Q1 2025 Coloplast AS Earnings Call
[music].
And Valentin not the chorus call operator.
Speaker Change: I would like to remind you that all participants will be in listen only mode and the conference is being recorded.
Speaker Change: The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star one on your telephone.
Speaker Change: For operator assistance, Please press star and zero the conference must not be recorded for publication or broadcast.
Speaker Change: At this time, it's my pleasure to hand over to Chris Tom Wilson, President and CEO. Please go ahead.
Speaker Change: Good morning, and welcome to our Q1 'twenty four 'twenty five conference call Christine belongs in the sea of coal plus and I'm joined.
Speaker Change: By our CFO honest learnings call on our Investor Relations team.
Speaker Change: We will start with a short presentation by Anders and myself and then open up for questions. As we usually do please turn to slide number three.
Speaker Change: Yes.
Speaker Change: We delivered 8% organic growth on a reported EBIT margin before special items of 27%, which was in line with our expectations.
Speaker Change: Adjusted return on invested capital after tax and before special items was 15% on par with last year.
Speaker Change: Let me start today's call with a few highlights.
Speaker Change: On the 14th of November 2020 for.
Speaker Change: The final local coverage determination policy for skin substitutes was announced.
Speaker Change: <unk> was one of the few products that was added back to the final list of covered products as a result of the strong clinical evidence backing the efficacy of the fishkin technology.
Speaker Change: Following a freeze of all regulatory guidance not yet in effect by the New U S administration and the implementation date of the final LCD policy has been moved by two months to the 13th of April 2025.
<unk> products are currently covered number remain covered once the final LCD policy is implemented and as such this updated implementation timeline is not expected to impact.
Speaker Change: Trading.
Speaker Change: Next in December 2024, we announced the divestment of our skin care business.
Speaker Change: The divestment is a key initiative from the simplicity and profitability improvement program for our advanced wound care business area, which will result in a positive impact on the group EBIT margin of around 30 basis points This financial year.
Speaker Change: The divestments will reduce reported revenue for 2425 with around 350 million Danish kroner or around one five percentage points impact on reported revenue growth.
Speaker Change: Now, let's look at a few performance highlights from Q1.
Speaker Change: Our chronic care business is off to a good start with both Ostomy and continence care outgrowing the market.
Speaker Change: Continence care Q1 marked the first quarter in which <unk> was the main contributor to growth driven by the male catheter.
Speaker Change: We continue to receive strong feedback on <unk> and its micro <unk> zone technology from both users and health care professionals.
Speaker Change: We also continue the rollout of the female version of the catheter are now available in nine markets with the U S. As the latest launch market.
Speaker Change: Our two newest additions to the portfolio.
Speaker Change: <unk> medical and <unk> are also off to a good start with continued strong momentum at <unk>.
Speaker Change: Digit growths in the quarter.
Speaker Change: Finally, Q1 also marked a soft start in our interventional urology business and our emerging markets region.
Speaker Change: And international Urology growth in the quarter was impacted by a voluntary product recall related to packaging.
Speaker Change: Initiated in December 2024.
Speaker Change: The issue with the packaging has been resolved and we will resume sales of the affected products here in February.
Speaker Change: Emerging markets growth was impacted by a high baseline last year, but despite the softer start I expect an improvement.
Speaker Change: In both businesses during the year.
Speaker Change: Now, let's look at today's results in more detail could I ask you to please turn to slide number four.
Speaker Change: In Ostomy care, both organic growth and growth in Danish kroner was 7% in the first quarter.
Speaker Change: So EMEA portfolio was the main growth contributor in Q1.
Speaker Change: Our latest addition to the Ostomy care portfolio since Romeo and Black is off to a good start in the 12 markets, where the range has been launched.
Speaker Change: Bravo range of supporting products also made a solid contribution to growth, while Austin SURA and a sore alternate portfolios continue to drive growth in emerging markets.
Speaker Change: From a geographical perspective growth in Q1 was driven by solid contributions from Europe, and the U S. Emerging markets region was impacted by a high baseline last year as mentioned earlier.
Speaker Change: <unk> delivered a softer Q1.
Speaker Change: The U S posted double digit growth in the quarter, which includes solid underlying demand and also some benefit from a lower baseline last year.
Speaker Change: In continence care, both organic growth and growth in Danish krone were 7% for Q1.
Speaker Change: The larger portfolio was the main growth contributor in the quarter driven by the male catheter in the UK and Germany.
Speaker Change: The speed of catheter <unk> catheter has also contributed to growth in the quarter.
Speaker Change: Our two smallest segments incontinence care about care and collecting devices, both contributed to growth in Q1.
Speaker Change: From a geographical perspective growth was driven by Europe, and the U S. While growth in emerging markets was impacted by a high baseline as mentioned previously.
Speaker Change: Voice and respiratory care posted 11% growth for Q1 with growth in Danish krone up 10%.
Speaker Change: Strong performance in voice and respiratory care continues to be driven by broad based contributions from both laryngectomy in tracheostomy, both of which grew at a double digit rate in Q1.
Speaker Change: And then injected knee growth was driven by an increase in the number of patients served in existing and new markets as well as an increase in patient value driven by the <unk> portfolio.
Speaker Change: A recent example of how we continue to develop the line injecting the market comes from France.
Speaker Change: While reimbursement for heat moisture exchangers was expanded from one <unk> per day to <unk>.
Speaker Change: Multiple <unk> per day, allowing users better choice.
Speaker Change: Better situational use of the products.
Speaker Change: Growth in Tracheoscopy in the quarter was driven by continued solid demand and an increase in the number of patients served from a geographical perspective, all regions contributed to growth led by Europe and the U S.
Speaker Change: The advanced wound care organic growth was 12% for Q1 and growth in Danish kroner was 7%.
Speaker Change: Reported growth includes four percentage points negative impact from the divestment of the skincare business, reflecting one month of impact.
Speaker Change: <unk> was the main growth contributor in the advanced wound care with continued solid momentum and growth of 32% in Q1.
Speaker Change: Growth was broad based with contributions from both the inpatient and outpatient segments in.
Speaker Change: <unk> operating profit margin, excluding PPA amortization was 12% in the quarter inline with expectations.
Speaker Change: The advanced wound dressings business grew 6% in Q1.
Speaker Change: From a product perspective bite and fiber was the main growth contributors followed by a <unk> silicone and October 2020 for addressing portfolio was strengthened with the launch of <unk> Super absorber.
Speaker Change: Often not adhesive dressing for the treatment of warrants with high volumes of exited.
Speaker Change: Product has been launched in key European markets with very positive feedback.
Speaker Change: International Urology, both organic growth and growth in Danish krone or 1%.
Speaker Change: As mentioned earlier growth in the quarter includes negative impact from the voluntary product recall in bladder health in surgery of around 25 million Danish kroner.
Speaker Change: We expect continued negative impact from the product recall in the second quarter.
Speaker Change: Around 15 million Danish kroner, and as I mentioned earlier sales of the effective products will resume here in early February we.
Speaker Change: We expect to recover the majority of the lost revenues in the second half of the year as we continue to see unmet demand in the market for the affected products.
Speaker Change: The negative impact from the product recall was partly offset by a solid quarter in the endo urology business driven by our laser equipment, the sodium fiber laser drive.
Speaker Change: The men's health business in the U S. Also contributed to growth while the women's health business had a neutral impact on growth.
Speaker Change: From a geographical perspective, the U S was the main growth contributor in Q1, while Europe detracted from growth due to the product recall.
Speaker Change: I'll now hand over to Anders who will take you through the financials and outlook in more detail.
Anders: Please turn to slide number five.
Anders: Thank you Christian and good morning, everyone.
Anders: Reported revenue for Q1 increased by 420 million, Danish kroner, or 6% compared to last year.
Anders: Organic growth contributor around 500 million Danish kroner around 8% to reported revenue.
Anders: Revenue from divested operations, mostly related to the divestment of the skincare business and December 24 reduced reported revenue by 47 million Danish kroner around 1%.
Anders: Foreign exchange rates to reduce reported revenue by 32 million things corner or around 1%, mostly related to the depreciation of a basket of emerging market currencies such as the <unk>.
Anders: <unk> peso, the Brazilian real against the things corner as well as the Japanese yen against the Danish kroner.
Anders: This negative impact was only partly offset by the appreciation of the British pound against the Danish kroner.
Anders: Please turn to slide number six.
Anders: Gross profit for Q1 amounted to $4 8 billion things came off corresponding to a gross margin of 68% on par with last year.
Anders: Gross margin was positively impacted by favorable development in input cost price increases and country and product mix.
Anders: The positive development in the above mentioned factors was partially offset by ramp up cost of our manufacturing sites in Costa Rica and possible.
Anders: Gross margin also included a negative impact from currencies of around 40 basis points.
Anders: Operating expenses for Q1 amounted to around $2 8 billion things corner, increasing by 6% compared to last year.
Anders: The distribution to sales ratio for Q1 was.
Anders: 33% compared to 32% in Q1 last year.
Anders: <unk> and distribution cost was driven by continued commercial investments in <unk> and higher sales activities across markets.
Anders: The distribution costs also included around 20 million Danish kroner extraordinary costs related to the new distribution center in the U S.
Anders: The admin to sales ratio for Q1 was 12% compared to 5% last year, primarily impacted by a high baseline as well as benefits from synergies from the <unk> medical integration.
Anders: The R&D to sales ratio for Q1 was 3% of sales compared to 4% last year.
Anders: Overall this resulted in an operating profit before special items of $1 9 billion Danish kroner in Q1, and a 5% increase compared to last year.
Anders: The EBIT margin before special items for Q1 was 27% compared to 28% last year.
Anders: The EBIT margin continues to include negative impact of around 100 basis points from <unk>, including the PPA amortization costs.
Anders: <unk> also had a negative impact on the reported EBIT margin of around 40 basis points, most related to the depreciation of a basket of emerging market currencies as well as the Japanese yen against the Danish kroner.
Anders: Financial items in Q1, and an expense of 69 million Danish kroner compared to a net expense of 253 million Danish kroner in Q1 last year.
Anders: Driven mostly by interest expenses related to the financing of the answers medical acquisition.
Anders: The finance expenses were partly offset by gains in balance sheet items against the loss and balance sheet items in last year.
Anders: The ordinary tax expense in Q1 was 342 million Danish kroner with an ordinary tax rate of 22% on par with last year.
Anders: However, the total tax expense and effective tax rate was impacted by an extra or extraordinary tax expense of 336 million things corner related to the transfer cases in today's for province, you from Iceland to Denmark.
Anders: As a result of the extraordinary tax expense.
Anders: Effective tax rate in Q1 amounted to 41%.
Anders: The <unk> IP transfer has made to ensure consistency with our tax model and will help us maintain simplicity in our infrastructure as we initiate the integration of <unk>.
Anders: The IP transfer will have a similar quarterly impact on the tax expenses for the rest of this financial year as a result of the IP transfer and extraordinary tax payment impacting cash flows will be made in Iceland.
Anders: 26 27 at the earliest.
Anders: The payment in Iceland will be fully offset by reduced tax payments in Denmark for a period of around seven years, starting from 'twenty four 'twenty five.
Adjusted for the <unk> IP transfer net profit before special items in Q1 was $1 4 billion to east West.
Anders: 17% increase compared to last year adjusted diluted earnings per share before special items also increased by 17% to $6 three eight Danish kroner.
Anders: Please turn to slide number seven.
Anders: Operating cash flow for Q1 was an inflow of 2 billion Danish kroner compared to an inflow of $1 8 billion things corner in Q1 last year.
Anders: Development in cash flows was mostly driven by positive development and changes in working capital driven by trade receivables and inventories, partially offset by an increase in interest payments.
Anders: Cash flow from investing activities was an outflow of 133 million Danish kroner compared to an outflow of 267 million last year. The development in cash flow from investing activities. In Q1 includes positive impact of 192 million Danish kroner from the divestment of the skincare business.
Anders: Capex in Q1 amounted to 308 million Danish kroner with a capex to sales ratio of 4% on par with last year.
Anders: As a result, the free cash flow for Q1 was an inflow of $1 9 billion things corner compared to an inflow of $1 5 billion things corner last year.
Anders: <unk> the positive impact from the skin care divestment, the adjusted free cash flow with.
Anders: It was an inflow of $1 7 billion Danish kroner, or an 11% increase from Q1 last year.
Anders: The trailing 12 months cash conversion was 85%.
Anders: Net working capital amounted to around 25% of sales on par with last year.
Anders: Now, let's look at the guidance for 'twenty four 'twenty five financial year, Please turn to slide number eight.
Anders: For the 24 25 financial year, we continue to expect organic revenue growth of 8%, 9% and an EBIT margin before special items of around 28%.
Anders: The assumptions on both organic growth and EBIT margin before special items outlined in November still lastly, Holt.
Anders: Reported revenue growth in Danish krone is now expected to be around 7%.
Which includes around one five percentage points impact from the skincare divestment and the neutral.
Anders: The impact from currencies.
Anders: On organic revenue growth guidance assumes continued good momentum and stable supply and distribution of products across the company.
Anders: And key developments since November is the product recall intervention, urology, which creates a higher level of uncertainty, but as mentioned earlier. We are optimistic that we can recover majority of the lost sales in the second half of the year.
Anders: On <unk>, we continue to expect contribution of around one percentage point to group organic growth and the updated timeline for implementation of the final LCD does not change our expectations.
Anders: On EBIT margin before special items, we continue to expect benefit from low inflationary pressure across cost categories and benefit from the profitability improvement initiatives in advanced wound care of around 30 basis points, mostly related to the skincare divestment.
Anders: You're also starting to see a gradual improvement in the extraordinary costs related to the establishment of the U S distribution syndrome, and we are on track to reach a more.
Anders: Our normalized cost level at the end of Q2.
Anders: <unk> as we continue to expect the year with improved profitability. However, the impact for the group is still expected to remain at around minus 100 basis.
Anders: Basis points.
Anders: Finally currencies I expect it to have a limited positive impact on the EBIT margin with improvement expected as of Q2.
Anders: In terms of facing we expect both organic growth and the EBIT margin to be second half weighted.
Anders: But 'twenty four 'twenty five I continue to expect around 130 million Danish kroner and special items.
Anders: Net financial expenses for 'twenty four 'twenty five is still expected at around minus 715 million things Kona most.
Anders: Mostly related to interest expenses from the financing of medical acquisition.
Anders: Our ordinary tax rate for 'twenty four 'twenty five is still expected to be around 22%. However, as a result of the closest IP transfer from Iceland to Denmark. The effective tax rate is expected to be around 40% for the year.
Anders: Our long term expectations for tax rate of around 22 or 23% unchanged.
Kevin: Kevin do you still expect it to be around $1 4 billion things coma and includes investments related to the establishment of new manufacturing site impossible.
Kevin: Our net working capital I still expect the net working capital to sales ratio in 2425 in line with our long term expectations of around 24%.
Kevin: Finally, before we move to Q&A I would like to mention that we will host a capital markets day in Denmark on the second of September 25.
Kevin: Where we will present, our new five year strategy to the market.
Kevin: We will share further details about the event in due time.
Kevin: We look forward to seeing many of you in person in September.
Kevin: So thank you very much operator, we are now ready to take questions.
Kevin: We will now begin the question and answer session.
Kevin: We have to ask a question my breath and one on the telephone.
Kevin: We'll hear at <unk> to go through that you have entered the queue.
Kevin: If you wish to remove yourself from the question queue, you May press star and two.
Kevin: Question is on the phone are requested to disable the loudspeaker mode. When asking your question anyone who has a question you May Press Star then one.
Kevin: At this time.
Moderator: The first question comes from Hasan <unk> from Barclays. Please go ahead.
Hasan: For taking my questions I have three please firstly a high level question on execution Cola plus given recent distribution center issues as well as the small bladder health recall, what gives you confidence that these are isolated issues and that we should see more call it plus like performed.
Moderator: Thats going forwards.
Speaker Change: <unk> on top line guidance, Christine you talked about the lower end of the range, reflecting an adverse outcome on the LCD last year. So is the upper end of the range now more likely what are the key pushes and pulls fuel mind when it comes to growth for the full year and as Lou just still tracking ahead of internal expectation.
Speaker Change: And then thirdly longer term within interventional urology can you talk about how you're thinking about deepening penetration in the Ips segment, which is low today.
Speaker Change: <unk> launches and how you see coverage developing in this segment. Thank you.
Speaker Change: It sounded an awful like five questions to me Hassan but.
Speaker Change: Why don't I take a step take a stab at that so on the first question high level on an execution.
Speaker Change: We don't run a perfect company.
Speaker Change: But we've had two two setbacks over the last 12 18 months, one related to a distribution center and a quality problem.
Speaker Change: In urology.
Speaker Change: We have dealt with us I'll say the distribution center went back to service levels.
Speaker Change: And there'll be a little bit of cost lingering effect.
Speaker Change: We will very soon be out of we have taken the learnings.
Speaker Change: Consequences from this.
Speaker Change: And then I'll say.
Speaker Change: The company manufactures.
Speaker Change: More than one five of 1 billion medical devices from time to time.
Speaker Change: Quality issues happen you should expect that we run a high level high quality execution company.
Speaker Change: But not that we.
Not that we run a perfect company Hassan, but these are certainly aberrations that I do not expect to repeat.
Speaker Change: On top line range, we have.
Hassan: Guiding for eight to nine.
Hassan: So we're also guiding for a profile to growth this year, where we are weighted to the second half what will drive what will drive a pickup.
Hassan: Pick up in second half.
Hassan: It is of course that we get out of the back order situations that we've had around IU. We still continue to get good contributions to growth from from innovation and of course that our new acquisitions continued to deliver.
Hassan: A little too early to guide, where we are on the range with just one quarter in.
Hassan: We also.
Hassan: We also would like to see the LCD take effect of course, but so far we're maintaining guidance and I expect that we will land comfortably in our range.
Hassan: On IQ and the question on Ips.
Hassan: For me right now.
Hassan: Everything is about the clinical trial Hassan and.
Hassan: What we can do with that technology will depend on the quality of the results that we get.
Hassan: And.
Hassan: And we will talk a lot more to how we think about commercializing the technology once we have the <unk>.
Hassan: Clinical data.
Hassan: We have of course thought about.
Hassan: How you do that what the commercial investments look like what kind of training programs you put in place what the commercial plan will look like but at the end of the day the strength of the clinical data will determine what kind of reimbursement that we will be able to command and therefore also the strength of the case that we can make to clinicians in the market. So I would like to.
Hassan: Speak more to that once I've got more clinical data.
Hassan: In hand, and then we can share what the commercial plan will look like.
Hassan: Perfect. Thank you I'll jump back in the queue.
Speaker Change: Next question comes from decline on Clark's from RBC capital markets. Please go ahead.
Speaker Change: Hi, guys. Thanks for taking the questions.
Speaker Change: And just talking with carrier.
Speaker Change: <unk>.
Speaker Change: If you read commentary coming from.
Speaker Change: A different manufacturers.
Speaker Change: Around the scope for the products included on the Reinvestments to benefit from the reduced number of products available on the market.
Speaker Change: Given the potential for the LCD <unk>.
Speaker Change: The market to contract can you talk us through what kind of gives you confidence that call it close to stable increase in.
Speaker Change: April given.
Speaker Change: Given this confidence has your thinking around medium term margin for carrier system. So.
Speaker Change: Second question is on the manufacturing ramp up costs. So I was wondering if you could quantify.
Speaker Change: Yes.
Speaker Change: This had been included in the cost of goods in the quarter and remind us of your expectations for these costs going through the remainder of the year.
Speaker Change: And then my last question is on Larry I'm wondering whether you can quantify the contribution from the increase in patients.
Speaker Change: The increase in patient value and how much runway you see for patient value has increased over the medium term. Thank you.
Speaker Change: So why don't I take question, one and question three and then Andrew can take the question on manufacturing ramp up costs. So on LCD.
Speaker Change: We are we are on the.
Speaker Change: Final policy, you will no doubt like I commented on that the implementation date has been postponed.
Speaker Change: <unk>.
Speaker Change: We are on the list for <unk>, but not for <unk>. We've also indicated that deal use today is low single digit share of the of our.
Speaker Change: Portfolio.
Speaker Change: It's too early to talk about what kind of pick up will will happen. We off course deep in the operational planning on this end.
Speaker Change: If you imagine that we have a reduction from a couple of hundred products to less than 20.
Speaker Change: That will be of course quite a bit of commercial opportunity in that space.
Speaker Change: We are ready.
Speaker Change: We have we have the volume of product we have the team in place.
Speaker Change: And exactly how it's going to play out we don't know yet.
We don't know yet so the way that we're thinking about <unk> is continuing the momentum.
Speaker Change: Of course, it has the opportunity to accelerate if if if this plays out in our <unk>.
Speaker Change: Favre.
Speaker Change: When it comes to Larry.
Speaker Change: I'm very happy with the performance from a toss up both Larry and trick.
Speaker Change: The growth model for the Larry business is pipe volume, so basically winning patients.
Speaker Change: Getting them onto a right product at the right product mix and the right use of product.
Speaker Change: And this has this has always been.
Speaker Change: The growth Formula you should remember that the <unk> business runs a quite a large share.
Speaker Change: The business in our own channel.
Speaker Change: So we are speaking with patients on a monthly basis, we can.
Speaker Change: Introduce new products to patients on a monthly basis and as you heard. The example, now from France.
Speaker Change: We've worked on reimbursement changes over over the past year and a half we managed to.
Speaker Change: To get the allowance for heat moisture exchange has moved from one to multiple and of course that allows us that allows us to inform all patients that this reimbursement has take has taken effect.
Speaker Change: And it drives a relatively immediate pickup so it will be my expectation.
Speaker Change: Is that it remains a key component of driving.
Speaker Change: Good service to patients right product right volume our product mix.
Okay.
Speaker Change: Jack Let me take your second question around the manufacturing cost. So as you saw in our numbers gross margin for Q1 is ballpark at the level of last year.
Speaker Change: Q1 gross margin level is driven by a couple of things. So first of all the the <unk>.
Speaker Change: Put cost pressure.
Speaker Change: Coming down we are seeing is that the.
Speaker Change: Low inflation levels.
Speaker Change: Can see impacting.
Speaker Change: Input costs in a positive way we have hitched.
Speaker Change: <unk> prices at a lower level and.
That is then partly offset by the higher manufacturing costs related to the ramp up in Costa Rica. So we are still ramping up in Costa Rica.
Speaker Change: And then we are initiating the ramp up in <unk>.
Speaker Change: In Portugal, where we are starting with the investments, especially into white collar and the other one that is offsetting the positives that foreign exchange rates. So those are the key moving parts on our gross margin for our first quarter.
Speaker Change: Thanks very much just.
Any follow up.
Lee: The next question comes from Lee <unk> from <unk>. Please go ahead.
Speaker Change: Thank you very much good morning, just two questions from me. Please the first one on <unk>.
Speaker Change: If you could give any additional color on the traction youre seeing in the women's product I think you've added a third of the four markets. Since your full year results and disinterested hip feedback Cornell nice additions and also how we should think about phasing of further market rollouts from him.
Speaker Change: That's the first one and the second one just a follow up on gross margin and <unk>.
Speaker Change: <unk>.
Speaker Change: Ramp up cost in Costa Rica in Portugal, and would it be possible to quantify the size of that headwind on gross margin and then thinking about the forward looking impact how we should think about that headwind.
Speaker Change: In future periods and when it starts to Rajiv. Thank you.
Speaker Change: Thanks, Richard So dilutive rollout continues.
Speaker Change: The mail product has said top 12 markets now we are in nine markets now with the larger female.
Speaker Change: And it's getting it's getting good traction I am looking at similar pickup curves to the to the mail product of course for.
For the purposes of moving the entire the entire catheter franchise, we need a full offering too.
Speaker Change: Both male and female so I'm glad to see that.
Speaker Change: And you'll see that rollout continue we'll be in the same market. So in top 12 markets also with the female product net rollout will be happening during during this year.
Speaker Change: And to your second question around the gross margin so I talked to the moving parts for Q1, when I look at the full year I am expecting our gross margin to improve to sit around the 6% to 8% level as we have guided for so it's similar moves.
Speaker Change: Moving parts as of Q1. So we are looking at a lower pressure from input cost we are we.
We have hits the energy prices at a lower level.
Speaker Change: Compared to last year, we also have increased salaries in Hungary at a mid single digit level, whereas last year. It was a double digit level and then and then yes. We are ramping up as I said earlier in the in Costa Rica is still and we also starting up in political and that is offsetting some of the benefits we see.
Speaker Change: On the other categories and then the final thing is the foreign exchange rates had a negative.
Speaker Change: We have headwind on that in Q1, and I am expecting from Q2, we will start to see.
Speaker Change: Some tailwind from FX. So those are the moving parts for the full year.
Speaker Change: Martin.
Thanks, and then maybe just to follow up on the on the ramp up costs in Costa Rica in Portugal, I mean should we think about that getting potentially more of a headwind through the year neutral or slightly better from here in terms of the phasing of those projects.
Speaker Change: I'm expecting a similar level.
Speaker Change: Remember also throughout the year as normal our revenue absolute revenue will be at a higher level. So we will also have some scalability.
Speaker Change: The consequence of higher absolute revenue throughout the year, but it's basically the ramp up in Costa Rica will stop to yet to be finalized.
Speaker Change: The course of the year.
Speaker Change: Got it thank you very much.
Speaker Change: The next question comes from <unk> from Jpmorgan. Please go ahead.
Speaker Change: And we now have a question from Lisa Clive.
Speaker Change: Bernstein. Please go ahead.
Speaker Change: Hi, three questions for me first of all.
Speaker Change: Women and continent at just thinking through when the decline there well.
Speaker Change: Okay.
Speaker Change: <unk> I believe from your.
Speaker Change: Various disclosures that Lynn and continents is probably around 11% of urology.
Speaker Change: At.
Speaker Change: With perhaps that business declining.
Speaker Change: So just wanted to confirm that that now maybe 5% of that portfolio and just trying to understand whether we're nearly at the bottom of that decline.
Speaker Change: Annualized.
Speaker Change: Paul.
Speaker Change: For <unk>, the Medicare patients and physicians.
Speaker Change: Youre, obviously not included.
Speaker Change: Just if I missed it but do you have a trial underway, it's an area where you're.
Speaker Change: Focused on trying to get reimbursement or because you tend to be more focused on the hospital channel.
Speaker Change: Yes, just to reflect back out and then lastly on Halo just love an update.
Speaker Change: Okay.
Speaker Change: Outlook for reimbursement and market entries and just thoughts on the ramp up over the next 12 to 18 months.
Lisa Clive: Thanks Lisa.
Speaker Change: Good ones.
Speaker Change: First off on women's and urology.
Speaker Change: The.
Sorry, we lost the connection with the Speaker, we have now a question from Julien <unk> from Jefferies. Please go ahead.
Julien: Hi, good morning.
Speaker Change: Thank you lost the connection with management I guess on a rifle.
Speaker Change: We love the connection with the speaker of the conference will be.
Speaker Change: Continue shortly.
Speaker Change: Okay.
Speaker Change: You are now connected again okay.
Speaker Change: Okay.
Speaker Change: So that's kind of just China.
Speaker Change: No.
Speaker Change: You can go ahead with your question.
Speaker Change: Yes.
Speaker Change: Can I just check that you have audio from outside.
Speaker Change: Yes, yes, we do.
Speaker Change: Okay.
Speaker Change: Apologies.
Speaker Change: Before we move Julian before we move on to the next question I think I owe Liza.
Speaker Change: These ahead at least I had a few questions that I would just I would just address.
Speaker Change: Women's health.
Speaker Change: We had flat performance in the quarter. So the business. The business decline has stopped and of course the decline last year has taken the share of our portfolio down now the strong focus is.
Speaker Change: Is to drive the <unk> product and the clinical evidence that we have around that product to serve customers and of course, the big news for that portfolio is going to be the tbi tbi product, but the business decline has stopped.
Speaker Change: On the question of deal use for <unk>, we have a trial underway.
Speaker Change: Of course, we expect to also be.
To be admitted.
Speaker Change: Once that once that trial has has concluded and then finally the question on Halo and the payers in Germany. Unfortunately, I have no news to report on that side the German authorities.
Speaker Change: Have not provided a.
Speaker Change: And answer to us.
Julien: With that I think we can go on to you Julien.
Julien: Hi, good morning, everyone. So I also have three questions if I may.
The first one relates to voice and respiratory care, obviously, a pretty strong Q1, but I just noticed that the comps get significantly tougher for the remainder of the year. So how should we think about growth in that space and you mentioned some positive reimbursement evolution. So.
Julien: Anything there that could explain the relative confidence in sustained momentum for the next few quarters.
Julien: Second question relates to <unk> and the delay in the implementation of the NCD.
Julien: This has been also some speculation around that maybe could be due to some political backlash in some providers asking for more time.
Julien: Hello.
Julien: Of confidence that actually take place in April from April onwards.
Julien: And the third question.
Julien: Could you just shed more light on this 26 million Euro management restructuring charges that you had in Q1 three times is that good.
Julien: Sizable announce so just curious as to what you predict.
Julien: Julian Thank you let me let me take the first two and then Anders will take the last question voice in respiratory care.
Julien: It is of course, when you run a double digit growth business the comps gradually get harder I'm expecting the business to deliver a year around double digit.
Julien: One of the one of the callouts that's positive.
Julien: The language Acme side is is the increased reimbursement in France.
Julien: We've guided for the business when we acquired it that it would deliver between 8% to 10% we are definitely comfortable.
Julien: In that range and I'm glad we're starting it at the high end of the range.
Julien: The Tracheoscopy business is doing well good good.
Julien: Good momentum so all told.
Julien: Really really good progress also on the also on the integration side, while the <unk> LCD.
The delay as we understand it is following a freeze of all regulatory guidance.
Julien: Not yet in effect by the New U S administration.
Julien: So it's not if you will a something that is LCD specific but it's one of these set blunt instruments that have been.
Julien: Made yourself by the incoming U S administration, there is of course always uncertainty.
Julien: With these types of transitions, but for now I have no evidence to suggest that this would not go into effect come April.
Julien: And Julien your third question related to the 26 million Danish kroner, that's related to the sale.
Julien: Leadership changes, we made back in November.
Julien: Alright, Thank you very much.
Julien: Sure.
Speaker Change: The next question comes from Stefan <unk> Pataki from Kepler. Please go ahead.
Speaker Change: Hi, Yes. Good morning. Thank you very much for taking my questions I have two so first of all question I was wondering if you could provide us a bit of an update on what you're seeing in the U S. Chronic care sales posted a disruption of the distribution center.
Speaker Change: Collyn last year late last year.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: What do they have been some market share losses, whether you can claim back those patients I was wondering.
Speaker Change: If you have more color to share on that and then my second question.
Speaker Change: How are you seeing the situation in China has there been any any material or noteworthy change that you would like to talk about it. Thank you.
Speaker Change: Thank you Mike two questions.
Speaker Change: The U S business strong first quarter here.
Speaker Change: Just remember we had relatively benign comps also for for this quarter.
Speaker Change: I will say when I when I look at the sales out momentum.
Speaker Change: The business, it's sitting at at high single digits, suggesting that.
Speaker Change: We've come we've come through with come through the rough.
Speaker Change: Without too much damage, but of course I would like a few more months and quarters under my belt before calling final verdict on that but so far so good I am expecting the business to deliver a high single digit growth growth year.
In China hospitals look good momentum in hospital look good, but I'd say on the whole really no change.
Speaker Change: I am expecting a mid single digit year. It is was up mid single digit Q1.
Speaker Change: The outlook for the economy and the way the consumers behave we're really not seeing anything that makes us more optimistic at this stage.
Speaker Change: Great. Thank you very much.
Speaker Change: The next question comes from Neil <unk> from Carnegie. Please go ahead.
Neil: Hey, Thanks for taking my questions two if I may could you.
Neil: First talk about the sustainability of your R&D to sales ratio, which.
Neil: It seems to be on a continuous slight down.
Neil: Secondly.
Neil: Could you talk about.
Neil: Your expected tax rate.
Neil: Once the transfer off your IP rights, Denmark has been completed thank you.
Speaker Change: So thanks, a lot Neil let me take.
Speaker Change: Two questions. So first of all in terms of R&D to sales ratio was around 3% for Q1.
Speaker Change: A bit of timing and then also please remember we have now included Kocis and Thats us where the ratio is lower than the total ratio.
Speaker Change: Im expecting the ratio for the year to sit something around 335%.
Of sales.
Speaker Change: That's how we look at the <unk>.
Speaker Change: <unk> to sales ratio for this financial year.
Speaker Change: In terms of your second question.
Speaker Change: Around the IP transfer and the tax so as I explained earlier, we have done this because we are now starting up the integration of <unk> into our it infrastructure and we will complete that work later this year and as part of that.
Speaker Change: So <unk>.
Speaker Change: Moving the IP rights over the closest to Denmark and that has an extraordinary impact on our tax rate for this financial year in terms of the payments. So the cash flow. If you will start to see that from the financial year 'twenty six 'twenty seven.
And onwards and that would be in.
Speaker Change: Net effects of around one three.
Speaker Change: One four.
Speaker Change: Billion Danish kroner from 26 2007, so so that's my.
Speaker Change: My high level assumptions.
Speaker Change: And for how many years would you benefit from that.
Speaker Change: So.
Speaker Change: The overall benefit it's around the seven years that we are expecting.
Speaker Change: So that's my assumption.
Speaker Change: Thank you.
Speaker Change: The next question comes from <unk> <unk> from Morgan Stanley. Please go ahead.
Speaker Change: Hi, Good morning, Thanks for taking my question I had just two.
Speaker Change: The first one is on the continence care business are you able to break out in terms of catheter segment growth in particular, and whether you are seeing any solid share wins, they're just with belt with the launch of a new flagship platform like Louisiana, you might see a stronger growth developments for contingents in the first quarter.
Speaker Change: And then my second question is a follow up on in PBF does your guidance for 2025 contemplate any sales contribution from or commercial investment into the launch of this product or are you in kind of a wait and see mode until you get the pivotal data in June and then you announced some commercial initiatives in the third or fourth quarter.
Speaker Change: <unk>.
Speaker Change: Hey, guys.
Speaker Change: Two good questions. So.
Speaker Change: Lucia launch continues.
Speaker Change: Doing well.
Speaker Change: So we can see a very consistent market share gains on the mail side, we start with the with the mail product, which is about 60% of that market, but more than 60% of the market. We're now rolling out female.
Speaker Change: Being a similar pickup curve on launch so I'm also expecting of course once we have a full offering in the market that youre going to see.
Speaker Change: Youre going to see impact on the on the franchise at Behr.
Speaker Change: Bear in mind that when we report the continence care business, we have two of the product categories. In there one is power management or Paul care franchise and are collecting devices business.
Speaker Change: But the impact on the business. This quarter is really phasing in the underlying growth in the catheter business is strong and it's picking up.
Speaker Change: When it comes to <unk>.
Speaker Change: And.
Speaker Change: And investments there that will be some costs. This year that were basically preparing for that.
Speaker Change: Ahead of the launch but of course, we do not start to spend.
Speaker Change: Significantly until we know the strength of.
Speaker Change: The clinical data and I don't have visibility to that until we get into.
Speaker Change: The other side of summer of this year commercialization would happen in 'twenty five 'twenty, six and I forgot who asked the question earlier, but but but the entire investment thesis will rest on the strength of the clinical data and the resulting.
Speaker Change: The resulting reimbursement level. So the clinical data is absolutely critical for decision on an investment level, but there is a bit of cost already.
Speaker Change: Thank you.
Speaker Change: If I could follow up with one question on the wound business I think you have lagged some destocking behavior in December in anticipation of the LCD is coming into effect in February how his customer.
Speaker Change: Their behavior evolve since then and could you are curious this growth well above the 30% target. This year given the combination of delayed implementation and then inclusion for DFT.
Speaker Change: Yes.
Speaker Change: So we haven't seen too much change in terms of customer behavior.
Speaker Change: So the all the products that.
Speaker Change: Our at risk of.
Speaker Change: Or that will disappear from the market. When the final policy takes effect are of course now still in market. There are a number of companies start promoting them.
Speaker Change: And it is still too early to speculate but like I said to a.
Speaker Change: One of the previous callers who asked the question about this of course this creates an opportunity.
Speaker Change: If we reduce the number of products from 202 less in 'twenty.
Speaker Change: We have prepared for the opportunity.
Speaker Change: In terms of ensuring that we've got significant volume ready in the market and of course, we've got commercial plants.
Speaker Change: We are in close dialogue with customers about it but the final effect TBD.
Speaker Change: Thank you very much.
Speaker Change: The next question comes from <unk> <unk> from Bank of America. Please go ahead.
Speaker Change: Thank you very much for taking my questions. The first one is is a quick follow up on the wound care.
Speaker Change: Could you provide maybe an update on the curious as trends you are seeing today, and especially trying to understand if you've seen some customers already shifting from competitors' product to <unk> or asking for samples.
And maybe trying to prepare ahead of the LCD implementation.
Speaker Change: And my second question is on voice and respiratory could you share. If there are any key countries yet to prove reimbursements like you had pulled in for example here in how big of an opportunity could be for the rest of this year. Thank you.
Speaker Change: So on <unk> of course, that's been a lot of noise in the market related to this many customers who are asking questions about how the policy is going to pan out.
Speaker Change: And of course, we are active in those in those dialogues.
Speaker Change: And some customers are of course also getting samples. We've also seen a few orders, but we haven't seen a major market shift.
Speaker Change: Sure.
Speaker Change: So we expect that once we get closer to implementation date more customers will change behavior and like I said to the previous caller we are ready.
Speaker Change: On a toss this is.
Speaker Change: This work of opening up access for the products and reinvestment for the products is part of that is part of the growth model is by the way also part of the growth model for the content business and the <unk> business.
Speaker Change: Sure.
Speaker Change: <unk> previously talked about those businesses. The Ostomy business has grown for 17 years cotton. This business has grown for 35 years.
Speaker Change: The <unk> business right now.
Speaker Change: 35 year old category, it's still growing penetration is relatively low.
Speaker Change: So we've got good penetration in Northern Europe, you go to southern Europe, We've got about half the half the penetration of northern Europe of treatment.
Speaker Change: And we move to the U S penetration is lower and that's hardly any use.
Speaker Change: So so this will remain a growth lever for for many years to come.
Speaker Change: And we've got at any given point in time, we've got a portfolio of projects that we're working on to open reimbursement. So you sort of if you will.
Speaker Change: Probably also here in the coming years, hopefully more good news.
Speaker Change: But it's not one where we have one waiting in the.
Speaker Change: In the immediate pipeline that we would expect would dramatically change the trajectory of the business. It's part of running a business that's sitting comfortably in the 8% to 10% growth range.
Speaker Change: Okay. Thank you very much.
Martin: The next question comes from Martin <unk> from Nordea. Please go ahead.
Speaker Change: Hi, Thank you very much for taking my question for you Christian.
Martin: I try to keep it.
Just.
Speaker Change: Questions. Please the first one would be on emerging markets, which has come out a bit slower than the double digits that you are aiming for and that you expect to.
Speaker Change: So come back in the next quarters can you maybe just put some color on how much of that is just phasing of orders how much is maybe less hyperinflation and.
Speaker Change: Okay.
Speaker Change: How should we see this going forward is that already a Q2 thing.
Speaker Change: See a pickup or how does that look like that's the first question.
Speaker Change: And then the second question would be I think Christian you have implied a few times on this call that you are ready for exploration. After the LCD is implemented on <unk>.
Speaker Change: But I guess you expect this to be effective in two weeks from now so have you ramped up sales costs here.
Speaker Change: The anticipation of the LCD implementation, but we're going to see.
Speaker Change: The numbers.
Speaker Change: That would be the second question is just the third question is a bit to understand.
Speaker Change: If we should.
Speaker Change: Potentially to see anything like this but there have been some investigations have been concluded that total plus a small margin squeezing Steve just with its dominant position just are you aware of any.
Speaker Change: Other markets, where <unk> has a dominant position in web al undergoing similar position investigations that we should be aware of.
Speaker Change: That would be the third question. Thank you.
Speaker Change: Thank you Martin three good questions on emerging markets remember tough comps last year, we grew.
Speaker Change: I think 19% last year.
Speaker Change: In the quarter very very strong quarter.
Speaker Change: This largely phasing it is a more volatile region is as you know it's phasing related to <unk>.
Speaker Change: Eastern Europe, Russia, and a bit of middle East I am expecting I am expecting the.
Speaker Change: The reason to deliver a high single digit growth year.
Speaker Change: LCD.
Speaker Change: I have the footprint I need for now.
Speaker Change: So you could say that the number of people that we've got in market where it is.
Speaker Change: Like we've ramped up dramatically we are trying to run a very strong growth business of course every year, we put on salespeople and try and get them on board and make them effective.
Speaker Change: Part of the commercial model here will be just to to really become very good at that we continue to deliver on it but we have the footprint we're ready.
Speaker Change: Fact that it comes two months later it doesn't really change the plans.
Speaker Change: So I'd say the <unk> team also grew as you can see 32% in the quarter, it's not like we.
Speaker Change: We've run out of what to do and opportunities to pursue so.
Speaker Change: More to come once we see the the go live date on the on the Danish Court case from the competition authorities I'm not going to comment too much I will say we are in fundamental.
Speaker Change: Okay.
Speaker Change: Great.
Speaker Change: And it will play it will play its way through the App.
Speaker Change: Through the appeal system and courts.
Speaker Change: We are not aware of any type of case like that anywhere else in the portfolio of countries that we serve.
Speaker Change: Yeah.
Speaker Change: That's that's very clear. Thank you so much for the thorough answers.
Speaker Change: The next question comes from Yang Zheng Yan from Citi. Please go ahead.
Speaker Change: Hi, guys. Thanks for taking my question I am following the trend of having any questions as well.
Speaker Change: The first question is just a quick check in terms of your full year guidance on margin.
Speaker Change: Really if you said that you're expecting to see margin improvement.
Speaker Change: In AWP in advance wound care, whereas in the previous release is that in advanced wound care.
Speaker Change: Correct, Dave I was wondering if there is anything to read into there <unk>, perhaps if any cost savings identified and corrected.
Speaker Change: My first question. The second question is in terms of the U S distribution center cost is there any more cost that we should be expecting in the remainder of this year and lack.
Speaker Change: Last question. Thank you have the bladder health recall I understand the sales.
Speaker Change: In February.
Speaker Change: How do you assess the risk of block four.
Speaker Change: Sure.
Janus product a question rather than being the conference later EMEA. Thanks.
Speaker Change: Alright, let me start with the two first questions.
Speaker Change: So in terms of.
Speaker Change: Margin guidance for the year I'm expecting that.
Speaker Change: That the divestment of the skincare, including some marching up summarization activities within the dressings business will contribute around 30 basis points to our <unk>.
Speaker Change: That's in guidance, so I hope that clarifies. The first question on question number two whether we are expecting more.
Speaker Change: Cost related to the distribution challenges in the U S I'm expecting a bit more here.
Speaker Change: In Q2, and the level of $10 million.
Speaker Change: That's my current estimate.
Speaker Change: And then finally young to your question on bladder health.
Speaker Change: Of course, there is always a risk when you have quality problems like we've been through that we've lost some customers we are quite optimistic.
Speaker Change: It's been a relatively quick process, we've got product in market now waiting to be released.
Speaker Change: And we are seeing a good demand there are.
Speaker Change: A number of our competitors in the market who are also we've also had some supply supply issue. So this strong demand in markets. So I'm optimistic that we're going to recover the.
Speaker Change: The significant majority of.
Speaker Change: What affected us here in Q1.
Speaker Change: Thanks, guys.
Speaker Change: The next question comes from Carsten Madsen from Danske Bank. Please go ahead.
Speaker Change: Excellent. Thank you very much.
Speaker Change: Two questions left the first one as well.
Speaker Change: If you look at the <unk>, the new reimbursement or youre securing for the carriers as product could maybe be to talk about the individual patient value. So one thing is how many new patients you will be able to get but what will be the value per patient. Once this is implemented.
Speaker Change: On a yield basis being allowed to produce more dressings at a lower price or what do you think will happen here.
Speaker Change: Also from memory.
Check.
Speaker Change: And I would just check while I'm answering from from memory, they will still be I think.
Speaker Change: An opportunity to use a sixth dressings.
Speaker Change: As part of the of the updated policy. When you look at our current you said market. When we look at the average of our current use.
Speaker Change: It is it is sitting around five to six and Alexandra just correcting me that the value per patient.
That's covered by the LCD is actually eight dressing so were over 12 weeks now it's a little difficult to predict because that doesn't mean that everybody will be using eight of course it will meet its basically a number where you could use up too.
Speaker Change: So.
Speaker Change: So the the final impact on patient value.
Speaker Change: I don't know yet.
Speaker Change: Person to the patient.
Speaker Change: To save money, because maybe not pretty big burst of zinc.
Speaker Change: Is there any room for all I'm, hoping I hope I guess because their wounds heal.
Speaker Change: Okay.
Speaker Change: So so sorry.
Speaker Change: The intent of the policy is to drive good clinical outcomes.
Speaker Change: And.
Speaker Change: And of course.
Speaker Change: If youre healed after you've used five or six dressings, then you shouldn't be.
Speaker Change: You shouldn't be using more product.
Speaker Change: Okay.
Speaker Change: And then secondly.
Speaker Change: Yes.
Speaker Change: You have this new.
Speaker Change: Look at what the macro technology, but some of your competitors.
Speaker Change: Im running some campaigns.
Speaker Change: Technology.
Are you assuming anything in the market in terms of margin pressure from marketing campaigns.
Speaker Change: No.
Speaker Change: No.
Speaker Change: Okay.
Speaker Change: Ladies and gentlemen that was the last question I would now like to turn the conference back over to Clay stand Wilson for any closing remarks.
Speaker Change: So.
Speaker Change: Okay.
Speaker Change: We lost connection therefore.
Speaker Change: For a couple of minutes during the call. We look forward to engaging with all of you on the road here over the coming days and weeks and please reach out to our Investor Relations Department should you have any follow up questions related to today's call. Thank you very much.