Okay, good afternoon, and welcome to El.En.'s conference call for third quarter 2022 financial results. Today's call will be recorded and so will be an opportunity for questions at the end of conference call. With me on the call are Andrea Cangioli, El.En.'s Managing Director, and Enrico Romagnoli, El.En.'s Chief Financial Officer and Investor Relations. Before we begin, please note that there is a remark the management makes on the conference call about future expectations, plans and prospects, and forward-looking statements. Certain statements in this call, including those addressing the company's beliefs, plans, objectives, estimates, or expectation of possible future results or events are forward-looking statements. Forward-looking statements involve known or unknown risks, including general economic and business conditions and conditions in the industry the company operates, and may be affected should the assumption turn out to be inaccurate.
Consequently, no forward-looking statement can be guaranteed, and actual future results, performance, or achievement may vary materially from those expressed or implied by such forward-looking statements. The company undertakes no obligation about the contents, nor to update the forward-looking statements to reflect events or circumstances that may arise after the date hereof. At this time, I want to turn the call to Andrea Cangioli. Please, Andrea, go ahead.
Thank you very much, Nicola. Thank you, Bianca, as well. and thanks everybody of you for joining us in this call following the release of our financial report at the end of the third quarter of 2022. Enrico Romagnoli is with me on the call. After my introduction that will provide you with a few comments on the very basic financial highlights and on the general trends of our businesses and of our performance, Enrico will provide you with the articulated details of our financial performance. The group once again delivered an outstanding performance, further accelerating the very fast growth trend of the first half of the year. With EUR 157 million quarterly revenues, up 19.8% on 2021, brought to EUR 484 million, the nine months total revenues, up 19.5% on 2021.
In terms of profitability, the financial displayed strength with the sales volume increase, allowing EBIT margin to maintain the 12% record level on the nine months. After the third quarter, seasonally, one of the weakest, and that was weaker than average in this 2022 as well, marking a 10.4% EBIT margin. The reason for such softer profitability in the quarter was, though, not limited to the summer slowdown only, but also and mainly to other reason I will examine right away. The strong performance was pretty much widespread in all the application segment as demand stayed robust. Our order backlogs are still higher than the historical average, both in absolute value and in days of production, notwithstanding the large capacity increase that we put in place.
As you know, the investments in the capacity expansion have been one of the pivots of the group strategy, and it's a great satisfaction for the management of the company to see this multi-year effort progressively reaching the results of the infrastructure, R&D, and commercial long-term planning. Really, there is great satisfaction for what we have achieved in this year to date, solid growth in revenues and profit, but most important, a solid and diversified organization, which is proving to be able to respond to the demand needs and seize the opportunities that our end markets are providing to us. We are beating expectation and are still, and again, working on the foundation of our construction to make it even stronger. I want to share this with you before I start to comment a few gray spots that are showing up in the brilliant picture of our performance.
In this successful year, there is, though, an area which is quite significant for our business, where the market response was not positive in the quarter and in the year. I'm talking of our China operations in the industrial sector, with our brand new manufacturing sites dedicated to large volume manufacturing of high-powered laser sheet metal cutting systems. The situation in China continues to be hindered by their unique approach to COVID, which continues to lock down entire regions in order to prevent the widespread of the disease, also by very limited number of positive individuals. It is well known that this policy led China, and is leading China, to isolation from the rest of the world, and also is internally creating many obstacles to the normal development of the mainland business activities.
We firmly believe in the mid and long-term potential of Mainland China market, and we are continuing to invest in order to reinforce our local structure. We strongly believe that our products that on the same application markets are encountering an extraordinary success are going to lead once again to positive results as soon as the Chinese economy will start performing decently. Under this point of view, we welcome the news on the lighter limitation enforced on visitors entering China in terms of quarantine period, and also the apparently positive outcome of the Biden-Xi meeting. On our side, we are continuing to work on the project of a possible IPO of the business units on a Mainland China market, and we moved another step by allowing a couple of private equity firms to be part of the shareholder base of Penta Laser Zhejiang.
Another requirement, I would define it as a soft requirement, of the possible IPO. Such IPO, I recall, would allow a strong financial and structural reinforcement of the business unit, allowing it to more freely design its fast growth strategies and for El.En. to dilute the significant financial burden of supporting such very rapid growth. This development pattern has worked very well for us in the past. Another area of declining revenue in 2022 has been Japan. For what concerns our subsidiary dedicated to the professional aesthetics business. Bad news is that revenue is decreasing and the company's loss in the nine months. The good news is that the breakeven was met again in the third quarter.
Good news is also that the revenue that we are missing is mainly low margin revenue generated on a local basis by the sale through our channels of small home use devices that are used to integrate the work performed in the beauty salons. That the sharp sales increase registered in the aesthetic segment for the group that Enrico will show you in a while is net of this negative impact and is therefore even higher if we consider the units we manufacture with our own technology only.
Business-wise, I'd also like to mention the revenue expansion in the identification marking business, where the structural investments made in the last year are still currently ongoing in Lasit and are now starting to pay off, and are now being flanked by investment in the distribution channels too, in order to spread the footprint of a business that is proving to have excellent growth potential. Another sensible spot of our 2022 performance is cash generation, or better cash absorption of the period, which led to a decrease in our net financial position, which is anyway still positive and strong. A large increase in working capital has been put in place in order to support the rapid growth. I'd like to stress the term put in place because it's something that was designed in order to allow a smooth manufacturing performance.
In order to increase volumes, we needed to make sure we had all materials available amid a phase of widespread and unheard of before unreliability of the supply chains. More purchases for the increasing volumes and more raw materials and components inventories in-house in order to prevent the expansion and variance of the lead times, of course, of the suppliers' lead times. The subsequent structural increase in inventory has then sometimes been increased by late deliveries by suppliers, which didn't allow to manufacture the planned volumes or by, let's say, normal schedule adjustments by our customer. For instance, we have been heavily impacted by delay of supplier, notwithstanding our preventive work in our subsidiary, Asclepion, that had to slow down production rates for the whole summer for its top seller system, which is the MeDioStar Hair Removal Diode Laser System.
The other new circumstance of this year is the need of paying vendors better and sometimes ahead of time with down payments. For certain components, there is in place a real competition to try to get allocated to ourselves the largest possible volumes by the suppliers. We had to shorten payment terms in order to have a word in such competition and to keep our production line constantly fed with materials. Finally, the end of Q3 is seasonally the worst moment in the year for inventories since we have in-house what is needed for the final quarter, which is always by far the strongest quarter in terms of volumes. In terms of ratios, net working capital on revenue of the last 12 months was 25.3% at the end of 2021, and was 33.6% at the end of Q3.
Out of the EUR 73 million net working capital increase of the nine months, EUR 20 million are proportional to the revenue growth, and 53 are, let's say, in excess, for the reasons I just explained. We are positive we can reduce this latter portion. I am positive as well, we will be still far from the end of 2021 metrics. Of course, the number will depend, I mean, the number of net working capital reduction in Q4 will depend upon the actual results and shipments of the last months. To have down the excess portion in Q4 would be, for me, an excellent result. It is a goal we are targeting, but the primary goal is still to make sure production activities run flawlessly. Another dominant theme of these times is inflation.
We are hit by the inflation in our purchase cost of any kind of components, and we are hit even more strongly in U.S. manufactured components due to the strong U.S. dollar, which on the other side, is helping us on the sales side by improving margins on sales to the United States. As you can see, sales margins on the nine months basically remained unchanged with a reduction in the third quarter, which in fact rather than to cost pressure, was due to the aggressive price policy pursued in the industrial segment in the period in order to maximize the expansion rate of the customer base. Inflation impact has also been smoothed down by the anticipation of purchases, but will eventually impact our cost of goods sold. For this reason, we are starting to apply price increases on several of our product lines.
Sometimes with immediate effect, sometimes kicking in with the new year. In certain cases, we did not explicitly apply price list increases, softly reaching the goal of increasing ASPs, average selling prices, by reducing the discount headroom allowed to sales force for closing orders. Price increases are something new for us in the last year, since we seldom applied price increases to specific products. Our strategy is always centered on continuous innovation. New price levels are set by introducing on the market new innovative products, obsoleting the previously released ones, and by doing it at a very high pace, benefiting of the effectiveness and productivity of our R&D and engineering departments. Of course, the current inflationary circumstances do not allow us to wait for the innovation cycles to be completed in order to adjust margins, and we needed to take actions.
Prior to letting you into the financial details, I'd like to spend a few words on the shareholders meeting upcoming in December for the release of a new incentive stock options plan to become exercisable in 2026. Our management and valuable employees have been incentivized and rewarded also by the means of the currently open 2025 stock option plan, which has been of great benefit for the recipients, but of course, proved to be extremely effective for the issuer as well. We are therefore issuing a new midterm plan with shares that will be awarded basically at market price, probably in late winter or early spring, to constitute a great incentive and retention tool. In terms of size, we are seeking shareholders approval for up to 2 million shares, a pool that should be widely sufficient for the allocations we are thinking of.
With my initial introduction, Enrico, please go ahead with your section.
Okay. Thank you, Andrea. I'm going to comment the financial results. As already said by Andrea, we had good third quarter in terms of revenues, with an increase of 19.8%, third quarter over third quarter. Also in terms of operating result, with an EBIT increase of 20.5% on the EUR 13.7 million of the same quarter of last year. In the nine months, thanks to the good performance of the quarter, we had revenue in the nine months to EUR 484 million, up 19.5% compared to the last year, and allow it to maintain high level of profitability with an EBIT of EUR 57.9 million, up 30%.
Thanks to the high volume of sales, we have a sharp increase in EBIT and EBIT margin, with an impact on sales of 12% higher than last year, 11%. Gross margin for the nine-month amounted to EUR 179.5 million, an increase of approximately 19.5% compared to EUR 150 million of September 2021. Gross margin on revenue remain in line with the nine months 2021, and marking a slight decrease in the third quarter compared to the first half, as indeed happened last year. Operating expenses amounted to EUR 41.5 million, an increase in absolute value compared to last year, and with an impact on sales that increased from 8.4% to 8.6%.
The increase in the impact on turnover is mainly due to the commercial expenses as effect of the recovery of international travels and trade fairs and congress, activities which, in particular in the medical sector, is a significant cost. Staff costs are also increasing, even though the impact on turnover is improving. On September, there were 2,183 group employees. EBIT, EBITDA for the first nine months was positive for EUR 67.6 million, up by 21.4% compared to the EUR 55.7 million as September 2021. Thanks to the increase in turnover and the better absorption of the operating expenses. EBITDA improved. Margin improved too.
We had a decrease in depreciation and provision, and the EBIT at the end of 9 months showed positive balance of EUR 57.9 million, compared to the 44.6 million of euro at September 2021, with an EBIT margin increasing from 11% to 4%. Also the pre-tax income had an increase in 9 months, over 9 months over 27%. The net financial position at the end of September was approximately 32 million of euro. Looking to the cash flow of the 9 months in the. We had a decrease of approximately 84 million of euro from the beginning of the year, and with a reduction of 11.9 million in the third quarter.
The cash profitability for the period, although very good, was not able to avoid the decline in net financial position, which however remained positive and still strong. The EUR 74 million increase in net working capital resulted from the need to supply materials in order to support the rapidly growing scaled production volumes. CapEx in the quarter amounted to EUR 6.3 million, and the total amount for the 9 months is EUR 19 million, with EUR 3 million of liquidity invested in insurance policy and recorded in financial fixed asset to reflect its multi-year nature. The group companies invested in this instrument also in the past years, and the total value of this kind of investment at September 2022 was over EUR 21 million.
In the nine months, the group paid dividend for EUR 17.2 million, as 20 euro cents per share. In terms of business breakdown, we had a growth. The growth achieved was significant in all market segments in which the group operates. Double-digit results were registered both in the medical sector, which grew by 22.7%, and in the industrial application sector, which showed a 15.7% increase. Aesthetics, the most important segment, closed the period with revenues at EUR 167 million versus EUR 140.5 million in September 2021, up almost 20% with a 61% share on the medical sector.
A share that decreased slightly due to the even faster growth recorded in the other segment, recovering after having suffered most during the acute phases of the pandemic. The fastest growth, though, was recorded in surgery, 35.2% with a result of EUR 43.8 million, compared to the EUR 32.4 million in the same period of last year, also exceeding the record levels marked in 2019. A goal achieved also in therapy, where turnover grew by 20.7% to EUR 11.6 million, compared to EUR 9.6 million the same period of 2021. In the aesthetics, sales performance was excellent in all main application segments, hair removal of tattoos and pigmented lesions, body treatments, and skin rejuvenation.
Revenue and after-sales service were up by 25.9% and are close to 20% of the medical sector turnover, with a sharp increase thanks above all to the sale of optical fibers for urology surgical applications. The industrial sector recorded growth of more than 15%. A very positive result considering the negative condition of the Chinese market, which is the main market for the group in the sector. Revenue are 215.8 million EUR compared to 184.8 million EUR in 2021. Turnover was driven by the laser cutting segment, which recorded revenues for 108.5 million EUR compared to 156 million EUR in the nine months of 2021, with an increase of 16%.
Laser cutting highlighted a very brilliant trend in sales in Italy and in Europe, while in China, the results were lower than forecasts due to the limitation deriving from the new wave of lockdown imposed in Chinese territory and to the still-uncertain economic trend. In Italy, the Cutlite Penta recorded a very positive trend in sales with an extraordinary 62% growth in revenues. Also Cutlite do Brasil performed very well with a 10% growth in the nine months in local currency. The marking segment accelerated in the quarter and posted a 15% growth in revenue, while the laser sources sector remains stable. Sales in after-sales service increased by 18% in accordance with the increase in the installed base.
Looking at the revenue breakdown by area, we have grown in all the geographical areas, except in the rest of the world industrial sector, due to the China situation. In China, in the period, there was a 17% decrease in local currency, 9% in Europe. On the other hand, we have a very brilliant result in industrial, thanks to the very good performance of Cutlite Penta , mainly in Italy and in the rest of Europe. In the medical sector, we had a strongly positive trend in all areas, and without the production problems associated with the supply chain, growth in Italy would have largely reached double digit.
At the end, the current status of the demand, order books, and production capacity allow us to look forward to a positively positive end of the year, in line with the excellent result achieved so far in 2022. The company confirmed the guidance already issued with expected annual consolidated revenues higher than EUR 660 million and the net EBIT margin in line with the result of the first nine months of the year.
Now the presentation is over, and we are available to answer your kind questions.
I would like to add a comment here. I mean, we confirm the guidance released in September, and we are going to overcome the EUR 660 million annual revenue threshold, and expecting to maintain up to the end of the year, the record EBIT margin level registered so far in 2022. There is room for a quite wide beat of the minimum EUR 660 million revenue, especially if the Chinese market will display just a little bit more vitality than it did in the last months. While we are very confident in an excellent Q4 performance of the medical sector and of the other industrial businesses, meaning cutting outside of China, but also marking.
Also, since the leverage effect is seasonally pushing EBIT margins upwards in the fourth quarter, our profitability guidance can be considered prudent as well. Taking into account possible soft sales volume in China for the inability of acknowledging revenue of installed systems due to the lockdown limitation and also some inflationary impact on margins. I wanted to make also this comment on our guidance before we open the session to the Q&A. Thank you.
We now open the Q&A session. For your question, please book into Bianca Fersini Mastelloni chat, and you will be given the floor by order of arrival of your request. Andrea, we already have some question. The first one is from Giovanni Selvetti from Berenberg. Go on, Giovanni, please.
Ciao, Andrea. Ciao, Enrico. Hi. Thanks for taking my question. I have a few. The first question is on FX. If you could please give us the impact of the FX on top line growth, particularly in aesthetics in China. Just to have an idea of the trajectory of volumes, how much volumes would be down in Q3 if it wasn't for the positive impact of the renminbi. The second question is on prices, on the press release, and before you were mentioning that the first time in recent history, you're increasing prices, to offset the impact of the cost inflation. If you could please elaborate a bit more on this, what is the size of this increase, and if it's spread between the two divisions or if it's affecting just the medical division.
I don't know if I understand correctly before, but you were saying that the reduced margin in Q3 were also mainly due to some price applied in the industrial division, so meaning that you lower the prices in the industrial division to expand the customer base. The third question is on Accure. When should we expect the FDA clearance for this product, and how it will different from the recently launched AviClear from Cutera? The last one on my side is on the supply chain bottlenecks. I believe that Asclepion is suffering from quite a few quarters now, so I was wondering what are the specific components that Asclepion is using that are missing and that cannot provided by the other companies of the group. That's okay from my side.
Thank you for your question, Giovanni. Thank you for being with us for this call. The foreign exchange top line impact has been 3.7% global on the nine months and 4.2%, so slightly higher on the three months. The same impact on the renminbi part only has been roughly 9.3%, both on the nine months and in the quarter. Actually, it's 9.3% on the nine months and 9.5% on the three months.
I want to stress that finally there is even a higher swinging foreign exchange impact, which is the real, the Brazilian currency, which of course weighs less, but it's significant under a certain point of view, which I mean is around 14%, both for the quarter and for the nine months in terms of foreign exchange effect. For what concerns real, we have a pure advantage there since the Brazilian subsidiary purchases its goods in euros and sells them locally in real. Therefore, the reinforcement of the real implies for us an increase in margins. This doesn't hold true for the renminbi, where we are just converting in full the financials of our Chinese subsidiaries without having a real advantage in terms of trading.
For what concerns the U.S. dollars, we have overall on the group level an advantage on margins because, bottom line, the revenues we book in dollars are higher than the cost we purchase in dollars. Nevertheless, even though the revenue in U.S. dollars are growing quickly because of the good success of the sales to the U.S. subsidiaries also, purchases in U.S. dollars are growing, therefore we have an impact on margins which is below half of the impact on the top line. Pricing. The pricing. Yes, you understood what I said about the aggressive pricing in the industrial business. This is independent from inflation impact.
Simply that we have low margins because we applied low prices, not because we applied low prices as a strategic decision to expand our footprint in this period. Nevertheless, both in this area and in the medical area, we are applying price increases which for the future are going to be something around 10% for the medical business, probably a little bit less on the industrial laser system. What I said during my presentation is rather than applying list price increases, in certain circumstances, we simply avoid to apply discounts. Since in certain markets, a 10%, 15% discount on the list price is something quite common when closing a sale.
By limiting maximum discounts possible to, let's say a 5%, 3% threshold, we are in fact increasing average selling prices. Accure is supposed to receive the FDA clearance within the end of the year. This is the latest news we have from our subsidiary, which has been a news that has been postponed several times. This is the news we have today, and it would be of a surprise if we wouldn't receive the FDA clearance within the end of the year. Our product is completely different from the AviClear, which has been extremely successful. It has been a great dismay for us to have Cutera reach the FDA clearance before we did. This is what happened.
Unfortunately, as I said, our partners were not as fast as we could have expected in taking advantage of their first mover advantage, because we moved by far as the first in the space, and were beaten on time by Cutera in getting the FDA clearance. Our product is for sure a more complete product and more expected to be way more effective due to the technology and to the narrowness of the emission, which is exactly on the most effective wavelength, and is concentrating a very high density energy density. We expect our unit to be more effective.
The backflip of the units being more effective is the unit is also more expensive, and therefore it would be, it would cost more, and it will be to our partners and to the funders of the business to find the right approach in order to maximize sales also in presence of a higher cost of goods sold. Asclepion. You're right. Why Asclepion is the only company which is behind, which had problems which we could not solve in a short time? It's a good question. The answer stays also in the fact that we are talking of a medical product. We are talking of a very special medical product.
We are talking of a product which is by far the best in kind in the world, and therefore, in order to obtain this kind of performance, has very specific components and very specific subassemblies that are not easily replaced in a short time, especially now. Give you an example. They had a traditional manufacturing of a component which is part of one of the key control units of the laser made by a local manufacturer in Germany. We tried to convert production in Italy, but also the manufacturing facilities we found in Italy gave us delivery for the first batches after nine months.
We need you to know that we are fighting in a manufacturing world that is becoming extremely slow in reacting. We did all that we could in order to overcome these problems. The issue with our products is that they are made of hundreds of parts and each part could become critical if missing in a somehow chain effect where a $5 component might block the production of $100,000 or EUR 100,000 units. Good news here is that at least for the units for the components that slowed down production in the last months, problems have been solved.
Of course, once you've solved a problem on one unit, there's always the risk that there are other units which slow down the process. We are looking forward to a positive closing of Q4 of Asclepion and to their ability to recover what they had lost in the first nine months by improving materially manufacturing pace in the last two months, last three months. I hope I answered.
Yeah. No.
... possibly all your questions, Giovanni Selvetti.
I don't wanna take time from others. Maybe I have one more, but I'll just leave room for other people to ask.
Okay. Maybe you can ask after other people.
Yeah, yeah, at the end is fine for me. Thank you.
You're welcome.
Okay. Andrea, we have another question from Francois Robillard on Intermonte.
Hi, everyone. Good afternoon. Thank you for taking my question. First one is on your guidance for the year. As you mentioned yourself, it may look both the EUR 660 million base for your top line and the indication for the EBIT margin may leave some quite some good room to be beaten in the fourth quarter. What are the factors that pushed you not to upgrade those statements? Do you see some risks that things might go worse in the fourth quarter? That was my first question. Second question is on China.
Can you just give us an update on how the activities have been proceeding in the first weeks of the fourth quarter and your level of confidence on a potential recovery of the situation there or enhancement of the situation there? Another question was more on the cash flow side. If I understood correctly, another cash burn from working capital in the fourth quarter might not be to exclude. Would you consider at some point going into a net debt position to keep production lines running? And if so, to what extent?
The next question to this one, I guess, would be what are your expectations for working capital evolution potentially in the fourth quarter, and how much is it tied to your activity growth in China? Maybe a quick final one, which is another of your competitors has highlighted some pretty good performance for a woman's health product. I guess it's called EmpowerRF RF. Can you comment on that? Are you losing some market share? What's the impact for you of the success of this product from your competitor? Thank you very much.
Thank you, Francois. Guidance. We decided not to update the guidance because in case the update was gonna be marginal and because as I mentioned, there are some risk factors. We maintained the guidance and we had the comment that we are confident in beating it, though especially the Chinese situation called for some prudence for the reason I explained before. Specifically in China, things are not moving much faster than in the last month. We, though, should be able to close a large number of installations which are part of the inventory on one side and are not contributing to sales on the other side.
Since the revenue recognition in China calls for an explicit approval of the installation by the customers, and this is not always easy, especially in large installation and especially in areas where lockdowns do not allow salespeople to move freely. I mean, this is something which is still subjected to a certain degree of uncertainty. Concerning the cash position, I am sorry if what I said was somehow misleading. I said that we expect in the fourth quarter the ratio of net working capital to sales to decrease. Of course, we expect also the last 12 months sales volume to increase, but we expect also a reduction in absolute value of the net working capital. This is what we are expecting.
We don't foresee needing to turn the company into a debt position in order to support the growth, but we count on being able to revert the net working capital cycle starting from this Q4. About the RF products in the women's health, the issue is the target market. There are companies, if you are mentioning to if the product is InMode's product, they are not targeting to the same market we are. It's a gynecologic device that they are selling to gynecologists, but is a device which they are selling more or less to the whole market of derms and of practitioners.
It's a product which we are not able to fight against, because our devices do not have the clearances that would allow us to aggressively market against them. I believe themselves, they do not have such clearances, but nevertheless, they are able to market it in this moment, and they're able to grab a good success. As I mentioned several times, we are not happy with the situation of MonaLisa Touch, which is our gynecologic vaginal atrophy device, that was created by the 2017 FDA intervention on the matter. We are not able also due to, or mainly due to that specific intervention to market freely in the U.S. our device.
The only way to reinstate a strong marketing is to obtain a de novo or a new FDA clearance for our device, which involves a very high investment. We have been discussing a long time with our partner, Cynosure, the investment to be performed in order to get this clearance. It would be a multimillion project lasting at least four years. We have not found the agreement with Cynosure. In this moment, the project is, let's say, set aside.
We will need to identify, if possible, alternative partners, because it's not a project that El.En. can stand by itself, not because it doesn't have the financial ability, to stand by itself, but because El.En. feels that it needs to partner with an appropriate partner in order to guarantee success of the distribution once the clearance is obtained according to the specification that we are seeking. Bottom line, in this moment, we are experiencing in the MonaLisa Touch market segment, a good increase in sales, though at a volume which is about 1/3 of the maximum volumes we were having in 2016 and 2017.
In this moment, the project is being somehow followed, but still we do not have the green light to go ahead with the large products project that would unlock MonaLisa Touch sales in the U.S. in a time period of about 4-5 years. I hope I answered to your questions. Thank you very much.
Now, we have Paolo Cipriano from TP ICAP . Go on Paolo, please.
Good afternoon. I have a question regarding inflation. Could you just elaborate a bit more regarding cost inflation, how the trend is developing in the second half of the year, also in relation to which cost components?
Okay. We are seeing typically inflation increasing cost of any components. Basically, the orders we place call for price increases around 10% on all our materials. Of course, we have larger orders for critical materials that might have had a better trend due to volumes. We also have larger orders for materials which have an even higher inflation cost inflation pricing due to the inability of manufacturers to increase volumes. We are asking to increase volumes in order to accommodate our projected revenue increase. I could tell that on the average, we are getting roughly a 10% increase on all the purchases. There is a second inflation, which is the energy inflation.
This inflation is implicit in our purchasing costs that I just mentioned, and it's additional cost on our general expense, especially in the Italian companies, both the electric bill and where we have it, the gas bill for the gas that we use for heating, are increasing materially. The fact is that in this year, where we had such a rapid growth of most of the significant Italian facilities, I'm talking of Quanta System, El.En., CutlitePenta , which are growing at wide double-digit rates.
The increase in general expense has been material, but the leverage effect of the increased revenues has allowed us not to perceive, on our financial result, the impact of a cost increase, which in certain cases has been extremely material by triplicating, and even more, the cost of energy within the general expense of each company.
Okay. Thank you.
Now we have Andrea Bonfà from Banca Akros. Go on, Andrea, please.
Hello, and good afternoon to everybody. My question is, once again, if you can elaborate a little bit more on the component scarcity, Andrea, in the sense that, it was definitely clear, the example you mentioned before. I was wondering, this scarcity is, let's say, a derivative of the strong CapEx cycle across the world or where does it come from? Because, I mean, okay, we had the pandemic, and we know the fallout effects. Just to try and understand who are your competitors for these components, if it's possible. Then if you can quickly recap, let's say, the new product clearances, geographies that will contribute to next year growth, also China, if that is your opinion. Then, I'm still confused on the price hike.
Did I understood correctly that you are planning to increase prices by 10% starting from the Q4 or is it, Maybe I misunderstood it? Thank you.
Okay. Laura, excuse me that I'm starting from the last question, price increase. Yes, I said that we are increasing prices, not in all our companies, but in several businesses, and that the price increase rate is about 10%. I also said that sometimes we did not explicitly increase prices, but we implicitly increase average selling prices by reducing the allowed discounts. The sought amount, yes, is more or less 10%. This is what we are seeking. What we are already obtaining is under certain circumstances in 2022, at least in terms of new orders being booked for delivery in 2023. About the new products and geographies of clearances, China is something where we do not expect any particular product to be cleared.
Of course, you know, the clearances are impacting medical systems only. We don't need any clearance to sell industrial systems, which is our main market in China. For what concerns medical laser systems, we are seeking clearance for a new body sculpting device to be sold in the United States, which is the successor to the current unit called PHYSIQ, and that will provide a different emission more effective and with a more comprehensive market clearance in order for it to be very effectively marketed by our distribution networks.
We also expect a good revenue growth in the same market by Onda, which obtained a clearance under the name TiteK2, and that will be a distributor under the name Sculpt by one of our distribution partner called Sentient, which is distributing the product in the United States. We are expecting a very interesting result by them. We also expect a new CO2 device to be ready for sale in the United States early in 2023. This device is called Helix. The clearance is expected momentarily within the end of the year in order for sales to be started already from Q1 2023.
Of course, you need to know that much of the regulatory activity in the last months has been slowed down by the missing publication and approval of the common specification underlying the new MDR directive of the European Commission, concerning especially medical aesthetic devices. The regulation has been finally approved and is waiting for the final signature by the European Commission. In absence of this regulation, the clearance of new products is basically not possible because the rules under which the new products can be cleared are unknown. For this reason, we have several products in the pipeline for hair removal, for pigmented lesion treatments, for body shaping, for skin resurfacing, for tattoo removal.
As opposed to what has been taking place in the past, where obtaining the CE mark was the first step in distributing a product, in this particular phase, it is easier to get an FDA clearance. Since even the procedure is cumbersome and complex, the procedure has certain known rules, it is easier to get an FDA clearance than a CE mark. Nevertheless, we are very optimistic that once this regulation will be finally freed up, we will be able to pile up a significant number of units in the certification pipeline and we will be able to add new products to our sales force.
I need to remember that anyway, once you obtain the CE mark for selling in the CE countries, it then takes a while to get the product released for sales in the other countries worldwide. Therefore, this year and in next year, we are expecting clearance to follow for various countries and for various devices. By the way, we just obtained release in Korea for certain devices, and we are expecting after several years in which the Korean market has not been so strong for us, to be able to increase the sales, especially in the body space, in the body contouring devices. Getting to your component scarcity question and to the bottom part of your question, who are the competitors?
The main issues we had is in high voltage components for our power supplies. Our systems need high voltage power supplies and need very sophisticated components, which are able to handle high powers at high voltages. The segments which are handling high voltages and high powers are the electric vehicle segment and the solar panel management market. Those two markets are in very rapid expansion and you understand that if they are not specifically competing with us for specific components, they are competing with us on the same providers on high power components. I believe this is why we generally fell into shortages of components in this particular area.
This is the area in which also, Asclepion devices have been slowed down in their manufacturing pace. I mean, the subassemblers that weren't able to provide timely deliveries for certain components are large companies which anyway had been slowed down by the slowdown in manufacturing of those components, or at least by the slowdown of manufacturing of those components compared to the very rapid increase of demand that these components have experienced.
Okay. Thank you, Andrea. If I may, on the, let's say, new regulatory framework of Europe, I presume the industry as a whole is being slowed down. It's not an issue just for you, I mean.
Absolutely. It's a big issue for the industry as a whole. If you read the papers and if you read the news, on the industry news, the whole industry is in great turmoil because of this incredible delay in providing regulations.
Thank you.
I return to Giovanni Selvetti from Berenberg for another question. Please go on, Giovanni.
Hi. Well, yeah, I was just following up the situation on Asclepion. My question was if the sales missed by Asclepion were somehow compensated by the other selling products within the group?
Within the group as a volume, of course, yes, because we are up 20% or in the aesthetics business without the support of Asclepion. Specifically, the systems that were sold to Asclepion's own customers were based on Asclepion technology, and we are not able, generally speaking, to supplement with other products of the group because that particular technology, as I explained to you, is an excellence of Asclepion and Cynosure manufactures a product which is unique worldwide, but is unique also within the group. We do not have other companies which could provide a product for that application with the same technology.
Under certain circumstances, in certain cases, we were able to avoid the fleeing of certain customers by offering other products with different technologies manufactured by the group. We are talking of a great difference. Rather than providing to an end user a semiconductor hair removal laser, we would provide an Alexandrite hair removal laser , which, I mean, could be considered under certain profiles also more effective, but it's a completely different product. In certain cases, it is impossible to replace one system with the other one because the customers do want that specific technology.
By the way, I recall you that the ability to cover the needs of customers wanting different technologies and different approach has been one of the competitive advantage of the group, which with its multi R&D center, multi manufacturing site, and multi distribution network approach is able to capillarily cover all the needs with all the requested technology. I'm making an example which is easy, very easy to understand. Basically, the diode hair removal laser could be considered an Apple technology iPhone, an iPhone technology, while the alexandrite laser could be considered an Android device. The two completely different worlds, customers that want to stick to their own world, and we cover both with our group, Android and Apple, alexandrite and diode lasers.
We have the best penetration, but if somebody wants an Android, you cannot give him an Apple instead, and vice versa.
Okay, thank you. Maybe if I may again, the new investment in Samarate for Quanta are destined to increase the production of surgical laser or aesthetic lasers?
They are made to boost the production capacity of both segments. We have very fast growth expectation for both the segment. Of course, should the Accure production line kick in, aesthetics would be under the strongest strain. What we did in Samarate, basically, we are now refurbishing the second building. Who of you has been or in Samarate to our company visit has seen one building. We bought the building beside, and we are now refurbishing it to make it available for both office space and production to increase all the production line, which are both in surgical and in medical. Of course, one important thing to mention is that we are going to move the white rooms which are needed to manufacture the optical fibers.
The white rooms were in the old buildings and were becoming an obstacle to the expansion of certain production phases that we need to expand within the old building. We are moving and enlarging the white rooms to improve production capacity of optical fibers and also to release space in the older building that will be available for both medical and surgical and aesthetic production.
Andrea-
Thank you. Thank you very much, Andrea.
Sorry. We have another question from Emmanuel de Figueiredo from LBV. Go on, Emmanuel. Thanks.
Hello. I saw in your press release yesterday night the possibility of the IPO in China. My question is a little bit, what are the parameters we should expect or the timing? Are you waiting just for a recovery in the Chinese market? Are you waiting for recovery of multiples of Chinese stocks? Are you waiting for some sort of a regulatory approval? Anything you could say about what are the considerations for actually if you know making this happen?
Yes, it's a plan that is in place. We are doing whatever is needed in this moment to undergo this plan, including opening the shareholding base to new investors. Of course, all the points you mentioned hold true. The point is that we will need a certain dimension and a certain profitability of the company in order to be able to file for the demand. This will, of course, be dependent upon the financial performance of the company to determine when we will be able to file. When we will find it adequate, the adequate moment to file, the filing process is, in China, a very long process.
It is expected to take around 12 months in order to be handled by the CSRC. Any filing that we would make would be made on the assumption and on the belief that the Chinese economy would progressively recover over the following months. These are the constraints and the elements that we are taking into account in deciding whether to move and go ahead into this project.
Okay. Just a quick follow-up. These two, I think I read in the release, two Chinese private equity. Is that something which is likely to happen in the next 6 months, 12 months, or what is the timeline for that?
It happened already.
Oh, it happened already?
It happened already. I mean, it happened already. It's something we closed on in the month of October. This is something, they are already within our shareholder base.
Okay. You have not released the values, right? That has not yet been released, or has it?
We did.
Mm-hmm.
The valuation of the business unit headed by Penta Laser Zhejiang, which includes the three Chinese companies, Penta Laser Zhejiang in Wenzhou, Penta-Chutian Laser (Wuhan) Co., Ltd. in Wuhan, and Penta Laser (Shandong) Co., Ltd. in Linyi, and the Italian CutlitePenta , the total valuation, pre-money valuation was CNY 12 billion.
Okay. Thank you.
which is more or less equal to EUR 170 million. The valuation was roughly 12 times the adjusted EBITDA of 2021. Adjusted because it didn't take into consideration certain international accounting standard adjustments that were taken in 2021 into the Chinese financials stemming from the conversion of the company into a corporation which took place in February.
Thank you.
I just want to ask if we have more question from the floor. Some more question? Andrea, we have no more question in our list, and if there are no further question from the floor, let us conclude this conference. Thank you for attending, and we hope to have you all at the next occasion. Good afternoon to everybody.
Bye, Enrico.
Bye. Bye.
Bye. Thank you very much.
Bye-bye, everyone.
Bye. Thank you very much.
Bye.
Bye. Thank you. Ciao, grazie.
Bye.