Siemens Healthineers, Imaging, Q4 2020, Sales Results

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On February 1st, Siemens Healthineers announced its financial results for Q4 2020. Due to the company’s non-calendar reporting cycle, this is its first fiscal quarter. These results show that overall Group sales returned to growth during the quarter, following two consecutive quarters of declining sale. During the quarter, total group sales reached €3.87bn, compared with €3.59bn during Q4 2019, an increase of +7.8% year-on-year. When adjusting this figure for foreign exchange and portfolio effects, comparable sales grew by +13.3% year-on-year. Quarterly sales growth was driven by higher sales from all business segments, led by diagnostics (+€170m) followed by imaging (+€89m) and advanced therapies (+€8m). This took cumulative 2020 sales to €14.74bn, compared with €14.8bn during 2019, a marginal decrease of -0.4% year-on-year. When adjusting this figure for foreign exchange and portfolio effects, PMI estimates that comparable cumulative 2020 sales grew by +2.2% year-on-year. During the Q4 earnings call, CEO, Bernd Montag commented: “[sales growth] has been driven by all of our businesses, but also has been significantly supported by COVID-19 related revenues, particularly by the rapid antigen test, but also by other COVID-19 related needs, such as very high demand for CT scanners and pull-ins of sales due to temporarily lower VAT in several European countries.”

*Bottom right graph represents calendar Q4 and NOT Q3 as title suggests.

From a geographic perspective, the return to growth during the quarter was driven by higher sales from customers based in the EMEA and Asia, partially offset by lower sales from customers based in America, mainly, the United States. Within Europe, the company reported explosive sales growth from Germany (+58%), supported by the lower VAT. In Asia, China contributed strongly with over 20% growth, driven by government programs to prepare for the possible second wave, for example, by setting up fever clinics, which need to be equipped with CT and X-ray systems.

Order growth continues at record levels

During the quarter, total comparable order growth including service was 11% year-over-year. This resulted in a book-to-bill ratio of 1.16, a precursor for revenue growth in the coming quarters. The positive order growth came mainly from Imaging, with equipment order growth in the low teens. This was mainly from computed tomography equipment where the company experienced significant demand related to the Coronavirus pandemic.

The Imaging Segment

The imaging segment encompasses the companies portfolio of medical imaging platforms and accounted for approximately 62% of overall Group sales revenue during 2020. The segment reported fourth-quarter revenue of €2.32bn, compared with €2.22bn during Q4 2019, an increase of +4.4% year-on-year. When adjusting this figure for foreign exchange and portfolio effects, comparable sales were approximately +9.3% higher year-on-year. This took cumulative 2020 sales to €9.18bn, compared with €9.14bn during 2019, a marginal increase of +0.4% year-on-year. When adjusting this figure for foreign exchange and portfolio effects, PMI estimates that comparable cumulative 2020 sales were +2.2% higher year-on-year.

During the Q4 earnings call, CEO, Bernd Montag commented:

Imaging has delivered a remarkable first quarter, returning to growth mode and at the same time delivering record margins. While in Q1, growth was good across the modalities, we saw exceptionally strong growth in our CT and X-ray businesses. The latter is clearly triggered by special demand related to the pandemic. Regionally, we have once again seen our strong global presence paying off. The strong growth in Europe and China more than offset the temporarily softer performance in the US. We continue to expect the US market to rebound in the calendar year 2021. Margins hit a new record level in Q1, benefiting from strong revenue growth and good conversion, positive mix effect with significant demand for CT, but also ongoing lower discretionary spend. Siemens Healthineers is the innovation leader in imaging with around two-thirds of revenues stemming from new and upgrading products not older than three years. And as we have shown at the Meet the Management in November last year, breakthrough innovations are hitting the market this and next year, with the Magnetom Free.Max, the photon-counting CT and Syngo Carbon. At the same time, the COVID-19 pandemic has clearly shown the high resilience of this business throughout the crisis. This is due to the high share of recurring service revenues of roughly 40%, regional diversification and the substantially increasing order backlog from long-term value partnerships.

Actual versus comparable results, the FX component

Siemens Healthineers is exposed to exchange rate volatility, particularly involving the U.S. dollar and the currencies of emerging markets such as the Chinese yuan. The company is a net exporter from the eurozone to the rest of the world, which means that in terms of absolute values a weaker euro is generally favourable for its business and a stronger euro is in principle unfavourable. Jochen Schmitz commented “Q1 saw translational headwind from foreign exchange on the absolute revenue line of over 4%, which we expect to continue through the fiscal year 2021. In addition, we now also saw a more material headwind from foreign exchange on the transactional line in Q1, which we expect to continue to be another 3% of headwind in our adjusted earnings per share number. Especially, the weakening US dollar impacted the bottom line since US dollars are a frequent transaction currency also outside the United States. This is especially true for smaller countries, where usually do not have a large local foot footprint to balance the currency exposure. But also other currencies have depreciating local currencies against the strong euro, adding to the transactional headwind. These effects are primarily showing up in the Imaging and Advanced Therapies segment.

Sales growth expectations for 2021

Due to the strong Q4 results, ongoing pandemic-related demand as well as higher confidence in the normalisation of usual business, Siemens raised its projections for FY2021. Total Group comparable sales growth is now expected to be between 8% and 12%, an increase from the previous projection of between 5% and 8%. For the Imaging segment, comparable sales are expected to grow by at least 7%, an increase from 5%.

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