Arcoma AB, the Swedish originated manufacturer of x-ray systems, published it’s latest quarterly results yesterday for it’s third-quarter. These results show that sales revenue continued to grow during the quarter. The consolidated net sales revenue reached SEK 30.4 million during the third quarter of 2019, compared with SEK 29.3 million in 2018, an increase of approximately +4% year-on-year (YoY). Growth continued relative to 2018, despite the exceptionally strong growth during Q3 2018 of +73%. On a calendar year-to-date basis, cumulative net sales revenue reached SEK 98.8 million, compared with SEK 85.4 million in 2018, an increase of approximately +16% YoY.
Sales results by geography
Sales growth from customers based in Europe continued, which is the continuation of the companies longer-term growth trend within the region. Sales revenue generated from Europe still accounts for over 50% of total company sales revenue and therefore remains the companies primary market. The company continues to expand its market presence within Europe and during Q1 2019, entered into another distributor agreement to sell its systems in Slovakia and Hungary. From a product perspective, the company has recently evolved into selling “complete” digital imaging solutions which include the Precision and Intuition platforms. This has been strategically important as it gives Acroma a stronger market position, which in the longer term, is expected to contribute toward increased commercial opportunities and revenues. Sales growth from customers based in the United States continued and the company views the North American market as its greatest potential for future growth. This is in part due to its product being well-aligned to the needs of customers as well as its relatively new partnership with Canon in North America, enabling greater sales and distribution of its x-ray systems within this region. Sales from customers based in Asia began to grow during the third quarter, following a weak start to the year, although business volumes remain low. In order to encourage greater sales activity from the region, the company hired a new well-credited senior executive to lead the expansion within this market. While revenue contribution from Asian is still relatively small currently, the business envisages that this market will become increasingly important in the longer-term.
The partnership with Canon Medical Systems
Arcoma currently generates sales globally through distributors and partnerships with large OEMs, one of these being a long-standing relationship with Canon Medical Systems. From Arcoma’s perspective, this partnership helps enable the delivery of completely integrated systems to its clients based on Canon’s imaging software and detectors. It also provides the company with a greater global market presence through leveraging Canon’s sales and distribution network as well as the opportunity to participate in multi-modality transactions where Arcoma can deliver on the x-ray systems component. From Canon’s perspective, the partnership has helped to strengthen its product line-up within the diagnostic x-ray segment, particularly for fixed premium solutions. For example, the Canon-branded Aceso+ platform incorporates Arcoma’s auto-positioning technology with an ergonomic design, helping toward efficient workflow and maximizing patient throughput, a desirable characteristic for many customers of premium diagnostic x-ray systems. In Europe, the two companies entered into a reseller agreement allowing Canon to sell Arcoma’s premium x-rate systems across Europe with a focus on expanding into central and southern Europe. Most recently, Turkey was subsequently included within an additional distribution agreement. The European market remains Arcoma’s most significant market in terms of revenue contribution and the firm has reported a positive impact on business volumes following this collaboration. This has led to further distribution agreements between the firms, covering North America and Asia. The firm has reported that these reseller agreements have had a positive impact on sales activity within the United States, although notes that these agreements are still “in the start-up phase”. Jesper Söderqvist, CEO of Arcoma AB comments on the partnership within the Q3 results; “I am very pleased with how the collaboration with Canon in the US and Canada developed during the year, although we have not yet seen the full result in sales figures. We have joint forward-looking activities that create a strong foundation for the future.”
A new facility for January 2020 along with streamlined production
The development and production of x-ray systems have been taking place at the company’s premises in Växjö, although the company is in the process of completing the construction of new bigger premises, which is expected to be inaugurated during January 2020. The new premises will provide a bigger office for staff and visitors as well as enable the further streamlining of production processes. This forms part of the companies ongoing program to reduce production costs which are expected to be fully realized in mid-2020. There are encouraging signs that these activities are already having a significant positive impact on the companies profitability and financial position. For example, during the first nine months of 2019, operating costs were SEK 2 million lower than the same period last year. Furthermore, both operating profit and EBITDA have improved considerably, although some of which is driven by a more favourable product mix. Operating profit for the quarter amounted to SEK 3.4 million, a doubling of the same period last year. For the first nine months of 2019, EBITDA was SEK 8.7 million, an improvement of SEK 4.9 million from the previous year.
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