Ladies and gentlemen, welcome to the Straumann Group Full Year 2018 Results Conference Call and live webcast. I'm Alice, the conference call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. Webcast viewers may submit their questions in writing by the relative tab. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Marco Gadola, CEO. Please go ahead, sir.
Good morning, everyone, and thank you for joining us today for this conference on Straumann's 2018 full-year results. As usual, our presentation and discussion will include forward-looking statements. Please take note of the disclaimer on slide two and at the end of our press release. In addition to the presentation slides and the press release, you can get our annual report and financial statements via the links in the press release and at the end of the presentation. As usual, I will go through the highlights and then Peter Hackel, our CFO, will share the business performance and financial details with you. After that, I will bring you up to date on our strategic progress and our exciting growth opportunities. We will be happy to answer your questions.
The main story this morning is that 2018 was our best year since 2005, and we finished it with a very strong fourth quarter. Looking at the key figures on slide five, full-year revenue climbed 23% to CHF 1.36 billion. Acquisitions contributed four percentage points, and with a neutral currency effect, our underlying organic growth amounted to 19%. Asia-Pacific was our fastest-growing region for a fourth consecutive year, posting an organic increase of more than 30%. In addition to meeting our promise of top-line growth in the high teens, we also delivered our guidance for improved profitability. Gross profit exceeded CHF 1 billion for the first time, and EBITDA soared up 24%, lifting the respective margin by 30 basis points. In view of the good results in 2018, the board is proposing a further increase of the dividend to CHF 5.25 per share.
Looking ahead, we expect to outperform the market again this year with organic revenue growth in the low teens, despite the high baseline that we set in 2018. Once again, we expect further improvements in EBITDA and EBIT margins, I will say more about that later. Moving to slide six, we saw a sequential acceleration of four percentage points which was our strongest quarter. Organic growth reached 22%, with three of our regions posting increases of more than 20%. The strong revenue growth is reflected through the P&L, as you can see on slide seven. Our underlying EBITDA and EBIT margins expanded by 30 and 20 basis points respectively, and excluding one-time exceptionals, earnings per share rose 16% to CHF 17. Looking at the historic context on slide eight, we have succeeded in increasing organic revenue at an average of 13% over the past five years.
Moving ahead to slide nine, we estimate that the global market for implant dentistry is worth four and a half billion CHF. In 2016, it grew at 4%-5%, driven almost entirely by volume growth. Having outperformed significantly for several years, we are the clear market leader with a share of 25%. As you can see on the left, the overall dentistry market is worth between CHF 26 billion and CHF 28 billion, and we have built a competitive portfolio that enables us to address half of it. In 2018, we created more than 700 new jobs worldwide. A further 350 joined us through acquisitions, increasing our global team by more than 1,000. Most of the new positions were in sales and related functions in high-growth markets, but also in production. In Switzerland, we welcomed 115 new colleagues, underlying our commitment to Straumann's roots and the value of our Swiss brand.
Most of these positions were in production and research and development. With that, I will pass over to Peter for the performance and financial details.
Thank you, Marco, and good morning, everyone. I would like to begin with slide 12 and our top-line development. At 2018 exchange rates, our full-year revenue in 2017 would have been CHF 5 million lower, mainly due to the weakening of the Brazilian real. Recently, we have made a number of acquisitions, five of which have a significant impact on our reporting. ClearCorrect and Dental Wings in October 2017, followed by Batigroup, T-Plus, and Createch in 2018. To determine the comparison basis for organic revenue growth, we add the respective sales or distributor markups of the acquired entities to the revenue baseline in the previous year, which means that the M&A effect added CHF 39 million to our adjusted revenue of CHF 1.15 billion.
As you can see in the middle of the chart, all our regions posted double-digit increases, bringing organic growth to almost 19%, driven by North America and EMEA, which cumulatively contributed 65% to overall growth, as you can see on the right-hand side of the slide. Asia Pacific kept its dynamic pace as organic revenue growth surged 28%. Latin America also showed a very pleasing trend with a growth of more than 20%. Based on external data, we believe we gained share in all our regions. Looking closer at the regional performances in Q4 on slides 13 and 14, you can see that momentum increased in our largest region, EMEA. Organic growth accelerated to 19%, fueled by strong demand for digital equipment and good growth in our base business. Belgium, Iberia, Russia, Sweden, and the U.K. all posted dynamic increases.
Germany and Switzerland both reported good growth, while Eastern Europe and the Middle East benefited from successful ITI congresses in their region. North America also posted a successive increase in Q4 as organic revenue climbed more than 23%, driven by good performances in both our premium and non-premium implant businesses. BLT continued to be the principal contributor on the premium side, and we have sold more than 800,000 of these implants in the regions since their launch four years ago. The clear aligner business also grew dynamically and contributed notably to regional growth. Moving to slide 14 in Asia Pacific. Organic growth reached 21% in Q4, driven by China and lifted by a strong performance in Korea. With the exception of Japan, which posted a strong prior year performance, all our subsidiaries grew at double-digit rates.
The pace was a little slower in Q4, the performance was no less remarkable, and we still do not have all our products on the market because of the lengthy approval processes. We opened a new subsidiary in Thailand and strengthened our foothold in the highly competitive non-premium segment, launching Neodent in Australia, Indonesia, and Thailand, and adding T-Plus in Taiwan and China. Finally, in Latin America, organic growth accelerated to 27%, reflecting the marked improvement in confidence following the presidential election in Brazil. The latter posted low double-digit growth while we grew dynamically elsewhere. Following the successful launch of botiss in Brazil and Mexico earlier in the year, sales of biomaterials boosted the overall performance. Turning to slide 15. From a business perspective, our full year performance was driven by implant volumes. Growth in the digital business was the most pronounced.
Implants generated half of the group's growth. All implant lines, including the ceramic range, contributed to this, with the strongest growth coming from Straumann's BLT line. Our non-premium implant business also developed well, especially in North America and emerging markets, while the uptake was lower than expected in some parts of Europe. Our restorative business delivered good results, driven by implant abutments and digital hardware, particularly co-branded into our scanners and 3D printers. Demand for our bone graft and membrane products was good throughout the year. Emdogain sales were interrupted for several months in the U.S., but resumed in Q3 and picked up quickly. Before I comment on the key financial statements, let me give you an overview of the prior year period restatements and the exceptional effects in 2018. This will facilitate a like-for-like comparison.
In September 2017, we acquired ClearCorrect, we disclosed the respective purchase allocation in our financial statements on a provisional basis. The PPA has now been completed, we adjusted the 2017 statements retrospectively. These changes reduced the 2017 EBIT by CHF 300,000, but increased net profit by almost CHF 7 million. The large difference between EBIT and the bottom line is due to the revaluation of deferred tax liabilities related to the U.S. Tax Cuts and Jobs Act. A complete overview of these changes is shown in note three of the annual report. As we communicated in August, this year's exceptional effects relate to inventory revaluation expenses in connection with the acquisition of Batigroup and the respective tax benefit. In addition, we increased our stake in Createch to full ownership and our participation in T-Plus to 58%.
We subsequently consolidated both businesses, leading to a collective consolidation gain of CHF 11 million. All these items are presented in a separate column on slide 16. To facilitate the comparison, we have shown all key financial figures on a reported basis and excluding exceptionals. We made further profitability improvements despite significant investments in geographic expansion, innovative technology and production capacity. Our underlying EBITDA margin rose 30 basis points to just less than 30%, while the underlying EBIT margin improved 20 basis points to almost 26%. Underlying net profit increased 19%, bringing the corresponding margin to 20%. Look at gross profit development in slide 18, our margin in 2017 amounted to 75.6% on a reported basis or 75.9% adjusted for currencies and exceptionals.
In 2018, strong volume growth in our premium and non-premium implant solution expanded our gross margin, but this was offset by a less favorable business mix as the proportion of sales from third-party products, digital equipment, and clear aligners increased. This reflects our strategy to offer a wider range of products and more integrated solutions, which usually come with lower gross margins. Pricing in our implant business was stable. Our significant investments in production capacity and the additional hire of manufacturing personnel across our implant facilities resulted in higher production costs and depreciation charges. Collectively, these factors reduced the gross margin by 40 basis points. On the next slide, you can see that the EBITDA margin increased 30 basis points to 29.6%, which is remarkable in light of the lower gross margin and the high level of investments in our global distribution network.
Currency effects lifted the EBITDA margin by 20 basis points. The increase in marketing, R&D, and administration is mainly due to the incorporation of ClearCorrect and Batigroup, as well as higher R&D investments and additional expenses related to the upcoming implementation of the European Medical Device Regulation. The change of income had no significant impact on margin development. On slide 20, you can see the changes in depreciation and amortization broken down into regular and acquired intangible assets. Depreciation and amortization expenses include ClearCorrect and Dental Wings on a full year basis. They also reflect the acquisition-related amortization of Batigroup, T-Plus, and Createch. All factors considered, depreciation and amortization increased by CHF 12 million. Moving on to slide 21 and the operating income margin.
The EBITDA expansion added 10 basis points and FX added 40 basis points, which is significantly less than in H1, when we benefited from a strong currency tailwind of 120 basis points. The aforementioned higher D&A charges reduced the EBIT margin by 30 basis points. Overall, the EBIT margin increased 20 basis points to 25.8%, similar to the first half level. As you can see in slide 22, the combination of these operational factors contributed CHF 66 million to net profit. The net financial result, excluding exceptional items, was CHF 14 million lower than in the prior year due to a lower interest result, higher hedging costs, and currency exchange losses in emerging markets like Turkey, Iran, and Brazil. In addition, the strong performance of the acquired Batigroup triggered a revaluation of the present value of future earn-out payments.
Following the final settlement with our former Chinese distributor, we paid the remaining compensation payments as well as some default interest. Our underlying share of results from associates was in line with the prior year. There was an impairment charge of CHF 8 million for Rodo Medical, which we already addressed in the first half. I should point out that the products from our associated companies made a positive contribution to our top line and gross profit. Income tax expenses, excluding a tax benefit of 2 million related to the Batigroup inventory revaluation, rose by CHF 8 million. The underlying income tax rate was stable at 15%. These items collectively increased our underlying net profit by 19% to CHF 274 million, with the corresponding margin reaching 20%. The next slide shows the details of our cash flow statement.
Free cash flow increased from CHF 145 million in 2017 to CHF 169 million in 2018, mainly due to an increase of the EBITDA profit of CHF 72 million. The change in net working capital added CHF 4 million to the year-on-year change in cash flow. Days of supply decreased by nine days, and days of sales outstanding remained unchanged compared with the same period a year ago. As a result, operating cash flow rose 28%. Due to expansion projects in our implant facilities, capital expenditures increased CHF 35 million to CHF 110 million. Higher interest and tax payment reduced cash flow by CHF 14 million. The combination of these effects resulted in a free cash flow margin of 12%, and return on equity amounted to a very solid 24%, and we are net cash positive.
In the course of 2018, we invested CHF 72 million in land, buildings, and machinery at our three main production centers in Switzerland, Brazil, and the U.S. The construction of our new building in Villeret is on track and will create an additional production space of 16,000 sq m when it opens in Q1 2021. We have also enlarged capacity significantly in Curitiba and Andover. All these investments are crucial in order to meet current and future demand, as our current present capacity is fully utilized. Furthermore, we have added specialized production machinery for innovative projects that are currently in development. In December, we also successfully implemented SAP in Brazil, which is a huge achievement that was only possible thanks to the excellent collaboration between our IT teams at Neodent and the headquarters in Basel.
As Marco mentioned, based on the strong performance, the board is proposing to increase the dividend for the fourth consecutive year. Dividend proposal is CHF 5.25, which is an increase of CHF 0.50. The share will be traded ex-dividend as of April 9th. Going forward, the board's intention is to increase the dividend subject to further good performance of the group. With this positive message, I will hand back to Marco.
Thank you very much, Peter. The next three slides summarize our strategic progress in 2018, starting with our first priority, which focuses on driving a high-performance culture. Over the past five years, the play-to-learn mindset has shaped our company and helped us to achieve excellent results, sustainable market outperformance, and significant market share gains. We have become more agile, more entrepreneurial, more customer-focused, and more engaged. I'm convinced that our strong performance in 2018 reflects this and is a return on the investment we have made in our cultural journey. We still have work to do in order to unleash the full potential of our organization. This is the focus of Cultural Journey 2.0, which began in September and is now in full swing. Our efforts to target unexploited growth markets and segments were intense and fruitful.
In addition to opening new subsidiaries and branches to extend our geographic reach, we made further inroads into the non-premium implant segment, for example, by extending Neodent's footprint, which now covers more than 50 countries. This was accelerated by our group brand structure and initiatives to converge our premium and non-premium activities. We gained control of T-Plus in Taiwan, which provides us with a foothold in the lower value segment of the large Chinese market. We entered the large market for biomaterials in Brazil, where the uptake exceeded our expectations. To penetrate the corporate dentistry segment, we established a dedicated unit to serve dental service organizations at the outset of 2018. It has since doubled in size and has won large contracts with chains that collectively comprise several hundred clinics. Moving on to slide 29.
In pursuit of our strategy to provide total solutions in aesthetic dentistry, we have brought three new implant systems to market. Straumann BLX, Straumann Mini Implant, and Straumann PURE Ceramic Implant. Not forgetting Neodent GM, which entered its full market release early in the year. We strengthened our position in specialized CAD/CAM prosthetics by fully acquiring Createch, which has become our center of excellence for CAD/CAM innovation. We also enhanced our digital portfolio and entered the exciting field of remote patient monitoring using artificial intelligence and smartphone technology. In biomaterials, we secured our partnership with botiss medical by acquiring a 30% stake in the company. Finally, we began to pilot the portfolio of in-licensed products, including innovative caries treatments, as well as novel approaches to preventing tooth and implant loss. Moving on to slide 30.
In 2018, its customer base expanded by more than 15%, and the number of cases grew 61%. This was driven by North America, where ClearCorrect began to promote its aligners with DentalMonitoring's remote monitoring system. After successful pilots, we have started the full launch of ClearCorrect in Brazil and are entering additional markets in Europe. To cater for current future growth, we invest in production capacity in Round Rock and Curitiba. China is the world's second-largest market for clear aligners and is forecast to grow dynamically in the next five years. To accelerate market entry, we are partnering with ZhengLi Technology, a company in Tianjin, whose modern clear aligner system has already received Chinese regulatory approval. We have obtained exclusive rights in China, we leverage our network, marketing, training, distribution, and service capabilities to penetrate this huge, exciting, and dynamic market.
Shortly after New Year, we took full ownership of Zinedent, the joint venture we established with our former Turkish distributor in 2015. Zinedent supplies implant solutions in Turkey and to distributor markets in the Middle East, North Africa, and Eurasia. The brand's implants use an established design and are priced for the lower value segment, making them attractive in emerging markets. As 2018 ended, we acquired a 34% stake in Z-Systems in return for a capital injection to develop their pipeline and expand their portfolio. Z-Systems is a leader in ceramic implant systems, and we have obtained exclusive distribution rights to their next-generation implant line, which complements our own ceramic range. It has an apically tapered bone level two-piece design for prosthetic flexibility and convenient handling.
Unlike other implants, it features a ceramic connection screw, making it the first two-piece ceramic screw-retained implant that's full ceramic, with no metal and no plastic. We will launch it next month under the brand name Straumann SNOW. Together with Z-Systems, the combination of our expertise, research capabilities, sales power, and reach position us jointly as a leading force in the global ceramic implant market. Removable overdentures carried on implants are one of the most popular options for edentulous patients. The market for retention devices used in these systems was dominated by a very small number of manufacturers. Seeking an alternative supply, we partnered with Valoc in 2015, and together with Medentika, we have made their range one of the most widely used systems in our industry. Made in Switzerland, their Novaloc and Optiloc systems are innovative, user-friendly, durable, and compatible with most leading implant systems.
This has been a great partnership. Today, we are announcing that we have increased our stake in Valoc from 44% to 55% and have consolidated the company as of January 29th. In three weeks' time, the IDS in Cologne will open its doors to more than 150,000 visitors from around the world. Being the biggest dental event, it provides an excellent platform to promote the launches of Straumann BLX and Straumann SNOW, as well as the international rollout of ClearCorrect, our digital innovations, and more. The illustration on slide 35 shows the Straumann area of confidence, which is our main stand. Also, Neodent, Medentika, and Dental Wings will also have booths, and there will be a Straumann virtual clinic. Please come and join us if you can, especially on March 13th for our analysts and media event.
On a more personal note, we recently announced that Guillaume Daniellot, our Head of Sales North America, will take over from me as CEO on January 1st, 2020. Shortly afterwards, I will stand for election to the board. I am looking forward to my new role in the Straumann Group, and I am very glad that my successor is an outstanding leader from within the company who is equally passionate about Straumann. The timing is perfect. We are in a position of strength, and Guillaume's appointment, as well as my transition to the board, will ensure continuity. We also announced recently that Alastair Robertson will join us as Head of Global People Management & Development around mid-year. He is a highly experienced executive with an impressive track record in large multinational organizations.
He will take over from Alexander Ochsner, who has done an excellent job in building our HR capabilities over the past two years. Alexander will take on a new senior role, which we will communicate later. In addition to these transitions, we are delighted to announce that our board of directors will propose Juan-José Gonzalez for election as an additional board member at the forthcoming AGM. Juan-José is an expert in the med tech and consumer health sectors and has served as president of J&J's orthopedic business in the U.S. You can see details of his background and impressive career on slide 37 and in the press release. That brings me to the outlook for 2019.
We expect the global dental implant market to continue growing at a similar level to 2018. We are confident that we can outperform by achieving organic revenue growth in the low teens, in other words, around 13%. Assuming fairly stable exchange rates, we expect further improvements in the EBIT in spite of further investments and excluding exceptionals, as well as the impact of the new lease accounting standard, IFRS 16. We have provided an estimate of this impact on slide 47. We are very excited about BLX because it is more than an innovative next-generation implant. It is a new treatment philosophy. We now have a highly differentiated premium solution to compete in the fully tapered segment, which makes up a quarter of the implant market.
BLX enables us to address a sub-segment of 1.2 million to 2 million in premium implants, which we haven't been able to address up to now. Through this, we have a great opportunity to penetrate the non-premium implant segment in the coming years, both in the upper and lower value tiers, as you can see in slide 41. As you can see, our share of these segments is still modest, and we have lots of potential. Investor sentiment was subdued in Q4, and we received several inquiries about potential cyclicality in Straumann's business. In response, I would like to point out that while implant and orthodontic treatments still are elective procedures, Straumann has changed significantly since 2008. Our business is spread all over the world, and we have tripled our subsidiaries. Furthermore, we cover multiple price levels and have diversified into adjacent product categories.
Our business is more diversified and resilient. Now I would like to open the question and answer session. As usual, we will give our guests here in Basel the opportunity to put their questions before we open lines to our webcast participants. If you have a question, please enter your question in the webcast feature or press star and one on your touch-tone telephone to join the queue. Kindly limit yourselves to two questions. This will give all participants a chance to ask a question within the available time. Can we have the first question from the room, please?
Hi, Marco. It's Peter with Credit Suisse. I have two questions. The first respect to your non-premium business in Europe. You mentioned that you might not be fully satisfied with the performance. Could you indicate what kind of keeps European dentists from buying your non-premium implants? The second question relates now to corporate dentistry. I think you mentioned also in U.S., a driver in your business. Actually, would you be able to indicate what kind of is at this stage, corporate dentistry? Basically, also how you see demand on that channel being different from the traditional maybe in terms of product mix, et cetera. Thank you.
I take the first question, Peter will answer the second question. When it comes to our European premium business, you are right, we are not developed during 2018. We had some excellent developments in certain countries, like, for example, in Germany, where we have grown significantly our non-premium franchise. We have other countries, I want to name here, for example, France. Also in the Nordics, where we haven't actually exploited the commercial synergies which are out there. 2019, obviously, we will put much more focus on making sure that the premium and the non-premium sales reps work together. We have changed the organizational structure in most countries in such a way that now the regional head is actually responsible for both businesses and is leading both sales forces.
We are convinced that through this new approach, this new organizational approach, we will also exploit much more what actually is at hand when it comes to commercial synergies.
The second question from you, Chris, was according corporate dentistry and the DSO. As you know, in 2015, we acquired our first big DSO as a customer, and we only started to penetrate that very attractive customer segment over the last couple of years. Beginning of this year, we formed our own organizational unity in the headquarter. That market segment is growing over-proportionately within the Straumann Group, but the whole business of DSO is contributing still only a single-digit percentage range to our overall business, and it's strongest in Europe and in North America.
In terms of product portfolio, the reason why we did without an organization is not only that we have peers at the respective management level that can negotiate with the corporate dentistry organization, it's also that we have respective specialists who can, together with the customer, shape the portfolio and limit the portfolio and tailor-make the portfolio that the DSO is purchasing from us according to the specific needs of the DSO organization. Digital equipment and the digital workflows are playing a crucial role in the DSO business there.
Let me add one additional comment. What's also interesting to notice, and we find out and learn obviously more, the more we dig deep into the DSO segment, is that many of these DSOs, their primary business and their bread and butter business is preventive dentistry. It's caries treatment, it's periodontitis treatment. They are all very excited that we don't only offer dental implant systems, CAD/CAM, digital workflows, that we are also now piloting our preventive dentistry portfolio. I personally believe that for DSOs, this is actually a great add-on and will make us an even more attractive partner to these customers going forward.
Two questions. The first one, just in terms of dynamics, the BLX, I think still in the How do you say?
Limited market release.
Limited market release compared to BLT, now 4 years ago, I think. Just the dynamics, is it similar or do you profit from BLT accounts which can also use BLX, or is that a different pair of shoes? You understand the
I understand your question
the difference there. The other one is, in China, the aligner, how much is that different to the ClearCorrect product? I know, ClearCorrect is not yet approved in China, but just conceptually to understand, is that a far better product or a similar or some disadvantage, advantage? Thanks.
Now, to the first question, with BLT, we started to address the abutment tapered market, which is actually the largest segment within dental implant systems. Roughly 60% of all implants placed are abutment tapered implants because it's an ideal combination between parallel wall and fully tapered. For average dentists dealing with implants, that's the preferred design and shape of an implant. Now with BLX, clearly we go into a segment of dentists we haven't been able to penetrate before. We are talking here about full-arch restorations, dentists dealing with fully edentulous patients, dentists dealing with highly aesthetic cases, primary stability, loading the same day. These are the indications which are actually the first target group for BLX. As I pointed out before, neither with BLT nor with our traditional parallel-walled, tissue-level and bone-level implants, we were actually able to attract these customers.
With Straumann BLX, we believe we have the state-of-the-art implant when it comes to full-arch restorations, when it comes to dealing with fully edentulous patients and when it comes to actually providing high primary stability to these dentists. On your second question, ZhengLi, the reason why we were going after this cooperation usefully, has been on one hand because ClearCorrect is not yet registered in China. It will take us another 2 to 3 years before we will have the business registered in China. Secondly, ZhengLi is also a company which has a very attractive software platform for doctors. If you compare their doctor portal to the ClearCorrect doctor portal, it's even stronger. There are also some synergies, some learnings we can get from ZhengLi when it comes to further developing our ClearCorrect doctor's portal and our software platform.
In terms of the final product, the aligner itself, the products are very similar. They use more or less the same materials, the same commercial approach, a flex and an unlimited. The difference is in the doctor portal, is in the software platform. As I mentioned before, the main reason why we entered into this cooperation is the case that they have a registered product in China, and we can start immediately. We are planning Q2, but we could start immediately commercializing their product portfolio in China, which is the second largest clear aligner market worldwide and growing over 50% on an annual basis.
Sibylle Bischofberger, we have more questions about ClearCorrect. First, are you happy with the development? Is it as you expected? Can you feel the stronger competition in the market, which is since 2018? Lastly, I just want to understand how are you going to enter the European market? Is it right, you're only going to the large dental chains and the full launch in Europe will be later?
Regarding whether we are happy about the development. If you just look at the numbers, we are very happy. Over 60% case growth. Just keep in mind that, the ClearCorrect business today is primarily U.S. business. We generate still more than 90% of the cases in the U.S. If you just look at the pure numbers, yes, we are very happy. When looking at the progress we have made during 2018 to bring our software platform to the next level when it comes to catching up with Align, when it comes to the materials and the indications we can provide to patients with clear aligners, we are not fully happy. There is still quite some catch-up to do. Your second question when it comes to Europe, no, we are not just focusing on DSOs. We will go into mass market or however you want to call that.
We're going to target GPs, general practitioners, we've in Europe, different actually compared to North America, to the U.S., where we are only targeting GPs and DSOs with the Straumann sales force, not with the ClearCorrect one. We will also go after specialists in the European markets. Interesting, I think, it's worth mentioning this, we have won, at the end of 2018, the first large contract with a DSO when it comes to clear aligners, and we are very excited about that.
As there are no further questions in the room here, we would like to move on to the webcast and telephone participants. Operator, can we have the first question, please, from the telephone line?
The first question from the phone comes from Patrick Wood, Bank of America Merrill Lynch. Please go ahead.
Perfect. Thank you very much for taking my questions. I have two, please. The first will be on the ceramics side. I'm just curious because it looks like an interesting price mix benefit for you guys. Has enough time passed since the last push on ceramic, those years ago when I think some people had a, certainly in North America, a fairly difficult time initially with ceramic implants. Has enough time passed since then and are there challenges to pushing that product in that market now with people's memories? That's one. The second one is a bit more financial. Obviously, you're expecting some EBITDA margin expansion in 2019.
Obviously, 2018 had a very small boost from FX, but it looks just provisionally like it goes ever so slightly the other way, for 2019, which means implicitly the underlying business must be seeing, if this is correct, a little bit more margin expansion underlying ex FX than last year. If that is correct, what is helping to drive that? Is this product mix or is it just operating leverage? Thank you.
I will take the first question, Peter. In case you will answer the second question. On ceramic implants. Yes, ceramic implants still have, in certain parts of the world, a relatively bad reputation because early versions of ceramic implants were not osseointegrating, were breaking apart a lot. That actually contributed to this reputation of not really being a reliable solution. Our ceramic implants and also the ones of Z-Systems, they do not break and they osseointegrate. We actually stress test every single implant leaving our factory. When looking at the complaint rates we have on ceramic implants, it is almost zero. Keep in mind that we have now our ceramic implants in the market since 2013. We have now seven years of data on our monotype ceramic implant.
What we can see based on this data is that from a clinical point of view, ceramic implants tendentially have one big advantage compared to titanium implants, and that is soft tissue integration. If you then actually think about this going forward, if you have better soft tissue integration, faster soft tissue integration, that also means that tendentially you have less peri-implantitis down the road. So we at Straumann, we are big believers that ceramic implants, that is not just an interesting option to patients because of aesthetics or because probably, some patients, they do not want to have metal in their body or in their mouth. But that there are truly clinical benefits compared to titanium implants and titanium solutions.
That is why we are so excited about our own developments, our own projects when it comes to developing state-of-the-art ceramic implants, but also about the cooperation we entered at the end of 2018 with Z-Systems.
On your second question, Patrick, concerning the EBITDA and the currency development right now.
It's right that if you look at the current currency levels, most of the currencies are trading at or even below the average of 2018. In 2019, if currency stays at the current level, we will face a further negative currency impact on the margin level. To increase the underlying operating margin, we would need to overcome, or we will overcome that negative impact by increasing the margin, overcompensate that from the effects perspective, that we have an underlying margin increase. The operating margin increase would need to be higher in 2019 than in 2018 to overcome the FX level. Where does it come from, was also part of your question. It's coming from one part, from a higher economies of scale.
You have seen that our growth guidance is in the low teens organic growth rate, it's coming from getting more efficient, very cost discipline and management of the OpEx costs, leveraging our fixed cost structure in the back office.
Very helpful. Thank you. If I could just squeeze one more in very quickly. Do you guys have an updated estimate for roughly what your share is just in the pure tapered side? Obviously parallel wall, I'm assuming is pretty stable, but where do you think you're up to now on tapered?
You have to differentiate between premium and non-premium. If you look at the premium, now here we talk about apically tapered and fully tapered. Apically tapered, which is roughly 60% of the premium segment, we have roughly 30% share. With BLT. On the fully tapered premium, which is roughly 25% of the total premium market, we talk here between 1.5 million and 2 million premium implants, we have 0% share. If you look at the value segment, which is obviously from a volume point of view, the large majority, I'm always talking volume now, volume shares, I'm not talking value shares. If you look at the non-premium segment, apically tapered and fully tapered, you're talking here roughly 15 million to 16 million implants.
There, our share is, if you include the Brazilian market, it's close to 10%, because we have more than 50% in the Brazilian market. If you exclude the Brazilian market, we have roughly 5% share. Still quite some way to go.
Very clear. Thank you for the answers.
The next question from the phone comes from Alex Gibson, Morgan Stanley. Please go ahead.
Hi. Thanks for taking the questions. I have two. The first one's on the phasing of growth that you're expecting through the year. Should we expect Q1 to be particularly weak relative to the other quarters, since you're going to do the full BLX launch at IDS? Some comments on the phasing would be helpful. My second question is on how the margins of your non-premium implant businesses are developed or are expected to develop during the course of 2019. I understand your guidance for improving margins, but a breakdown between your core premium implant business margin and your other products business margin would be helpful. Thanks.
You take the first question?
The first question, we are issuing a full year guidance, and we are not breaking down our guidance on a quarterly guidance. I just ask for your understanding in that respect. However, if you look at the first quarter, we see that we have one working day less in the first quarter this year, and that will probably impact a little bit our organic growth rate. However, as I said, we are committed to our full year guidance of low teens organic growth for the full year 2019.
On the gross margins, obviously our premium dental implant system is our highest margin business, clearly. Followed by our non-premium dental implant business. Obviously, we mentioned that during several occasions already in the past, clear aligners, that's still below 70%. I can share this number with you, 70% gross margin. We are actually obviously working on bringing the margin up to at least average levels, gross margins level of the whole group. When you look at our digital business, consumables are relatively high profitable parts of the business. Whereas obviously the equipment, so the intraorals, scanners, mill machines, 3D printers, they are, I would say, the lowest profitable part of our portfolio.
Just to clarify that, through the course of 2019, the investments that are going into the business, do you expect your core premium implants business, the leverage that you're going to get in that business to offset the further investments that you're making in your new product lines? Or are your new product lines also going to see improving margins this year?
If you look at 2018 and the gross margin development during 2018, you probably noticed that we were able to make up for the worse portfolio mix through improving the profitability of the underlying business. We were making up almost fully for actually the, let's say, the less profitable from a gross profit margin point of view, for the less profitable mix to actually improving the profitability of the remainder of the business. There is no reason why we should not be able to achieve the same during 2019.
Okay. Thank you.
The next question from the phone comes from Maja Pataki, Kepler Cheuvreux. Please go ahead.
Yes, good morning. Two questions from me as well, please. First of all, I'm not sure if it's too early, but when you look at the limited market rollout of the Straumann BLX implant, are you seeing a greater part of cannibalization than what you've seen when you launched the Straumann BLT? Or is it really adding volumes and not cannibalizing? The second question is, you've invested a lot in 2018. You've integrated more companies, you've entered new partnerships, there are a lot of projects ongoing right now that I believe must also absorb quite a lot of management time and focus. How shall we think about the next two to three years?
Are you going to keep the pace up of entering new areas, new partnerships, or is 2019, 2020 going to be more a year of establishing and putting everything on solid two feet before you continue to look into new areas? Thank you.
Yeah, your question on Straumann BLX and Straumann BLT, just to make sure we talk the same here. Straumann BLT was not cannibalizing the existing parallel-walled franchise, or just to a very small degree. If you look at the growth we have achieved in 2015, 2016, 2017, 2018, a considerable part of our overall proportion of growth was actually due to launching Straumann BLT and to be able to play now not only in 20%-25% of the premium market, but in 80% of the premium market. With Straumann BLX, we anticipate the same. We have a lot of interest in competitive users. In the LMR, we don't have just faithful strong customers in the limited market release. Intentionally, we wanted to test Straumann BLX against the gold standard in the industry today, which is NobelActive.
We obviously wanted to compare Straumann BLX against NobelActive by giving that product to some experienced Nobel users. Our target with Straumann BLX is not to convert Straumann BLT users to Straumann BLX. Obviously, this will happen to a certain degree, clearly. Our target clearly is to go after the potential of 1.5 million-2 million premium implant, which are out there for growth. On your second question, in terms of partnerships, complexity, will this speed continue? We are agile. We actually create opportunities when we can, we will for sure not stop and not do this anymore. That's not in our DNA. We have shown over the last five years that we can extremely well deal with complexity, that we can actually digest a large part of acquisitions, partnerships on an annual basis.
I can tell you, we are standing on solid feet, it's not like everything's mobile. From time to time, it takes efforts to integrate these partners and to deal with these partners, especially if you deal with partners where you have a minority shareholding. That's obviously not a ballgame than controlling a company 100%. To answer your question in a nutshell, if opportunities will come up, we will go after them like we did in the last six years. At the same time, obviously, what we get at hand, we make sure that actually we get the best out of it and we bring these partnerships and these acquisitions on a solid ground.
Thank you.
The next question from the phone comes from Julien Dormois, Exane. Please go ahead.
Hi. Good morning, guys. Thanks for taking my questions. I have two. The first one relates to digital equipment, I think you highlighted in your slides that the strongest growth you've experienced is coming from restorative and digital equipment. I was just wondering whether you could give us an indication of how much of group sales they now represent. Are we talking about double-digit contribution to group sales? Related to that, what is the differential in growth that you see there? Are we talking about maybe 30% or 40% growth in those intraoral scanners and milling machines? The second question is just a housekeeping one on CapEx. Obviously, you had lots of projects and lots of investment in 2018. Just looking for a guidance on CapEx for 2019 and maybe 2020.
Let me start with the second question on the CapEx. In 2019, I would expect a similar level of CapEx as in 2018, simply because most of the projects that we started are still ongoing in 2019. The expansion of the manufacturing sites in Villeret, Curitiba, and Andover, and also Round Rock. In 2020, I would see a certain decrease of the CapEx again, because most of these projects are finished by the end of 2020. As I said, Villeret will go live first quarter 2021. Coming to the other question on the digital equipment and the share and growth of digital equipment. We basically started our digital equipment in the second half of 2017. We started also in 2018 and was a rather low base. It's still a single percentage of the group in total turnover for all the different digital equipment categories.
Naturally, as the growth base is rather low, the growth rate is in a high double-digit area.
Okay. Thank you.
Next question comes from Veronika Dubajova, Goldman Sachs. Please go ahead.
Good morning, gentlemen. Thank you for taking my questions. I have two, please. My first one is, can you give us an update on the GP products trial? How much progress you have made since July, August, and your views on whether this might be a contributor to growth as you look at the business in 2019. My second question is sort of a more conceptual question. If I look at the momentum in the business that you had exiting the fourth quarter, obviously the guidance, I know you like to be conservative, but the guidance would suggest a meaningful deceleration versus where you were.
If you can maybe walk through, you've highlighted a number of tailwinds to the business, but to the extent that you see any headwinds, if you can help us understand what those might be, and why you are looking for such a meaningful deceleration in the guidance that you have provided. Thank you.
On the GP pilot, I would say so far, a little bit of a mixed bag. Very enthusiastic reaction from DSOs when it comes to this portfolio. When it comes to the bread and butter GP, I think it's still too early to draw a conclusion. We see some of the products in our portfolio which are very well-received, and we see others where we probably have to have a deep look into the viability of having these products in our range. It's still too premature to actually have a judgment and make any decisions in terms of the portfolio we have at hand right now, will this also be the portfolio for the future. On your second question, 13% growth, that's actually in line with the average growth we achieved over the last five years, which has been 13%. We believe that's not a shabby target.
It's actually not something which will just happen without actually any efforts. Market will grow between 4% and 5%. With 13% growth, we would still outperform the market by a factor of three, which means we would also in 2019 gain quite considerable market share. I would not concur with your statement that actually 13% is not an ambitious target. We believe 13% is an ambitious target. 2018 was just, I would say, a phenomenal year. With a 19% organic growth in the market, which is growing between 4% and 5%. To repeat such a year is not easy.
Marco, I was not accusing you of not being ambitious. You've been anything but over the past five years. That was not at all what I was saying. My point was more, if I look at the exit rate you had out of the business in the fourth quarter, I look at the fact that you're launching BLX. There was further ClearCorrect launch. Obviously, you start incorporating the U.S. business into the base rate of growth as well. The 13% would suggest that there might be some headwinds that you're anticipating to the business that might offset some of those incremental sources of growth. I was merely trying to understand, is this just you being conservative because it's early on in the year, or are there actually any specific headwinds that you are concerned about as you move into 2019?
I could now pull out a lot of concern out of my sleeve, like the trade war and like Brexit and all these buzzwords which are out there, which would have an impact, obviously. To be honest, you have followed us now for many, many years. If you look at the guidance, which we normally bring to the table, when we actually talk about the former year, has been in the past, I would say, yeah, very realistic. Okay? We don't want to change this habit.
Of course. Understood. Thank you very much.
The next question comes from David Adlington, J.P. Morgan. Please go ahead.
Hey, guys. Thanks for taking the question. Most have been asked already, but maybe you could just give us the ClearCorrect revenues in 2018 and how they grew over 2017, please.
It's a bold question. What we normally give, and we will continue to provide you with this information is, the case growth, and the customer base growth. 15% customer base growth, 61% case growth. I can give you another kind of hint to fill your model. The case growth and the revenue growth are not that far apart.
That's helpful. Thank you.
The next question comes from Kit Lee from Jefferies. Please go ahead.
Thank you. I have two questions, please. Firstly, on the clear aligner rollout timeline. Wondering, in your European launch, would it be gradual or would you be launching ClearCorrect at the same time in all the regions in Europe? I think you mentioned China in Q2. I am wondering if you would be adding more salespeople in the U.S. for your clear aligner business as well. Secondly, on the indications, I think you mentioned you are still not happy with the type of cases you can treat with ClearCorrect. Wondering, when do you think you can catch up with Align Technology in terms of the additional indications that you hope to treat? Thanks.
First part of your question, in Europe, we are going to launch in all larger European markets at the same time, and that is actually beginning of Q2 of this year. As you also pointed out, we will actually launch ClearCorrect in some larger Asian markets, especially in Japan, end of Q2, beginning of Q3. When it comes to the comparison to Align, we made that statement several times already. Our target group are mainly general practitioners, so professionals who treat the mild to moderate cases. Our target group are not necessarily the specialists who deal with the really complicated cases. We are in the process of developing a new material, which touch wood, we are hopefully going to launch still during the course of 2019. That new material will allow us to actually increase the percentage of cases we can treat with our ClearCorrect aligners.
To be honest, also with the new material, we will still be far behind Align. Align is just, that is the dominating force. They claim that they can actually treat 85% of all ortho cases with their clear aligners. If we get to 70% with the new material, we are already very happy. We have other advantages, like, we are, from a price point of view, extremely competitive. We are, how to say that, very GP-friendly in many aspects. We have some differentiating factors against Align. If you just look at the number of cases you can treat with the Align product portfolio compared to ours, even with additional materials, new materials, we will still be quite behind Align.
Okay, that is clear. Just to come back to the clear aligner rollout. I guess, in the U.S., are you planning to add more salespeople, more, I guess, feet on the street?
Yes.
Are you happy with the current? Okay.
No, absolutely. Not only in the U.S., we are also adding quite significant salespeople in the European countries to support the European launch, also in the other countries where we're going to launch ClearCorrect. We will actually, obviously, make this happen through adding people on the ground, through adding customer service people, technical support people.
Okay, that's great. Thank you.
For any further questions, please press star and one on your phone. The final questions from the line comes from Tom Jones from Berenberg. Please go ahead.
Good morning. Thank you for squeezing me in at the end. I had two kind of guidance related questions. I was just wondering, first, if I could go back to Veronika's line of questioning. Maybe try a slightly different angle. Within your 13%ish growth rate guidance for 2019, how are you thinking about the relative regions? They all grew very well in 2018, with emerging markets a bit faster than developed markets. If I look at 2019, particularly in Europe, which despite your laudable efforts to diversify the business, is still roughly half the group's revenue. Germany's stagnating, Italy's going backwards, France is in flames, the U.K.'s got Brexit going on. It doesn't look like the economic backdrop in Europe is going to be half as friendly in 2019 as it was in 2018 for you.
Just some kind of color on the kind of regional expectations you have and how you think that might affect your overall 4%-5% market growth estimate. The second question, just one for Peter. We all got caught on the hop a little bit, I think, by financial expenses in H2. I was just wondering if you could give us any steer for 2019 as to what to expect. I see there's an additional CHF 5 million impact from IFRS 16, outside of that, how should we be thinking about financial expenses for this year? Should we expect a bit of a drop given the variability this year or, in 2018, sorry. Should we expect a sort of broadly similar level in 2019 versus 2018?
Thanks a lot for your comments. It actually confirms that our guidance is very realistic. That's what I got out of your statement. Europe, obviously, there are some uncertainties. Again, you could name the Brexit and Germany and France falling apart and the Italians still not having their act together, et cetera. We believe that despite all this, we can deliver a 13% organic growth because we have many very compelling growth initiatives at hand. We have BLX, we have the whole digital workflow. We have the non-premium dental implant franchises, where, as I pointed out before, our market share outside of Brazil is still slightly below 5%. clear aligners, a huge opportunity to penetrate the markets outside of the U.S.
We believe we have enough exciting growth initiatives in the pockets to actually live up to what we are promising today, and that's a 13% organic growth. Peter, you want to take the.
Yes, come to the second question on the financial result, Tom. Thank you for that question because I think that result justifies that I comment a bit and lose some words on it. The financial result was about CHF 13 million worse in 2018 compared to 2017. About 50% is coming basically of two positions that I elaborated a bit in my presentation. It's on the one hand, the catch-up of the earn-out for the acquisition of the Batigroup, and the other part is the default interest payment that we made for the settlement of litigation. If you take the other 50, I would consider both of these events as one-time events in 2018 and non-recurrent events in 2019.
The catch-up of the earn-out of the Batigroup was, of course, linked to the performance of the former Batigroup or the current Turkish organization, and it remains to be seen how that performance will develop in 2019, but I would not expect a similar catch-up in 2019. If it comes to the other 50% of that CHF 13 million, that's basically caused by a negative FX impact. If the FX rates stay at the current level, I would expect a better result in 2019 compared to 2018. However, of course, I don't know how the FX are going to develop during that year. Of course, we have the normal interest result and the interest payments that we recognize for our outstanding bond, which is only in April 2020.
Okay. Again, in addition to that, [one-offs] obviously expect a pretty stable financial expense line?
A pretty stable one in 2019, I would say, compared to 2017, but not to 2018 because we had these one-offs in 2018 and a very unfavorable FX result in 2018 as well. I would not expect that 2019 as of today.
Sure. That's very clear. Thank you very much. Thank you for your questions. If you need further information, please consult our annual report, which is published online today. Of course, you are welcome to contact our colleagues in investor relations and corporate communication. We cordially invite you to our events at the IDS, and we would be grateful if you would register by using the link on slide 45. Thank you once again for joining us, and have a great day.
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