Welcome to Getinge AB Q3 report 2022. Throughout the call, all participants will be on listen only mode, and afterwards, there will be a question and answer session. If you wish to ask a question, please press zero one on your telephone keypad. Today, I'm pleased to present CEO Mattias Perjos and CFO Lars Sandström. Please begin your meeting.
Thank you very much, and thanks everyone for joining today's conference. We can move straight away to page number 2, please. Looking at the key takeaways for the quarter, when it comes to performance, Q3 was very much about handling external challenges such as staffing constraints in the hospitals, COVID restrictions in China, and continued supply chain constraints, which by itself had a negative impact on sales of at least SEK 400 million in the quarter. I think the organization have taken on these challenges in a good way, just as we did during the pandemic, which enabled us to keep the decline in net sales at 2.6% organically in the quarter. Order intake was down by 5% organically in the quarter.
It's worth mentioning that the comps were exceptionally hard to match due to a strong 21.8% organic growth last year. It's also worth mentioning that the positive trend continues in product categories that were negatively impacted throughout the pandemic despite the headwind from supply and staff shortages in hospitals. As a result though of the overall uncertainty linked to external factors, we are lowering our outlook for organic sales growth, which is now expected to decrease by 3%-6% for the full year 2022 versus the strong 2021 we had. As one could expect as well, 3%-6% lower sales volumes will have a negative impact on the margin as well.
From a purely logical perspective, we could expect roughly 3% point lower EBITDA margin for 2022 versus 2021 based on the new growth outlook. That would take us to around 16%. If we move to earnings, a higher level of productivity and also currency effects helped keep margin up in the quarter, coming in stronger sequentially. We also made further progress in productivity improvements in our manufacturing, and this will be even more evident once volumes start to increase again. All in all, this took us to a free cash flow above SEK 1 billion in the quarter, so we remain in a very strong and solid financial position. We can move over to page number 3, please.
If we look at the quarter from an activities and events standpoint, I think one key highlight for us is we entered into a supply partnership with Medtronic, which recently received a CE marking for the Radiant covered stent. It's the first covered stent for chimney endovascular aneurysm repair. This is a real positive for us. We also had a case study at the SRH Klinikum Karlsbad-Langensteinbach in Germany. This revealed that the installation of Getinge sterile reprocessing solutions has achieved time and cost savings, as well as improved safety for patients and employees. One example here is that the reprocessing batch time for complex spinal surgery instruments decreased by 40%, and at the same time, also reducing the consumption of water significantly.
This is something that we see more and more demand from customers putting more emphasis on sustainability going forward. When it comes to sustainability improvements within our own scope, so to speak, our successful efforts to reduce energy consumption in the operations continued. We have, for example, one of our production facilities in France succeeded in reducing its electricity consumption by 44% over a three-year period. This is really a good achievement in these times. We're also moving fast into renewable energy as old contracts roll off. Taking us to 67% renewable energy of total energy consumption year to date, and this can be compared to 57% by end of June this year. Some good progress on that front as well.
We also had some changes in management. I'm very happy to welcome Joanna Engelke, our new Executive Vice President for Quality, Compliance, Regulatory, and Medical Affairs, and also a member of the Getinge executive team. She took up this position on October sixth this year. Joanna joins us most recently from the Head of New Ventures and Chief Quality Officer at Juul Labs. Prior to Juul, she held leading positions as Senior Vice President, Global Quality and Regulatory Affairs at Boston Scientific Corporation, among others. Joanna brings a very broad and solid experience from areas of regulatory healthcare in international and truly global companies. We also continue to improve our training offering for customers related to quality and how to use our products in the best possible way.
Year to date, had 35,198 online sessions for customers this year. We can then move over to page 4, please. If we then look at the top line a bit more in detail, order intake decreased by 5% and the net sales decreased by 2.6% organically. As I said a moment ago, net sales and order intake didn't match our own expectations or the high growth that we had last year overall.
From a regional perspective, orders are down in Americas despite yet another strong quarter by Surgical Workflows, accomplishing close to 18% growth in the quarter. However, Acute Care Therapies and Life Science are down order-wise in Americas, and this is due to exceptional growth previous year linked to both life-saving devices and also bioreactor bags for vaccine production. On net sales, Americas had support from more than 20% growth in Surgical Workflows. The positive development in EMEA is due to strong growth in Acute Care Therapies and Life Science on orders, while the growth in net sales is mostly attributable to Surgical Workflows. The year-on-year order comps in Asia Pacific were especially tough this quarter due to us having an exceptionally strong order intake in all business areas, with a 46.7% growth in the previous year.
China specifically had a negative impact on sales in the quarter in many parts due to the continued challenges linked to the pandemic and the lockdowns that we continue to see. We can move over to page number 5, please. Based on what I've been presenting so far regarding external factors impacting the short-term demand and also the supply chain challenges that we continue to face, we've decided to lower the expectations, and our new outlook is for net sales to decrease by 3%-6% organically in 2022. Let's then move over to page number 6, please. From an order intake perspective, we have tough comps in all of our business areas for this quarter. In Acute Care Therapies, we are down 5.9% organically.
Decline in Acute Care Therapies is mainly due to challenging comparative figures in ventilators and ECMO therapy products last year due to exceptionally strong growth during the pandemic. If we then look at the order intake of cardiovascular surgery products and more elective surgery-related products, there we saw an increase year-over-year, so that is a positive. We're still not back to pre-pandemic levels in these categories. Life Science was down 5.3% organically. The order intake in Life Science fell mainly as a result of lower demand for products related to the production of COVID-19 vaccines. However, the order intake when it comes to sterilizers increased, and this contributed to the positive performance in EMEA. Surgical Workflows 3.4% decline organically.
This decline is primarily due to the lower activity in China that I mentioned a moment ago. The root cause here is continued challenges related to the COVID-19 restrictions. EMEA also had also decreased due to challenging comparative figures last year. The positive trend in order growth in Americas is continuing for Surgical Workflows. We can now move over to page 7, please. If we look at sales and the bridge between this quarter and the same quarter last year, Acute Care Therapies had a 6.8% organic decline. This decline in sales was primarily attributable to lower sales and volumes of ventilators. Net sales increased in products for elective cardiovascular procedures, but net sales have not yet reached the pre-pandemic levels.
Sales of capital goods in Acute Care Therapies were negatively affected by the continuing shortage of components and also the lower demand for ventilators. If we look at Life Science, here we were down 5.7% organically, and net sales, the decline of net sales in Life Science was mainly a result of challenging comps in products related to COVID-19 vaccines and also major deliveries of washer-disinfectors in the same quarter last year. One positive overall, and especially Life Science, I think, is the service business that is continuing to grow. Sales of capital goods in Life Science were negatively impacted by the continuing shortage of components that we've seen for quite some time now.
Recurring revenue in Life Science declined as a lower result of lower volumes of consumables related to the production of COVID-19 vaccines, so mostly bioreactor bags here. Surgical Workflows, here we saw a 7.2% organic growth of sales. This is a considerable increase, and it's mostly related to good net sales in Operating Room products in the quarter. We also saw an improvement in Infection Control, while Digital Health Solutions was weaker in the third quarter. Net sales for Surgical Workflows in Asia Pacific fell as a result of lower activity in China, and this is again related to continuing restrictions while the positive trend in America continues for us.
Net sales increased substantially in capital goods as a result of the strong order bookings, mainly in Operating Room products and despite the shortage of components that we see from a rather broad perspective still. Currency had a SEK 774 million or a 12.3% positive impact on net sales for the group in the quarter. Organic net sales of capital goods came down in the quarter due to tough comps, but also due to supply chain constraints. The relatively lower decline in consumables you can see is related to tough comparative figures in bioreactor bags. We can move over to page 8, please.
If you look at the gross profit evolution, adjusted gross profit increased by SEK 258 million to SEK 3,592 million in the quarter, where a positive FX effect accounted for SEK 450 million. For the group as a whole, the adjusted gross margin decreased by 1.1% points as an effect of lower volumes, negative mix effects and increased cost linked to inflation and supply chain challenges. The effects were partly offset by price increases, productivity enhancing measures, and also support from currency. For Acute Care Therapies, the adjusted gross margin was marginally higher despite the lower sales volume, the shortage of components and also greater pressure on costs. This was offset by currency effect, a favorable mix within the business area and the continuing productivity activities.
For Life Science, the gross margin decreased by 4.2% points, mainly as a result of unfavorable product mix within the BA and greater pressure on costs as a result of supply chain challenges. Favorable currency effects contributed positively to the margins in Life Science. When it comes to Surgical Workflows, the adjusted gross margin fell by 1.3% Points, and this is primarily as a result of greater pressure on costs, which could be partly offset by continuing productivity improvements and the favorable currency effect. To some extent, pricing as well. With that summary, I think we can move over to page 10, and I hand over to you, Lars.
Thank you, Mattias. Adjusted EBITDA increased by SEK 10 million compared to the same period last year, while the margin decreased to 16.9%, mainly due to lower adjusted gross profit margin, which ties back to the lower volume, unfavorable mix effects, and supply chain related costs and challenges overall. Adjusted for currency, GP had a 1.9% point impact on the EBITDA margin due to the reasons just mentioned. Organically, OpEx was largely unchanged despite higher R&D costs and a general increase in pressure on costs. This was mainly offset by lower variable employee related costs and positive realized currency effect. However, on the margin, currency adjusted OpEx had a -1% point impact due to reduced operational leverage. Adjusted for currency, D&A didn't have any impact on the margin in the quarter.
Currency had a positive impact of 1.4% points on the margin. All in all, this resulted in an adjusted EBITDA of SEK 1.17 billion and a margin decrease of 1.5% points. Over to page eleven, please. Free cash flow was about SEK 1 billion for the quarter. The change in working capital is explained by a combination of seasonality with a build-up for the Q4 with higher deliveries coming, and also increased inventory levels linked to component shortages, and as the current product mix in itself brings long lead times. Working capital days continue to be well below 100. We are now at some 92.6 days, down 36.5 days from the peak in Q2 2018.
We also see a continued strong operating return on invested capital, where we are at 15.9 on a rolling 12-month basis and well above the cost of capital. As you can see, we are now closing in on the positive trend, long-term trend on return on invested capital. Let's move to page 12. The change in net debt year-on-year was positively impacted by the cash flow taking us to SEK 3.2 billion. If we adjust for pension liabilities, we are at SEK 0.7 billion. This brings us to leverage of 0.5x EBITDA. If we adjust for pension liabilities, the leverage is at 0.1x EBITDA. Cash amounted to approximately SEK 4.8 billion by the end of the quarter. By that, let's move to page 14. Back to you, Mattias.
All right. Thank you, Lars. Just a summary of the few key takeaways that we have from the third quarter. We've seen continued external challenges, both in terms of the staffing situation in hospitals and also demanding comps, of course, when it comes to just the relative performance to Q3 last year. We also continue to see external challenges related to supply chain. That's a challenge that we expect will continue. When you combine these two headwinds, we have a new outlook for 2022, where we expect now our net sales to decrease by 3%-6% organically. I'm happy with the strong margins that we've seen in the quarter.
It shows good resilience in the business, and it shows the result of a lot of hard work over several years when it comes to continued productivity improvements and of course, also helped by sort of currency effect. Another evidence I think of this underlying strength is that our free cash flow above SEK 1 billion is really a change compared to the first half of this year. That's also positive and we remain in a very strong financial position. Finally, our customers' biggest challenge right now is to continue ramping up elective surgery. This is made more difficult due to the staff shortages, the cost pressure that they're experiencing and also the disruptions in supply chain. We're continuing to do everything that we can to be a strong and supporting partner in this important task. With that, we open up for the Q&A part of this call.
Thank you. If you wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two. Our first question comes from Erik Cassel from ABG. Please go ahead. Your line is now open.
Hi, good morning, Mattias and Lars. Just first off for some clarification. I mean, does the lack of comments on the adjusted EBITDA margin expectations imply that you see, you know, an unchanged guidance, you know, despite the relatively large cut in growth rates?
I'll hand that over to you, Lars. I only heard part of the question.
Yeah. No, I think what we are saying is that with lower revenues, that will have an impact, of course, on the results for the full year as well. That is what we are trying to say.
Could you potentially quantify that impact?
What we said is when you do the math, this impact would bring us down towards 16%. I think previously we have said that we would expect a 1%-2% decline compared to last year. That would add another 1%-2% depending on where you are.
Okay. Thank you very much. Could you perhaps help us bridge the guidance cut a bit more and, you know, explain where have you changed assumptions for the business areas in a bit more detail?
I think we can share a bit on the higher level perspective. The change assumptions from half year is related to both the challenges that we see with our customers when trying to work around the staffing shortages in the business. We don't see the real strength or the improvement that we need for the remainder of the year and going into 2023. That headwind is a bit more challenging.
The other big part is the supply chain whack-a-mole that has continued for some time now. We've resolved most of the challenges that we saw in the beginning of the year, but there's new ones popping up. We had the expectations at mid-year that we were going to be able to resolve those and leave this year mostly without the remaining shortages and challenges. We don't see that this year. Well, I don't think it will get any better from this level, actually. We will have to live with this for the remainder of 2022 and a bit into 2023.
Okay. Thank you very much. I'll leave myself to one more, a short one. I mean, how should we now think about the 2025 guidance? Do you see any need of revisiting those targets and thinking specifically on the margin targets?
No, I think it's too early to address that. I think our assumption is that we can see that there's a very strong underlying need for our product still in line with what we said when we talked about the long-term target. It's now hampered by these external factors when it comes to staffing challenges and to component supplies. We expect that we will be able to resolve this during 2023, and we should see much better momentum from there. There's no change at this point to the longer term outlook.
Okay. Thank you very much.
Thank you. The next question comes from Kristofer Liljeberg from Carnegie. Please go ahead. Your line is now open.
Yeah, thank you very much. Good morning. Two questions. The first one is, what assumptions you have done in this new guidance when it comes to the flu season here in the fourth quarter? My second question relates to ACT. Even though margin is down year-over-year, we see quite good improvement quarter-over-quarter. If you could explain that. Thank you.
Yeah. When it comes to the flu season assumption, nothing has really changed. We still expect a normal flu season. That's what's needed to hit the current guidance. It's a bit too early to say. We can see now signs of a stronger flu season in the US, for example. It's too early to speculate about the impact on our business, so that's something we'll have to wait. Our assumption is there will be a kind of normal impact flu season for the fourth quarter. When it comes to the-
Sorry.
Yeah.
Can I follow up on that before taking the ACT margin? If you take the range 3%-6%, what's the difference in your assumption between -3% and -6%? Is this related to flu season or is it more related to supply issues and the staffing shortage, for example?
It's more related to the challenges with supply chain and staffing shortages than the flu season.
Thank you.
Good. On the ACT margin, I think there has been a good job when it comes to productivity. That's one thing. There is a currency impact here as well that one should be aware of. Those I think are the main factors. Also pricing, I would probably mention when it comes to gross margin resilience. We've continued to do diligent work when it comes to rolling out price increases. Even if the net between cost increases and price improvement is still negative for us, we see a gradual improvement and we expect it to turn positive next year.
Thank you.
Thank you. The next question comes from Victor Forssell from Nordea. Please go ahead. Your line is now open.
Thank you and good morning. I'll follow up on the gross margin bridge here or the margin bridge overall into the fourth quarter. I think this quarter showed more resilience, and now it's turning the opposite way again in terms of year-over-year declines according to your new guidance. If you could give some more context here in understanding the dynamics of why it reverses again here in Q4 compared to Q3, the delta then.
Yeah. I think as you know, Q4 is our biggest quarter, always. We had quite a strong Q4 last year. Then, of course, the product mix as such, with increasing sales of SW. That is impacting. Then, of course, the higher weight of SW and Life Science in the quarter compared to, let's say, the previous quarters. That is impacting here going into compared to last year. I think those are, let's say, the main areas. Then you have the underlying cost inflation coming, which we are working with on the pricing side to offset partially, but we cannot offset. There will be a margin impact, let's say, from the net of pricing and the cost inflation.
Curious, when looking at your gross margin bridge here on your slides, of course, there's pressure from cost absorption, inflation, et cetera. How do you see this play out into the first half of next year? Do you expect already to be, you know, flat margins in first half compared to this year? Should we expect this pressure to continue just to get a sense of the phasing of the margins next year, please?
We don't give guidance on margins for next year, but I think we all know what's happening with inflation. It's continuing. We are also continuing working with our pricing. That is no change in that trend going forward, I think. That will be something that we know it, that's why we work with it to offset as much as we possibly can. To be prepared for the uncertainties that we see going forward. I think it's visible to everybody, who follows raw materials, for example, that in many parts this has peaked. We should see a little bit of less pressure on component pricing in next year. I also think when it comes to logistics, for example, it has not only peaked, it has started to decline significantly. That's one, I think, helpful tailwind for next year.
Just finally on your order intake, since it's on a group level, still quite muted, and your expectations on how this will translate into sales next year, it seems reasonable at this stage at least to believe that 4%-6% growth can be challenging, especially with a weaker first half. Any sort of discussions here of the phasing of sales as well that you can bring?
No, I think we'll have to come back on this when we've closed out this year. No, no real color on that at this point.
Okay. Thanks a lot.
Thank you. The next question comes from Oliver Reinberg from Kepler Cheuvreux. Please go ahead. Line is now open.
Thanks very much for taking my question. The first question is also on the order intake. I mean, I acknowledge the cash comp in Q3, but if I look at the average order growth for the last three years, this amounted to 2.8%. I was also trying to get a feeling, how confident are you that this is improving short term? Can you just confirm that you still expect the kind of shortfall of growth in 2022 to be compensated for in the period 2023-2025 as part of your midterm guidance? That would be question number one. Question number two, on elective volumes, there were some kind of positive remarks from J&J actually yesterday. We talked about increasing procedure volumes later in Q3 and also in the rest of the world.
Is that something you're seeing here as well? The last question, just on China. I mean, China is probably not a kind of huge exposure for you against high single-digit potential sales. Can you just talk about the kind of level of restrictions? Does it get worse? Any change in distribution patterns? Generally the kind of outlook for your Chinese business going forward. Thank you.
Yeah. All right. If we start with order intake, there's nothing in the order intake that we see that makes us change the longer term guidance right now. As you mentioned, we have a challenging comp. The underlying order, when it comes to the different categories that suffered during the pandemic, we do see an improvement there that we expect to continue. It's not that we're very bullish about the outlook in the short term here, but as soon as there is available staff and so on, we do see improvements in elective surgery volumes, and that has a positive impact on our business as well.
Yes, we see some evidence of the same thing that you're quoting. I won't comment on any kind of intra-quarter dynamic in this. It tends to be rather unreliable. We prefer to talk about complete quarters when it comes to these types of trends. When it comes to China, there's the headwind there is mostly related to the Surgical Workflows.
It is, as I said, partly related to some of these lockdowns and the COVID-19 restrictions that we continue to see in China, which makes life difficult, both from a supply point, but also from a sales and delivery to customer standpoint, continues to be a challenge. I also think that the initiatives that we see with favoring more made in China is a headwind for us there that will also continue. That's something that we're factoring into the plans going forward.
Thank you. Can you just confirm, I mean, the shortfall of sales in 2022, do you still expect that to be compensated for in 2023 to 2025?
We think it's too early to think about changing these plans. As I said to one of the earlier questions here, we do sense a strong underlying demand for our products. There's nothing that changes that compared to what we had guided for in the longer term. Of course, the uncertainty has increased now because 2022 is essentially a lost year when it comes to growth. It's too early to have any updated view on the 2025 outlook in the longer term, so to speak.
Thanks for explaining. Thanks very much, Mattias.
Thank you.
Thank you. The next question comes from Peter Östling from Pareto Securities. Please go ahead. Your line is now open.
Okay, thank you very much. A couple of questions. First on China. They have had this zero tolerance policy for quite some time, and you've been asked questions about China in previous calls, but it seems that it's never have been any problem. So what has happened now that you all of a sudden highlight China as one of the main problems being behind the lower 2022 guidance? That's my first question. We can start with that.
Yeah, I think that's, if anything, is a misunderstanding. We have highlighted China earlier as well in our report. It has been a headwind throughout the year. It's maybe not as we haven't pointed it out as much, but it's still there, and it's continuing to be a challenge. There's no dramatic change in Q3 compared to the previous quarter.
You said that the main headwind in China is related to surgical workflow. Is it so that you originally expected to deliver large part of your huge backlog in the fourth quarter, and now you see that that will not happen and it will probably spill over to 2023 instead? Is that the case?
That is part of it. We do see a reduction when it comes to both infection prevention, but also the Surgical Workflows, so the operating room part of the order book with a lower level of deliveries than expected earlier. That's correct.
Okay. Then when we look at many of the large healthcare suppliers both in the US and the private ones that you get numbers on in Europe, they all mentioned, and they all have difficulties with the staff shortages and so forth. Most of them highlighted improvements in that area in their Q2 reports, and that had started to improve in Q2-Q3. Can you give a little bit more color what you see when it comes to staff shortages?
There are glimpses of improvement sometimes if you look at, you know, individual months and so on. I think overall, this is still a challenge. It's confirmed by customer discussions we had as late as last week, actually, both in the US and the UK., that this will remain a challenge for some time still for them. In certain cases, some geographies you can see improvements, but I think overall this will remain a challenge for a little bit longer than anyone would have liked.
Okay. Finally, you have built up your inventory a bit over the last couple of quarters in order to get the safe secure manufacturing and so forth for certain components. I guess those purchases has been at relatively high levels, high prices. Could you say anything about how long you believe it will take before this higher priced inventory has gone through the P&L and of course will affect cost of goods sold for some time?
No, I think the short answer, and Lars may wanna add some additional color, but this is not normally something we guide for.
No, I think the buildup in inventory is, you can see, threefold. You have the seasonal buildup that you have normally after the big deliveries in Q4, and that we have this year as well, and it's a little bit more than as SW is growing, as a total share of the total. That is also the product mix. You have the safety stock, as you mentioned. Yes, we did that especially during this first half of the year, and the cost of that is of course impacting. In one way you can argue it was also bought earlier on before the big inflation kicking in, so it's a mixed impact of that. Of course the disturbances we talked about is also ending up as almost finished goods in our inventories now. That has also impacted the buildup.
These three
Parts are there. As soon as we start getting deliveries out, that finished goods will come out. The safety stock, we will then stabilize and start bringing down during next year.
Okay. Okay, thank you. I get back into the queue.
Okay.
Thank you. The next question comes from Viktor Ardelean from Handelsbanken. Please go ahead. Your line is now open.
All right. Thank you for taking my question. First one, past quarters you've been able to quantify the year-over-year increase in the backlog, you know, +20% or so. First, if you could share a figure on that would be very helpful. Secondly, if you can also comment a bit more on your visibility on access to components for deliveries here in the next few quarters, as well as any, you know, slowdown in hospital CapEx discussions that you're seeing signals for so far. Thank you.
Yeah. All right. Well, the backlog has continued to increase a bit, still there. That trend is intact. When it comes to component access, it is partly murky visibility that makes us change our guidance for this year as well. It is a bit more difficult than predicted to get access to some key components. We can also see the components that we actually have got delivered during the third quarter sometimes fail the quality tests, and we have to start over again. So there are these unexpected impacts as well when it comes to component supply. The uncertainty is difficult to work with at the moment.
We don't see any immediate improvement for the remainder of this year when it comes to resolving this.
Finally on the CapEx budgets, anything you know cutting down or any negative signals there in the hospitals you work with?
Yeah, I think negative signals in terms of talk and wording definitely from customers. We hear them being restrictive going forward. We don't see that as a bottleneck right now. It seems like the staff shortages is much more of an imminent problem to tackle. We don't see really less business so much because of lower CapEx right now, but it's definitely something we'll keep monitoring.
Thank you very much. Very helpful.
Thank you.
Thank you. The next question comes from Ed Ridley-Day from Redburn. Please go ahead. Your line is now open.
Good morning. Thank you. I think if we could delve into the underlying growth perhaps in a different way than we've discussed today about sort of the future outlook, which we all understand you can't really speak to at this point. If we look at acute care in the third quarter, can you give us more color on the level of COVID headwinds, i.e., what you feel the underlying growth would have been roughly without the overhang from respiratory and ventilator revenue from COVID last year? That would, I think, be very helpful in terms of framing where you feel the underlying business is. Secondly, just to confirm on the margins, thank you for the commentary on the FX effect this quarter. Could you confirm where you see FX effect on margin for the full year at current rates? To confirm as well that the updated margin guidance is on a constant currency basis.
Well, if we start with the COVID effects, we cannot speculate what order intake or sales would have been if we didn't have these headwinds. On the ventilator front, it is largely in line with the weaker demand that we had expected because of the very high demand in 2020 and 2021. We've had 4,600 vents sold year to date, and we expect to end up around 7.5, 7, 6.5, 7,000 for the full year. That gives you some quantification of the headwind, given that a normal year would have been between 8,000 and 10,000. That's one factor. Otherwise, I think the COVID headwinds are mostly related to the indirect impacts when it comes to staff shortages and when it comes to supply chain challenges. Those are impossible to quantify and say what it would have been if they were not there.
Okay. Just quickly follow up on that. Thank you for that. Just, I mean, in terms of the life support business, obviously a high level of consumables are obviously boosted by COVID as well. In terms of maybe looking at the underlying run rate then, say this quarter and perhaps fourth quarter, would you say therefore really in these two quarters you would expect a normalized run rate for the business, or would you still potentially see some additional overhang into 2023?
Yeah. I don't think it's difficult to dissect. If you look at the underlying run rates of bioreactor bags, for example, we can see that the COVID demand is gone from this. The underlying demand is there, but it's still quite lumpy when it comes to orders and deliveries. It's very difficult to speculate and then say what is a real underlying run rate here. So I really can't give you any more color on that either, unfortunately.
No, that's helpful though. Thank you. The margin, sorry?
Yeah. When we talk, we don't know what the currency rates will be in the future. When we talk about that, this based on what we know today.
Yes, for sure. Just to confirm that the updated margin guidance is on a constant currency basis.
No, no, it is on where we are at the moment.
Okay, thank you.
Thank you. The next question comes from David Adlington from JP Morgan. Please go ahead. Your line is now open.
Hey, guys. Thanks for taking the questions. Two please. Firstly, just wondered if you could talk a bit more color on the pricing environments, maybe by division. Is there any difference by division in terms of pricing, and is that pricing sufficient to offset cost inflation? Secondly, just on your ventilator business, with the larger installed base now, just wondered what you were seeing in terms of attachment rates in terms of service relative to where you were historically. Thanks.
Yeah. Thanks, David. When it comes to pricing, I think it's one of the things that works rather well. We've had an average about 2% price improvements so far this year. It's a big difference between some of the areas when it comes to spare parts and service, where we have a much higher level of price increases. We have some categories where we're bound by contracts where there are no price increases. The net or the average is 2%. A little bit more improvement in Acute Care Therapies where we have the shorter cycle categories. We do see some improvement in Surgical Workflows, but here in that BA, the pricing effects take longer time to kick in.
That gives you a bit more color. In Life Science it's a bit more difficult to measure actually because there's so many customized projects. We do have improvements there as well, especially when it comes to the service bit. When it comes to the price, positive price impact compared to the cost increases, it's still a net negative for us. We expect this to change sometime during 2023, but right now it is a burden for us. When it comes to the ventilator installed base, it's one of the areas where we do see improvements in service and better attachment rates. We don't disclose numbers on this externally, but the trend continues to be positive on the installed base as well.
Cheers. Well, thanks so much.
Thank you. The next question comes from Robert Davies from Morgan Stanley. Please go ahead. Your line now open.
Yes, thanks for taking my question. My first one, just could you give us a little more color around the backlog? Obviously, there's been a disconnect between the orders and the sales profile in the last couple of years. I just wondered in terms of expected timeline of delivery, what's the kind of phasing of the backlog? How much of that can you deliver if and when supply chains start to ease through 2023? Could you materially ramp that delivery, or is it gonna be phased over a couple of years? That was my first question. And then the second one was just really around some of the supply chain issues. You've obviously flagged that a number of times during the call. What gives you conviction that sort of, you know, it's still gonna sort of persist through 1Q 2023?
I guess the genesis of the question is why do you think it's certainly gonna get better by the middle of 2023? Is that just you kicking the tire far enough down the road that you think broadly these challenges will get better? Or are there specific things that you're putting in place that gives you conviction that sort of by the middle of next year you'll be able to work your way around? Are you sort of changing suppliers, changing supply routes, you're getting more providers? Can you just kind of walk us through that? Thank you.
When it comes to the backlog phasing, I think yes, there is a little bit of a delay in delivering the backlog because of the supply chain constraints and the capacity issues at hospitals to receive goods as well. We're not talking about multiple quarters here. We're talking about months, I would say on average. That gives you a little bit of flavor and color on that at least. When it comes to supply chain, it's a complicated picture. I mean, as I said to one of the earlier questions, we have resolved the challenges, most of the challenges that we had at the beginning of the year. New ones have popped up.
We do believe that they are quite well defined. In some cases it's about helping suppliers ramp up. In some cases it's about, as I mentioned, getting a quality batch that maybe didn't live up to the quality that we need actually, so we have to start again. That's a different kind of rework. In other areas, it's about redesign. We do have a fair amount of our engineering capacity working on redesign and working around the component shortages as well. We have relatively good transparency on that also. We don't think that these issues will be gone during even the first half of 2023. It will be a challenge for in the beginning as well, but that's the visibility we have. We do think it will gradually improve from year end, but not within 2022. That's the main reason for the updated guidance for this year.
Maybe just as one follow-up if I could, just around Surgical Workflows. Obviously, your margins are getting better off a low base or actually negative in the first quarter of the year. Just be curious to think, how do you see the trajectory over maybe the back half of this year and into next year for that, for that business given all the moving parts?
I mean, Surgical Workflows is one business where we have good operational leverage. We expect to continue to see improvement when it comes to the margin evolution area in sync with the higher volumes for them. Overall, I think it's one area of Getinge that has done a good job when it comes to working with underlying productivity, and we do see that positive going forward.
Okay, great. Thank you.
Thank you. The next question comes from Patrik Ling from DNB Markets. Please go ahead. Your line is now open.
Thank you, guys. Maybe I can come back to a question that has already been asked about your -3% to -6% growth guidance for the full year here. I mean, you also before that, I mean, that implies a normal flu season, and you've also said that you expect supply headwinds and component shortages to be relatively stable from this point in time. I mean, what is it that's gonna make the difference between 3% and 6%? I mean, is it personnel shortages? Or maybe you can elaborate a little bit more on that a little please.
I mean, yeah. I mean, yes, that's one factor because it really impacts the ramp up at our customers when it comes to elective surgeries. The span of possible outcomes when it comes to staff shortages is definitely one of those. Also the flu season that you mentioned, a normal flu season, it includes a span actually as well in that. It's not an absolute number. Supply chain, I'd say, is a very broad spectrum challenge right now. The underlying assumption is that it won't improve from here. We will have to live with the current challenges that we have. That also has, you know, a magnitude of possible outcomes. That's also one reason for the breadth of the guidance span.
Okay. Maybe a follow-up then on staff shortages. I mean, to me that sounds like probably the fact that would have the longest impact. Can you give us some color on what you see, I mean, longer term when it comes to supply issues? Because, you know, people leaving the healthcare systems do take time to get them back and educate new ones.
Yeah, I think yes. I mean, that is, this really comes from talking with customers. There's already a rather difficult situation when it comes to especially nurses. We've seen both the shortage but also for hospitals, the cost of staff is going up. That adds to the challenge. We've also in the discussion with customers, we get the indication that there is still expectations that you will have quite a few resignations of nurse staff and difficulties to replace this, not the least in the UK.
When you combine all these messages and views from customers, it makes us a bit concerned about this as a headwind definitely for the remainder of this year. As you rightly pointed out, I think it is one of the longer term headwinds as well that we need to work out. We're making a lot of effort into supporting customers with products that require less, that are less staff intense, so to speak. More automation, more remote monitoring, and those types of solutions is increasing in demand, and we're trying to help customers. It is a problem of significant magnitude for them.
Okay, great. Thank you, guys.
Thank you. The next question comes from Michael from Jefferies. Please go ahead. Your line is now open.
Hi. Good morning, Mattias and Lars. Thanks for taking my questions. I have two, please. Firstly, following on from a previous question on the order backlog, you mentioned some customer delays, but have you started to see any order cancellations from customers? That's my first question. Second question, can you talk about growth expectations for bioreactor bags and ECMO in 2023, please? Thank you.
Yeah. On the first question, we've seen no cancellations. We've heard this from some of our peers, but we've really gone through and looked in our order book, and we have nothing material to report when it comes to cancellations. When it comes to the growth of bioreactor bags in 2023, it's something we'll have to come back to you on. It's a little bit too early to say right now. We think that, as I've pointed out, the COVID demand is gone. We're seeing some green shoots when it comes to the non-COVID related demand. To quantify that right now for next year is too early. We cannot do that.
Okay, thank you. Just to follow up as well on the ventilators, you said, 6.5-7,000 is the expectation for this year. Year to date, 4.6. Any expectations for next year on kind of where that comes out in terms of unit ventilators on the units?
No, also too early to say. We have no guidance to give, for 2023 on that.
Okay, thank you.
Thank you. The next question comes from Peter Östling from Pareto Securities. Please go ahead and ask the question. Your line is now open.
Yes, thank you. Just a quick follow-up on the FX impact. Lars, if the current rates remains, will we see a similar impact in Q4 that we saw in Q3?
Similar. Yes, it's taking off a little bit. It's a little bit less since we have the weakening in krona was already last year starting that. It's taking off a little bit, but of course, we have a bit higher volume as well when it comes to revenue, et cetera, in Q4. Rates impact will be a bit lower, but then we have a higher volume as well, order flows.
Because the reason we're asking this is of course, this should be quite substantial help to support the margins even in Q4, even if volumes go down.
To some extent.
O-okay.
To some extent, yeah. Mm-hmm.
Yeah. You still believe that there will be around 3% points difference between 2021 and 2022?
That is what we say when you do the technical adjustment of the top line.
Okay. Thank you.
Thank you. No further questions at this time. Over to you, Mattias and Lars, any closing remarks?
Yeah. All right. No, thanks, everyone. We're almost at time anyway, so appreciate the dialogue. No additional summary from our perspective. Just thanks for joining the call and have a good rest of the day.