Coloplast As Sp/Adr

Ladies and gentlemen, welcome to the Coloplast Interim Financial Statement for 9 months 2025-26 conference call. And I'm Moritz, the conference call operator. I would like to remind you that all participants will be in a listen-only mode and the conference is being recorded. The presentation will be followed by a question and answer session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's our pleasure to hand over to Gavin Wood, Income President and CEO. Please go ahead, sir.

Good morning, everyone, and welcome to Coloplast Q3 2025-26 conference call. I'm Gavin Wood, President and CEO of Coloplast. I'm joined today by our CFO Anders and our investor relations team, Anders and I will take you through the quarter and then we'll open up the call for questions. Please turn to slide number three. Over my first hundred days at Coloplast, I've spent a great deal of time with our businesses, customers, users, and colleagues. When we last met, I spoke about what attracted me to Coloplast, its purpose, its people, and its ambition. What I've seen since joining has reinforced that initial view. Coloplast is fundamentally a strong company. We operate in attractive markets, hold leadership positions across our businesses, and continue to generate sustainable growth, profitability, and cash flow. The Impact4 strategy provides a strong foundation. As we progress through the rest of the year, I will continue to evaluate our priorities and the choices that will be critical to driving growth and long-term value creation. Today, I want to highlight a few. Starting with the core of Coloplast, chronic care. We have to sustain and extend our leadership in chronic care. Chronic care is the foundation of Coloplast. It represents more than 75% of group sales and is our main engine of growth, profitability, and cash generation. We have a number one positions in attractive categories Deep customer relationships and an annuity-based business model that provides a stable and predictable revenue stream. Combined this creates a unique opportunity and a powerful competitive moat. One of the things that has stood out to me is the quality and clinical differentiation of our products. Sensura Mio combines body fit technology with a secure fit designed to prevent leakage and protect the skin. The Lugia range intermittent catheters has been proven to enable complete bladder emptying in one free flow without the need for repositioning the catheter. I believe we have an outstanding product portfolio, which gives us a strong starting point as we prepare for the next innovation cycle. We also have a strong capability in opening and developing markets. This has been an important source of growth throughout the company's history and there is still considerable potential ahead. In continence care, for example, we see strong double-digit growth rates in markets with recent reimbursement openings. Looking ahead, our objective is to extend that leadership. We will increase our investment in innovation, shorten time to market for new products, and strengthen commercial execution. We have a solid pipeline today But we have to look also beyond the immediate launch cycle and develop products that will shape our categories over the longer term. We are well positioned to deliver on these priorities. The second priority I want to touch on is our US opportunity. We have to capture a larger share of the largest healthcare market globally. It represents our biggest value creation opportunity and only accounts for around a quarter of group sales today. We are seeing strong momentum with high single-digit to double-digit growth across chronic care and interventional urology. At the same time, our position remains below its full potential when we look at current positions. In U.S. ostomy care, we're number three, with a market share of around 15 to 20%. In continence care, we're number one, but our share is around 30%. In both categories, our US position is still well below our global average. We also see considerable potential in men's health, the fastest growing part of interventional urology. Here we hold the number two position and have a strong platform from which to grow. The US, in our opinion, should therefore play a much larger role in our strategic and investment choices going forward. We will be more deliberate about where we invest, and more focused on our execution with a clear ambition of accelerating growth and strengthening our market positions. Moving on to wound and tissue repair. We continue to see attractive long-term opportunities in biologics. The recent market reset in the US has been challenging but has also given us a much clearer view of where we can win. The right customer segments, specialties and care settings. We increasingly see biologics moving toward the inpatient setting. Kerasys is very well positioned there, supported by strong clinical evidence, favorable healing outcomes, and clear product differentiation. It is also where the majority of Kerasys sales are already generated. We will continue to concentrate our resources on priority accounts and specialties and continue to deepen our presence in inpatient care. At the same time, we will restore profitable growth. That means increasing field productivity, sharpening commercial execution, and continuing to build on our clinical capabilities. As announced yesterday, Fertram will step down from his position as Executive Vice President of Wound and Tissue Repair and transition into a new role in Coloplast as Chief Innovation and Technology Advisor to the CEO. The wound and tissue repair business will report into me on an interim basis while we sharpen the organization and priorities to support the next chapter of this business. I want to thank Firtrim for his exceptional contribution to Coloplast over the past three years and I'm very pleased that Coloplast will continue to benefit from his experience and innovation mindset. I have now given you an idea of where we will focus and what we believe in We will need to also continue to fund our growth journey, and continuous productivity improvement and disciplined capital allocation has to be a central part of it. Coloplast has a strong record of operational discipline, productivity, and cost management. These capabilities underpin our industry-leading profitability and remain an important competitive strength. Going forward, we need to apply the same discipline to how we allocate resources and capital. We will direct investment towards opportunities with the greatest potential for sustainable growth, value creation and operating leverage, supported by clear accountability and rigorous investment governance, enabling us to make smarter investments. I want to conclude this topic With what you've heard me speak about before, the importance of people and culture, I'm deeply impressed by the people I've met across Cooloplast. There's a strong sense of purpose and a deep commitment to users and customers across the organization. We will build on this foundation by strengthening accountability, giving teams greater clarity and room to act, and aligning our performance expectations to our ambitions and priorities. We will focus on developing the capabilities for the future and ensure that our strongest people are working on the priorities that matter most. A stronger talent pipeline and clear succession plans will be essential. And an important first step is the appointment of our new Chief People Officer. I'm very pleased to welcome Amanda Rajkumar to Coloplast and to the executive leadership team. With three decades of global HR experience, Amanda brings deep expertise in leadership dynamics, employee culture, succession planning, remuneration, and talent development. So this was a recap of my first 100 days and my perspective on the priorities and choices that will be central to driving long-term value creation. At our full year results, we expect to provide a broader update on what they will mean for our strategic priorities, value drivers, and execution within the IMPACT IV framework. Let me now turn to our performance in the third quarter. Please turn to slide number four. I am pleased to share that we delivered a third quarter with 6% organic revenue growth and 5% EBIT growth in constant currencies before special items. Return on invested capital after tax and before special items was 15%, in line with last year's adjusted level. Performance in chronic care and interventional urology was also strong, while biologics continued to be affected by the recent reimbursement changes. Net profit and free cash flow also developed strongly. Let me take you through the performance by business area. Please turn to slide number five. In ostomy care, organic growth was 5% for the first nine months, and growth in Danish kroner was 2%. In Q3, organic growth was 5%, with growth in Danish kroner of 4%. Across Europe, US, and emerging markets, excluding China, ostomy continued A strong performance and grew 7%. Growth in the US was a strong double digit, continuing the momentum in the first half and benefiting from recent product launches. In China, the implementation of our new channel strategy resulted in a significant inventory reduction in the third quarter. This temporarily affected growth but is expected to improve channel economics over time. From a product perspective, Sensura Mio remained the main contributor to growth led by the convict segment. Our latest launches with Sensura Mio continued to good performance with further variants expected to launch next year. In continence care, organic growth was 7% for the first nine months and growth in Danish Kroner was 5%. In Q3, organic growth was 8% and growth in Danish Kroner was also 8%. Growth was led by the U.S. and Europe. The U.S. delivered strong double-digit growth supported by Luja and a positive phasing effect between third and fourth quarters. Luja was the main product contributor. Valcare also performed well delivering strong double-digit growth in the quarter. Since launch, Lucia Male has been a key contributor to sustained high single-digit growth in the male catheter business, and Lucia Female has lifted growth in the female catheter business to high single-digit today. These are both very encouraging early indicators and demonstrate the value of meaningful innovation. Voice and Respiratory Care delivered 7% organic growth for the first nine months, with growth in Danish Kroner of 5%. In Q4, organic growth was 6% and growth in Danish Kroner was 5%. Laryngectomy delivered high single-digit growth in the corner, while tracheostomy was softer due to order phasing in the distributor markets with the affected orders expected to move into fourth quarter. In wound and tissue repair, organic growth was 2% for the first nine months and growth in Danish Kroner was minus 4%. with two percentage points negative impact from the skincare divestment in December 2024. In Q3, organic growth was 3% and the growth in Danish Kroner was also 3%. Advanced wound dressings returned to growth, increasing 4% in the third quarter. The improved momentum was driven by strong momentum in the U.S., phasing in Germany and Middle East, China remained a headwind due to the product return initiated in the third quarter of last year. Biologics declined 6% in the quarter, but in line with our expectations. The decline reflects the continued impact from the reimbursement reform in the outpatient setting. In the inpatient setting, momentum remains healthy with double digit growth year to date. In interventional urology, organic growth was 8% for the first nine months, and growth in Danish Kroner was 4%. In Q3, organic growth was 7% and reported growth in Danish Kroner was 8%. Growth in the quarter was led by Men's Health in the US, particularly Titan, our flagship inflatable penile implant. Titan has delivered double-digit growth for several quarters in a market growing at the mid-single-digit rate. Our next generation penile implant, Titan Prime, has received FDA approval in the US and we expect to launch the product in the next couple of months. We are also seeing strong performance ahead of expectations in Euromedica, the company Coloplast acquired back in February. And finally, given the recently anticipated FDA review timing for Intibia, we now expect the launch of the product in the US at the beginning of 2728. With that, I will hand over to Anders, who will take you through our nine-month financial performance. Please turn to slide six.

Thank you, Gavin, and good morning, everyone. Reported revenue for the first nine months increased by 568 million Danish kroner, or around 3%, compared to last year. Organic growth contributed 1.2 billion Danish kroner, or around 6%, to reported revenue. Foreign exchange rates had a negative impact of 595 million Danish kroner or around 3 percentage points on reported revenue, mainly related to the depreciation of the US dollar, the British pound and the basket of emerging markets currencies against the Danish kroner. Please turn to slide 7. Gross profit for the first 9 months amounted to 14.4 billion Danish kroner corresponding to a gross margin of 67%. The gross margin was negatively impacted by currencies of around 90 basis points, mostly related to the depreciation of the US dollar, the British pound, and a basket of emerging markets currencies against the Danish kroner, and an appreciation of the Hungarian for rent against the Danish kroner. Ramp-up costs in Costa Rica and Portugal also impacted the gross margin negatively. The negative impact was partly offset by lower inflation on freight compared to last year. We are still not seeing any material impact on the gross margin from the conflict in the Middle East in Q3. Operating expenses for the first nine months amounted to 8.8 billion Danish kroner, a 3% increase from last year. The distribution to sales ratio for the first nine months was 33% on par with last year. Distribution costs grew 2% versus last year, reflecting Keras's one-off costs in Q1, partly offset by lower sales costs in China and lower logistics costs due to the one-off costs in the US last year. The development in distribution costs were also positively impacted by the depreciation of the US dollar against the Danish kroner. The admin-to-sales ratio for the first nine months was 4% on par with last year. and the R&D to sales ratio for the first 9 months was 4% of sales compared to 3% last year. The increase was driven by higher activity levels in chronic care and biologics. Overall, this resulted in operating profit before special items of 5.6 billion DKK in the first 9 months, or a 2% decrease compared to last year. Average margin before special items in the period was 26% compared to 27% last year. Reflecting around 90 basis points negative impact from currencies and around 50 basis points negative impact from caries. In constant currencies, EBIT grew 5% compared to last year. Koloplast incurred special items expenses of 3.1 billion Danish kroner in the first nine months, of which 3 billion Danish kroner relates to the caries impairment loss. Financial items in the first nine months was with a net expense of 100 million Danish kroner compared to a net expense of 875 million Danish kroner last year. The net expense included around 500 million Danish kroner in interest expenses, most related to the financing of the Atos medical acquisition. The interest expenses were largely offset by gains on exchange rate adjustments, mostly related to the US dollar, Hungarian for rent, and the Costa Rican kolon. The tax expense in the first nine months was 533 million DKK compared to an ordinary tax expense of around 1 billion DKK last year. The tax rate was 22% on par with the ordinary tax rate last year. Net profit before special license in the first nine months was 4.3 billion DKK or 510 million DKK increase from last year when adjusted for the non-recurring tax expenses last year. Adjusted diluted earnings per share before special items increased by 14%. Please turn to slide number eight. Operating cash flow for the first nine months was an inflow of 5.4 billion Danish kroner compared to an inflow of 4.4 billion Danish kroner last year. The positive development in cash flows from operating activities was mostly driven by favorable development in working capital, in particular due to improved trade receivables. Lower financial items also had a positive impact on cash flows, while higher income tax paid had a negative impact. Cash flow from investing activities was an outflow of 1.3 billion DKK compared to an outflow of 861 billion DKK last year. CapEx in the first nine months was 5% of sales, on par with last year, and includes investments related to the new manufacturing site in Portugal. which is on track to be operational here in Q4-25-26. As a result, the free cash flow for the first nine months was an inflow of 4.1 billion Danish kroner compared to an inflow of 3.5 billion Danish kroner last year, or a 16% increase. Excluding acquisition costs this year and benefits from the divestments, last year the free cash flow increased 27% in the first 9 months with a free cash flow to sales ratio of 20% compared to 16% last year. The trading 12-month cash conversion was 91% and networking capital amounted to around 26% of sales. Now let's take a brief look at the financial guidance for the year. Please turn to slide number 9. Our guidance for full year 2025-2026 remains unchanged. We expect fully organic revenue growth of 5-6%, EBIT growth in constant currencies before special items of around 5%, and return on vested capital after tax before special items of around 15%. We continue to expect negative impact from currencies with around 2-3% impact on reported revenue growth and around 80 basis points negative impact on the reported EBIT margin. We are especially seeing negative impact from the Hungarian for rent, which saw a notable appreciation against the Danish kroner following the Hungarian election back in April. We continue to monitor the developments in the Middle East and the impact on the business, including implications for demand, supply and cost inflation. With the knowledge we have today, we expect limited impact on sales and we maintain our previously communicated assumptions Rasmus Hannemann Møller Rasmus Hannemann Møller Thank you very much. Operator, we are now ready to take questions.