1 General information and basis of preparation

1.1 General information

medmix Ltd (the “company”) is a company domiciled in Switzerland. The address of the company’s registered office is Neuhofstrasse 20 in Baar, Switzerland. The consolidated financial statements for the year ended December 31, 2023, comprise the company and its subsidiaries (together referred to as the “groupˮ and individually as the “subsidiaries”).

The group is a global market leader in high-precision delivery devices for the healthcare and consumer and industrial business areas. The group specializes in the design and production of innovative, high-precision delivery devices and applicators for the dental, drug delivery, surgery, industrial and beauty markets. The group employs 2'658 people at 19 production, sales and service sites around the world.

medmix Ltd is listed on SIX Swiss Exchange in Zurich, Switzerland (symbol: MEDX).

Details of the group’s accounting policies are included in note 31.

1.2 Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) Accounting Standards using the historical cost convention except for

• financial assets at fair value through profit and loss; and
• net position from defined benefit plans, where plan assets are measured at fair value and the plan liabilities are measured at the present value of the defined benefit obligation.

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements and have been applied consistently by all subsidiaries.

The preparation of financial statements in conformity with IFRS Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the group’s accounting policies. The areas involving a higher degree of judgment or complexity or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 5.

Rounding

Due to rounding, numbers presented throughout the report may not add up precisely to the totals provided. All ratios, percentages and variances are calculated using the underlying amount rather than the presented rounded amount.

Tables

Within tables, blank fields generally indicate that the field is not applicable or not meaningful, or that information is not available as of the relevant date or for the relevant period. Dashes (–) generally indicate that the respective figure is zero, while a zero (0.0) indicates that the relevant figure has been rounded to zero.

2 Significant events and transactions during the reporting period

The financial position and performance of the group were particularly affected by the following events and transactions during the reporting period:

• Revenue increased from CHF 477.1 million in 2022 to CHF 486.6 million in 2023. The group generated growth in each of the Drug Delivery, Surgery and Beauty market segments. The Industry market segment, limited by production capacity and a softening of end market demand, and the Dental market segment delivered negative revenue growth. Dental market segment customers throughout the value chain reduced their inventories in 2023.
• Property, plant and equipment increased by CHF 26.6 million from CHF 157.6 million to CHF 184.2 million. This increase is mainly due to significant investments in the new production facility for the Industry market segment in Valencia, Spain, and a state-of-the-art Healthcare manufacturing facility near Atlanta, USA.
• On July 5, 2023, the group acquired 70% of the issued share capital and voting interests in Guangdong Qiaoyi Plastic Co. Ltd. (“Qiaoyi”) for CHF 31.3 million. Qiaoyi employs nearly 400 people and is a beauty manufacturer serving in particular the Chinese and South East Asia cosmetics market with innovative products, located in Shantou (China). Qiaoyi operates as part of medmix' Beauty market segment. Since the acquisition date, Qiaoyi contributed revenues of CHF 16.8 million and net income of CHF 2.0 million to the group. The acquisition resulted in an increase in goodwill of CHF 24.2 million and other intangible assets of CHF 24.0 million at the date of acquisition (see note 4).
• In December 2023, the group acquired a non-controlling interest of 25% in AARDEX Group SA (“AARDEX”) for CHF 5.7 million to reinforce medmix' drug delivery business under the Haselmeier brand. AARDEX is a global software-as-a-service (SaaS) provider of digital solutions for measuring and managing medication adherence in clinical trials, located in Seraing, Belgium. AARDEX offers its solutions with expertise and patents in the algorithms that analyze, visualize and interpret patient’s adherence behaviors.  The group has significant influence over AARDEX and is therefore applying the equity accounting method. The acquisition resulted in an increase in investments in associates of CHF 5.7 million at the date of acquisition. Since the acquisition date, AARDEX contributed net income of CHF -0.0 million to the group.

For a detailed discussion about the group’s performance and financial position, please refer to the section financial review.

3 Segment information

Segment information by business areas

Certain expenses are not attributable to a particular business area and are reviewed as a whole across the group irrespective of the business area. These expenses are presented in the following reconciliation statement.

Bridge from business area gross profit to adjusted EBITDA

Information about reportable segments

Operating segments are determined based on the reports reviewed by the Board of Directors (BoD, chief operating decision maker) that are used to measure performance, make strategic decisions and allocate resources to the segments. The business is managed based on business areas, and the reportable segments have been identified as disclosed below. The BoD assesses the performance of the two segments based on the business areas’ revenue, gross profit and gross profit margin.

The BoD assesses performance of the group using alternative performance measures (APM), which are derived from the financial statements prepared in accordance with IFRS Accounting Standards. The APMs are prepared in addition to IFRS Accounting Standards to assist in comparability of information across periods by adjusting for depreciation, amortization, impairment, restructuring and other non-operational items (see section alternative performance measures (APM)). In this context, the BoD assesses the performance of the group based on adjusted EBITDA and free cash flow in addition to each business area’s revenue and gross profit.

Revenue from external customers reported to the BoD is measured in a manner consistent with that in the income statement. There is no significant revenue between the segments. No individual customer represents a significant portion of the group’s revenue.

Healthcare

Through its well-known brands Haselmeier, Medmix, Mixpac and Transcodent, the Healthcare business area specializes in the design and production of innovative, high-precision delivery devices and services within the drug delivery, surgery and dental markets. Products include injection pens for subcutaneous delivery of drugs, surgical delivery devices focusing on trauma bone repair and wound-healing tissue treatment, and mixing, filling and delivery device systems for the dental consumable industry.

The business area’s IP-protected solutions make the customers’ products precise, safe, unique and more sustainable, leveraging the business’s expertise in drug delivery, plastic-injection technology, molding and two-component mixing.

Consumer & Industrial

Through its well-known brands Mixpac, MK, Cox and Geka, the Consumer & Industrial business area specializes in the design and production of innovative, high-precision delivery devices and services within the Industry market segment, such as adhesives used in construction, electronics, automotive, aerospace and various industries, and consumer markets such as beauty and other microbrush applications. Products include hand-held mixing and dispensing delivery devices for two-component adhesives and sealants, mixing tips, cartridges, high-precision make-up applicators and microbrushes.

The business area’s IP-protected solutions make the customers’ products precise, safe, unique and more sustainable, leveraging the business’s expertise in plastic injection molding, two-component mixing, fluid handling, material design and microbrushes.

Regional segment information

The allocation of assets is based on their geographical location. Non-current assets exclude non-current financial assets (other than investments in associates), deferred income tax assets and defined benefit assets. The allocation of revenue from external customers is based on the ship-to location defined by the group’s customer, which does not necessarily correspond with the location of the end customer.

Non-current assets by region

Revenue by region

Market segment information

The following table shows the allocation of revenue from external customers by market segment:

Revenue by market segment

4 Acquisition of subsidiaries

Acquisitions in 2023

On July 5, 2023, the group acquired 70% of the issued share capital and voting interests in Guangdong Qiaoyi Plastic Co. Ltd. (“Qiaoyi”) for CHF 31.3 million. Qiaoyi employs nearly 400 people and is a beauty manufacturer serving in particular the Chinese and South East Asia cosmetics market with innovative products, located in Shantou (China). Qiaoyi operates as part of medmix' Beauty market segment.

As of July 5, 2024, the group will buy another 10% equity interest held by the non-controlling shareholders for a fixed price. The group recognized other current and accrued liabilities (note 25) based on the purchase price in the amount of CHF 4.7 million (December 31, 2023: CHF 4.4 million). Since the acquisition of additional 10% in Qiaoyi represents a fixed-price forward, the group recognized an economic interest of 80% and recorded 20% for the non-controlling interests. The non-controlling interests are measured at the non-controlling interest’s proportionate share of the recognized identifiable net assets.

At any time after July 5, 2027, the non-controlling shareholders have a put option to sell, and the group has a call option to purchase, the remaining 20% equity interest held by the non-controlling shareholders for a formula-based purchase price. The group recognized a redemption liability, recorded in other non-current liabilities (note 25), based on the discounted put exercise price in equity in the amount of CHF 10.0 million, which is accreted over the contract period in equity (December 31, 2023: CHF 9.8 million, put option liability).

The following table summarizes the recognized amounts of assets acquired and liabilities assumed at the date of acquisition, including the resulting goodwill and the total consideration. If new information obtained within one year of the date of acquisition about facts and circumstances that existed at the date of acquisition identifies adjustments to the amounts recognized below, then the accounting for the acquisition will be revised.

Net assets acquired

The goodwill is attributable to synergies by leveraging the scale of the combined product portfolio, the geographical coverage and new channels to market.

According to the purchase agreement, the seller will reimburse the group for specific risks for which the group provided provisions. The group therefore recognized an indemnification asset in the amount of CHF 6.6 million, recorded as other current receivables and prepaid expenses (December 31, 2023: CHF 6.4 million, note 19). The indemnification asset is measured using the same measurement basis as for the provisions before reflecting management's assessment of collectability of the asset.

Transaction costs recognized in the income statement amount to CHF 0.1 million. Since the acquisition date, Qiaoyi contributed revenues of CHF 16.8 million and net income of CHF 2.0 million to the group. If the acquisition had occurred on January 1, 2023, the group estimates that consolidated revenue would have been CHF 503.4 million and consolidated net income would have been CHF 2.7 million. In determining these amounts, the group assumed that the fair value adjustments, determined previously, that arose on the date of acquisition would have been the same if the acquisition had occurred on January 1, 2023.

Cash flow from acquisitions of subsidiaries

Acquisitions in 2022

On October 24, 2022, the group acquired the entire plastics business of Universal de Suministros, S.L., Spain, (“Universal”) for CHF 14.7 million and the business was integrated into medmix Spain. The following table summarizes the recognized amounts of assets acquired and liabilities assumed at the date of acquisition, including the resulting goodwill and the total consideration paid.

Net assets acquired

5 Critical accounting estimates and judgments

In preparing these consolidated financial statements in accordance with IFRS Accounting Standards, management has made estimates and assumptions that affect the reported amounts of income, expenses, assets, liabilities and contingent liabilities. All estimates and assessments are continually reviewed and are based on historical experience and other factors, including expectations regarding future events that appear reasonable under the given circumstances. The group makes estimates and assumptions that relate to the future. By their nature, these estimates will only rarely correspond to actual subsequent events. The estimates and assumptions that carry a significant risk, in the form of a substantial adjustment to the present values of assets and liabilities within the next financial year, are set out below.

Employee benefit plans

The present value of the pension obligation and the plan assets depends on a number of factors that are determined on an actuarial basis using a number of assumptions. Assumptions used in determining the defined benefit assets/obligations include the discount rate, future salary and pension increases, and mortality rates. The assumptions are reviewed and reassessed at the end of each year. Further details are provided in note 8 and note 31.

Income taxes

The group is obliged to pay income taxes in numerous jurisdictions. Assumptions are required in order to determine income tax provisions. There are transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. Management believes that the estimates are reasonable and that the recognized liabilities for income tax-related uncertainties are adequate. Further details are disclosed in note 11.

Goodwill and other intangible assets

The group carries out an annual impairment test on goodwill in the first quarter of the year (after the budget and the three-year strategic plan have been approved), or when indications of a potential impairment exist. The recoverable amount from cash-generating units is measured on the basis of value-in-use calculations with the terminal growth rate, the discount rate and the projected cash flows as the main variables. Information about assumptions and estimation uncertainties that have significant risk of resulting in a material adjustment are disclosed in note 12. The accounting policies are disclosed in note 31.

Lease assets and lease liabilities

The group has applied judgment to determine the lease term for lease contracts that include renewal and termination options. The assessment of whether the group is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and lease assets recognized. This assessment depends on economic incentives, such as removal and relocation costs. Further details are disclosed in note 14 and note 31.

Revenue

At contract inception, the group assesses the goods or services promised in a contract with a customer and identifies each promise to transfer to the customer as a performance obligation. The group considers the terms of the contract and all other relevant facts, including the economic substance of the transaction. Judgment is needed to determine whether there is a single performance obligation or multiple, separate performance obligations.

If the consideration promised in a contract includes a variable amount (e.g., early payment discounts, volume discounts), the group estimates the amount of consideration to which the group will be entitled in exchange for transferring the promised goods or services to a customer. The amount of the variable consideration is estimated by using either of the following methods, depending on which method the group expects to better predict the amount of consideration to which it will be entitled: the expected value or the most likely amount. The method selected is applied consistently throughout the contract and to similar types of contracts when estimating the effect of uncertainty on the amount of variable consideration to which the group is entitled. Depending on the outcome of the respective transactions, actual payments may differ from these estimates.

To allocate the transaction price to each performance obligation on a relative stand-alone selling price basis, the group determines the stand-alone selling price at contract inception of the distinct good or service underlying each performance obligation in the contract and allocates the transaction price in proportion to those stand-alone selling prices. If the stand-alone selling price is not directly observable, then the group estimates the amount with the expected cost plus margin method. Further details are disclosed in note 31.

Provisions

Provisions are made, among other reasons, for warranties, disputes, litigation and restructuring. A provision is recognized in the balance sheet when the group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. The nature of these costs is such that judgment has to be applied to estimate the timing and amount of cash outflows. Depending on the outcome of the respective transactions, actual payments may differ from these estimates. Further details are disclosed in note 24 and note 31.

Indemnification assets

Indemnification assets are recognized for potential cash outflows covered by indemnity clauses in business combinations. An indemnification asset is recognized at the same time when the indemnified item is recognized and measured on the same basis as the indemnified item, subject to the need for a valuation allowance for uncollectible amounts. The nature of these assets is such that judgment has to be applied to estimate the timing and amount of cash inflows. Depending on the outcome of the respective transactions, actual payments may differ from these estimates. Further details about the recognized indemnification asset are disclosed in note 4.

6 Financial risk management

6.1 Financial risk factors

The group’s activities expose it to a variety of financial risks: market risk (including currency risk, price risk and interest rate risk), credit risk and liquidity risk. The group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the group’s financial performance. The group uses derivative financial instruments to hedge certain risk exposures.

Risk management is carried out by a central treasury department (Group Treasury). Group Treasury identifies, evaluates and hedges financial risks in close cooperation with the group’s entities and businesses. Principles for overall risk management and policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity, exist in writing.

a) Market risk

(I) Foreign exchange risk

The group operates internationally and is exposed to foreign exchange risk arising from various currency exposures. The group is exposed to transactional foreign currency risk to the extent that revenues, purchases, license fees, borrowings and other balance sheet items are denominated in currencies other than the functional currencies of group companies. The functional currencies of group entities are primarily CHF, EUR, USD and CNY. Management has set up a policy to require entities to manage their foreign exchange risk against their functional currency. The entities are required to hedge their major foreign exchange risk exposure using forward contracts or other standard instruments, usually transacted with Group Treasury. The group’s management policy is to apply the following hedge ratios:

Contractual FX exposure

• 90% to 100% of the exposure

Non-contractual FX exposure

• 100% of the forecasted exposure for the next 1–3 months
• 60% of the forecasted exposure for the next 4–6 months
• 40% of the forecasted exposure for the next 7–12 months

The group uses forward exchange contracts to hedge its currency risk, with a maturity of less than one year from the reporting date. The contracts are generally designated for hedge accounting as cash flow hedges. The group determines the existence of an economic relationship between the hedging instruments and the hedged item based on the currency, amount and timing of the respective cash flows. For hedges of foreign currency purchases, the group enters into hedge relationships where the critical terms of the hedging instrument match exactly with the terms of the hedged item. The group therefore performs a qualitative assessment of effectiveness. If changes in circumstances affect the terms of the hedged item such that the critical terms no longer match exactly with the critical terms of the hedging instrument, the group uses the hypothetical derivative method to assess effectiveness. In hedges of foreign currency purchases, ineffectiveness may arise if the timing of the forecast transaction changes from what was originally estimated.

Presently, most of the contracts are designated as cash flow hedges. External foreign exchange contracts are designated as hedges of foreign exchange risk on specific assets, liabilities or future transactions on a gross basis. The group has certain investments in foreign operations whose net assets are exposed to foreign currency translation risk. If required, currency exposure arising from the net assets of the group’s foreign operations is managed primarily through borrowings denominated in the relevant foreign currencies. Derivative financial instruments are only used on an ad hoc basis to manage foreign currency translation risk.

The following tables show the hypothetical influence on the income statement related to the foreign exchange risk of financial instruments. The volatility used for the calculation is the one-year historic volatility on December 31 for the relevant currency pair and year. For 2023, the currency pair with the most significant exposure and inherent risk was USD versus BRL. If, on December 31, 2023, the USD had increased by 12.2% against the BRL with all other variables held constant, profit after tax for the year would have been CHF 0.1 million higher due to foreign exchange gains on USD-denominated assets. A decrease of the rate would have caused a loss of the same amount.

Hypothetical impact of foreign exchange risk on income statement

The following tables show the hypothetical influence on equity related to the foreign exchange risk of financial instruments for the most important currency pairs as of December 31 of the respective year. The volatility used for the calculation is the one-year historic volatility on December 31 for the relevant currency pair and year. Most of the hypothetical effect on equity is a result of fair value changes of derivative financial instruments designated as hedges of future cash flows in foreign currencies adjusted for tax effects.

Hypothetical impact of foreign exchange risk on equity

(II) Price risk

As of December 31, 2023, and 2022, the group was not exposed to price risks related to investments in equity securities.

(III) Interest rate risk

The group’s interest rate risk arises from interest-bearing assets and liabilities. Assets and liabilities at variable rates expose the group to interest rate risk. The group analyzes its interest rate exposure on a net basis and, if required, enters into derivative instruments in order to keep the volatility of net interest income or expense limited. The group’s current and non-current interest-bearing liabilities mainly comprise a syndicated term loan of CHF 250.0 million with variable interest rates and CHF 150.0 million revolving credit facility, of which CHF 30.0 million are drawn as of December 31, 2023 (December 31, 2022: CHF 150.0 million drawn).

The group uses interest rate swaps to hedge its interest rate risk, with a maturity aligned to the hedged item, which is variably financed over the next five years. As of December 31, 2023, CHF 125.0 million were swapped from variable to fixed rate. The contracts are generally designated for hedge accounting as cash flow hedges. The group determines the existence of an economic relationship between the hedging instruments and the hedged item based on the interest reference, amount and timing of the respective cash flows. The group enters into hedge relationships where the critical terms of the hedging instrument match exactly with the terms of the hedged item. The group therefore performs a qualitative assessment of effectiveness.

The following table shows the hypothetical influence on the income statement for variable interest-bearing assets net of liabilities at variable interest rates, assuming market interest rate levels would have increased/decreased by 100 basis points. For CHF, increasing interest rates would have a negative impact on the income statement since the value of variable interest-bearing liabilities exceeds the value of variable interest-bearing assets. For the other most significant currencies, EUR, USD, CNY and GBP, increasing interest rates would have had a positive impact on the income statement as variable interest-bearing assets (comprising mainly cash and cash equivalents) exceed the value of variable interest-bearing liabilities.

Hypothetical impact of interest rate risk on income statement

On December 31, 2023, if the interest rates on CHF-denominated assets net of liabilities had been 100 basis points higher with all other variables held constant, post-tax profit for the year would have been CHF 0.6 million lower as a result of higher interest expenses on CHF-denominated liabilities. A decrease of interest rates on CHF-denominated liabilities net of assets would have caused a gain of the same amount. As of December 31, 2022, if the interest rates had been 100 basis points higher with all other variables held constant, post-tax profit for the year would have been CHF 1.0 million lower as a result of higher interest expenses on CHF-denominated liabilities.

The following tables show the hypothetical influence on equity related to the interest rate risk of financial instruments as of December 31 of the respective year. The sensitivity used for the calculation is 100 basis points. The hypothetical effect on equity is the result of fair value changes of derivative financial instruments designated as hedges of future cash flows from variable interest rates adjusted for tax effects.

Hypothetical impact of interest rate risk on equity

b) Credit risk

Credit risk arises from cash and cash equivalents, derivative financial instruments, deposits with financial institutions and credit exposures to customers, including outstanding receivables, contract assets and committed transactions. The maximum exposure to credit risk per class of financial asset is disclosed by carrying amounts in the fair value table.

Credit risks of banks and financial institutions are monitored and managed centrally. Generally, only independently rated parties with a strong credit rating are accepted, and the total volume of transactions is split among several banks to reduce the individual risk with one bank.

For every customer with a large order volume, an individual risk assessment of the credit quality of the customer is performed that considers independent ratings, financial position, past experience and other factors. Additionally, bank guarantees and letters of credit are requested. For more details on the credit risk of contract assets, please refer to note 17, and on the credit risk of trade accounts receivable, please refer to note 18.

c) Liquidity risk

Prudent liquidity risk management includes the maintenance of sufficient cash and marketable securities, the availability of funding from an adequate number of committed credit facilities and the ability to close out market positions.

Management anticipates the future development of the group’s liquidity reserve on the basis of expected cash flows by performing regular group-wide cash forecasts.

The following table analyzes the group’s financial liabilities in relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows calculated with the year-end closing rates. Borrowings include the notional amount and interest payments.

Maturity profile of financial liabilities

6.2 Capital risk management

The group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

The following table shows the net debt/adjusted EBITDA ratio as of December 31.

Net debt/adjusted EBITDA ratio

For the definition of the adjusted EBITDA and the ratio, please refer to the chapter alternative performance measures (APM).

6.3 Fair value estimation

The following tables present the carrying amounts and fair values of financial assets and liabilities as of December 31, 2023, and 2022, including their levels in the fair value hierarchy. For financial assets and financial liabilities not measured at fair value in the balance sheet, fair value information is not provided if the carrying amount is a reasonable approximation of fair value.

Fair values are categorized into three different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. Such instruments are included in level 1.

The fair values included in level 2 are based on valuation techniques using observable market input data. This may include discounted cash flow analysis, option pricing models or reference to other instruments that are substantially the same, while always making maximum use of market inputs and relying as little as possible on entity-specific inputs. The fair values of forward contracts are measured based on broker quotes for foreign exchange rates and interest rates.

Fair values measured using unobservable inputs are categorized within level 3 of the fair value hierarchy. This applies particularly to contingent considerations in business combinations.

Financial instruments table

Financial instruments table

As of December 31, 2022, non-current financial assets (at fair value) included the investment in medmix Poland of which the fair value (level 3) was assessed to be zero.

7 Personnel expenses