Samsung Medison, the Korean originated medical device OEM, published its latest quarterly results last week for the third quarter. These results show that quarterly sales revenue growth slowed during Q3 2019 with sales growing at +0.3% year-on-year relative to Q3 2018. This slow down in growth follows a period of sustained higher revenue growth which has averaged +14% over the previous four consecutive quarters. On a calendar year-to-date basis, the addition of Q3 revenues took total sales revenue to ₩243.7 billion, compared with ₩223.9 billion in 2018, an increase of +8.8% YoY.
Sales growth driven by ultrasound exports
During the first nine months of 2019, revenue growth was driven primarily by higher sales of ultrasonic imaging platforms to customers based internationally, which accounted for approximately 80% of total revenues. Revenue generated from ultrasound exports grew to approximately ₩195 billion, compared with ₩173 billion in 2018, an increase of +12.5% YoY. Higher sales from ultrasound exports were partially offset by lower sales from domestic-based customers, resulting in overall sales growth of 10% for the ultrasonic diagnostic imaging portfolio. Sales performance from the companies other medical imaging product lines was weaker and overall revenues contracted marginally. This includes its portfolio of x-ray solutions for digital radiography and computed tomography.
Sales growth led by North America and Asia
The revenue growth year-to-date has varied significantly by geographical region with sales growth being driven by the larger mature markets within North America, Europe and Asia. Sales growth from customers based in the United States and China were particularly strong. During the first half of 2019, sales revenue from North America grew by approximately +30% YoY and approximately +80% YoY from Asia. The company anticipates continued growth from both the U.S. and China, following new platform releases as well as improved local sales infrastructure within the western and southern Chinese provinces.
During the first half of 2019, sales revenue from customers based in Europe contracted by approximately -6% YoY, relative to H1 2018. While overall sales revenue from European customers was lower, sales growth at individual product level varied significantly. For example, the sale of premium ultrasound systems for obstetrics and gynaecology applications were notably strong.
Within emerging markets such as the Middle East and Central and South America, political and diplomatic instability and intensified exchange rate fluctuations led to a rapid deterioration in the market conditions and lower sales revenue relative to 2018.
Growth from ultrasound centred upon RS85, HERA W10 & WS 80 platforms
From a product perspective, sales growth was predominately driven by the export of Samsung’s premium branded ultrasound systems, which include the RS85, HERA W10 and HERA I10 platforms. This has particularly been the case within the United States which typically favours premium ultrasound with certain segments. Both the W10 and I10 platforms have recently been launched within the United States; the W10 receiving FDA approval during December 2018 and the I10 receiving FDA approval during June this year. Both of these platforms focus on their strengths within women’s health, particularly for obstetrics and gynaecology clinical applications. With the addition of these product releases, the company is beginning to focus on increasing its market presence amongst large US hospitals within these clinical segments. Within China, the premium branded WS80 ultrasound system also configured for gynaecology applications performed well, along with the premium RS80A platform for general imaging. In Europe, the sales performance of the W10 has also been notably strong for similar reasons to the United States, with specific customer segments favouring premium branded systems for women’s health.
Production volumes and portfolio pricing
At its Hongcheon manufacturing plant, the company reported maximum production capacity for ultrasonic products of 11,115 units for the first half of 2019, compared with 12,040 units in 2018, a decrease of -8% YoY. In terms of production volumes, the company reported total production of 9,354 units during the first half of 2019, compared with 9,614 units in 2018, a decrease of -3% YoY. At an overall portfolio level for ultrasonic diagnostic products, the mix between increased revenues and lower production volumes resulted in a higher unit average selling price. Based on the data published across various quarterly financial statements, pricing index strength for ultrasound units is estimated to be in the +10-15% range, relative to unit prices during Q1 2016 (base period). This favourable pricing action is perhaps due to Samsung’s recent success from the launch of its new ultrasound platforms as well as its strategy to capture greater premium sales.
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