Straumann reports efficiency and market-share gains, as full-year net revenue reaches CHF 736 million

  • Global recession and currency headwind constrain full-year net revenue to CHF 736 million, 2% off prior year in local currencies (-5% in CHF)
  • Innovation leadership and service excellence result in expanded customer platform
  • EBITDA, EBIT and net profit margins reach 30%, 23% and 20% respectively, despite economic headwind and counter-cyclical investments in Sales and R&D to position Straumann well for market recovery
  • Strong free cash flow of CHF 215 million (29% margin) lifted by improvement in net working capital
  • Roxolid®, Straumann® Allograft, and prosthetics in IPS e.max® launched; further steps in digital dentistry
  • Structured approach to Board and leadership succession
  • Unchanged dividend of CHF 3.75 per share proposed [1]





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Basel, 16 February 2010: Despite continuing pressure from the global economic crisis in 2009, the Straumann Group achieved its expectations for full-year net revenue and margins, and, having invested counter-cyclically, is well positioned for market recovery.


Throughout 2009, the compound effects of low consumer confidence, rising unemployment, and credit restrictions, resulted in slow patient traffic in dental practices and lower volumes of implants sold. It is estimated that the global market for implant, restorative and regenerative dentistry contracted by 6% in 2009. Straumann’s full-year net revenue reached CHF 736 million, 2% down in local currencies (l.c.) from the previous year. With the continuing strength of the Swiss franc against major currencies, the Group had to contend with an unfavorable currency effect, which resulted in a net revenue decrease of 5% in Swiss francs. There was no material acquisition effect in 2009.


The early implementation of cost management initiatives, combined with efficiency gains throughout the year, helped to keep the EBITDA margin close to 30%. Operating profit reached CHF 165 million, corresponding to an EBIT margin of 23%, while net profit amounted to CHF 146 million with a net profit margin of 20%. The marked increase in reported EBIT and net profit over the previous year reflects the exceptional non-cash write-downs in 2008. To show the underlying performance, these have been excluded in all the following comparisons. The Group also succeeded in leveraging its cash flow by reducing net working capital. This contributed to a significant expansion of the free cash flow margin from 19% in 2008 to 29% in 2009.


Gilbert Achermann, President & CEO commented: “Our staff have done an excellent job in a very demanding environment. We managed costs through the downturn, delivered above-market performance and launched innovative products in key markets. We increased our customer base and created partnerships to expand our business portfolio. The efficiency gains and our strong free cash flow have enabled us to invest counter-cyclically – maintaining service levels, strengthening existing franchises, and enhancing innovation capabilities. As a result, we are well positioned for market recovery in the future”.





New-generation products support underlying business

Revenues were generated primarily by the soft-tissue-level implant business, supported by SLActive and lifted by the Bone Level implant system, which has continued to gain market share since its introduction in the latter part of 2007.


SLActive gained marketing approvals in Korea and China, and is now available in more than 70 countries. Since its introduction in 2005, more than a million SLActive implants have been sold – a milestone reached in 2009. To meet future demand, the Group opened a new dedicated production unit in Villeret.


The most significant highlight in implants in 2009 was the launch of Roxolid, Straumann’s high-performance implant material, in Europe and North America. Roxolid combines higher tensile and fatigue strengths with excellent osseointegration and has been designed to increase reliability and confidence with small diameter implants.


While the dental implant market was sluggish throughout 2009, sales of CADCAM crowns and bridges continued to grow solidly. In August, Straumann’s CADCAM unit reported that it had sold over a million individualized crown and bridge elements since entering the field. The significance of this milestone lies in the fact that Straumann’s business is comparatively new and has only recently expanded internationally.


Straumann’s CADCAM offering has been strengthened through the addition of IPS e.max® ceramic technology supplied by Ivoclar Vivadent. The new ceramic materials combine unparalleled durability and esthetic properties, which make it easier to produce long-lasting prosthetics that are indistinguishable from natural teeth. Straumann prosthetics in the new materials are now available in Europe and North America.


In the field of oral tissue regeneration, the Group launched Straumann® Allograft in the US, a bone augmentation material supplied through Straumann’s partnership with LifeNet Health®. This product – together with Straumann BoneCeramic – enables Straumann to address more than 60% of the dental bone augmentation market in the US, which is estimated to be worth in the region of USD 100 million[4].


Spearheading the digital revolution

Straumann aims to be at the leading edge of the digital revolution in dentistry and took several significant steps towards that goal in 2009.


Firstly, the Group entered the emerging field of computer-guided implant surgery by acquiring the dental business of IVS Solutions AG in Germany. The acquired technology simplifies the planning and execution of complex implant procedures and thus reduces the risk of surgical and prosthetic complications.


Secondly, Straumann signed an agreement with Cadent Inc., a leading provider of 3-D imaging solutions, for exclusive European distribution rights for Cadent’s iTero digital impression systems. Cadent's intra-oral scanning technology avoids the slower – and potentially less reliable – conventional process of impression-taking in the dental practice, followed by model casting in the laboratory.


Thirdly, Straumann continued to advance its CADCAM service with new features and powerful software upgrades, giving laboratories greater flexibility and precision.


Despite multiple launches in 2009, Straumann still has a well-stocked attractive pipeline, which is presented in further detail in the Group’s Annual Report.





Signs of stability in Europe

In Europe, full-year net revenue contracted 2% in l.c. to CHF 462 million (63% of Group total). The weakness of the Euro, the Swedish krona and the British pound against the Swiss franc resulted in a negative currency effect that squeezed net revenue development by 5 percentage points.


Revenues in Germany and Italy – Straumann’s largest European markets – were more or less in line with the high comparative levels of 2008. The important Iberian dental market suffered most from the economic recession in 2009. Switzerland and the UK posted slight contractions. France, the Nordic countries, and the Eastern Europe regions all achieved strong top-line growth, against the general trend. On the basis of available data, Straumann further enhanced its leadership position in the region.


Market position strengthened in North America

Straumann’s regional net revenues amounted to CHF 155 million or 21% of the Group total. This represents a contraction of 1% in l.c. or 2% in Swiss francs from the high prior-year baseline, when net revenue grew 14% in l.c. SLActive and the Bone Level range together with the relaunched and enhanced regenerative portfolio enabled Straumann to win new accounts. In the fourth quarter, the North American business returned to positive growth and reported an increase of 7% in local currencies. The Group is therefore confident that it outperformed its main competitors and strengthened its firm number-two position in the region.


Towards full transition in Asia

With the major Asian markets locked in recession, the Asia/Pacific region reported a 5% decrease in full-year net revenues in l.c. The positive currency effect – due mainly to the strength of the Japanese yen – reduced the shortfall to just 1% in Swiss francs. The region generated CHF 95 million or 13% of Group net revenue.


The Group achieved good organizational and operational progress towards completing the transition from distributors in Japan and Korea, which began two years ago. Key product approvals were obtained in Korea and China, where Straumann continued to grow strongly.


Solid growth elsewhere

In the Rest of the World, net revenue rose impressively by 8% (2% in Swiss francs) to CHF 23 million or 3% of the Group total. This was driven primarily by Straumann’s Brazilian and Mexican subsidiaries.





Workforce stable; return to full working hours in production

The Group successfully adapted production output to the changes in demand without compromising its supply capabilities. This was achieved through reduced working hours in implant production for most of the year and through organizational and efficiency improvements. At year-end the global workforce totaled 2170 employees, 1% lower than in 2008. Full working hours were resumed at the outset of 2010.


Efficiency gains cushion impact on margins

The top-line contraction obviously resulted in reduced earnings and margins. Full-year gross margin decreased by 140 base points to 79.7%. Foreign exchange effects had a negative impact of 50 base points. Cost containment initiatives thus partly offset the negative effect of the currency headwind and lower manufacturing capacity utilization due to lower volumes and initiatives to optimize inventories. Thanks to the latter, year-end inventories were 31 days less than at 30 June 2009 and 78 days less year-on-year.


Selling and administrative (SG&A) costs decreased by CHF 6 million, despite increased marketing investments in the second half of the year that were signalled in August. The reduction was due to foreign exchange effects and the streamlining of administration (for instance through the implementation of regional hubs) and did not affect the Sales team or Customer Services. Despite the aforementioned staff adjustments, the average number of employees and personnel-related costs were higher than in 2008. The combination of the above factors and the lower net revenue resulted in a 2 percentage point increase in SG&A to 52% of net revenue.


At CHF 39 million (30 million in 2008), R&D expenses were more than 5% of net revenue, reflecting the Group’s strategy to invest counter-cyclically in order to drive pipeline innovations to market.


Consequently, EBITDA reached CHF 218 million, CHF 56 million down from the previous year. The EBITDA margin was 30%.


Operating profit constrained by currencies and lower gross profit

After amortization and depreciation charges of CHF 53 million, operating profit (EBIT) amounted to CHF 165 million (23% of net revenue), 490 base points down from the high comparative levels of 2008, when Straumann posted 15% growth in l.c. The negative currency effect alone reduced 2009 EBIT by CHF 16 million or 110 base points.


The net financial result was CHF 8 million, an improvement of CHF 22 million from the previous year, when there was a CHF12 million impairment charge on available-for-sale assets. The underlying improvement of CHF 10 million was mainly due to foreign exchange and hedging gains. Thanks to a significant reduction in gross debt and lower interest loan rates, financial interest expenses were reduced. Financial income on the other hand remained at the prior year’s level. Thanks to efficient tax structuring, the Group achieved a tax rate of 16% as tax expenses amounted to CHF 27 million, CHF 9 million above the previous year level. Going forward, the underlying tax rate is expected to remain in the 16-17% range.


As a result of the above, full-year net profit reached CHF 146 million (20% margin) with basic earnings per share amounting to CHF 9.38.


No long-term debt ; free cash flow surpasses CHF 200 million

Net cash from operating activities jumped by more than 20% to CHF 245 million. This was due to a marked reduction in net working capital, achieved mostly through the aforementioned reduction in inventories. It also reflects the settlement of outstanding income taxes in the prior year. At CHF 31 million, capital expenditure was significantly lower than in 2008, when considerable investments were made in property, plant, equipment and software. As a result of lower demand and spare capacity, no significant investments in additional equipment for expansion were necessary. Full-year free cash flow rose sharply to CHF 215 million, with the respective margin expanding to 29%.


Net cash used for financing activities totalled CHF 96 million and includes payments of CHF 58 million for the ordinary dividend and CHF 50 million to repay a short-term loan.


As a result, cash and cash equivalents amounted to CHF 262 million on 31 December 2009. Being debt free and generating a high level of cash flow, Straumann continues to have the financial flexibility to pursue attractive investment opportunities that may arise over the coming years.


Dividend maintained

On the basis of the full-year performance, the Board of Directors will propose an ordinary dividend of CHF 3.75 per share to the General Meeting of the Shareholders. This corresponds to a payout ratio of approximately 40%.



OUTLOOK (barring unforeseen circumstances)

With consumer spending, access to credit and unemployment far from returning to pre-recession levels, Straumann considers it premature to speak of a lasting recovery and remains cautious about forecasting when underlying, sustainable growth will return to the market in which it operates. The Group assumes that this market will be flat or grow in the low-single-digit range in 2010.


Based on its clinically-proven innovative products, organizational strength, market presence, and differentiated services, the Group is convinced that it can deliver above-market performance. With the goal of simply doing more for customers and patients in 2010, it will continue to invest in all its business franchises, its innovation pipeline, and its marketing and sales organizations to create superior treatment solutions and services.


Taking this into account and assuming that there will be currency headwind in 2010, the Group expects to achieve net revenue in Swiss francs and an operating margin at least in line with the 2009 levels.



[1] The Board of Directors once again proposes a dividend of CHF 3.75 per share for 2009, payable in 2010 subject to shareholder approval. The dividend ex-date is 31 March 2010.

[2] In this release ‘exceptionals’ refers to the impairments of intangible assets and/or financial assets in 2008.

[3] Comparison of 2009 with 2008 ‘pre-exceptionals’

[4] Millennium Research Group