* Net revenue rises 13% in local currencies (15% in CHF) to
CHF 352 million
* Operating and net profit grow over-proportionately by 18%
and 34% respectively
* Cash flow generated from operating activities jumps 56%
and earnings per share increase by 34% to CHF 6.10
* Combination with etkon provides immediate presence in
CAD/CAM tooth restoration business; etkon franchise partners
in U.S. and Benelux sell shareholdings to Straumann
* Japanese and Korean distributors acquired, giving direct
access to Asia's two largest markets
* Experienced global sales executive completes Group
Management team; job creation continues as international
business expands
Key figures
(in CHF million) H1, 2007 H1, 2006
Net revenue 351.7 305.4
Growth in % 15.2 19.3
Growth in local currencies in % 13.1 16.6
Operating profit 107.8 91.4
Margin in % 30.7 29.9
Growth in % 17.9 13.7
Net profit 94.9 70.9
Margin in % 27.0 23.2
Growth in % 33.9 4.1
Earnings per share (in CHF) 6.10 4.54
BASEL, Switzerland, August 8, 2007 (PRIME NEWSWIRE) -- In the first six months of 2007, Straumann net revenue grew 13% in local currencies (l.c.), or 15% in Swiss francs, to CHF 352 million. Operating profit climbed 18% to CHF 108 million, contributing to a 34% jump in net profit to CHF 95 million. As a result, the operating and net profit margins expanded to 31% and 27% respectively, while earnings per share rose 34% from the first half of 2006 to CHF 6.10. Cash generated from operating activities surged 56% to CHF 93 million.
Entry into promising CAD/CAM dental market through acquisition of etkon
One of the main strategic highlights in the first half of 2007 was Straumann's friendly acquisition of etkon AG, a rapidly emerging company in the fast-growing market for CAD/CAM-based restorative dentistry. The combination of the two companies positions Straumann as a unique dental partner providing regenerative, restorative and replacement solutions.
The acquisition took place at the beginning of March and Straumann currently owns 78% of etkon shares, which were purchased for EUR 78 million. The remaining shares will be acquired in the near future, bringing the total purchase consideration for etkon AG to EUR 100 million.
In addition to this, Straumann recently acquired the outstanding shares of the etkon franchise partners in the US and Benelux countries: on 19 July, Straumann bought the outstanding 49% of etkon BeNeLux & France N.V. for EUR 2.1 million in cash with an additional performance-related payment of up to EUR 0.8 million, and on 31 July, the Group signed an agreement to acquire the remaining 46% of the shares of etkon USA, Inc. for a cash consideration of USD 3.8 million.
Direct access to customers in Asia's two largest markets
In the course of the first half, Straumann worked towards its goal of gaining direct access to its customers in Asia's two largest markets for dental implants. On 2 July, the Group gained control of Daishin Implant System Co. Ltd, the exclusive distributor of Straumann implant products and services in Japan for CHF 75 million plus a performance-based consideration of up to CHF 10 million. Even more recently, on 7 August, Straumann succeeded in acquiring its Korean distributor B.I. Trading for up to CHF 12 million. These transactions provide Straumann with its own fully-fledged local subsidiaries to serve the Japanese and Korean dental markets directly.
Progress towards resolving the Biora import detention in U.S.
Straumann's Biora products are subject to an import detention in the U.S. in connection with the FDA 'warning letter' received by the company in January. At the end of the first quarter, the FDA completed its review of the company's response to the letter and determined that Biora's responses to the observations appeared to be adequate. However, a re-inspection is required before the import detention can be lifted. The company does not expect this to happen before year end. Full-year U.S. sales of the products in question would normally amount to approximately CHF 11 million.
SLActive surface technology: the success story continues and a new chapter unfolds
Less than two years after its initial launch, Straumann's third generation implant surface SLActive is now sold on every fifth Straumann implant in most markets as customers increasingly appreciate the reduction of implant failure as major benefit. The superiority of SLActive is further supported by a new study in 35 patients, which showed successful outcomes despite early loading in very poor quality bone(1). In the first half of 2007, SLActive was the subject of no fewer than six peer-reviewed articles, of which one has been published, one is in press, and four have been accepted for publication. SLActive will be one unique differentiating attribute of an entirely new generation of bone-level implant pioneered by Straumann.
A new generation of bone-level implant coming soon
In the second quarter, important research findings were presented on Straumann's exciting new bone-level implant, including intermediate data from the first clinical study(2). Excellent esthetic results were reported with regard to both hard and soft tissues indicating a low risk for recession, and no esthetic complications. At launch, this implant will be backed by an unprecedented scientific and clinical program, which together with the compelling data on SLActive, will set a new benchmark in implant dentistry. With its array of innovative features, it will give Straumann access to a significant market segment in 2008 and will offer clinicians every implant option in Straumann quality, with Straumann simplicity and the unique proven benefits of SLActive.
New clinical evidence supporting Straumann regenerative products
Results were also presented from a multicenter randomized controlled clinical trial of Straumann BoneCeramic involving 48 sinus floor elevations and 110 dental implants(3). The study incorporated a direct head-to-head comparison with a leading competitor and further confirmed the excellent osteoconductivity and convenient handling characteristics of Straumann BoneCeramic, which make it an ideal fully-synthetic alternative for guided bone regeneration.
Clinical results were also presented on Straumann's innovative, in situ-forming membrane(4). The study, which included 37 patients with bone dehiscence defects around implants, underlined that the membrane can be successfully used to treat bony defects. Importantly it also showed significant time savings and handling convenience. Straumann's activities towards launching the product will continue as soon as the FDA re-inspection of Biora has been successfully completed.
Top executive recruited and job creation continued
In the course of the first six months, Straumann's global workforce increased by 146 to 1680, as the Group continues to expand and grow its global business. Of the increase, approximately half were newly created jobs.
To lead and drive global sales, Franz Maier was appointed Executive Vice President, Head of Global Sales, a newly created top management position in the Straumann Group. Mr Maier, who joined Straumann from Procter & Gamble in July, is an accomplished and experienced manager with a strong track record in international sales and marketing in a business-to-business environment. His addition completes Straumann's Executive Management Board, which was established at the beginning of the year.
New significant shareholder
In the second quarter, Baillie Gifford, an independent investment management firm based in Edinburgh, UK, informed Straumann that it had increased its stake in the company to 789 525 registered shares, representing 5.1% of Straumann Holding AG.
Financial performance
Double-digit net revenue growth continues
In the first six months of 2007, Straumann's net revenue rose 13% in local currencies. 2% points of revenue growth was due to the acquisition of etkon, which contributed CHF 10 million to first-half revenues. The remaining 11% points were generated organically, although this would have amounted to 13% excluding the impact of the U.S. import detention on Biora products. In Swiss-franc terms, net revenues rose 15%, reflecting a strengthening of the Euro against the franc.
Europe
Europe saw growth accelerate in the second quarter, boosted among other things by the addition of etkon. Regional first-half revenues climbed 15% in l.c. or 20% in Swiss francs to CHF 233 million, representing 66% of Group net revenue. Germany continued to post double-digit growth, and strong growth was maintained by Straumann's UK and Iberian subsidiaries. Excluding etkon, European revenue grew 11% in local currencies or 15% in Swiss francs.
North America
Revenue growth in North America was impacted by the import detention on Biora products in the U.S. With the exception of January, first-half revenue growth was thus driven by the non-regenerative business, which grew 14% in local currencies over the full six-month period. Overall, Straumann's North American revenues edged up 7% in l.c. to CHF 77 million, or 22% of Group net revenue. The increase in Swiss francs was 3%, reflecting the weakening of the dollar against the Swiss franc.
Asia/Pacific and RoW
Revenue in the Asia/Pacific region increased a moderate 5% to CHF 32 million, or 9% of Group net revenue. Relatively strong first-quarter revenue growth was followed by a decline in the second quarter as both Japanese and Korean sales slowed in the lead up to the transition of the businesses to Straumann. Australia and New Zealand posted continued strong growth. Elsewhere, in the rest of the world, revenues rose 56% to CHF 10 million.
Operating profit rises to CHF 108 million
As a proportion of net revenue, total costs, excluding other income, decreased 0.6% points to 69.8%. The cost of goods sold dropped from 19.5% to 17.9% as the expenses resulting from the production expansion in 2006 diminished and production processes, especially SLActive production, improved. Consequently, the gross profit margin exceeded 82% for the first time in the company's history.
In contrast, selling and general administrative costs collectively increased to 48% of net revenue, mainly due to staff increases at Straumann's subsidiaries, to expand the global business, and due to charges arising from the etkon acquisition, including the amortization of CHF 1.6 million for intangible assets. (The purchase price for etkon has been preliminarily allocated to recognize EUR 32 million of the difference between the fair value of the consideration paid and the fair value of the net assets acquired as intangible assets including technology, customer relationships and brand, which will be amortized over 10 and 20 year periods.)
Licensing revenues, rent from Straumann's former site in Waldenburg and disposals of fixed assets contributed to other income of CHF 1.7 million.
As a result of all these factors, first-half operating profit (EBIT) rose 18% to CHF 108 million, and the EBIT margin expanded by almost one percentage point to 30.7%.
Operating profit before depreciation and amortization (EBITDA) increased 17% to CHF 127 million, resulting in an improvement of the EBITDA margin from 35.4 to 36.0%.
Net profit increases to CHF 95 million
The acquisition of etkon was financed through a Euro loan, which will be repaid using revenues generated in Euro. This loan resulted in first-half interest payments, which together with other financial expenses amounted to CHF 2.5 million. This was offset by financial income of CHF 2.5 million.
A one-time revaluation of deferred tax liabilities and an improved tax structure resulted in a first-half tax rate of 12%. The underlying tax rate going forward is expected to be between 17 and 18%. After tax, first-half net profit amounted to CHF 95 million, corresponding to a net profit margin of 27%.
Capital expenditure returns to normal level
Net cash flow from operating activities reached CHF 93 million, leading to an improved operating cash flow margin of 26% compared with 19% for the first six months of 2006. Net cash flow for investing activities amounted to CHF 142 million, of which CHF 126 million were due to the etkon acquisition and CHF 15 million due to capital expenditures. As a result of this, free cash flow was a negative CHF 49 million.
The combination of all these activities together with a dividend payment of CHF 47 million meant that overall cash and cash equivalents on 30 June 2007 amounted to CHF 202 million.
Outlook
Barring unforeseen circumstances, Straumann foresees 2007 full-year net revenue growth of around 21% in local currencies or 22% in Swiss francs including the acquisition effects of etkon and the Japanese and Korean distributors as well as the import detention on Biora products in the US.
While the acquired businesses will contribute to Group revenues and profits, they will not contribute to margin expansion in the near term. Taking this into account, Straumann's full-year operating and net profit margins are expected to reach 27% and 22% respectively. The operating profit margin of the underlying business is anticipated to be around 30%.
Disclaimer
This release contains certain "forward-looking statements", which can be identified by the use of terminology such as "expectations", "will", "up to", "foresees", "expected", "anticipated", "outlook", or similar wording. Such forward-looking statements reflect the current views of management and are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Group to differ materially from those expressed or implied. These include risks related to the success of and demand for the Group's products, the potential for the Group's products to become obsolete, the Group's ability to defend its intellectual property, the Group's ability to develop and commercialize new products in a timely manner, the dynamic and competitive environment in which the Group operates, the regulatory environment, changes in currency exchange rates, the Group's ability to generate revenues and profitability, and the Group's ability to realize its expansion projects in a timely manner. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this report. Straumann is providing the information in this release as of this date and does not undertake any obligation to update any forward-looking statements contained in it as a result of new information, future events or otherwise.
About Straumann
Headquartered in Basel, Switzerland, the Straumann Group (SWX:STMN) is a global leader in implant and restorative dentistry and oral tissue regeneration. In collaboration with leading clinics, research institutes and universities, Straumann researches, develops and manufactures dental implants, instruments, prosthetics and tissue regeneration products for use in tooth replacement and restoration solutions or to prevent tooth loss. Straumann currently employs approximately 1790 people worldwide and its products and services are available in more than 60 countries through its broad network of distribution subsidiaries and partners.
Media and analysts' conference
Straumann will present the 2007 first-half results to representatives of the media and financial community at 10.00h Swiss time in Basel. The event will be webcast live on the internet and a playback will be available. A telephone dial-in service is also offered for analysts and journalists.
Dial in: Switzerland: +41 44 580 34 09; International: +44 1452 560 068; Pin-code: 10106095.
Further information and the presentation slides are available at www.straumann.com.
Photographs
A selection of photographs of Straumann, its activities, locations and executives is available at www.straumann.com.
Further key reporting dates 2 November 2007 Q3 and 9M sales 7 February 2008 FY 2007 28 April 2008 Q1 sales 7 August 2008 Q2 sales and H1 results 30 October 2008 Q3 and 9M sales
Details of Straumann roadshows and other events for investors are published on www.straumann.com.
Full Press Release, including all financial tables: http://www.newsbox.ch/public/12518/att/13806_mediarelease.pdf
(1) Roccuzzo M: Data presented at the Osteology Congress,
Monaco, May 2007
(2) Buser D (University of Bern) and Belser U (University
of Geneva): Data presented at the ITI World Symposium,
New York, April 2007
(3) Cordaro L (Eastman Dental Institute, Rome); Data presented
at the ITI World Symposium, New York, April 2007
(4) Jung R (University of Zurich): Data presented at the ITI
World Symposium, New York, April 2007