Getinge AB (publ)

Welcome to the Getinger Q4 2023 report. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to the Speaker CEO Matthias Pergeus and CFO Lars Sandström. Please go ahead.

Thank you very much and welcome everyone to today's conference. I have Lars Sandström with me here today and he will do the deep dive into the financials and also help with the Q&A a bit later. But we can move directly into page number two to look at the key takeaways for the fourth quarter of last year. In terms of sales, getting net sales increased by 16.5% in the fourth quarter, and this is following growth in all business areas and regions. Organic growth accounted for 10.1% of this, acquisitions for 5%, and currency for 1.5%. Our order intake increased by 4.1% in the quarter, driven by acquisitions and currency. Organically, it decreased by 2.4%. which is mainly due to the challenging comparative figures from 2022 in connection with China lifting its COVID-19 restrictions back then. Despite the increased sales, the adjusted EBITDA margin was lower than last year, mainly due to the quality costs for the improvement work in acute care therapies that we've had since the second quarter of 2023. In the fourth quarter, these additional costs amounted to just over 200 million SEK corresponding to minus two percentage points on the margin. These costs are expected to continue to affect us a bit into 2024 until we have resolved the current deficiencies in accordance with the timetable that we have previously communicated. In addition, the margin was negatively impacted by a generally unfavorable geographic and product-related mix and also higher cost for input goods and for employees. Free cash flow increased in Q4 and our robust financial position stands firm, providing us with a solid ground for continued investments in our growth. The board of directors has also decided to propose a dividend of 4.4 sec per share compared to 4.25 sec last year. So with that, we can move over to page number three, please. So we're going to take a short step back and look at some other key events during the quarter. When it comes to our offering to begin with, in December, our Servo Air received sales approval from Chinese authorities. And this is going to be the first ventilator that we manufacture in China. So that's a good positive step. In surgical workflows, we launched McKay-Coren, a new operating mobile premium table, and this is our first connected mobile premium table, setting a new standard also when it comes to safety in this industry. We also have a small organizational change to report. Our CFO, Lars Sandström, who is here today with me, has decided to pursue what he believes is an exciting opportunity outside of Geringen. Lars has been instrumental in developing getting his finance organization to the current high standard that we have and I really appreciated our close collaboration. Agneta Palmer who is currently the executive vice president for operational services has been appointed his successor and Agneta has a strong track record both in and outside of getting it. The handover process has already started and will continue until 31st of March when Agneta finally formally takes over. Agneta has also been instrumental in her previous job in building the finance organization, so she's very familiar with this. And I think there's also a clear recognition of a strong succession planning and I wish both Lars and Agneta best of luck in the new roles. When it comes to sustainability and quality, I want to mention that the continued quality improvement efforts in cardiac assist and cardiac pulmonary according to our previously communicated plan are ongoing and that's following that plan. For cardiac pulmonary and the packaging solutions, we still have the testing ahead of us and for cardiac assist, we continue with the field corrections that we've been on for a while there and this is also in line with the plan previously communicated. When it comes to carbon dioxide emissions, energy consumptions and the share of renewable energy, we continue to develop in a positive direction also here. Our index for improvements related to customer quality also improved in the quarter as the number of open complaints have been worked on. And the positive trend in the number of training sessions, which totaled more than 45,000 in 2023, It's due to an increased number of global customers in the online academy portal that we have, which has proven very effective. We can then move over to page number four, please. So we'll talk a bit about net sales and order intake. Our order intake, as I stated earlier, declined by 2.4% in the quarter and net sales increased 10.1% organically. Acute care therapies and surgical workflows or organic order intake declined in total due to soft development in EMEA and APAC, while both business areas showed positive development in our important Americas region. Life science increased its order intake in all product categories except for bioprocessing, and the trend in the US was especially strong from a geographic perspective. So organic net sales increased organically in all business areas and regions with EMEA growing at over 14%. Let's then move over to page number five. So we're providing a bit of updated guidance for 2024 as well. So this takes us to the outlook where we expect organic net sales for growth to be two to 5% for 2024. And in addition to this organic growth, we expect our recent acquisitions to contribute with three to five percentage points. We're going to move to page number six. So when it comes to order intake, acute care therapists had a decline of 2.4% organically. And the decline in the quarter was mainly related to cardiopulmonary and cardiac assist. We're getting it still has many orders that have not yet been delivered. Life science, there we had 4.2% organic growth and life science increased its order intake in all product categories except for bioprocessing. The trend in the US was strong while the order intake in China remained weak. The trend in EMEA and Americas was strong, but the order intake in APEC remained weak, and this was again mainly related to China. In surgical workflows, we had a 4.9% organic decline. This was across order intake. From a geographic perspective, it was particularly weak in Asia Pacific, while other regions were basically unchanged. Then move to page number seven. Looking at our sales then in acute care therapies, we had 7.6% organic sales growth. And the increase is mainly thanks to large deliveries of hardware in cardiac assist, which are expected to then drive future sales of consumables. There is on the margin, it's a negative mix effect from this. We will talk a bit more about in a short while. From a growth perspective, though, we also saw healthy development in cardiopulmonary within acute care therapies. Higher volumes of consumables in cardiac assist and cardiopulmonary and a strong trend in service and spare parts contributed to an increase in recurring revenue as well. Moving then to life science, we had a 4.9% organic growth. And the reason behind this is due to slight recovery in the biopharma segment. Sales to European customers performed positive in the quarter. I think it's worth mentioning as well. Surgical workflows then, we had a 15.6 percentage points organic sales increase. And this was in all categories and across all regions geographically. Performance in surgical workforce was particularly strong in Europe, mainly in Central and Eastern Europe. Acquisitions is worth mentioning as well. In the quarter we had a contribution of 421 million SEK from our recent acquisitions. Currency had 127 million SEK or 1.5% positive impact on net sales for the group in the quarter. Recurring revenue grew by 9.9% in the quarter, positively impacted by service and disposables. We can then move to page 8. Let's have a look at the gross margin evolution. Adjusted gross profit increased by 443 million SEK to 4,596,000,000 SEK in the quarter. where a positive FX effect accounted for 63 million sec. From a margin perspective and for the group as a whole, the adjusted gross margin declined by 2.5 percentage points as a result of temporary costs related to the earlier mentioned challenges in cardiac assist and cardiopulmonary and also generally unfavorable product mix. The margin was also negatively impacted by the general cost increase due to inflation that we see and this was partly offset by price increases and the activities that we've had in place to enhance productivity and to some extent also currency effects. For acute care therapies the adjusted gross margin declined by 1.9 percentage points mainly due to the costs we've talked about here related to the ongoing improvements in cardiac assist and cardiopulmonary. The margin was also impacted by negative currency effects, higher costs for input goods and personnel. And this was then partly offset by price increases, a continued recovery of consumables in cardiac assist and cardiac pulmonary, and also productivity improvements. When it comes to life science, the adjusted gross margin fell by 3.9 percentage points as a result of a negative product mix acquisition and higher costs for input goods and personnel. The margin was also negatively impacted by impairment and provisions of just over 40 million SEK in life science. Price increases and currency helped to somewhat reduce these negative effects. In surgical workflows, the adjusted gross margin fell by 1.0 percentage points, primarily as a result of higher costs for input goods and personnel. So this is mainly an inflationary effect as well. This was an offset by contributions from acquisitions and also price increases. So with that summary, we can move over to page nine and I leave it over to you Lars.

All right, thank you Mattias. Approved EBITDA was basically unchanged versus the same period last year, but the margin came in 2.2 percentage points lower. Adjusted gross profit effect on the margin was minus 2.5 percentage points due to what was just said by Mattias. Adjusted for currency, OPEX had a slightly positive impact on the margin in the quarter. This is despite an OPEX increase of 442 million year-on-year, which is explained by the acquisitions done and employee-related expenses. effects and costs related to the improvement efforts in cardiac assist and cardiopulmonary. Other OPEX was minus 113 million in the quarter but year on year this is a gain of plus 37 million due to less negative impact on receivable and liabilities in foreign currency this year versus last. Adjustable currency DNA had a positive impact or effect of 0.3 percentage points on the margin in the quarter And FX had a slight negative impact on the margin in the quarter as a whole. All in all, this resulted in just a bit of 1,318,000,000 and the margin of 13.3%. Over to page 10, please. Free cash flow amounted to almost 1 billion and was impacted by higher operating profits. Looking closer at working capital, we managed to handle the seasonality effect quite well and we see improvement here, especially on the inventory side. Working capital days continues to be well below 100 and we are now close to 94 days, down a bit more than 35 days from the peak in 2018. We continue to be somewhat below trend on operating return on invested capital with 11% on a rolling 12-month basis, but still above the cost of capital. Let's move to page 11. The change in net debt year on year was impacted by acquisitions finalized in the quarter, taking us to 8 billion in net debt at the end of the quarter. And if we exclude pension liabilities, we are at 5.3 billion. This brings us to leverage of 1.4 times EBITDA. And if we adjust for pension liabilities, it's at 1.0 times EBITDA. And cash amounted to approximately 2.7 billion by the end of the quarter. And all in all, we can conclude that the financial position continues to be strong even after the acquisitions. Let's move to page 13 and back to you, Mattias.