"Growth in the third quarter was held back mainly by lower critical care rental volumes in the US, and adjusted for this the Group grew organically by almost 5%. We continue to perform well in most major markets, with healthy demand and growth. However, in the US, effects from extensive healthcare staff shortages and a volatile economic climate for healthcare providers have resulted in a slowdown in investments in capital goods, lower DVT sales and a slower pace of implementation of awarded rental contracts."
"We operate in a market situation, especially in the US, that is difficult to assess and which presents external challenges that are expected to remain in the coming quarters. Despite this, I look forward to continuing to build a strong Arjo for the future," says Joacim Lindoff, President & CEO of Arjo.July-September 2022 in brief
Net sales rose organically by 0.3%.
- Net sales increased to SEK 2,519 M (2,247).
- Adjusted EBITDA amounted to SEK 420 M (524).
- Adjusted operating profit amounted to SEK 147 M (280).
- Profit after financial items amounted to SEK 115 M (252).
- Earnings per share amounted to SEK 0.32 (0.69).
- Cash flow from operations amounted to SEK 280 M (390).
- The cash conversion was 67.7% (75.0).
- Changed outlook: Based on the current situation, the organic net sales growth for the full year 2022 is expected at around 0%.
- Arjo announces changes to the Arjo Management Team.
- Arjo presents updated financial targets for 2023-2025.
Capital Markets Day 28 October: Arjo's long-term strategy is more relevant than ever
At today's Capital Markets Day, Arjo will present the results for the third quarter 2022 as well as an update regarding Arjo's strategy, how the Group is managing short-term challenges in the external environment, key growth and profitability drivers for the coming years, and updated financial targets for 2023-2025.
"We expect continued growth in the years ahead and a long-term improvement in profitability, although the challenges in the global business environment has pushed the profitability target forward in time and also added uncertainty to the short-term growth outlook," says Joacim Lindoff, President & CEO of Arjo.
Global healthcare needs are continuing to rise despite short-term challenges in the world. Offering more people high-quality care using fewer resources has perhaps never been as important as it is now, which means that Arjo's long-term strategy is more relevant than ever. Furthermore, interest in solutions and technologies that can improve and make care outcomes more efficient remains high.
"In the wake of the pandemic, healthcare systems around the world are suffering from a lack of resources, both in terms of staff and funding. The strategy we laid the foundation for in 2020, where we create added value for patients, healthcare professionals and care providers, by offering outcome-based solutions for some of healthcare's most costly challenges, is more relevant than ever," says Joacim Lindoff, President & CEO of Arjo.
Cost increases due to external challenges
Arjo's profitability trend has been held back by external challenges in 2022. The combination of higher prices of materials and transportation as well as inflationary effects related to salaries, energy and fuel are estimated to cost the Group approximately SEK 400 M between Q4 2021 and Q4 2022. Material and inflation costs are expected to remain at high levels in 2023.
To mitigate the higher cost pressure, the Group is continuing its work to gradually implement both tactical and strategic price adjustments. Also, a US rental efficiency program was initiated with the aim of improving the infrastructure in critical care rental in the US. The program is expected to generate annual savings of approximately SEK 50 M starting from the end of 2022. In addition, an expansion of the Group's shared service initiatives and optimization of the sales operations are expected to positively contribute to the profitability trend for 2023 and beyond.
Key growth and profitability drivers 2023-2025
In recent years, Arjo has worked actively on building up a strong product portfolio that supports the development of both the underlying business and the Group's strategic direction. A number of upcoming product launches, the continuing development of service and core rental business, and new technologies for increased value creation will all contribute to growth and profitability over the coming years.
The roll-out of solutions for Pressure Injury Prevention is progressing according to plan. The Group continues to see high potential in this area and for the SEM scanner alone Arjo expects sales volumes of about SEK 40-50 M for the current year, and around SEK 200 M in 2023, with further potential in the next few years.
Updated financial targets for 2023-2025Arjo's updated financial targets for 2023-2025 are:
- Organic sales growth of 3-5% annually
- Adjusted EBITDA margin of approximately 23% from full-year 2025
- Annual cash conversion of more than 80%
In addition, the aim is for the Group's dividend to correspond to 30-60% of net profit after tax.
Information about Arjo's Capital Markets Day at Epicenter in Stockholm on October 28, 2022
Arjo's Capital Markets Day will start at 8:30 CEST. The speakers are Joacim Lindoff, President & CEO, Daniel Fäldt, CFO, and Christian Stentoft, Chief Strategy Officer.
The Capital Markets Day will be live streamed via: https://live.twebcast.com/participant/arjocmd
A recording and the presentations will be available after the end of the event on Arjo's website:
For further information, please contact:
Maria Nilsson, Acting EVP Marketing Communication & Public Relations
Tel: +46 734 244 515
Sara Ehinger, VP Investor Relations & Corporate Communications
Tel: +46 723 597 794
This information is information that Arjo AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, on October 28, 2022 at 07:00 CEST.
At Arjo, we believe that empowering movement within healthcare environments is essential to quality care. Our products and solutions for patient transfers, hygiene, disinfection, diagnostics, treating leg ulcers, prevention of pressure injuries and deep vein thrombosis, and our medical beds are all designed to promote mobility, safety and dignity in all care situations. With over 6,500 people worldwide and 65 years caring for patients and healthcare professionals, we are committed to driving healthier outcomes for people facing mobility challenges. www.arjo.com