Thank you for standing by, and welcome to the Coloplast Q1 2012/2013 Financial Statements Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation, followed by a question and answer session, at which time, if you wish to ask a question, you will need to press star followed by 1 on your telephone. I must advise you, this conference call is being recorded today, the thirteenth of January, two thousand and thirteen. I would now like to hand over the conference to your speaker today, Lars Rasmussen, CEO. Please go ahead, sir.
Afternoon, welcome to this Q1 2013 conference call. I am Lars Rasmussen, CEO of Coloplast. I am joined by CFO, Lene Skole, and our investor relations team. As usual, Lene and I will start with a short presentation, then we open up for questions. Please turn to slide number three. We are satisfied with our results, that our results came in line with our overall expectations. Our organic sales growth was 6%, we have reported a solid EBIT margin of 31% for the quarter. During the quarter, we returned DKK 844 million to our shareholders in dividends, corresponding to a payout ratio of 38%. We can see that strong free cash flow generation continued in Q1 2013. We also finalized our one to five stock splits and the cancellation of one million treasury shares.
We expect to initiate the second part of our buyback program in Q2 2012-2013. For 2012-2013, we continue to expect a revenue growth of 6%-7% organically, whereas we now expect to grow 5%-6% in Danish kroner. We continue to expect to deliver an EBIT margin between 31% and 32%, both in local currencies and in Danish kroner. Please turn to slide number four. Revenues were up by 6% organically, and 8% in Danish kroner, and amounted to almost DKK 2.9 billion. In Ostomy Care, organic growth was 5% in Q1. The growth was driven by good performance in U.K., U.S., and the Nordic region, whereas growth was negatively impacted, especially by Spain and Italy. Emerging markets also saw a weaker than usual quarter, driven by Russia and China.
Our Brava accessories product range has been launched very successfully. Uptake in the market is great. In Continence Care, organic growth was 7% in Q1. Here, U.K., U.S., and the Nordic region did very well, despite the fact that the U.S. catheter business was negatively impacted by distributor order patterns. Growth in sales of urine sheath and urine bags was not satisfactory. We had expected a higher pickup on the back of the weak performance last year. Growth in our bowel management franchise remains satisfactory. In Urology Care, organic growth was very satisfactory at 11% in Q1. Sales of penile implants in the U.S. market continue their strong growth. We saw challenging performance in women's health generally, as sales of female slings continued to decline. Restorelle, our synthetic mesh for pelvic floor repair, continued to deliver good growth rates.
Our recently launched single incision sling for female stress incontinence, Altis, has been well received, and performance has been good in Q1. Overall, we are satisfied with the launch, and expect Altis sales to step up gradually as the launch continue. Our European urology business, especially endourology, saw satisfactory performance in Q1, partly helped by lower sales in Q1 last year, due to a product recall. In Wound & Skin Care, sales were unchanged compared to the same period last year. Our wound care business continues to face very challenging market conditions in Europe. This quarter, we saw declining sales, especially in Germany, the UK, and Southern Europe, whereas we were very pleased to see that our biggest European market, France, did considerably better than the previous quarter.
We have, however, encountered a new challenge in the French market, as most Wound Care players, apart from Mölnlycke, have been denied to sell silver products. The ruling is not yet final, but should it end so, it will impact our French Wound Care business with around DKK 10 million negatively in 12-13. Our Skin Care business contributed with very satisfactory growth in Q1. Looking at our reported geographical segments, we continue to see stable organic growth in our European markets of 4% in Q1. The performance was driven by stable trends in our chronic care business, especially in UK, our Nordic region, and France, whereas the markets in Southern Europe remain challenged by the macroeconomic downturn in the region. We also continue to see declining sales in our European Wound Care business. Organic revenue growth in other developed market was 9% in the quarter.
Our US business continued to deliver in accordance with the plans, and especially our growth in Ostomy Care, has been off to a better than expected start in Q1, where several campaigns within accessories support the strong development. Coloplast won a GPO contract with Novation on ostomy appliances from 1st of January, 2013, running for three years. We see the win of Novation of the Novation GPO contract as important for the execution of our plans in the US Ostomy Care business. From 1st of April 2013, however, MedAssets has excluded Coloplast Ostomy Care from its offering. The loss of MedAssets on Ostomy Care is expected to have a limited negative impact on the performance of our US Ostomy Care business, as we expect that we can convert a significant number of our customers to either Novation or Amerinet.
Revenue in the emerging markets grew by 9% organically in Q1. The growth rates are not satisfactory. We did expect relatively low growth for the quarter, but we came in slightly below our expectations. The market is normalizing in Russia, coming down from very high growth rates in the first quarter of last year. In Brazil, performance improvements kick in slowly and will be back end loaded for the year. Finally, China saw distributors bringing down stock levels in the quarter. On a positive note, we saw good growth in Argentina and Greece. During the quarter, we pushed forward with our revised growth strategy and established a new region under emerging markets, EMEA, covering India, Middle East and North Africa. The region will be headquartered from Dubai to secure close links with the local markets. The region will be led by our former country manager in France.
We expect it will take two to three years before the region is fully up and running and providing a meaningful contribution to our corporate growth rates. I will now hand over to Lene. Please turn to slide number five.
Thank you, Lars. Gross profit amounted to DKK 1.9 billion. That's equal to a gross margin of 67%. This is an improvement of two percentage points compared with Q1 last year, and was driven by efficiency gains in our production economy and higher absolute sales. The gross margin in fixed currencies was also 67%. The SGA to sales ratio came in at 33% and was, as expected, down by around one percentage point compared to Q4 last year, which was impacted by the accumulated effect of a number of minor cost items. Compared to the same period last year, the ratio was in line when adjusting Q1 last year for non-recurring items of around DKK 70 million.
We have started to invest in our revised growth strategy and expect a major part of the investment schedule for this fiscal year to occur in the second half of the year. We have already disclosed investments in Brazil and the EMEA setup mentioned by Lars. Both of these will be followed by a range of initiatives over the coming years. The R&D to sales was in line with the full year 2011-2012 level at 3%. All in all, this results in a reported EBIT margin of 31%, compared with 26% same period last year. Excluding a number of non-recurring items in Q1 last year, the EBIT margin improved by two percentage points. Net of currency impact, the EBIT margin was also 31%. Net financial expenses increased by DKK 22 million compared to Q1 last year.
This was mainly due to an increase in losses from our hedging activities, and an increase in the fair value adjustment on cash-settled options. This was partly offset by a decline in net interest expenses. Our net profit for the period increased by 27% to DKK 617 million, corresponding to a diluted earnings per share of DKK 2.88, against DKK 2.27 last year, i.e., an increase of 27%. CapEx amounted to DKK 91 million, corresponding to a CapEx to sales ratio of 3%. The increased CapEx compared to last year, was due to higher investments in production equipment. The ratio for the same period last year was 2%.
Free cash flow was up 138% to DKK 385 million, compared to DKK 161 million last year, due to increased earnings and a decrease in net loss from realized foreign exchange hedging contracts. Return on invested capital after tax was 41%. That's up nine percentage points from last year, as we continue to increase earnings on a stable asset base. Please turn to slide number six. For 2012-2013, we continue to expect revenues to grow 6%-7% organically, and we now expect to grow 5%-6% in Danish kroner.
The change in the guidance in Danish kroner is a consequence of the fact that since the beginning of the fiscal year, the euro, and hence the Danish kroner, has appreciated against a number of key currencies, such as the British pound sterling, Japanese yen, and the US dollar. The growth guidance implies a continued stable growth in the European business, whereas we expect, especially the US market, to add to the growth as they continue to execute well on their strategy. Given the slow start in twelve-thirteen for our emerging markets business, we are now a little more cautious and expect it to grow at least in line with last year, but I have to stress that it's a volatile business. We are still firm in our belief that we can expect less than 1% net negative impact on prices in twelve-thirteen.
The pricing project we started up in 2011 continues to deliver value, but what is more important, is that especially the reforms in the U.S. and Italy came out with limited direct impact on our business.
Right now, we also expect that the French price cuts are delayed until July, thereby reducing the potential impact on our current fiscal year performance. It's still our view that our business longer term is subject to around 1% annual price erosion. For 2012-2013, we continue to expect an EBIT margin between 31% and 32%, both in local currencies and in Danish kroner. There are no changes to the underlying assumptions behind our EBIT margin guidance. We assume 6%-7% organic growth, and we expect to deliver gross margin improvements within the half to 1% range, as previously communicated. Our CapEx guidance for 2012-2013 is around DKK 400 million, and our effective tax rate is expected between 25% and 26%, consistent with last fiscal year.
Regarding use of cash, we returned DKK 844 million in dividends, corresponding to a payout ratio of 38%. We also expect to initiate the second part of our buyback program in Q2 2012-2013, with DKK 500 million available for repurchase of shares. With regards to extraordinary dividends, we continue to generate high cash flow, and depending on our liquidity situation, the mandate for extraordinary dividends in 2012-2013, provided at the AGM in December 12, will most likely be used. This concludes our presentation. Thank you very much. Operator, we are now ready to take questions.
Thank you. As a reminder, if you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. If you wish to cancel a request, just press the hash key. We have a question from Martin Wells. Please go ahead and state your company.
Hello, it's Martin Wells from UBS. Could I start by just getting some clarification on one or two of the things that impacted growth this quarter? If you could quantify the impact that the Russian tender impact last year had on Ostomy Care growth. In the U.S., you talked about slowing intimate and catheter sales growth. Is this simply a higher base, or is there anything to be concerned about? Maybe we could start with those.
Yeah. Actually, the way that we see it, if we look at Europe, we have a pretty stable growth in Europe and also a growth above the market. We have a strong growth in the U.S., a growth which over the last couple of years have picked up. Then we have a growth in the emerging markets, which is a bit slow. That is not something that we feel concerned about. The reason why we see a slower growth is that our first quarter last year was impacted by a very high sales in Russia, due to a tender we had at that point in time, there.
Growth rates are normalizing in Russia as we speak, and that's especially Ostomy we're talking about here. For the U.S., we, it's a timing issue as we see it. What is really important to us is that we are defending a base of lower technology catheters, and then we are building a, you know, actually with quite high growth rates, a new base of high-tech catheters in the U.S. and also higher price catheters. It's simply a timing on the quarters that we are talking about here. There's nothing here where we think that this is something which is systemic or in any way, something which we believe is going to repeat itself over the year.
it's really, what it is. It's just a quarter.
Okay, one more question before I go back to the queue. You talked about declining revenue in Wound Care again.
Yes.
I suppose the obvious question is pricing, volume, mix, all three. What's actually happening here? A bit more detail.
Yeah. It's Europe, which is pulling us down. I guess it's fair to say that most wound care businesses that operate in the market do not have a feast in Europe these days.
That's true.
We are unfortunately quite exposed to Europe and especially exposed to the southern part of Europe. That is what you see in our numbers. I would like to remind everybody that it's a bit self-inflicted, because over the last few years, we have done a lot to increase our profitability in this business area, and thereby, we have also cut, you know, in our business base and reduced the products that we do not make much money on. Having said that, we need our base, our sales base in the emerging markets to be significantly bigger to offset the negative development that we have in Europe.
This is predominantly volume driven then, from the sound of things?
Yes. Yes.
Okay.
well, it's to a certain extent volume driven, but there's also a price pressure in Southern Europe. No doubt about that.
Okay. That's great. Thank you.
We have a question from Klaus Madsen. Please go ahead and state your company.
Yes, hello. It's Klaus Madsen from Sydbank. My first question relates to the Continence Care category. You mentioned that you saw some weakness in Euro shares and Euro banks. Could you elaborate on this? Is this a volume decline, which you think is temporary, or are you seeing some share loss, or is there a price component there? On the Southern European exposure, could you give us the provisions in this quarter and what you think currently about the region and the risk, maybe with particular focus on Greece? You mentioned in a Reuters interview, I believe, that you are not considering selling the Wound & Skin Care business.
I guess that should imply that you will then acquire something as it seems unsustainable or unlikely that you can repair your scale issue organically. Is that a fair conclusion?
I, well, if you want the truth, always read the newspaper. It's, let me start with your last question first. The wound care business, to be more correct, what I said was, what I have said, I guess also to you, Klaus, is that we are convinced that there need to be a consolidation in the wound care business, because there are too many companies to drive a profitable business for everybody. You need a certain scale to have a profitable business. We think we have very interesting assets to take part in that consolidation. We would love to keep the business because it fits very, very well with our growth of business in emerging markets and with our technology.
We need to find the best way to create value with this asset, so therefore, we're not ruling out any options. That's, but that's probably a too elaborate an answer to find in the news. Then to come back to your first question with sheath and bags, it's primarily the bags that we are impacted on. That's also where we feel that we have that we probably have the products that are more generic than anything else. It's emerging markets and Italy, where we have primarily felt it. We have to make an effort to make sure that we come back on track with that. It's not so much the sheath. Regarding provisions.
We, we obviously, Klaus, continue to follow very, very carefully Southern Europe, as it is an area of concern for us and I think for many others. We have, however, in the quarter not seen any deterioration, and we have not made any, you know, extra provisions for its outstandings in that quarter.
Right. Just one follow-up on the downgrade, which I guess it is on the emerging markets region. I guess that should imply that you're also seeing a slow start to this quarter as you were in the middle of Q1 when you gave guidance for this fiscal year. Is that fair to say that the sort of soft growth spills over into what you've seen so far?
It will. First of all, I think it's fair to say that we have a guidance for the year, which is 6%-7% on the top line, and that one we are not at all talking about. We expect to be able to deliver an organic growth of 6%-7%. It might be that the composition of the business ends up being a little bit different than what we thought when we started out. You know, we don't have any hesitation in our plans with the emerging markets business. It's a fact that when you are investing yourself into emerging markets, it takes time.
Mm-hmm.
I mentioned during my part of the presentation, that we have now formed a new region in EMEA, which is opening up out of Dubai. When you are going into a new country, what you have to do is first you need to register yourself as a company. That's a prerequisite for registering the products. It just takes time. If you look at our investments into emerging markets today compared to 12 months ago, they are significantly bigger. Of course, they will also bring further growth into the company. So you know, we don't hesitate to reiterate that we expect higher growth in the future from emerging markets.
I also actually, if I may add, think it's a little bit harsh to call it a downgrade. That's not at all how we see it. We may be a little bit more cautious, and we're seeing it takes time, but I think that's the level we are talking at.
All right, great. Thank you.
We have a question from Steven Alexopoulos. Please go ahead, and listen your company.
Hi, thanks for taking the question. Just one on the US business. You switched your market share disclosure on that from 0%-10% to 10%-20% last quarter. Just wondering when exactly that crossover happened, and also where you see that going, especially now, kind of near term with this Novation and then MedAssets situation. Second, just on Wound Care, you mentioned the impact of the China distributor inventory reduction on growth in the quarter. Just wondering how big of an impact or how big that business is within China, and also how much on a relative basis that dragged down the rest of Wound Care? I guess just lastly, we saw a strong France in Wound Care and a weak Germany.
Historically, I think Germany was a market that was a bit stronger for you, and you had implemented some of the turnaround there a bit earlier. Just wondering why that regression there and why more strength in France, and is this just a kind of a phasing issue, or is there something that the strategy hasn't worked out as well as you thought it might have done? Thank you.
Whoa! That was a lot of questions in a very short time. For the U.S. business, what, you know, if you go two years back in the U.S., you would see that we are growing approximately 5%. Last year, we grew around 10% in the U.S. This year, what we say is that we grow more than 10%. We think that that is really what we are saying. When you're looking at ostomy devices, in particular, we talk about 10%-20%. It's for the ostomy devices and not for the U.S. market as a whole, that we are talking about the 10%-20%.
Please remember that when you look at the ostomy market for the U.S., we are subscale. It's not like all the other markets that we talk about. We actually have a lower market share from the outset, in the U.S. Ostomy Care.
I think when you look at the market share description, what we used to have, that we used to have the market share for the Americas, and what has now been changed to other developed markets. The definition of the region has changed, which is the reason for the change in market share. It's not that our market share has all of a sudden increased dramatically, even though, of course, we are taking market share.
Yeah. What was your question on China?
As you mentioned, the distributor inventory reduction in wound care, just understanding how big wound care is as a relative basis, on a relative basis in that market.
China is around, all in all, a couple of percentage points of our total sales. It's not a big base that we have out of China, but we have a lower growth this quarter than in previous quarters, and we expect that to pick up again. We can see that it's not in-market sales that is the problem. It is basically just some stock adjustments.
Okay, clear. Thanks. For, just for Germany versus France on the wound care front, Germany was stronger. Is that a situation where-.
Yeah.
It changed a lot or? Yeah.
Well, it's basically also the same, that we, there are a couple of orders that we are missing out on in Germany. We also have to remember that there is a very big scale difference of our businesses in France and in Germany. France is significantly bigger for us than Germany is. We it's not as if Germany is underwater forever. In this quarter, we felt the impact of a missing order.
Okay, good. Thanks.
Other question from Niels Granholm-Leth. Please go ahead, and I'll see your company.
Good afternoon, Niels Granholm-Leth from Carnegie. First question on the Ostomy Care division. You are mentioning that the Brava series of accessory made up a substantial part of the growth in the quarter. Could you inform us how much has the growth been in the Ostomy Care division, excluding the accessories? My second question would be on your working capital. You managed to improve your working capital again this quarter, despite the fact that the situation in Southern Europe, I guess, has not improved in terms of payments. Have you in this quarter, seen any, I would say, extraordinary payments from Southern European customers? Thank you.
Yeah. No, well, let's start with the Brava. It is a launch, Nils. It's, you know how it is with launches, it takes a little while for it to really give impact. I think that the comments that we have is more a comment that we have been surprised that something where we are newcomers, that is going better than our own forecasts in it. It is still a new launch, so it's not the bulk of the business. We are not going to go into or down the street where we are guiding on what are we coming out with, you know, inclusive and exclusive of new launches.
It's simply just off to a good start, and that's what we want to signal. When it comes to our provisions, it's, you know, we are really practicing the discipline of being good at collecting money.
Okay, you have actually received the payments from customers in Spain and Italy during this quarter?
We have not seen a deterioration of our outstandings, as you can see. That means that we have been very keen on collecting, and we have been able to do that without seeing an increase. I think the only part of the working capital that has basically worked against us has been that we owe people a little bit less than we did when we entered into the year. We are comfortable with the development and the working capital.
Okay. Just getting back to my first question on the Ostomy Care division. Is it fair to say that the wording that the accessories has made a substantial contribution to the overall growth that is perhaps a little bit of an overstatement, given the small size of the accessories relative to the?
It depends what you put into substantial. We just say, you know, I think that you should take it in the spirit that we are off to a very good start with Brava. We think we can make an inroad into a market where we have not really been a player in the past. That is basically what we are saying. That's, let me just elaborate a bit more on why we are maybe mentioning it without being or why it's part of it.
It's also down to the fact that we have talked a number of times about the fact that we are that we have built a direct-to-consumer business, and we are just happy to see that that new business channel which we have built is actually very good for us when we are launching a product like this. The other thing that we would like also to get out in the open with this is that when we are now launching ourselves into an area where we do have very little market shares from the outset, it also means that we can launch without cannibalizing our current business base. That's of course great.
Okay, thank you.
I have a question from Ed Ridley-Day. Please go ahead and your company.
Thank you. Yes, Ed Ridley-Day from Bank of America, Merrill Lynch. First of all, just while we're on the stocking, I'm not sure if you can quantify the impact of the destocking in the U.S. That would be helpful. Also in the wound mentioned in your comments on the wound market in France, could you give a little bit more color around the silver dressing legislation and why you feel that has come about? On the timing of that would also be helpful. I also had a question, thirdly, on FX. If you could give us a little bit of additional color about where you view the full year impact in terms of your hedging costs for the current financial year. Thank you.
The silver dressing in France, you know, the background for it is that the French authorities feel that they have no. Well, first of all, silver dressings are more expensive than normal dressings. The French authorities feel that the documentation in the markets that are proving that silver dressings are reducing the time to heal a wound is not strong enough to support the higher price that these products have. Therefore, they have said that they are going to change it, but they need to finish up, you know, the law or the paperwork regarding this change of reimbursement.
It will happen during our Q2, we estimate. That's also the basis for us saying it's approximately 10 million days that we've been impacted by. That's approximately half of the sales that we have on silver dressings for a full year. That's really how much we know about it. Then for the stock reductions, like, you know, I really can't give you any numbers.
We don't want to go into the fact of giving any numbers on it because this is our first quarter, and I think that you know the market well enough in the US to know that some of our bigger customers, they come out with very big orders, and they very often come out with very big orders at the end of either a month or a quarter. Therefore, it is something that can move it around, and you will see that every quarter that either it's a bit too positive or a bit too negative due to these swings. We don't want to sit and comment on that every quarter.
No, I understand, but you still feel comfortable with the end market numbers you're seeing?
We feel very comfortable with our progress in the U.S. As I mentioned before, two years back, 5% annual growth. Last year, 10% annual growth, and this year we're confident it's more than 10% annual growth. We think that's a very, very strong uptake in a market which, you know, is difficult to operate for the time being. We are very pleased with our competitiveness in the market.
Thank you. That's helpful.
With regards to the FX, Ed, as you can see, we reported a minus DKK 65 for the quarter, and we expect that that will, you know, we will report positive for the remaining part of the year. That with current exchange rate, it looks like a minus DKK 25 for the full year. Of course, you know that can change very easily with exchange rates changing.
No, of course. That's very helpful. Thank you.
We have a question from the line of Ingeborg Øie. Please go ahead and state your company.
Good afternoon, Ingeborg Øie from Jefferies. three questions, please. First one is on CapEx, where, of course, you had a very big spend during the years when you were moving manufacturing, and then we've had some years of very low spend. I'm wondering, in the longer term, how we should see that CapEx line developing, whether we should go more towards 4% of sales rather than the 3% that we've been at. Secondly, on P-line implants, given the contribution to the growth rate that it had and given that it's more cyclical nature than some of your other products, are you able to help us with how much this contributed towards that growth in the quarter, or some indication so we can have a sense of how much of that potentially has a cyclical element to it?
The final question is in Wound Care and the comments that you made, that the French authorities didn't think there was enough documentation. I think this is maybe a problem of the Wound Care market overall, that there are no, you know, large studies to actually compare technology versus other technology. Is this something that you're looking into engaging in, into studying in order to prove better the value of your products? Thank you.
The CapEx, I think, it's fair to say that you should look more for 4% than the 3%, and that's also what we're guiding for this year. Longer term, we think that's probably more in line with what we need, compared to what, you know, over the last years we have actually been more around 3%. Four percent, yes, we can confirm that. On the penile implants, are you know, I'm not sure what your question really is. Are you talking about how penile implants are impacting the group numbers or what's your question?
Yes. If you could give any color on how much that is of the strong growth rate?
Pretty small. Ingeborg, it's a relatively small area, and you also mentioned the cyclical nature. I mean, yes, we saw a downturn when the financial crisis hit. That's getting back to normal, but it's not something we expect to be sort of extremely cyclical, but we have seen a downturn that's getting back to normal. It is a small number, the penile implant, so I don't think it makes a whole lot of sense to look at that particular part.
That's not what is driving the overall growth of the company.
No.
That's for sure. For Wound Care, you're absolutely right. We, you know, going forward, we will need better and better documentation for the products that we bring to the market, because the Wound Care market is quite an expense for most governments. That's also what you see in France, where they ask for more documentation. In a sense, we think that the documentation that the silver products work is actually quite convincing. That's of course not our judgment call to say that it is, and we've also been turned down on it. Please note that the Wound Care dressings have not been ruled out in France.
It's just only one company that are able to have it in the market after this, and that is Urgo. In that sense, it's a very peculiar situation in France.
Thank you. Perfect.
We have a question from Veronika Dubajova. Please go ahead and state your company name.
Good afternoon. It's Veronika Dubajova here from Goldman Sachs. Thank you for taking my questions. I have three, and then hopefully just a quick clarification. First one's on Altis, and thank you, Lars, for giving us the commentary on the roll out. I was just wondering if you might be able to give us a sense for how big you think a market opportunity this could be for you, and I appreciate the language around gradual, but maybe, you know, what's the time frame in which you could get there? My second question is just a sort of housekeeping question, trying to understand how much pricing pressure you saw in the first quarter and whether you saw a meaningful change from the momentum that you've witnessed over the last 12-24 months.
My next question, this is, hopefully very quick, is, Line, I just wanted to confirm that, your guidance for financing costs or for the net financial line for the year is DKK -25 million. That's great. Thank you.
We have been uncompetitive in the market for slings over several years because we have not had a minimum invasive sling technology available. We are thrilled that we finally have it. We are thrilled that we have the first product in the market which have been approved or, yeah, well, approved by FDA after they came out with a safety warning. We have documented this product to the standards that you need to document a product by now. We have many hundreds implants now in place, we know that what we have works. How...
You know, for how long we will be in a situation where we are the only one having a product like that, how well we are able to to benefit from that growth-wise, remains to be seen. We have strengthened our sales pressure in the in our urology franchise over the last years. We feel that we're in a good position. You also have to remember that we come from a very low base. Therefore, for this to have meaningful impact on group level, it takes a lot.
We are in a very good position, we think, with the surgical business right now, on the implant side, because we have the sling that I just talked about, Altis, and we also have one of the lightest weight meshes in the market. Therefore, it is not a product issue for us. It's definitely a matter of being able to use this new situation. We believe me, we do the best that we can to get the best out of it. On the pricing pressure, we don't see a step up of pricing pressure. It's, you know, we have the guidance of approximately 1%, and if anything, we are below the 1% and not above the 1%.
With regards to the financial, Veronika, I can confirm it's the DKK -25, that with the current exchange rates we see for the full year, that consists of the DKK -65 we have already taken in Q1, a positive around DKK 40 for the remaining year, and that equals the DKK -25 for the full year at current exchange rates.
That is great. Thank you. If I may, just 1 follow-up. Lars, given the commentary that you made earlier today on Wound, on this conference call, not in some newspapers, is it fair to assume that your stance on whether that business stays or goes is maybe changing slightly? When I go back to the conversations that we've had 6 or 12 months ago, you were very adamant that this is an important door opener for you for emerging markets, and I'm just wondering if maybe, given some of the challenges that you're seeing in Europe, you might be reconsidering how you think about that.
I think that what Lene Skole and I consistently have said over the years is that our task is to create value. Any business that we are running needs to create value over time. It is a very tough market right now for Wound & Skin Care. We are definitely subscale with what we have. We are committed to create the most value we can with these assets. We know that there will be a consolidation, and we would love to take part in that consolidation.
We can't be specific whether that means that we, at the end, will be the, a consolidator or if we will end up not having this business, but it is a business that really has a close link to the group because of technology and also because of a fantastic fit, especially in emerging markets when it comes to call points. Having said that, we need to do the moves that creates the most value and that's why we keep it a bit open.
Understood. Thank you.
We have a question from Oliver Dörler . Please go ahead and your company.
Hi, this is Oliver from Commerzbank. Two questions. My first question is regarding your agreement with Novation. When do you think that it will really become effective in measurable, significant sales numbers for your business? My second question relates to the Urology Care business. You've achieved a very nice growth rate of 30%, but if you exclude the various factors that have impacted the Q1 last year negatively, in which range would be a clean organic growth rate for this business? Thank you.
Well, I think I should start with the fact that we have a business which is primarily a community business. We do need the hospitals because that is where we are meeting the patients first time, but most of our business and most of our sales is actually in community. As we speak, actually, we have a higher new patient discharge, a higher hospital share than community share in the U.S. We are still sort of filling the gap or closing the gap between the hospital market share we have and then the community market share we have.
In that sense, you know, we're not in desperate need of more hospital presence, actually, as we speak. Having said that, we are actually growing pretty nicely now in community. The fact that we are now into innovation is not making things worse for us. It's actually an upside going forward, and it's also talking or speaking to the benefit of our organization, that we're able to close a deal like this with Novation, because we've never been on Novation before. You just have to be mindful of the fact that just because we are now in or on contract with Novation doesn't mean that we automatically start selling. We have to visit each of the hospitals in which are part of this group purchase organization.
he staff there so that they know our products. We have to make sure that our products are on the shelves in each of the hospitals, and then we start selling. That's how it works. The good thing about Novation is that once this starts working, this is also what we consider to be high compliance group purchase organization. That also means that once you have done your introductory work and once you have done your training, you also start to get some business from it.
The most important thing for us have been what we've been doing over the last years, namely to repair the relationship that we have with the dealers, because it is, at the end of the day, the dealers who decide what kind of products that people are ending up with in community. That is really what is working for us, and that is why we are growing so much over the markets in the U.S. as we do. You know, this is good for us long term, but Novation will not give us much business this year. It's something that comes in long term. Okay. On the Urology side,
I think that we'll have to-
Yeah.
We had a recall in Q1, last year, in the DSU business. There are actually so many moving parts that it could be very, very difficult, I would say impossible, for us to say what would it have been had we not, and so on. You know, if I should venture a guess, it would be something like a clean somewhere around 7%-8% would be a guess. I must say it's a guess, and remember, there are a lot of moving parts in this, but that would be the best estimate.
Okay. Very helpful. Thank you.
We have a question from Christoph Gretler. Please go ahead and your company.
Yes. Hi, good afternoon. Christoph Gretler, Credit Suisse, most of my questions actually have been asked, not just answered, you know, so I have just one question, a follow-up question on GPOs and your strategy there. Maybe, you know, if you could elaborate, you know, what, you know, is actually the difference in term of contract conditions and also product, you know, that, you know, are being offered, you know, between, you know, MedAssets and Novation and now, and just in general, you know, what is a strategy? You know, is it basically, you know, to try to get as many of these, you know, GPOs on board, or will it always be, you know, a certain, you know, division?
I understand, you know, there are quite a few others there still, which you could make, you know, some inroads, you know. I was wondering whether that's, you know, the aim, you know, ultimately.
it will always be. Of course, we'd like to be on as many of the GPOs as possible. That's, I think that should be the starting conclusion on this. They are important, and as we grow in size in the US, that will be more and more important. If you look at the different technologies that we have on board then if you take Amerinet then actually, we are on Amerinet with all of our products, when you talk about skin and wound and Ostomy and Continence Care. For Novation, we are now on for Ostomy, but we were already there for Wound Care.
In that sense, you know, I guess that's probably the main conclusion for this. From MedAssets, we are in there for skin care, for wound care, and for Continence Care.
You're basically holding also negotiation with, you know, the other guys, like, you know, Premier...
Yes.
you know, HealthSouth also.
Actually, the way we are organized, we have an organization that is only working with this, and then this is actually sort of a multi-year task that they have where they need to be very well positioned, and they need to understand what it takes to be very well positioned every time a GPO contract come up for renewal. Therefore, it's not something that is just going on during the renewal. It's something that goes on way before the renewal of the contracts. I think that the team is showing that they are able to get on board.
Basically, for in the case of innovation, you know, did you push out somebody there, or did they just add you as an alternative source?
For the recent they were adding us as an alternative source.
Okay. Then maybe, you know, last question on just, you know, on your U.S. ostomy business. I mean, you mentioned that it was somewhat ahead of your expectation, which I think, you know, is very encouraging. Was this now essentially all driven by the accessory line, or, you know, is this basically a broad-based, you know, performance?
I think that the traction that we have in the U.S. is broad-based when it comes to Ostomy Care, but it is, of course, helped by the fact that we are launching the accessories, and maybe I should explain a little bit why. The fact is that when you are having a dealer, or if you are running a dealer, then they actually don't make much money on the Ostomy franchise. Once they add to the patient's accessories, if they're able to bring to the patient's accessories, they actually sell more on the current customer base, and therefore, they're very interested in that.
The cooperation that we have, we are bringing to them a complete program of ostomy accessories, and where we are also helping them to sample their customers, so that they can obtain more sales. That is actually a situation where we are helping them not only to make more money on the current Coloplast customers, but we actually help them make money on the total base of ostomy patients. Of course, that is highly appreciated by the dealers, and that also means that in turn, the dealers are more willing to give us other business. This is very helpful in that respect.
Okay, thank you very much. Have a good day.
We have a question from Scott Bardo. Please go ahead and state your company.
Hi, guys, Scott Bardo from Berenberg Bank. Thanks for taking my questions. The first question actually is on Europe. We put in, I think, something like a 4% growth, and that was against a pretty weak comparator for part of the year, where you were only at a couple of % growth, and intuitively, I would've thought that you would've done a little bit better than that, given the comp. You mentioned obviously southern European countries, but was there anything particularly of note that surprised you? Just wondered, you know, how that trend reverses over the course of the year. Second question was on your sort of product launch pipeline schedule.
If my understanding is correct, you've actually missed one of your sort of scheduled slots, which may well have been sort of understandable. Also we should be expecting a couple of launches coming very shortly in both Wound Care and Ostomy. I just wondered if you could confirm that for me. I have one other question, I'll let you answer those first, if that's all right.
Yeah, well, 4% growth in Europe, we are actually quite satisfied with that. You could say it's on a weak basis, but it's always... If you take our growth quarter by quarter and do this analysis going backwards, you will see that it's not always sort of a rule of nature, a law of nature, that every time we've had a weak quarter, then the comparing quarter will be a high quarter. If you have a weak quarter, then the following quarter will be a high quarter. You see all kinds of different movements in there. What is important to us is that we look at our new patient discharge numbers.
We look at the momentum we have, you know, in each of the markets, and what we can see is that we have a better momentum today in Europe than we had last year. Of course, having said that, we can feel the situation in Southern part of Europe. Even there, if you win market shares at a high pace, it's not really showing in your numbers because there is pressure on the Southern European markets, especially Italy and Spain. If we take Europe as a whole, we are actually quite satisfied with the strength that we have in Europe, and we are quite confident that Europe will deliver a good growth also this year.
Product launches, yes, we are launching, if at all possible, new products that we have here. We just launched the SpeediCath Compact Set, as you know, in the last fiscal year. This year, there will be some launches also for wound care. On ostomy, we have had the Brava launches. That's what we have had. We have not had any new products coming out there apart from that.
Okay, thanks very much. Also just interested to sort of explore a U.S. growth and strategy. Clearly, that's quite important for the group. MedAssets, I believe at the time that you initiated this contract, was something like 2011 for ostomy, and clearly one of your first wins in ostomy. And obviously, over that period, you know, I think you explained there was a lot of training and visiting hospitals and what have you. Clearly, that contract didn't get renewed. I wonder if there was any reason for that or lessons to be learned that you can take to other GPOs? If maybe you could just help us understand, or is that just the nature of the beast? You win some, you lose some. Thank you.
I think it is the nature. You win some, and you lose some. Of course, we are also digging into it to see what at all possible we can, we could do to not lose anything. It's, you know, these are purchase organizations, and if they can construct a better deal, then that's what they are doing. Here we didn't have a chance to stay on board, unfortunately. We of course, quite annoyed with that because it just came two weeks after we had an innovation win. That was not really what we love to see. There are other opportunities that we then have to pursue.
Got you. Just a very quick follow-up. I'm very intrigued by your comments that, so, you know, you, in a sense, you're actually losing share between the hospital discharge setting and the community setting. It appears to me that the most obvious way to approach that would be to strengthen in the community-
Yes.
By home care.
That's exactly what we're doing.
Do you discount that, you know, you won't ever go back to home care in the U.S.? I mean, is it Sterling, once bitten, twice shy, or is that something you can sort of invest in to strengthen in the future?
Well, we definitely have no plans of going into home care in the U.S.
Okay. Thanks very much indeed. Very helpful.
We have a question from Christopher Lyrhem. Please go ahead, sir.
That will have to be the last question, by the way.
Thank you for that. Christopher Lyrhem from Carnegie. Just on your comments about the potential extra dividends, is that something if it is decided, is that something that will automatically happen, in connection with the fourth quarter, or could that come any quarter before that? Thank you.
There is nothing that happens automatically here. We will need to look at how our liquidity situation sets, looks at any given point, and then it's up to the board, to decide, when.
Okay. It could come. It doesn't necessarily have to be in connection with the fourth quarter when you announce the normal dividend.
It doesn't have to necessarily come at any specific time, but it does have to have the board approval.
Sure. Okay. Thank you.
All right. Thank you very much for participating. Yeah, so I think that we come to the end with the questions, and thank you all for participating, and I guess that we're going to see a lot of you in the coming days and weeks, and we are definitely looking forward to that.
Yes. Thank you.
Thank you. Have a great day.
Thanks.
That does conclude our conference for today. Thank you for participating. You may all disconnect.