Good morning, ladies and gentlemen, and welcome to the Carl Zeiss Meditec AG Analyst Conference Call on sixth-month figures 2019 and 2020. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Mr. Sebastian Frericks, Head of Investor Relations.
Yeah. Good morning, ladies and gentlemen. Thanks for joining us today. Welcome to our half-year analyst conference call. I'm Sebastian Frericks, Director of Investor Relations, and with me, as usual, are our President and CEO, Dr. Ludwin Monz, and our CFO, Justus Wehmer. Let me now hand over to these gentlemen to introduce our financial statements with some prepared remarks, and afterwards, we are looking forward to your questions.
Yeah. Good morning, ladies and gentlemen. Welcome to our analyst conference. From my end, these are very unusual times given the COVID-19 crisis. I hope that you and your families are well and you are not impacted by the coronavirus pandemic so far. Yeah, on slide two, you can see our agenda of today's call. I will start with an overview of the results, and as usual, my colleague, Justus Wehmer, will go into more detail of the financials in the next section of the presentation. We will address the impact of the COVID-19 pandemic in our business in all sections of our presentation, obviously. However, in the highlight section, I will provide you some more insight in what we are doing to manage the situation. Yeah, and finally, I will talk about our outlook. Let's have a look at slide number three.
Carl Zeiss Meditec was able to grow again in the first half of our fiscal year compared to the same period of prior year. However, although we started with a very strong first quarter into the business year, our business was probably not unexpectedly impacted by the COVID-19 pandemic significantly in the second quarter. In late January and February, there was the lockdown in China, followed by European countries and parts of North America beginning in March. Although not included in the H1 results, I would like to note that the business slowdown even accelerated in April with a decline of 20%-30% for order entry and revenue compared to the same months in prior year. Back to the revenues of the second quarter of the business year. As a result of the slowdown, revenues ended up roughly on prior year level in Q2 standalone.
Revenues of the first half of the year reached EUR 715 million. Good contributions came from both SBUs in terms of regions. Both Americas and APAC contributed well. Year-to-date growth rates for the first half were 7.2%. At constant currency, the growth rate was 5.8%. Justus will discuss these results little bit more in detail in a minute. The EBIT margin decreased to 14.3% versus 16.5% in prior year. This was mainly caused by the lack of growth in Q2, despite of ongoing investments, for example, in research and development. However, I would like to note that the comparison base for our R&D cost in prior year was extraordinarily low, due to a one-time effect in last year, which we discussed a year ago in this call. Caused by the COVID-19 pandemic, the EBIT margin was negatively impacted by both the product mix and also the regional mix.
The decline of our business in China reduced our consumable business in Q2 in particular. Yeah. Our net income reached about €64 million, which corresponds to earnings per share of €0.71. Last year, it was EUR 0.65. EPS increased due to the absence of hedging losses that occurred in prior year. Yeah. Much for the overview. I will now hand over to my colleague, Justus, who will discuss the results in detail. Justus.
Thank you, Ludwin. Good morning. Warm welcome also from my side. I'm now going to give you a more detailed overview of our financials, starting with the performance of our strategic business unit, Ophthalmic Devices or OPT. Revenue came in for OPT with EUR 517.7 million compared to prior year. Reported growth was 5.5% or currency adjusted 4.2%. As already discussed, the COVID-19 pandemic really impacted our Chinese business since late January, early February, whereas most other world regions still developed relatively well until early March, but entered then a significant downturn when national lockdowns were implemented and non-essential surgeries were largely canceled. This is why the start into April has also been rather difficult, with new orders substantially down, as just mentioned by Ludwin. OPT EBIT margin decreased compared to last year's.
There was a negative mix effect as our strong consumables business declined in February and March due to the situation in China. There was also some negative operating leverage while growth was slowing, our R&D investments continued to grow as planned. Let's take a short look at microsurgery. Our strategic business unit, MCS, delivered overall positive performance with revenue of EUR 197 million, which is +EUR 20 million versus prior year. Also quite clearly, there was a slowdown late in the last quarter. The start into Q3, as measured by the month of April, has been rather tough, particularly for new order generation. Revenue increased by roughly 11.7%. Currency adjusted, this is still 10.1% in the half year reporting periods.
Up until March, there was still continued strong revenue growth in neuro ENT, supported by our robotic visualization systems, KINEVO, as well as a good trend for the new TIVATO 700. EBIT margin remained strong in the reporting period. At least we are entering what likely will be a weaker quarter from a very profitable position after six months. Let's now take a look at the regional trends. The revenue split across the three regions remains pretty well-balanced. In the Americas, we achieved EUR 206 million of revenue, which is an increase of 13.6%, or currency adjusted, 10.8% over last year. The U.S. business grew with 10%, currency adjusted, 7%. A positive development in the region, supported by the introduction of especially our diagnostics products, CLARUS 700 and CIRRUS 6000. We also saw positive contribution from our MCS business.
However, we had a weak start into April as most of the country has been affected by lockdowns, shelter in place orders, and cancellations of elective surgical procedures. EMEA experienced overall a slight decrease of -2.3%, to EUR 209 million of revenue, with mixed developments across key markets. Mixed developments, mainly also an expression of the various changes in the timing of the lockdowns. We have seen in markets like France, Italy, Spain, accentuated decreases, followed then also by Germany, and also U.K. I should note, however, that Europe has started April on a very weak note. It remains to be seen how fast surgical procedures and equipment business will return to more normal volumes as restrictions are slowly beginning to be lifted and offices and clinics open their doors again. Finally, APAC increased revenue by 10.3%, currency corrected 8.8%, to a total of EUR 301 million.
China was only on prior year's level due to the corona situation during Q2. However, China is now beginning to ramp up business again and has embarked on a more positive trajectory in April. We are still cautious as economic activity has not yet fully returned to pre-crisis levels, but our early indicators at least look quite positive. Similarly, South Korea is holding up well and has managed to grow rather consistently throughout the difficult months of February and March. These positive indicators notwithstanding, we see very weak activity out of other Asian markets such as Japan, India, and the Southeast Asian countries, including also Australia in April which is more in sync with the weak performance that we see in Europe and in the U.S. Let's have, on the next slide, a look at our P&L.
Slightly decreased gross margin with 55.6%, which particularly in Q2 suffered from a reduced volume of consumables business in China. Still relatively strong microsurgery performance, which was supportive. We expect gross margin to continue to be under pressure as the number of surgical procedures in Europe particularly remains down to very low levels in April, and it is not clear yet how quickly it can recover. OpEx in terms of absolute numbers increased mainly in R&D. We are pushing ahead with our strategic investments, for example, in digital solutions, as we have mentioned in the past, as well as in strategic topics such as, for example, the IanTECH technology that we acquired.
We are already seeing a slight reduction in sales and marketing expenses, which will become a bit larger still as we move forward due to concerted saving efforts. Also helped by the reduction in travel and the cancellation of some major trade shows and congresses in the remainder of this year. EBIT came in at EUR 103 million, slightly lower than previous year. EBIT margin achieved 14.3%, down from the 16.5% previous year. I'd still say that I would consider it a fairly healthy level. Near term outlook remains, however, extremely difficult due to the weak start into Q3. Likely we will face significant negative operating leverage, at least in the near term, due to lower revenues. A quick look at the adjusted EBIT margin, which reached 14.7%, which is 2.1 percentage points down versus prior year.
As you know, it's only rather small effects related to purchase price allocation in those periods. The increase is mainly due to the PPA of IanTECH. On the next slide, a quick shot at the cash flow statement. Operating cash flow is down to EUR 41 million from EUR 89 million previous year, which is due to increased working capital, mainly inventories, as we increase some safety stocks to secure deliveries in this rather difficult-to-predict environment. Mainly in China, we have taken some strategic inventory decisions in the light of the, at that point in time, very unclear lockdown situation in Germany, out of which we decided to ship goods as long as they could be shipped. Cash flow from investing activities.
You basically see here mainly the difference to previous year affected by the IanTECH acquisition, cash flow from financing activity is mainly influenced only by changes in receivables and payables in our treasury accounts. With that, I hand it back to Ludwin.
Yeah. Thank you, Justus. As you can imagine, the current situation, which is caused by the COVID-19 pandemic, is really demanding for the global organization of Carl Zeiss Meditec. On the next slide, which is slide number 12, I would like to discuss how we manage the current situation and how we prepare ourselves for the recovery of the markets. As the COVID-19 pandemic has been spreading around the globe, we have been focused on three priorities: the safety of our employees, business continuation with a focus on production and customer service, and thirdly, financial stability of the company, which means cost and cash flow management in particular. Yeah, in terms of safety, we follow the respective country-specific shutdown directives. This means, in particular, that we had to move a large majority of our employees into work from home in basically all countries.
We want to keep our facilities open for those functions that cannot work from home, such as production, obviously. In order to reduce infection risk, we systematically reduced the number of people in our buildings. We introduced hygiene and organizational measures and ensured the required social distancing. We use at least two separate teams or shifts within a function, and these teams must not mix up. The idea is to at least have one of the teams operational, even if the other one would be quarantined due to an infection. I'm glad to say that so far, the number of COVID-19 infections across all of the Zeiss Group has been fairly low. There have been no significant business disruptions anywhere. In order to continue customer service and generate at least some revenue, we have been committed to keeping production open at all times.
A particular focus has been on the supply chain as our suppliers are dealing with restrictions as well. Furthermore, we closely monitor financial stability of our suppliers in order to anticipate potential dropouts. In some cases, we have built up safety stock, as Justus was just saying, for both production materials and also finished goods. For now, there has not been any critical interruption of our supply chain, and we do not anticipate problem in this field. Yeah, the third priority is our financial stability. Although we have a significant liquidity in our balance sheet, we are doing what we can to avoid excessive cash burn in this really challenging environment. The two levers are working capital and cost management. In terms of cost management, we have decided to make use of flexibilization schemes such as Kurzarbeit, short-term work here in Germany.
The instrument allows us to temporarily reduce the payroll costs, and similar schemes are being used in other countries like France, Spain, Turkey, as well as the so-called furloughs in the U.S. OpEx can be reduced, particularly in the areas of sales and marketing, where some major congresses have been canceled and the surrounding professional education and advertising activities have largely gone digital. There's also a substantial amount of variability in our sales and marketing spend, as it includes certain distributor fees and variable bonuses for the sales reps. Lastly, we keep an eye on managing net working capital tightly while maintaining customer support at a high level. However, we try to avoid any undue escalation of DSOs and manage inventory actively. Now, the look forward on slide 13.
This slide is about the preparation of the end of the crisis, we focus on three areas which shall allow us to ramp up business as quickly and as effectively as possible. It's obviously important to realize that most ophthalmologists have reduced their medical services and only provide emergency treatments. In particular, surgical interventions such as cataract surgery or refractive surgery are not being performed in most clinics. The same is true for neurosurgery, which is limited to emergencies as well. Even during the shutdown, we engage closely with our customers. For example, in order to allow for the treatment of patients under very tight hygiene requirements, we provide consumables like covers, drapes, and shields for our diagnostic devices. Furthermore, we offer a wide range of digital services, such as an extensive range of webinars for medical professionals or digital consulting services.
The offerings have been quite successful and encouraging, as many ophthalmic surgeons, for example, simply have more time than usual. There are clearly some learnings here on how to reach out to customers digitally and on how to best provide digital customer support. Secondly, we prepare for our customers resuming their medical services. We have learned from China that procedure volumes in certain areas might come back quickly, but it needs a thorough preparation. Devices need preventive maintenance and consumables need to be on hand. We actively support our customers with these preparations. Thirdly, we closely monitor market changes. We expect digital solutions and telemedicine to play a larger role in the future. The healthcare systems already have or will open up for remote services.
With the deployment of our digital strategy ongoing for some time, we have been expanding our solutions for just that, and we believe to be right on track for a post-crisis market that will likely look somewhat different. For example, in diagnostics and chronic disease management. In this context, it remains to be a priority to drive our long-term R&D roadmap. We believe that the crisis is an opportunity to win relative to our competition on this front. Due to our financial stability, we can afford to push ahead with innovation where others likely will have to make bigger concessions. This brings me to the last agenda item of today's presentation, the outlook. I apologize, it's different than usual. As we said before, Q3 has started with a weak month of April, unfortunately, which is perhaps not surprising given the global COVID-19 situation.
We have highlighted some of the measures which we have taken in order to mitigate the impact of the crisis. Clearly, visibility, particularly for the next couple of months, is extremely limited. We have, therefore, already warned you on April 2nd that an outlook is not feasible in this environment for the time being. At the beginning of the fiscal year, we had really ambitious targets for both growth and profitability as we expected further growth across our portfolio and made deliberate investments, particularly in research and development. Revenue trend has turned negative in April due to the COVID-19 crisis, this business plan no longer looks achievable and realistic, unfortunately. We will update you as soon as we feel there are clear market trends and there's enough visibility which allows us for a new forecast.
With that being said, let me reiterate that we believe in the attractive market which we are in, and we also believe in our favorable strategic position, as we have discussed with you many times. We are in a strong shape financially, and we are sure that we will weather this storm. We are ready to return to our growth path once the crisis is over and markets recover. That's so much for our presentation. Thank you for your support in these turbulent times, and we are now looking forward to your questions, and I hand back to the moderator to explain the procedure.
Thank you. Ladies and gentlemen, if you would like to ask a question, please press nine followed by the star key on your telephone keypad. Please press nine and star right now. We have a few questions coming in. First is from Scott Bardo from Berenberg. Please go ahead.
Thanks very much for taking my questions. The first question, please, just relates to experience in China. I wonder if you could be a little bit more explicit and quantify for us for the month of April, where you are with refractive correction procedures and cataract procedures. Some sense of how much they are down or up relative to the prior year would be helpful. I wonder if you could also further comment here on any changes in operational activity at these centers amid the containment of the coronavirus. Have these centers changed the way that they deal with patients, making higher volumes more difficult? Perhaps some discussion there, please. I'd also, as a second question, like to understand your perspectives on the recovery for the equipment side of ophthalmic devices and microsurgery.
Do you believe this will be somewhat late cycle, waiting for patient volumes to normalize? Would you anticipate an uptick prior to that? Third point, please. Apologies if I missed it, but I just needed to understand, does the company feel confident in the medium-term outlook that you set at the beginning of this year? In which case, would it be a reasonable assumption to resume return to that trajectory, both from a top and bottom-line perspective, in the next fiscal year? I wonder if you could lay some comments there, please. Thank you.
Yeah. Thank you, Scott, for the questions. I simply start answering and then Justus can fill in. Yeah, first one on China. Well, what happened in China was that the treatments of patients in both refractive and cataract dropped to zero. That happened within a couple of days. Really all refractive clinics, for example, were closed. Step by step, they opened up. If I recall it correctly, now more than 90% actually of the clinics are open again. The procedure numbers also have somewhat recovered. They are not at the same level. They might be at 70%-80% in that range currently. To be honest, we were surprised how fast the recovery was. The clinics really did a great job to ramp up, and we did what we could to support them with the supply of consumables.
Also, as I mentioned, maintenance of devices is critical. A laser you cannot switch off and switch on again. It needs maintenance. That really worked well in this case. Cataracts, actually, I don't have numbers on China, but my suspicion would be that this is a little bit slower. Again, I don't have numbers and would need to investigate that. The second question was on the equipment side. In China, we see that actually a lot was just postponed, right? Because the deals which had been negotiated, they were just carried out a little bit later. In China, I believe there will not be a big dip also on the equipment side. We will probably just have lost certain time.
However, I would be careful to make the same assumption for the rest of the world, because if I look at Europe or also the U.S., situation is a little bit different. Here, it's about hospital budgets and I could imagine that certain funds were just reallocated and spent in other areas given the crisis. That's speculative, Scott, I really don't know yet. Of course, we hope that a lot of the deals are still up, and we do not have any indication otherwise yet. We need to find out. Regarding the procedures also in Europe and America, I would expect also rather fast recovery because most of these clinics really live from these procedures, so they have a big interest to ramp up. I believe that's going to be fine.
The midterm outlook is just difficult because we don't know how long the crisis will last. There's no reason that we could not return to the same level as in the past, but the only question is when will that happen? That I cannot answer. Nobody can say that. Our fundamental position and the fundamentals of the market are unchanged. Why shouldn't we return to the growth path where we had been for so long? I think that will happen. Again, I don't know by when.
Thank you very much. Just to understand then, the midterm outlook has not been retracted at this point. It still holds until you have heightened clarity.
Exactly. We can't tell whether that is going to happen as planned and when the growth path will be resumed. For the time being, there is no possibility to say that more clearly.
Understood. Thank you. I'll jump back in the queue.
Thank you. The next question comes from Falko Friedrichs from Deutsche Bank. Please go ahead.
Good morning. Thanks for taking my questions. I would have three, please. Firstly, you mentioned the 20%-30% order intake and sales decline in April, and I expected it to be worse. Can you also provide a rough split for the three different regions, potentially? Secondly, can you share a bit more color on the different growth dynamics you noticed in the countries in the EMEA region, both in Q2 and in April? As lockdowns are lifted currently in this region, are you already noticing a slight uptick in your order book here? Thirdly, do you think that the pandemic changes your timelines for the IOL approval in the U.S.?
Thank you, Mr. Friedrichs. Let me just make a note here. First, April 20%-30%. If you look at Europe, you would expect that it's worse, right? In Europe, probably it is worse. In fact, actually it is worse. Fortunately, we've got China. China already was coming out of the crisis. South Korea somehow managed to avoid the crisis. I don't know how that it is. South Korea is still fairly stable. The U.S. in April, and also in March, I believe they have not reached really the maximum impact of the crisis yet, right? There was still also quite some business in the U.S. The U.S. is a continent, right? While there is a huge impact of the pandemics in the East Coast and also West Coast in Southern California in particular.
The center of the country, the Midwest is to some extent less affected or not affected at all, and there is still some business. The U.S. also was going okay. Region-wise, I would say U.S. was so-so. Europe was really bad, and Asia, some key markets actually were quite strong. Asia, one more note, Japan actually is also a concern. We had really good business in Japan also in March. March is a key month in Japan. Going forward, Japan has weakened, and the crisis really now impacts Japan more than this was the case in Q2. Yeah. What I'm trying to say is the dynamics in the countries is really very different, and it's difficult to give a number. The total 20%-30% in April, this is the result, and that's the mix of the countries.
The second question was on the growth dynamics in EMEA. You asked whether we already see some positive signs after certain measures have been lifted. The clear answer is no. That's just too early. I believe, hopefully the first effects we will see here in Germany. Outside Germany, France, Spain, Italy, U.K., these countries are still in lockdown and there's basically no business whatsoever, and it will certainly take weeks until we see things improving. It's too early to answer your second question. Third question on the timeline in the U.S. I would say, no, we do not expect delays. The clinical trial is going well. The data collection is more or less complete. That's going well, and I would not expect an impact on the timeline. I hope that this stays, but from what I've heard, we are well on track.
Okay. Thank you. Just a small follow-up. Do you think that China can reach a flat level in the third quarter, year-over-year?
Well, I would not exclude that, yeah. I guess that's realistic, but again, it's speculative.
Yeah. Okay. Thank you.
Next question comes from Mr. Markus Gola from MainFirst Bank. Please go ahead.
Yes. Great. Thank you. My first question is related to your equipment business in the U.S. Indeed, it seems that there's kind of an unprecedented financial distress on hospitals due to the lack of elective procedures. You already mentioned that as a response, U.S. hospitals are expected to cut their CapEx. I wonder whether you could share some discussions you had with your U.S. clients around this, or whether you even saw cancellations for the microsurgery equipment business. My second question, also a bit related to this on the ophthalmologist side. Could you share your discussions with your clients, your U.S. clients here, how much appetite is to invest into a brand new VisuMax, given the skyrocketing unemployment rates in the country? As a response here, will you backpedal on your U.S. expansion, or how will you adapt to this situation? Thank you.
Yeah. Just a note. It's too early to tell, actually, for both of the questions. We have not had indications yet that hospitals would postpone investments or reallocate funds in the U.S. That's probably too early. We keep in very close contact to our clients, but I've not heard of indications that things are postponed or shifted. It's just that in some states and counties, there is simply no access to customers because hospitals are in emergency modes, and you know how it is better than I do. That's difficult. From the discussions I'm aware of, there's nothing into that direction which you are asking, which could hint at postponement or even a reallocation of funds. That's not the case. Same is true regarding VisuMax. For the time being, most refractive laser clinics in the U.S. were shut down.
What I have heard is that now some have reopened, and I would expect that it will be more and more going forward. Same is true, by the way, for cataracts, ASCs, ambulatory surgery centers. They also start reopening. Regarding our expansion strategy in the U.S., of course, no change. The market has not changed, right? The market has come to a standstill, more or less. I'm optimistic here that this will recover at some point in time. The only question is how long will it take? Of course, we will continue to expand.
Great. Good to hear. Thank you.
Next question we have is coming from Mr. Daniel Wendorff from Commerzbank. Your line is open.
Yes, good morning. Thanks for taking my questions. Two, if I may. Again, on the decline in revenue and order growth you observed for April, the 20%-30% you mentioned. Can you talk a bit more about what this meant for your different product lines, i.e. lenses, equipment, refractive surgery treatment packs, et cetera? That would be my first question. My second question would be, you mentioned the significant negative operating leverage you see. Would this mean that your margin will likely fall then in the single digits, maybe in Q3? Maybe the postponement of travel expenses or maybe your reduced operations will result also in lower on the cost line. Any more color you could provide here on the development of your cost lines versus pre-crisis levels in absolute terms, that would also be helpful with regard to that second question. Thank you very much.
Yeah. Thanks for the questions. I take the first one on the decline in April and the split by product lines. What we learned, and that's the same basically in all countries, that when hospitals stop treating patients, we immediately see the impact on the consumable or the implant side. That's not a surprise, but it is really true, and we saw that, right? Both IOLs and refractive treatment packs dropped sharply when hospitals stopped treating patients. That's simply the case. While equipment, it's a slower reaction, right? In equipment, definitely, I hope that things are just postponed.
With the procedures, hospitals really try to somehow treat more patients after the crisis when they have reopened, but they are clearly capacity limit, so they can only do that to a certain extent. What I'm trying to say is that decline came from all categories, but the implants and consumables reacted fastest. Yeah, that's basically it. Justus can.
Yeah. Daniel, here's Justus. Your question was on operating leverage and margin expectations for Q3 and potential lower R&D cost lines. First of all, we don't give a quarterly guidance here. Please understand that you were asking is our margin going to be single digit or whatever. It remains to be seen. What I clearly would say is that Q3, if you look at what we shared with you in our presentation, the outlook for Q3 is clearly that it's going to be a challenging one. On the other side, we have, as Ludwin explained, basically three programs in place. The cash protection, where we clearly have a focus on conserving our operating cash flow, keeping it positive, managing our inventories, especially. We also look, of course, on our spendings. We do have the, let's say, the appropriate measures taken when it comes to personnel spending.
We have mentioned that we have used for Germany here the instrument of Kurzarbeit. Besides the personnel expenses, we also obviously can cut back on discretionary expenses. This is clearly a EUR double-digit million package in total for the Q3 where we counteract towards what might be the negative impact on the top line. There's so much uncertainty that I really don't give you here any indication of what it then will ultimately mean for the margin. Clearly, Q3 is going to be a difficult quarter. I think, with the levers that we are taking or have put in place, we will manage robust through the next three months.
Thank you very much.
The next question comes from Mr. Patrick Wood from Bank of America. Please go ahead.
Perfect. Thank you. Two on my end, please. Just kind of curious within the cataract business and specifically on the IOLs, how should we be thinking midterm about the mix between standard and premium? Do you think the change to consumer finances changes that equation for some people, or is it just that people have already set their hearts on a premium lens and so they're unlikely to change?
That's the first question is, outlook for mix there. The second question, obviously you're having to manage your cash a fair bit at the moment, just like everybody is. More midterm, you're in a far stronger balance sheet position than some others. I guess on the question of M&A, there may be some assets that have become cheaper.
It'd be handy just to get a sense of what kind of things you're looking for on the technology side, just a refresher of the kinds of assets that interest you. That'd be great.
Thank you.
Yeah, on your first question, I would not expect that the customer preferences would change very much. One guess could be, well, if consumers have less money to spend, they just go for standard lenses. Honestly, I don't think so. Because cataract surgery you do once in your life, right? Maybe twice for the left and the right-hand eye and that's it, right? You think about this carefully, what lens to choose, and I just can't imagine that this will have a big impact here. I wouldn't expect that. For size, both standard and premium IOLs are important.
We have grown in the standard segment strongly over the last years, really strongly. Clearly the premium segment is also a very profitable one. Both segments are important for us going forward, but I wouldn't expect a big change of the market patterns. Yeah. Regarding the second question, M&A. I have not seen actually desperate targets being around which look for acquisition. Right now, the large players in our industry, they will easily survive this, no question. They are strong. It's really about the smaller companies, technology companies, as you said. Even there, right now they seem to be well-financed and somehow manage their way through. Regarding M&A, the same holds as always. We are not so much driven by the acquisition price, right? To me, the most important thing is the strategic fit, right?
We really look at what is it that we are acquiring. Will that help us going forward in implementing our strategy?
We look at technologies that complement basically what we have in-house that would expand our offering and strengthen our position. No strategy change there. Our strategy has always been, and again, also no change in this field. Our strategy has always been to build around our core strength, to build around the products that we already have, the segments, because we understand the application, we understand the customers, we have access to the customers. It just makes sense to use that and expand by acquiring around these competencies. We continue to scan markets, and should the crisis lead to availability of more targets, that's fine. If they are available for relatively lower valuations, that's even better. That's for us, not the main driver, to be honest.
Super. Thank you for taking my questions.
Thank you. The next question comes from Mr. Alexander Galitsa from H&A. Please go ahead.
Yes, hello. Thank you very much for taking my questions. Most of them were already addressed. I was wondering if you could provide any more color in terms of your consumables business. How do you see these inventories within your customers, at the moment? Is it more or less in line what you typically would have in a normal year, or any more color would be appreciated.
You are asking for inventories, is that right?
For inventories in terms of consumables, so IOLs and, I guess, treatment packs.
Yeah, well, there's nothing unusual there, right? It's just that, because the consumption has dropped, the level might be a little bit higher. Really nothing unusual. We've used the last weeks and months also to carefully refill stocks, but just to a level that is needed. For the time being, nothing unusual except that the demand has dropped, and because of that, in the one or the other area, there might be excess stock in our warehouses. It's really nothing unusual.
Okay, that's helpful. Thank you very much. Maybe if you could add any color on the IanTECH. I understand that it's probably a sensitive topic, whether you have been able to build on this technology and whether we can expect any commercial products anytime soon. Any color on that?
As always, we don't publish timelines on our R&D projects. The IanTECH acquisition has been made because the company owns IP and has plans of development of new technology. To some extent, it's public, what they are doing. It's really exciting technology. There's no news I could talk about for the time being. I should also say there's no change in what direction ever of the plans, right? Everything is going according to plan, we are quite optimistic on that end.
Awesome. Thank you very much.
Yes, we have one more question coming from Mr. Scott Bardo from Berenberg. Your line is open.
Hello, can you hear me?
Yes.
Perfect. Thank you. Thanks for taking the follow-ups. I wonder if you could help us understand a little bit the exposure of your equipment business via the channels, the ambulatory surgical centers or private sector and hospitals. Whether you could provide then some sense of both ophthalmic devices and microsurgery, the exposures of those businesses, please. Also on the equipment business, can you give us a flavor for what the typical book-to-bill is for these business areas? I guess the nature of this question is if you are seeing order declines currently, which you've explained, whether that's more of a revenue impact for your fourth quarter than your third quarter. Last question, please. I just wonder if you could comment a little bit about expectations surrounding prospective dividend.
You mentioned the use of some government subsidies in this crisis, which is clearly understandable, but does that impact your dividend distribution expectations for the prospective year? Thank you.
Yeah, maybe I'll start, and Justus, you can fill in. The equipment business, public versus private. I would expect that in the private hospitals, they stick to their plans and their budgets are not reallocated, which might happen in the public sector. Again, too early to tell. We do not have indications yet that this actually would happen. I can only guess here in this field, but there's nothing in particular. Regarding the dividend, Justus, you can take the second question. Regarding the dividend, I can only say that for the time being, there is no clear regulation regarding dividend if you use public monies. I believe we still have the options, but there's a political discussion going on in Germany, and we don't know how that will end up.
In the end, it will be a decision also of our supervisory board, what to propose to the shareholder assembly, and that decision has not been made. It's still open. Long term, our dividend policy. On the short term, we have to protect our company, and this is why we have to manage our costs and take all options we have to reduce the cost base. Yeah, I don't know yet regarding the dividend. Justus.
Yeah, not much to add, actually. As Ludwin said, in the end, it's our supervisory board who needs to make that call. On the book-to-bill ratios and your questions referring the sectors, maybe just a couple of things. First of all, I think what's really important to mention for everybody is factually, we have not seen any single order cancellation or anything of that nature. You can, on the other side, argue whether that in itself means all orders are healthy and will be taken as per their original schedule. Fair question, on the other side, as a clear factual indicator, none of our customers has approached us basically saying that he would walk away. That's the one thing. The second was on the impact, of course, again, Scott, that's tough to say.
We would clearly believe that, yes, some of the lower order entry will materialize also within Q3. With all our assumptions, hoping that then Q4 would actually see then some improvement on deliveries for our equipment, assuming that at some point, the book-to-bill ratio reverses again.
Okay. Thank you very much. Apologies if I didn't phrase the question correctly, but with respect to the exposure, the rough exposure percentages, is your equipment business roughly half hospital, half private sector? Have you any waiting sense for the various different categories? Maybe just very lastly, it's actually quite encouraging to see then some return in refractive correction procedures in Asia. I think you said maybe 70% or 80% volumes down on the prior year. I just wonder, do you have good data here that this is, in a sense, send out volume rather than stocking volume? Can you track that these procedures are being done? Is this just a sense of what you're selling out to your end channels in China? Thank you.
China, actually, we have good visibility know how many procedures are being performed, right? We really believe that right now it's the, as we said before, let's say 70, 80% or so of the procedures are back and being performed. Public versus private, 50/50 is probably a fair estimate. That's a big average. It really depends on the sector. In refractive, it's more private.
In cataract, I would say there is also, in some countries, a lot public, but if you go to the U.S., it's all private. It really depends. The average 50/50 is probably a good assumption if you want to model a little bit the market.
Thanks very much.
Mr. Frericks, there are no further questions in the queue.
Okay. Ladies and gentlemen, thank you very much. This was an unusual call about unusual subjects. I hope that next time we will return to normal a little bit more. I wish you all, personally and your families, all the best in these times. Thank you for your interest in Carl Zeiss Meditec, and talk to you after our third quarter. Thanks and bye-bye.