Siemens Healthineers fully on track after successful second quarter

Original from: Siemens Healthineers

Siemens Healthineers AG today announces its results for the second quarter, ending March 31, of fiscal year 2023.

Q2 Fiscal Year 2023​

- Equipment orders continued to exceed very strong equipment revenues; equipment book-to-bill ratio 1.01

Comparable revenue growth was very good at 11.2% excluding rapid COVID-19 antigen tests; taking into account the tapering rapid antigen test business, comparable revenue declined by 2.5% from a very strong prior-year quarter

- Imaging showed clear comparable revenue growth of 12.7% and a strong improvement in adjusted EBIT margin of 130 basis points to 21.5%

- Diagnostics revenue fell 39.0% on a comparable basis due to the tapering rapid COVID-19 antigen test business; adjusted EBIT margin of -10.1% burdened by transformation costs (€77 million, or 710 basis points)

- Varian achieved excellent comparable revenue growth of 27.0% following resolution of a previous supply-chain issue; adjusted EBIT margin at 14.4%

- Advanced Therapies showed very strong comparable revenue growth of 9.9%; adjusted EBIT margin clearly higher than in the prior-year quarter at 16.8%; endovascular robotics solution will focus exclusively on neurovascular interventions

- Overall adjusted EBIT margin was down to 12.7% due to lower contributions from rapid COVID-19 antigen tests, transformation costs in Diagnostics, and cost increases, particularly for procurement and logistics

- Adjusted basic earnings per share were below the prior-year quarter at €0.43; excluding rapid antigen tests and transformation costs, adjusted basic earnings per share increased by 11%

Revenue in the second quarter of fiscal year 2023 declined by 2.5% on a comparable basis. The reason was the materially lower revenue from rapid COVID-19 antigen tests. Excluding the rapid antigen tests, revenue rose 11.2% on a comparable basis – with very good growth in the Varian, Imaging and Advanced Therapies segments. From a geographical perspective, revenue grew sharply in the China region, while in the Asia Pacific Japan region it grew significantly. Revenues in the Americas and EMEA regions fell as the rapid COVID-19 antigen-test business tapered off. Excluding the rapid antigen tests, the Americas recorded strong growth and EMEA very strong growth. Nominal revenue was around €5.3 billion.

Equipment order intake continued to exceed very strong equipment revenues in the second quarter; the equipment book-to-bill ratio was 1.01.

Adjusted EBIT fell 30% to €681 million, resulting in a lower adjusted EBIT margin of 12.7%. This was due to markedly lower contributions from rapid COVID-19 antigen tests and transformation costs for the Diagnostics business. Cost increases, particularly for procurement and logistics, were largely compensated by positive currency effects.

Net income fell 81% to €108 million. Besides the effects already mentioned, it was especially affected by expenses related to the focusing of the endovascular robotics solution exclusively on neurovascular interventions and the associated withdrawal from the robotic-assisted endovascular cardiology business in the Advanced Therapies segment. The tax rate remained low at an unchanged 23%.

Compared with the percentage decline in net income, adjusted basic earnings per share fell by only 36% to €0.43 because the expenses for the withdrawal from the robotic-assisted endovascular cardiology business were adjusted as other portfolio-related measures.

Free cash flow rose to €517 million.

Imaging segment revenue was around €2.9 billion in the second quarter. The broad-based revenue growth was at 12.7% on a comparable basis.

From a geographical perspective, Imaging revenue grew sharply in the China, Asia Pacific Japan and EMEA regions. Revenue in the Americas region grew moderately.

Due to the positive revenue development, the segment’s adjusted EBIT margin rose to 21.5%. Cost increases, particularly for procurement and logistics, were largely compensated by positive currency effects.

Second-quarter revenue in the Diagnostics segment fell 39.0% on a comparable basis from the very strong prior-year period to almost €1.1 billion. The reason was the materially lower contributions from rapid COVID-19 antigen tests of €4 million (prior year: €678 million). Excluding the rapid antigen tests, revenue was down 1.4% primarily due to the tapering-off of other Covid-related tests.

In the China region, Diagnostics posted a significant rise in revenues. Revenues in the EMEA and Americas regions fell by a mid-double-digit percentage, and in Asia Pacific Japan by a mid-single-digit percentage, mainly due to lower contributions from rapid COVID-19 antigen tests.

The segment's adjusted EBIT margin fell to -10.1%. The margin decline was largely due to the lower contributions from rapid COVID-19 antigen tests. Transformation costs of €77 million and negative currency effects also weighed on the business. The transformation costs essentially consisted of expenses connected with the derecognition of assets, which was a result of measures to optimize the cost efficiency of the existing product range.

Second-quarter revenue in the Advanced Therapies segment rose very strongly by 9.9% on a comparable basis to €498 million.

In the China region, revenue grew sharply, while in the Americas region, it grew significantly. The Asia Pacific Japan region posted slight growth. In the EMEA region, revenue fell slightly.

The adjusted EBIT margin of 16.8% was markedly higher, driven by effects from the very strong revenue growth. Positive currency effects outweighed cost increases that were seen particularly in procurement and logistics.

Outlook

For fiscal year 2023, we continue to expect comparable revenue growth of between -1% and 1%. Excluding revenue from rapid COVID-19 antigen tests, this corresponds to comparable revenue growth of between 6% and 8%.

Adjusted basic earnings per share (adjusted for expenses for portfolio-related measures and severance charges, net of tax) are still expected to be between €2.00 and €2.20.

On the segment level, we make the following adjustments:

For the Diagnostics segment, we now expect comparable revenue growth of between -26% and -23% (previously -21% to -19%). Excluding revenue from rapid COVID-19 antigen tests, this corresponds to comparable revenue growth of between -2% and 1% (previously 3% to 5%). We now expect an adjusted EBIT margin of between -4% and 0% (previously 0% to 3%). The outlook is still based on the assumption that we will generate only €100 million in revenue from rapid COVID-19 antigen tests and still includes negative impacts within adjusted EBIT of €100 million to €150 million in connection with the transformation of the Diagnostics business.

For the Imaging, Varian, and Advanced Therapies segments, we confirm the targeted ranges as published in the annual report 2022.

The outlook is based on several assumptions including the expectation that current and potential future measures to keep the COVID-19 pandemic under control will not negatively impact demand for our products and services. Regarding developments related to the war in Ukraine, we assume there will be no material adverse effect on our business activities. The outlook is also based on the current macroeconomic environment and current exchange-rate assumptions, and excludes potential portfolio activities. Exchange rates have significantly changed from the expectations underlying the outlook in the annual report 2022. From today’s perspective, this results in a negative effect of more than €0.10 on expected adjusted basic earnings per share for fiscal year 2023. The outlook is based on the number of outstanding shares at the end of fiscal year 2022. The outlook further excludes charges related to legal, tax, and regulatory matters and frameworks.

Source: Siemens Healthineers fully on track after successful second quarter