Arcoma AB, Q1 2020 update

Image Credit: RiverSide Medical Supplies, http://www.rsmedic.com

On the 29th April, Arcoma CEO, Jesper Söderqvist, delivered an update to investors regarding the companies performance and its response to COVID-19. This interview is available to watch on the Arcoma investors web page and it presents some of the actions already taken as well as some of the planned mitigating actions in the event that sales and production deteriorate significantly due to the Coronavirus pandemic. The companies financial results for Q1 2020 have been scheduled for publication on the 20th May 2020, alongside its annual meeting of shareholders in Växjö.

Summary points

  • Arcoma has not reported any increased demand for its products arising from the Coronavirus pandemic. Jesper noted that the Arcoma Intuition system can be mounted very quickly in the event that hospitals require a temporary wall-mounted solution, although the increased demand arising from COVID-19 appears to be mainly focused around mobile x-ray systems which can be used at the point-of-care in an emergency or ICU setting.
  • Production activities were sustained at the levels the company had previously envisaged. The company experienced some delivery challenges (supplier) within China during January and February, although these are now resolved.
  • The company is taking additional steps to secure its material flows from subcontractors and suppliers in order to secure future production.
  • The company is progressing with the launch of its latest premium platform, the Arcoma Precision i5. This product launch is going ahead, albeit more digitally. Jesper noted that the company has already received a very positive response from customers on the new system.

Financial position

In terms of the companies financial position, the company has been taking mitigating actions in order to strengthen cash-flow and liquidity in the event that the Coronavirus pandemic lasts for much longer than anticipated and has a deeper impact on global markets. This includes the following:

  • All consulting agreements have been cancelled so the optionality of reducing costs is available from mid-April onwards.
  • All non-critical costs have been stopped.
  • Extended payment terms with many key suppliers have been agreed along with the potential for consignment stock in order to free up working capital.
  • The companies credit was increased to SEK 4.5 million at the end of March.
  • The companies Chairman and major shareholder, Lars Kvarnhem, increased his ownership during March, providing additional private equity capital.
  • The option of utilising the Swedish government’s crisis package along with borrowing money through the tax account also remain possibilities depending on how the situation evolves.