Full Year 2025 Coloplast AS Earnings Call
Ladies and gentlemen, welcome to the Coloplast financial statement for the full year 2024/2025 and the annual report 2024/2025 conference call.
I am Sandra the course cooperator.
I would like to remind you that all participants have been listening mode and the conference has been recorded
The presentation will be followed by a Q&A session.
You can register for questions at any time by pressing star and 1 on your telephone.
For operator assistance, please press star and zero.
The conference must not be recorded for publication or broadcast at this time. It's my pleasure to hand over to larger. Rasmusson, interim. CEO, please go ahead.
Thank you and good morning and Welcome to our full year 2425 conference call. And I'm joined by Anna lonnix gokart our CFO and by our investor relations team. We will start with a short presentation by Anna and myself and then open up for questions. Please turn to slide number 3.
We delivered 7% organic growth and reported a bit before a bit margin before special items of 28% for this financial year.
Um, that is in line with our revised guidance. But below the H to 9% organic growth expectations that we set forth at the beginning of the year.
The adjusted return on investor Capital after tax and before special items was 15% on power last year.
Chronic care including voice and Respiratory Care and excluding China delivered a solid year.
While we faced Performance challenges in interstellar, reality and advanced wound dressings.
Both.
Businesses were impacted by product recalls with significant negative impact on performance.
We also saw increased volatility in the biotics markets driven by the postponement of the final LCD policy, which led to a Slowdown in the momentum for cases in the second half of the year.
In many ways 24/25 did not be become the year. We had anticipated
it became a significantly more turbulent year and 1 that forced us to take decisive actions.
In the year, we restructured our business in China.
Performance during trial 2525 was muted. While we remain committed to serving the Chinese market, we have streamlined our organization to align with the new market reality and ensure a sustainable focus.
Secondly, we initiated several profitability initiatives in wound care. Among others, that divestment of our skin care business. In December 2024.
These initiatives are aimed at simplifying our business operations and improving profitability.
Really, we took important.
Toward optimizing.
Space in Interventional reality.
Both to protect our profitability in the light of recent Performance challenges, but also to ensure that we have the capacity to invest in New Growth initiatives, including in tibia, our implants of tibial nerve stimulator.
Uh, expected to launch in 2627, assuming we obtain FDA approval.
At a group level. We have also made significant changes.
Which I'm confident will be vital for a strong strategy and execution towards 2030.
By structuring our business into 2. Distinct units, chronic and acute care. We will, we will, uh, to an even larger extent be able to honor the differences in market dynamics, customer needs patience, uh, Pathways and business models.
And with a new and strengthened executive leadership team. We now have a balanced mix of commercial and Technical expertise.
And a strong team to lead Coloplast into the next strategy period.
Please turn to slide number 4.
Looking ahead, I believe the Investments. We have made in slide, 25 combined with the structural changes that we made this year. Provide School price with a strong foundation and key building blocks for the future value creation.
Our addressable market for chronic care and acute care has a combined value of more than 120 billion Danish corner and we have the strongest product portfolio that we have ever had.
There's ample opportunity to go for uh, and we will position to capture it.
With our new strategy, impact 4. We'll utilize our solid foundation while setting a new direction for the company with a strong focus on customers and value creation.
The impact 4 focus is on 4 prior, uh growth uh, through Innovative offerings on unlock Next Level efficiency gains.
Embrace technology, including AI to elevate our user experience and scale, and finally cultivate a winning and sustainable company.
And these promises.
the first is,
Ka of 7 trade percent through, 2930.
Then to grow a bit in line with or above revenue growth and finally to achieve a return on investor capital of about 20% by 2029-2030.
By putting customers at the center. We aim to deliver best-in-class products, services and support reinforcing our ambition to double our impact and reach 4 million, people long term.
In a strategic period. We will also maintain a strong focus on sustainability, and we have set, clear targets to reduce our environmental impact, uh, through emissions reductions and less material used in our products and packaging.
Finally, we aim to positively impact Society by improving reimbursement, ensuring access for users and Health Care Professionals to the best products and services as well as investing by in initiatives, that benefits people and communities.
Now, let's shift gears for a moment and look at today's results in more detail. Please turn to slide number 5.
in ostomy care, organic growth was 6% for the full year and growth in Danish Corner was 4% organic growth for in Q4 was 7% and growth in Danish Corner was 1%
Our ensure meal portfolio continues to be the main driver. A gross driver, followed by Brava a range of supporting products, our ensure and assure alternate portfolios continue to contribute to growth in Emerging Markets.
All right. Geographical perspective. Growth in the quarter was brought based across regions with good growth in Europe.
A high baseline in the U.S. due to the resolution of the supply disruptions in Q4 last year and strong growth in emerging markets, driven by increased inactivity.
Things in China, the client reflecting weaker consumer sentiment and competitive pressures.
In continent care. Organic growth was 8% for the full year and growth. In Danish Corner was 5% in Q4 organic growth for 9% and growth in Danish Corner was 3%.
Due to our new intermittent catheter with micro holes Zone. Technology was the main growth contributor in the quarter especially the famous female female version.
Uh, driven by solid contributions from Europe and the U.S.
With respect to all regions contributes to growth.
Growth in Europe, was driven by France, the UK and Italy.
In the Emerging Markets, growth was less was led by a letter.
Boys and Respiratory Care. Posted 9% organic growth. For the full year with growth and danish corner of 8%.
In Q4, organic growth was 9%, and growth in Dennis Corner was 7%.
A good performance, invoice and Respiratory Care continues. To be driven by broad broad-based contribution from both lendi and psychiatry
with high single data growth in low integrity and double digit growth in Trio.
In run and tissue repair, organic growth was 8% for the full year, while growth in Denmark was minus 3%, which reflects an 8 percentage point difference. Next, we will discuss the impact from the Skin Care division.
Organic growing to 4 was 5% and growth and dangerous Corners minus 11%.
Which includes an 11% negative impact from the Skin Care Department?
The advanced wound dressing business in isolation declined. 6% in the quarter as China. Detracted significantly.
Uh, from growth due to the product return in initiated in Q3 from a product perspective, by its in super absorber and by 10 fiber, continue to perform well.
Thank you for.
Your kind and close in the quarter was 20% and an improvement compared to Q3 as expected.
The inpatient setting continued to deliver solid growth and was the main growth contributor. The outpatient setting saw an improved momentum in Q4.
This uh, was in line with our expectations, that the impact from our LCD for postponement, and the resulting Market shift to higher price products would be most pronounced in Q3.
In Interventional Urology, organic also is 2% for the full year and growth in Danish Corner was flat.
in Q4, or
Can report it grows in dense Corners minus 2%.
A growth in the quarter was driven by a good momentum in the men's health business, our Flagship product within Men's Health, the Titan. Penile implant continued to perform well
with the patient foreign positively impacted by our patient Support Program. Targeted at prospective patients
The Women's Health business, also contributed to growth in the quarter.
Uh, within kidney and bladder health, the Julio fiber laser Drive continued to deliver a solid growth contribution, but the segment overall attracted from growth due to the impact from the product recall.
We have begun to see early signs of recovery across key accounts, but expect some negative impacts to persist into q1.
With this, I'll now hand over to Anna who will take you through the financials and Outlook in more detail. Please turn to slide number 6.
Thank you, Lars, and good morning, everyone.
Reported revenue for the full year increased by 844 million Danish corner of 3% compared to last year.
Organic growth, contribute 1.8 billion Danish corner or around 7% to report a revenue.
Divested businesses, mostly related to The Skin Care divestment in December 24, contributed revenue by DKK 352 million or around 1%.
1 exchange rates, had a negative impact of 587 million Danish corner on reporter revenue or around 2% mainly related to the depreciation of the US dollar and the basket of Emerging Markets currencies against the Danish corner.
Please turn to slide number 7.
Cross profit for the full year amounted to 18.9 billion Danish Corner because bonding to a gross margin of 68% on powerful last year.
Because Martin was positively impacted by a favorable development in the input cost.
Pricing increases and Country and product, mix partly of set by Rambo cost. At our manufacturing sites in Costa Rica and possible.
The gross margin also include a small negative impact from currencies of around 20 basis points.
Operating expenses for the full year amounted to around $1.1 billion.
A 3% increase from last year.
The distribution to sales ratio for the full year was 33% on power of the last year.
The increase in distribution cost was driven by continued commercial investments, in carouses, and higher sales activities across business areas.
The admin to sales ratio for the full year was 5% on par with last year.
The R&D to sales ratio for the full year was 3% on sales also on path will last year.
The special items expenses were extraordinary high in 2425 and amounted to 469 million Danish corner.
The special items were related to profitability improvement initiatives, including the skincare investment management, restructuring, and the integration of Atos Medical.
Overall this this resulted in operating profit before special items of 7.7 billion Danish Corner in the full year and a 5% increase compared to last year.
The EIT margin before special license for the year was 28% compared to 27% last year.
The EBIT margin included a negative impact of around 110 basis points from the inclusion of carousels, including PBA amortization costs, in line with expectations. Additionally, there was around a 30 basis point benefit from the divestment of the skin care business.
Currencies had a small negative impact on the reported ebit margin of around 30 basis points.
Related to the depreciation of the US dollar and the basic of Emerging Market currencies against the Danish corner.
Cutting currencies, EBITDA before special items grew 6% in full year 2025.
Finance license in the full year were and their expenses of.
1 billion and 444 million Danish Corner, compared to a net expense of 925 million.
Driven by the duplication of the US dollar against the, the Danish corner.
The ordinary tax expense for the full year was 1.4 billion Danish corner with an ordinary tax rate of 22% on pathway last year.
The total tax expense for the full year was 2.5 billion Danish Corner impacted by the transfer of cosas intellectual property from Iceland to Denmark.
As a result of the extra tax expense, the effective tax rate amounted to 41%.
As a result, net profit before special items for the full year was 4 billion Danish kroner compared to 5 billion Danish kroner last year. Diluted earnings per share before special items decreased by 21% to 17.76 Danish kroner. Adjusted for the extraordinary tax expenses related to Care's IP transfer, the net profit before special items was 5.1 billion Danish kroner, a 123 million Danish kroner increase compared to last year.
Adjusted diluted earnings per share before special items increased by 2% to
20%, 84 Danish Corner. Please turn to slide number 8.
Operating cash flow for the full year was an inflow of DKK 6.6 billion compared to an inflow of DKK 2.8 billion last year.
The positive development in cash flows was mostly driven by lower income tax paid, as 2024 included $2.5 billion Danish kroner, with an extraordinary impact from the transfer of assets and medical intellectual property.
Changes in working capital and the adjustment of non-cash operating items also had a positive impact on the cash flows from operating activities.
Cash flow from investing activities was an outflow of 1.25 million Danish kroner compared to an outflow of 1.1 billion Danish kroner, which included a positive impact from the divestment of the skin care business of 192 million Danish kroner.
Cabbage for the full year amounted to around 5% of sales from the past year and includes around DKK 450 million related to the new manufacturing site in a possible.
expected to be, um,
Operational in.
As a result, the free cash flow for the full year was an inflow of DKK 5.4 billion compared to an inflow of DKK 1.4 billion last year.
Yeah, adjusted free cash flow for the full year, was 5.2 billion in corner compared with 3.9 billion Danish Corner last year.
Or at 32% increase.
The trading 12 months cash conversion was 82%. While the adjusted free cash flow to sales was 19% compared to 15% last year.
Networking capital amounted to around 26% of sales, compared to 25% last year.
Impacted by increased inventories and decreased trade payables.
Now, let's look at the guidance for 2526 Financial year.
Please turn to slide number 9.
For the 2526 Financial year. We expect organic Revenue growth of around 7% and around 7%. EB growth in constant currencies before special items.
We also expect a return on invested capital of around 16% up.
Around 1% from 15% adjusted last year.
Revenue growth guidance of around 7%.
And we assume continued good momentum in chronic care, including voice and best practical care, as well as an improvement in momentum in both the bun and tissue repair and Interventional Urology.
In chronic care, we expect a good contribution from our recent product innovation.
In continent care and we expect Lucha to uh continue driving the momentum in intimacy. Catheters in Austin, we care. We expect the recent line extensions. Such as sensor, mu backpacks and the new 2 piece into a moo offering to continue their good launch trajectory and support growth.
In wound tissue repair.
We expect an improved momentum driven by Carrows, which is expected to deliver growth of around 25%.
Partly offset by the negative impact from the product return in advanced wound dressings. In China, from Q1 to Q3.
On COLOPLAST's performance, there is subject to a higher degree of volatility due to the expected changes to the skin substitutes coverage.
And payments in the outpatient setting, as of January 1st, 2026.
In international reality, we expect growth to improve to around missing digit in 2526.
Up from low single digits, uh, last year.
Informed, you know, Women's Health business.
in kidney and bladder health. We expect to see a recovery as the impact from the product recall will lapse on December 25.
After which we are up against an easier Baseline.
Revenue growth in the Danish corner is expected at 4% to 5% and assumes a 2 to 3 percentage point negative impact from currencies.
It's basically the U.S. dollar and, to a smaller extent, the British pound and the Chinese yuan.
As well as two months, negative impact from the skin care. Deanmont.
DB growth and constant currencies of around 7% assumes a stable, inflation levels and continued ramp up in Costa Rica and possible.
The EB growth also assumes that carros will deliver an ebit margin uplift to around. 20% driven by scalability in non-sales functions and Salesforce efficiency improvements.
Enabled by good topline momentum and a high gross profit margin of around 90%.
Furthermore, the EB growth guidance, includes the initiation of impact for Investments?
Including global technology investments and AI investments towards a new bowel care opportunity.
The US and Investments related to in tibia.
In terms of facing, we expect the organic Revenue growth to be a second half, awaited with a soft starting q1, where we will have the impact from the product recalls in both Advanced wound dressings and intervention reality.
Furthermore, we expect a soft start in Austin care due to a high baseline in the U.S. and order facing in emerging markets.
For 25 and 26, we expect around 50 million dangerous corners and special items.
From acquisition related integration costs. The integration of address medical is pro progressing according to plan and we will be finalized during the year.
The net Financial expenses for 2526. I expected at around minus 500. Million Danish Corner down from around 1 billion Danish Corner in 2425.
Mostly driven by more favorable outlook on net. Exchange rate, adjustments based on spot rates as of October 31st and to a smaller extent lower net interest. Interest expenses. Due to low on this, net interest in bearing depth and lower interest rates.
The effective tax rate for 2526 is expected to be around 22%.
That profit is expected to significantly increase year-over-year. As 2025 has been impacted by extraordinary high special items, high financial items due to negative exchange rate adjustments, and the extraordinary tax expense related to the transfer of Cosa's intellectual property.
The cab to sales ratio is expected at around 5% and includes Investments to compete in the new manufacturing site in possible.
Investments in new machines for existing and new products, as well as in IT and sustainability investments.
On networking capital, we expect a networking capital to sales ratio in 2526 of around 25%, down from 26% in 2425.
Our guidance is based on the knowledge we have today and, in June's, immaterial impact from tariffs, as we expect our products to remain exempted.
And no impact from healthcare reforms in the year.
On October 31st 25, the centers for Medicare and Medicaid services in the US issued. A final rule on the Medicare efficient physician fee schedule for calendar year. 26 with a fixed payment of 127 uh dollars per square. Centimeter for all products in the Physicians.
Private office in the outpatient setting.
We consider both this rule, as well as the final LCD policy as positive for the market and chaos is in the long term and will be closely monitored or and we will closely monitor Mark developments in relation to these initiatives.
With this, I would
10.
Thank you, honest.
C is now entering an exciting phase as we begin to unfold the potential of our new impact strategy.
Uh, and I look forward to continuing to lead this work until a new COO checks in.
As we move into Impact 4, we do so from a position of strength, with a strong product offering, a clear structure, a strong leadership team, and an ambitious strategy towards 2030.
I'd like to thank our customers, my colleagues, and our investors for.
Your trust and support in 2024-2025.
Ing. Our mission: Making a positive impact for patients, healthcare systems, and society.
Corporate is well positioned to set the standard of care at scale, create lasting value for all stakeholders, and continue making life easier for people with intimate healthcare needs.
Thank you very much, operator. We are now ready to take questions.
Thank you. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and 1 on the telephone. You will hear a confirmation that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and 2. In the interest of time, please limit yourself to 2 questions.
Anyone knows if there's a question 1 at this time?
Our first question comes from Hassan Alva from Barclays. Please, go ahead.
Good morning. Thank you for taking my questions. I'm going to try and sneak in three, please. Firstly, can you talk about the China rostami business, the increased competition in the community channel, and whether consumer sentiment is getting worse, given the decline here? How are you thinking about business development in 2026?
secondly, um,
If you can, uh, expand on the drivers for the Caracas margin ramp this year and the phasing of that improvement, given some of the volatility you've observed around reimbursement changes. And then finally, Lars, uh, when we met recently, you talked about slower volume uptake in the UK for Halo. Um, how is this trending? And to what extent are you shelving, uh, potential launches elsewhere? And in hindsight, what went wrong? Thank you.
That's uh, that was a good. That was a good, a good opening. Uh, so um, so the China um,
The China situation first. Uh, so it's more or less flat growth that we are seeing.
We actually see that we are quite competitive in the market.
So, we, in that specific part of the market, we don't see that we are losing traction. Uh, but we, um,
We we have a consumer sentiment which is super important because it's out of pocket in in the Chinese market, uh uh in the in the community market. Um, we have a consumer sentiment which is negative and uh, and and that basically reflects on how much
A consumers are willing to spend.
um,
We don't have an increased number of competitors; we still have a lot of competitors in the market. However, the total market here is still super low. So, we feel that our competitors' competitiveness is intact.
But the market sentiment basically is the reason why we don't grow in China.
Uh, on um, on the caresses Martin. Yes. We we expect to have a significant amount in this year. Uh, then we, uh, uh, then we had in the year that we're coming out of. Uh, and and it is, it is basically due to scale. Uh, so now we, now we start to be a little bit more of a mature business. Uh, it's not that we're not investing, uh, but, but we, we do have, uh, more sales per head in the, in the organization and we don't need to scale to the same. Same extent all over the place when we are growing. Uh, and that is basically what is sitting in in the increased margin for car races. Uh and yes that is volatility as as we go into um,
Into this year. And as you all know, Friday night, we received, uh, news on the LCD and, uh, and the physician fee schedule changes. Uh, and I, I expect that we will also talk to that, uh, a little bit later, but but that, that means that there's some turbulence as we go into the year. Uh, but we, I'd like to say from the get-go. We consider the changes to be positive for us. Um, but
Of course, it also means that we will have a bit of, uh, volatility as we go into the year, and then for Halo,
Thank you very much.
The next question comes from Jack Reynolds Clark from RBC Capital Markets. Please go ahead.
Uh, hi there. Thank you for taking the questions. Um, my first one was on the 8th of integration. You mentioned you were expecting that to be completed next year. Um, guess what, what's left to do on that? Uh, and when do you expect that the benefits to start kind of coming through meaningfully there? Um, then the next question was on tracking off to me. Um, I think for the last couple of quarters, uh, growth has been a bit lower than it has been in the past. Uh, is this a function of a lower or a higher base, or is there something else kind of going on here? Um, and how should we think about this going forward?
We have answers into our IT infrastructure and into our processes, our shared services, and all of that here during this financial year. What we are basically.
Speaking markets that are left. So it's the US, the UK that we are currently focusing on and then uh, the integration will be finished. Uh, and we will also uh the sages of around the the 100 million that we have communicated. When we acquired access some years ago
In terms of tragic.
Um, yes, we have seen a little bit of a slowdown, uh, recently. Um, it's also because we are against, uh, a high baseline. So, um, last year or the year before, um, we had quite a significant sales uptake due to forward integration.
And when that is said the uh, the tracker asked me business is developing very, very well. Uh, also compared to to the acquisition case, we did some years ago and uh we actually expect that our tracker, a, we will support our growth.
Within Asus quite significantly towards 2030 and we are currently sitting with a market share of around the 10%. Uh, and we actually feel we have a okay product platform, uh, and this will be 1 of the the key Focus areas towards the 2030 and also an area, we will invest a further in. Um, so so the tracker asked me business is is an area that we are very optimistic about going forward.
Fantastic. Thank you very much.
The next question comes from Martin pakoy from Seb. Please go ahead.
Yes, Martin Parker s e B2. I don't know, 2 questions I guess. Um, just on your guidance. Uh, I just want to to get you confident level because uh, you know, uh you you started you're saying that it will be back and loaded and that gave me some kind of D for the last, uh, couple of years. Um, how are you confident level this year of this actually will, will will materialize. Uh, do things. You have been more prudent this year and you have been in in previous year are they above of potential hiccups, which you have faced the last couple of years? And then second question, is just on the ASP development. Uh, what kind of ASP development, have you assumed in your guidance for this year? And maybe you can talk a little bit to to that, across your business areas
As we have communicated today, we expect organic growth.
To be around 7%, uh, for the year. And we are. As I also said, seeing some headwinds here in q1, due to the product recalls that we had last year. So, um, and so the Urology recall will, um, we will lap that in December. And the recalls we have in China on the dressings part will still impact Us in q1, but also Q2
Q3 but overall we are very confident that we are able to deliver on on our organic growth guidance. Uh also back on back of a very challenging year last year where we also had some uh challenges that we did not expect back to the the product recalls but also back to as last said earlier our Chinese uh moment,
Play out as we anticipated.
um, on
and so, so the
As well as as the chaos as business throughout the year. So, um, when you are your second question around, what that was asp?
Mhm.
Um, we are expecting, uh, small positive on uh, on ASP development. Uh, um, we are not expecting any bigger Healthcare reforms.
We are expecting small positive impact from ASP, especially, uh, within Urology. Uh, we also expecting some on The Chronic side, um, and that is again, primarily an emerging markets and and then we get the yearly inflation adjustment in in the UK. So, those are some of the, the main, uh, reasons for us being positive, on, on the asp.
Thank you.
The next question comes from Martin Reno from Nora. Please go ahead.
Thank you for taking my questions. I'll build a bit on, on the, on the other Martens, uh, uh, question here. Uh, we learned at the CMT that you held earlier in the year that you have, uh, quite normally, uh, 2 or 3, uh recalls, uh, during during a year. And I just wonder, uh, how much you have baked into potential recalls, uh, in in this year and how, how you have if you have a financial buffer,
4, that's potential outcome. And then secondly uh on caresses um would be instinct to to to hear how you expect to to re-accelerate, 500 basis points. Uh a few words on what is going to drive it in terms of uh product launches uh new geographies? Anything like that, thank you.
when you, when you produce the
products in the numbers of of billions, then then of course, uh, of course, they can be from time to time.
uh,
Recalls. Uh, what we saw from, um, urology.
primarily, uh,
is is something which, uh, which uh, which which we see, very, very rarely and, uh, and and, and I would like to take this opportunity to remind everybody that
That the product returns that we have seen in China.
Has nothing to do with, uh, products that don't work or complaint rates or anything like that.
so, that was, um,
The reason for that was actually.
um,
Reasons that we have never seen before and and that that we could not have done anything internally to avoid.
I would say so. So, therefore, uh, we, we do not have a buffer for, uh, very large recalls, and it is something that we, that we don't see what we have seen of real, uh, events over the last couple of years, has been
the Distribution Center event that that to uh to difficulties in delivering and uh and then uh what we saw in
Us completely. Um,
unexpected and and, uh, and
To a very large extent internally driven so so we could have avoided them and that's what we have tightened the system to make sure that we don't get into that situation. Having said that you can't run a business and do not and never have issues.
Yes.
Oh sorry. No. Not on on organic growth.
uh, so, um
so, so as we
As as I started, by saying we, we actually consider this to be um, the the changes to uh The Physician fee schedule should be positive for us. Um, and and we also see that we have strong momentum. We are not in a situation where we have
Fully utilized, uh, the uh, uh, our uh, sales muscles, so to speak. Uh, so so we are we, of course, still hiring
Uh, sales reps to, uh, just to go to the market. Uh, but we see it as we get more access, uh, with what is happening now, because there will be fewer.
There will be fewer, uh, companies to serve the same customer group, as we had before. Uh, and uh, and, and that is definitely going to
Just need to see it, played fully out before we we start to become too positive, but but we think that that is where we are. Now we can have a, an object because the turmoil that we saw in Q3 is not going to come back.
Thank you, last.
The next question, Council. Aisha. Noir from Morgan Stanley, please go ahead.
Hi, good morning. Thanks for taking my question. My first 1 is on the competitive bidding program in the US, for chronic care products. You mentioned in the press release, that any changes would take effect in 2028 at the earliest, but your peers are flagging that this could even, you know, be a bit later. So 2029 just curious what your internal assessments involve towards this timeline and whether you have any renewed, thoughts on the potential magnitude of the sales impact for you.
Uh, my second question is just a quick one on the wound recall impact in China. Could you help us quantify the negative impact that you're calling out in Q2 and Q3 for 2026? Thank you.
Yeah, let me take, um, the competitive bidding. Um, uh, question. So as you all are aware, um, this is something that is currently going on, um, and we expect some kind of an outcome, uh, as we understand it during this quarter,
Uh, we however, believe that if there will be an impact and that is still highly uncertain that it will not impact us uh, until 28 at the earliest.
um, so so that's the information we are, are currently um, sitting with
Uh, in terms of the wound recall in China, as we have said a number of times now, we expect that to have an impact in Q1, Q2, and Q3. My estimate per quarter is something around $25 million.
Uh, based on on the knowledge that we have.
Thank you very much.
25 million per quarter.
Hi, good morning. Thank you for taking my questions. Um, the first question is just on gross margins. How should we think of gross margin development over FY26? Can you provide your assumptions around constant inflation, hungry wage inflation, and the other moving parts? And then the second one was just around if you could provide us an update on how the search for the new CEO is going, or is the expectation still for having an answer to the replacement by spring next year?
Thanks for for your question. Let me take the first 1, um, so our grass margin. Um, my high high level assumptions, um, are that we are looking into a year with a pretty stable inflation levels. That also means that our raw material prices, utility costs, uh, Freight Etc are pretty flattish compared to to last year, um, but uh, we will also have some headwind still from high salary inflation in Hungary. Uh, we are still seeing um, a very intense labor market.
And then we are investing in uh in ramping up our facilities um still uh as some ramp up in Costa Rica. But next year, we will really start to ramp up in the possible. We are expecting possible to be in operation.
In Q4 of 2526, those are the main moving parts on our gross margin into 26.
And uh on the CEO search. Um, so in a sense, uh, what I have said before the search is going on, um,
Uh, it's like it's like a funnel, right? You start. You start Broad and then you, then the, the field is narrowing down and, and that's of course where we are now.
Uh, we haven't, um,
uh, signed any contracts at this point in time, uh, but but we have a number of qualified candidates uh, and uh,
and once uh, we have a signature
you will be the first to know, uh, and and then of course, uh, it depends then
On, uh, what kind of garden leave or other terms does that person have? And, uh, and that will then put, uh, put a date on when a person can start, and until then it will be.
A team that you are meeting today, that will be running the companies together with the rest of of the leaders in in cool.
Um, are you able to provide or quantify the effects headwind to margin for FY26?
To ebit margin.
so,
On the top line. Um, we will we expecting a reported growth uh, in the level of 4 to 5% and that is, uh, also again a driven by the US dollar, uh, to a large extent on on, uh, the EP growth. Um, we will see some headwind uh, also coming from the US dollar. Also some on the British pound and the Hungarian hoof
Okay, thank you.
The next question comes from Veronica dooba from City. Please go ahead.
Um, hi, good morning, Larson, Anders. Thank you for taking my questions. I'll keep it to 2, please. 1, obviously looking at the revenue growth and the EBIT growth guidance, and I appreciate, Anders, you don't want to talk about gross margin guidance, but it does seem to me that there is a fairly large amount of investments going into the business, obviously year on year. Um, especially stripping out carousels, which is, you know, delivering a nice little tailwind to profitability. I was just hoping you could maybe talk about what are some of the areas of the business where you are investing meaningfully with this high single-digit kind of OPEX growth guidance. Um, that would be super helpful. Um, and then I just...
To circle back on the China competition answer, because it wasn't clear to me, um, Lars from your comments at the beginning. We see if I look at the press release, you are calling out competition.
The first time it wasn't in the prior releases. So just trying to understand what really has changed. What has prompted you to put it into the release? And I guess is that competition from local players or is it from other multinationals? That are becoming more focused in the market. Thank you so much.
Um, thanks a lot Veronica. Let me take you the the first 1, uh, in terms of um the Investments. So now we are entering into the first year of our impact 4 strategy. And as we also set at the capital markets, we are going to invest into new initiatives, uh, both to drive. Um,
Uh, the topline growth but also to support our EP growth. The ambition.
And what we will initiate, uh, this year is Investments, uh, primarily into our us, chronic business. Uh, we see quite a few opportunities also with the new opportunity within a bowel care.
We will also initiate Investments, uh, in urology, uh, to support the launch of insiya. We are expecting um, um, when we get approval from the FDA that we will launch in tibia into 2627. So we will also initiate Investments here and then uh, we will initiate quite a bit of investments into technology and AI both to support uh, improvement in our user, uh, experience. But definitely also to support uh activities to automate and optimize um, back office activities, especially order management. Prescription management through AI.
So those are are some of the, the things that that we will initiate, um uh basically to support our long-term growth and uh value creation agenda.
And for for China. Um,
Yeah, that I think is it's, it's actually a very appropriate, follow-up Veronica. Thank. Thank you for that. Uh, that gives me the opportunity to say that we have the the Our Community Markets here in Austin Kerr is is very, very high in China.
um, and uh, and we are not
um, yeah, well more than 60% so so and and uh as we are not seeing growth uh like we used to um it is
Primarily because we uh, we have a consumer sentiment that is not the Super positive, but but of course, we also feel, uh, the pressure every single day that somebody would like to, to take away some of the, the market share that we are having. Uh, we are seeing very able competitors, uh, in in China. Uh,
A very, very even though we have many local competitors. They have a very, very small markets here. Uh, very low single digit, I would say, and therefore, it is uh, it it is, uh,
Uh, but it has not worsened, so that's not how you should read it.
Very clear. Thank you.
The next question comes from Oliver. Medsker from oddo bhf, please. Go ahead.
Yes. Uh good afternoon. Thanks for taking my questions. Um,
First question is also on curses and you mentioned this Market shift towards the higher price products. Um, can you just elaborate a little bit more about the Dynamics and how sustainable you regard this shift and, uh, the the second question is about, um, still also the operating cost development. So follow up on Veronica. So, if I do the math and calculate, a stable gross margin, and let's say also is a stable, even even bit margin and still the amount of operating leverage, you should have. Um, it it would be great if you if you can dive deeper into respective costs and yeah, you you mentioned the wrap up in TBR but I calculate the quite significant operating leverage which is according to your augmentation eaten up. So would be great to have a little bit more transparency regarding the cost position.
And how the math works. Thank you.
So uh, on your first 1, um, Olivia
so the physician fee schedule changes uh to uh to the payment um as as we you know you know we we are we are running right now with an average price of 110 US dollars per square centimeter
and the new fixed price is 127.
Points 3 US dollars per square, centimeter from 1st of January 2026.
That is of course positive uh on an average basis uh that will also be uh fewer. Um
Competitors. We expect uh that has not been uh does not come out the yet, but we expect before. 1st of January that we'll have a full list of who has coverage
And that dynamic, all together means that, uh, as the
Year progresses, and as the stocks that have been built, they are being consumed.
Uh, that we will be in a better position.
To compete better than we are at this point in time, because there are fewer competitors and what we compete with would have a higher average price. That's how we see it. That's also why we...
Think that this at the end of the day, is a positive change. Seen from our point of view.
Your second question around our cost development. I think I I talked to the gross margin moving path earlier. Uh, I also um, talked to where we are going to invest.
Back to Veronicas question and uh and you should also said earlier, you should expect our inflation levels or the inflation levels salary regulation, Etc. To be pretty stable also compared to to last year. So we are really um,
The layer, which effect we have, we, we really in this step back into new initiatives. Uh, and I explained those initiatives earlier. So it's a us, it's in tibia. Uh, and then also investing into technology, Ai and to support, uh, long-term growth and long-term value creation.
Okay, thank you.
The next question comes from. Julia from Jeffrey. Please go ahead.
Um, thanks a lot, Julian. Let me, uh, start with the U.S. Um, uh, coding. Yes, it's going to have an effect here from January. But we also, um, are aware that there will be quite a lot of operational activities going on in moving the coding from the previous way of the previous reimbursement codes and now to specific hydrophilic codes.
Uh, so there will be, um, quite a big operational activities in our us business. To get that fully implemented and it is still first too early to, to call out, uh, the, the impact. But over time, we expect this to be positive
Um in terms to your second question around uh guidance on The Chronic side as you have seen. Um also last year we have a a good momentum within the continents driven by our intimacy, catheters driven by the Lugia launch. But we also see in good momentum within our bowel care uh business
And and we see that momentum, uh, also continue into uh, into 2526, uh, and um, and remember the Awesome event franchise as last also has mentioned, a number of times. Now are also impacted by um, low growth or flat-ish growth the um, in China. So so that is the main headwind, uh, OC versus CC.
But overall, we are expecting that the Chronic business will continue with good momentum also into 2025.
Thank you.
The next question comes from Sam. England from bernberg. Please go ahead.
Hi. Thanks for taking the the questions. So, the first 1 is just a follow-up on the investment and margins piece. Can you talk a bit about how the impact for investment evolves over the plan period, um, to understand how margins might trend from here. Is it pretty much front end weighted?
Or are there areas like AI? Um, that are more sort of multi-year Investments throughout the plan period. And then invoicing Respiratory Care. Just wondering if you're expecting any more positive momentum on reimbursement, during 2026 following the improved reimbursement that you saw in France for for hmes earlier this year. And then you expecting any other new markets in voice and Respiratory Care to open reimbursement in 26. Like we saw with with Poland this year, thanks.
Yeah, so thanks Sam, uh, to your first question around, uh, Investments during the impact for period. And that the ones we have talked about today that is, uh, yeah front loading some of the activities to support the growth, uh, and also value creation over the period. Uh, so we are, um, yeah. As I said a couple of times now front loading, uh, activities within the US.
Uh, in TIBIA and technology, AI to reap the benefits. Um, later in the strategic period.
On voice and Respiratory Care. Um, we, we expect, uh, the momentum we have seen in recent years to continue. Uh, we have seen some reimbursement openings, um, in in some of our smaller Emerging Markets.
Uh, but also in France, um, but you should not expect any bigger ones. At least not the short term.
Right. Thanks very much.
The next question comes from Graham Doyle from UBS. Please go ahead.
Morning guys, thanks tick. My questions. I just 1 1 for Andrew and 1 for Lars and and it's just in terms of the Q4 it looked like there was a fairly sizable Step Up In other operating income, which seems to be related to a transition Services agreement. And it was kind of like 2, 3% of, uh, of ebit. And how sustainable is that? And when should we expect that to sort of run off? Um, and then, just a point on, on reimbursement, um, for large area, when you look at these skin Subs, is there not a danger. If the ceiling reimbursement. I want a doctor receives is capped at 127. Why would there not be a race to the bottom to products for like 20, 30 $40, where you make this spread so it's just just understand how you think. Doctors balance patient outcomes with I suppose Financial incentives.
Will be will be helpful. Thank you.
Well, thanks a lot Graham. Let me take the first 1. Uh, yes. Um, we have a, a step up in in operate other operating income throughout the year. And this is really related to our, um,
The uh the cost to do these services are sitting in the individual cost items. So when I net it up,
In our p&l, it's actually neutral effect.
Um, you should expect the, um, uh, uh yeah. The other operating income also to continue into 2025/2026, and we expect to be done with the services towards the end of the year. But for the total, uh, EBIT, it's a neutral, uh, impact.
So, on the cases, uh,
um,
but I think, you know, at least as much as I do about the Dynamics, uh, the financial dynamics of uh, of
Of the skincare Market in the US. Um, the way I see this change is
that um, for most
Vendors. They will get into a space where they have a significantly lower, uh, pay per square centimeter than
they had before and we come into a space where we have more
The windows that are left in that space. Now, um,
They can only be there when they have good quality clinical data.
uh and the clinical data that you have to obtain to be in that market, you you can only get those when you have a certain
uh,
investment in the
in in, in the, in the quality of those data uh, and
and, and I think,
The, it's hard to see.
Uh, where the kind of Investments that you have to do to both create these products, but also to document them.
That is going to be a substantial race to the bottom.
Uh on the country. I think that uh that it's uh it's going to be a market that for some of the vendors will be hard to complete in. We just happen to be set up in a way where we have extremely strong clinical data.
We also have a very competitive setup when it comes to to the cost on this. Um, so so we we of course prepared to
Um, to compete.
but we, um,
We just don't think that we are in a space where, uh, what you described there is, there's a logic that will just be the right or the first thing that happens. But
We might be proven wrong and this, of course, uh, but but I really think that what happens, the steps that have been taken here.
That gives a choice for, uh, the society to offer.
Very, very strong.
Products.
At a reasonable price, and those who would like to compete in that space, that's how I see it.
Thanks. No. I completely hear you just. Uh, it was just, um, something I thought about as we looked at how some of the higher price products are trending today. Thanks a lot for that.
I think that we will have to end with the next question because we are over time. But uh, what could we take 1 more?
The next question comes from Carson. Lindbergh marsan from dansky bank, please go ahead.
Excellent. Thank you very much for squeezing me in. Uh I was just hoping that you could talk a little bit about the scenarios for the LCD. Um because that is of course, a sort of continuous rumors about it, not being implemented and maybe being canceled. So what will actually happen with your organic uh, Revenue growth guidance for twins for next month?
Potentially. Yeah, and if it should be in a situation where the LCD is not being implemented,
Um, Castle, let me take that one.
For, for the coming year is the growth of around 25% and remember, uh, around 70% of our business, that's the hospital business and the hospital business. We have a very strong, uh, growth quarter over quarter and it's really the outpatient setting when we discuss the LCD and the price levels where we have some volatility, uh, but we are, um, uh, we expect to deliver, um, growth up around the 25% for our chaos as business. Uh, 2526.
Uh, could you help me? Uh, remember it?
Yeah. So
We are in the process of doing clinical studies, and we expect those to finish.
sometime next year, uh,
so so that that the current assumption
Thank you.
Okay, so uh, so I actually, I changed my mind that had that happened some times in life. Uh, so yes, by if you're still alive, you can you can ask your questions because you're the last 1 who's left. So that would be like almost personally if we leave you out here.
The next question comes from yesterday from DMP Carnegie. Please go ahead.
I'm sorry for taking the time. Um, just maybe on the bow care opportunity that you mentioned in regards to your, uh, increased investments into the next financial year. Could you just elaborate a bit on on that opportunity and and what kind of contribution you expect, uh, to to get from that? And then, lastly, on on Halo, um, than the, the special items that you have a special as specified. Um, so my understanding you don't do capitalization of your IDs, I'm just trying to understand what's, what specifically, driving that and and and to
Justice.
X. Uh yes. But let me take your questions. Um,
when we had the CMD back in uh, in September and described our impact 4, mm also for the us, we also talked to an opportunity, we are seeing in the US for our bowel care, uh, business
Um, so, um, the good news are that we are now getting a reimbursement for bowel care in the US and uh, that's why we are now initiating Investments, uh, into this specific.
Area and uh, and uh, that's what we have been planning for doing this year.
Uh, in terms of your second question, uh, the um, related to the Halo. Uh, yes we have evaluated the, um,
the value of Halo also, as a consequence of the current sales in the, uh, in the UK and our plans not to, to launch in other markets and therefore, we have, uh, included, um,
Um a a quite significant amount in our special items and its related to the it Investments. We have done so to develop the solution and uh to develop the app. Um and therefore we have reassessed the uh basically the depreciation. Um,
For for the Halo solution and that's what we have included in special items.
Thank you.
Thank you very much guys. And, um,
Looking forward to seeing many of you over the next period. Thank you.
No.
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