2014 Full-year results

26.02.2015
2014 Full-year results
Conference presentation for investors, analysts & media
Basel, 27 February 2015
1
Disclaimer
This presentation contains certain forward-looking statements that reflect the current views of
management. Such statements are subject to known and unknown risks, uncertainties and
other factors that may cause actual results, performance or achievements of the Straumann
Group to differ materially from those expressed or implied in this presentation. Straumann is
providing the information in this presentation as of this date and does not undertake any
obligation to update any statements contained in it as a result of new information, future
events or otherwise.
The availability and indications/claims of the products illustrated and mentioned in this
presentation may vary according to country.
2
1
26.02.2015
Dr Peter Hackel, Straumann’s new CFO
 Rejoined Straumann on 1 December 2014
 Oerlikon Drive Systems (4 years): CFO
 Straumann (6 years): Business
Development, Head Group Controlling
 Geistlich Biomaterials (2 years): Director
Orthopedic Marketing & Sales
 McKinsey (2 years): Consultant
 Education: PhD in Biochemistry and
Molecular Biology; Business Administration
studies
3
Full-year highlights
Marco Gadola, CEO
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26.02.2015
Strong growth and strategic expansion
REVENUE
BEST PERFORMERS
GROWTH STRATEGY
710m
APAC & RoW
Geographic & segment
expansion
FY: +6%1
Q4: +9%1
14% growth1 in both regions
New hybrid approach to dynamic
Chinese market; further investment in
Instradent (value) platform
EMERGING MARKETS
MULTI-BRAND PLATFORM
CURRENCY IMPACT
16%
of Group
Portfolio
expanded
Mitigating
actions
China & Brazil fuel mid-teen growth
in EMs, which now contribute 16% of
Group revenue (14% in 2013)
New products/solutions (botiss, BLT, Pro
Arch etc.); Investments in MegaGen,
T-Plus, Rodo Medical
Cost-savings & other initiatives to
reduce impact of strong CHF, without
impairing ability to grow business
CHF
1
Organic growth – i.e. excluding the effects of acquisitions, divestitures and currency exchange rates
5
Outpacing the market for 7 consecutive quarters
15%
10%
Rightsizing and
re-organisation
measures
Q4: revenue of CHF 187m
(+9% organic)
5%
0%
-5%
-10%
-15%
Market for tooth replacement & restoration (leading companies)1
6
6
Straumann
* Straumann, Nobel Biocare, Zimmer Dental, Biomet 3i, Dentsply Implants - based on company and SEC
1 Straumann, Nobel Biocare, Zimmer Dental, Biomet 3i, Dentsply Implants, based on company and SEC reports, as
reports as well as management comments.
well as management comments.
3
26.02.2015
Profitable growth
Organic revenue
growth1
Adj. gross margin 1
Adj. EBIT margin1
Adj. EPS1,2
(in %)
(in %)
(in CHF)
+6.4%
+20bps
+330bps
710.3
20.9
8.40
667.4
78.5
78.7
7.00
17.6
2013
2014
1 Excl.
7
+20%
2 Excl.
2013
2013
2014
2014
2013
2014
currency exchange rate effects and restructuring costs in 2013
one-time benefit from capitalization of deferred tax assets in 2014 amounting to CHF 27m related to Neodent
Significant impact from currency exchange rates
Operating profit margin
27.4%
25%
20.9%
20%
17.0%
15-20%
15%
10-15%
10-15%
10-15%
10%
9.2%
2008
Straumann
1
8
2012
2013
2014
Dental peers benchmark1
Average operating income margin for the following companies: Dentsply, Patterson, Henry Schein, Osstem,
Sirona, and Nobel Biocare ( 2014 9M)
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26.02.2015
Business and regional review
Peter Hackel, CFO
Significant profitability improvements
in CHF million
FY 2014
FY 2013
Change (rounded)
Reported
Reported
excl. FX
excl. FX and
exceptionals
710.3
679.9
667.4
667.4
Gross profit
558.7
535.9
524.0
524.0
margin
78.7%
78.8%
78.5%
78.5%
Revenue
Reported
Organic growth%
EBITDA
margin
EBIT
margin
6.4%
176.2
148.4
142.0
149.9
24.8%
21.8%
21.3%
22.5%
148.3
115.8
109.6
117.5
20.9%
17.0%
16.4%
17.6%
Net profit
157.8
101.2
margin
22.2%
14.9%
Basic EPS
10.15
6.55
Adjusted EPS
8.40
7.00
Free cash flow
128.4
139.2
18.1%
20.5%
margin
excl. FX and
exceptionals
6.6%
( 20 bps)
20 bps
300 bps
230 bps
390 bps
330 bps
17.5%
26.2%
10
5
26.02.2015
Higher implant sales offset FX and mix effects
In % of revenue, rounded
+20 bps
(1.0%)
0.3%
0.9%
(0.3%)
78.8%
78.7%
78.5%
Gross profit
margin
FX effect
Adj. gross profit Price / volume /
margin
mix
Inventory
change1
2013
1 Change
COGS (higher
volumes)
Gross profit
margin
2014
in finished and semi-finished goods in 2014 compared with prior year
11
EBIT margin above 20%
In % of revenue, rounded
+330 bps
3.2%
(0.6%)
(0.1%)
0.2%
1.2%
20.9%
17.6%
17.0%
Reported EBIT
margin
FX effect
Restructuring
costs 1
Adjusted EBIT
margin
Gross margin
effect
2013
1 Exceptional
Lower OPEX
intensity
Other income Reported EBIT
margin
2014
costs of CHF 8 million related to cost optimization measures in 2013.
12
6
26.02.2015
Strong cash generation constrained by working
capital increase
In CHF million
27.8
(16.1)
(5.5)
(2.1)
(2.1)
(7.6)
(5.2)
139.2
128.4
FCF margin
20.5%
Free cash
flow 2013
13
FCF margin
18.1%
EBITDA
improvment
Higher net
working
capital
Higher
CAPEX
investments
Higher
interest
payments
Higher tax
payments
Difference in
non-cash
OPEX 1
Various
Free cash
flow 2014
Chart shows cash-relevant changes Jan-Dec 2014 compared with the same period 2013
changes in share-based payments and provisions
13
1 Mainly
All regions drive growth
Revenue development (in CHF million, rounded)
4.5% in CHF
6.4% in l.c.
13.1
4.2
14.0
(12.5)
11.6
710.3
679.9
667.4
Change in l.c.
(1.9%)
Revenue FY
2013
FX Effect
2013
Revenue FY
2013 @ FX 2014
3.2%
7.8%
14.0%
14.2%
Europe
North America
APAC
ROW
Revenue FY
2014
2014
14
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26.02.2015
Strong finish in Europe; share gains in N. America
Revenue change (organic)
7.6%
Europe
4.1%
56%
(3.4%)
(1.4%)
2.7%
 Best quarterly growth rate since
2008, contributing almost half of
overall growth in Q4
(1.5%)
53%
North America
Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014
9.1%
11.4%
11.0%
5.2%
 Europe grew 8% in Q4 amid tough
competition
9.3%
5.4%
 Strong performers: UK, Spain and
the Nordic countries; Germany
solid
 N. America posts strong Q4 on top
of high base line
 High demand for Roxolid and
SLActive implant lines
Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014
27%
 New Bone Level Tapered implant
well received in controlled release
15
Boost from China and Japan
Asia Pacific
Revenue change (organic)
8.3%
7.9%
15%
Rest of World
15.3% 17.0% 14.5%
16.3%
56%
 Strong growth in Japan, region’s
largest market
Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014
35.1%
28.6%
18.2%
9.0%
1.8%
5%
 China delivers strong increase;
good progress in establishing new
hybrid sales model
3.0%
Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014
 Straumann outperforms Japanese
market, driven by SLActive
launches
 Back to double-digit growth in Q4,
driven by strong demand for
implants in most markets
 Good performances in Brazil,
Mexico and Middle East
 Neodent posts high single-digit
growth in 2014
16
8
26.02.2015
Double-digit growth in implant volumes drives
revenue increase
Implants
Restorative
Regeneratives
17
Foreseeable impact of currency rates on 2015
results
Development of Straumann’s main currency
exchange rates YTD 2015
Ø 16 January – 27 February
Theoretical FX impact on 2014 revenue and EBIT
In CHF m
(rounded)
FX rates 16 Jan
Ø FX rates
after 16 January
0.8
Revenue
(75)
(55)
0.6
EBIT
(40)
(31)
0.4
EURCHF
1.02
1.05
USDCHF
0.87
0.92
1.2
1
0.2
01.01
16.01
EURCHF
USDCHF
31.01
BRLCHF
15.02
JPYCHF
Source: Thomson Reuters
18
9
26.02.2015
Mitigating the impact of the strong Swiss franc
Short-term measures expected to deliver >CHF 20 million:

Compensation reductions for Directors and all employees in CH;
96% of staff in agreement

Hiring and replacement only to fill business-critical positions

Tighter cost control (e.g. travel), additional efficiency measures

Re-negotiation of supplier contracts
Mid-term:

Further optimization of cost base; improve order-to-cash process

Improve natural hedge – balance manufacturing capacity, production expansion
outside CH, supplier contracts not in CHF, ensure suppliers pass on FX benefits
o Long-term growth opportunities not compromised
o ‘Swiss label’ comes at a price but adds value to premium brand
19
Update on our strategic progress
Marco Gadola, CEO
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26.02.2015
Mastering challenges and turning them into
opportunities
CHF
Strong Swiss franc
Limitations of our current culture
GP
BRIC
Increasing number of GPs placing implants
Future growth markets are outside Western Europe
Increase in discounters claiming compatibility
Growing segment of corporate clinics / dental chains
Advanced innovation cycle
21
Our journey to create a high-performance culture
In 2014, we started a ‘cultural journey’ to promote and foster: delegation,
empowerment, responsibility, risk-taking, challenging and creative thought,
which are predominant behavioral styles in high-performance
organizations.
Straumann’s current culture
Our ideal
22
11
26.02.2015
Straumann USA lacks presence in GP segment
30%
Estimated US dental implant market share by
customer segment
20%
10%
0%
Estimated share of US GP market based on survey data1
Estimated overall implant market share (units) 2
23
1 Straumann
dentists survey of 120 GPs performed by Exevia, Fall 2014
2
iData, MRG and Straumann estimates
Collaboration to address GP segment and to
enhance the standard of care
 More effective approach to fast-growing segment
of surgically active GPs
 JADA study points to lower implant success rates
in general practices1
 Straumann takes responsible approach together
with Patterson Dental and Spear Education
Straumann SMART One
 Straumann Smart One package designed to help
GPs perform straightforward indications
 SMART One exclusively available through
Patterson in US, with Spear’s interdisciplinary
curriculum
24
1 Da
Silva JD et al, JADA 2014;145(7):704-713
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26.02.2015
Interdisciplinary relationship between specialists,
GPs and labs
Product manufacture, coordination
Mentoring, coaching
GP
Targeting and customer leads
Experienced surgeon
Education
25
Value and technology platforms expand
Germany
(Option 30%)
Spain
(30%)
Brazil
(49%)
Germany
(51%)
Canada
(44%)
Germany
(100%)
Taiwan
(Convertible)
S. Korea
(Convertible)
US
(13%)
Taiwan
(43% in 2015)
Common platform of technology & Production
Premium
26
Implants
Value
CADCAM/prosthetics
Regeneratives
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26.02.2015
The latest addition to our Instradent platform
 A leading local dental implant company in Taiwan
 Instradent to acquire approximately 43% of TPlus in March/April 2015; option to increase to
90% by 2020
 T-Plus has the products, regulatory clearance
and customer proximity to penetrate the fastgrowing value segment in China
 Injection of capital will accelerate T-Plus’ growth
strategy and international expansion plans
 Deal subject to approval by Taiwan Investment
Commission
27
Investments targeted at markets with high growth
potential
China
North America
Marketing & sales expanded;
CADCAM site in Arlington upgraded
and expanded
Own organization built up;
Distributor activities taken over;
Leadership in premium segment;
Preparing entry into value segment
Japan
Brazil
Building CADCAM
production
Straumann’s sales
power increased
LATAM
Initiative underway to gain
direct access to key S.
American markets with
Straumann & Instradent
28
14
26.02.2015
Patient expectations have changed – especially
for multi-teeth interventions
Today patients expect:
 fixed, reliable, natural-looking,
long-lasting replacements
Incidence of tooth loss among middle-aged
and elderly population1
80%
 minimal discomfort
60%
 shorter (immediate) treatments
40%
 affordability
20%
 more than a smile, a changed life
>1/4 HAVE LOST
HALF THEIR
NATURAL TEETH
0%
no teeth lost
1-14
US
29
Brazil
15-27
lost all teeth
Germany
1 Source: Straumann proprietary study based on >11000 respondents in the US/BR/DE conducted by
AFG Research in 2012
Preferred partner of leading US network
in full-arch replacement
 ClearChoice is the leader in full-arch restorations
and does more implant procedures than any other
US network
 Straumann enters dental chain segment
ClearChoice centers in the US
 Straumann & Instradent to serve ClearChoice as
a preferred partner, starting Q1 2015
 >90% of centers technically equipped; most
switching expected by end of Q1
 CADCAM production in Arlington expanding to
meet ClearChoice requirements
 38 million adults in the US estimated to need one
or two full dentures by 20201
1
30
Straumann Pro Arch solution
Douglass CW, Shih A, Ostry L. Will there be a need for complete dentures in the United States in 2020?
J Prosthet Dent. 2002 Jan;87(1):5-8
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26.02.2015
Addressing a significantly larger market through
partnership and licenses
US regeneratives market by category
(market estimated at USD 260m in 20141)
Allograft
38%
Synthetic
4%
Straumann Allograft
Tissue
regeneration
Straumann
Bone Ceramic
8%
Membrane
34%
Straumann Emdogain
Xenograft
17%
>2014
>2015/16
Straumann Membrane C+
Straumann Xenograft
31
1
Source: Millennium Research Group 2014
New BLT implant – a significant growth
opportunity in 2015
 Controlled release underway since September
2014; products well received
 Full launch in Europe and N. America expected
Q2/Q3 2015
 BLT opens door for Straumann to compete head
to head in the largest implant segment (>60% of
all implants are tapered/conical)
 Good primary stability combined with rapid
secondary stability (SLActive) and Roxolid
strength make this a new-generation BLT
 BLT an important element in securing
agreement with ClearChoice
32
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26.02.2015
Outlook 2015
Confirmation that we are working on the right
things
Our strategic priorities:
Drive Straumann high performance
culture & organization
Target unexploited growth
markets & segments
Become total solution provider
for tooth replacement
34
17
26.02.2015
Guidance 2015
Barring unforeseen circumstances
 Further improvement in global implant
market expected
 Revenue expected to grow organically in
mid-single-digit range
 Further investments in strategic growth
markets and projects
 Cost reduction measures including
compensation reductions in CH, strict hiring
and travel restrictions
 2015 EBIT margin target >20% (organic),
assuming exchange rates remain more or
less at recent levels1
1
35
35
Average spot rates since 16 January: Euro=CHF 1.05 ; USD=CHF 0.92
Effects of Neodent consolidation
IFRS consolidation
Initial stake
49%
05.2012
03.2015
Option to increase
to 100%
Option to increase to 75%
08.2016
02.2018
11.2019

Straumann will consolidate Neodent fully as of 1 March 2015, irrespective of
whether and when it might exercise its step-up option

Consolidation will trigger ordinary fair-value adjustments:
 Formal purchase price allocation (PPA) process to be conducted
 One-time effects: revaluation of initial 49% book value; inventory step-up to
fair value; FX losses on current equity position through P&L
 Recurring effects: Annual amortization charge to be communicated once
PPA process is complete

Decision regarding option to increase ownership is still outstanding
36
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26.02.2015
Questions & Answers
37
2014 Annual report now available online
38
19
26.02.2015
Get an update on our latest innovations
Cologne, 10‐14 March
SEE YOU
SOON IN
COLOGNE!
Hotel Dorint
If you would like to join us for this event, please write us an email at [email protected]
39
Calendar of upcoming events
2015
27 February
Full‐year 2014 results
Basel HQ
05 March
Investor meetings
London
06 March
Investor meetings
Paris
12 March
Investor breakfast IDS, Cologne
17 March
Investor meetings
Toronto
18 March
Investor meetings
Chicago
19 March
Investor meetings
New York
27 March
Kepler Cheuvreux Swiss Seminar
Zurich
10 April
Annual General Meeting 2014
Basel Congress Center
14 April
Dividend Ex‐date (16th
17 April
Investor meetings
Madrid
23 October First‐quarter results Webcast
15‐16 March
Investor meetings
London
40
payment date)
Results publication and corporate events. More information on straumann.com → Events
40
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26.02.2015
Straumann’s currency exposure
Revenue breakdown 2013
Average exchange rates (rounded)
Other
21%
EUR
39%
USD /
CAD /
AUD
29%
CHF
11%
FX sensitivity (+/- 10%) on...
2014
2013
Revenue
EBIT
EURCHF
1.21
1.23
+/- 27 million
+/- 17 million
USDCHF
0.92
0.92
+/- 17 million
+/- 7 million
JPYCHF
0.86
0.95
+/- 4 million
+/- 3 million
BRLCHF
0.39
0.43
+/- 2 million
+/- 1 million
Development of Straumann’s main exchange rates since 2013
120
Cost breakdown 20131
Other
13%
100
EUR 20%
USD /
CAD /
AUD 22%
80
60
CHF 45%
2013
2014
USDCHF
1
EURCHF
2015
JPYCHF
BRLCHF
These distribution charts represent the total net revenues and the total COGS as well as OPEX expenses in the various
41 currencies. All numbers are rounded and based on 2014 figures.
41
Results from our Q4 buy- and
sell-side survey
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26.02.2015
Perception survey last December: Respondents...
...by job
...by country
UK
5%
5% 2%
Fund Manager
US
23%
Scandinavia
30%
40%
Buy-side analyst
Sell-side analyst
France
Switzerland
Germany
25%
43
54%
5%
2%
9%
Equity sales
Other
Gizmo survey with a sample size of 59 respondents out of approx. 220 questionnaires (26% response rate)
Shareholding and recommendation levels
Buy‐side
Sell‐side
32%
43%
We were invested in
the past, but not now
(valuation)
We were invested in
the past, but not now
(fundamental industry
concerns)
8%
16%
We never owned
STMN shares
We are shareholders
I am neutral on
the stock / don't
recommend it to
my clients
25%
50%
5%
20%
I am negative on
the stock
considering the
current share
price
I am negative on
the stock due to
fundamental
industry concerns
I recommend my
clients to be long
in the stock
44
22
26.02.2015
Why are you a shareholder / not invested at the moment
(Top 4 responses ranked by order)
Why are you a shareholder?
Why are you not invested?
Likely outperform its peers and can
leverage its fixed cost base (100%)
Industry growth does not match
valuation
Find management convincing
Increasing marketing efforts needed to
maintain growth
I think the entry into value segment will
stimulate cashflows
Industry has low entry barriers
Advantage of dedicated implant player in
a consolidating industry
I think the entry into the value segment
will dilute reported margins
45
Data based on buy-side sample only, i.e. 65% of the respondents
Medium-term growth of the modern tooth replacement
market1
By value (in % of respondents)
By volume (in % of respondents)
Double-digits
Double-digits
0
7-9%
63
1-3%
Flattish
Decreasing
46
7-9%
16
4-6%
19
2
0
2
32
4-6%
60
1-3%
7
Flattish
0
Decreasing
0
Question: What do you reckon will the entire global tooth replacement market p.a. grow in the coming 3 years
(implant, abutments and CADACAM combined; in value terms)?
1 Market includes total business, i.e. implant, abutments and CADCAM abutments and SRBBs. .
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26.02.2015
Your contacts
Fabian Hildbrand
Corporate Investor Relations
Tel.
+41 (0)61 965 13 27
Email
[email protected]
Mark Hill
Corporate Communications
Tel.
+41 (0)61 965 13 21
Email
[email protected]
Thomas Konrad
Tel.
Email
+41 (0)61 965 15 46
[email protected]
47
International Headquarters
Institut Straumann AG
Peter Merian-Weg 12
CH-4002 Basel, Switzerland
Phone +41(0)61 965 11 11
Fax +41(0)61 965 10 01
www.straumann.com
24