA margin improving 4% points to 33%, despite an additional write-down of CHF 3 million on the Waldenburg site as part of the Company's planned relocation to Basel at the end of 2004. Goodwill amortization charged in the first half came to CHF 3 million, most of which was related to the Biora acquisition.
Net profit up 42%
Financial expenses came to just less than CHF 1 million and were offset almost exactly by financial income. The fact that the overall financial result was a negative CHF 2 million was due to unfavorable currency developments.
The first-half tax rate was reduced to 17% owing to a one-time tax effect related to the acquisition and restructuring of Biora. The tax rate would otherwise have been 22%.
Due to the good operating result and the lower tax level, first-half net profit climbed 42% to a record CHF 54 million. As a result, the net profit margin increased 2% points to 25%, while earnings per share rose 42% to CHF 3.49.
High dividend and repayment of loans
First-half cash flow from operating activities rose 14% to CHF 65 million leading to an operating cash flow margin of 30%. Capital expenditure totaled CHF 22 million, corresponding to 10% of sales, and was mainly due to capacity expansion (CHF 15 million) and the new headquarter project in Basel (CHF 7 million).
The first-half free cash flow of CHF 43 million, the inflow of CHF 3 million from the Company's staff equity compensation scheme, and excess liquidity were used to pay dividends of CHF 48 million (including the exceptional 50th anniversary dividend), to repay outstanding short-term loans for the Biora acquisition (CHF 15 million) and to repay the mortgage on the Waldenburg site (CHF 14 million).
With the above total cash outflow from financial activities of CHF 74 million, net liquidity stood at CHF 70 million on June 30, 2004.
Return on capital further improves to 42%
From December 31, 2003 to June 30, 2004, the Straumann Group's total assets decreased slightly to CHF 349 million, while the return on assets (ROA) improved from 27% to 31%. Thanks to enhanced inventory management resulting in a reduction of stocking levels from CHF 35 million to CHF 33 million, net working capital increased only slightly from CHF 31 million to CHF 34 million, but decreased as a proportion of sales from 9% to 8% over the first half of 2004.
Despite the increase in the equity ratio to 75%, return on equity (ROE) improved from 36% to 42%. Based on the weighted average cost of capital of 9%, Straumann further improved its first-half economic profit by CHF 14 million to CHF 43 million.
With the Group's capital employed at CHF 262 million, return on capital employed (ROCE) rose from 41% to 51%.
Outlook (barring unforeseen circumstances)
The growth effect from the Biora acquisition discontinued at the end of June and will not contribute to the second half of the current year. Nevertheless, the Group's first-half sales performance provides a basis for increasing its full-year sales growth expectation from 23-24% to around 26% in local currencies compared with 2003. Linked to this, full-year operating margin is expected to be not less than 30%. With a foreseen tax rate of 22% for the full year, the net profit margin is expected to be in the region of 23%.
Disclaimer
This interim report contains certain "forward-looking statements", which can be identified by the use of terminology such as "scheduled to", "will", "expected to", "forecast", "expectation", or similar wording. Such forward-looking statements reflect the current views of management and are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Group to differ materially from those expressed or implied. These include risks related to the success of and demand for the Group's products, the potential for the Group's products to become obsolete, the Group's ability to defend its intellectual property, the Group's ability to develop and commercialize new products in a timely manner, the dynamic and competitive environment in which the Group operates, the regulatory environment, changes in currency exchange rates, the Group's ability to generate revenues and profitability, and the Group's ability to realize its expansion projects in Andover and Basel in a timely manner. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this report. Straumann is providing the information in this report as of this date and does not undertake any obligation to update any forward-looking statements contained in it as a result of new information, future events or otherwise.
Waldenburg, 12 August 2004
About Straumann
Headquartered in Waldenburg, Switzerland, Straumann is a global leader in oral implantology and tissue regeneration. In collaboration with the International Team for Implantology (ITI), leading clinics, research institutes and universities, the Group researches, develops, produces and distributes implants, instruments and tissue regeneration products for use in tooth replacement solutions or to prevent tooth loss. Straumann also provides training and services to the dental profession worldwide. Straumann's implants and instruments are manufactured in Switzerland, whilst its dental tissue regeneration products are produced in Sweden. With affiliates in 14 countries and distributors in 35, Straumann employs more than 1000 people worldwide. In 2003, the Group generated sales of CHF 344 million and a net income of CHF 80 million.
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