Good morning, ladies and gentlemen, and welcome to the Siemens Healthineers 20 NAC Third Quarter Conference Call. As a reminder, this conference is being recorded. Before we begin, I would like to draw your attention to the Safe Harbor statement on Page 2 of the Siemens Health and Ear's presentation. This conference may include forward looking statements. These statements are based on the company's current expectations and certain assumptions and are therefore subject to certain risks and uncertainties.
At this time, I would like to turn the call over to your host today, Mr. Florian Fosman, Head of Investor Relations. Please go ahead, sir.
Good afternoon, and welcome to our Q3 conference call. Our earnings release and Q3 presentation have been released at 7 o'clock this morning and available on our website. We have here today our CEO, Grant Montag and our CFO, Jochen Schmitz on the call to review our Q3 results. Bernd will start with the highlights of the quarter and Jochen will give more details on our financial performance. Afterwards, we will have time for Q and A with Brandon Jochen.
And with that, I would like to hand over to Brandt.
Yes. Thank you, Florian. Good morning, everybody. Thank you for joining and welcome to our Q3 earnings call. I'll jump right in.
Growth in this quarter has been strong with 5%. A very strong imaging business has been the main driver, which grew by 8% in this quarter. Also in Diagnostics, growth improved sequentially now to +1% in Q3. And also overall growth at Diagnostics has still been low. We are pleased with Finstrion sales growing at double digits.
This is very encouraging since it points towards a growing installed base and as a result growing reagent sales going forward. Another positive development has been the accelerating Adelica shipments. More than 300 analyzers this quarter, more than doubling the size of our Atelica installed base. With a total of 560 plus analyzers in the market, we are fully on track to achieve our fiscal year 2018 goal of 800 to 1000 analyzers shipped as well as our fiscal year 2020 target of 7,000 analyzers. In this quarter, we experienced again heavy foreign exchange headwinds, which left its marks on our profitability.
Our adjusted profit margin was minus 110 basis points below prior year, it's 16.0% this quarter, heavily impacted by adverse foreign exchange effect of 140 basis points. Profitability at our Diagnostics business has been lower. It has was held back by 2 special items this quarter. An initially dilutive large automation contract and peaking Atellica ramp up cost negatively impacted diagnostics performance this quarter. Jochen will come back to this later, but we don't expect these effects to repeat in Q4.
Foreign exchange had been in a higher tax rate affected our adjusted net income, which came in 7% lower than in the prior year quarter. Cash conversion is improving on segment level, but has been held back on a company level by a special pension funding in the U. S. And cash out of IPO costs. We confirm our guidance of 3% to 4% organic growth and an adjusted profit margin of 17% to 18%.
Now go into more details. First and foremost, this quarter we introduced 2 new major innovations that expand our lead in physician medicine. After launching our mid range ultrasound platform Juniper earlier this year in Vienna, We just had another major product launch within our ultrasound business. End of June, we introduced our new Accosun Sequoia, a completely new high end ultrasound platform for general imaging. Perhaps you remember the name Sequoia.
It has been the gold standard in radiology ultrasound around 20 years ago when we acquired Equitron. Our new Equitron Sequoia is a brand new system built up from the ground with unique features. It offers a deep abdominal transducer called the Dex language like top market index with unique depth of investigation and high resolution imaging from the near to far field in real time. This expands ultrasound scanning towards physician medicine by enabling high resolution imaging that adapts to patient's size and personal characteristics and therefore allows imaging with consistency and clarity. Turning becomes also faster because there is less need to adjust the focal point while scanning due to the high resolution from the near to the far field.
Another major introduction is our new digital PETCT, our new biograph vision now also available in the United States. It offers unseen resolution and performance in the field of digital PETCT. Its proprietary technology has extremely small crystal elements giving the highest resolution of large for PET CT standards. This enables the clinician to precisely detect smaller lesions than before to closely monitor the progress of treatment. At the same time, scanning is also quicker and with less radiation due to the system offering the industry's fastest time of sight performance.
Furthermore, the system comes with algorithms, which are feeding artificial intelligence into applications used for different collogies. Not on this slide, but also an important market introduction, our high sensitivity propylene I test, which is now also available in the U. S. For both Atellica as well as our legacy Penthouse. Now let's have a closer look at Atellica, where we are making good progress.
Shipments accelerated materially in Q3 with more than 300 analyzers shipped this quarter and we are well on track to achieve our target. Atellica proves to be highly competitive and we are winning deals against all major competitors. More than 35% of the analyzers shipped so far have been to new customers, which is significantly above the 20% that we have assumed in our business plan for our fiscal year 2020 target. Some of the competitive takeaways in the quarter include GSE in Germany, Herlef and Ghentroofe in Denmark as well as the University of Southern Nevada in the United States. As we see accelerating shipments, please be aware that depending on the configuration, it can take up to 3 to 4 months on the time of shipping until the reagent revenue kicks in.
It means that reagent revenues associated with Atelica will ramp up with a time lag to our shipment. At the same time, we are making good progress on expanding the menu and the market reach of Atelica. 7 additional essays have been approved in the United States, bringing the total menu now to 157 assays in this market. At the end of Q4, we expect to have 170 plus SAs approved in the U. S.
Our market registrations in Japan and China are also on track. Japan is scheduled for the Q4 and China next year as planned. And with that, I hand over to Jochen to go through the financials in more depth.
Yes. Thank you, Bernd, and also a very warm welcome from my side. Let me now give you some more color on our Q3 results. Order intake of around €3,500,000,000 has been strong, 6% comparable growth year over year. Vans Therapies has been growing very strongly, again in the double digits.
Imaging recorded mid to high single digit growth, while orders at diagnostics grew at the same rate as revenues. Revenue growth accelerated further in Q3 with 4.7 overall comparable growth after 3.6 in Q2. All regions contributed to growth with the U. S. Growing by 7, EMEA and Asia Pacific was 4% each.
China had a weaker quarter with minus 4% on very tough comps. But year to date, revenue growth has been strong with 9% and Q3 orders have been very strong with close to 20% growth. Hence, we do not see this as an issue, but more as quarterly fluctuation. The adjusted profit margin was 16%, is down 110 basis points year over year, driven by strong foreign exchange headwinds of 140 basis points and the lower profitability at Diagnostics. After the IPO, we had to change the way we account for the Siemens AG stock awards that have been already granted to our employees.
As part of Siemens, the valuation is locked in at date of grant. These are equity instruments. On a standalone basis, this has changed. Now the valuation changes go as cost items fully through our P and L and are spread out across our business segments and functional costs. They are now considered to be cash settled instruments.
Sorry, this was now a bit technical, but necessary at this topic of potential fluctuations will be with us until all Siemens AG stock awards are fully vested. This has been only partially compensated by a positive effect in our central items associated with a gain from the special funding of our U. S. Pension plan. The effect from share based payments, as explained beforehand, had a negative impact on our margin of approximately 80 basis points, whereas the pension related gain had a positive impact of approximately 60 basis points.
Combined, these two effects reduced our margin by 20 basis points. Adjusted net income came in at €334,000,000 which is 7% under prior year quarter on lower adjusted profit and a higher tax rate of 32%. Interest expenses net were significantly lower in Q3 with €34,000,000 compared to previous quarter due to the more favorable capital structure post IPO. Let's now move on one level deeper to our segments. As mentioned before, imaging has been the driver behind our very healthy top line development.
Revenue growth at imaging has been very strong with 8%, driven by molecular imaging, x-ray product and magnetic resonance. Regionally, we saw strong growth across the board, particularly in the U. S. Adjusted profit margin has been heavily impacted foreign exchange headwinds of more than 200 basis points. Taking out the negative impact from foreign exchange, the margin has improved by 140 basis points year over year.
Diagnostics grew in Q3 by 1% comparable, another slight sequential improvement compared to Q2. Although overall growth is still muted, double digit instrument growth both in Q3 as well as year to date points toward a growing installed base and subsequent improvement of reagent growth. Geographically, we saw modest revenue growth for Diagnostics in Asia Pacific and in EMEA and only flattish growth in America. Diagnostics profitability was low this quarter because of 2 effects, which we don't expect to continue going forward. Bernd has already mentioned the large automation contract in the U.
S. Although the deal overall is margin accretive when looking at the full lifespan of the contract, It is the way it is structured that it had initial negative profit in place. Also, at telecom transition costs peaked in this quarter. In Q3, we have been hit by a combination of strong Atelica shipments with limited reagent revenues. This increasing Italica reagent revenues, the transition impact will go down again already in Q4.
When adding the two effects together, they impacted Diagnostics profit negatively by around 150 plus basis points in this quarter. As already mentioned, we don't expect these additional effects to repeat in Q4. Therefore, expect a more normalization of margin. On a separate note, our 2 recent acquisitions in Diagnostics continue to perform well. Fast Track Diagnostics saw revenue growth in the high single digits and Epocal saw even strong double digit growth rate.
In advanced therapies, we experienced another lower growth quarter. This has been expected as the structure and timing of our orders booked pointed towards another softer quarter. Since Advanced Therapies is our smallest segment, it experiences the highest quarterly volatility. Adjusted profit margin was down 40 basis points year over year due to very high foreign exchange headwinds of more than 300 basis points. If you take out the negative impact from foreign exchange, the margin has improved by over 2 50 basis points year over year.
This shows clearly the operational good performance and positive mix in this quarter versus prior year. After looking at the top and bottom line performance, let's now look at the cash development this quarter. And then operational level, that means on a segment level before interest and taxes, cash conversion materially improved compared to Q2. Imaging with a cash conversion rate of 1.2, advanced therapies even higher with 1.6. Also diagnostics saw an improvement to 0.4 versus previous quarters.
It is important to understand that the cash conversion rate at Diagnostic is structurally lower because of additions to operating leases, capitalized R and D costs over a shorter period than the amortization period and investments into the 2 factories in Walpole, Massachusetts and Shanghai, China. In Q3, we had non operational cash out in our settle items from the U. S. Pension funding of €126,000,000 and from cash out of portions of the IPO cost of €41,000,000 In the cash flow statement, you see this impact in our assets and liabilities. If we exclude these non operational cash outs, free cash flow pretax for the group is €261,000,000 resulting in an operational cash conversion rate of €0.9 for the overall group.
Now we are coming to our last slide, our guidance for fiscal year 2018. As Soren has already pointed out, we reaffirm our guidance of 3% to 4% growth and adjusted profit margin of 17% to 18%. Below the line, we still expect a tax rate of 28% to 30% for the full fiscal year, probably closer to the lower end of the range as we saw positive tax rates in the first half of fiscal year 'eighteen. Interest expenses will likely be a bit higher in the range of €170,000,000 to €190,000,000 for the full year, partially on back of stronger U. S.
Dollar. Foreign exchange has been a heavy headwind so far this year. Also in Q4, we will continue to face considerable foreign exchange headwinds as last year's Q4 has been hedged on very favorable terms. Just to remind, it's 1.07. Current hedging of the U.
S. Dollar for Q4 is still above 1.20. With this, I would like to close and hand it over back to the operator for Q and A.
Okay. Thank you. We will start today's question and answer session. And we would like to ask you to limit yourself to 2 questions. Our first question today comes from Ian Douglas Pennant from UBS.
Please go ahead, sir.
Thanks for taking my question. Yes, it's Ian Douglas Pennant at UBS. So first, on your long term margin guidance that you have given, at what point do you need to revisit that if currency rates continue to move against you? And the second question is in the on the impact of the stock option revaluations. Was there any impact to these options in Q1 and Q2?
Or because you were under Siemens at that point, did it go straight to equity? And were any of the divisions impacted more or less than others? And the final subpart of that question is at what point do all of those options kind of expire and so this isn't an issue anymore? Thanks.
Yes, thanks for the question. I think midterm guidance and foreign exchange, so far, we have no intent to change our midterm guidance. I think if you look at the historical financials, and I think when we did the Capital Market Day, historical financials on imaging and advanced therapies were already within the margin ranges. Imaging was just at the lower end of the range and AT was even slightly above the upper end. And we made clear that this midterm guidance is also because of foreign exchange headwind.
Let's see how that goes over time. But we are not have no intentions to change it. With regard to stock award, the impacts in Q2 and Q2 Q1 and Q2 were much less, yes? They were also made we used the same accounting we had to use the same accounting method on a standalone basis. It is depending, in particular, on the share price and volatility development of the Siemens box, which influences the valuation of those stock awards.
And the impact on the different segments should be relatively similar. So if you use the 80 basis points, I think that was a good proxy for every segment. And the impact generally speaking, the impact or the base impact should go down year by year as those stock awards vested would be done within the next 3 years.
Okay. Can I just quickly just follow-up on that? Maybe I should follow-up with Florian afterwards because it seems like the decline in the Siemens stock price in calendar Q1 was roughly speaking the same as the increase in Q2. So I'm obviously misunderstanding something as to why the impact wouldn't be exactly the same but the other way around.
I mean, we can we should not go too much into option valuation here with regard to volatility played also a role of share.
I see. Okay. Appreciate it.
Thank you very much. By the way, Florian is currently whispering. I bet he said that, by the way, the logic also plays a role. How does the Siemens stock performs against a peer basket, which will also influence, let's say, the relative performance against the peer basket will also influence, let's say, the valuation. Thanks very much.
Welcome.
Thank you. Our next question comes from Romain Zana from Exane PNP Paribas. Please go ahead.
Yes. Good morning. Thanks for taking my questions. The first one will be on imaging. I was wondering to what extent you would attribute your great performance to the market acceleration as a whole or rather greater market share gains?
And in that case, maybe a softening competition, I'm alluding here to GE mainly because Philips also had a robust performance. How long do you still do you think it would be sustainable? And the second question still on imaging. I was wondering if you could give us a bit more granularity by modality. Have you experienced some acceleration in ultrasound, for example?
Or is it still led by, let's say, your main leading franchise in imaging? Thank you.
Yes. Thank you, Romain. On imaging, first of all, I don't think that we see a major change R and D when it comes to the market growth data. So I mean, our basic assumption for the midterm is that the imaging acceptance market grows by 3%. And for us, because of our leading installed base, our service business growth by 5%, and this is about 40% of the imaging side.
And these overall assumptions are also true currently. I don't see a reason to deviate from that. Our and I'm sure this has been another quarter of market share gains. And the assumption is right here that not everybody could have 1 year. And I mean, particularly strength to answer the second point, we have particular strength in MRI, x-ray and molecular imaging.
For ultrasound, it is a little bit too early to see the impact of the new product, which is really a spectacular add on. First shipments will happen in Q4 only. So this has not been a contributing factor already for the top line revenue. Okay.
Thank you. And if I may, just a follow-up one on ForEx and Diagnostics in particular. I was thinking that the bulk of the U. S. The bulk of the diagnostic instruments were produced in the U.
S. So can you just explain why you are experiencing such big ForEx headwind on margin at least this quarter?
On imaging? What's your question on imaging?
On diagnostics.
On diagnostics, actually, we don't have headwind from foreign exchange. We had slight tailwind from foreign exchange as in the other quarters, roughly 70 basis points.
Okay. I understand better now.
Thank you.
Thank you. Our next question comes from Veronika Dubajova from Goldman Sachs. Please go ahead.
Good morning, gentlemen, and thank you for taking my questions. I have 2, please. My first one is on the imaging business growth. And I'm wondering, Vern, how you're thinking about the momentum, not just for the Q4, but really into 2019? If I look, the order book has been strong.
Obviously, you're delivering some pretty impressive numbers, but the comps do get a little bit more difficult. So I'd love to get your thoughts on whether you think that this current mid single digit growth rate for imaging that you are kind of tracking to on a 12 month basis, is that sustainable beyond the Q4 of this year and potentially could it accelerate? So that's my first question. And my second question is on the Diagnostics margins. And I was curious, you happen to hear your comments about you expect it to return to a more normalized level in the Q4.
Is the first half of the year a good proxy for what normalized margins in diagnostics look like at this stage? Thank you.
Yes. Thank you, Veronika. When it comes to imaging, I mean, Q3 has, of course, very has been very strong, I mean, also after a very strong Q2 already. I mean, as you know, Q4 is for us always a very strong quarter. So don't expect the same growth rate on top of this extremely strong slice also we have in the last year.
So but we are very bullish when it comes to market and confident when it comes to this being another year with market share gains in imaging. And outlook for the next year, I mean, as careful as I should be here, I would expect imaging to be clearly in our within the growth we project in the midterm for the overall company of 4% to 6%. So the imaging segment is assume it's to be in that range also in the next year.
On Diagnostic margin, what does normalization means? I think if you look at the guidance we gave, we said 150 basis points from those special items. We do not need to be repeated in Q4. And then the share based payments that is due in the eighty basis points also applies to 100 percent also to diagnostics, yes? Not knowing what share based payments we'll do on the senior stock awards in Q4.
But I would say between 150 plus basis points better than Q3 should be a good proxy.
Okay. Thank you. And can I just follow-up, Brent, on the imaging growth? And I'm just curious, I look at your numbers, they look pretty strong. I look at the Phillips numbers, they look pretty strong.
G sequentially seem to have seen some improvement. And I know you said you don't think the markets accelerated. So where do you think these share gains are coming from if we see the large 3 players performing as strongly as they are? Who is the 1st player in the market?
Yes. I mean, I would I think if you look a little bit more closely, also when you look at the numbers of competition, yes, because I mean to some extent, when we report out imaging separately and a lot of and while in others it is a little bit it's part of whatever health systems or diagnostics and treatment and so on and so on. So when you look at core imaging, yes, I mean imaging in the sense of diagnostic imaging and ultrasound. And when you look closely, yes, then into the statements also of others, then I think it gives some light on that in this area we are very strong. And that it also makes sense when you add up, yes, so that who is winning and who is not winning, yes?
Okay. Okay, understood. Thank you very much.
Thank you. Our next question comes from Peter Reilly from Jefferies. Please go ahead. Okay. Mr.
Riley, your line is open. Please go ahead.
Hello. Can you hear me?
We can indeed.
Great. Sorry for that. I've got two questions, please. Firstly, are you fair to say that ultrasound has been a long running underperformer, but you've got some major new product launches out now. Does this get your product portfolio by and large where you want it?
And are these new products inherently higher gross margin, the ones they're replacing? And then secondly, and this may be quite difficult to answer, but the 35% plus share of orders coming from new customers in diagnostics in Intellica. Is there any way to characterize who these customers are? Are they large ones, small ones? Are you winning in any particular regions or against any competitors?
Just very interested in some more color on why you're winning such a high share from new customers compared to your expectations from 6, 12 months ago.
Okay. Peter, thank you. I mean, a comment on ultrasound. We have a clear strategy in ultrasound of focus, So we focus especially on 2 segments, which is general imaging and this ultrasound language for radiology and the cardiovascular, the cardiology space. With the launch and the introduction of the EcoSense Sequoia as a real system which is setting new standards in the high end and with Juniper in the low and the mid range, we are covering the GI space extremely well and much better than we have done in the past.
So this has been a long term investment in R and D. And these products definitely also have a better margin position, because on one hand, there has been a lot of emphasis on design to cost and on the other hand, I'm very confident that the special performance of these systems also allow us to give us pricing power, more pricing power than before. Then on the 30 5% in lab diagnostics, so I mean, I would without going into geography, I
think the
main the wins which please us the most is that we see that we are a very strong partner for those institutions, larger institutions. So these are often bigger settings like the Hermes Padini project, which we've talked about last in the next quarter already. It's really about larger labs. The governing principle is productivity and really building the lab of the future. And then they take a fresh look at who is the best partner for automating for reducing labor costs, taking out variations and so on and so on, then we are a very, very strong go to company for them.
So this is where most of these wins come from.
Maybe to add a bit more on this, I think we see now that we get strong feedback from the early adopters with regard to clinical performance as well as the hands on time to run the lab. I think that works extremely well. And as Bernd pointed out, as those customers are more sophisticated, more complex, yes, might also be one of the reasons why it takes a bit longer until we see results coming from the reagent revenue stream as the implementation takes a bit longer, just as to say a side note.
Okay. Thank you.
Thank you. Our next question comes from Gunnar Romer from Deutsche Bank. Please go ahead.
Gunnar Romer, Deutsche Bank. Thanks for taking my questions. The first one on imaging. Can you talk a little bit more about the growth composition in the quarter, I. E, how the 8 percent breaks down in equipment and services revenues?
And then also, if you can just repeat what you mentioned in your prepared remarks with regard to order intake, the mid- to high single digit growth in order intake, is that that relates to equipment orders in imaging, is that right? Then the second question would be again on Atellica. You're talking about higher transition costs. Can you give us a little bit more color what's going on here? Also, I think even if we're adding back the 150 basis points drag, the margin is down sequentially despite some additional tailwind from currency actually.
And I think when we entered the year, you were talking about gradual improvements, sequential margin improvements. What's going on here relative to your plans and expectations at the start of the year? Just a little bit more color around that would be helpful. Thank you.
Thanks for your question, Gunnar. On imaging, I think very speaking, the 8%, we had even a slightly higher equipment revenue than there is revenue number in there, yes. So very, very healthy on the equipment side. On the order number, the 6% here, the equipment orders were slightly higher than the equipment orders. Equipment orders was in the mid single digit arena.
On the Enercare transition costs, I think as we pointed out, first of all, this extraordinary contract, which put some burden on the margin in Q3. Those kind of contracts from their structural contract language do not appear too often. Therefore, it's a very, very special one, and we do not expect that next quarter. This was one reason the way the foreign exchange tailwind is not different than in the other quarters. It's in the same ballpark.
And on the Atellica implementation costs, I think what I mentioned briefly in my answer beforehand is that we see, in particular, installations at a more complex customer side than initially expected. And that means the meantime to result is longer than expected. And that means currently the proportion of instrument revenue versus reagent revenue is for sure it's leaning towards instrument, but it's leaning much heavier instrument than maybe initially anticipated.
That's helpful. Thank you. And just a quick follow-up, if I may. On the structural cost savings, you were targeting €50,000,000 in the second half. Can you let us know what was the number for the Q3, please?
Yes, we are the €50,000,000 is still holding up. We are still with €50,000,000 I think it's slightly bigger portion comes in Q4.
Okay. Thank you. Okay.
Thank you. Our next question comes from Daniel Wendorff from Commerzbank. Please go ahead.
Daniel Wendorff, Commerzbank. Thanks for taking my questions. 2 on Atellica, another question from Atellica. And please, if you look back the last three quarters, can you potentially give us a hint what the average number of analyzers placed for customers were? I mean, you gave us a few details here in Q2 and also in Q3.
But when you look back over the last three quarters and having in mind what you did in Q3, can you potentially give us a bit more color here? Has this changed? Has it not changed?
Sorry, can you repeat that question?
Yes, the average number of analyzers placed per customer, how this has developed over the last three quarters? And the second question on Atelico would be, can you give us a hint to the split of direct straight sales versus other financing models of the analyzers? And that would be good. And my last question would on hedging. Given what you said on Q4, can you potentially give us a hint of how the situation will look like for 2019?
Thank you.
Yes, I can do can you start with the first question?
Can you start with the second question? Also currently the ratio of let's say when it comes to the business model on the Atenica side is about 5050 between getting replacement and operating leases. And when it comes to the number of analyzers per customer, I don't have a number on the top of my mind, because this varies extremely I mean, as an extreme case, I mean, we talked about the 50 Atellica analyzers, which are part of one contract here in the Hammers Padilla. I mean, that's not in fault yet, yes. So this can vary a lot.
So I would suggest that you follow-up on that our IR team here for 2019 will follow-up with you to give you a little bit more detail on this. But I mean, as I said, maybe as an indication, yes, so that we are happy about many of large deals, which is a good thing, which on the and which is exactly relates to the strength of Atellica, which and I want to reiterate here also what Jochen said, which on the other hand, currently has a little bit of short term impact that it takes a little bit longer until placement or shipments turn into reagent revenue because of these complex settings and connecting Atellica analyzers to tracks and so on. And then for foreign exchange,
Johan? Turning to our hedging policy, we hedge at least 3 months in advance, 75% of the net currency position. So we have started hedging into Q1 on rates which are relatively close to rates, which are currently in place. So let's see how that pans out, difficult to say. So far, it looks that we should have some tailwind year over year, next year from foreign exchange as currency stays as it is.
Thank you.
We'll take our next question from Max Yates from Credit Suisse. Please go ahead.
Thank you. Just my first question is around Advanced Therapies organic growth. Obviously, you were growing sort of 1% this quarter. Is that a growth rate that you think reflects the market? Do you think you're undergrowing the market here?
And maybe if you could give a little bit of color around how you see that growth rate continuing in the next few quarters? Is it something you're aiming to step up? And what is constraining you from growing faster in that division?
So, yes, when Jochen already spoke about that this is the smallest segment and this is that's also why it's most, let's say, hit by quarterly fluctuations. I mean, when you look at maybe one data point is year to date after 9 months, I believe we are at 4%, let me just confirm. I hope we are at 4% growth, yes. And that's also a good number, yes, for roughly, yes, for what we expect for the full year. And we also are very happy with the order book yes, and in both in Q2 and Q3, these are very strong orders in Advanced Markets.
Yes, So from that point of view, we believe we are very comfortable with the business and when it comes to longer term outlook, I mean, we assume a 4% market growth in on equipment in this field and we definitely want to grow off market. So which again fits well to the 4% to 6% overall target for the company initially.
Okay. And maybe the second question would just be around the M and A pipeline. If you could talk a little bit around your pipeline, whether you're seeing any interesting opportunities out there and broadly how you're finding valuations in the market currently. So any comments around sort of intentions there or areas of interest? If you could just update us on that, that would be great.
Yes, I mean, we have specified here that I mean the areas of interest for us is in the same for the trial therapies. On the one hand, it is about expanding our presence in diagnostics, especially in the molecular space and the optical and Fast Track Diagnostics acquisitions speak for that. As good examples, yes, also with now strong track record and as a third area, the topic of the digital health. For us, the primary topic is really the strategic and not so much doing M
and A for the sake of
M and A. So from that point of view, of course, we have a careful eye on valuations. But most importantly, it is about the strategic fit and we have our eyes open, but again strategy must be and synergies must be is the main topic before us.
Is it fair to say that the M and A targets are probably more in the pipeline at least probably more geared towards bolt ons than larger deals? Or do you continue to sort of assess or have both larger and smaller?
Let's say, I mean, when we look at I mean, when we do M and A, it will not change the face of the company, meaning we have the 3 segments, we have 3 areas we focus on. When you look at it, it is by radical and we have strong horizontal capabilities here from 1 sales force to 1 digitalization strategy to 1 service organization. So if and when there is M and A, it will fit into that picture of the company independent of size. Perfect. Thank you very much.
Thank you. Our next question comes from Daniel Zviem from MainFirst. Please go ahead.
Yes, hello. Thank you very much for taking my question. The first one would be on the 35% new customer wins. Could you please explain whether this is Atellica unit shipments or monetary value? If it is unit shipments, is the monetary value observation the same?
That would be my first question. The second one, you seem to be on track to reach the 800 to 1000 target for this year. If you could please comment the competitiveness seem to be better. What could you say about your existing customers? How is the adoption going?
If you could provide some color on that front as well, that would be highly appreciated. Thank you very much.
Yes, thank you very much for the question. I think the 35% or bigger than 35% is definitely related to the unit numbers for the analyzer numbers, but I would not expect that to be too different from the value amounts. I don't have the numbers with me, but I would say it's relatively similar. I think with regard to the 8,000 units or anniversaries as a target, I think as you pointed out, we feel well on track for this. The retention rates on our installed base is in the ballpark of the 90% as expected.
And as we cannot ship in certain regions of the world, like China and Japan, there, obviously, we have no Atelica applications yet. On the other hand, we see strong, I would say, strong inroads, in particular in Europe, as you can see from the numbers we gave you. And Asia is obviously lower because of China and Japan. And we see, in particular, also in our own in store base, picking up demand on the telecoms and the Americas.
Maybe one add on question on Japan. I think in the previous presentations, you had indicated H2, now it is Q4. Could that explain why we do not have a material acceleration in the Q3 when it comes to monthly shipments compared to the last data point you gave for the last month in the last quarter?
I would say on Japan, it was always to be seen in the second half, as you mentioned. Now it's Q4. Japan is not a super important market for us. The Chinese market is a much more important market with regard to its healthcare shipment. So I would not I cannot confirm to the statement that this would be a reason for any, I would say, deviations in shipments that this moves into Q4 is in Q4.
All right. Thank you very much. Thank you very much.
The last question please. Last question.
Thank you. Our last question comes from David Avington from JPMorgan.
Good morning guys. Thanks for taking the questions. Apologies if it's some repeating. I actually dropped
off the call for a
couple of minutes. But firstly, just on tariffs, I just wondered if you had managed to get your heads around potential impacts and any plans you might be putting in place to potentially mitigate any impacts. And then just to follow-up on interest, as we look into the '19, obviously, you've upped your interest expense guidance for this year. Should we be thinking about that having a bigger impact as a full year impact for next year as well? Thank you.
I start let me start with the interest topic. I think the interest topic is we are seeing slightly higher net interest expenses than originally guided. This is it's partially on the back of the stronger U. S. Dollar, as U.
S. Dollar. Most of our debt is denominated in U. S. Dollar.
I think the original guidance we gave on a running basis is like the price for the full year in the new capital structure, it was in the ballpark of €120,000,000 interest rate expenses net. I would expect that this will be we will be in this ballpark of 120 to 140. Let me start on tariffs, yes? I think if you look at our value add structure, in a lot of cases, we have value add coming out of EuropeUS or China. And so we have the ability also to redirect supply from China via Europe to the U.
S. And so we do not see a significant impact on the tariffs topic in this fiscal year. We expect to see after the redirection of the supply chain, an impact of the lower mid single digit arena for next fiscal year. They will stay as they are today.
Okay. Thanks so much, guys.
So with that, I would like to close the call today. Thank you for everybody participating. And as always, the II II team and myself will be available for further questions. So thank you, everybody.
Thank you. That will conclude today's conference call. Thank you website address is www.corporation.seamenshealthineers.com/investorrelations.