Image credit: Screenshot, Detection Technology Q1 2021 Report
On April 27th, Detection Technology published its financial results for Q1 2020. As forecast, quarterly group sales contracted during the first quarter, driven by the continued negative effects of the Coronavirus pandemic on the security business unit. During the quarter, overall sales reached €18.3m, compared with €19.9m during Q1 2020, a decrease of approximately -8% year-on-year.
From Q1 2021 onward, the company has three reportable segments, the industrial solutions business (IBU), medical business unit (MBU) and security business unit (SBU). The sales contraction during the quarter was driven by lower sales from the SBU (-€3.6m), partially offset by higher sales from the MBU (+€1.7m) and IBU (+€0.2m). Quarterly sales originating from the MBU reached €10.1m, compared with €8.4m in Q1 2020, an increase of approximately +20% year-on-year. Hannu Martola, President and CEO, commented: ”Despite the double-digit increase in both medical and industrial application sales, the beginning of the year was, all in all, slow: COVID-19 did not loosen its grip on the security market.”
The sales growth achieved by the MBU was led by strong demand for medical CT products, particularly from customers based in China. Underlying sales for CT applications was supported by capital investments made into healthcare infrastructure as well as the demand for high-end CT applications. For example, the company reported strong sales of its X-Tile solution. This solution is an industry first, off-the-shelf, tileable CT detector module which is easily scalable, resulting in lower costs and quicker routes to market for CT system OEMs. The company reported that sales of its X-Panel series did not grow as expected during the quarter although it is anticipated that commercial shipments will accelerate during 2021. The X-Panel 2301 is targeted toward dental applications and the X-Panel 1511 toward dynamic imaging in C-arm systems, both of these product segments have been significantly negatively impacted by the pandemic situation. The company reported that demand for dental applications continued to normalise during the quarter, at an increasing speed across all target markets, encouraging signs for future growth within this segment.
The impact of COVID-19 in Q1
The company estimates that the pandemic adversely impacted total company net sales by approximately 1/3 during the first quarter. Although the company’s net sales decreased, its year-on-year profitability improved. Operating profit amounted to €1.4m, compared with €1.2m in Q1 2020, corresponding to 7.5% and 5.9% of net sales respectively. The improvement in profitability was driven by a variety of factors including, product mix, cost-savings and tax reductions related to the High and New Technology (HNTE) certification of its Chinese subsidiary. The company reported that there were no significant challenges in the availability of electronic components and other materials in Q1, but risks related to the availability have increased.
Outlook for 2021
The company is projecting total net sales to return to growth during Q2 and H1 of 2021, resulting in double-digit sales growth relative to 2020. This growth is anticipated to be driven by the MBU and IBU, partially offset by lower sales from the SBU as the pandemic continues to adversely affect the security market. The SBU is projected to decline during H1 of 2021 but take an upward turn in H2. The company anticipates demand in medical CT applications to increase and MBU sales to grow more in Q2 and H2 than in Q1. IBU sales are expected to be at the same level as in the comparison period in Q2 but to grow in H2. Hannu Martola commented: “We believe that the worst challenges in demand are behind us, and the company will head toward growth starting in Q2 of 2021. Demand in medical CT applications will increase and that of industrial applications will remain stable. In addition, there are early positive signals in the security market. We are cautiously optimistic that demand in security applications will take an upward turn in late Q2″. Looking beyond the pandemic, in the medium term, the company aims to increase sales by at least 10% per annum and to achieve an operating margin at or above 15%.