Ladies and gentlemen, thank you all for standing by, and welcome to today's Vitrolife Interim Report, January to September 2020. At this time, all participants will be on a listen-only mode. There will be a presentation followed by a question and answer session, at which time, should you wish to ask a question, you will need to press star and the number one on your telephone and wait for your name to be announced. I must advise you all that this conference is being recorded today, Friday the November 6th, 2020. Without any further delay, I would like to hand the conference over to the first speaker for the day, Sir Thomas Axelsson. Sir, please go ahead.
Thank you very much. Welcome to Vitrolife Interim Report January-September 2020. The speakers of today will be the CFO, Mikael Engblom, and myself, Thomas Axelsson, the CEO of the company. Please change page and get into the presentation on page number two. The overall theme for this report is good profitability and continued recovery. Especially about the recovery is something we will come back to and explaining what currently has happened within Q3 and some also small projections regarding what goes on right now. Look on then Q3 first. The sales was SEK 320 million, and it is equal to -15% then. In local currency, it was a decrease of 11%. Our EBITDA was SEK 134 million, corresponding to a margin of 42%. Let's then change page and go to page number three.
What we have right now during this presentation is on page number three, it is sales and growth per market region. On page number four, it is current situation and short-term outlook. What I will try to do then together with Mikael, but what I will try to do right now is to explain quarter three. When I do some of the comments regarding quarter three, you know that we started quarter three by saying that the end of quarter two and the beginning of quarter three, we saw the IVF cycles at around two-third. What we see currently at the end of Q3, beginning of Q4, is it is around 90% globally, the IVF cycles. What I will do then is to start on page number three, going from the right side, going from our geographical area, Japan Pacific.
It is quarter three, a decrease of 27%. If I go into this then, when we started the period, it was still some restriction in Japan, which was holding back the clinics. We thought that it was around 90% at the beginning of this period. In Australia and in New Zealand, you know that it's been restrictions, but the IVF clinics has been open, and they have been running quite well. What we see also in this is that our disposable business, our consumer business, is doing very well also in this territory. What can be explained why it is such a decline, with 27%, is of course due to that the clinic has not been able to operate normally together with the situation that the hardware business, our technology business, has been slow in both Japan and Australia.
The comparison number also for last year is a little bit tough since it was last year that we had good orders to clinic chains, both in Japan and in the Pacific area. Let's go into the area that is what we are calling it China and Asia, really Asia. There's a mixed picture. What I will start with is China. China is picking up good. Our best guess is that the cycles in China today is +90%, something like 90%-95%. What we can see is that every clinic more or less is opening and running quite well. The sales in China on the consumer business is very good, and that is, let's say, making the numbers still so good within the territory. We're having -14%. If China goes well, the consumer business goes well.
We have got back our media position that we were, let's say, losing market shares from Q2 last year due to some regulatory and supply things. We are right now back, and it looks very, very good. However, the territory includes, as you know, Thailand, Cambodia, and India. In Southeast Asia, the Thailand and Cambodia business, Vietnam, and all of them are in a situation where the clinics are running with very low cycles, and also some has not yet reopened. In India, we feel that the cycles are coming back. Our best guess is that currently the clinics are running around plus 50%. Good growth coming back within the region. China is back. Consumer business, very, very good. We are coming into EMEA region. There we have a mixed picture between some regions and also between public and private clinics.
Overall, wherever we are, if we are in the EMEA region or we are in the U.S., it is the private clinics that are performing very well. We had good situation in Western Europe. U.K., the private clinics are doing very well. They are also doing more cycles, at least in some clinics, than what we've seen before. Private clinics in Spain, however, since they have quite a few of their cycles is depending upon what's called IVF tourism. They are a little bit low compared to last year. Territories where cycles has not yet recovered is for sure Middle East and part of Turkey and some of the countries like Czechia and other places. Private goes very well. They are picking up. As I said, they're doing more cycles than probably ever in some countries.
The public clinics, in some places, they have not really reopened. What we can see, for instance, is that unfortunately, they're talking about the second wave, or what we should call it, is that it is not a pattern globally, but I'm just going to update you that we can see a decrease in oocyte pickups in, for instance, Belgium and France right now. Why I'm mentioning that is that we don't see a decline or any reaction on the private clinics. We don't see any reaction in Australia, Japan, or in China on, let's say, the risk of a second wave. The only places we see some decline can be and are in public hospitals, clinics in just a few countries. That is just the current situation today. The decline in the EMEA region was minus 4%. Go over to the Americas.
That region is a really interesting region in Q3, where we had in South America, and you know well that they have COVID problems down there. They are picking up, but still they are not back into normal rate. It's hard to define exactly what we believe is in that territory because there's a difference between Chile, Brazil, Peru, but I would like to say that it is probably around 50%-60% of last year. U.S. U.S.A. Numbers high. It's picking up. What we are hearing from the clinics and what we also see from our sales is that the consumer business is doing very well. Cycles are still high. It was growing in Q3.
The discussion with the clinics and how we can assume what's going to happen in U.S. right now is that they will continue to do cycles as last year, and maybe a little bit higher in some clinics. They are unfortunately waiting, we can also see that on our technology business, that they are waiting with doing orders of our time-lapse. Overall, the market is picking up. Overall, Q3 has come from a situation where it was difficult to plan the demand up to situation where the demand is more similar to the, let's say, the traditional planning situation then. Talking about planning, talking about demand, let's go over to page number four then and see the short-term outlook. I'm just repeating that we see that globally, we see that it is about +90%, approximately, the number of cycles being done.
As mentioned, huge difference between the high cycle rates in the U.S. compared with the very low cycle rates in Southeast Asia. Private clinics back quicker than public, of course then. Also what Mikael and I are addressing is that we don't know if it is going to be any impact on the second wave or the kind of restrictions that we are slowly seeing coming in, especially Western Europe. There is no changes. When we are seeing the quick pent-up demand in U.S. and some other new countries where they're coming back, we do believe that's going to be the pattern for most regions. Okay, go then into page number five. Demand products and how does it look like for our divisions. The consumable business in Q3, it was plus 7% in local currencies, and that reflects the increase of numbers.
It also reflects what we believe that in some clinics, they have been careful, and they're building up a small inventory so they could come into Q4 and be more secure about their demand that they also have from the end user, the patients. Good consumer business growth with 7%. Technology is not as fun to talk about, the situation there is that we believe, and we can also see that some customers are waiting in doing the final order confirmation, and they are waiting up until when they believe that the operations has been normalized. As said before, first are the consumer business coming, then we believe that one to two quarter after, when the consumer business are back, the technology will be back to normal situation then.
Genomics, minus 13%, that are reflected by our customers and where they are in EMEA and in the Americas then. That was a short review of the sales per division and also per territory. Mikael, could you please continue on page number six?
I will take us through some of the key financials for the third quarter. Gross margin in the third quarter was 62%, down two percentage points compared to the same quarter last year. The reason for the decline was negative economies of scale. Due to that, we have lower sales in this quarter compared to the same quarter last year. We also had a negative currency effect in the third quarter, that was offset against the positive product mix. Due to that, we sold more consumables, which has a higher margin. On the EBITDA margin, we increased one percentage point versus last year, from 41%- 42%. The decline in gross margin that I just mentioned was offset by lower operating expenses in relation to sales.
What we saw here was reduced various activity costs, such as travel and exhibitions, as well as a reduced provision for bad debt of about SEK 5 million due to that the market is recovering. We also had a good cost control in general during the quarter. On the cash position side, we have a net debt in relation to EBITDA of -1.9, so a net cash position as before. We are planning to use the cash to make value generating acquisitions as before. Please change to page number seven for the long-term outlook. After the COVID situation, we expect the market to return to its long-term growth rates of about 5%-10% in monetary terms. As before, we believe it will be driven by demographics such as parents-to-be, wait longer time to have children and are in more need of treatment.
We also believe the social acceptance for IVF will increase and the increased global income that supports this treatment. Vitrolife, we will, as before, focus on sales expansion and broadening our product offering. This will be done both organically and through acquisitions. With that, operator, we are ready to take questions.
Thank you. We will now begin the question and answer session. As a reminder, should you wish to ask a question, please press star and one on your telephone keypad. Wait for your name to be announced. Should you wish to cancel it, you may press the pound or hash key. Once again, for questions, please press star and one. There are a couple of questions that came in. Please stand by while we compile the Q&A queue. This will now take a few moments. Thank you. We are now taking the names of participants who would like to ask a question. While we are waiting, should you wish to ask a question, again, please press star and one. Thank you for patiently waiting. Our first question comes from the line of Ulrik Trattner. Your line is now open. Please go ahead.
Thank you very much. This is Ulrik Trattner from Carnegie. Hi, Thomas and Mikael. I have a few questions. We can just start off with the general market recovery. First, if you can please help us remind what the split between your exposure to private versus public clinics is in the EMEA, given the different dynamics of rebound in these clinics.
Okay. It's Thomas here. Hi, Ulrik. The public, as you know, is mainly in Western Europe. What we are having is, if you compare our sales there, normally in Western Europe, it is maybe 60/40. If you go into the global numbers, it is for sure more and more private sales then. That's about the situation then where 60% is then private in Western Europe in our sales, roughly. You asked two questions.
Yes
okay. Yeah.
That's great. You mentioned in the report that you expect negative effects in Q4 as well. Should we interpret this as a flat market rebound going into Q1?
Yeah. The way of running this company, as you know, has been always for growing. We are comparing with Q4 and going into Q1, it is difficult right now to project, and especially in Western Europe. As I try to say is that U.S. is going very well. We were talking to the clinics even yesterday, trying to find out if there were any kind of changes there. It seems like rebound and even a higher demand in U.S. than normally. Look, we got a response from one customer that said, clinic then that, we see a higher inflow from patients than ever, and were two reasons behind it. One was that their patients now working from home, they had time to go into and start the procedure. Also that there were some customers who were afraid of more regulations.
In case of Biden would win, they were afraid that it could be more regulation, therefore they want to go into the clinic as soon as possible. Let's say U.S., I do think it's going to be a normal business. Japan, Pacific, I do think it's going to be a normal business. In China, quickly soon to a normal business. Southeast Asia, they have a lot of tourists. There is not going to be any IVF tourists within the next quarter, as we believe. All the restrictions that goes down in China, in India, that will keep back the rebound. In the EMEA business, you started to say about the public and private. Public, I'm afraid that they will not rebound to normal business.
Seeing a slightly decrease in oocyte pickup rate in Belgium and France, I think that can set a pattern in case of the restrictions will continue to grow for, let's say, IVF inside Europe. There isn't any restrictions ongoing in Europe. Clinics can be open, the private clinic. It is difficult. That's why I can't give you a straight answer. We do not believe overall for the Vitrolife business that we will rebound to normal sales within Q4. No.
Okay. That's great. Thank you very much. Just one last question before I'll get back into the queue. You highlight as well, sort of a build-up in inventory positive for your consumable business during the third quarter, taking back market share in China. Could you, first of all, please sort of quantify or at least shed some more light on how much of the growth in consumables you believe to be in inventory build-up? And secondly, on regained market share, do you believe that you have regained the majority of the positions lost last year due to the production issues?
Yeah. We can start with the second one. Yes, we believe so. That's a quick answer. On the rebound, or let's say the building up on inventory, that's difficult for us to judge. We have feel, in some discussions that customers were quite concerned in late of June, starting on July, when they were getting back to the IVF clinics opening after that. They were out of products, and we were able to supply, and so were also some of the competitors. We know that there were also some competitors that had a little bit of a supply problem. I think that overall, many clinics has been on the safe side, building up a little bit more of inventory.
The sensitive part for the products that we have is the culture media, with the risk of scrapping, the risk of scrapping for the customers, and with shelf life that are different. In some cases, it is 12, 16 weeks. I don't think it is any huge amount. Best guess, maybe I shouldn't do this, Mikael, is the CFO then, but I think that maybe a couple of percentage, 2%, 3%, 4% maybe.
That was my follow-up question. My point exactly, given the short shelf life of perhaps the most important large portion of consumables being media.
obviously dependent on when the inventory was built up. As you mentioned, June, July, this shouldn't be interpreted into hampered demand going into Q4, right?
Not in any major impact.
Okay. That's great. I'll get back to the queue and get back later.
Thank you.
if I have the opportunity. Thank you.
Okay, your next question comes from the line of Guillaume. Please go ahead.
Good morning, everyone. My question was kind of similar than the inaudible one. I wanted to have a bit more color about the restocking impact in Asia. How do you see this? There is a point with the life cycle of the media product and then the point with the restocking. How could you quantify the pent-up of the demand, I will say?
Hi, Guillaume. I think that the question regarding the stock-up is very similar to what I just said. It's probably going to be just a few percentage regarding the consumable business then. Your question was regarding the Asia and South Asia business. I wasn't really able to find out really what you are aiming at with your questions. Could you please be more specific, and I can try to be more specific in my answer?
My question is, the result in Asia and especially in China has been very good, but I would like to know what could you attribute to the stock build-up and what the parts you could attribute to the real demand?
In China, the business, as you know, was down very quickly in the end of Q1, and then it started to move up first in Q2. If we see about the inventory level and also the rebound of the business and then the running business, the China business has had an opening of the clinics that have been going on for six months or something like that. I feel that it is the easiest market right now to predict because they have been opening up. It is controlled by, let's say, the regions and provinces when they can open up. In a situation currently where the business in China runs 90%, 95%, that is the kind of demand that we are planning for.
When we see that our consumer business is growing as good as it is overall, that it is partly reflecting a constant planned purchase pattern from our Chinese customers. I don't see any bigger build-up on inventory in China right now. Mikael, what's your view on that?
I agree.
Okay. Thanks very much. That was very clear.
Once again, for questions, please press star and one. No further question at this time. Please continue.
If there isn't any further questions then, I would thank you all that are calling in, and I hope that you are all doing fine and that we will get the COVID out of the picture as soon as possible. Thank you very much for today. Bye.
Thank you. That does conclude our conference with the speakers. Please stand by, participants, you may all disconnect. Thank you all for joining us. Stay safe, everyone.