Full year Disclaimer. Richard Laube, CEO Oliver Walker, CFO

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1 Richard Laube, CEO Oliver Walker, CFO Zurich 19 February 2013 Disclaimer This presentation contains forward-looking statements based on beliefs of Nobel Biocare's management. When used in this presentation, words such as "anticipate", "believe", "estimate", "expect", "intend", "plan" and "project" are intended to identify forward-looking statements. They may involve risks and uncertainties, including technological advances in the medical field, product demand and market acceptance, the effect of economic conditions, the impact of competitive products and pricing, foreign currency exchange rates and other risks. These forward-looking statements reflect the views of Nobel Biocare as of the date made with respect to future events and are subject to risks and uncertainties. All of these forward-looking statements are based on estimates and assumptions made by management of the company and are believed to be reasonable, though are inherently uncertain and difficult to predict. Actual results or experience could differ materially from the forward-looking statements. Nobel Biocare disclaims any intention or obligation to update these forward-looking statements. 2 1

2 Oliver Walker Chief Financial Officer in brief Economic and fiscal challenges drive modest decline in implant-based tooth restoration market Continued low- to mid-single digit growth in North America Weak but stable development across most European markets Japan impacted by adverse media; market estimated to decline ~15% BRIC implant markets growing >10% Nobel Biocare becoming a flexible, fitter and performance-oriented organization Revenue development excluding Japan broadly in line with peers Growth in core business Implant Systems (excluding Japan) Tooth-based restorative component and scanner decline continued Becoming systematically more efficient and leaner / reducing resources in administration and shifting to R&D 4 2

3 Financial summary Key figures Change in Change at in EUR million FY 2012 FY 2011 EUR CER Revenue % -2.7% Gross profit Gross margin Operating profit (EBIT) EBIT margin Net profit Profit margin % % % % % % 1.2% -3.6% -4.8% -15.4% 15.3% Basic earnings per share % Net cash from operating activities % Net cash/(debt) Return on average equity 15.2% 14.0% 5 Financial summary Solid performance in a challenging environment Key points Comments Improved revenue performance in Q4 (all regions) Q3: -5.1%, Q4: -3.4% (CER) Japan significantly ifi impacted Group revenue FY excl. Japan: Group -0.3% (CER) Continuing strong emerging markets growth; growth in major country organizations Brazil, Russia, India, China and Taiwan; US, UK, France Positive trend in Implant Systems (excl. Japan) Q1: 0.9%, Q2: 1.3%, Q3: 2.9%, Q4: 2.6% (Sales growth CER) Continuous shift of resources to growth drivers and realization of first efficiencies besides strict cost management Operating profit margin impacted by Japan, royalty reassessment and termination/severance cost Solid cash flow generation and return to net cash position OPEX declined (-1.3% CER) despite increase of R&D spending (16%) as well as termination and severance costs (for the most part in Q4) EBIT of 68.7m (EUR 72.1m in 2011), EBIT margin of 11.8% (12.7% in 2011) Net cash from operating activities of EUR 103.0m (EUR 93.1m in 2011) 6 3

4 Revenue development Currency tailwind lifts revenue above prior year in EUR million +2.0% in EUR % -0.3% excl. Japan excl. Japan 26.7 (6.2) -9.5 excl. Japan (9.2) FY 2011 Implant systems Individualized FY 2012 FX effect 1) FY ) Currency effects mainly driven by US dollar and Japanese yen 7 Product revenue development Positive trend in Implant Systems (excl. Japan) Change Change in EUR million Q CER FY 2012 CER Implant Systems % % Individualized % % NobelActive and NobelReplace CC and PS drive implant revenue Tooth-based restoration components continue to drag Individualized product performance down Alpha-Bio Tec up >20% through h expansion to new markets FY 2012: -9.2% (9M 2012: -8.0%) Total % % % Implant Systems growth excluding Japan : Q Q Q Q FY % 1.3% 2.9% 2.6% 1.9% Implant systems % FY 2012: -1.3% (9M 2012: -1.2%) Individualized 8 4

5 Regional revenue performance Performing broadly in line with market (excl. Japan) in EUR million +2 0% +2.0% in EUR -2.7% excl. Japan (8.6) (10.6) FY ) EMEA Americas APAC FY 2012 FX effect 1) FY 2012 Currency effects mainly driven by US dollar and Japanese yen 9 Regional revenue performance All regions improved in Q4 in EUR million APAC Americas 0 Q FY 2012 Revenue Change % % US with improved performance in Q4 Stable Implant Systems growth in US, maintaining leading market share Canada sluggish after weak start in 2012 Direct markets in Latin America up at double-digit rates Revenue Change Ch Q % FY % EMEA Revenue Change Q % FY % Performance at least on market level in most markets Persistent economic situation, in particular in Southern Europe Continued share gains in declining markets such as Sweden and Italy as well as in Russia and France Japan significantly affected by media coverage APAC excl. Japan up 5.6% in Q4 Southeast Asia and Australia down Continued strong growth in China and India China 3rd largest revenue contributor in region now 10 5

6 Nobel Biocare media campaign in Japan Implant treatment in the aging society Apollonia 21 - Monthly magazine to professionals in dental industry, primarily GPs - Print run and distribution: 13,000 Choosing good implant clinicians Asahi Weekly Mook - Annual implant magazine for patients introducing clinics and providing information about implant treatment - Print run and distribution: 1.5 million 11 Underlying gross margin stable in % of revenue Gross profit FY 2012 EUR Change Change at million in EUR CER (1.1) % -3.6% FY 2011 Business mix Implant Individualized FY 2012 FX effect FY 2012 Systems Negative gross margin development was mainly a result of Japan Reassessment of royalties related to prior years diluted implant systems margin Individualized margin stable despite material decline in tooth based restorative components Slightly positive impact from business mix and currency 12 6

7 Continuing shift of resources to growth drivers in EUR million FY 2012 FY 2011 Change in EUR Change Comments Revenue % -2.7% Strong FX impact Research & development in % of revenue % % +20.7% +16.3% Continuous investments 6% headcount increase Selling & marketing in % of revenue % % +2.9% -1.0% Sales force expansion in growing countries and strict cost management in declining markets and back office Administrative expenses in % of revenue % % -6.2% -8.5% Strict cost management Realization of efficiencies Investments in IT Total operating expenses in % of revenue % % +2.3% -1.3% Decline of 3.6% CER excl. growth in R&D and termination and severance costs 13 Shift of resources and efficiency program starting to create visible impact Peak headcount in Q ( in FTE) Shift of resources toward growth drivers (2012 over 2011 in EUR million) Variance in EUR Variance in CER R&D % S&M % Admin % OPEX % Areas of improvement Reallocating resources to growth drivers Streamlining global structures and processes Automating administrative processes Re-engineering of order-to-cash processes Significant reduction of indirect purchases Manufacturing and supply chain optimization 14 7

8 EBIT margin mainly impacted by lower revenue in % of revenue Operating profit FY pp EUR million Change in EUR Change % -15.4% (2.2) -1.7 pp FY 2011 Business mix Operating Var. in FY 2012 FX effect FY 2012 leverage costs, net of CER efficiencies Operating leverage mainly attributable to Japan generating above-average profit margins Variances in costs also include investments into growth drivers, reassessment of royalty expenses related to prior years, termination and severance costs and efficiencies 15 Net profit significantly up by 15% in EUR million FY 2012 FY 2011 Comments Operating profit (EBIT) EBIT margin % % Financial result Improved net interest result and favorable hedging result Profit before tax Income tax expenses Income tax rate of 24.8% (28.3% in 2011) Net profit Profit margin % % Growth of 15% 16 8

9 Stronger cash flow generation in EUR million FY 2012 FY 2011 Net cash from operating activities in % of revenue % % Net cash used in investing activities Free cash flow Net cash used in financing activities Change in cash and cash equivalents Solid balance sheet with sound financial position in EUR million 31 Dec Dec 2011 Net working capital Net working capital turnover Days sales outstanding (DSO) Capital employed in % of revenue % % Net cash/(debt) 42.7 (36.2) Equity Equity in % of total assets 54.1% 47.5% 18 9

10 Foreign exchange rate impacts remain significant Development of foreign exchange rates most relevant to the Group: Chart with EUR/USD 01/01/ /01/2013 Chart with EUR/JPY - 01/01/ /01/2013 Sensitivites to foreign exchange rate Currency Sensitivity rate Impact on revenue Impact on EBIT USD/EUR +/- EUR 18 million +/- EUR 6 million JPY/EUR +/- EUR 7 million +/- EUR 3.5 million +/-10% SEK/EUR +/- EUR 1 million +/- EUR 6 million CHF/EUR +/- EUR 0.5 million +/- EUR 4 million 19 Dividend proposal to the Annual General Meeting Increased dividend of CHF 0.20 per share Payout ratio: 44% of net profit Payment out of additional paid-in in capital: tax favorable for most shareholders Payment date 8 April

11 Richard Laube Chief Executive Officer 21 Designing for Life Mission: Designing for Life Passionate and proud about making a real and lasting difference by improving patients' lives. Help customers to treat more patients better Performance objective Sustainable and profitable market share growth Strategy with four value drivers / pillars 1. Designing for Life: Innovative products and solutions to last the life of the patient 2. Partnering for Life: Value-added services helping our customers treat more patients better 33. Learning for Life: Training and education programs to improve customers knowledge and skill set 44. Organization effectiveness and efficiency 22 11

12 Delivering on targets Short-term (2012) Mid-term ( ) Execute on strategy Manage new launches for full impact Apply best practice customer initiatives globally Changes moving rapidly into place Maintain determined and systematic execution of strategy Grow core business in line with market - Implants 1 year early Grow strategic product lines ahead of market Pipeline on track Continuously leverage profitability The march has started 23 Rapidly closing the gap to peers 12% * 10% 8% 6% 4% 2% 0% -2% -4% * * -6% -8% -10% * Q1-Q3 average for Straumann and Dentsply Nobel Biocare Straumann Biomet Zimmer Dentsply Source: Company reports 24 12

13 Best team in the industry CEO Richard Laube 1 Global Research, Products and Development Global Finance Growth Drivers 2 3 Hans Geiselhöringer Innovation Global Customer and Sales Development Melker Nilsson Customer Experience Corporate Business Development, T&E, Special Channels Petra Rumpf Training & Education Oliver Walker Global Operations Frank Mengis Global Legal & Compliance Jörg v. Manger-Koenig Global Human Resources Walter Ritter Global Information Technology Dietmar Böhm 4 Organizational Efficiency and Capability Designing for Life: Innovative products and solutions to last the life of the patient Launches and service offering expansion on track: NobelClinician TM NobelActive 3.0 NobelReplace CC and PS >25% increase in subscriptions, 30% now on Mac >10% of NobelActive line and growing, 12% competitive users >12% of NobelReplace line, 28% competitive users on NobelReplace CC OsseoCare TM Pro over 300 units sold in 3 months, more than previous drill motor sold in last 14 months NobelProcera Scan and Design Center beta test on track for expansion in

14 2. 2 Partnering for Life: value-added services to help our customers treat more patients better Create unique partnerships with customers beyond the sales transactions: Help customers treat more patients better Trained core activities among 800+ global field force 85% of field force with mobile devices Conducted > activities, i.e. study clubs, esthetic alliance programs Significantly reduced sales representative turnover to 10% Tracking rep performance and activity it level l uniformly and globally ll ensuring improvement and execution Increased field force in rapidly growing countries and reduced in declining markets Learning for Life: Training and education programs to improve customers knowledge and skill set Europerio Avignon Gothenburg Established new training and education concept and program 6 country symposia: Gothenburg, Avignon, Hamburg, Odessa, Rimini, Toronto >2 500 attendees excellent feedback Nobel is back 5 Corporate Forums at major association events: AO, AAP, AAOMS, EAO, Europerio >600 attendees at Europerio and AO standing room only Nobel is back Created new global course catalog for 2013 Almost 100 of the world s most renown experts Announced Global Symposium in June 2013 in NYC Only a few seats left four months after announcement >100 world renowned speakers in all areas of implant-based tooth restoration 28 14

15 4. 4 Organization effectiveness and efficiency Organization effectiveness and efficiency Significant efforts initiated in the second half of 2012 Significant reduction of administrative expenses of 6% (CER) Significant shifts in headcount towards growth markets US, China, India and Brazil and towards Research and Development Significant cuts in declining markets in Europe Net of 90 positions reallocated from declining to growing markets 29 Tapping new opportunities Nobel Biocare is increasingly well positioned in emerging markets/bric Alpha-Bio Tec showing strong promise >20% revenue growth for two consecutive years Expanding into new markets 2013: Introduction to China 30 15

16 Designing for Life: 2013 product launch preview - most meaningful product launches in many years Implant systems NobelProcera NobelClinician/ NobelGuide NobelReplace PMC New 2nd generation scanner New NobelClinician volume rendering 31 NobelProcera System innovations: Worlds most precise and complete implant-based prosthetics World s best implantbased prosthetics Design & Service Centers Open interface to partners More components on third party implant platforms Beta test expansion 3Shape in Q

17 Analyst and investor breakout meeting at IDS Nobel Biocare is proud to take its place at one of the largest dental gatherings in the world, the 35th International Dental Show in Cologne. The popularity and tradition behind this event makes it a prime opportunity for us to display our latest innovations and launch new ones. Date/time Location Friday, 15 March 2013 Radisson BLU Hotel 09:00-10:00 Room: Concilium II Messe Kreisel Cologne, Germany RSVP by 12 March 2013: Patricia Dal Pont, , patricia.dalpont@nobelbiocare.com 33 Outlook Nobel Biocare believes that the market conditions for 2013 will remain difficult, similar to 2012 In this environment, the Company targets to modestly build market share and deliver modest revenue growth. Based on this and the initiated measures, and barring any unforeseen events, Nobel Biocare expects to deliver an EBIT margin improvement of 50 to 100 bps at constant exchange rates (CER) Nobel Biocare is moving from rebuilding to a phase of continual performance improvements. Within the next 3 to 5 years, assuming markets improve beyond 2013 to modest mid-single digit growth, Nobel Biocare targets growing at least in line with the market and to improve EBIT margin also continually between 50 to 100 bps per annum at constant exchange rates 34 17

18 35 Financial calendar 2012/2013 and contact info Event Date Annual General Meeting 28 March 2013 Interim report 1, April 2013 Interim report 2, August 2013 Interim report 3, November 2013 Full year February 2014 Detailed financial and industry conference calendar on Süha Demokan Head of Investor and Corporate Relations Tel Mobile

19 P&L by quarter EUR million Q1 Q2 Q3 Q4 H1 H2 Revenue CER growth % -0.2% -2.2% -5.1% -3.4% -1.2% -4.2% Reported growth % 2.8% 4.2% 2.2% -1.1% 3.5% 0.4% Gross profit Gross margin 75.4% 75.5% 75.7% 75.0% 75.4% 75.3% Operating expenses as % of revenue 61.3% 60.9% 66.5% 65.6% 61.1% 66.1% EBIT EBIT margin 14.1% 14.5% 9.1% 9.4% 14.3% 9.2% Net financial result Income tax expense Tax rate 27.0% 23.8% 30.6% 19.1% 25.4% 23.9% Net profit Net margin 9.3% 9.4% 5.3% 7.3% 9.4% 6.4% Free cash flow Key ratios EUR million Q4 Full year / / 2011 Revenue % * % * Gross profit % % Gross margin 75.0% 75.8% % 76.0% -60 Operating expenses % % as % of revenue 65.6% 60.9% % 63.3% 20 EBIT % % EBIT margin 9.4% 14.9% % 12.7% -90 Net financial result % % Income tax expense % % Tax rate 19.1% 29.0% % 28.3% -350 Net profit % % Net margin 7.3% 8.6% % 7.0% 90 Free cash flow nm nm *At constant exchange rates (CER) 38 19

20 Reclassifications of the 2011 figures (EUR million) Q Q Q Q Q Q Q Q Revenue by region YTD YTD YTD YTD Europe, Middle East and Africa (EMEA) Reported growth 0.3% -6.2% -5.6% -7.1% 0.3% -3.0% -3.8% -4.7% CER growth -1.2% -6.2% -5.3% -7.0% -1.2% -3.7% -4.2% -4.9% Americas Reported growth 11.4% -6.4% -1.5% 10.0% 11.4% 1.7% 0.7% 3.1% CER growth 8.8% 4.1% 6.5% 9.9% 8.8% 6.2% 6.3% 7.2% Asia/Pacific Reported growth 4.9% -13.3% 0.2% 3.2% 4.9% -5.2% -3.3% -1.6% CER growth -4.8% -12.6% -0.8% -2.1% -4.8% -9.1% -6.2% -5.1% Total Reported growth 5.0% -7.8% -2.7% 0.9% 5.0% -1.8% -2.1% -1.3% CER growth 1.5% -3.9% 0.2% -0.2% 1.5% -1.4% -0.9% -0.7% Q Q Q Q Old New Old New Old New Old New Selling and marketing expenses Administrative expenses Foreign exchange impact 2012 FX impact on P&L (in EURm) Structural FX exposure Revenue % Avg chg vs EUR Revenue COGS OPEX CoGS -6.1 YoY, in % % of Group % of Group % of Group EUR 26% 21% 32% OPEX USD 8% 32% 31% 21% EBIT % JPY 8% 12% 7% 7% SEK 4% 1% 26% 9% FX result 0.2 CHF 2% 1% 6% 10% Others 28% 9% 21% Net FX impact % 100% 100% 100% currency impact % of revenue Revenue driver Cost driver Positive top line impact primarily from US dollar, followed by Japanese yen (average rates) Adverse impact of US dollar, followed by Japanese yen, on expenses 40 20

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