• Organic Growth: 8% in Q1.
• EBIT Margin Before Special Items: 27% in Q1.
• Adjusted Return on Invested Capital: 15%.
• Revenue Increase: DKK420 million or 6% compared to last year.
• Gross Margin: 68%, on par with last year.
• Operating Profit Before Special Items: DKK1.9 billion, a 5% increase compared to last year.
• Net Profit Before Special Items: DKK1.4 billion, a 17% increase compared to last year.
• Adjusted Diluted Earnings Per Share: DKK6.38, a 17% increase.
• Operating Cash Flow: Inflow of DKK2 billion.
• Free Cash Flow: Inflow of DKK1.9 billion.
• CapEx: DKK308 million with a CapEx to sales ratio of 4%.
• Advanced Wound Care Organic Growth: 12% in Q1.
• Voice and Respiratory Care Growth: 11% in Q1.
• Interventional Urology Growth: 1% in Q1.
• Ordinary Tax Rate: 22%.
• Effective Tax Rate: 41% due to extraordinary tax expense.

• Warning! GuruFocus has detected 4 Warning Signs with CLPBF.

Release Date: February 04, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Coloplast AS (CLPBF) reported 8% organic growth and a 27% EBIT margin before special items, aligning with expectations.
• The divestment of the Skin Care business is expected to positively impact the group EBIT margin by around 30 basis points this financial year.
• The Chronic Care business, including Ostomy Care and Continence Care, outperformed the market, with Luja being a significant growth contributor.
• Atos Medical and Kerecis, recent additions to the portfolio, showed continued momentum with double-digit growth in the quarter.
• The Advanced Wound Care segment achieved 12% organic growth, with Kerecis contributing a strong 32% growth in Q1.

Negative Points

• Interventional Urology growth was negatively impacted by a voluntary product recall related to packaging, affecting sales in Q1.
• The divestment of the Skin Care business is expected to reduce reported revenue by around DKK350 million, impacting reported revenue growth by 1.5 percentage points.
• The effective tax rate for Q1 was significantly impacted by an extraordinary tax expense related to the transfer of Kerecis intellectual property, resulting in a 41% tax rate.
• The gross margin was negatively affected by ramp-up costs at manufacturing sites in Costa Rica and Portugal, as well as currency impacts.
• Emerging markets growth was softer due to a high baseline last year, impacting overall performance in the region.

Q & A Highlights

Q: What gives you confidence that recent distribution center issues and the Bladder Health recall are isolated incidents, and how do you see Coloplast's performance moving forward? A: We don't run a perfect company, and we've had setbacks related to the distribution center and a quality problem in urology. We've addressed these issues, and the distribution center is back to service levels. We manufacture over 1.5 billion medical devices, and while quality issues can occur, these are aberrations that we do not expect to repeat.

Q: Can you discuss the top-line guidance and whether the upper end of the range is more likely? How is Luja performing? A: We are guiding for 8% to 9% growth, with a second-half weighted profile. The pickup in the second half will be driven by emerging markets and resolving back order situations. Luja continues to perform well, but it's too early to specify where we will land within the range.

Q: How do you plan to deepen penetration in the Interventional Urology segment, particularly with the ITNS segment? A: Everything depends on the clinical trial results. The strength of the clinical data will determine reimbursement and the commercial strategy. We will discuss commercialization plans once we have the clinical data.

Q: What is the outlook for Kerecis and the impact of the LCD policy delay? A: We are on the final policy list for DFUs, but not for VLUs, which is a small part of our portfolio. The delay in implementation provides a commercial opportunity, and we are ready with product volume and a team in place. The impact will depend on how the market evolves.

Q: Can you provide more details on the manufacturing ramp-up costs and their impact on gross margin? A: The gross margin for Q1 was on par with last year, impacted by lower input costs and hedged energy prices, offset by higher manufacturing costs from ramp-ups in Costa Rica and Portugal. We expect similar levels throughout the year, with scalability benefits as revenue increases.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.