Solid underlying business momentum in H1 2023 restrained by transitory factors
In the first half of 2023, medmix generated revenues of CHF 248.1 million, essentially matching the record first-half 2022 revenues, with organic revenue growth slightly up year-on-year (+1.3%). Strong double-digit growth in Beauty (29.6%), Surgery (27.7%) and Drug Delivery (18.0%) market segments offset the temporary impacts of reduced production capacity in Industry market segment as we ramp up our new factory in Spain (–8.3%) and persistent high customer inventory levels in Dental market segment (–23.9%).
The acquired plastics business of Universal de Suministros, S.L. in Valencia, Spain, contributed 100 basis points to group revenue growth, while currency exchange rates accounted for a negative impact of –320 basis points.
A comparison of first-half 2023 with second-half 2022 provides a clearer picture of current revenue trends, with group organic revenues growing 12.2%. On the same basis, the Industry market segment confirmed its continued recovery by ramping up production outside Poland, with organic revenue growth of 5.9% while the Dental market segment grew slightly by 1.1%. Beauty, Drug Delivery and Surgery all grew double digits organically vs. the second half of 2022, at 20.6%, 21.4% and 42.0% respectively, confirming the strong year-on-year growth trends.
Unless otherwise indicated, revenue-changes from the previous year are based on organic figures and all other changes are based on nominal figures. The numbers as of June 30, 2022, have been adjusted following the deconsolidation of medmix Poland and all comments in the financial review are based on these adjusted numbers. A reconciliation to the previously published numbers is provided in note 14.
“medmix matched its record first-half 2022 revenue despite volume challenges in two of its market segments, demonstrating the strength of our business model. Our half-year 2023 margin and profit reflect the impact of the transitory headwinds we currently face. However, compared with second-half 2022, we observe clear signs of recovery. Excellent progress in the ramp-up of our new facility in Spain is an indication of what to expect for the remainder of 2023.”
Jennifer Dean
Chief Financial Officer
Record-matching revenue generation
In the first half of 2023, medmix generated revenues of CHF 248.1 million, essentially matching the record first-half 2022 revenues, with organic revenue growth slightly up year-on-year (+1.3%). The market segments presented a mixed organic growth picture.
In the first half of 2023, as in second-half 2022, Healthcare business area revenues were constrained by persistently high customer inventories within the Dental market segment. On an organic basis, revenues in the Dental market segment declined by –23.9% year-on-year, offsetting the robust growth delivered by the two smaller market segments, Drug Delivery (18.0%) and Surgery (27.7%).
The Dental market segment faced tough comparisons in the first six months given organic growth of 15.7% in the first half of 2022 when underlying industry growth is typically around 2% to 3%. The high growth seen in 2021 and H1 2022 was driven initially by a post-Covid surge in patient treatments, and subsequently by customers’ concern about supply chain bottlenecks as global markets reopened and geopolitical tensions increased, as well as by customers purchasing ahead of successive inflation-driven price increases. These combined factors created abnormally high customer inventories. We had previously assumed that these inventories would be depleted by the middle of this year, but recent market intelligence suggests that destocking could continue into the second half, possibly until year end. Regardless of these timing issues, we expect to see good second-half Dental growth.
The solid growth at Drug Delivery reflects our strong device and project pipeline while Surgery is benefitting from the conversion of tissue banks to our products . Both market segments registered all-time high half-year revenues.
By contrast, the Consumer & Industrial business area grew high single-digit due to a strong performance by the Beauty segment.
The Beauty market segment, with 29.6% organic growth, benefitted in the first half of the year from several new product launches, resulting in the highest half-year revenues since 2018. Several of our global customers launched new products that had long been in the pipeline but delayed due to Covid restrictions. Our own innovation, the Micro Bristle Applicator, successfully gained footholds in new cosmetic fields outside our core eyelash applications. We expect market segment growth to moderate in the second half after these first-half customer launches.
As expected, half-year 2023 revenues in the Industry market segment were lower year-on-year, –8.3% organically, given that group-wide production is still not operating at full capacity. However, compared with the second half of 2022, the market segment grew organically by 5.9% demonstrating that a recovery is well advanced. The acquisition of Universal de Suministros, S.L. in Spain contributed 310 basis points to market segment adjusted revenue growth and 170 basis points to business area adjusted revenue growth. Despite capacity constraints, the market segment was able to gain new business, leveraging supply chain and quality issues faced by certain competitors. In the meantime, production trials have been ongoing since April at our new production facility in Spain and a total of 20 machines installed as of the end of June. Equipment previously in our Polish factory was shipped to Spain, where we plan to be at full production capacity before the end of the year.
Revenue by market segment
January 1 - June 30
millions of CHF
2023
20222)
Change in +/–%
+/–% adjusted3)
+/–% organic4)
Revenue Dental
53.7
71.3
–24.8
–23.9
–23.9
Revenue Drug Delivery
26.9
23.8
12.8
18.0
18.0
Revenue Surgery
8.6
6.7
27.7
27.7
27.7
Total revenue Healthcare1)
89.2
101.9
–12.5
–10.7
–10.7
Revenue Industry
72.7
79.2
–8.3
–5.2
–8.3
Revenue Beauty
86.3
69.5
24.2
29.6
29.6
Total revenue Consumer & Industrial1)
158.9
148.7
6.9
11.1
9.4
Total revenue
248.1
250.6
–1.0
2.2
1.3
1)Revenue from external customers.
2)The numbers as of June 30, 2022, have been adjusted following the deconsolidation of medmix Poland. A reconciliation to the previously published numbers is provided in note 14.
3)Adjusted for currency effects.
4)Adjusted for acquisition and currency effects.
Profit impacted by transitory factors
Business area gross profit declined by –9.5% year-on-year to CHF 108.6 million, generating a margin of 43.8%, a decrease of –413 basis points. This decline was due to an adverse product mix, as Healthcare business area gross 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 outside Poland and the ramp-up of our new factory in Spain. A comparison of the first half of 2023 with the second half of 2022 demonstrates a profit turnaround similar to the one seen in revenues, with business area gross profit up 10.8% in absolute terms and a margin increase of +52 basis points.
Healthcare first-half business area gross profit declined by –15.2% year-on-year as a result of an adverse product mix, driven primarily by lower Dental volumes. Compared with the second half of 2022, first-half 2023 gross profit increased by 10.4%, slightly faster than the comparable 9.7% organic revenue growth, delivering a gross margin increase of 161 basis points.
Consumer & Industrial first-half business area gross profit declined by –3.1% year-on-year faced with ongoing production cost headwinds, that include lower volumes and high-cost manual assembly for Industry market segment products, as well as an adverse product mix within the business area. However, compared with the second half of 2022, gross profit increased by 11.3%, slightly slower than the comparable 13.6% organic revenue growth.
Business area gross profit margin by business area
January 1 - June 30
Healthcare
Consumer & Industrial
Total medmix
millions of CHF
2023
2022
2023
20221)
2023
20221)
Revenue2)
89.2
101.9
158.9
148.7
248.1
250.6
Business area cost of goods sold
–35.1
–38.1
–104.4
–92.4
–139.5
–130.6
Business area gross profit
54.1
63.8
54.5
56.3
108.6
120.0
Business area gross profit margin
60.6%
62.6%
34.3%
37.8%
43.8%
47.9%
1)The numbers as of June 30, 2022, have been adjusted following the deconsolidation of medmix Poland. A reconciliation to the previously published numbers is provided in note 14. The complete deconsolidation adjustment is related to the Consumer & Industrial business area.
2)Revenue from external customers.
Adjusted EBITDA declined by –17.3% to CHF 49.7 million, with an adjusted EBITDA margin of 20.0% compared with 24.0% in the first half of 2022 (–400 basis points). This negative trend was driven primarily by an adverse product mix due to lower Dental customer orders and volume impact of transition of production in the Industry segment from Poland to Spain, partly offset by an increase in contribution from the Beauty segment.
A comparison of first-half 2023 with second-half 2022 shows that adjusted EBITDA grew by +9.5% with an unchanged 20.0% margin.
Bridge from operating income (EBIT) to adjusted EBITDA
January 1 - June 30
millions of CHF
2023
20221)
Operating income (EBIT)
14.5
16.9
Depreciation
14.9
14.6
Amortization
10.7
10.2
EBITDA
40.0
41.7
Restructuring expenses
0.1
0.5
Non-operational items2)
9.5
17.9
Adjusted EBITDA
49.7
60.1
1)The numbers as of June 30, 2022, have been adjusted following the deconsolidation of medmix Poland. A reconciliation to the previously published numbers is provided in note 14.
2)Non-operational items include significant acquisition-related expenses, gains and losses from the sale of businesses or real estate (including release of provisions), and certain non-operational items that are non-recurring or do not regularly occur in similar magnitude.
Adjusted EBITDA margin
January 1 - June 30
millions of CHF
2023
20221)
Adjusted EBITDA
49.7
60.1
Revenue
248.1
250.6
Adjusted EBITDA margin
20.0%
24.0%
1)The numbers as of June 30, 2022, have been adjusted following the deconsolidation of medmix Poland. A reconciliation to the previously published numbers is provided in note 14.
Financial income and expenses
Interest expenses on borrowings and lease liabilities increased from CHF –3.0 million in the first half of 2022 to CHF –4.2 million in 2023, due to higher interest rates on borrowings.
Other financial income and expenses amounted to CHF –1.6 million in 2023, compared with CHF –0.2 million in 2022, mostly driven by negative fair value changes on derivative financial instruments.
Income tax expenses
The effective income tax rate is 19.0% in 2023, compared with 32.8% in 2022. The effective income tax rate for 2022 was impacted by extraordinary one-time effects related to the deconsolidation of medmix Poland. Income tax expenses decreased to CHF 1.7 million in 2023, from CHF 4.5 million in 2022, as a result of the lower effective income tax rate.
Net income
Net income declined by CHF 1.9 million to CHF 7.3 million from CHF 9.2 million in the prior period and more than trebled compared with CHF 2.3 million in the second half of 2022.
Key balance sheet positions
Total assets as of June 30, 2023, amounted to CHF 971.6 million, a decrease of CHF 134.3 million from December 31, 2022. All balance sheet movements are compared with the year-end balances as of December 2022, unless stated otherwise.
Non-current assets increased CHF 14.1 million to CHF 631.1 million, mainly driven by the increase in property, plant and equipment of CHF 23.0 million. As previously communicated, this increase is primarily the result of the investments in our new Industry production facility in Spain.
Current assets decreased by CHF 148.6 million to CHF 340.4 million, mainly resulting from the repayment of the syndicated revolving credit facility in the amount of CHF 150.0 million. In line with our decision to hold high levels of inventories to ensure continuity of supply, Inventory increased by CHF 5.6 million. Trade accounts receivable increased by CHF 7.0 million.
Equity amounted to CHF 486.9 million on June 30, 2023, down by CHF 17.9 million. The dividend of CHF 20.5 million, currency translation differences of CHF 3.2 million and acquisition of treasury shares of CHF 1.0 million reduced equity. Net income for the period added CHF 7.3 million to equity.
Non-current liabilities increased by CHF 7.0 million to CHF 337.0 million.
Current liabilities decreased by CHF 123.5 million to CHF 147.6 million, mostly due to the repayments of current borrowings. As of June 30, 2023, the syndicated revolving credit facility was undrawn and as of December 31, 2022, the facility was fully drawn for an amount of CHF 150.0 million.
Free cash flow
Cash flow from operating activities was CHF 15.4million, down from CHF 26.1 million in the first half of 2022. Trade accounts receivable increased by CHF 7.3 million and inventory grew by CHF 6.4 million.
Cash out from investing activities was CHF 13.0 million, mostly related to purchase of property, plant and equipment.
Cash out from financing activities was CHF 168.6 million, including shareholders’ dividend of CHF 7.9 million. During the period, current borrowings in the net amount of CHF 154.8 million were repaid.
The lower year-on-year first-half 2023 EBITDA and the elevated capital expenditure, combined with our decision to hold high levels of inventories to ensure continuity of supply, delivered a negative free cash flow of CHF –4.9 million vs. a positive CHF 14.2 million in the first half of 2022.
Bridge from cash flow from operating activities to free cash flow
January 1 - June 30
millions of CHF
2023
20221)
Cash flow from operating activities
15.4
26.1
Purchase of intangible assets
–1.4
–0.7
Purchase of property, plant and equipment
–18.9
–12.0
Sale of property, plant and equipment
0.0
0.8
Free cash flow (FCF)
–4.9
14.2
1)The numbers as of June 30, 2022, have been adjusted following the deconsolidation of medmix Poland. A reconciliation to the previously published numbers is provided in note 14.
