Carl Zeiss Meditec closes first nine months of 2023/24 with slight decline in revenue

Jena/Germany | August 6, 2024 | Carl Zeiss Meditec AG

Carl Zeiss Meditec generated revenue of around €1,486.5m in the first nine months of fiscal year 2023/24 (prior year: €1,509.6m) corresponding to a slight decline of -1.5% (adjusted for currency effects: +0.1%). Earnings before interest and taxes (EBIT) declined to around €162.7m (prior year: €244.9m). The EBIT margin was 10.9% (prior year: 16.2%).

Dr. Markus Weber, President and CEO of Carl Zeiss Meditec AG: “As announced at the time of our forecast adjustment in June, we cannot be satisfied with the performance in the third quarter of 2023/24. A recovery of the markets is likely to take considerably more time than was originally assumed at the start of the fiscal year. At the same time, we are seeing the first signs that the situation in the devices and consumables business is stabilizing, based on orders received. It is important in this situation to set the right course for the next fiscal year and beyond now – with a combination of tactical resilience measures as well as the even more important medium-term transformation projects that we have initiated in the areas of innovation, production and commercialization. After many years of strong growth, it is now vital that we consolidate that success and create the conditions for sustainable productivity increases again. Specifically, this means getting even more out of our still well-filled innovation pipeline, driving cost optimization in production again after years of extremely turbulent supply chains, and also ensuring that our innovations are brought to market and marketed in line with their full potential in the future.”

In the first nine months of fiscal year 2023/24, revenue in the Ophthalmology strategic business unit (SBU) fell by a slight -0.8% (adjusted for currency effects: +0.7%), from €1,152.3m in the prior year to €1,143.0m. The initial consolidation of the retinal surgery company DORC¹, acquired in April 2024, had a positive impact, contributing €52.7m.

In the reporting period, weaker sales of refractive consumables – partially related to the normalization of consumables inventories in China, which was completed in March 2024 – led to an underlying decline in revenue. The devices business and the sale of surgical microscopes remained below the prior year due to the continued investment reluctance of various customer groups, particularly in North America, and adversely impacted the development of revenue.

The Microsurgery strategic business unit generated revenue of €343.5m (prior year: €357.3m), corresponding to a decline of -3.9% (adjusted for currency effects: -1.9%). This is mainly due to a weak neurosurgery business, which was also affected by the investment reluctance of various customer groups, particularly in North America, in light of higher financing costs.

Revenue in the EMEA² region increased by +16.1% in the reporting period (adjusted for currency effects: +19.1%) to €432.2m (prior year: €372.3m). Positive contributions to growth came from Italy, Spain and France, among others.

Revenue in the Americas region decreased significantly by -13.0% (adjusted for currency effects: -11.9%) from €410.3m to €356.9m. In North America, in particular, demand in the devices business was below expectations.

The APAC³ region recorded a slight decline in revenue. Revenue decreased by -4.1% (adjusted for currency effects: 3.0%) to €697.5m (prior year: €727.0m). India and Australia, in particular, contributed to growth. China reported a subdued start to the peak season for refractive laser surgery compared to the prior year.

Carl Zeiss Meditec AG noted an operating result (earnings before interest and taxes, EBIT) of €162.7m (prior year: €244.9m) after the first nine months of fiscal year 2023/24. The weak performance is mainly the result of a less favorable product mix due to the reduction of inventories in the Chinese sales channel by March 2024 and the delayed implementation of volume-based procurement of IOLs in China. The strict implementation of a cost control program showed initial success and led to flat development of operating expenses overall, before consideration of acquisition effects. Further cost-cutting measures have been introduced for the fourth quarter of 2023/24 and fiscal year 2024/25.

The EBIT margin was 10.9% after the first nine months (prior year: 16.2%). Adjusted for special effects and the contribution from the DORC acquisition, the EBIT margin was 11.2% (prior year: 16.8%). Earnings per share declined significantly compared with the same period of the prior year to €1.32 (prior year: €2.29) due to the weaker EBIT and the lower financial result.

The forecast for the fiscal year as a whole projects revenue on a comparable basis of around €2,000m, plus the contribution from the acquisition of DORC of around €100m. Adjusted EBIT is expected to range between around €225m to €275m. After the first nine months, adjusted EBIT amounted to €161.0m. To ensure targets are met, further measures to cut costs in Sales & Marketing and Research & Development in the short to medium term have been introduced. Savings in the low to mid-double-digit millions of euros range are planned for fiscal year 2024/25, before inclusion of the DORC acquisition. Medium-term transformation initiatives to optimize processes and increase productivity in the areas of innovation, production and commercialization are currently being implemented. In the medium term, the EBIT margin is expected to recover and move back in the direction of around 20%, with an increasing proportion of consumables, underpinned by the transformation initiatives.

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