Interim Report 2, January-June 2000

Interim Report 2, January-June 2000 The Nobel Biocare Group * Sales increased by 16% to SEK 999.1 million (860.0). * Dental Implant sales increased by 15% to SEK 875.9 million (761.0). * Procera® sales increased by 24% to SEK 123.2 million (99.0). The growth rate of Procera® AllCeram copings in the USA increased from 21% to 39% compared to the first quarter 2000, reaching an annual running rate of +34%. * Operating income amounted to SEK 128.4 million (116.0). This includes the reimbursement of SPP surplus funds, SEK +22.3 million, and costs for the redemption of synthetic options, SEK -9.8 million. Currency effects were negative, SEK -14.6 million. * Earnings per share amounted to SEK 3.60 (3.13). TiUnite , a new and unique titanium surface structure for dental implants developed by Nobel Biocare, was presented in July. SEK M Jan-June Jan-June Change 2000 1999 Net turnover 999.1 860.0 +16.2% of which Dental Implants 875.9 761.0 +15.1% of which Procera® 123.2 99.0 +24.4% Operating income excluding cost of synthetic options and 115.9 116.0 -0.1% before non-recurring items Operating income before non-recurring 106.1 116.0 -8.5% items Non-recurring items 22.3 - - Operating income 128.4 116.0 +10.7% Income after net financial items 109.7 98.0 +11.9% Earnings per share, SEK 3.60 3.13 +15.0% Earnings per share excluding goodwill 4.75 4.18 +13.6% amortization, SEK Group sales Nobel Biocare sales increased by 16% to total SEK 999.1 million (860.0). Dental Implant sales increased by 15% compared with the first six months of 1999. Replace Select and Brånemark System Mk III products that were launched in 1999 are experiencing strong sales growth. Nobel Biocare has strengthened its global leadership holding an estimated market share of more than 40%. Sales in Procera® reached SEK 123.2 million, an increase of 24% compared with the first six months of 1999. The growth rate for Procera® AllCeram has continuously increased during the year. Procera reports a positive result for the first six months of 2000. [REMOVED GRAPHICS] Group results Operating income was SEK 128.4 million (116.0), including expenses of SEK 9.8 million relating to the redemption of synthetic options in the first quarter of 2000 and the calculated value of future reimbursements from SPP pension funds, SEK 22.3 million. Excluding these items of a one-off nature, operating income was 115.9 million (116.0). The year-on-year currency impact was a negative SEK 14.6 million. Excluding the currency effect and the one-off items, operating income improved by 13% compared with the first six months of 1999. [REMOVED GRAPHICS] The reported operating margin was 12.8% (13.5%). Operating margin before goodwill amortization amounted to 15.7% (16.5%). The year-on-year comparable operating margin before goodwill amortization was 16.1% (16.5%) following adjustments for the non-recurring expenses of synthetic options, the non- recurring reimbursement from SPP, and currency effects. This year-on-year comparable deviation of -0.4% is primarily a consequence of business area mix as Procera, which shows a lower profitability than Dental Implants, has grown relatively more. The unfavorable development of the gross margin, 70.8% (74.1%), is primarily due to the negative currency development and the business area mix referred to above. [REMOVED GRAPHICS] The improvement in operating income for Dental Implants was hampered, primarily as a result of the year-on-year negative currency trend, which is mainly expressed in the form of reduced gross profit margin. The operating income for Procera, which was close to break-even in the first quarter, moved into profitability in the second quarter. This has been possible despite start-up costs as a result of establishing a second manufacturing facility for Procera. Procera is in the start-up phase of establishing its products in the marketplace and the focus remains on sales growth. Productivity improved at both the Yorba Linda and the Karlskoga plant. Also the Procera facilities improved productivity in terms of variable cost per product produced. Operating expenses, excluding the cost of redeeming synthetic options, as a percentage of sales amounted to 55.4% (56.4) in the first half of 2000. Depreciation, SEK 29.4 million (26.2), increased by SEK 3.2 million. Goodwill amortization amounted to SEK 28.9 million (26.2). Financial income and expenses, net, totalled SEK -18.7 million (-18.0). Income after net financial items amounted to SEK 109.7 million (98.0). Business area Dental Implants Dental implants are used permanently to replace missing teeth. A screw-shaped element is installed in the jawbone and functions as a replacement for the natural dental root. The products are offered to dentists for the treatment of all types of missing teeth and are used at around 40,000 clinics in some 50 countries. Nobel Biocare markets dental implants under three brands, Brånemark System®, Steri-Oss® and Replace , with a global market share of some 40%. So far, 1.2 million patients have been treated. The positive global sales trend for dental implants continues. Sales within the business area increased by 15% in the first six months and totalled SEK 875.9 million (761.0). The total market is expected to grow by more than 10%. Replace Select is currently the fastest growing implant brand on the market and Brånemark System is maintaining its position as the world's leading dental implant brand, accounting for approximately two-thirds of Nobel Biocare's dental implant sales. Nobel Biocare sales increased by 9% in North America and 17% in Europe (excluding the Nordic region). Sales are developing favorably in Japan and strong growth is also being achieved in Latin America. The Nobel Biocare Team Day 2000, held in July in Gothenburg, Sweden, attracted close to 2 000 customers from 50 countries. A new titanium surface structure developed by Nobel Biocare was presented for the first time at the Team Day meeting. This innovation, called TiUnite , has an enlarged surface area which improves the bone response and enables faster bone healing. The initial clinical tests show very promising results. The new surface will be introduced on Brånemark System fixtures and the market launch will start during the fall of 2000. The interest on the market for modified surfaces is very high. Brånemark Novum also attracted attention at the Team Day meeting. This new concept of new teeth in one day will be launched in November 2000. The All-in-One individualized bridge work in titanium for implant prosthetics was globally introduced. All-in-One, which is designed and produced with Procera® technology, adds a new potential of more than 200 000 implant bridges equaling approximately SEK 1 billion. Marketing will start in Europe in the course of 2000-2001 and in North America in 2001. Distribution of Gore dental membranes In June 2000, Nobel Biocare became the world-wide exclusive distributor of membrane regeneration products for W.L. Gore & Associates, USA. By adding this product line, Nobel Biocare is strengthening its customer offer and utilizing its global distribution power more effectively. This position also gives Nobel Biocare the advantage of having access to a customer base of competitive users. Sales of regenerating membranes are developing according to plan. Business area Procera® Procera® is a CAD-CAM-based process for the industrial production of the inner core, the coping, of dental crowns made of ceramic material or titanium. A Procera® AllCeram dental crown has superior strength and esthetic properties, as well as a significantly lower material cost, compared with conventional dental crowns. So far, more than 300,000 patients have been treated with Procera®. The product system is marketed to dental laboratories, which invest in computer-aided equipment from Procera®. Information is sent by modem to a Procera® production unit, where the dental coping is produced industrially and then shipped to the dental laboratory. After applying the porcelain to the surface, the dental laboratory delivers the crown to the dentist. Sales in Procera® totalled SEK 123.2 million (99.0) and increased by 24% compared with the first six months of 1999. The volume increase for Procera® AllCeram was 34% compared with the same period in 1999 after a continuous improvement in growth rate during the year. In North America, Procera® AllCeram sales increased by 30%, in Europe by 41% and in other markets by 84%. After a slow start in the first quarter, the US market, which accounts for approximately two-thirds of Procera AllCeram sales, improved its growth rate in the second quarter to 39%. The positive sales trends for both scanners and copings have continued in Southern Europe and Germany. In Brazil, the initial response has been very favorable. The annual running rate for copings at the end of June 2000 was 650,000 units compared with 600,000 at the end of March 2000. Sales of Procera® Scanners totalled 137 during the first six months of 2000 and a total of 937 scanners have now been installed worldwide. Procera® scanners and copings have now been approved by the Japanese authorities and the first group of laboratories will start using Procera during the fall of 2000. Several new product introductions took place at the International Team Day meeting in July. Procera® AllCeram Laminates for esthetic dentistry and a new upgraded version of the Procera Scanner were launched. Investments Capital expenditures totalled SEK 43.1 million (44.3). Personnel The number of employees at the end of June 2000 was 1 191, of whom 365 were employed in Sweden. The corresponding figures in 1999 were 1 109 and 357, respectively. Liquidity and financial position Liquid assets totalled SEK 98.9 million (31/12/1999: SEK 121.8 million). Operating cash flow before capital expenditure amounted to SEK 122.3 million in the first six months of the year. Operating cash flow was SEK 79.3 million in the same period. Net debt was reduced by SEK 13.6 million in the second quarter. The equity/assets ratio was 60% (31/12/1999: 61%). Shareholders' equity per share was SEK 54.06 (31/12/1999: SEK 52.52). The number of shares totalled 25,098,195 (31/12/1999: 24,922,934) after the further redemption of warrants issued in connection with the acquisition of Steri-Oss Inc. Swedish Pension Plan SPP surplus funds The group's share of SPP's surplus is SEK 23.5 million. Approximately SEK 8.2 million will be reimbursed to the company in September 2000. The amount of the payment in September 2000 and the discounted present value of the future payments have been recorded as a non-recurring item, SEK 22.3 million. Synthetic options Operating income in the first quarter of 2000 was charged with SEK 9.8 million for the redemption of synthetic options held by present and former employees of Nobel Biocare. All the options had been redeemed as of 31 March, 2000. ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2000/08/16/20000816BIT00500/bit0001.doc The full report http://www.bit.se/bitonline/2000/08/16/20000816BIT00500/bit0002.pdf The full report