Siemens Healthineers, Imaging, Q1 2021, Sales Results

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On 3rd May, Siemens Healthineers announced its financial results for Q1 2021. Due to the company’s reporting cycle, this is its second fiscal quarter. These results show that overall Group sales continued to grow during the quarter and reached €3.97 bn, compared with €3.68 bn in Q1 2020, an increase of almost +8% year-on-year. When adjusting this figure for foreign exchange and portfolio effects, comparable sales grew by approximately +13% year-on-year. Quarterly sales growth was driven by higher sales from the Diagnostics (+€232m) and Imaging (+€59m) segments, partially offset by lower sales from the Advanced Therapies segment (-€13m).

From a geographic perspective, quarterly sales growth was driven by lower sales from America (-€158m), which were more than offset by higher sales from EMEA (+€359) and Asia (+€79). Sales from customers based in North America, which accounted for 85% of total sales from America, declined by approximately -12% year-on-year, driven by the negative effects from the Coronavirus pandemic as well as a tougher comparable. Sales from customers based in the EMEA, particularly Germany, grew very strongly, driven by antigen test sales. Sales from customers based in the Asia Pacific grew significantly, driven by customers based in China and Japan.

Order growth continues at record levels

During the quarter, comparable order growth was +23% higher when compared with Q1 2020. This was driven by strong order growth from both equipment and services. The U.S. was a strong contributor to the quarterly equipment order growth which “had a very positive rebound”. This is a positive precursor for sales revenue growth from the United States later in 2021.

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 quarterly revenue of €2.37 bn, compared with €2.31 bn in Q1 2020, an increase of almost +3% year-on-year. When adjusting this figure for foreign exchange and portfolio effects, comparable sales were approximately +7.4% higher year-on-year. Quarterly sales growth was driven by sustained growth from pandemic-related products, mainly computed tomography and general X-ray systems, combined with “moderate” underlying growth from other modalities.

During the Q&A session, within the Q1 earnings call, when discussing the Imaging business, CEO, Bernd Montag commented:

“So on the imaging side, let’s start with a regional view. What we see is a very strong European business, which is driven, by healthy underlying demand on the one hand here, but then also certainly the — some pandemic readiness investments still. And also the government programs too, a bit of stimulus in it. In China, which is basically the most important market to look at when it comes to APAC, there is a super-strong underlying growth plus a special demand on the CT side for establishing the so-called fever clinics, which is a government triggered program. which is driving the special increase on the CT side. This is now slowly going down again. So this is really more of a one-off character. And we see in the United States now the effect of, call it, unfreezing frozen budgets, which has created a situation where we have now already very good order growth while revenue is not yet following because of the timing of the orders. We saw good market share development, again, in the United States on the order side, which is encouraging, especially because we also don’t have a big value partnership transaction in the order book in this quarter. So when you take it from a — let’s say, from an overall timing of orders and revenue point of view, geographically, we might see or we will see some normalization over time in Europe and the normalization to the normal high growth rates in China. But we will see the U.S. coming back. I think what is really important to look at — to be conscious of when you look at the strong numbers we present in this quarter, that the Americas contributed minus 1% to the top line. So — and when this super important market comes back here, it will compensate definitely a big portion of normalization in Europe and in Asia. And the same, you can also see in the modality mix. There is currently a very high CT mix in it. But at the expense of — at the expense, so to say, of MR and MRI. Molecular imaging, pet CTs and so on are since they are not really pandemic-related, are a little bit down on priority. And so we will see a similar normalization of the mix on the modality side, which also implies there is no real mix effect and adverse mix effect to be expected when it comes to margins from a geographical point of view, but also from a modality mix point of view.

Completed Varian Acquisition

During the quarter, Siemens completed the acquisition of Varian Medical Systems.

Sales growth expectations for 2021

During the Q1 earnings call, Siemens increased its forward guidance on comparable revenue growth for 2021. The company is projecting comparable revenue growth of between 14% and 17%, an increase from 8% to 12%. This is driven by a combination of higher revenue assumptions from antigen products as well as the contribution from the Varian acquisition.

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.

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