- Revenue for Q3 was up 4.8% at constant exchange rates (CER) driving year-to-date revenue up 1.6% at CER to EUR 417.2 million (down 2.4% in EUR versus prior year)
- Implant systems growth further accelerated to +5.8% at CER in Q3 with +8.0% at CER in USA
- Continued adverse currency impact on revenue -4.0pp, gross margin -0.4pp and EBIT margin -1.2pp for the nine months
- Increased R&D investments yielding results with new products improving treatment workflow and outcome as well as customer productivity, strengthening Nobel Biocare’s innovation leadership
- Cost savings and efficiency gains offset investments in innovation, customer development programs and training and education, allowing the full year outlook for the EBIT margin improvement to be raised to 100-150 bps at CER excluding realignment costs
- EBIT margin year-to-date excluding realignment costs and currency impact at 13.5% versus 12.7% a year ago
- Underlying net profit excluding realignment costs and currency impact was EUR 41.4 million, up 21% from EUR 34.3 million in the prior year
Table 1: Selected key figures in EUR million
Q3 2012 restated
Variance at constant exchange rates (CER)
Operating profit (EBIT)
Net financial result
Profit before tax
Basic earnings per share, EUR
Net cash from operating activities
1. Including EUR 6.2 million non-recurring costs for headquarter realignment
2. Figures for 2012 have been restated due to changes in the presentation of the income statement and the adoption of IAS 19R. For more information, refer to note 3 of the condensed consolidated financial statements 2013.
Richard Laube, CEO: “While we are satisfied with the progress in the third quarter, there is still scope for improvement in many areas of the business, and we are still far from reaching our potential. The quarter does, however, confirm that our investments in innovation, customer development activities and training and education are well placed to deliver sustainable and increasingly efficient growth. We remain on the right track.”
Business performance update
Table 2: Revenue by region
in EUR million
Europe, Middle East and Africa (EMEA)
Share of total revenue
Share of total revenue
Share of total revenue
Revenue of EUR 127.9 million in the third quarter was up 4.8% at CER (down 2.4% in euro due to a strong adverse currency impact). All regions reported revenue growth at CER in the quarter, confirming the positive trend of the preceding quarters. For the first nine months revenue was EUR 417.2 million, up 1.6% at CER (down 2.4% in euro). As mentioned in earlier reports, the difficult market conditions in Japan have stabilized but still significantly affected the year-to-date comparison with prior year. Excluding Japan, revenue for the third quarter was up 6.0% and for the nine months up 3.3%, both at CER.
Revenue growth in implant systems (85% of Group revenue) accelerated to 5.8% at CER in the third quarter (+6.8% at CER excluding Japan), lifting year-to-date growth to 3.0% at CER (+4.5% at CER excluding Japan), driven by continued double-digit percentage revenue growth with NobelActive® and a solid increase in NobelReplace® revenue. Implant systems growth of 3.0% at CER for the first nine months is ahead of the total implant market which is estimated to grow at 1-2%. The individualized business (15% of Group revenue) slightly improved sequentially from the second quarter. (Q3: -0.3% at CER, +1.0% at CER excluding Japan), resulting in -5.3% at CER for the first nine months (-3.6% at CER excluding Japan). Increasing growth (excluding Japan) in implant-based restorations such as individualized abutments and overdenture bars continues to be offset by the ongoing decline of more than 20% in tooth-based restorative components and scanner equipment.
In Europe, Middle East and Africa (EMEA), revenue for the nine months rose to EUR 170.1 million, up 1.8% CER (Q3: +2.5% CER). The third quarter performance was driven by increases in both Nobel Biocare brand implant systems and the individualized business. While the overall market conditions remained weak in many countries, Nobel Biocare continued to achieve improving revenue development in most countries, returning to growth in the quarter in major markets such as France, Italy, Spain, Belgium and the Nordics.
In the Americas, revenue year-to-date grew 4.2% CER to EUR 169.6 million (Q3: +8.2% CER). All major countries were positive in the quarter. Overall US performance was up nearly ten percent with both implant systems and individualized accelerating. Canada is back at the prior year’s level, while revenue in Mexico continued to increase at double-digit rates for the quarter and year-to-date. After a weaker first half year, revenue growth in Brazil returned to double-digit rates in the third quarter also.
In the Asia/Pacific region, revenue for the nine months was down 3.6% CER to EUR 77.5 million (Q3: +2.3% CER). The first positive quarterly revenue performance in over a year was driven by continued strong revenue growth in China and India. Excluding Japan, regional revenue was up 5.5% CER in the first nine months (Q3: 9.8%). While still slightly negative, the quarterly performance in Japan improved significantly as the daily run-rates in our implant systems revenue have stabilized since the negative media coverage last year. The Japanese market contributes about half of the overall regional revenue.
Alpha-Bio Tec (ABT) first nine months revenue increased at a mid-teens percentage rate (CER) versus a year ago. Revenue growth in Q3 was, as expected, high single digit percent at CER due to holidays and distributor order patterns. ABT plays an important role allowing the Nobel Biocare group to serve customer segments and specific markets with reduced and more affordable componentry to treat primarily single tooth indications. This forms an ideal complement to the Nobel Biocare brand, which leads in treating more complex indications and often compromised patients.
Financial performance update
The 2012 financials have been restated due to the adoption of IAS19R. Additionally, following a review of the income statement, the Company decided to change its accounting policy with respect to the presentation of the income statement, resulting in the reclassification of some expenses. For more information, refer to note 3 of the condensed consolidated financial statements 2013.
Gross profit for the reporting period was EUR 317.5 million (Q3 2012 YTD: EUR 323.7 million), reflecting an improved gross margin of 76.1% compared with the previous year (75.7%). The dilutive impact of the decline in Japan, currency effects (-0.4pp) and non-recurring costs for the realignment of headquarter functions (-0.2pp) was offset by efficiencies in production and favorable volume/mix effect.
Operating expenses in the first nine months were as planned at EUR 272.2 million (compared with EUR 269.5 million a year ago). The increase is primarily due to non-recurring costs related to the organizational realignment of headquarter functions (EUR 5.1 million). Investments in innovation, customer development activities and training and education were compensated with cost savings from an increasing number of programs to improve the organization’s efficiency.
Operating profit (EBIT) was EUR 45.3 million with a margin of 10.9% (Q3 2012 YTD: EUR 54.2 million reflecting 12.7%). EBIT excluding non-recurring costs of EUR 6.2 million and the adverse currency impact was EUR 58.8 million year-to-date reflecting a margin of 13.5%.
Currencies – During the first nine months of 2013, the currency translation impact became increasingly negative and was -4.0pp on revenue, -0.4pp on the gross margin, and -1.2pp on the EBIT margin.
The net financial result in the first nine months of the year was EUR -4.2 million (Q3 2012 YTD: EUR -7.4 million). This improvement resulted primarily from a favorable foreign currency hedging result.
Taxes – Tax expenses for the reporting period were EUR 10.9 million versus EUR 12.5 million a year ago. The estimated tax rate was 26.5%.
Net profit for the first nine months was EUR 30.2 million (Q3 2012 YTD: 34.3 million), with dilution due to the non-recurring costs previously mentioned and an adverse currency impact. Excluding these effects, net profit stood at EUR 41.4 million compared with EUR 34.3 million a year ago. Earnings per share (EPS) were EUR 0.25 compared with EUR 0.28 a year ago.
Net cash from operating activities for the first nine months was EUR 45.4 million, compared with EUR 66.4 million in the same period a year ago. The third quarter cash flow was diluted by an increase in safety levels of inventories and a strong revenue development towards the end of the quarter. At the end of September 2013, the cash position was EUR 161.3 million, compared with EUR 146.6 million at the end of 2012. Net cash was EUR 45.6 million from EUR 36.5 million at the end of 2012.
Nobel Biocare’s strategy is to help its customers treat more patients better with its superior products and treatment solutions, thereby achieving sustainable and profitable market share growth. The Company is focusing on four strategic pillars to achieve this:
“Designing for Life” innovation program: The Implant Systems business continues to profit from the innovative and patented NobelActive® implant with over six years of double-digit growth and the more recently launched NobelActive® 3.0. The NobelReplace® line is again growing thanks to the launch of NobelReplace® CC (conical connection) and PMC (partially machined collar). Recent launches of NobelClinician™ for MAC®, an improved user interface with volume rendering, NobelConnect™ and the NobelClinician™ Communicator app are improving treatment efficiency with superior planning, treatment team efficiency and patient treatment acceptance. NobelClinician™ subscriptions have tripled to over 7,000 in the past 30 months.
Recent announcements of exciting product launches will improve revenue growth in 2014. These include the continued opening of NobelProcera® individualized prosthetics that will give 3Shape® customers access to the outstanding quality of NobelProcera® customized abutments and the new NobelProcera® 2G Scanner which will deliver improved customer efficiency by reducing scanning time by up to 50%. In addition, the new OneScan NobelGuide® surgical templates enable more precise and prosthetically optimized implant placement. A new range of biomaterials will also be launched under the creos brand.
“Partnering for Life” customer development activities: Efforts to improve training of the Company’s field force are leading to increased sales representative productivity. Over 10% of the field force has been redeployed from declining to growing countries, and headcount has been added in growing countries to accelerate growth. The new Online Store has expanded to cover 70% of the implant business with increasing order rates.
“Learning for Life” training and education: The number of associate member registrations for the newly inaugurated Foundation for Oral Rehabilitation (FOR), which has a state-of-the-art global e-learning platform as one of many benefits, has exceeded 1,500 in the first four months. In addition, Nobel Biocare participated successfully in industry association meetings with exciting corporate forums and live training demonstrations at its booth. The global course catalog which was launched this year has led to a participation of 86% of capacity already.
Operating efficiency and effectiveness: All major programs to deliver sustainable benefits such as the HQ realignment, NobelQuality3, order-to-cash redesign have been launched and are on track. A new procure-to-pay program has been initiated to tackle the more than EUR 150 million indirect purchase cost block. Reallocation of resources to growth drivers is accelerating revenue growth and delivering improved operating margins.
Based on the first nine months’ results, the company expects low single-digit percentage revenue growth for the full year at CER, modestly building market share. Based on this and the initiated measures, and barring any unforeseen events, Nobel Biocare expects to deliver an EBIT margin improvement of 100 to 150 bps at constant exchange rates (CER) excluding EUR 6.2 million non-recurring costs related to the realignment of its headquarter functions as announced in June 2013.
Within the next 3 to 5 years, assuming markets improve beyond 2013 to modest mid single-digit growth, Nobel Biocare targets growing at least in line with the market and also improving the EBIT margin continually between 50 to 100 bps per annum at CER.
Nobel Biocare is a world leader in the field of innovative implant-based dental restorations. The company’s portfolio offers solutions from single tooth to fully edentulous indications with dental implant systems (including key brands NobelActive®, Brånemark System® and NobelReplace®), a comprehensive range of high-precision individualized prosthetics and CAD/CAM systems (NobelProcera®), diagnostics, treatment planning and guided surgery solutions (NobelClinician® and DTX Studio™) and biomaterials (creos™). Nobel Biocare supports its customers through all phases of professional development, offering world-class training and education along with practice support and patient information materials. The company is headquartered in Zurich, Switzerland. Production takes place at six sites located in the United States, Sweden, Japan and Israel. Products and services are available in over 80 countries through subsidiaries and distributors.