Demant Hldg U/Adr

Good afternoon, everyone, and welcome to our conference call following the release of our interim management statement for Q1 2025 after market closed yesterday. For the call today, it's business as usual, and we plan to run through the presentation followed by a Q&A session. The presentation should now be available on our website. As per usual, we plan for the call to last no more than one hour in total, including the Q&A session. On the call today, we have Søren Nielsen, our president and CEO, René Schneider, our CFO, and myself, Gustav Hög, from the IR team. That's it for the practical elements, and now over to you, Søren.

Yeah, thank you very much, Gustav, and welcome, everybody. I will today take you through business highlights and key financial takeaways, quick review of the business area, and we will take you through the outlook as well, and then get to Q&A. Business highlight in first quarter. We have seen a negative development in the global hearing aid market coming from increased macroeconomic uncertainties, most importantly in the U.S. market. And this is different than our original expectation. So I'm sure you have already seen we lower our full year guidance for market growth. I think this is number one key takeaway. As expected, hearing aids was impacted by a strong comparison base, a strong introduction last year, as well as the change strategy in managed care and the following laws of share there, but below expectation solely due to the soft market developments. Hearing care continues to deliver solid organic growth, well above the market growth rate, and we continue to consolidate distribution in line with our strategy and the underlying consolidation taking place in the market. The market for diagnostic instruments continues to be soft, impacting growth, although we estimate we have maintained our share in the period. Key financial takeaways. The group realized organic growth of 0%. This is below expectations, but it is due to the lower than expected growth in the global hearing aid market in the first quarter. Adjusting for this market slowdown, we find the underlying performance in line with expectations. Gross margin declined as expected due to the very strong performance in the hearing aid side last year, but also slightly lower than anticipated as the negative US market have caused a change in our mix across geographies that naturally leads to a following ASP decline for our portfolio, our hearing aid sales, just like we have seen in the global market. OPEX saw a slight organic growth following the cost-saving effort in second half last year, which acquisition has naturally added to growth, but also here in line with expectations. EBIT following the slowdown in the global market was below expectation. In addition, we have seen exchange rate also have a slightly negative impact on the profitability on EBIT. We continue to see very strong cash flow from operation and where we are both higher than last year and supported by working capital development. The change in the estimate for the global hearing aid market of 2% 1 to 1 translate into a revised outlook for our organic growth, previously 3 to 7%, now 1 to 5. The loss of profitability from this reduced organic growth and the negative development in currencies since February And then a little bit on tariffs lead to a downwards adjustment of the full year guidance for EBIT from previously 4.5 to 4.9 billion Danish kroner to now being 4.1 to 4.5 billion Danish kroner. Targets and ambition for share buyback unchanged above 1.5 billion. We'll get back to the various growth rates, but to the right, you can see organic growth and you can see hearing aids external minus four. However, with a strong growth in own retail or hearing care and in that growing share of wallet, then a higher growth rate internal and leading to a total growth of minus one percent. Hearing care four, diagnostic flat. and then all in all 3% from acquisitions coming in both in hearing aids, but of course primarily in hearing care. Few more details on the business area, starting with the hearing aid market in first quarter. You see the table with the statistics where we estimate that Europe in general have grown 4% against last year's 3%. North America, US, Canada have grown minus 3% against the 6% last year. But U.S. commercial is where the big deviations to expectation is. It has declined 5 percent compared to first quarter last year and compared to a full year growth of 7 percent last year. Rest of the world estimated Q1 4 percent against a full year 3 percent last year. All in all, 2% so far in the year against our normal expectation of 4% to 6%. I know you could argue that it's a little bit in the comparison base, but still this is below our expectations. And again, the development in the U.S. commercial market is significantly below expectations. We do expect some recovery during the year, but it cannot fully close the gap. The ASP globally is slightly negative where we originally guided for flat. This is purely related to the change in mix that the development for the full year is expected to do. And for the first quarter, of course, more dramatic when U.S. commercial is down 5%. So Europe, the growth there was driven by NHS, also good growth in Germany. France was slightly positive in line with expectations. We still and remain to have strong expectations for the full year. However, we knew that it would be a soft start since we have to get clients in to the funnel and have them out on trial before they can actually be invoiced. Again, U.S. commercial down across the various channels, private pay and managed care. The growth in VA remains slightly negative. This is in line with what we saw last year and still mainly attributed to capacity constraints of various kinds. We saw solid growth in Canada. Rest of the world slightly positive in both Japan and China and good development in a number of emerging markets. So 2% in the first quarter and somewhat revised expectations, but we'll get back to that for the full year. Hearing aids in first quarter, soft start to the year was expected and we have seen that. This was based by, or the reason for that was the very high comparison base driven by the Oticon Intent launch last year in February and the following market share loss in managed care in second quarter last year. So the last quarter with full strong comps in managed care sales. However, still below expectations due to the negative development in the U.S. commercial market. In terms of external sales, unit growth was flattish, while the market development in U.S. resulted in negative development in ASP. But again, this attributes purely to geography mix changes with larger growth rates in rest of the world than in North America. Europe, solid performance in Europe, slightly positive growth in France following the market development, negative growth in UK, below market growth rate as we still have a weak position in what's called AQP, which is private fitting of government NHS instruments, something we work on improving our position in. but currently cannot follow up with the increased amount of people that seek this route. North America, positive growth and market share gains in VA. Negative growth in U.S. commercial due to loss of share in managed care in Q2-24. And, of course, also the comp space, as we spoke to. Strong growth in Asia with solid growth in China due to market share gains on the wholesale side. Very strong growth in Japan and solid growth in Australia. Here in care, first quarter, solid performance, outgrowing the market. Again, 4% organic growth, obviously above the underlying market growth. We saw very strong performance in Canada, in Germany and several of our mid-sized markets. Solid performance in U.S. relative to the weak market. We continue to see a growth. You would say an improved mix between instruments that have no co-funding from Managed Care and those that have. And this benefits the business. Continued contribution from acquisition in the period primarily in Germany, Denmark and Italy. All countries where we have done significant acquisitions within the last quarters and therefore with a good strong effect in the first quarter. Growth mainly driven by units with a slight ASP tailwind from positive product mix as well as geography changes. Slightly positive growth in France, as I said, and there are continued strong expectations for sales and growth in the common quarters as we expect the market to pick up and us capturing a good strong share in that. Diagnostic in the first quarter continued the headwinds from soft market developments in general and the market remained soft. We estimate that it was flat in the period. We estimate that we have maintained our share as we have also been flat. Our service and consumable business continue to perform well in January. The geography is more specifically strong growth in UK and France, positive growth in US, negative in Canada due to very strong comps and then negative growth in China due to continued inflation. Access issues to public markets due to insufficient product portfolio, which is made in China, but again, something we work to improve. Good growth in several emerging markets in the diagnostic business as well. So coming back to outlook and markets estimations. Of course, the world is uncertain. This is our best estimate. It is based on a core assumption of recovery in the hearing aid market. We see this as a postponement either of your buying a first hearing aid or a renewal. especially in U.S., driven by increased consumer uncertainty. We expect this uncertainty to improve and therefore people spending more again. The global hearing aid market, as I said, saw 2% unit growth in Q1, all coming from U.S. On the full year basis, we revised this to a Three to five percent growth, meaning one percentage point down, which, of course, implies an improvement during the year. We don't know the exact timing and it can go a little bit up month to month. But the trend is an upwards positive development. It cannot fully close the gap. That's our assumption. And therefore, the three to five percent. On the ASP, again, previously flat, now minus one. Well, this follows the revised unit growth expectations across regions and not isolated any changes like for like pricing as such. So all in all, revised outlook from previously 4% to 6% in value to now 2% to 4%, meaning a lowering of 2 percentage points in the overall growth for the market. And this is, of course, what we have carried on in our own organic growth expectation, as I said. Currency have also worked a little bit against us, and I will give the word just shortly to René to elaborate a little bit further on the details in that.

Yeah, thank you, Søren. And yes, it has been an unusual development in the past month. And we will here try to elaborate somewhat on the impact on demand and also our expectations. But since our publication of the original outlook on 6th of February, we have seen a significant depreciation of almost all currencies against the euro and thus also against the Danish kroner. And if I could draw your attention to the table on the top right hand side, you will see how some of the main currencies that we are exposed to have changed since our previous outlook and thus what we have incorporated into our expectations for the full year, since our expectations are already always based on the current sort of exchange spot rate. But you would see major currencies like US dollar, Canadian dollar, Australian dollar being down five to seven percent now incorporated into the full year expectations. These are currencies that we hedge actively. And then you see also Some other main currencies like the Chinese yen, Brazilian real and Turkish lira also being down significantly. These are currencies where we do not hedge because the cost of doing that is kind of prohibitive. This changed currency environment translates into a significant change in top line expectations from currency, where we previously expected a plus 1% growth on the top line. From currency we now expect a minus 2%. both rounded numbers. So all in all, this is on the revenue side a change negatively of more than 800 million. Despite the fact that we hedge, this does give an impact to the EBIT side. When we look at the non-hedged currencies where there is a big drop through we estimate the impact to be 50 million whereas on the hedged currencies meaning all our main currencies the impact is quote unquote only 75 million since we have a quite significant hedging gain that hits the P&L And then in addition, we have other natural hedges that you will see positively in the cash flow statement under investments that will also be, you can say, less expensive in DKK. So all in all, this gives us, with the current exchange rates, a negative impact of 125 million compared to our original outlook. I think that's it on currencies.