Coloplast As Sp/Adr

Thank you, operator, and welcome to our Q1 23-24 conference call. I'm Christian Billinson, the CEO of Coloplast, and I'm joined by our CFO, Anas Laninskoglu, and our investor relations team. We'll start like we usually do with a short presentation by Anders and myself, and then we'll open up for questions. Could I ask you all to please turn to slide number three? We delivered 8% organic growth and a reported EBIT margin before special items of 28%. Return on invested capital after tax and before special items was 15%, a level which reflects the full impact from the Kerasys acquisition and which we expect to be the trough. I'm satisfied with the solid start of the year. We continue to outgrow the market and help a lot more people with intimate healthcare needs. Let me start the call today with a few highlights. We had a strong start in our chronic care businesses with both AustinCare and ContinenceCare delivering 8% organic growth. In continence care, we're starting to see positive impact from Luja, our new male intermittent catheter with a micro-hole zone technology. The product is now available in 10 markets, with most recent launches over the last few months in the UK, the US, and Germany. The reception of the product across markets has been fantastic. Based on a recent survey, we know that 95% of healthcare professionals would recommend Luja to their patients, while 86% of users New decatheterizations have reported that they do not worry about urine left in the bladder when using Lugia. These are very strong numbers. Our newest member of the family, Carasys, is also off to a good start with 4% contribution to reported revenue growth in Q1, in line with expectations. The underlying business growth was around 35%, reflecting continued market share gains in the U.S. And last but not least, We've now officially kicked off what I'll call the year of launches with the launches of biotane silicone fit in wound care and paracetamol light in bowel care. Biotane silicone fit is a new silicone foam dressing for pressure injury prevention and wound management launched in January 2024 in the U.S. This is a strategic product launch that strengthens our advanced dressings portfolio with a U.S.-specific offering. And to reach the full potential of the launch, we have also now invested in a dedicated U.S. wound care organization. As such, with the launch of biotin silicone fit and the expansion of our U.S. wound care sales force, we're well positioned to build a meaningful presence in the world's largest advanced wound care market. Peristeen Light is a new low-volume trans-anal irrigation device in bowel care, which is designed for ease of use. Bowel care is a sub-segment of our continence care business, and today it's an area where many patients remain untreated. With the launch of Peristein Light, we aim to expand the addressable market and help more people with bowel dysfunction by making trans-anal irrigation an option for more patients. The product will be launched in markets across Europe over the next 12 months, and it's expected to support continued good growth in our bowel care business. Now, let's take a look at today's results in a bit more detail. Please turn to slide number four. In Austin, McKay, organic growth was 8 percent for the first quarter, and growth in Danish Corner was 5 percent. Our Censura MU portfolio was the main growth contributor, followed by the Bravo range of supporting products. Our Censura and Asura alternative portfolios continue to contribute to growth in emerging markets. From a geographical perspective, growth in the quarter was driven by a broad-based contribution across emerging markets, as well as Europe, mainly driven by the U.K. The Austin care business in China posted mid-single-digit growth in Q1 in line with expectations. Growth was driven by a strong quarter in the hospital channel and a double-digit increase in inflow of new patients, while the consumer channel remained impacted by lower average value per patient and a bit of consumer sentiment. Incontinence care organic growth was 8% for the first quarter, with growth in Danish corner of 4%. Growth in the quarter was driven by solid momentum in intermittent catheters across the speedy cath portfolio with good contribution from both compact standard and flexible catheters. LUJA, our new male intermittent catheter, also contributed to growth in Q1. Our two smaller segments in continence care, bowel care, and collecting devices both also contributed to growth. From a geographical perspective, all regions contributed to sales growth in Q1 led by Europe, driven primarily by Germany and France. Markets where reimbursement has been recently established or improved, such as Poland, Australia, Japan, and South Korea, all continued to perform well and all grew double-digit. Boys in respiratory care posted 7% organic growth for the first quarter, with growth in Danish corona of 6%. Both laryngectomy and tracheostomy posted high single-digit growth in Q1. Growth in the quarter includes negative impact from rationalization of non-core, low-margin products. Growth in laryngectomy was driven by an increase in the number of patients served in existing and new markets, as well as an increase in patient value driven by the ProvoxLife portfolio. Growth in tracheostomy was driven by continued solid demand and positive impact from forward integration in both European markets and the US. From a geographical perspective, all regions contributed to growth led by Europe. In January, we achieved a significant milestone in China, where we made the first commercial sale of our voice prosthesis, enabling a laryngectomized patient to regain their voice. China is a good example of how ATOS Medical can benefit from Cold Blast Global Footprint to the benefit of the many laryngectomized patients who, until now, did not have access to treatment. The ATOS Medical team is now able to utilize our well-established best-in-class infrastructure and business support functions, enabling then to focus on building the standard of care and commercializing the portfolio to reach many more patients. Finally, I'm also happy to say that in addition to the continued good performance in voice and respiratory care, we also continue to make good progress on the integration of Etos Medical into the cold blast infrastructure across key markets, allowing us to reap the anticipated synergies in 23-24. Organic growth in advanced wound care for the first quarter was 9%, and growth in Danish Krona was 40%, which includes impact from the Kerasys acquisition. Advanced wound dressings business grew 9% in the first quarter, which includes benefit from a lower baseline last year. Growth in the quarter was broad-based with solid contributions from Europe, especially Germany, the U.S., and emerging markets led by China. The biotin silicone portfolio continued to be the main growth contributor in the quarter. Kerasis' revenue amounted to $229 million, Danish Kona in Q1, with underlying revenue growth of around 35%. The hospital channel and surgical wounds were the main growth contributors, and Kerasis' operating profit margin excluding PPA amortization was around 10% in Q1. In interventional urology, organic growth was 5% for the first quarter, up against the high baseline last year. Growth in Danish Kona was 2%. A men's health business in the U.S. was the main growth contributor in the quarter followed by the endourology portfolio, including solid contribution from our first laser equipment, the thulium fiber laser drive. With geographical perspective, the U.S. was the main growth contributor in Q1. And with this, I'll now hand over to Anders, who will take you through the financials and outlook in more detail. Please turn to slide number five.

Thank you, Christian, and hello, everyone. Reported revenue for the first quarter increased by 501 million Danish kroner, or around 8%, compared to last year. Organic growth contributed 459 million Danish kroner, or around 8% to reported revenue. Acquired revenue contributed 229 million Danish kroner to reported revenue for the first quarter, or around 4%, reflecting three-month impact from the kerosene acquisitions. Point exchange rates had a negative impact of 187 million Danish kroner on reported revenue, mainly due to the depreciation of the U.S. dollar and the Argentinian peso against the Danish kroner. Please turn to slide six. Gross profit for the first quarter amounted to 4.5 billion Danish kroner, corresponding to a gross margin of 68% on par with last year. The gross margin was positively impacted by the inclusion of kerosene, which contributed around 100 basis points. In addition, lower freight rates, price increases, and baseline benefits of around 40 basis points from the Italian payback reform also had a positive impact on the gross margin. The positive development in the above-mentioned factors was partly offset by raw material price increases, double-digit wage inflation in Hungary, and ramp-up costs at our manufacturing site in Costa Rica. The gross margin also included negative impact from currencies of around 100 basis points. Operating expenses for the first quarter amounted to 2.7 billion Danish kroner. The like-for-like increase in operating expenses, excluding inorganic impact from chaos, was around 88 million Danish kroner, or 4%, compared to last year. Chaos contributed with 222 million Danish kroner to operating expenses, of which 26 million Danish kroner in PPA amortization included under distribution costs. The distribution to sales ratio for the first quarter was 32% compared to 31% last year and includes impact from the Kerasys acquisition and an increased level of commercial activities. The admin to sales ratio in the first quarter was 5% on par with last year and was primarily impacted by the inclusion of Kerasys. The R&D to sales ratio for the first quarter was 4% of sales on par with last year. Overall, this resulted in an increase in operating profit before special items of 3% for the first quarter, corresponding to an EBIT margin before special items of 28% compared to 29% last year. The EBIT margin for the first quarter contained around 100 basis points negative impact from the inclusion of chaos in line with our expectations. Currencies had a negative impact of around 120 basis points on the reported EBIT margin, mostly related to the depreciation of the U.S. dollar and the Argentinian peso against the Danish kroner, as well as appreciation of the Hungarian for rent against the Danish kroner. Financial items in the first quarter were a net expense of 253 million Danish kroner compared to a net expense of 334 million Danish kroner last year, driven mostly by interest expenses related to the financing of the HHS medical acquisition, as well as losses on balance sheet items denominated mostly in U.S. dollar and Argentinian peso. The tax expense in the first quarter was 342 million Danish kroner, with a tax rate of 22%, compared to a tax rate of 21% last year. The tax rate continued to include positive impact from the transfer of Atos Medical Intellectual Property to Denmark. As a result, the net profit before special items for the first quarter increased by 8%, compared to last year. Diluted earnings per share before special items increased by 2%, to 5.45 Danish kroner and include impact from the equity raise in August 23. Please turn to slide 7. Operating cash flow for the first quarter amounted to 1.8 billion Danish kroner compared to 487 million Danish kroner last year. The positive cash flow development was mainly driven by phasing of income tax paid, which benefited from the HS Medical IP transfer. As communicated in November, following the IP transfer, there will be an extraordinary net tax payment of 2.5 billion Danish kroner for full year 2023-2024, mostly impacting our second quarter. Changes in working capital also had a positive impact on the cash flow, mostly driven by a stabilization trend in inventories as well as trade and other payables. Cash flow from investing activities was a net outflow of 267 million Danish kroner at a similar level to last year. The capex to sales ratio was around 4%, compared to around 5% in the first quarter last year. As a result, the free cash flow for the first quarter was an inflow of 1.5 billion Danish kroner, compared to an inflow of 212 million Danish kroner last year. The trailing 12-month cash conversion for the first quarter was 87%. Networking capital amounted to around 26 percent of sales at the end of Q1, on par with last year. We continue to expect the net working capital to be around 25 percent in 2023-24, and return to our long-term expectations of around 24 percent at the end of the strategic period. Now let's take a look at the guidance for 2023-24 financial year. Please turn to slide number eight. The financial guidance on organic growth and EBIT margin for 2023-2024 are unchanged, and the assumptions laid out in November still hold. We continue to expect organic revenue growth of around 8%, which assumes continued good momentum during the year, with growth across businesses and geographies in line with our Strive25 ambitions, with the exception of China. We now expect reported revenue growth in Danish kroner to be around 11% from previously around 12% impacted by currencies. Currencies is still expected to contribute around 4 percentage points to the reported revenue growth. We continue to expect a reported EBIT margin before special items of 27% to 28%, which assumes a gross margin of around 68%. Food management of our operating expenses negative impact from currencies of around 100 basis points, including around 100 million Danish kroner in amortization charges, and finally, negative impact from currencies of around 50 basis points. For 2023-2024, I still expect around 50 million Danish kroner in special items related to the ongoing integration of Atos Medical. The net financial expenses for 2023-2024 are now expected at around minus 750 million Danish kroner impacted mostly by losses on balance sheet items due to the devaluation of the Argentinian peso. Our effective tax rate is still expected to be around 22%, positively impacted by the transfer of the ETH's medical intellectual property. And CAPEX guidance for 2023-2024 is unchanged at around 1.4 billion Danish kroner and includes investments in establishing our new manufacturing site in Portugal. With this, I will hand over to Christian for final remarks. Please turn to slide nine.

Thank you very much, Anders. So, we delivered a solid start of the year and once again showed the strength of our business model in chronic care significantly outgrowing the market. We continued with the launch of our new male intermittent catheter, LuJeb, which we expect will set a new standard of care in intermittent catheterization. And we kicked off a year of product launches. with the launch of biotin silicone fit and peristein light, and I look forward to continue expanding our product offering with new innovation in the coming quarters. This was also the first full quarter with Kerasys, where we continued to see strong growth and continued adoption of the Fiskin technology in the U.S. At the same time, the inflationary pressure we've been experiencing over the last several quarters continues to come down. Most recently, we've seen a positive development in the inflation levels in Hungary, now down to a single-digit level, as well as a positive trend in the electricity prices in Hungary. In summary, I feel confident about our long-term growth prospects of 8% to 10% and returning to an EBIT margin of 30% by the end of the strategic period, excluding Kerasis, and also confident about an EBIT margin of more than 30% long-term. Finally, Before we move to Q&A, I'd like to mention that we will host a Meet the Management event in Denmark on June 6th this year. At the event, you'll have a chance to meet the broader management team and we'll give an update on the business and main strategic themes. We'll also host a dedicated session on Kerasys, which will be represented by its founder, Fertram Sigur Jonsson, and his team. We look forward to meeting many of you in person in June and And with that, thank you very much. Operator, we're now ready to take questions.