Straumann Holding AG (Straumann) has reported net revenues of CHF779 million for full year 2008, compared with the net revenues of CHF714 million, in the previous year-end. It has also reported net revenues of CHF189 million for the fourth quarter of 2008, compared with the net revenues of CHF195 million, in the year-ago quarter.
The strengthening of the Swiss franc against major currencies resulted in a negative foreign exchange rate effect of roughly 6% points. Despite the economic crisis and the market slow down, the Group was able to achieve growth across all businesses in the fourth quarter, with net revenues increasing 5% in l.c. (-3% in Swiss francs) to CHF 189 million.
Europe (+7%) and North America (+1%) continued to generate growth in l.c. in the fourth quarter, while Asia Pacific declined (-4%). Overall, Group net revenue growth declined from September through November but stabilized in December.
Straumann announced that it is implementing measures to adapt its organization to market conditions and to reduce its cost base. These measures will not compromise the Group’s innovation, selling and service power.
Straumann also communicated that, due to the economic downturn, intangible assets have been revalued, leading to exceptional non-cash write-downs for 2008. Excluding these, 2008 operating and net profit margins will be at, or above, the guided levels of 25% and 20%, respectively. Despite the write-downs, the Group will report a positive net profit for 2008 and expects to offer a dividend to shareholders. Straumann’s full-year audited financial statements will be presented on 12 February 2009, as planned.
Prompt action to adapt organization and processes to market conditions
As a result of an anticipated continuation of dynamic growth (+22% in the first six months), the Group created 300 new jobs worldwide increasing its global workforce to almost 2300 in 2008. The unprecedented effects of the economic slow-down, which became evident in September and continued into the fourth quarter, made it clear that this would need to be addressed. As a first action, Straumann reduced working hours in implant production in December.
In parallel, the Group carefully reviewed and reprioritized all projects, and identified cost savings that would not jeopardize innovation, sales force strength, and the ability to bring new products to market, and to meet supply requirements. At the same time, plans were accelerated to implement regional business hubs and service models to enhance efficiency and maintain a high level of customer satisfaction. Efficiency improvements will lead to a reduction of the global work force of approximately 3% worldwide. Straumann will approach this reduction in a socially responsible manner, using natural attrition, fluctuation, and early retirement wherever possible.
Economic situation leads to revaluation of intangible assets
As a consequence of the prevailing economic crisis and expected subdued growth, the value of Straumann’s intangible assets related to previous acquisitions has been reassessed. Their value, which totalled CHF 330 million on 30 June 2008, will have to be reduced by roughly half and the corresponding write-downs will be disclosed in the full-year statements, in accordance with International Financial Reporting Standards (IFRS).
Outlook (barring further unforeseen circumstances)
Uncertainty in the global economy and historically weak consumer sentiment make it difficult to guide for the year ahead. From Straumann’s perspective, the market for implant, restorative and regenerative dentistry is not expected to grow in 2009.
The strength of its global franchises, product range and innovation capability affirm Straumann’s confidence in achieving above-market growth. The aforementioned initiatives, will not compromise the Group’s innovation, selling and service power but will lead to efficiency improvements that should enable the Group to deliver an operating margin of more than 20% in 2009, depending on currency developments.
Global demographic trends, low penetration rates and high substitution potential continue to make Straumann’s markets highly attractive in the mid and long term. The Group believes that it has the right strategy in place and is well prepared for a market turnaround in the future.