ROUNDUP 2: Siemens Healthineers expects weakening – restructuring of diagnostics

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(new: statements from the conference call, price, analysts)

ERLANGEN (dpa-AFX) – The medical technology group Siemens Healthineers is assuming weaker development for its new fiscal year. The company expects adjusted earnings per share (EPS) to decline and comparable sales to almost stagnate. In the 2021/22 financial year, which ended at the end of September, the Erlangen-based group benefited from the takeover of the US cancer specialist Varian and a special boom in the diagnostics business through the sale of rapid antigen tests for the detection of Covid-19.

But apart from the good business with the rapid tests, high costs and delivery bottlenecks are a burden on the diagnostics division. The introduction of a smaller version of the Atellica laboratory system was postponed because of the pandemic. The market launch only recently began this year in Europe. The systems for small and medium-sized test volumes are to be rolled out extensively in the coming calendar year. Because of the lockdowns in China, there were also no sales with routine tests for months. When the figures were published on Wednesday, the company therefore announced that the restructuring of the division would be accelerated in order to improve competitiveness and profitability.

Healthineers now wants to focus on the Atellica platforms and gradually abandon older technologies. According to CEO Bernd Montag, the number of platforms should be reduced “by more than half”. This goes hand in hand with fewer locations and lower production, Montag said in a conference call. Jobs will also be affected – but where and to what extent is still open.

The simplification of the portfolio should also reduce complexity. The plan envisages leaner organizational and research structures. Healthineers intends to focus its investments on key regions. Supply chains and service are also to be “optimized”. The management expects savings of 300 million euros by 2025. CFO Jochen Schmitz put the costs for the same period at 350 to 450 million euros. Total costs of up to 200 million euros are to be incurred in the current financial year.

Meanwhile, management lowered its medium-term expectations for the division’s growth and profitability. This also reflects the greatly changed environment, Montag said. However, Healthineers is sticking to its growth forecast for the Group up to 2025.

In the past financial year, Healthineers increased sales by almost 21 percent to 21.7 billion euros. The rapid tests contributed around 1.5 billion euros to this. On a comparable basis, which excludes currency effects and the purchase and sale of parts of the company, revenues increased by 5.9 percent. All segments contributed to this. If the corona-related sales are deducted here, the comparable growth was reported to be 3.8 percent.

After tax, profit rose by 18 percent to almost 2.1 billion euros, adjusted earnings per share increased by 13 percent to 2.29 euros. Healthineers once again had a strong final quarter and performed better than analysts had expected. Shareholders are to receive a dividend of 95 cents per share, which has been increased by ten cents.

For the new financial year 2022/23, Healthineers expects comparable sales in the range of minus one to plus one percent. If you exclude the test business, the comparable sales growth should be six to eight percent. Healthineers can build on a thick order book. Adjusted earnings per share are likely to fall to between EUR 2.00 and EUR 2.20 in the coming year. Adjusted for the test business, however, Healthineers would also make gains, it said. Analysts had hoped for a little more overall.

The share price was volatile throughout the day. After a brief slide into the red at the start of trading, it temporarily climbed by almost five percent. After that, however, the stock gave up almost all of its gains, only to climb another 1.6 percent around midday. This put Healthineers at the top of the Dax.

There was praise and criticism from analysts. The quarterly figures were better than expected, noted analyst Hassan Al-Wakeel from the British investment bank Barclays. The valuation is cheap and the long-term prospects look good. UBS also praised the quarterly figures. Market expectations for the new fiscal year are likely to fall as the forecasts for the diagnostics division are revised, noted analyst Graham Doyle./nas/stw/stk