Financial review

^{Unless otherwise indicated, changes from the previous year are based on nominal figures.}

Solid results in a complex operating environment

In 2023, medmix generated revenues of CHF 486.6 million, 2.0% higher than 2022 revenues of CHF 477.1 million, with acquisition effects (primarily of Guangdong Qiaoyi Plastic in China) more than offsetting foreign exchange effects. The key metric of organic revenue growth was positive year-on-year (+1.1%), matching our full-year guidance of “broadly flat”. The group generated strong double-digit organic growth in each of the Drug Delivery (18.6%), Surgery (34.2%) and Beauty (16.6%) market segments. In the second half, the Beauty market segment growth moderated as expected, while the Surgery market segment growth accelerated significantly. The Industry market segment, limited by production capacity and a softening of end market demand, especially towards the end of the year, delivered full-year organic revenue growth of -10.3%, marked by a slowdown in the second half driven by lower customer order quantities on the back of soft end user demand and higher interest rates. As communicated last October, Dental market segment customers throughout the value chain continued to reduce their inventories in the second half. Full-year revenue represents a decline of 13.3% year-on-year. We expect both market segments’ revenues to improve progressively during 2024, with the recovery skewed towards the second half.

Driven mainly by the consolidation of Guangdong Qiaoyi Plastic in China, acquisitions contributed 470 basis points to group revenue growth, while currency exchange rates accounted for a negative impact of 380 basis points.

“In a complex operating environment, medmix was able to deliver solid results thanks to our focused key growth and efficiency initiatives in all our market segments.”

JENNIFER DEAN

CHIEF FINANCIAL OFFICER

Revenue by market segment

Business area gross profit

Business area gross profit was broadly stable at CHF 216.4 million, delivering a margin of 44.5%, a year-on-year decrease of 120 basis points. This decline in profitability was driven by an adverse product mix given that the Healthcare business area gross profit margins are significantly higher than the group average, compounded by one-off expenses in the Industry market segment relating to the higher cost of temporary production in our Haag, Switzerland, factory. In the second half of 2023, business area gross profit margins improved by 190 basis points compared to the second half of 2022 and by 140 basis points compared to the first half of 2023.

Business area gross profit margin by business area

Gross profit, which includes shared costs and under absorption, declined by 10.1% year-on-year to CHF 157.6 million. Gross profit margin reached 32.4%, a decrease of -440 basis points. This decline was driven primarily by the volume shortfalls in the Dental and Industry market segments.

Profitability impacted by product mix

Adjusted EBITDA declined by -11.7% to CHF 93.1 million, delivering an adjusted EBITDA margin of 19.1% compared to 22.1% for full-year 2022 (-300 basis points). This trend was driven primarily by an adverse product mix due to lower Dental customer orders and the transition of Industry market segment production from Poland to Spain.

Bridge from operating income (EBIT) to adjusted EBITDA

Adjusted EBITDA margin

Financial income and expenses

Total financial income / (expenses), net, amounted to CHF -13.0 million, compared with CHF -7.4 million in 2022. The financial expenses are mainly driven by interest expenses on borrowings and realized fair value changes on derivative financial instruments.

Total interest income / (expenses), net, increased from CHF -5.8 million to CHF -8.7 million in 2023 due to higher interest rates on borrowings.

Other financial income / (expenses), net, amounted to CHF -4.4 million in 2023, compared to CHF -1.6 million in 2022, mostly driven by realized fair value changes on derivative financial instruments.

Income tax expenses

The effective income tax rate in 2023 is 76.7%, compared to 5.1% in 2022. The higher income tax rate in 2023 is mainly the result of changes in tax rates and legislation resulting in a release of a deferred tax asset of CHF 2.2 million and prior-year adjustments of CHF 1.0 million as well as a slightly different geographical spread of profit before tax. In addition, the lower income tax rate in 2022 was mainly the result of tax-deductible impairments of foreign subsidiaries, partly offset by deconsolidating the net assets of the former subsidiary in Poland.

Net income and adjusted net income

Net income declined by CHF 10.9 million to CHF 0.7 million (thereof CHF 0.3 million attributable to shareholders of medmix AG) from CHF 11.6 million (thereof CHF 11.6 million attributable to shareholders of medmix AG) in the prior period.

Adjusted net income attributable to medmix shareholders declined by roughly one-third to CHF 36.9 million from CHF 58.7 million in 2022, primarily due to the lower operating result.

Bridge from net income to adjusted net income

Adjusted diluted EPS

Adjusted diluted EPS declined from CHF 1.43 in the prior period to CHF 0.90 in 2023.

Bridge from diluted EPS to adjusted diluted EPS

Key balance sheet positions

Total assets as of December 31, 2023, amounted to CHF 1'006.8 million compared to CHF 1'105.9 million as of December 31, 2022. Non-current assets increased from CHF 617.0 million to CHF 698.7 million. Purchases of property, plant and equipment of CHF 60.1 million, reflecting mainly the investments in our new Industry production facility in Spain and our new Healthcare manufacturing facility in Atlanta, were partly offset by depreciation (CHF 22.8 million), amortization (CHF 23.0 million) and impairments (CHF 3.0 million). The acquisition of Qiaoyi increased goodwill by CHF 24.2 million, other intangible assets by CHF 24.0 million and property, plant and equipment by CHF 5.1 million. In 2023,  the group acquired non-controlling interests of 25% in AARDEX for CHF 5.7 million. Defined benefit assets increased in 2023 by CHF 22.1 million. Negative currency translation effects on non-current assets amounted to CHF 27.1 million.

Current assets decreased by CHF 180.9 million to CHF 308.1 million, mainly due to lower cash and cash equivalents. Besides regular cash flow generation and investing activities, the decrease in cash and cash equivalents is the result of lower borrowings after the group repaid CHF 120.0 million (net) of the syndicated credit facility.

Equity amounted to CHF 474.3 million as of December 31, 2023, down by CHF 30.5 million compared to the previous year. The dividend of CHF 20.5 million, currency translation differences of CHF 25.0 million, the recognition of a put option liability of CHF 9.8 million and the acquisition of treasury shares of CHF 3.1 million reduced equity. The remeasurements of defined benefit plans of CHF 19.5 million and the acquisition of a subsidiary with non-controlling interests of CHF 9.0 million increased equity. Net income for the period added CHF 0.7 million to equity.

Non-current liabilities increased by CHF 24.4 million to CHF 354.4 million. The main drivers were a recognized put option liability for the Qiaoyi acquisition based on the discounted put exercise price (CHF 9.8 million) and a liability from sale of investments in subsidiaries in the amount of CHF 11.4 million. Current liabilities decreased by CHF 93.0 million to CHF 178.1 million. This was mainly driven by lower current borrowings (CHF 123.6 million) due to the repayment of the syndicated credit facility, higher current provisions (CHF 12.6 million) and higher current income tax liabilities (CHF 8.0 million).

Net debt increased in 2023 by CHF 62.3 million to CHF 219.0 million. Net debt to adjusted EBITDA ratio was 2.35 in 2023 compared to 1.49 in 2022 (see note 6 for net debt calculations).

Capital expenditure

Gross capital expenditure in 2023 significantly increased year-on-year to CHF 66.3 million, up 77.6%, to reach 13.7% of revenues compared to 7.8% of revenues in 2022. This was primarily due to the exceptional investments in our new Industry production facilities in Valencia, Spain and planned growth investments in Atlanta, USA. 

Bridge to capital expenditure, net

Cash flow

Cash flow from operating activities was CHF 56.1 million, up from CHF 47.6 million in 2022, mainly as a result of lower net working capital changes partly offset by a lower net income in 2023. Net income in 2023 amounted to CHF 0.7 million compared to a net income before loss on net assets derecognized and retained investments in 2022 of CHF 27.0 million (year-on-year change of CHF 26.3 million). Current trade assets and liabilities (inventory, advance payments to suppliers, trade accounts receivable/payable and other net current assets) increased in 2023 by CHF 7.3 million whereas in 2022 they increased by CHF 39.4 million, leading to a year-on year impact of CHF 32.1 million. The group paid interest and income taxes in 2023 of CHF 14.2 million compared to CHF 17.0 million in 2022.

Cash out from investing activities was CHF 80.6 million, associated to the purchase of property, plant and equipment (CHF 46.4 million), the acquisition of subsidiaries (CHF 29.4 million) and the acquisition of associates (CHF 5.7 million).

Negative cash flow from financing activities amounted to CHF 153.8 million, mainly related to net repayments from borrowings of CHF 123.6 million. Dividends paid to shareholders amounted to CHF 15.0 million and dividends paid to non-controlling interests in subsidiaries were CHF 1.3 million. The group further purchased treasury shares of CHF 3.1 million to cover its exposure related to share-based payment plans and paid lease liabilities of CHF 10.4 million.

The lower year-on-year EBITDA and the elevated capital expenditure described above, combined with higher-than-usual inventories to ensure continuity of supply ahead of the opening of the factory in Valencia, Spain, delivered a modest free cash flow of CHF 3.4 million, down by around two-thirds compared to CHF 10.3 million in 2022. By contrast, medmix’ key metric of adjusted operating net cash flow, which is operating cash flow adjusted for capital expenditure and exceptional and non-operating items, increased by 9.3% to CHF 40.8 million compared to CHF 37.3 million in 2022.

Bridge from cash flow from operating activities to free cash flow and adjusted operating net cash flow

Outlook

Reference is made to the letter to the shareholders.

Alternative performance measures (APM)

For the definition of the alternative performance measures, please refer to the chapter alternative performance measures.

Abbreviations:

CAGR: Compound annual growth rate

EBIT: Earnings before interest and taxes

EBITDA: Earnings before interest, taxes, depreciation and amortization    
ONCF: Operating net cash flow