Thank you very much, and thanks everyone for taking the time to join our earnings call today. W ith me, I have our CFO, Lars Sandström, who will support me during t he presentation. So if you could please move over to page two, please. If you look at the key takeaways for the fourth quarter of 2018 in terms of performance, we can see that our growth continues. Our net sales increased by 7% in the quarter, and 2.4% of this was organic growth.
We do see a softer and temporary decline, so the softer order intake and a temporary decline on the order side, but we leave the year with a better order book than we had at the end of 2017, which is very positive. Also, the signals from our customers and the market in general means that we expect the order growth for the coming quarters and full year 2019. We expect a rebound here, and we still guide for 2019 that net sales will increase by 2%-4% organically, so no change from that perspective.
We have also very good control of our operating expenses, which on an adjusted basis was in line with the previous quarter. This is despite the fact that overheads are seasonally highest in the fourth quarter of the year, and that we've also continued to make selective investments in our organization. That's also positive. T his translates then to an EBITA margin of 17.9% and adjusted for currencies, this is in line with the corresponding period in 2017. From a cash flow perspective, we can see that this is also stable, despite the large payment of SEK 276 million to cover a previously reported cost related to investigations in Brazil.
We had good underlying cash performance. And if you look at the dividend perspective, the proposed dividend amounts to SEK 1 per share. Then we can move over to page number three , please. So if we continue to talk about the key takeaways in terms of events during the quarter, I'd like to start with saying that our production facilities in Wayne and Merrimack are now remediated, which means that we can focus entirely on productivity and other improvements in operations, and we can also focus on getting the PMA approval for our covered stent. That's also good news.
When it comes to Brazil, to mesh litigation and the FDA warning letter to Fairfield, we have no new material information to share on the developments related to this. But we will, of course, communicate as soon as we have new information on any of these topics. I also think it's worth mentioning that in the quarter, we launched several new products that strengthen our leading positions in different categories. One example of this is the advanced Maquet PowerLED II operating light. We've already received the first orders for this and have very, very good feedback from customers.
For those of you who attended the Capital Markets Day, you also met Stéphane Le Roy, who took office as new President for Surgical Workflows in November. He's already well into the business. He's been on board in Getinge since 2012. He comes from a role as president of South West Europe, and previously, he has held a number of managerial positions within GE HealthCare and Siemens. So Stéphane has already proven to be a good addition to the team, and given his past experience in the company, he will have a very short learning curve as well, and smooth transition into the role. Over to page number four, please.
So if you look at our growth development in a bit more detail here, we can see that our net sales grew 2.4% organically, 7% in actuals. So very stable performance in the quarter, a little bit better than expected, which meant that we exceeded the guidance for the full year somewhat. From a regional perspective, we saw very good development in Americas. Life Science grew 18.4%, and Surgical Workflows, 9.7% organically. And this is mainly attributable to North America. There was a slight decline in APAC, and this is mostly related to Surgical Workflows, and again, in our view part of normal fluctuations in the business.
If you look at things from an order intake perspective, we had 3.1% organic decline, 1.6% in actuals. And as I mentioned earlier, we see this dip as temporary, and we do expect the growth to be back in the coming quarters. The decrease is mainly related to Surgical Workflows and in emerging markets, and it's emerging markets in EMEA, so Middle East and Africa in this context. So there were a number of significant orders in the fourth quarter of last year, so the bar was rather high for this Q4. So we don't see any structural reason for this. We rather expect the order growth to come back in the coming quarters there.
We also had strong growth in Americas. I think it's worth highlighting. We had more than 8% organic growth in the U.S., which shows that the organizational changes made there and the targeted actions that have been put into place are starting to bring positive results. With that, we can move over to page five, please. So if you look at the contribution in order intake for the fourth quarter and break this down by business area, we can see a rather mixed picture. So Acute Care Therapies had an organic improvement of 0.9% or SEK 196 million in absolute terms. We saw good growth in Cardiovascular and in heart-lung machines in all regions, and good growth in Critical Care in East Asia.
We saw a decline in EMEA, which was then mainly attributable to Middle East and Africa. When it comes to life science, we had a 2.3% organic improvement, and SEK 48 million i n absolute terms. So life science continues to show good growth in organic order intake in the Americas, very, very encouraging. We also had the good development on isolators in all regions and also services in Americas and APAC. And finally, surgical workflows, where we had the decline, minus 9.5% organically in the quarter, or SEK 139 million in money terms.
So this reduced organic order intake is mainly attributable to emerging markets in the Middle East and Africa, and to a smaller extent in Asia Pacific. We do think it's temporary, and we expect to be coming back in the next coming quarters, given the signals really from our customers and the market sentiment in general. And also had good growth in the Americas, and mainly attributable to North America in the quarter. So please move over to page number six, please. Looking then at the BA or the business area contribution to net sales in the fourth quarter, we had an increase of 7%, of which 2.4% was organic. Here you can see every business area contributed positively.
We also find that capital goods continue to grow faster than consumables, but the gap in growth pace is smaller than what we've seen in previous quarters. If you look at the Acute Care Therapies, we had 0.3% growth in the quarter, SEK 194 million . There was good growth in critical care and in cardiopulmonary in both Americas and in Asia Pacific. We had a bit of a decline when it comes to vascular systems, primarily in Americas, and also a little bit weaker performance in cardiac systems. When we look at sales of expandable vascular stents, there was a decline year-on-year. However, the rate of decline now is clearly lower than in previous quarters.
We can also see that the decreased sales volume in the U.S. is, to some degree, compensated by other regions, even if that is a little bit at lower gross margins than in the U.S. And finally, on ACT, we can say that sales of consumables and services increased in relation to capital goods, which positively impact the gross margin. If we then move to Life Science, we had 15.5% growth organically in the quarter, SEK 129 million . We saw sales growth in all regions, with particularly good development in Americas and in Asia Pacific. We saw very good growth in sterilizers in Asia Pacific and Americas, and disinfectants in all regions.
In Life Science, we can see as well that the sales of capital goods is increasing at a rather rapid pace. This has a negative impact on the gross margin in the short term, but in the longer term, it is expected to lead to increased sales of consumables and services. So long term, we believe this is positive. And then finally, if we look at Surgical Workflows, we had the growth of 2.3% organically, or SEK 196 million. Here, we saw good sales growth in EMEA and Americas, but weaker performance in Asia Pacific compared with the fourth quarter of 2017.
Worth pointing out, I think that we had strong development within Infection Control in all our regions. When it comes to Capital goods versus consumables and services, Capital goods continue to grow faster, which has had some margin pressure in terms of gross margin. But just as with Life Science, we do expect this to lead to increased sales of consumables and services in the longer term. With that, we can move over to page number seven, please. So if we then look at the gross margin development in the fourth quarter, gross profit as such increased by SEK 199 million to SEK 3.79 billion in the quarter. This was driven by volume and some support from currency.
If you then look at the margin, however, the currency impact was minus 0.7 percentage points, due to negative transaction effects. And if you look at the margin effect year on year, it also amounted to minus 0.7 percentage points, and this is explained by currency and by mix factors. And as we've underlined in a number of instances here, the mix effect that we believe is natural in the growth phase, like the one we've been in during 2018. Long term, we expect that the larger install base will support sales of consumables and also service, which will in turn support an improvement in the gross margin.
I want to point out again that we will continue to see fluctuations between quarter and it's, it's more of an evolving change, I would say. With that, we can move over to page number nine, and I leave over to you, Lars, to continue with the financials.
Thank you, Mattias. As you can see, the EBITA margin decrease amounted to 0.8%, where almost all 0.7 percentage point is explained by negative currency effects, +0.1 percentage point higher GP and depreciation, which, however, is offset by OpEx. And I think we have control over our OpEx, adjusted for currency, OpEx is in line with the third quarter of 2018, despite the fact that overheads are seasonally highest in the fourth quarter of the year. And adjusted for currency, sales expenses are in line with the corresponding period in 2017, while administrative expenses increased by 10%, and this is mainly attributable to the remaining costs after the spin-off of Arjo.
This resulted in an adjusted EBITA of SEK 1,412 million, with a current impact of +SEK 6 million, where our transactional effects represented -SEK 51 million, and translational effects, +SEK 57 million. With current hedging positions, when it comes to transaction flows, we would end up with a negative impact of some SEK 10 million on GP, EBITA, and EBIT for the full- year 2019, as we stand today. If you then go over to page 10, please. So let's take a look at the contribution to EBITA, which was positively impacted by currency tailwinds of SEK 6 million in the quarter as a total. For ACT, Acute Care Therapies, adjusted EBITA increased by SEK 182 million and 3.6 percentage points, mainly due to higher gross margin, reduced OpEx, and positive currency effects of SEK 46 million.
In Life Science, adjusted EBITA increased by SEK 28 million as a result of higher sales. For Surgical Workflows, adjusted EBITA decreased by 5.2 percentage points year-on-year due to lower gross margin, higher operating expenses, mainly attributable to remaining costs from the spin-off of Arjo and investments in sales in U.S. Here, currency headwinds were significant in the quarter, amounting to -SEK 33 million. Over to page 11, please. Here, we see a clear trend break in the areas impacting OpEx. One of those are FTEs. We were 10,684 FTEs in the organization at the end of 2017, and at the end of 2018, we are 10,515 FTEs. The peak was reported in Q1, and since then, we have reduced the workforce by 277 FTEs.
This is without any big campaigns that can create unnecessary distortion from our strategy. Rather, it is repetitive monitoring and follow-up in all parts of the organization, and looking into where to re-place, reallocate, et cetera, if someone decides to leave the company in order to ensure increased productivity. This, together with other activities, is contributing to the trend break on OpEx versus net sales here, looking at rolling twelve, and that is what you can see in the graph to the right. And this is something that we intend to continue keeping very close focus on going into 2019. Over to page 12, please.
When looking at our cash flow, I would like to remind you that it is quite difficult to compare this year's performance with the cash flow from Q4 and the full year of 2017, as this includes the cash flow from Arjo as well. Cash flow from operating activities amounted to SEK 684 million, and free cash flow amounted to SEK 321 million. The previously announced payout of SEK 276 million in the corporate fine related to ongoing investigations in Brazil took place during the quarter, and working capital is negatively affected by lower rates of increase in accounts payable. Net debt decreased by SEK 201 million in 2018. Over to page 13, please.
During the year, we have been working intensely with breaking the growth trend in working capital that we saw in recent years. The first step was to stop the growth, and the next is to start moving into decline. As you can see in the left graph, we broke the trend in working capital days in the second quarter, followed by decline in the third and fourth quarters. This means that working capital is growing 1.5 times slower than organic sales growth, and this is what we show in the graph in the middle.
We also see that cash flow after net investment increase in 2018 compared to 2017, despite the fact that we have been growing more than in many years, and despite the fact that I was included in the cash flow for 2017. This work will continue, just as with everything else we do, in order to improve productivity and thus both earnings and cash flow improvement. Let's move to page 15, and over to you, Mattias.
All right, thank you very much, Lars. So we skip directly to page number 15. And it's just a few words on the outlook for 2019. As I mentioned before, we expect net sales to grow 2%-4% organically for the full year of 2019, so there's no change in earlier guidance here. This means that we expect that the comeback effect that we saw in 2018, which led to us outperforming the market growth, will probably calm down a little bit, and the growth will be more in line with the addressable markets that we have for our portfolio. I'd like to point out that from a customer perspective, we expect the overall positive demand pattern to continue. And this goes for both capital goods and also for consumables and for services. So overall, there's a positive sentiment, I'd say, out there.
We also get positive feedback from our customers on newly launched products, and we expect the same reaction to the ones that are to come in 2019. We also expect that the positive traction that we see in the U.S. continues. So overall, that contributes to a positive outlook of 2%-4% overall growth for the group in 2019. Then we can move over, please, to page 17 and the summary. So to summarize where we are after the fourth quarter of 2018, we expect continued growth. No change in that pattern from what has been earlier communicated.
There will be still swings and fluctuations between quarters, but I think the underlying momentum remains positive, and the sentiment when we speak to our customers is continues to be rather positive as well. So we reconfirm the guidance of 2%-4% for 2019. We see some early signs, I would say, when it comes to improved margin. So this is both in terms of gross margin performance, where things are stabilizing or bottoming out, if you like. And we can also see that we are starting to see some improvements when it comes to productivity in terms of the OpEx related in relation to our net sales.
So this is a journey that will continue for the coming years as well. Also, we, when it comes to working capital and cash flow, we expect also our key indicators in this regard to continue to be rather good and some extent improving despite the net sales growth. So, overall, I'd say we put a year behind us that's been, 2018 has been for sure, a year of a lot of headwinds and challenges that we've had to tackle during the year. From an underlying business perspective, though, I think we can start to see some green shoots of improvement, so that's positive.
Still want to underline, though, that it's an early phase and we continue to work methodically and in a structured way, the improvements and the different components of improvement for our turnaround, really. So with that, I look forward to 2019 as a year of continued focus on innovation, on customers, quality, and continuous productivity improvements. With that summary, we open up for questions.
Thank you. Ladies and gentlemen, if you do wish to ask a question, please press zero one on your telephone keypad, and if you wish to withdraw your question, you may do so by pressing zero two to cancel. The first question comes from the line of Michael Jüngling from Morgan Stanley. Please go ahead.
Thank you, and 2019 guidance, what stopped you from giving a 2019 EBITA margin guidance or some sort of directionality? Secondly, on the EBITA margin for 2019, can you comment on what the foreign exchange implications are on margins using current spot rates? And would it be correct to assume that you'll have a slight margin headwind based on current spot rates? And thirdly, a question about intangible assets. Can you comment why the carrying value of your intangible assets of SEK 24 billion have not been impaired, despite your margins for the group effectively halving over the last five years? Why would those intangible assets still be worth the same today than they were perhaps four or five years ago? Thank you.
Okay. I'll take the first one, and Lars, the second two. When it comes to EBITA guidance, we just believe that we are still turnaround phase, there will be fluctuations and still a lot of moving parts here. So we just feel it's a little bit too early to to give more granular guidance below the the top line here. So that's why we stay with 2%-4% organic growth for 2019. You we actually lost you a little bit in the first part of the question, so I hope that was the whole first question then.
Yes, it was. Thank you.
Good. Coming to currency impact, when it comes to the transaction part, as I mentioned there, given what we have today and the flows that we see, the expectation is around -SEK 10 million on the result. And on the spot rate there, I think I will have to come back to you on that, but there should be no large impact as it looks now. And on the intangibles there, on the intangibles there, we do the impairment testing. That's part of the normal closing process that we do, and we have no reason to have any other opinion that we can defend the values without any problem at all. So that's why they remain. And as you know, there is no amortization on goodwill.
Yeah. Can I just quickly get back to the 2019 guidance for the EBITA margin? Is it fair to say that on the balance of probabilities today, after a very solid Q4, that the margins are more likely to increase than to remain flat year-on-year in 2019?
I just want to reiterate really the message from the Capital Markets Day as well, that we expect 2019 still to be a year where we have to implement and get a lot of things done in the business. So the real improvement is more to be expected from 2020 is what we've said. So I don't want to give any more granular guidance on a EBITA level for 2019.
Okay. And then briefly on the intangible assets, I mean, I understand that there is a requirement every year to, as part of the order process, to look at the valuation of intangible assets. But just conceptually, when the businesses that you've acquired over the years, over the past decade, and you now have a margin and a cash flow that is less than it used to be, why would the carrying value be the same? What is it that has allowed your accounting department to think that those assets are valued fairly at the same rate as it was perhaps five years ago? I'm just curious how that works, please.
No, but when doing the valuation, of course, we look at the future, expected cash flows, and, given those, we have no reason to not be able to defend the values that we have. So it is as simple as that.
Okay, great. Thank you.
The next question comes from the line of Kristofer Liljeberg from Carnegie. Please go ahead. Your line is now open.
Yes. Just thank you. Can you hear me well?
Yes.
Oh, good. So, two questions. First, I looked in what you define as one-off items, i.e., what you adjust for. You have some write-down of receivables, SEK 83 million, in there. I haven't seen that before. Is that something we should see as exceptional, or is this something that could continue to come going forward as well? And then on the OpEx side, nice to see the stabilization here in the second half of the year. So do you think you could, you know, keep OpEx rather flat in absolute terms also in 2019?
Yeah, I'll start with the second question there, Kristofer. And I think when it comes to OpEx, we've said that as a productivity measure, we'd like to see the ratio of OpEx to sales continue to decline. We don't want to give guidance in absolute terms because I think it's important to remain flexible when it comes to investing in opportunities and so on. So I don't really want to give guidance on the absolute level, but we continue to work with productivity, so the ratio should continue to creep down is the ambition.
On any particular investments you could highlight for the OpEx line in 2019?
No, there's nothing that stands out as extraordinary or anything like that. As you know, in 2018, we had a lot of investments in quality. We had in sales and service, and to some degree, in innovation. We do feel that we have come to a situation where we're quite satisfied with where we are. Having said that, though, I mean, there are still areas in terms of penetration of different categories in certain geographies and so on, that we may want to invest in so, b ut it's not of the magnitude of what you've seen when it comes to quality, for example, here. So it's, there's no single piece that kind of stands out.
On the quality system, have that now been rolled out to the entire organization, or still some risk that, you know, for delays and more spending necessary to do that?
Yeah, that's more or less done. There's some small fine-tunings here in the first quarter, but we're more or less where we need to be with it.
Then, coming to your first question there, and we have during 2018 really have an intense work and enhanced work and focus on internal control activities, we have extended our audit work, both external and internal audit work, as well as working on the compliance areas very much. And this has led us now in this quarter to provide mainly related to receivables on distributors, and that is why this is coming out. And the question there is there will be more, of course, we have done a comprehensive work here. Can I rule out there will be never anything else? Of course, that is very difficult, but we have done a lot of work during 2018 in this area.
Is that related to old receivables or something that has been booked as sales in 2018?
No, this is mainly related to old.
Okay. Good. Thank you very much.
Thank you.
The next question comes from the line of Hans Mähler from Nordea. Please go ahead.
Yes, good afternoon. I have two questions on the ACT business area. When it comes to the sale of the biosurgery business, how did that affect the fourth quarter? Did you sell sort of an inventory to the buyer of the unit for the coming period, when the buyer is sort of setting up their own production? And also on the covered stent business, how did that develop on a year-over-year basis, and how far away from PMA are you currently? Thank you.
Okay. Yeah, I think when it comes to the Biosurgery business, there's no significant impact of stock level changes or anything here in the fourth quarter. Nothing, nothing at all, or very small, at least. And when it comes to the covered stents business, we still had some decline in the U.S., but it's much smaller than it's been before, and it is to some degree compensated by other geographies. We sell a bit more in Europe and other parts of the world, even if it's a little bit lower gross margin.
Okay, thank you so much.
The next question comes from the line of Peter Östling from Pareto Securities. Please go ahead.
Yes, thank you. Two quick questions, if I may. First, could you just remind me, how much of the intangible that you lowered when you sold the Biosurgery business or the Mesh business? That's the first one.
Yeah. The total write-down we did was SEK 90 million, and it was mainly related to intangibles in the first quarter.
Okay. And then, my second question is that, during 2018, you in a very nice way, stabilized and kickstarted the organic top line growth, and you ended the year with also, it seems like you have reversed the declining trend in profitability. In that environment, what kind of message do you think you send to the market by lowering the dividend?
Okay. I think the reasoning, the dividend, first of all, it's a recommendation from the board to the AGM, obviously, and it's their decision. But the recommendation discussion in the board has really been that we have good faith for the future, optimistic about the future ahead. But at the same time, we can't ignore everything that's happened in 2018. There have been a number of extraordinary events, and therefore, we believe it's responsible to lower the dividend a little bit. So that's the underlying logic in the recommendation.
Okay, thank you.
The next question, the next question comes from the line of David Adlington, JP Morgan. Please go ahead.
Hi, chaps. Thanks for taking the questions. So firstly, big picture question, I suppose. So the first part of the year saw your revenues accelerate quite markedly, but your margins come down quite a lot. Fourth quarter, that seems to flip around with growth sort of coming down quite a lot, but margins certainly improving versus expectations, and but orders order growth has also slowed down. So that's certainly an unusual pattern for us to see. Just maybe, do you think the focus on your costs is potentially hitting your growth, both top line and in orders? And then second, just to sort of focus, obviously, you know, the streets sort of slightly struggling to model your margin and EPS growth pattern here.
You've also got that 10% EPS growth number out there over the midterm. Do you think that's going to be possible over the 5.91 number you reported in 2018? Thanks.
When, when it comes to the cost focus and the impact on growth, we're not worried at all about this here. If you really, drill down into the order intake pattern in the fourth quarter, it's really a number of deals, primarily in the Middle East and in Africa, that we had in the fourth quarter of 2017, that we don't have this year. But these investments, typically, come with new hospitals or significant upgrades of hospitals and so on, and they tend to be spread out in time, so it's not something that we are concerned about.
It's also worth remembering, I think, that we actually leave the year with a better order book than we entered the year with, which is also positive. So we don't see any link between the focus on cost or productivity and the growth pattern. We think we had a comeback effect in 2018, and we expect to be seeing a more normal development in line with the market in 2019. That's really the main point here. And when it comes to the EPS, I mean, the target remains, no question about that, but we don't give guidance on whether it will be achieved or exceeded in 2019.
We prefer to again reiterate the message from the capital markets day, that first of all, the target remains, but it's a midterm target. We continue to focus on productivity. We would like to have more leverage in the business and see more of the positive top line momentum really translate into earnings as well.
Okay, thanks.
The next question comes from the line of Scott Bardo from Berenberg. Please go ahead.
Yeah, thanks for taking my questions. So first question, on adjusted gross margin, please. I think at the Capital Markets Day, you highlighted that adjusted gross margins had bottomed out, and I think we've seen actually a relatively okay adjusted gross margin in the fourth quarter. So the question for you is looking into 2019, should we expect adjusted gross margins to start to improve, considering, if you like, some trends unfolding for slightly better geographic mix, slightly better product mix with consumables, and maybe some view on where adjusted gross margins can go over the next months would be, or over the next 12 months, would be helpful. Also, I'd like to understand a little bit more on your adjusted EBITA level.
As I look to this, the adjusted EBITA margin contracted about 270 basis points year-over-year, or a delta of just over SEK 400 million. If I understand correctly, 100 basis points of that relates to currencies, and a very significant proportion of that relates to this heightened holding cost from the Arjo spin-out. So can we talk a little bit about the Arjo cost, and how that's being worked down, how quickly that can move? And also confirm that there will not be then this 100 basis points of margin pressure related to FX at current spot rates. So they're the first two, and I have a follow-up, please.
Well, if we start with the Arjo cost and the stranded cost there, looking at 2018, then of course there is no cost in from Arjo included. So what we have now is the cost we have, and that is what we have been working with all through 2018, and we continue working on this, and this is impacting, so to say, all the lines, both the COGS and the OpEx. And here, part of that has been, I showed you earlier on there, the FTE reductions that we've been working with during the year here, and we continue to address areas where we can find opportunities when there are turnover in people, not to rehire, or when there are areas where we can do a structural activity, but more, no general activities, but really targeting where we see opportunities.
This is also very much connected to areas where we can drive harmonization and efficiency in different areas of the company. So this is more methodological work all through the company to drive this down and improve at the same time the company performance in everything we do. So that is what we are aiming for here. So going forward here, there should not be any discussion on stranded costs. This is our cost that we have, and this is what we continuously work to drive down. And when it comes to currency impact here, yes, we have an impact from the transaction side in 2018.
As I mentioned there, what we expect going into this year is around, given the flows we have now and the hedge positions that we have now, we expect around -SEK 10 million for 2019, so not a considerable amount in that sense.
When, sorry, when it comes to the gross margin, bit, again, we, I really think that the right way to look at this is the same thing that we said at the Capital Markets day, that we believe they bottomed out after the third quarter. We don't really want to guide on any kind of magnitude of change for the coming quarters or years. Just reiterate that we continue to work with productivity improvements to improve the gross margin, really. But we, I can't give you any timing or magnitude of this. And you will still also continue to see mixed patterns have an impact in both directions, I think, on the gross margin.
We understand that it's difficult to model the business to some extent, but this is the reality that we live in. So, that's really all the guidance we can give, I think, at this stage.
All right, thank you. And then just a question on divisional margins, please. And, I mean, the pleasing thing to me about your results here is that your Acute Care Therapies margin held up pretty well year-over-year, at about nearly 20%, similar to the prior year, despite pressures to covered stents, increased remediation cost, all of the issues with intra-aortic balloon pumps and so forth. However, on the negative side, margins in the Life Science business have fallen materially, 630 basis points, and in the Surgical Workflows business, down 370 basis points. Without the sort of, if you like, heightened headwinds that you've had in the Acute Care Therapies business. So I guess the question I want to understand is, why have margins for those businesses fallen so materially?
Can you please comment as to, are you allocating any cost related to your FDA remediation to these divisions? Are these housing any of this FDA-related cost? If you could comment on that, that would be great. Thank you.
Yeah, I think the last thing, there's nothing of the FDA-related cost allocated to neither SW, Surgical Workflows, or to Life Science. There are some costs, of course, for implementing our overall group common quality system. So that has had some impact and some pressure, but there's nothing else related to quality or FDA outside of Acute Care Therapies. So I think the margin pressure or the challenges for both those BA are more business related. So there's of course an element of price pressure, but it's still in line with what we said at the Capital Markets Day.
It's actually positive for Life Science and negative for, slightly negative for Surgical Workflows, but there's no change in that perspective. The other thing is that we do have some supply chain improvement work to do. There is, I mean, structural efficiencies when it comes to the impact from OpEx as well, that we need to work with. The Arjo impact Surgical Workflows almost entirely, so that's one element that we discussed really. So there's not one single thing here, with a number of things.
I think, as Stefan highlighted, both at the Capital Markets Day and in subsequent discussions that we had, they're well aware of this situation, and I think they're also very, very well aware of where the key improvement areas lie. This is really the main focus for 2019, now, to come to terms with this, because we are well aware that there's a significant gap between our performance and competitive performance, especially in Surgical Workflows, but to some extent, also in Life Science.
Okay, thank you.
The last question comes from the line of Annette Lykke from Handelsbanken. Please go ahead.
Thank you very much. In respect to the order decline we have seen here in the fourth quarter of 2018, do you then expect a more back-ended loaded 2019 than usual? Of course, I'm aware that Q4 is a very big quarter, but will it be even more back-ended loaded than usual? And then I know that basically all analysts have asked about the margin development and have not got a lot of answers from you. But I try even though on slide 11 you're showing how you are controlling OpEx.
Could you give any indications on how you see this slide going forward, where you are looking at the trend and breaking the number of cost? And then, also to that slide, you say adjusted OpEx. Can you please explain what you are adjusting for? So we have a chance to analyze that prudently. Then finally, I'd like to ask on the settlement, mesh settlements. Have there been more than the previous anticipated 900 cases? Just to have an update on that. Thank you very much.
All right. I'll take the first one then, and leave the other ones to Lars. When it comes to the order intake, the impact of the sales patterning in 2019, I don't think there's going to be any meaningful impact on the quarterly sales performance of 2019 just because of this fluctuation in the fourth quarter of 2018. We will still have a hockey stick, probably in the fourth quarter of 2019 as well. It's a pattern that we're trying to work our way a little bit away from, or at least reduce, but it's not that easy.
There are some customer-related factors in this as well, but I don't think the change in order intake will really have any material impact on this.
On your question there on addressing OpEx and what are we doing on the COGS, so to say. As you know, a big part of our COGS is connected to the material cost, which is then an area where we continue to work hard on the redesigning products to bring down the cost. We also work on the normal procurement side to drive that further, being there is a lot of things to do, and of course, you have other areas like logistic, et cetera, but also to drive the production efficiency all through the different business areas, et cetera. So there are several activities also here.
And also, of course, we have FT working in the factories, et cetera, that we also need to continuously work on, make sure that we take the opportunity when we see them to address these levels. And on your question there on adjusted OpEx, it's mainly related to depreciation and amortization. That is, making out large adjustments, so it's more to get a comparable figure there. And then some of the adjustments there that we took now in Q4, connected to the write-downs or provisioning there is also impacting that one. But you can see in note five, where you can see the split up, all the different adjustments that we do, there you can find every little number, so to say.
Okay. And then on the mesh settlement?
Yeah, there's really no news in regards to this. It's going to be a while, I think, before we have any news either. So really nothing of material to communicate there.
Okay. Thank you very much.
Thank you.
As there are no further questions, I'll hand back to the speaker.
All right. Well, thank you very much for taking the time to join us today. There's nothing in addition to add from our side either. So just again, once again, thank you very much for your time.