Good morning. Good morning, everyone who's joining us here at Investor, and also good morning to those of you who are joining us on our call or on our webcast. This is our Q1 presentation. Today we will, of course, listen to our CEO, Johan Forssell, and also our CFO, Helena Saxon. We also have the CEO of Mölnlycke here, Richard Twomey, who will give a presentation on Mölnlycke. After that, we will have a Q&A session. By that, please, Johan.
Thank you, Viveka, and welcome everybody. Let me then start with an overview of the Q1. Overall, we had a strong start of the year. Net asset value was up 9% in the quarter. Our total shareholder return was up 11.5%, of course, supported by the strong stock market that was up 13% in the quarter. If we look on the individual business area, starting with listed core investments, the return was up 10% in the quarter. A highlight, of course, was that Electrolux announced the intention to split the company in two, and AstraZeneca also announced a major collaboration within the oncology area. Moving then to Patricia Industries, the value increase was 7% in the quarter, and Mölnlycke, Laborie, and Permobil were the key drivers in terms of value.
The major subsidiaries had a growth of 16%, of which 3% was organic, and the profit growth was very strong, 27% in the quarter. I should say already up front that we have this new accounting, IFRS 16, relating to leasing. If we adjust for that, the profit growth was 25%. I must say already now that I think the key highlight, at least for me in this quarter, is the strong profit growth that we have in the subsidiaries in the quarter. EQT had a good development with the value increase in constant currency of 6%, and we got a good cash flow this quarter of more than SEK 700 million from EQT. After the quarter, we announced that we have increased the ownership in EQT from 19% to 23%, and I will come back to that. Finally, we have a strong balance sheet.
The leverage at the end of March amounted to 5.3%, which is actually somewhat down compared to year-end, where it was slightly above 6%. Saying a few words about the macro picture, starting with the economy, I think it's fair to say that the demand differs a lot depending on what geography, industry segment that you look at. It is really a mixed picture. Overall, I think one should expect that we might enter a softer period. As I said before, I don't have a crystal ball when it comes to the macro economy. What I do know is that it will be highly important how the outcome will be when it comes to the trade discussions between China and the U.S., the U.K. situation, and also other geopolitical situation.
The reason is that it will be important for business confidence among the business people and consumer, and that in turn will, of course, have an impact on the world economy. For us as an engaged owner, the key is that we here at Investor and also our companies are prepared for whatever business cycle there will be, so we can deliver good returns, good performance, and be agile if things would turn south. Regardless of the business cycle, it is key that our companies now use the new technologies that are out there. I've been out traveling now for a number of weeks, and it's very clear visiting companies in different countries that the speed within automation and digitalization is happening right here and right now, and it's going very fast.
We are constructively challenging, supporting our companies to use the technologies that are already there, to use these technologies to bring forward offerings to the customers that add value, because that's in the end how you grow the business, how you can get good price points, and thereby good profitability. Moving back to the quarter, I think for us as an owner, it is key that we continuously look for value-creating activities, because that is what will eventually lead to strong financial figures. In the quarter, we have, of course, the announcement of the intention to split Electrolux into the professional part and the consumer part. We are fully behind this decision. We believe it will create two companies with stronger focus and two strong platforms to really achieve profitable growth in the years ahead, and thereby value creation.
Both companies will be core investments in our portfolio. You know I have talked about that many times before, that we have a top priority to grow organic and work hard on efficiency, but we also want our companies to do add-on acquisitions. Add-on acquisitions where you can get a good fit with the current business and where you can buy attractive assets. In this quarter, we have three companies, Mölnlycke, Laborie, and Sarnova, that all made add-on acquisitions. Finally, from our point of view, we believe in strong alignment between shareholders, boards, and management teams. In the quarter, we have sold options to a number of the shares in our companies. As you have seen in the quarterly report, we have hedged and bought those shares ourselves.
We think this is important to have a strong alignment, and the share, of course, plays a very critical role for us in our ownership role. Moving down to Patricia Industries. I will be very short on Mölnlycke since we have the true professional here in the room, but let me just say that we had a good start of the year with an organic growth of 4%, and where the organic growth in wound care was 5%. The company is continuing to invest in bringing new products out, sales and marketing, and innovation to drive this growth. I will stop there and leave the floor later on to Richard. Moving down to Permobil. This quarter, growth was flat. Power products declined while seating and positioning and manual grew.
Geographically, APAC actually showed a good double-digit growth. This is still a small part of the business. The other markets were more or less flat, slightly down. That is how you end up in total a flat growth. As you have seen in the report, we see a very sharp profit growth in the quarter. That is mainly due to the good cost initiatives that have been driven in the company now for a couple of quarters. There is also some currency help, but there is a very strong profit development in the company, so I must say I am very pleased with that. Importantly, a new front-wheel drive power wheelchair is being launched, and this is a segment that is important for Permobil. It represents about 35%-40% of the total offering in this segment. Moving over to Laborie.
Organic sales growth of 7% in constant currency. Urology was the key growth driver. The profit margin improved significantly compared to last year, even though it is still hampered by integration costs related to Cogentix and some restructuring costs in Europe. You can see now that we now have three quarters above the 20% line after the integration cost that we took in Cogentix. A good development in Laborie. This company also made an add-on acquisition in the U.K., and this is a company within the gastrointestinal area related to diagnostics. Piab Actually had an organic growth that was slightly down in the quarter, -2% in constant currency. That was mainly due to a weak demand in the U.S. automotive segment.
We also had an internal effect. That is that we are now working hard to reorganize the sales channel for the gripping part of the business. We have suction cups. We have the gripping to make that sales channel more efficient by integrating. That had, in the quarter, a negative impact on the growth. We believe that will be very important to drive efficiency and growth in the long term. You can see, though, on the lines here that we have a very strong profit development in the company. The profitability was on a very good level in the quarter. Ronnie Leten has been appointed the new Chair in the company. The process to appoint a new CEO is ongoing. Moving to Sarnova, organic sales growth of 2%.
That is a little bit lower than you have seen for a couple of quarters. This is a performance which we are pleased with. It is a strong performance. The reason why I say that is if you look on the bars, you can see that the bar to the right, it is in a very good level. The reason why it is only 2% is because in the Q1 2018, there was a very strong flu season that led to, call it, a very high sales and tough comparison. The underlying sales development in the company is very good. The profit margin was slightly lower than last year. Also here, the company is investing a lot in logistics, in digitalization, and improving the whole efficiency chains, things that we believe are important for the long term.
This company also made a quite sizable acquisition, as you can see. The company, it's a regional distributor within the emergency preparedness business, you can see it has sales of $28 million. BraunAbility, organic growth was 5% in constant currency. In this quarter, it was the commercial business and the lifts that were the key growth driver. The profit margin was in line with last year. Here we are continuing to work with supply chain efficiency. It's an ongoing work, we are already seeing some efficiency measure, we are continuing to invest in that. Aleris, when you look on the slide here, you can see it looks like the margin just goes through the roof. We need to be a little bit careful reading into that.
The company has been very successful, which, of course, is very good in renegotiating a couple of loss-making contracts, that has led to an extraordinary gain in the quarter. You know that now we have entered the new radiology contract in Stockholm with lower price levels that I talked about many quarters to prepare for that. So we have one positive, if we adjust for both those two, the underlying improvement in the healthcare business, excluding diagnostics, we are actually starting to see an improvement in the profit. If we just then take away the quality renegotiation part of the contract, we put in all things with radiology, the new contract, the margin was actually slightly lower than last year. That is the best guidance I can give you.
They did a very important partnership with Apoteket that relates to renegotiation of prescriptions in the quarter. We have Three. I will not go into the detail. You see it's a stable, solid performance. Some subscription growth. The underlying growth was up 2%. The underlying profit, if we exclude for the VAT change and IFRS 16 that significantly boosts the profit, we saw also some slight profit growth in the quarter. We had a SEK 360 million distribution to Patricia in the quarter, they made some acquisitions for Spectrum in Denmark. Over to EQT. Good development. Value change of 6% in constant currency. You can see SEK 740 million in cash flow during the quarter. We now have SEK 21.6 billion in value in EQT, in addition to that, SEK 15.3 billion of commitments.
They did a very successful closing of EQT Infrastructure IV at EUR 9 billion, which of course is a tremendous achievement to raise such a large infrastructure fund. In this work and the process to simplify the ownership in EQT, we have increased our ownership from 19% to 23% after the end of the quarter. Just to recap, the company is in the process of looking into alternatives, how to strengthen the balance sheet. As part of that work, one work is to work with simplifying the ownership structure, based on that, a number of transactions have taken place. This is one of them. What I can add is that our total exposure to EQT has not materially changed in this process. With that, I hand over to Helena.
Thank you, Johan. Looking at our long-term net asset value development, we can see that we landed the quarter at SEK 407 billion in adjusted net asset value. This is ahead of the reported net asset value of SEK 358 billion, and the difference being the estimated market values of Patricia Industries. Looking at the listed core investments, we can see that they amounted to SEK 294 billion at the end of the quarter, and this is roughly 70% of our total assets. The performance in the quarter or the total shareholder return was 10%, mainly driven by AstraZeneca, Atlas Copco, and Electrolux. Looking at the sequential development of the estimated market values of Patricia Industries, I can say that overall, the value creation was driven by profit growth in the quarter. Multiples were also contributing positively, as was FX.
Looking here specifically at the separate companies, we can see that Mölnlycke, Laborie, Permobil, and BraunAbility all developed well, while companies like Aleris, The Grand Group, and Vectura Group were flat. Three, Scandinavia distributed SEK 360 million to Patricia Industries, and Patricia's cash was also impacted by a distribution or an internal transfer to Investor AB.
Looking at what drove these companies that developed well, we can see that Mölnlycke's estimated market value increased by SEK 4 billion in the quarter. This was due to higher multiples and the positive impact from currency. Laborie and Permobil both increased their estimated market value by SEK 1 billion, and this was driven by higher profits in these two companies. BraunAbility was up some SEK 0.4 billion, and here, profit currency and multiples all interacted and impacted the company's value positively. Three, as I said before, distributed SEK 360 million to Patricia in the quarter.
Financial investments, as you know, is the run-off portfolio of the legacy IGC portfolio, the portfolio today amounts to SEK 7.7 billion, some 2% of our total assets. In this quarter, there were no major investments or divestments. Finally, our financial position at the end of the quarter. Our leverage ended the quarter at the lower end of our target range. As you can see in the graph, some 5.3%, slightly lower than at year-end, as Johan already mentioned. Net debt amounted to some SEK 20 billion, and our gross cash position around SEK 13 billion. The average maturity profile of our debt portfolio is now around 10 years. A positive development after the end of the quarter is the refinancing of Three Scandinavia, after which there are no outstanding ownership guarantees. On that happy note, I hand over to our friend, Richard Twomey.
Thanks, Helena. Pleasure to be here and share 15 minutes on Mölnlycke with everybody. If I look, a quick introduction to myself. I have actually been in med tech for 30 years, and at Mölnlycke for five. Just about getting to grips with the business now. Quick overview in terms of scale. We are about 8,000 people, 15 manufacturing sites on three continents, and we are present in over 100 countries around the globe. What do we do? What do we focus on? We focus on outcomes and solutions for our patients. What do I mean by that? If you look at our wound care portfolio, it is all about innovation. It is what do we do to differentiate ourselves in a crowded field. It is the R&D pipeline which yields us products such as Flex, which in terms the largest category of wound care is bordered foams.
We have a product which we're in the process of launching, which is differentiated in many ways. Illustrated here is the bacteria trapping. If you can imagine a chronic wound, it's a wound which is going to be with the patient for anything from three months through a lifetime, an increasingly prevalent sort of type of wound. Our dressing actually traps bacteria 22 times more effectively than any other bordered foam available in the market. That's the sort of innovation and the sort of investment we put into the business to help keep us in front of the competition. Wound care, explicit focus. It's the same in our surgical business. Here we highlight our procedure trays, which is a pack that's delivered to the OR.
It's customized for the particular surgeon or the operating room, and we have an integrated supply chain where we can actually drop that into the OR with precision in a customized fashion, mass customization, and we've digitalized that process. What we're actually looking to do is deliver better outcomes for patients and better outcomes and solutions for the clinicians that we serve. If you look at the underlying factors which affect the particular businesses we're in, surgical and wound care, they're positive. Aging population. An aging population suffers more acute and chronic conditions, and this is reflected in the fact that over the last eight years, surgical procedures have increased by 38%. Every time there's a surgical procedure, there's an opportunity for somebody to benefit from one of our products.
In terms of the OR, the surgical portfolio, every time you have a surgery, you create a wound, so it benefits our wound care portfolio. Perhaps more telling than that is the fact that the world is getting less healthy. There's a stunning statistic which not many people are aware of, but one in eleven of the global population suffers from diabetes. Of that one in eleven of the population, 34% will suffer a diabetic foot ulcer. A diabetic foot ulcer is a chronic wound which will exist with the patient for three months or more. If you have a diabetic foot ulcer, more people die from a diabetic foot ulcer than breast cancer in this day and age.
When you look at that prevalence of diabetes, which is increasing, the long-term benefits that our products can provide underpin the future of the market that we operate in. There are also increases in obesity, pressure ulcers, and various other factors which are a cause of chronic wounds. The takeaway is global growth for our products is secure in the long term. Attractive market because of those underpinning factors. There's also expanding access to healthcare in the developing world. Innovation, and I go back and it's a recurring theme, will be rewarded, because if you can provide a better outcome for a patient, you also then provide an economic benefit. I put that in simple terms.
If you have a wound and that wound is going to be prevalent for six months, if we have a product where you can actually shorten the wound's time to three months, you halve the cost of treatment for a patient. We're absolutely focused on innovation. We'll be rewarded for that. There's also a focus globally on preventing wounds, particularly chronic wounds, because if you don't have the wound in the first place, obviously there's a significant benefit for a health system. Just an example of that, a stage three or stage four pressure injury in the U.S. costs in the region of $35,000 to treat. If you can prevent that with a $10 interface dressing, the economic benefits are obvious to everybody. Strong tailwinds. Headwinds, pretty common. Increasing number of patients require care, puts pressure on budgets.
It's why we focus on innovation, so we can demonstrate the economic benefit of our products and the clinical outcomes that they generate. That budgetary pressure is there. In today's environment, the regulatory pressures get ever tougher. In Europe, we've got MDD, which is replacing MDR. MDD, 3 initials, but hugely onerous on us as a company. They cost us an awful lot of money and opportunity cost because our R&D organization is now focused on meeting the requirements of MDD in Europe. That we see as a benefit because we're ahead, we believe, of our competitors, and if people don't adhere to the new stipulations of MDD, they will be at a competitive disadvantage in the marketplace. The two headwinds we see as having some upside for us as well. Quick view of the portfolio. Wound care, we cover every aspect.
We cover the acute setting, which is traumatic wounds. If you have a car accident, if you have a surgical procedure in a hospital, you create an acute wound. We have the products to deal with any of those wounds. Chronic wounds, which are more prevalent, are those wounds which affect people who are perhaps compromised from a health perspective. That might be a pressure injury, a diabetic foot ulcer. If you have venous insufficiency, 6% of the American population over 65 have a chronic wound, generally of the leg because their blood isn't pumping around the body adequately, so they end up with a venous leg ulcer. Chronic wounds, we have the most comprehensive and innovative portfolio for treating chronic wounds. We also focus on prevention. I'll give you one statistic, which is from Baltimore, which is the leading health economic university in the U.S.
It was a Professor Bill Padula who produced work independently, which demonstrated if you used the funny-shaped dressing there, which looks like a heart, on a patient, you can prevent a pressure ulcer. The pressure ulcer is extremely painful and life-changing for the patient and costs, as I say, up to $35,000. If you use that interface, which costs $10, you actually save $77 every time you use it. That was over a million patients that were actually part of that data. We also have moved into biologics. We have a therapy which delivers oxygen, hemoglobin directly to the wound site. We have a comprehensive surgical procedure. When we say OR solutions, that's every single device, single use and disposable, you need to carry out a surgical procedure, we deliver into the operating room.
We're also number one in surgical gloves globally and number one in safe patient bathing in the hospital environment to prevent infection. That's the scope of portfolio. In terms of footprint, we continue to expand. In Germany, we've classically been under-penetrated. We've made a significant investment in salespeople in Germany to get our appropriate share of the market there. France, we invest, and again, very strong position in France. We're also looking at emerging markets and have made, over the last four years, significant investments in Brazil, Latin America, the Middle East, and China, and those are yielding returns now. The U.S., we've pivoted. We're very strong in acute, and now we're focusing on post-acute, classically where we haven't been present, which is a SEK 600 million market that we're just targeting a sales force at.
Geographic expansion and into fresh segments is a focus for us 2018 and onwards. That's reflected in these graphs. Historically, we were very European-based, and as can be seen from the revenue split, the Americas, we've significantly increased in the last five years, and APAC is an absolute focus for us as well. We anticipate that rounding of our footprint to continue into the foreseeable future. Focus on innovation yields returns. We see that in wound care. If we look at the competitive environment, we've outperformed in terms of both the sales in the segments of wound care that we compete and in terms of growth. In surgical, we actually slowed down slightly in 2018 because we were balancing the portfolio and exited a number of the less profitable lines.
Based on MDD and the regulatory environment, we also exited a number of lines which it wouldn't have been economic to push through that regulatory process. Recurring theme, I move to the pipeline. What keeps us ahead and sustains that growth is the investments that we make in R&D. Each of the areas and core platform technologies, when it comes to wound dressings and wound treatment, we have launched or are in the process of launching a new product. It's gelling fibers, foams, which is the largest, prevention, we're a clear leader, and contact layers. We haven't just been incremental in the products that we've developed and launched. We have a significant delta in terms of performance of these products than the competitors, which helps us maintain a premium position and our number one market share. We've also expanded into adjacencies in wound care.
We've looked at digital solutions for diagnostics. As I touched on earlier, we acquired SastoMed, which is a biologic product. It actually has a hemoglobin content and delivers oxygen directly into the wound, and wounds require oxygenation to accelerate healing. If you can see from the vitality index there, we've moved from 4% in 2014 through to 12% in 2018 of products sold, which have been launched within the last three years. On the surgical side, it's the same story. There's less room for the expansive innovation, but we've absolutely digitalized that offering. If you imagine five million surgical trays, each one of them customized, delivered into an OR, what enables us to do that?
It's the investment in the manufacturing facilities and then digitalization of that process from configuration of tray to supply chain, which has differentiated us and ensures that we will grow in our OR solutions business. Gloves, a very mature business, but again, we've invested in innovation and will have, in 2019, the first ever accelerator-free glove. We see potential in gloves with innovation to drive share, and in antiseptics, the configuration for safe patient bathing is something that we continue to drive. I go back to innovation. That's what keeps us ahead, maintains our premium position and number one market position in each of those play. We spend 3.5% of revenues on wound care, but that's disproportionately skewed towards wound care, where we have a market-leading 4.5% invested in that particular business of ours. I talked briefly about geographic expansion. We'll continue that.
We're moving from Brazil, which is our core in Latin America. We'll go direct in Chile, and we're opening up Mexico and Colombia. Southeast Europe, we are going direct in Croatia this year, and we use that as the hub for the surrounding region. Germany, I touched, we only have a 15% market share. We're actually growing faster in Germany than we are in our other European markets, and we're doing that by investing in the channel. We're putting sales force there, and that helps drive the adoption of our new platform technologies that we're launching, such as [ Mepilex] . China, Brazil, and Middle East, we continue to grow, we continue to invest there, and we grow above market in each of those markets. In summary, wound care and surgical are great places to be. The underlying demand is there and will continue. We're launching new products.
I touched on Mepilex Border at the front end. 22 times more bacteria trapping potential than any of our competitors, and we're still rolling that out in major markets. We only effectively launched in Q4 in the U.S. We've got momentum back in the U.S. We slipped a little bit, but the new products increased focus on post-acute will take us back to a stronger growth position in the U.S. Two transactions. You saw the Tissue Analytics and the SastoMed, which is the biologic, that we closed during the course of 2018. With that, back to Johan.
Thank you. Thank you very much, Richard. I don't know if it's working. No. Thank you very much for that. I've been talking a lot about product innovation and geographical expansion and new growth markets for many quarters here. I think it was great to share more depth into those areas. Now it's time for me to just round it up. I think we had a good start of the year. I think for me, the key highlight of the quarter was the strong profit growth of 25% of the subsidiaries, adjusting for the new accounting rules. With that, I think we just open up for Q&A.
Any questions? Let's start here. There will be a microphone handed out to you.
Thank you. Magnus Råman, Handelsbanken. I have two questions for you, Richard. First, you mentioned a good market potential here in the post-acute care in the U.S. Could you expand on that a little bit to tell us what kind of targets for market share you have and what implicitly that could add to the group sales?
I won't explicitly give you any targets, what I will say is in Europe, we are in the acute and we're in a home care post-acute environment. In the U.S., classically, we've been in the acute setting, which is the hospital. In Q4, Q1 of this year, we built a sales force. We built the marketing capability to go after the post-acute market in the U.S. That's home care, long-term care facilities, and skilled nursing facilities, and that's a potential SEK 600 million market that we hadn't been present in.
If I rephrase the question.
Yep.
What kind of market share do you have in Europe in that segment?
It varies. You saw on the slide, 15% in Germany. If you came to the Nordics, we would be about 40%. Obviously, that isn't an indication of what we could do in the coming years in the U.S.
Right. Also, there has been a theme for several quarters, as mentioned here before, about your investments in growth, investments in the sales force that you mentioned now as well, and investments in ramped-up product launches. How should you review those investments going forward, say, in the coming year or two? Would they mature or will you continue to expand those investments?
It's one of those, you can see that we've made the investment, we've got the pipeline. We're actually going to continue to invest in that R&D pipeline. The thing to note with wound care in particular is there's a lag between the product launch and the adoption in a market. Very complex market with tenders, contracts. For instance, the U.S., if you talk to HPG, which is one of the largest group purchasing organizations, they open up every two years for a contract. You may launch maybe two years before you actually get any sales of that product. We see the pipeline we have continuing to help us grow for the coming years, but we're not going to back off on terms of the pipeline and continuing investments there.
Just to frame it in some financial metrics, you delivered 4% organic growth in this quarter, but the EBITDA margin, adjusting for IFRS 16, was down 1.5 or 1.6 percentage points. Is that a progression that you would be satisfied with in the coming quarters, given that those investments to drive that top line is bearing a cost?
I might just defer that one to Johan.
No, I think we have been very clear, we are in full alignment with Richard that the key will be to bring forward all these opportunities to grow. That will, for sure, have some effects on the P&L, but we will also need to work hard on efficiency. As I said before, there is no contradiction between the two. We, for sure, have ambition to keep growing at a good pace and have a good profitability. Exact going into where it will end up with whether 1% back and forth, I will not go in there. We will do whatever we believe, and Richard and his team will do whatever investments I think this is the most important. Whether it's geographically a new product innovation that Richard and the team believes will create value.
Thank you for the presentation. Maybe just finally, one or two questions for you, then Johan. On EQT, you mentioned the concentration or simplification of the ownership structure.
Are we done now, or could there be further measures like these before a possible listing of EQT?
They are in the process. That process is not done yet. There is a process going on, analyzing how to, in the best way, strengthen up the balance sheet. So far, we have done a couple of transactions, and we have announced one here after the end of this quarter. It can very well come more of those transactions.
Interesting. Good reply. Thank you. Also possibly, you showed here average annual return in EQT over the past 10 years.
Could you share any numbers on five year or three year metrics to have a bit more, s orry, on five year or three year metrics to have a bit more color on the performance closer to today.
Yeah, I don't have those figures in my head. You have seen that the performance has been very strong for a number of years. I would say that the performance in terms of the returns we have gotten has been very good also during those periods. What can be more a little bit of a lumpy is more the cash flow, because that can be depending on if they invest a lot or if they sell a lot, it can jump, not the least between the quarters, but also between the years.
When it comes to lumpy, the split in carry performance fee between the mother company and the employees or the partners, that share, that is not lumpy. That is quite stable over time, or?
The carry, when we announced that, just to give you the facts, everybody has the same facts. When we announced that we increased after the end of the quarter, the return, and maybe, Magnus, you can check some return figures meanwhile. What we said was, when we went from 19% to 23% was that at EQT's release or homepage, they have gone out with a couple of information. That information is basically that in 2018, the asset under management was €30 billion. Based on that €30 billion, they made revenues of about €400 million. Right now, the asset under management has increased from the €30 billion to €40 billion, and of course, a key part here is the infrastructure fund. That should give you a good feeling for that.
When it comes to the carry part, that is your explicit question, what they said, and that we refer to, is that if you look on the latest funds and the coming funds, about a third of the carry will go into the company. That is higher than it has been historically. Then we have said for a number of years over the last periods when I've stood here that the majority of our returns at Investor has been as an LP, but the carry part has also been a significant part.
Okay. Thank you very much.
Thank you. Magnus, how does it go with the calculator?
Very, very well, thank you. We've looked at our value chain from security. It was 10% in 2016, 21% in 2017, and we had 25% in 2018. Pretty good numbers in that period as well.
Yes. Hello. Joachim Gunell from DNB Markets. Just a question to Johan on your comment that both Electrolux and the professional products will remain listed core investments.
Could you perhaps then provide more of a description from a timing perspective why it makes sense to make this split right now?
I think it's always a process that first of all, of course, as you know, this is a question that had been debated in the board and among the management team. It's always a question for all companies, I would say, if I can take a step back, you need to continuously evaluate the structure of the company. Continuously. In some cases, you make changes internally to improve efficiency, to improve the responsibilities, how you set up the organization in the most efficient way. In some companies, you come to the conclusion that actually the structure solution that we believe will create more value is a little bit of a bigger one, then that has been the case, for example, in Atlas Copco and now in Electrolux. In this case, this is of course not something that you wake up one morning and come up with.
This can, of course, be a process. It doesn't mean that you started very early in splitting, but there can be different parts. How can we make it more efficient? It's normally a gradual process on how you do it. In this case, what I think is most important is that we believe that the professional business and the consumer business will have better prospects of achieving profitable growth on their own.
That's clear. Thank you. Then finally for you, Richard, on a more broader theme, in terms of M&A appetite perhaps, how large M&A opportunities would you be comfortable with at this stage?
Let me try again. We're focused on organic growth, but there are a number of opportunities that we will look at, and if it makes sense, we're absolutely in the market for acquisitions, but only when they make sense.
Finally coming back to the investments into product innovation, and obviously this is an ongoing process, but could you please elaborate a bit more on how much of the investments made have already, so to say, been accretive for your numbers, and You mentioned the timeframe here from zero to two years perhaps.
Yep.
Some further color on that, please.
It's an interesting one when you look at the development cycle in wound care. It's a very dispersed market. By the time we actually start getting traction, it may be two or three years post-launch. The trick is, and you think about the timelines we're talking about, we lost the IP on Mepilex in 2014. We significantly invested in the pipeline then. We're starting to see that pipeline come through. If you look at, we slowed down, but we will maintain our position as number one. We'll maintain our margin because we've got that innovation pipeline now so that it's firing off, and we get a nice cadence of product launches into the foreseeable future. We have a pipeline which goes out five years and introduces incremental product into those platforms going forward.
We'll maintain our position, maintain our price point in a challenging marketplace.
Right. Thank you.
[Rutger] Smith. A couple of questions to Richard. In the wound care, how much is attributable to acute wounds and how much to chronic wounds?
Chronic wounds is the larger part of the market. If you think an acute wound generally heals quickly. If you're in a hospital, you have a surgery, there's generally very little complication. You may get 2% infection rate in the wound. A chronic wound can be there for the patient's life. If you actually looked in terms of dressings, about 60, 65% of the value is in the chronic section there, the post-acute.
All right. When it comes to wound healing, not everyone is aware of that is a very complicated biological process.
Absolutely.
All sorts of growth factors contracting each other. Historically, the knowledge about wound healing has been insufficient, but very rapidly, we are gaining that information. Once we know how a wound actually heals, the market for chronic wounds may change drastically.
Instead of having a wound that is around for 10 years, it may be healed within a month. My question to you is then, are you entertaining entering the more You talk about biologics, but there are differences in biologics. Are you entertaining going into the more medical side of it? Because if you're not, you may lose out on that part of the business.
No, it's a great question. If you look at the chronic portion of wounds, though, there is no magic bullet that any pharma company or biologic does that gets rid of a chronic wound, because there are multiple factors which come into play. We see, at least for the next 10 years with any technology on the horizon, the number of chronic wounds in the world increasing. The trick is actually how do we help the patient, how do we help the caregiver, the healthcare system? We don't provide a healing environment for that wound, and that's what we're focused on. The dressings create a great environment to prevent infection. They provide the moist environment. They manage the exudate so the wound will heal more quickly. When we look at biologics, it's how do we actually accelerate the healing of those chronic wounds.
We're focused explicitly on accelerating the healing, not the underlying pathologies.
Any more questions in the room here? Yes.
Thank you. Ermin Keric from Nordea Markets. Just on the regions. You're growing fairly rapidly in Latin America. Could you give us any flavor on difference of margins between the different regions?
The margins in Latin America. If we pit the emerging markets, our margins are as strong, if not stronger there than they are in Europe. The reason being, we actually provide products which are completely differentiated into the private setting, which is where we focus. Our margins are as strong, if not stronger, in both China, Brazil, and the Middle East.
Thank you. Then more on the short term. It's mentioned in the report that Brexit supported the sales in the quarter. Could you give any sort of flavor on how much that contributed?
For the quarter, not that material. In the regional, SEK 3 million, but it's difficult to actually put a hard number on it as people stock up.
Sure. Thank you. For you, maybe more on the macro outlook where you say that you see maybe somewhat softer global economy going forward. Is there any specific industries you would single out where you see are more vulnerable?
I should start by saying that, as I normally say, I don't have a crystal ball when it comes to the macroeconomy. Of course, I can see the IMF projections that it's slowing down in a number of areas. That's my comment, and it's important because we need to, and our company needs to be ready. Having said that, coming back to your question, one segment that has clearly been weaker is the automotive sector. While many other sectors have held up reasonably well as we have seen. The key question for me is, if you go historically, normally when the automotive sector goes down, the general industry tends to also follow and becoming softer. Whether that will happen and to what extent, of course, I have no idea, but that is a risk. The automotive segment has been weak in a number of areas.
Thank you.
Just a follow-up question on that topic. Are there any segments or sectors that you want to highlight that have actually exceeded your expectations in terms of underlying demand?
No, I will refrain from actually going into the different business segments since we are in the midst of a quarterly report season.
Thank you.
If we have no more questions here in the room, let's check if we have any questions from participants on the call.
Ladies and gentlemen, if you have a question on the telephone lines, please press zero one on your telephone keypad and you will enter a queue. There are no questions at this time.
Okay, no questions on the call. Do we have any questions from the webcast? No. By that, we would like to say thank you, and thank you for joining us today. That was all. Yeah.
Cool. Thanks a lot, Richard.
Thanks.