2007 Full-year results presentation. Analysts & Media Conference Basel, 7 February 2008

Transcription

1 2007 Full-year results presentation Analysts & Media Conference Basel,

2 Disclaimer This presentation contains certain forward-looking statements, which can be identified by use of terminology such as expect, expectation, intend, continue, achieve, maintain, improve, foresee, anticipate, product introductions, outlook, forecast, or similar wording. Such forward-looking statements reflect the current views of management and are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause actual results, performance or achievements of the Group to differ materially from those expressed or implied herein. Should such risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this presentation. Straumann is providing the information in this presentation 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. 2

3 Agenda 1. Highlights 2. Financials and operational performance 3. Market opportunities 4. Outlook 5. Questions & answers 3

4 Strategic goals across all dimensions fully achieved in 2007 Business portfolio enlarged and addressable market doubled through entry into CAD/CAM prosthetics (etkon) and launch of Bone Level Implant, delivering Straumann quality and reliability to both markets. North America gathered momentum, access to key Asian markets secured and expansion into Eastern Europe underway. New product introduction and operational excellence key for US turnaround; acquisition of Japanese and Korean distributors enhance Asian reach and local competitiveness while European expansion secures the right to play. Ability to sustain clinically proven innovation leadership and product differentiation strengthened by ongoing pre-clinical and clinical trial programs and number of peer-reviewed publications. 4

5 Framework for sustainable growth and competitiveness established Leadership team complete; organizational competencies upgraded throughout; management and talent development enhanced; new jobs created Quality management leadership, processes and capacities upgraded across all sites Business portfolio and sales leadership in place to grow above market and start regaining market share (in particular in North America and Asia/Pacific) 5

6 Financial performance impacted by strategic initiatives and special factors Top line growth lifted by acquisitions (etkon, Japan and Korea) and launch of Bone Level Implant, but negatively impacted by US import detention on Biora products Efficiency improvement programs (e.g. Organizing for Growth to unlock hidden potential) on all levels led to impressive underlying margin expansion. Margin squeezed by acquisition effects and nonrecurring items. Strengthened financial leadership achieved marked increase in all underlying margins, improved tax structure, improved capital returns and capex management on an underlying basis 6

7 Financials and operational performance Marco Gadola, CFO

8 Robust underlying growth lifted by acquired businesses Contribution to FY 2007 net revenue growth in % Organic growth 2 by quarter in % (l.c.) + 6.4% 17.1% + 2.0% 19.1% 12.6% -1.9% 10.7% Growth excluding WL 1 Biora impact 1 Organic growth Acquisition effect Growth in l.c. Currency effect Growth in CHF Q1 Q2 Q3 Q4 Organic growth Organic growth excl. Biora 1 Excluding impact of import detention on Biora in the US (warning letter) 2 Organic growth excludes the impact of changes in FX rates and includes the additional net revenue growth of an acquired business upon consolidation 8

9 Turn-around continues in North America FY 2007 Net revenue growth in % by region Group: 17% (l.c.), 19% (CHF) 42% 61% FY 2007 Net revenue by region (Total: CHF 714m) 16% 21% 16% 11% 3% Europe CHF 459m 22% 64% North America CHF 154m 7% 3% Asia/Pacific CHF 81m Europe North America 1 Asia/Pacific RoW RoW CHF 20m l.c. CHF l.c. excl. Biora impact 1 No Biora (regenerative) sales in US since early 2007; non-regenerative business grew doubledigit in all quarters. Local currency growth in 2006: 12% 9

10 North America gaining momentum Encouraging underlying North American development; dynamic fourth quarter SLActive penetration further increased Significant progress in organizational alignment; fluctuation rate substantially reduced; upgraded education, sharpened sales approach US import detention on Biora imposed throughout 2007 (in CHF million) Q4 07 Q4 06 CHF % FY 07 FY 06 CHF % Net revenue % % Growth in % l.c. Growth in % l.c. excl. Biora effect +11% +8% +18% +16% +7% +12% 10

11 Europe leadership further underpinned etkon business grows above 50%, dedicated sales force built up in major European countries Robust fourth quarter on top of high base line; UK and Iberia dynamic throughout France restructured to invigorate growth; treatment postponements in Sweden (reimbursement) and Italy (new tax regulations) (in CHF million) Q4 07 Q4 06 CHF % FY 07 FY 06 CHF % Net revenue % % Growth in % l.c. +15% +24% +16% +19% 11

12 APAC/RoW growth fuelled by acquisitions Direct access to Asia s two largest markets through control of Japanese and Korean distributors Subsidiaries and leadership team established; integration activities on track; SAP platform implemented in Japan; significant restructuring measures ongoing Strong growth in Australia and New Zealand (in CHF million) Q4 07 Q4 06 CHF % FY 07 FY 06 CHF % Net revenue % % Growth in % CHF +61% +1% +43% +12% 12

13 All underlying margins expanded CHF million Net revenue growth in % CHF growth in % l.c. Gross profit 1 Gross margin in % EBITDA EBITDA margin in % FY 2006* FY 2007 Reported Underlying bps % bps EBIT % EBIT margin in % bps Net profit % Net profit margin in % Free Cash Flow Free Cash Flow margin in % After reclassification of expenses from COGS to OPEX: 80,6%; Reported gross profit margin 2006: 80.1% 2 Throughout this presentation the term underlying means that the effects of all acquired businesses and 13 the impact of the FDA import detention on Biora products in the US are excluded

14 Underlying gross profit margin improves ~2% despite more complex implant production In % of net revenue 0.5% 1.5% 0.3% - 0.8% COGS: CHF 119.5m COGS: CHF 131.4m 80.1% 80.6% 82.4% 81.6% Reported Gross Profit % Cost reclassification in H1 Restated Gross Profit % 2006 Productivity improvement FX effect Underlying Gross Profit % Aquisition effect (mainly etkon) Reported Gross Profit % Process and quality engineering expenses reclassified from COGS to OPEX 14

15 Manufacturing capability and productivity enhanced New high-speed implant manufacturing cell in Villeret fully operational Andover manufactured over 1.5 million components in 2007 Capacity requirements for 2008 fully covered including SLActive Productivity enhanced underlying gross margin improved by 180 basis points 15

16 Quality function strengthened Quality system strengthened FDA re-inspection required before Biora products can be imported into the US again Mock audits performed by independent consultants FDA will schedule re-inspection of Biora date to be confirmed 16

17 Operating expenses 1 rise due to amortization and start-up costs of acquired businesses In CHF million % of net revenue 51.4% of net revenue +10.4% 50.1% of net revenue 53.4% of net revenue Reported OPEX 2006 Reclassification 2 in H1 Restated OPEX 2006 Operating expenses underlying business Underlying OPEX 2006 OPEX effect of aquired businesses and WL effect Amortization acquired 3 intangibles Reported OPEX Including other income 2 Process and quality engineering expenses reclassified from COGS to OPEX 3 Actual acquired intangible assets approx. CHF 123m 17

18 Underlying EBIT margin improves by 300 basis points In % of net revenue 1.8% 1.2% - 0.8% - 1.0% - 2.3% EBIT margin 32.3% 32.3% 29.3% 28.2% Reported EBIT margin 2006 Gross Profit improvement of underlying business OPEX reduction (underlying business) Underlying EBIT margin 2007 Gross profit effect of aquired businesses Amortization acquired intangibles 1 Other operating expenses (acquisition effect) Reported EBIT margin Actual acquired intangible assets approx. CHF 123m; amortization charge of acquired businesses in 2007: CHF 6.8m 18

19 Ongoing tax rate reduced to around 17% In % of profit before taxes 2.2% % 3.0% % 18.4% 20.6% 16.5% 19.5% 8.9% Reported Tax Rate 2006 One-time benefits Ongoing tax rate 2006 Tax rate reduction Ongoing tax rate 2007 One-time income tax charge (Germany) Current income tax One-time benefits (Deferred tax position) * Reported Tax Rate 2007 * Revaluation of deferred tax liabilities 19

20 Net profit climbs overproportionately due to operational and tax rate improvements In CHF million Net profit +25% Net profit margin 23.7% + CHF 28.7m + CHF 6.7m Interest income Interest expense Exchange losses Financial result (net) Net profit margin 24.8% Net profit FY 2006 Gross profit Selling and administrative costs R&D costs Other income Financial result Taxes Net profit FY

21 Free cash flow 1 margin expands by 370 basis points In CHF million Free cash flow +39% Free cash flow margin 22.4% Free cash flow margin 26.1% Free Cash Flow 2006 Operating cash before changes in NWC Change in NWC Change in 2 Capex Free Cash Flow Net cash from operating activities less capital expenditures plus proceeds from sale of PPE and financial assets in % of net revenue 2 Includes the net proceeds from the sale PPE and financial assets 21

22 Market opportunities Gilbert Achermann, CEO

23 Huge potential for Straumann to explore Dental implant market 100% = CHF 3.3bn CAD/CAM prosthetics market 100% = CHF 1.1bn Dental regeneration market 100% = CHF 0.3bn Straumann s share: >45% Straumann s share: <5% 26% 60% 60% 40% 40% 60% 65% 65% 9% Tissue level Bone level Straumann very strong in tissue-level segment. New bone-level implant to unlock large market potential Centralized milling Laboratory milling With etkon, Straumann has gained a foot-hold in the CAD/CAM prosthetics market Straumann s share: <5% Straumann s share: >45% Membranes Perio. tissue regeneration Bone graft materials Straumann has built a leading position in periodontal tissue regeneration Source: Millennium, Straumann estimates 23

24 Portfolio expansion CAD/CAM prosthetics CAD/CAM prosthetics growing dynamically >95% of etkon acquired; remainder expected 2008 etkon revenues grew >50%, with impressive scanner sales Distribution, support and specialist sales teams established in several 24

25 All customer segments covered Surgical Regeneratives Prosthetics etkon Specialists* GPs and others** Dental labs Network Increases access to segments Increases share of wallet Protects franchise * Surgically active dental professionals irrespective of specialty ** Restoratively/prosthetically active dental professionals irrespective of specialty 25

26 Portfolio expansion new generation Bone Level Implant Doubles Straumann s addressable implant market Launched at end of October in Europe, North America, Australia, New Zealand In-depth clinical program Exceptional treatment flexibility and options All indications and preferences covered Differentiated through innovative features and excellent bone maintenance 26

27 All significant product needs covered Implants Bone level Tissue level 3rd generation surface Immediate placement Immediate loading Guided surgery Low cost ( ) x Regeneratives BoneCeramic Membrane Periodontal treatment BMPs ( ) (x) Prosthetics CAD/CAM Crown and bridges Ceramics Custom abutments 16-unit bridges Veneers and porcelains x Scanners Software Centralized milling Chairside milling x 27

28 Making our global business local Distribution taken over in: Japan Korea Czech Republic New Zealand Hungary Slovakia Number of sales subsidiaries rose to 21 in

29 Market position underpinned Regions Market position Market share Europe # 1 North America # 2 Asia/Pacific # 2 29

30 Sustain North America Maintain impetus of Bone Level Implant launch and roll-out of SLActive Aggressively build etkon franchise to capture market share in CAD/CAM prosthetics Work towards re-launching regenerative products in the US Maintain execution discipline achieved over the past year 30

31 Invigorate Asia Focus on operational excellence in new subsidiaries Accelerate growth to stop share erosion in all business and customer franchises Prepare for significant new product introductions 2009 Establish regional hub in H

32 Fuel Europe Bolster position in existing business in each franchise in each European country Drive growth with etkon and new products, Bone Level Implant, SLActive Invest further in European sales team, marketing and education Expand into developing markets 32

33 Sales & Marketing upgraded Experienced Sales and Marketing professionals brought in from consumer care sector Sales teams reorganized with specialized teams addressing different customer needs Increasing performance-related compensation E-commerce platform broadened considerably Education activities broadened (40% increase in participation in US) 33

34 Outlook

35 Our ambitions for the coming years Become a true solution provider in implant, restorative and regenerative dentistry Differentiate Straumann through meaningful innovation and added value Defend tissue-level segment, gain share of bone-level segment, drive CAD/CAM-franchise, and develop regenerative portfolio Maintain lead in Europe, extend momentum in N. America, accelerate in Asia, expand in Eastern Europe and explore opportunities in BRIC countries Deliver above-market growth with increasing underlying profitability in a sustainable manner 35

36 2008 guidance (barring unforeseen circumstances) The strength of our underlying business and the growing contributions from new products, technologies and subsidiaries are expected to drive our net revenue growth in 2008 to the mid-twenties range in local currencies. As efficiency improvements are expected to exceed the higher levels of amortization related to acquisitions, we foresee an improvement of around 50 basis points in full-year operating margin. With the tax rate returning to normal, the net profit margin is expected to be around 23%. 36

37 Second-half results provide basis for outlook CHF million H H FY 2007 Net revenue growth in % CHF 15.2 COGS (62.9) in % of net revenue 17.9 Expenses (181.0) (68.5) (131.4) (199.8) (380.8) in % of net revenue EBIT in % of net revenue Net profit 94.9 in % of net revenue

38 2008 full-year net revenue guidance + mid twenties (%) Underlying business etkon roll-out Bone Level franchise Acquired distribution channels 1 Biora relaunch in US Reported FY 2007 Expected FY Japan, Korea, Czech Republic, Slovakia 38

39 2008 operating profit margin guidance approx. +50 basis points Efficiency gains in underlying business Amortization of acquired intangibles Build-up of etkon structure Restructuring costs of acquired businesses 1 Dilutive effect of Bone Level franchise Reported FY 2007 Expected FY Acquisition effects include etkon (March 07), Japan (July 07), Korea (August 07), Czech Republic, Slovakia (January 08). 39

40 2007 Annual Report pre-print version available Comprehensive value reporting Independent expert opinions, executive interviews, corporate governance section, outlooks, etc. Follows GRI guidelines for sustainability reporting 40

41 Questions & answers

42 Important dates February 2008 European Road Show February 2008 US Road Show 28 March 2008 Annual General Meeting 28 April 2008 First-quarter revenues August 2008 First-half results October 2008 Third-quarter and nine-month revenues 2008 Detailed calendar on 42

43 Your contacts Media Relations Mark Hill Phone +41 (0) Mobile +41 (0) Investors Relations Fabian Hildbrand Phone +41 (0) Mobile +41 (0)