Financial review

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

“Sequential performance improvement across all KPIs, and the continuing revenue rebound in Dental, are positive indicators for the future. We do remain cautious due to continuing softness in end markets for Industry and Beauty market segments.”

JENNIFER DEAN

CHIEF FINANCIAL OFFICER

Revenue generation

In the first half of 2024, medmix generated revenue of CHF 241.2 million, 2.8% lower year-on-year. Acquisition effects (+5.4%) more than offset foreign exchange impacts (-2.0%). Underlying organic growth was negative year-on-year (-6.1%). Compared to the second half of 2023, however, Group revenues increased by +1.1% on a reported basis and increased by +3.2% organically.

Healthcare business area revenue in 2022 and 2023 was constrained by customer destocking within the Dental market segment. Today, there are positive signs that this destocking has run its course. More than offsetting the positive first-half organic growth in the Dental market segment, however, were adverse impacts from the Drug Delivery and Surgery market segments.

Healthcare business area revenues declined by -7.0% on a reported basis and -5.9% organically, with the difference of -1.1% entirely due to foreign exchange effects.

Based on the first six months of the year, with Dental organic revenue growth of +3.2% year-on-year and +5.5% sequentially, management is optimistic and looks forward to confirmation of these positive trends in the months ahead.

Drug Delivery market segment revenue declined by -18.5% organically. This shortfall was due to the planned transfer of a portion of production for one customer’s device to a second source manufacturer.

Surgery market segment revenue, with a -22.8% organic decrease, was impacted by rephasing of customer projects in the first six months following an exceptionally strong end to last year.

A second-half rebound in Healthcare business area revenue is expected, driven by the Dental and Surgery market segments, with the Drug Delivery market segment remaining a drag factor.

Consumer & Industrial business area organic revenue growth declined to a similar extent as Healthcare, driven by lower launch activity in the Beauty market segment. Although first-half demand remained subdued in the Industry market segment, a recovery is noticeable in the sequential revenue trend.

Consumer & Industrial business area revenues declined by -0.4% on a reported basis and -6.3% organically. Qiaoyi, last year’s Beauty market segment acquisition, contributed growth of +8.4% to the first six months, while foreign exchange rates had a negative impact of -2.5%.

Industry market segment revenue reached CHF 65.4 million in the first half of 2024, a decline of -8.5% due to a very strong first half of 2023, supported by the release of inventory from Poland. Compared to the second half of 2023, the Industry market segment delivered robust organic growth of +12.3%. Some end markets remain soft and management is watching these developments closely.

Beauty market segment revenue grew year-on-year by +7.6% to CHF 92.8 million. This was driven primarily by the Qiaoyi acquisition with a positive impact of +15.4%, partially offset by negative foreign exchange rates (-2.5%). The negative organic revenue growth -4.4% was anticipated. H1 2023 revenues benefited from several customer product launches delayed due to Covid restrictions, resulting in Beauty’s highest half-year revenue in five years. Year-on-year revenue growth is expected to be stronger in the second half of the year.

Revenue by market segment

January 1 - June 30

Business area gross profit

Business area gross profit declined by -2.2% broadly in line with Group revenues, delivering a slightly improved year-on-year margin of 44.0%.

Healthcare Business area gross profit decreased by -5.0% year-on-year to CHF 51.4 million, broadly in line with revenue, delivering a gross margin of 62.0% (+132 bps), with the Dental market segment recovery offsetting profit pressure within the Drug Delivery and Surgery market segments.

Consumer & Industrial first-half business area gross profit increased by +0.6% year-on-year, delivering a gross margin of 34.6%, an increase of 34 basis points, with the accretive Qiaoyi acquisition compensating for adverse year-on-year revenue trends in the legacy Beauty business and the Industry market segment.

Business area gross profit margin by business area

January 1 - June 30

Gross profit at the Group level, which includes shared costs and cost absorption, declined by -1.7% year-on-year to CHF 80.6 million. Group gross profit margin therefore increased to 33.4%, up +35 basis points. This improvement was driven primarily by the recovery in Dental market segment revenues.

Profitability

Adjusted EBITDA was CHF 46.0 million, a decrease of -7.4% year-on-year but an increase of 5.9%  sequentially, and delivering an adjusted EBITDA margin of 19.1% compared to 20.0% in H1 2023 and 18.2% in H2 2023. In addition to the lower volumes, the year-on-year decrease was driven by two main factors. Firstly, the company made additional investments to drive future growth, particularly in R&D and the new sites in Valencia and Atlanta. Secondly, it will take time to ramp up volume and efficiency in our new Valencia plant delivering Industry market segment products. The sequential improvement is primarily driven by the recovery of Dental volumes. In this context, it is worth noting that the reported EBITDA of CHF 41.9 million increased by +22.0% sequentially, i.e., compared to the second half of last year.

Bridge from operating income (EBIT) to adjusted EBITDA

January 1 - June 30

Adjusted EBITDA margin

January 1 - June 30

Financial income and expenses

Total financial income / (expenses), net, amounted to CHF -6.2 million, compared with CHF -5.5 million in the first half of 2023. The financial expenses are mainly driven by higher interest expenses on borrowings.

Income tax expenses

Income tax expenses comprise current and deferred taxes. Income tax expenses are recognized based on the estimated effective income tax rate for the full financial year. The effective income tax rate used for the reporting period is 15.7%, compared with 19.0% for the six months ended June 30, 2023. In the reporting period, the effective income tax rate is positively impacted by a tax-deductible impairment of a foreign subsidiary. The normalized estimated effective income tax rate for 2024, excluding the tax effect from the impairment of the foreign subsidiary, is 19.0% (half-year 2023: 19.0%).

Net income and adjusted net income

Net income declined by CHF 1.7 million to CHF 5.6 million (thereof CHF 5.2 million attributable to shareholders of medmix AG) from CHF 7.3 million (thereof CHF 7.3 million attributable to shareholders of medmix AG) in the prior period.

Adjusted net income declined to CHF 18.2 million from CHF 23.9 million in 2023, primarily due to the lower operating result.

Bridge from net income to adjusted net income

Adjusted diluted EPS

Adjusted diluted EPS declined from CHF 0.58 in the prior period to CHF 0.44 in 2024.

Bridge from diluted EPS to adjusted diluted EPS 

Key balance sheet positions

Total assets as of June 30, 2024, amounted to CHF 1'036.4 million, an increase of CHF 29.6 million from December 31, 2023. All balance sheet movements are compared with the year-end balances as of December 2023, unless stated otherwise.

Non-current assets rose by CHF 11.3 million to CHF 710.0 million, mainly driven by CHF 6.5 million higher Goodwill due to currency translation effects and the increase in property, plant and equipment of CHF 5.8 million. As previously communicated, the increase in property, plant and equipment is primarily the result of the investments in our new production facilities in Valencia, Spain, and Atlanta, USA.

Current assets increased by CHF 18.3 million to CHF 326.4 million, primarily due to the drawdown of the syndicated credit facility in the amount of CHF 15.0 million, which increased cash and cash equivalents correspondingly. Consistent with our decision to hold substantial inventory levels to guarantee supply continuity, Inventory increased by CHF 4.6 million.  Additionally, trade accounts receivable expanded by CHF 3.2 million whereas other current receivables and prepaid expenses decreased by CHF 3.5 million.

Equity amounted to CHF 470.6 million on June 30, 2024, down by CHF 3.7 million. The main drivers for the lower equity were the distributed dividend of CHF -20.4 million, cash flow hedges of CHF -2.6 million and CHF -3.2 million change in put option liabilities associated with the Qiaoyi acquisition. However, a net income for the period of CHF 5.6 million and currency translation gains of CHF 16.0 million contributed positively to the equity. 

Non-current liabilities decreased by CHF 9.4 million to CHF 345.0 million mainly resulting from the reclassification of a put option liability from sale of investments in subsidiaries (CHF 11.7 million) to current liabilities. 

Current liabilities rose by CHF 42.7 million to CHF 220.8 million. The main drivers were higher current borrowings (CHF 14.5 million), higher unpaid dividends (CHF 5.5 million), higher unpaid withholding taxes mainly relating to the dividend (CHF 6.5 million), and the reclassification of a put option liability from non-current liabilities to current liabilities (CHF 11.7 million). As of June 30, 2024, the syndicated revolving credit facility was drawn with CHF 45.0 million, compared to CHF 30.0 million as of December 31, 2023.

Capital expenditure

Gross capital expenditure in the first half of 2024 decreased year-on-year by CHF 17.4 million to CHF 17.7 million. This was primarily due to the exceptional investments in 2023 in our new production facilities in Valencia, Spain, and Atlanta, USA.

Bridge to capital expenditure, net

Cash flow

Cash flow from operating activities was CHF 28.6 million, up from CHF 15.4 million in the first half of 2023 mainly due to positive contribution from net working capital. In 2024, lower net working capital contributed CHF 3.1 million to cash flow from operations compared to CHF -14.1 million in the same period in 2023.

Cash out from investing activities was CHF 21.0 million, related to purchase/sale of property, plant and equipment (CHF 16.3 million, net) and intangible assets (CHF 4.7 million).

Cash inflows from financing activities amounted to CHF 0.4 million, which included paid shareholders’ dividend of CHF 7.8 million and paid lease liabilities of CHF 5.8 million. Current borrowings increased by CHF 14.5 million following the group’s drawdown of CHF 15.0 million from the syndicated credit facility.

The higher year-on-year cash flow from operating activities for the first half of 2024 and consistent payments for capital expenditure resulted in a positive free cash flow of CHF 7.6 million, compared to a negative CHF 4.9 million in the first half of 2023.

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

January 1 - June 30

Outlook

Reference is made to the letter to the shareholders.

Alternative performance measures (APMs)

For the definition of the alternative performance measures, please refer to the medmix annual report 2023, chapter on alternative performance measures.

Abbreviations

EBIT: Earnings before interest and taxes

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