Nobel Biocare Holding AG (Nobel Biocare) has reported total revenues of EUR619.2 million for the full year of 2008, compared with the total revenues of EUR665.9 million in the previous year-end. It has also reported a net loss of EUR109.7 million, or EUR0.90 per share, for the full year of 2008, compared with the net loss of EUR166.2 million, or EUR1.35 per share, in the previous year-end.
Change in commercial approach in Q4: reduced discounts and trade receivables
Japan: Continued high-teens growth in Q4 driven by recent product approvals
Continued strong market uptake of NobelActive: >130,000 implants sold in 2008
Strategic Alpha-Bio Tec, Medicim and BioCad acquisitions; ISI and Optimet partnerships entered
NobelProcera: Most comprehensive technology and product launch ever initiated by Nobel Biocare for 2009
50 headcount reduction in Q4 2008; additional 35 in Q1 2009 (in total about 3% of workforce)
Gross margin at 81.1%; EBIT margin at 24.1% (before exceptional items)
Strong operating cash flow, up 26%; solid balance sheet, high cash reserves
Basic earnings per share of EUR0.90 (~CHF 1.33)
Dividend proposal CHF 0.55 per share; payout ratio broadly unchanged (41%)
Domenico Scala, chief executive officer: “Despite a challenging 2008, Nobel Biocare strengthened its organization and made significant strategic progress. We successfully launched new products, strengthened our portfolio while taking actions to reduce costs. Highlights of the year were the successful introduction of NobelActive and the technology advancements in NobelProcera. Although the revenue growth slowdown adversely affected our margins, Nobel Biocare remains highly profitable and cash generative with very solid financials. For 2009 we expect the economic environment to remain challenging. Our priorities are to build on the success of NobelActive, to launch NobelProcera and accelerate our initiated cost reduction measures.”
Corporate performance: Investing in sustainable company health
For the full year 2008, revenues (CER) declined by 4.2%. Reported revenue decreased by 7.0% versus the prior year to EUR619.2 million. Revenue (CER) declined 13.3% in the fourth quarter (-10.1% as reported). During the course of the fourth quarter, Nobel Biocare changed its commercial approach, reducing discounts and trade receivables to focus on quality business and sustainability. Profit from operations (EBIT) for the full year 2008 was at EUR132.9 million (2007: EUR216.7 million). Lower reported sales, a decline in gross profit margin as a result of reduced volumes, exceptional charges for obsolescence, and an exceptional charge for previously capitalized R&D expenses are the main reasons for the lower EBIT and EBIT margin.
Net profit for the full year 2008 amounted to EUR109.7 million (2007: EUR166.2 million) and to EUR38.9 million for the fourth quarter.
Gross profit for the full year 2008 amounted to EUR493.6 million (2007: EUR5 59.3 million), which corresponds to a reported margin of 79.7%. Excluding exceptional charges of EUR8.5 million, mainly for obsolescence in conjunction with the anticipated reduction of the product range, the gross margin was 81.1%. Reported gross profit (excluding exceptional items) for the fourth quarter was EUR128.1 million, representing a gross margin of 78.8%. The full year decline in gross profit margin is mainly due to lower volumes, increased royalty payments for NobelActive and Nobel Speedy, the integration of Alpha-Bio Tec, as well as additional fixed production costs related to the opening of the Procera manufacturing facility in Japan. Pricing discipline remained high in all regions towards the end of the year.
Profit from operations (EBIT) for the full year 2008 amounted to EUR132.9 million (2007: EUR216.7 million). Lower reported sales and a declining gross profit margin, together with exceptional provisions for obsolescence, are the main reasons for the lower EBIT and EBIT margin. Moreover, an exceptional charge of EUR7.8 million in operating expense, mainly due to an impairment of previously capitalized R&D expenses, also adversely affected reported EBIT and margin. Excluding all exceptional items, EBIT for the full year was EUR149.2 million and the EBIT margin 24.1%. SG&A costs in 2008 were at EUR327.8 million (2007: EUR320.3 million). This cost increase was mainly driven by the hiring of additional sales representatives during the course of the year, as well as expenses related to the acquisitions of Alpha-Bio Tec and Medicim and the direct presence in Hungary and Taiwan. These additional expenses were mostly offset by continued efficiency improvements and cost reductions, which led to a reduction of 50 employees in the final quarter of the year and 35 more in the first quarter.
Currencies – Reported revenues decreased by 7.0% compared to 2007 on a full-year basis. The currency impact on revenues was -2.8%. This was mainly attributable to the, on average, weaker US dollar but also to the weakening of the British pound and several emerging-market currencies. At the operating profit level, the strong Swiss franc had a negative impact, which was partially offset by the weakening of the Swedish krona as of the third quarter. In total, the currency impact at the EBIT level was –2.1% for the full year. In the third quarter, the Group started to hedge its foreign exchange exposure more systematically and thus benefited from net gains (fully compensating the aforementioned negative currency impacts on operating profit), which were accounted for in the financial result.
Net financial result – The reported net financial result for the fourth quarter 2008 was EUR47.4 million. A change of internal funding structures led to the realization of exchange gains totaling EUR46.9 million in the fourth quarter, which more than compensated for the losses incurred on the financial portfolio reported in the second quarter. Excluding these exceptional factors, the financial result would have been a positive EUR2.0 million for the full year and EUR2.8 million for the fourth quarter.
Tax – The reported tax and tax rate was adversely affected by the aforementioned exceptional items, which led to an additional net charge of EUR7.7 million. Moreover, additional tax expenses of EUR6.6 million, mainly related to prior years, were accounted for in the fourth quarter. As a consequence, t otal reported tax expense increased by EUR3.9 million compared to 2007 (EUR45.8 million). This corresponds to a reported tx rate of 31.2%. Excluding the aforementioned exceptional charges, the full-year tax rate was 23.4%.
Cash flow from operating activities for the full year increased to EUR169.0 million versus the EUR134.1 million recorded in 2007. This represents an increase of 26%. The strong cash flow improvement resulted mainly from a decrease in working capital, mostly driven by improvements in trade receivables during the fourth quarter. Also, lower taxes paid contributed to the higher cash flow.
Cash and cash equivalents (net of bank overdrafts) amounted to EUR163.4 million at the end of December 2008 versus EUR186.2 million at year-end 2007 and EUR147.9 million at the end of September 2008.