Carl Zeiss Meditec closes first six months 2023/24 with a slight decline in revenue due to currency effects

Jena/Germany | 08 May 2024 | Carl Zeiss Meditec AG

Carl Zeiss Meditec generated revenue of around €947.2m in the first six months of fiscal year 2023/24 (prior year: €974.5m), corresponding to a slight decrease in revenue of -2.8% (adjusted for currency effects: -0.7%). Earnings before interest and taxes (EBIT) declined to around €108.2m (prior year: €143.9m). The EBIT margin was 11.4% (prior year: 14.8%).

Dr. Markus Weber, President and CEO of Carl Zeiss Meditec AG: "As expected, the first six months were characterized by the reduction in stocks in the Chinese distribution channel, which we were able to complete as planned in March. We also had to contend with currency headwinds and a certain reluctance to invest in the devices business, particularly in the North American market. We expect to see our growth accelerate again in the second half of 2023/24 - thanks to the cost-control measures we have taken, we should also be able to achieve the necessary recovery in our operating result to reach our annual targets. I am very glad that we were able to successfully complete the acquisition of D.O.R.C. in the first week of April - together as a team we will convince our ophthalmology customers with new innovative workflows for greater efficiency and quality. The integration work is already in full swing."

Revenue in the Ophthalmology strategic business unit (SBU) decreased by -5.7% in the first six months of fiscal year 2023/24 (adjusted for currency effects: -3.7%), to €700.6m (prior year: €742.6m). In the reporting period the planned reduction of large stocks of surgical consumables in the Chinese market led to a decline in revenue, as expected; currency effects, particularly from the Chinese renminbi, the US dollar and the Japanese yen, also had a negative impact on revenue development.

The Microsurgery strategic business unit generated revenue of €246.5m (prior year: €231.9m), corresponding to growth of 6.3% (adjusted for currency effects: 9.1%). The business unit benefited from the accelerated processing of the existing order backlog.

Revenue in the EMEA¹ region increased by +17.1% (adjusted for currency effects: +20.7%), to €289.4m (prior year: €247.2m). Positive contributions to growth came from Italy, Spain and France, among others.
Revenue in the Americas region decreased significantly by -20.0% (adjusted for currency effects: -17.9%) from €270.7m to €216.6m. In North America, in particular, demand in the devices business was below expectations. More cautious investment behavior as a result of high interest rates led to a restrained development in order entry in the reporting period.

The APAC² region noted a slight decline in revenue. Revenue decreased by -3.4% (adjusted for currency effects: -2.0%) to €441.1m (prior year: €456.7m). India and Southeast Asia, in particular, made good contributions to growth. Sales in the Chinese market declined as expected due to the reduction of stocks of surgical consumables.

Carl Zeiss Meditec achieved an operating result (earnings before interest and taxes, EBIT) of €108.2m (prior year: €143.9m) after the first six months of fiscal year 2023/24. The weak performance is primarily the result of a weaker product mix due to a lower proportion of consumables owing to the reduction in stocks in the Chinese distribution channel. The strict implementation of the internal cost control program showed initial success and led to a sideways trend in operating costs.

The EBIT margin was 11.4% after the first six months (prior year: 14.8%), This includes a one-time special effect of €18.2m in connection with the settlement of a legal dispute. Adjusted for special effects, the EBIT margin was 10.0% (prior year. 15.3%). The earnings per share benefited from gains on currency hedges, nevertheless still declined compared with the same period of the prior year, to €0.94 (prior year: €1.26) due to the weaker EBIT.

Following the successful completion of the reduction in stocks of consumables in the Chinese distribution channel, the company management expects gross profit and EBIT to recover over the remainder of the financial year and is providing a quantified forecast for the second half of 2023/24 for the first time.

The full-year forecast anticipates revenue on a comparable basis of €2,100m to €2,150m. In addition, the first-time consolidation of the acquisition of D.O.R.C. BV, which took place on 3 April 2024, is expected to contribute around €100m in revenue in the second half of 2023/24. Including D.O.R.C., the revenue forecast is around €2,200m to €2,250m. The ambitious target of an EBIT roughly comparable to the prior year is confirmed. However, achieving this target will require an acceleration in revenue growth within the second half of the year. The effects of the acquisition of D.O.R.C. on EBIT in the second half of 2023/24 are not to be included in the target achievement: It is planned to disclose the contribution from operating result, integration costs incurred and amortization from the purchase price allocation, by the end of the financial year at the latest. The target of a sustainable EBIT margin of over 20% in the medium-term is confirmed.

Further information on our publication and the Analyst Conference Call on the results for the first six months of fiscal year 2023/24 can be found at
https://www.zeiss.com/meditec-ag/en/investor-relations/financial-calendar/telephone_conferences.html