Release Date: July 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Strong order intake growth of 9% in Q2, indicating robust demand.
- Comparable sales growth of 2% across all business segments.
- Adjusted EBITDA margin improved by 100 basis points to 11.1%.
- Solid operational cash flow and productivity improvements.
- Positive outlook for the second half of 2024, with expected order intake growth.
Negative Points
- Free cash flow outflow of EUR64 million due to Respironics economic loss settlement.
- Decline in orders from China due to industry-wide anti-corruption measures.
- Personal Health segment in China down by 10%, with subdued consumer sentiment.
- High effective tax rate for the full year 2024 due to derecognition of deferred tax assets.
- Uncertainty in the macroeconomic environment, impacting overall business performance.
Q & A Highlights
Q: Can you talk about the strength you're seeing in North America and to what extent is it a catch-up on supply issues around MR or indeed share gains in other modalities as well?
A: We have seen improvement in our order book across different businesses in North America, driven by customer strengthening and consolidation trends. This includes monitoring, imaging interventional, and enterprise informatics, which are resonating well with our North American customers. We expect this order intake strength to continue.
Q: On the Personal Health business in China, which looks to be down around 10% in the quarter, what are your expectations here for the second half?
A: The decline in China is an industry-wide phenomenon, and we expect this subdued consumer sentiment to continue in the second half. However, we anticipate stronger growth in other parts of the world, particularly North America and Europe, which will help us meet our full-year guidance.
Q: You had an impressive margin delivery in the first half. Why haven't you raised guidance? Is this a continuation of conservatism, or is there something we should be aware of incrementally driving caution into the second half?
A: We are satisfied with the margin improvements and expect this momentum to continue into the second half. We prefer to remain confident in our full-year delivery and stick to our plan, focusing on innovation and execution.
Q: On some of the recently launched innovations, how do you see your current market share trends across key modalities like CT, IGT, and ultrasound?
A: The recent innovations, such as the AI-enabled cardiovascular ultrasound platform, are expected to positively impact our market share in the coming months. We have seen strong customer resonance and multiple deals across the world, indicating increased momentum based on our innovations.
Q: Can you provide more detail on the profitability for the Enterprise Informatics division as the business scales?
A: The strong order intake in Enterprise Informatics is driving conversion and contributing to profitability. We are on track to achieve our long-term target of EUR1.5 billion in sales and double-digit margins, with the portfolio gaining momentum and translating into improved contribution.
Q: How much of the 2% sales growth this quarter was due to pricing, and how do you see the pricing environment evolving?
A: We saw some pricing benefits in health systems, translating into the P&L. In Personal Health, pushing pricing is not currently beneficial due to subdued consumer sentiment. Overall, the net pricing impact was close to zero, with positive impact in health systems and less so in Personal Health.
Q: What is driving the cautious outlook for Diagnosis & Treatment (D&T) growth in the second half of the year?
A: The comparables for Q3 are tough due to dramatic growth last year, particularly in the mid-teens. We also need to see how China plays out. Therefore, we expect D&T growth to be at the lower end of the 3% to 5% guidance range.
Q: Can you provide an update on the legal front, particularly the DOJ case and European class actions?
A: There are no further updates on the DOJ case, and we continue to collaborate with them. For the European class action, we have limited information and have not been served with a complaint. We will defend ourselves rigorously, but it is too early to determine any implications.
Q: What does the Connected Care portfolio look like post-pruning, and do you expect to be present again on a considerable scale in ventilators and respiratory care?
A: The remaining portfolio is working well, with growth and profitability returning. We have a less broad portfolio but remain relevant with core products in Sleep & Respiratory Care. We continue to be active in both sleep and respiratory segments.
Q: Can you provide more color on the growth in ultrasound and Image-Guided Therapy (IGT) outside of China?
A: Last year, we had over 30% growth in ultrasound in the first half, so we don't expect significant growth this year due to high comparables. For IGT, we are seeing a slow recovery, and while this quarter was good, we don't expect double-digit growth for the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
