Good morning, everyone, and welcome to Straumann's 2015 full year results conference. It's a pleasure to have you with us, and thank you for taking the time to join us here in Basel. I would also like to welcome those of you who are joining us via the audio webcast. As usual, I would like to ask you to take careful note of the disclaimer on slide 2 regarding forward-looking statements. After I have shared the highlights with you, Peter will take you through the financial details and the business performance. Then I will review our strategic progress and the outlook, and after that, we will be glad to answer your questions. In 2015, group revenue reached CHF 799 million. Excluding the effects of currencies and acquisitions, our organic growth was 9% over the full year and 10% in the fourth quarter.
Our best-performing regions were Asia-Pacific and Latin America, which both reported double-digit increases. Driven by the top line and cost containment, our profitability improved, lifting underlying EBIT for a third consecutive year and driving the underlying EBIT margin to above 23%. Business-wise, implants were the main source of growth, and our new Bone Level Tapered implant was the key product in 2015. Available in Roxolid and is our SLActive surface, Bone Level Tapered is a differentiated product. We launched it in all our main markets except China, where registration is still pending. At year-end, every fifth Straumann implant sold was a Bone Level Tapered implant, and we have already sold over 200,000 pieces. We made good strategic progress enlarging our footprint in high-gross markets and in the wide value segment. We extended our reach in China with our new hybrid distribution approach.
We entered new markets in Latin America and have merged the Neodent and the Straumann organization in Brazil. In a separate release this morning, we announced a partnership with the French dental implant manufacturer, Anthogyr, which enables us to enter the fast-growing value segment in China. These are just a few of the milestones we passed in 2015. Overall, the performance was very robust and better than we had anticipated at the outset of the year. For 2016, we are confident that we can continue to outpace the market, and barring unforeseen circumstances, we aim to achieve organic revenue growth in the mid-single digits with a further improvement in the underlying EBIT margin. More about that later.
On the next slide, you can see that the growth trend increased in quarter four in all regions except North America, which generated double-digit growth in the first half, boosted by the full market release of our BLT implant. Moving on to slide six. As you know, we completed the biggest acquisition in Straumann's history, underpinning our global leadership in implant dentistry. The combination with Neodent has a significant impact, and throughout the presentation this morning, we will be looking at the numbers from two perspectives, the reported results on the underlying organic performance, which excludes the acquisition effect as well as the exceptional accounting factors and currency exchange movements. Peter will give you all the details in a moment. Excluding these exceptionals, gross margin improved 100 basis points. Thanks to operational gearing effective cost control and accretive income from Neodent, our underlying EBIT margin expanded 450 basis points.
Underlying earnings per share rose 9% to CHF 9.19. Consolidation in recent years has left approximately 60% of the global market in the hands of four leading multinationals, which make up the premium implant segment. The remainder of the market is highly fragmented and comprises several hundred competitors, most of whom have only a local or regional focus. Some are low-price players, while others offer more advanced services and education at mid-price points. Based on available data, we believe that the global tooth replacement market grew in the middle single-digit range in 2015. This does not include biomaterials and CAD/CAM solutions. Having achieved organic growth of 9%, we are confident that we have not just outperformed our main competitors, but have also strengthened our overall position. Including Neodent, our revenue in local currencies rose as much as 19%.
Currency fluctuations, in particular, the strengthening of the Swiss franc and the devaluation of the Brazilian real, had a big impact on our reported results in CHF and makes it difficult to compare with previous years. However, based on the latest available data, we estimate our share of the global market to be around 22%. Furthermore, you can see on this slide, which shows our revenue and profit development over five years, we have outperformed and accelerated since 2012, but not at the expense of margins, which have also expanded steadily as the chart on the right clearly shows. Neodent has not only contributed to our business and profitability, it has also added talent and diversity with more than 900 employees joining our global workforce. The integration of the Neodent business is now fully complete.
We were able to get through the currency crisis without cutting jobs in Switzerland, this year our headcount has actually increased. Thanks to the measures taken early in the year and the support of our staff, we were able to preserve jobs in Switzerland. As a result, our global headcount now stands at almost 3,500. We integrated Neodent quickly and smoothly and are beginning to unlock the synergies in supply chain, distribution, and administration in Brazil. On that positive note, I would like to hand over to Peter.
Thank you, Marco, good morning, everyone. In our first half results, we shared with you the various factors related to the Neodent acquisition that affect our results. We have listed them in this chart and in our press release, I won't repeat the details because there are no changes, with just one exception. The ongoing amortization expenses for customer-related intangible assets increased from CHF 2 million for four months to CHF 5 million for the 10-month period since our half-year reporting. In your modeling, please note that going forward, the annual run rate will be CHF 5 million based on current exchange rates. To provide a like-for-like comparison in this presentation, we will refer to values excluding business combination exceptionals, which totaled CHF 73 million, as you can see in the first column of the table.
Slide 13 gives you the figures with and without exceptionals for both years to facilitate the comparison. In both cases, you see growth in revenue and operating profit, and in spite of the fact that the strength of the Swiss franc cut sales by CHF 37 million, gross profit by CHF 36 million, and operating profit by CHF 22 million in 2015. Despite the currency headwind and investments in our value platform, sales organization, and growth projects, we succeeded in lifting the underlying EBITDA margin by 280 basis points to 28% and the EBIT margin by 240 basis points to 23%. Neodent also contributed to this pleasing result, which I will discuss later. Just for the sake of completeness, at constant exchange rates, our EBIT margin would have amounted to 25%.
As a reminder, in 2014, our net result benefited from the capitalization of deferred tax assets in the amount of CHF 27 million related to the acquisition of the initial 49% of Neodent. With their exclusion, net profit increased 11% to CHF 145 million, bringing the net margin to 18%. There were also some non-recurring effects in the financial result and the associate line, which collectively amounted to CHF 12 million. The combination of these factors meant that the underlying net profit margin was the same as in 2014, despite the remarkable improvement in the EBIT margin. Looking at the gross profit on slide 14, you can see that our reported gross margin was 78.7% in 2014. At 2015 currency rates, it would have been 110 basis points lower at 77.6%.
The positive message here is that strong volume expansion, economies of scale, and efficiency gains fully compensated for the negative currency impact while the underlying gross profit margin increased 110 basis points. Neodent had a slight negative effect of 10 basis points, as selling prices for value companies are lower than those offered by premium ones. At this point, I would like to highlight some of the achievements in production and logistics in 2015. We increased the level of automation in implant production, optimized capacity utilization to an average of 98% over the full year. We continued to transfer technology from Villars-sur-Glâne to Andover, building the flexibility to transfer production volumes quickly in response to market changes.
In line with our strategic goal of becoming a total solution provider, we invested in and opened a CAD/CAM milling center near Tokyo, offering custom abutments and complex prosthetic frameworks for Pro Arch and other solutions. It is also our first center in the world to offer drill templates produced by 3D printing technology. We also significantly extended our facility in Arlington to meet demand for screw-retained bars and bridges from ClearChoice. All our CAD/CAM facilities now operate under the Etkon brand and use the same machinery, materials, and milling strategies, making it easy to establish new centers with the same high-quality standards in other geographies. In addition, the Botiss Biomaterials and Medentika prosthetic portfolio are now fully included in our corporate supply chain management system. On slide 16, you can see that last year's EBIT margin, adjusted for currency fluctuations, would have been 18.7%.
Together with the gross margin effect of 110 basis points that I mentioned before, the other main driver was the improvement in operating expenses. Our OPEX intensity decreased to a level of 55% of sales and added 180 basis points to the margin. These elements together improved the EBIT margin by 300 basis points on the Straumann side of the business, which also includes the international value business that we operate under the Instradent umbrella. On the right side of this chart, you can see that the Neodent operational business in Brazil is highly accretive to our margins and added another 150 basis points to the group margin. Moving on to the next slide, let's look at the effect of all these factors on the bottom line. All the exceptional acquisition effects, which amounted to CHF 73 million, are shown on the right net of tax.
The one-time effect related to the capitalization of deferred tax assets is shown on the left. The main impact on the underlying numbers was the aforementioned profitability improvements, which added CHF 37 million. The financial result worsened CHF 9 million compared to the prior year and was primarily related to foreign exchange losses subsequent to the sudden appreciation of the Swiss franc and fair value adjustments of various financial instruments in the amount of CHF 7 million. The associate result, which includes partners like Dental Wings, Medentika, Createch, T-Plus, Valoc, and Neodent, was CHF 22 million lower than in 2014. There are three main reasons for the marked difference. Firstly, in 2014, Neodent's accretive business contribution was over a 12-month period, but only two months in 2015. Secondly, Neodent has booked provisions of CHF 7 million related to the termination of a local distributor agreement and an ongoing litigation case.
Lastly, the carrying value of T-Plus was impaired by CHF 5 million. Tax difference increased net income by CHF 7 million compared to last year. We benefited from a tax refund in Germany and the tax credit related to carrying forward of tax losses. The normalized tax rate going forward is unaffected by it, and we expect it to be at approximately 15%. All this combined meant that the underlying group net profit reached CHF 145 million, bringing the respective margin to 18%. Turning on to the cash flow on slide 18. Reported EBITDA increased by CHF 31 million and net working capital added another CHF 37 million to the free cash flow. Please note that this slide shows the values on a reported basis and includes exceptional factors. The adjustments for Neodent's inventory reduced EBITDA by CHF 30 million, but increased net working capital contribution by the same amount.
As a result, net cash from operating activities reached CHF 186 million, an increase of 27% compared with last year. CapEx investment increased CHF 17 million, reflecting the inclusion of Neodent and additional investments of CHF 8 million in our CAD/CAM facilities, which I mentioned earlier. The difference in non-cash OPEX was mainly due to the CHF 13 million provision booked in 2014 related to the sellout of our Chinese distributor. As a result, free cash flow climbed to CHF 151 million and the respective margin to 19%. Based on the results and positive developments in 2015 and our confidence going forward, the board of directors is proposing a dividend increase of CHF 0.25 to CHF 4.00 per share. As you can see on this chart, we have maintained our dividend at CHF 3.75 per share since 2008, despite challenging times. The dividend ex-date is shortly after our AGM on April 20th.
Now moving on to the growth performance by region. In 2015, our reported revenue grew 12% to CHF 799 million, of which CHF 63 million was contributed by Neodent. The appreciation of the Swiss franc, mainly against the EUR, and the devaluation of the Brazilian real, meant that growth was constrained by 6 percentage points. Excluding both factors, group revenue grew 9% organically, as Marco mentioned earlier. Europe built on the recovery achieved in 2014 and lifted growth in EMEA to 6%. The region contributed almost half our revenue and nearly a third of our growth. North America grew robustly above the market at 8%. The region added CHF 17 million to our overall result. Asia-Pacific is considerably smaller, but generated 30% of growth as revenue climbed 19%, driven mainly by China and Japan. Latin America expanded 11% as Neodent and Straumann both grew strongly despite the economic turbulences.
During Q4, the EMEA region grew 8%, with the main contribution coming from Germany, complemented by double-digit growth in Iberia and France. Likewise, the U.K. and the Nordics recorded very satisfying growth. Despite tough competition from value and discount players, Italy achieved an encouraging turnaround from the negative past trends. Distributor markets in Eastern Europe and the Middle East also posted strong volume growth, driven by patient demand and public healthcare tenders, but this was offset by price reductions for distributors to compensate for the sharp appreciation of the Swiss franc. Q4 revenues in North America grew 7% organically on top of a strong baseline in the prior year. All business franchises contributed to the increase, but the star performers were BLT and Roxolid. BLT is particularly important, as more than 70% of implants sold in North America are estimated to be tapered.
By end of the year, one in three implants sold by Straumann was a BLT. Another highlight in the quarter was our excellent performance in Asia-Pacific. We sustained momentum in Japan, benefited from the launch of BLT and our new CAD/CAM milling services. China posted very strong results, benefited from stocking by two new distributors in Q4. As the new dealer network is now in place, this process is complete. Australia recorded very satisfying sales, while our Asian distributors reported mixed results. Based on available data, we believe that we outperformed our main peers in the two largest Asian markets in 2015. In Q4, organic growth in Latin America reached 17% and was strong in all markets, especially Mexico.
In sharp contrast to the general trend of the economy and the stagnating Brazilian implant market, both Neodent and Straumann Brazil expanded at a double-digit pace and rebounded from the soft previous quarter. BLT obtained regulatory clearance in Brazil and was very well-received. With slide 23, I would like to add some more color on how the various segments contributed to our top-line performance. Double-digit implant volume growth was the primary growth driver. Increased sales of Roxolid and the SLActive were the principal contributors. The restorative business, including CAD/CAM prosthetics and digital equipment, posted solid full-year and fourth quarter growth. Demand was especially strong for simple, cost-effective value-based abutments and also the new CARES in-lab scanners, which is engineered by Dental Wings, was very well-received.
Revenue from biomaterials grew vigorously throughout the year as Straumann continued to roll out the botiss range in Europe and its bone graft and membrane products in North America. With that, I will hand back to Marco for the overview on our strategic progress and the outlook. Thank you.
Thank you, Peter. I would now like to give you an update on the progress we have made with our three strategic priorities. It is essential for Straumann to develop a high-performance culture in order to succeed in our fast-changing environment and to sustain what we have achieved over the last three years. In 2015, we advanced our so-called COACH cultural journey, focusing on a player-learner mindset that embraces change and drives behavior. We have defined eight core behaviors to increase agility, build trust, strengthen a commercial mindset, promote communication, encourage collaboration, and drive the high-performance organization we want to be. We are working hard to adopt these behaviors through internal campaigns and an international program of workshops and training modules. Transformation takes time. There is a clear sign of progress which have been confirmed in internal and external assessments.
Our strong financial results point to a growing high-performance culture. There are many other examples. The agility of our response to the currency shock, aligned strategic priorities, new collaborations and partnerships, and the speed of integrating Neodent are all signs that we are on the right track. Let me tell you about some of our investments to extend our geographical reach and unlock growth potential. China is one of our most exciting markets. Our new organization positions us to address the fast-growing private practice sector across the nation. We still need a foothold in the value segment, which is where Anthogyr comes in. I will say more about that in a moment. In Russia, we established our own subsidiary and were able to incorporate our local distributor.
This gives us a firm basis for investment to build the business with our sights firmly set on winning a substantial share of the large Russian implant market. Europe, we established Instradent subsidiaries in the U.K. and the Czech Republic in order to enter the value segments there. We entered a joint venture to supply value implants in Turkey. We are also looking forward to launching Instradent in Canada in mid-year. World's largest market by revenue is the U.S. It is still comparatively under-penetrated, which is why we have invested over-proportionally there. Our latest initiative is an education-focused approach for the growing number of GPs who want to offer implant treatment. Latin America is another source of growth. We are building up distribution hubs in Argentina, Colombia, and Mexico to serve local markets with both Straumann and Neodent solutions.
Finally, to strengthen our position in the restorative segment, we have invested in CAD/CAM production in the U.S. to cater for ClearChoice as well as in Brazil and Japan. This slide illustrates our current footprint in the global value segment and where we plan to expand this year. Neodent obviously has a major part in this. The beauty of our combination lies in the fact that Neodent complements the Straumann business by offering a high-quality, attractively priced alternative to our peer competitors, especially in the area of immediate function, which Straumann is now beginning to address with its BLT implant and its Pro Arch solution. Today, we are also announcing a partnership agreement with Anthogyr, which will open the door to the value segment in China. Anthogyr is a family-owned business close to Geneva in France, with annual sales of EUR 45 million.
It is a leading value player in France and sells internationally through 8 subsidiaries and a network of distributors. It is a particularly interesting partner for us because its implant system is established in China as a high-quality, attractively priced option. The agreement enables us to acquire a 30% stake in Anthogyr and foresees the transfer of the implantology business activities in China to us by mid-year. To give you an idea of the current size of the business, about 15% of their sales are generated in Asia. To address the non-premium segment in Turkey, we have created Zinedent, a joint venture with our local distributor to supply implants and prosthetics in the domestic and surrounding markets. There is also potential for opportunity to manufacture locally. More than 350,000 non-premium implants are sold annually in Turkey, so it is an attractive market segment.
Both Anthogyr and Zinedent complement our Instradent platform, which can be used to support the expansion to other markets. Some other approaches to growing customer segments are highlighted in this slide. Straumann Patient Pro is a platform we launched in 2015 to support dental professionals in educating patients and promoting their practices. It offers materials and tools for the internet and social media, as well as for use in dental practices. Our Young Professional Program has been running for more than 3 years and was expanded in 2015. It is offered in 10 countries and has enrolled more than 5,000 participants yet. We also expanded the so-called Peer-to-Peer Partnership Program that was piloted in 2014. It extends from personal coaching to surgical activities, where our highly experienced implantologists share surgical techniques and experience with their peers in the operating room.
Finally, a word about the ITI's Online Academy, which is a new learning platform for practitioners at all levels of experience. It was launched just over a year ago and recorded 200,000 visits and more than 3 million page views in the first 12 months. These statistics reflect the great need for education and mentoring as the number of dentists interested in placing implants keeps rising. The Engel Institute in the U.S. has provided training in implantology to more than 7,000 dental professionals since it was founded in 2005. We have agreed with them that our implant system and biomaterials will be used exclusively in all Engel Institute programs.
Our strategy to compete against the new conglomerates in our field is to be a total solution provider in tooth replacement by offering conventional, semi-digital, and fully digital solutions for all major indications to dentists and to offer a comprehensive portfolio for implant-borne solutions to dental laboratories. Despite the stream of launches, we have more than replenished our pipeline, and you can find details on that in the innovation section of the annual report. Our PURE Ceramic Implant offers a highly aesthetic alternative for patients seeking metal-free solutions. It has been made available in Europe since 2014 and gained approval in North America at the end of 2015. Although the requirement for metal-free alternatives is not a major driver of today's market, we believe that the availability of ceramic implants with similar performance, flexibility, and predictability to their metal counterparts will change implant dentistry.
Straumann PURE is a step in this direction. This week at the Chicago Midwinter Meeting in the U.S., we are launching an exciting new intraoral scanner developed by Dental Wings. Featuring next-generation technology, it is a truly differentiated product, intuitive, convenient, and attractively priced with no click fees. We have chosen to sell it through two distribution partners, Benco and Burkhart, who serve 40,000 dentists and labs across the U.S. We will be rolling it out in other markets as soon as we can. A year ago, we announced a collaboration with Amann Girrbach to offer dental laboratories a 5-axis milling machine to operate with our CARES CAD/CAM system and our new desktop scanners. The new milling machine is competitively priced and is now undergoing a controlled market release. In connection with our new intraoral scanner, it will offer an excellent chairside solution for larger practices with labs in-house.
We are also working on a compact chairside mill to combine with the intraoral scanner. For small practices that don't want to invest in milling equipment, the intraoral scanner can be used with our Scan & Shape service. We will have a whole range of chairside, in-lab, and central milling solutions. As you see from the schedule in this slide, our goal is to start limited market releases this year. In November, Neodent signed an agreement to take over Amann Girrbach's distribution business in Brazil, including its sales and customer service team of 20. Neodent began marketing and selling the full Amann Girrbach range last month and now covers the full workflow for dental labs to produce CAD/CAM prosthetics in-house. The trend among dental labs to save costs by using non-original abutments has fueled the growth of companies that focus on prosthetic component copies.
Medentika has been very successful in this business and offers attractively priced alternatives for most leading implant systems. We are responding to this trend in three ways. First, by strongly emphasizing the importance of using Straumann quality and precision in our Original on Original campaign. Second, by offering prefabricated TiBase and pre-milled blanks with Straumann original connections. Third, by turning it into an opportunity to offer high-quality, individualized CAD/CAM abutments for competitor implant systems and at an attractive price through our Etkon brand and Medentika. As the column on the right of this slide shows, the two brands cover all prosthetic options. Here again, our time frame is this year. The breadth and depth and quality of our portfolio make us confident that we can compete successfully with total solutions. Confidence also comes through research.
In 2015, an impressive body of scientific evidence on our products was published in peer-reviewed journals. Perhaps the most compelling publication came from independent investigators at the University of Gothenburg. It was a large retrospective study that evaluated various implant systems nine years after placement with regard to peri-implantitis, which can lead to implant loss. The results were very favorable for Straumann and revealed clear differences between implant systems. Encouraged by excellent five-year clinical results and the very low fracture rates, we are extending the lifetime guarantee on our Roxolid implants to include monetary reimbursement towards the treatment costs, in addition to replacing the implant. This provides extra confidence and sets a new benchmark in our industry. Roxolid is a truly remarkable material. I would like to show you a very creative, humorous video commercial that we are using to promote it through social media and other channels.
My fellow countrymen, the one who will be able to pull this very sword out of this rock shall be the righteous king. Who is brave enough to try?
It's not a trick. It's legendary science, designed for excellent primary stability, thanks to an apically tapered implant with groundbreaking material and surface technology for maximizing predictability. Discover the magic of the new implant engineered in Switzerland, home of Straumann. Be a legend in your own practice.
That brings me to our outlook for 2016. We expect the global implant market to grow solidly in 2016, and we are confident that we can continue to outperform by achieving organic growth in the mid-single-digit range. Despite further investments into strategic growth initiatives, our expected revenue growth and operational leverage should lead to further improvements in the underlying operating profit margin. Obviously, we cannot go into all the details this morning, but you can find most of them in the preprint of our annual report, which is now available on our website. The hard copies will be sent to subscribers in two to three weeks' time. This brings me to the end of the prepared remarks, and now I'd like to open the question and answer session.
As usual, we will give our guests in Basel the opportunity to ask questions before we open the lines to our webcast participants. As an additional feature, participants who wish to ask questions anonymously can use the tool in the audio webcast, which you find in the bottom left corner. If you are calling by phone, please make sure you have a good phone connection. In this case, you may press star and one to join the queue and press star two to leave the queue. Finally, in the interest of everyone waiting in the queue, I would kindly ask you to limit the number of your questions to two, including sub-questions and follow-ups. Can we have the first question from the room, please?
It's Oliver from Commerzbank. The first question is on your outlook, especially on sales growth. You expect a solid market that's basically the same guidance as you said also one year ago, but now you expect only growth in the mid-single digits. In 2015, you had much higher growth in the high single digits or almost double digits. What's different in 2016 compared to 2015? What makes you a little bit less confident now after having seen such a good performance? The second question is on the U.S. market. Over the quarters, we saw some sequential slowdown. You mentioned the first half was impacted positively by the BLT implants in the U.S., but basically you had also ClearChoice. Would you describe that the U.S. market is currently behind your expectations, and what's your outlook in particular for the U.S. for 2016?
First of all, I would like to mention what is the same like last year. We are tendentially rather conservative, we don't want to disappoint. There are certain question marks when it comes to the development of the macroeconomic environment, and I'm especially talking about Latin America, Brazil. We had a very good fourth quarter, but I guess some of you remember the third quarter, we had actually negative growth in Brazil. First signs indicate that the situation in Brazil is actually improving. We had, and I can already say that, we had a rather good start into 2016 Brazil, but we still remain cautious about the overall economic development in this, for us, extremely important country. The second point you mentioned is North America. We just had an important management change when it comes to the leadership of our North American business.
You're right, the fourth quarter was okay with solid single-digit growth. Honestly, I think we could have done better with the right leadership in place, with the right execution discipline on the many initiatives we have launched and are on the way in North America. Traditionally, or what history shows, is that in a transition phase of management, you have to be a little bit more cautious. These are actually the two points I would like to highlight. One is Brazil, the other one is North America. On both markets, which are both very important to the total contribution of our business, on both markets, we have taken a rather conservative stance when it comes to growth perspectives for 2016.
Okay. Thank you.
[Stan] Beliveau. Just two financial questions. Your working capital has substantially improved, and I think is now at 13% of sales, which is very good. Are you happy with that level, or you further plan to increase that ratio? The second one is the CapEx was roughly 1.4 times depreciation level, which is very high. What are the plans going forward? Not only this year, but midterm, how much you have to invest in CapEx? That's the question.
Let me start maybe with the second question, the CapEx level. As I mentioned in my comments, we invested into the expansion of the Arlington CAD/CAM facility, we set up the new CAD/CAM facility in Japan. Basically, these were one-time initial investments that we made in these two CAD/CAM plants in the order of CHF 8 million.
If you take, or if you reduce the CapEx level of 2015 by these CHF 8 million, if you also consider that in addition, we now have Neodent in our group, we come to a CapEx level which is similar to the CapEx level that we had over the last years, around CHF 25 million, CHF 20 million-CHF 25 million, including Neodent, I consider that as the sustainable CapEx level going forward, also to continuously reinvest in our production facilities and keep them state-of-the-art without any incremental CapEx or step-up CapEx to increase the production capacity as we have done last year. The second question, net working capital. You are right, we made quite some progress in 2015 in managing the net working capital. From the different key financial ratios, that's probably not the most important one.
It's always a certain balance that we need to find there by managing the receivables without really harming the growth, and that's exactly the right balance that we think. I think with the current net working capital level that we have, that's a sustainable relative level in terms of revenue going forward as well.
Two questions from me, please. One on EMEA or Europe. You had an excellent performance there, despite the fact that you have a very strong market share and the market as such is not growing that much. How much longer do you think you can outgrow the market that significantly? The second question is, you're sharing your views on the expansion of the value segment. We've seen Neodent having an accretive impact on your margin side. How shall we think about the Instradent platform longer term? Can it be accretive as well? Of course, short term, you're going to have some investments, or do you think it's going to be on group level? If we look on a five-year horizon, what kind of margin contribution shall we expect from the value in total or Instradent? Thanks.
You are right. Western Europe or Europe in general has seen a very positive development in 2015. I can already tell you we also had a strong start into 2016. You have to remember that actually we launched in Western Europe Bone Level Tapered, but only in some countries end of Q2, in other countries even in Q3. There's still a lot of potential to take a share away from other Tapered implant players in Europe. On top of that, we are now preparing the launch of our chairside solutions also in Europe. As pointed out during the presentation, we expect that in the fourth quarter of this year, we will actually also start with selling chairside solutions in some of the European countries. Then obviously, we will have the full effect in 2017.
Our innovation pipeline is full, we are working on a couple of other very interesting projects. Some of them we will actually obviously present at the IDS in 2017. I'm confident that during the next years, we will, in Europe, despite the high market share, be able to continue to outperform the competitors. In terms of Instradent, the markets where we have been present with Instradent now for quite some time already, and I'm here particularly talking about Iberia, Spain, they are already profitable. Our target is that next year, in 2017, if you look at all the Instradent activities, that we will break even, and then continuously start to increase our contribution to the group results, EBIT margin. The fact that we can actually leverage the value business on existing Straumann infrastructure helps the business to actually, at the end, yield quite significant EBIT margin.
I don't see any reason why mid-term, longer term, the Instradent contribution should not be equal in terms of relative margins with the Straumann business.
My name is Stephan Schelo from bz Basel. I have a question regarding Anthogyr. Are the products of Anthogyr and the value products of Straumann, are they competing? How do you deal with the fact that they perhaps are competing?
Good question. Anthogyr is strong in its home market in France, where currently we do not have a value product or a value line in the portfolio yet. They are strong in China, and in China, we don't have value product registered yet. Obviously, one alternative would have been that we go with the Neodent product range also after the Chinese value segment. Problem right now is that registration timelines in China are extremely long. It will take us more than two years to get the full range or the range of the Neodent products which we would need in the Chinese market to compete in the value segment to get them registered. We cannot wait two years. That's why we were looking for an alternative.
The Anthogyr product is a high-quality product, which is also important because despite the fact that we talk here value, Straumann's philosophy clearly is we don't want to have any company in our value platform which is not manufacturing high-quality products. With the Anthogyr manufacturing site close to Switzerland, close to Geneva in Savoie, they produce top-notch quality products. They are looking back at more or less the same years of history like Straumann. This is not a company which was founded a couple of years ago. This company looks back at more than 50 years of history. We believe this is really a good fit to our philosophy, and we are not competing in the core markets of Anthogyr. France, China, these are the two largest markets they are in.
Are you expanding in China with them?
Yes. We are making our hybrid distribution model available to also distribute Anthogyr in the Chinese market. As I pointed out, we will start the beginning of the second half of the year to commercialize the Anthogyr product range through the Straumann setup in China.
It's again Oliver from Commerzbank. One question on slide 23. For restoration, you have one plus compared to the implants of two plus, basically that's the past performance. A couple of times ago, you said basically it's your objective to move more forward to a dental solution provider and restorative is also an important part of it. Are you happy with the progress you have made over the last year of becoming a total solution provider, or has it fell something behind your expectation? My second question is on the general market consolidation. Over the last years, we saw some meaningful deals. If you look on the respective deals, from your position, how would you describe that the competitive landscape has changed, and to which extent you were able to profit from this consolidation of competitors?
To your first question, we were able in 2015 to close some significant gaps which we had to call ourselves a true total solution provider. Importantly, on the implant side, obviously the launch of Bone Level Tapered, which gives us now access to an important segment, to the largest segment in our industry, which we were not able to actually compete in before. We now have with Dentsply also a complete or the most complete biomaterials range. This has been a gap, too, in the past. We were kind of limited with our synthetic bone grafting material named Emdogain. We have launched, as pointed out, a new generation of scanners, lab scanners. Also this filled a gap. We are in a limited market release with our first full solution for labs, consisting out of the Motion 2 Amann Girrbach mill connected to our Dental Wings as scanner base.
We made quite some significant progress in 2015. In 2016, we add to this the chairside solutions, the intraoral scanner standalone, and then later during 2016 in combination with the chairside mill. On top of that, we are also launching a full range of materials. Our vision is that by the end of 2016, we have launched products and solutions which will allow us to fill the most important gaps, and that then we can truly state that we are a full and total solution provider for dentists and for laboratories. On your second question, the competitive environment. I mentioned the situation in the U.S. Whenever there is a transition from A to B, this is an opportunity for competition.
I think we can state, without stepping on anybody's toes here, that one of our core competitors and the company who was actually bought out last year by one of these multinationals, currently has to focus more on internal issues like efficiency improvements, process improvements, et cetera, to raise profitability and to increase efficiency. At least that's what we see in the marketplace, that the focus right now is not entirely on the customers and on the market side. This is obviously an opportunity for us. We should not fall into illusions that this will last forever. That company, who took over our competitor, has the reputation to act very swiftly and very fast on actually getting these efficiency improvement programs through. Then again, the focus will be on growing the business.
Yes, 2015, I think some of our competitors were kind of occupied more with internal issues, and this has helped us to actually take some share away.
Gentlemen, here comes a question from the web call. The participant would like to know what is our estimate, what the CAD/CAM share of the consumable part is, so how many elements today are produced through CAD/CAM technology, and what we estimate the growth rate of that market will be going forward.
It's in so far a little bit difficult to tell, because you have some markets which are already very mature when it comes to CAD/CAM. You have some markets where CAD/CAM doesn't play a role yet. As an example of the second, I would like to mention Brazil, where we are actually, I would say the ones who are actually bringing CAD/CAM solutions to the dentist. We all know that Brazil is the second largest dental implant market in terms of volume. There, CAD/CAM is still at the very early stage. If you look at the U.S., obviously, also Germany, these markets are. CAD/CAM is actually daily business. There, the percentage of penetration on the prosthetic side with CAD/CAM solutions is already rather high.
To give you an average throughout the whole industry is, I would say, I don't have these numbers available, to be honest.
Good. A second one from the internet. The person would like to know, given the transaction or the partnership with Anthogyr, are we still trying to register Neodent in China or is that not something we're pursuing?
I don't know if I should answer that question, yes, we are. Obviously, we are convinced that the Neodent product range is unique in terms of the combination of features it offers to dentists. I think I mentioned last time that my belief is that if you look at the Neodent product range, it's an optimum combination of the best available surfaces in the market. NeoPoros is an SLA surface. Acqua is a SLActive type surface, combined with the most modern designs. Coming from one of our competitors, if you look at the Neodent Drive or the Alvim, or even the Titamax, the designs look pretty similar to designs of one of our key competitors, obviously without infringing any patent. I want to make sure that that's well understood.
Thirdly, if you look at the connection, also there, from a connection point of view, the Neodent implants come with two types of connections, which are completely state-of-the-art. The combination of these features make the Neodent range really an extremely competitive product range in our industry. On top of that, we can actually offer that product range at a very attractive price. Yes, we want to have Neodent available in all our larger markets. China, it will take quite some time.
I'm Carla Bänziger, Vontobel. I have a question related to China. Can you maybe comment about, you were expecting that there could be still a distributor destocking effect. Was that fully compensated by the stocking of the new distributors? Secondly, on China, can you maybe explain a bit what the bottlenecks for you are there now? Because now you have set up the new system and the potential is huge. What is really the bottleneck for you there?
I'd like to take the second part of your question, Peter, you can comment on the stocking effect. The real bottleneck right now is registrations. That's the big bottleneck in China. Despite the free trade agreement between Switzerland and China, when it comes to non-tariff hurdles, it's becoming every day more complicated.
Yeah
Recently, the Chinese authorities started to ask for clinical studies for implants, which was not the case before, which obviously extends the timing of becoming a product registered in this market. This is the big bottleneck. It's the time for registering a new product in the Chinese market.
The de-stocking effect that you mentioned in China, that is coming from our former distributor in China, Focus Medical, and that de-stocking has taken place over the last couple of months. Going forward, I do not expect a significant negative impact on our sales due to that de-stocking effect. Of course, my transparency in that question is somehow limited because it's an independent, the former distributor is doing that, I do not expect this negative impact.
A follow-up on the Russian market. Is that a big impact when you include, as usual in Straumann's history, the distributor margin on the group level? Is it a small margin? If you can elaborate a bit on the Russian market, the current shape obviously must be very weak.
The Russian market is actually still a very attractive market. We are talking roughly 600,000 implants. The volumes have come down over the last one and a half years, it used to be an even larger market. We are selling, okay, I give you now some data we normally don't disclose, I tell you anyway. We are selling roughly 20,000 implants in the Russian market, we have a little bit more than 3% share. The key reason why we have taken our distributor there is because we didn't actually grow fast enough, 3% is not up to our ambitions. That also answers, in a way, the first part of your question. The impact on top line and on EBIT contribution has been insignificant.
A smart move, for sure. A last follow-up question on the U.S. excise tax. Can you quantify a bit, give us an update about the, I think it's this year and next year, right, the impact?
Yes, it's an impact this year and next year. When that tax was imposed, at that point in time, we always commented that we are not increasing the prices because of that additional tax. That also means that right now we are not decreasing the prices, or we don't need to decrease the prices because of that excise tax, which is currently suspended. We reported the respective cost in our administration costs, and it's a low single million-digit number.
This year and next year?
This year and next year, yes. Per year. A low single million-digit number.
With this, we would give the participant on the telephone a chance to address their questions. Please limit your question to two, and by pressing the star and one button. Chorus Call, can we have the first question from telephone, please?
Our first question from the phone comes from Lisa Clive, Sanford Bernstein. Please go ahead, madam.
Good morning. A question on the CAD/CAM business. Clearly, you have ambitions to grow this business very significantly, you've done a lot of collaborations, and you've really expanded your scope. If we look at the history of the CAD/CAM market, it's been a pretty bumpy one. If I look at your closest competitor, they had an incredibly challenging time after, frankly, getting a bit overextended in the market. Could you explain to us exactly how your strategy fits in with being an implant player? Is this really just going to be an implant-focused CAD/CAM business, or are you trying to reach out more broadly towards tooth-borne restorations? If the latter, there's a lot of competition out there. How can we be confident that this is the right strategic choice?
Follow-up question on that is, if you could give us an idea of your consumable split today between implant-related versus tooth-borne, that would be helpful. Second question on Patterson. Could you just remind us of where things stand? The collaboration seems to have completely dissipated. Is this going to get revisited at some point? Do you have an alternate strategy to target GP dentists, or is it really just going to be through the Neodent brand?
Okay. First question will take some time to explain, I will take the time, obviously. Our ambition is not to be just an implant company. No, our ambition is to be a total solution provider for tooth replacement for dentists and for labs. When we talk about dentists, tooth replacement, actually, we include the tooth-borne part of tooth replacement. There the tooth-borne part is not in the focus. When looking at the strategy, there are actually three different segments we have to differentiate. One is the chair-side workflow, so prosthetic parts which are manufactured by the dentists themselves in their own practice.
To actually cater for these needs, we will offer in the future an intraoral scanner, a chairside mill and prefabricated blanks out of titanium or cobalt chrome. To manufacture CAD/CAM-based titanium or cobalt chrome customized abutments chairside. We will obviously also offer to the dentist a full range of materials, starting with our own glass ceramic material, which we call n!ce, full ceramics, et cetera. We will actually be able, at the latest by the end of 2016, to offer everything a dentist needs to restore teeth in his own practice, starting from the equipment, all the implants, obviously the biomaterials, up to the corresponding materials he or she needs to actually then fabricate the crown or the bridge or the veneer, or whatever, in his own dental practice. We are actually targeting to offer the same to dental labs.
We already started, as I mentioned, by marketing our setup, consisting out of the Amann Girrbach in-lab milling machine, which can now be used seamlessly with our Dental Wings 3 and 7 series scanners. We offer that in conjunction with a broad range of materials, which are also Straumann-branded. Also there, we are already pretty close to our ambition to be a total solution provider when it comes to tooth replacement, implant-borne tooth replacement for labs. Finally, we have our centralized milling outfits, which can be used either by dentists or by labs. More and more, we specialize on these centralized milling outfits on complicated, highly sophisticated solutions like screw-retained bars and bridges, on materials which are difficult to be milled, either chairside or in-lab.
This is actually another service which we provide to dentists and labs, because at the end, again, we want to be a total solution provider. Independently of how our customers choose to restore teeth or full arches, we are there to provide the corresponding solution. Independently of them choosing to work either conventionally, semi-digital and fully digital. We will have the corresponding workflows available with the corresponding products, including equipment up to materials, to actually manufacture final crowns or bridges. On your second question, on Patterson.
The GP strategy.
Patterson. I think I already hinted last time, when we had the opportunity to talk to each other, at the fact that we have not been very pleased with the development of the relationship with Patterson. We have, in the meantime, terminated that relationship. We have now, as we believe, drawn the right learnings out of this experience. The new strategy we are now pursuing is by partnering up with, among others, the Engel Institute, which I mentioned during my presentation. The Engel Institute is the most important GP education body when it comes to surgical procedures in the U.S. As pointed out, roughly 7,000 students or dentists have undertaken a basic education program through Engel. On the same time, we are continuing to work together with Spear on the prosthetic parts.
Spear is the prosthetic arm when it comes to GP education, and Engel is actually filling the gap when it comes to the surgical part of GP education. We believe that actually through these two partnerships, we have a very solid and promising base to train GPs on our products, on the implant side as well as on the prosthetic side.
That's very helpful. Can I just ask one follow-up on CAD/CAM? Obviously, every company is different, but it seems like your competitor, who was also very involved in CAD/CAM, really ended up being overextended. Frankly, it is a very competitive market. You've got Chinese labs producing crowns at a fraction of what I imagine you may be willing to sell. Now, it's not high quality, but still, they're out there.
How can we be confident that all these investments will actually end up?
paying off?
At the end, we truly believe that it's not sufficient anymore in the future just to sell an implant or an abutment or a biomaterial. If you want to be competitive and a top-notch company in this industry, you have to provide total solutions. In contrary to what, and I know the competitor you're hinting at, in contrary to what this company did in the past, all our solutions are completely open. Okay? First of all. Secondly, we don't limit the offering just to centralized milling. We are actually giving our customers the choice how they want to work, and we support them in whatever way they actually choose to work.
What we want to make sure is that along the value chain, being it chairside, being it in-lab, being it through us, through centralized milling, that in this chairside, in this value chain, we are present, and we actually capture part of this value chain. To give you again the example of the chairside system, obviously, we make money with the intraoral scanner. We make money with the chairside mill. In future, the big additional source of revenue and profit will come from the materials. We strongly believe that you cannot just go out and sell the material. You have to be able to sell a total solution, including the materials. With the labs, it's the same. The move with the prosthetics was clearly a move actually to make sure that in future, at least we get part of the value chain captured with Straumann products.
Many of these labs in the past, they milled the connection themselves. Now we are there, and we can tell them, "Look, you don't have to mill the connection yourself. You get an original connection from us with a prefabricated blank." Many of them, they were crying for a solution like that. Obviously, we don't make the same profit like with a dentist or with a lab who's buying a standard abutment from us, but at least we are capturing part of the value which is generated in this process. As I also pointed out, we are also offering a wide range of materials to the lab. In future, we also capture part of the value by restoring a tooth through a crown or through a multi-unit bridge, which we didn't have in the past.
I think what's also important is, we fully realize that when it comes to centralized milling, centralized milling is not competitive when it comes to simple tooth-borne CAD/CAM copings. That business model is not working anymore. However, we still see that there are a lot of labs who are desperately looking for a provider who is providing to them an opportunity to get screw-retained bars and bridges, potentially even based on multi connections on a screw-retained bar, because there are also many patients around who have different types of implants in their mouths, and that's where we are actually putting the focus on. It's not that through our centralized milling outfits, we want to actually compete with the Chinese big labs or with the opportunity of now many, many dentists even to actually mill chairside a simple coping. That's not our intention.
Okay, thank you. That's very helpful.
Next question from the phone comes from Michael Jüngling, Morgan Stanley. Please go ahead, sir.
Great. Thank you. My first question is on the 2016 EBIT margin guidance. If you were to grow 5% in constant currency organically, what should the natural operating leverage look like for a business like yours? Question number two is on the carry-forward tax losses. I think you've got an asset around CHF 210 million. How can that be used in 2016-2018? My suspicion is you could use it faster and therefore is there a possibility of having an 11% tax rate for the next three years rather than your guidance of 15%?
Peter. I start with your second question on our tax rate. Yes, you're right. You look at the effective tax rate, this year it was around 11%. I'm confident that the underlying tax rate that we can achieve is around 15%. You look at the overall environment over the next couple of years, we see that it gets much more difficult in all the different countries, the tax environment compared to the past years. I'm not sure if we really have a significant improvement potential in the tax rate compared to the underlying of 15%.
I look at your question on the EBIT margin in 2016. As we have communicated in the past, the EBIT development is always a mixture between reinvesting part of the incremental EBIT that we can generate into expanding of our business and into our growth projects, be it the R&D portfolio, be it the value business, be it the expansion and establishment of new subsidiaries in other markets such as Russia that we recently have or in Latin America. We are convinced that we have a unique window of opportunity. We have discussed earlier, most of our competitors are currently involved in some kind of merging activities. We are convinced that we want to capture that window of opportunity to expand our business and reinvest and use the incremental profit that we generated for this expansion.
Look, I sort of understand this reinvestment potential. What I was trying to work out is a starting point for what the margin could be in 2016. Ignoring all investments that you're intending to make for growth above and beyond of what you're doing today, what sort of operating leverage could your business produce on 5% or so organic growth? Is it 100 basis points? Is that possible? Is that realistic?
You can make the math. You take a 5% growth of our top plan and you extract the additional COGS that we need to invest to achieve that 5% growth, you can basically say that 50% of the COGS is basically variable part of the COGS, the other is purely increasing the absorption of the current fixed cost. You can see without any additional investments in any additional sales force or marketing activities, you could see what the operational leverage would be theoretically.
Okay. On the margin, if I look at your China sales where the provision which stands at CHF 50 million, do you expect to utilize this in 2016 or is there a scope for you to write that back or a portion of that back?
The China-
On page 42, the China-
Yeah
sales where the provision.
Fortunately, we will spend everything.
Okay.
It shows that actually the business is developing as it was anticipating.
Yeah.
Let me add one point to what Peter said on the tax rate. The 15% is obviously already including the changes which you will see in the Swiss tax environment. I am not sure, Michael, if you are aware that there are some quite important tax reforms coming towards Switzerland, and some of them will also impact our tax rate. The 15% is already anticipating some, I would say, negative impact also on our tax rate due to these initiatives.
See, my question was very simple. If you look at the carry-forward tax benefit or asset you have got is CHF 210 million. Last year, you used CHF 15 million. Why couldn't you use?
Sure
CHF 20 million or CHF 25 million per year for the next three years?
We already activated and capitalized these as deferred tax assets.
Okay. Thank you.
Next question from the phone comes from Tom Jones, Berenberg Bank. Please go ahead. Mr. Jones, your line is open. You can speak now.
Good afternoon
Question from the phone comes from Veronika Dubajova, Goldman Sachs. Please go ahead.
Good morning, gentlemen. Thank you for taking my questions. I will stick to two, please. The first one is, Marco, it's great to hear your thoughts on where you're heading in terms of being a total solutions provider. It might be too early to ask, but if you were to look out at your business in three or five years' time, what would you expect the contribution to revenues to be from implants versus the CAD/CAM business versus the restorative business? That would be very helpful if you just would give us a sense for how you're thinking about it and the overall CAD/CAM opportunity. My second question is just very quickly on M&A. Obviously, you are de-leveraging. The cash flow was extremely healthy in 2015. Any thoughts on what the environment looks like and what's on your drawing board in terms of pipeline of potential deals?
What are the areas that you're looking at, when might we see another acquisition from you? Thank you.
On your first question, Veronika, I have to apologize. I cannot give you really concrete numbers here. The only thing I can tell you is that obviously the percentage of the business which we will generate with CAD/CAM will increase. We will actually generate percentage-wise more of our business with CAD/CAM. I think that's clear. This is the objective. How much exactly is, honestly, it wouldn't be a serious answer. On your second question on M&A, I think it was pretty prominently also in the press that there is one company out there for sale. It's actually the last large independent global implant company, besides the large Korean one, which is still available through an M&A transaction. We are waiting for the process to start. Obviously, our ambition is we also want to be number one in the value segment globally, in the foreseeable future.
An acquisition of this asset would obviously help us to achieve this target sooner than through growing organically based on the other value brands which we have available. However, like with every M&A transaction, at the end, it has to add value to our shareholders. We are not ready to pay just a fantasy price. It has to actually make sense financially. Again, it has to add value to our shareholders. Otherwise, we would stay away.
Okay. All right. Understood. Thank you. Maybe I can ask the CAD/CAM question or the business mix question slightly differently. Would you be willing to share with us your thoughts on what the revenue opportunity for you is in CAD/CAM on a medium-term basis?
At this point in time, not yet.
Okay. I had to try. Thank you very much.
Next question from the phone comes from Ines Silva, Bank of America. Please go ahead.
Hi, thank you for taking my questions. I have two, please. First of all, just on Latin America, on your comments that your business is currently improving over there. I just wanted to make sure that I understood correctly. Is this an underlying improvement of volumes, or is this due to the price increases that you've put up in the end of 2015? My second question is just on your gross margin. If you could, at this time, give us an idea if you're expecting any negative effects from the currency depreciation on your overall gross margin in 2016. Thank you.
I take the first question, Peter, you take the second one. Brazil, you're right. At the end of 2015, we increased prices in Brazil slightly. The growth in 2016 we have seen so far is obviously a combination of both. We've seen the impact of the price increases coming through, but we also have seen quite substantial volume increases in Brazil, especially in February after the large congress in São Paulo has taken place.
Thank you very much for the question about the gross margin, because I think that's a very interesting topic. If you look back a couple of years, you see that basically we had currency headwinds over the last years, five, six years. Nevertheless, despite these currency headwinds, we were able to keep our gross margin more or less around 78%. That shows that we were able to mitigate the currency headwinds by efficiency improvements in the different plants and by using the economies of scales. I'm also confident that we can also do that going forward. At the same time, on top of that, we also get a certain pressure on the gross margin as we are taking on more third-party products, such as the biomaterials from Botiss, for example, or the CAD/CAM products from Dental Wings.
I'm also confident there that we can mitigate that by achieving efficiency improvements in our different manufacturing sites.
I think it's also important, Peter, to mention that at EBIT level, these third-party products are not dilutive because we sell them through the same existing infrastructure, the same sales force. We don't have to add actually a lot of incremental OPEX. At EBIT level, they are even accretive.
Yeah.
Okay, thank you. Can I just have a quick follow-up on Latin America? If you're seeing volumes increasing significantly the first months of this year, why is your outlook so cautious for organic growth for 2016?
We don't know what happens during the rest of the year. We are not even at the end of February. We've seen again, the third quarter has been a sobering experience for us in Brazil, third quarter of last year. We remain rather cautious when it comes to anticipating the development for the entire 2016 in this, again, for us, extremely important country.
Okay, thank you very much.
Next question comes from Markus Gola, Mainfirst Bank. Please go ahead.
Yes, good afternoon, and thank you for taking my question. I have just one on your stake in T+, which you have impaired due to lower value in use. I understand that T+ has already a registration in China. Does that impairment mean that you expect some cannibalization between T+ in China and your cooperation with Anthogyr, or why did you impair that stake?
You're very well-informed. I'm impressed that you know that T+ is registered in China, which is correct, yes. We have other plans with T+. So far we have been talking about the premium segment, and we have been talking about the value segment. This has been our focus over the last couple of years, to regain market leadership in the premium segment, to reinvigorate the innovation pipeline, to actually reestablish the Straumann brand as the innovation brand in our industry when it comes to premium implants. We have also put a lot of focus on actually penetrating the value segment. What we haven't done so far yet is actually entering the discount segment. The discount segment, we should also not neglect, the discount segment is also a rather important part of the industry, and in certain countries, it's a fast-growing segment.
T+, we've acquired with the objective to actually leverage T+ when we have done our homework on premium and value to take the T+ and actually to use the T+ brand as an entry into discount segments, especially in the Asia-Pacific region. We also have to set priorities. We cannot do everything at the same time. Our priority right now is total solution provider premium is becoming among the top companies in the value segment. As I pointed out before, the pipeline of projects and initiatives is still rather empty, and obviously, at one point in time, we will also start thinking about how to entering the discount segment. T+ is one of the brands we most probably will use to actually go after the discount segment.
Okay, thank you. Just a quick follow-up. If you didn't change your value in use, so that means something in your underlying assumption changed. From what I understand, you just postponed the order of your project since you're focused on premium and value for now. Is that correct?
I don't know how I should put this, I give you now the true answer. We like light balance sheets.
Okay, thank you.
Now we passed the 90-minute mark. Before I hand back to Marco for the closing remarks, I would like to take a last question from the internet. This person wants to know how we avoid cannibalization between Neodent in Europe, where we active in Spain and Italy and elsewhere, and Straumann, the premium brand.
Our objective is not to avoid cannibalization. Our objective in all the markets where we are present with a Straumann outset and an Instradent outset is actually to gain market share in the premium and in the value segment. This is our objective. Our objective is not to manage cannibalization. Obviously, what we are doing, we are tracking very closely if there is cannibalization happening between the two brands. We monitor that by actually measuring how much of the turnover we generate through Instradent and obviously through the Neodent brand, how much of that turnover is actually generated with existing Straumann customers. This we track very diligently, and I can tell you that the percentage is in the low single digits.
We are confident now that, for example, in Spain, we have been present with Instradent or Neodent for more than two years, and this percentage stays more or less stable. It's low single-digit percentages. On top of that, this is not even full cannibalization. A large part of this business which is generated with existing Straumann customers is actually throwing out a second system these customers have in their practice and replacing the second systems with Neodent. Okay. Thank you for your questions again. We cannot go into all the details this morning, but you can find most of them in the preprint of our annual report, which is now available on our website. The hard copies will be sent to subscribers in two to three weeks. Thank you for your questions. Should you have any follow-up questions, please contact our IR team.
At the end of the presentation, we have also included the selection of the responses from our investor perception study, which we conducted in December of last year, and we would like to thank everybody who has participated for the participation. Thank you again for coming and seeing us here in Basel, and we wish you all an enjoyable rest of the day. Thank you.