Elos Medtech Interim Report January 1 - June 30, 2018

Rising demand and expansion in USA

April – June 2018

•  Net sales for the second quarter of the year increased and amounted to SEK 166.0 M (155.6), corresponding to organic growth of 6.7%. Adjusted for currency fluctuations the growth was 5.8%.

•  Operating profit was SEK 5.2 M (13.5). The operating margin was 3.1% compared to 8.7% in 2017. The operating profit has been negatively impacted by non-recurring costs amounted to SEK 5.6 million.

•  Profit after net financial items amounted to SEK 5.2 M (5.9). Net financial items were positively impacted by exchange rate differences of SEK 2.4 M (-5.3).

•  Profit after tax amounted to SEK 3.4 M (4.9), corresponding to SEK 0.42 (0.81) per share.

•  Cash flow from operations was SEK 19.6 M (20.6) and after investments SEK 2.2 M (13.7).

Events during the quarter

•  As part of our expansion strategy Elos Medtech’s subsidiary, Onyx Medical, purchased land in Memphis. The purpose is to double our production space and construction will start in the third quarter.

•  The lawsuit against Onyx Medical LLC that was filed in the US Federal Court of Chicago has been concluded without imposing fault, liability or wrongdoing on the part of Onyx Medical.

Comments from the CEO, Jan Wahlström 

Elos Medtech’s strategic growth journey continues at a high pace. During the first six months of the year, we have strengthened our position as key development and manufacturing partner in the global medical technology market. Elos Medtech is a brand that represents quality, expertise and innovation. Organic growth for the quarter was 6.7 per cent, resulting in a growth rate for the first six months of 8.5 per cent. Sales for the first six months of the year were SEK 322 (297) million and with that, we have exceeded SEK 600 million on our trailing 12-month net sales. 

Our focus remains on Orthopedics and Dental Implant Systems, along with further strengthening our brand. The goal is for all units to be specialized, offering products that are best-in-class. Focused efforts will enable us to grow more quickly and efficiently. 

Our strategy with clear focus on market segments has started to show results. In Dental Implant Systems we have already implemented several changes. Our aim is a higher level of specialization and streamlining that more clearly positions us in the niche market for dental implants and prosthetics, while developing a larger service offering in product development and design. Our sales growth for the first six months was 4 per cent. We are experiencing higher demand for new projects from several of our key customers, but we have also lost a few products, primarily because customers have opted for in-house production instead. 

For Diagnostics, we’ve taken on several new projects which has strengthened our position with existing customers and we are also expanding our offering globally. Growth for the first six months of the year was 14 per cent. During the third quarter of 2017, the turbulent situation in Hearing Device & Vibration started to settle down and we expected to see a recovery in 2018. The growth trend for sales has remained robust and growth the first six months of the year was 26 per cent. 

Growth in Orthopedics was 11 per cent in the second quarter. The demand from customers in trauma and robotic surgery has increased and our American operations have grown by 22 per cent during the first six months of the year. We purchased land in Memphis during the quarter and new construction will get underway in the third quarter. The expansion will double our manufacturing floor space and we are also investing in machinery to increase capacity. The investment in Memphis reduces our tax burden by SEK 12 million over a nine-year period. The investment to increase capacity will amount to approximately SEK 100 million during 2018-2019. The lawsuit against Onyx Medical LLC that was filed at the US Federal Court in Chicago has now been concluded without imposing fault, liability or wrongdoing on Onyx Medical’s actions. The legal process had a negative impact on operating profit of SEK 1.3 million. 

Operating margin including non-recurring costs was 3.1 per cent for the quarter. Operating margin was 5.1 per cent for the first six months of the year. The Group’s profitability is thus in line with expectations except for one unit, where we are now in the process of implementing several changes. We will see a positive impact on profitability by increasing our specialization, discontinuing projects that are inconsistent with our focus and reallocating machinery between our units. 

The profit margin for the quarter, excluding nonrecurring costs was 6.5 per cent, which is in line with the previous quarter. However, our profit worsened due to a number of non-recurring costs. One was the legal process with Onyx Medical LLC, along with discontinuation of the Cresco product range and costs associated with organisational changes at our production facility in Timmersdala. However, we are working intensively with improvements and expect to report higher profits. Non-recurring costs amounted to SEK 5.6 million. 

During the first half of the year, we began rolling out our platform for growth and expansion. Elos Medtech is regarded as a stable and knowledgeable key partner. Going forward, we will work diligently with our improvement efforts. This will enable us to achieve success, growth and profitability in a market where there is robust growth. 

For further information, please contact:

Jan Wahlström, CEO, +46 70 212 18 89, e-mail: jan.wahlstrom@elosmedtech.com 

Christian Bergaust, CFO, +46 70 293 50 40, e-mail: christian.bergaust@elosmedtech.com 

For additional information about the Elos Medtech Group, visit www.elosmedtech.com

This information is information that Elos Medtech AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above on July 19, 2018, at 13:00 (CET).