2013 Full-year results Analysts & Media Conference Basel, 25 February 2014 Disclaimer This presentation contains certain forward-looking statements that reflect the current views of management. Such statements are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Straumann Group to differ materially from those expressed or implied in this presentation. Straumann is providing the information in this presentation as of this date and does not undertake any obligation to update any statements contained in it as a result of new information, future events or otherwise. The availability and indications/claims of the products illustrated and mentioned in this presentation may vary according to country. 2 1
Explanation of terms To facilitate comparisons and to show underlying performance, this presentation refers to organic growth and exceptionals Organic growth means excluding the effects of: currency fluctuations the discontinuation of the intra-oral scanner distribution business (N. America and Europe only) in October 2012 Exceptionals refers to: 2013: Restructuring charges of CHF 17m and a pension curtailment gain of CHF 9m, both related to cost-reduction initiatives 2012: Charges of CHF 18m related to cost reduction and severances and the goodwill impairment of CHF 21m relating to the global regenerative business 2012 figures have been restated due to adoption of the IAS 19R (employee benefits) standard. 3 2013 Highlights Marco Gadola, CEO
Achievements and highlights Full-year 2013 Organization adapted to changing market environment Turnaround achieved Profitability significantly enhanced Innovation lead restored Share price / investor confidence restored Q4 2013 Third consecutive quarter of organic growth Paradigm-changers launched at successful EAO Foothold in value segment strengthened 5 Improvements at all levels REVENUE BEST PERFORMERS GROSS MARGIN CHF 680m N. America & ROW 78.8% Full year: +1% (organic) Fourth quarter: +4% (organic) Full year: +8% (organic) +95 base points 1 driven by further efficiency gains & optimized plant utilization EBIT MARGIN 1 PREMIUM+VALUE STRATEGY ORGANIZATION 18.2% Portfolio expansion Resized & refocused +333 base points thanks to improved gross profit and benefits from cost optimization measures Investments in Medentika and Createch complement expanding Neodent To support sales and adapt to a fast-changing market 6 1 Excluding exceptionals
Good progress more than offsets the slow start 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% -12% Others 40% Global market for dental implants & abutments (2013: CHF 3 bn 2013) 2 Zimmer Dental 5% Market share Biomet 3i 7% Straumann 19% Dentsply Implants 13% Nobel Biocare 17% Straumann organic growth Market for tooth replacement & restoration (leading implant companies) 1 7 1 Straumann, Nobel Biocare, * Straumann, Zimmer Dental, Nobel Biocare, Biomet 3i, Zimmer Dentsply Dental, Implants Biomet - based 3i, on Dentsply company Implants and SEC -reports based on company and SEC as well as management reports comments. as well 2 Source: as management MRG and idata comments. @2013 FX rates. Data include implants & abutments, but no instruments. Key growth fundamentals remain intact Proportion of US adults missing 1 or more teeth 1 200 100 20% 32% 38% 59% 68% 74% 84% 18-24 25-34 35-44 45-54 55-64 65-74 75+ Implant penetration per 10 000 population in 2013 2 0 Age Top 3 Tooth loss due to decay/periodontal disease correlates strongly with age; 3 of every 4 US pensioners have missing teeth While caries prophylaxis has reduced tooth loss in developed markets, potential for implants is still huge due to demographics, substitution potential etc 50-60% of the US adult population had lost at least one tooth in or prior to 2012 45% of those were fully treated; of the untreated, 31% (approx. 20m) planned to get treatment in the next 3 years More than a million people needed replacements for existing restorations (e.g. conventional bridges or dentures) In most countries the number of implants placed annually per 10 000 population is less than half the average of the top 3 countries 8 1 Wisdom teeth excluded 2 MRG and idata 2013
Business and regional review Thomas Dressendörfer, CFO Margin expansion at all levels in CHF million FY 2013 excl. IAS19 excl. at constant exceptionals restated 1 exceptionals FX Revenue 679.9 679.9 686.3 686.3 676.9 Change organic % 1.2% (1.0%) excl. exceptionals at constant Gross profit 535.9 531.5 534.4 525.0 0.3% 2.1% margin 78.8% 77.5% 77.9% 77.6% 95 bps 127 bps EBITDA 148.4 156.4 119.5 132.5 128.8 18.1% 21.5% margin 21.8% 23.0% 17.4% 19.3% 19.0% 370 bps 398 bps EBIT 115.8 123.8 63.1 102.1 97.4 21.2% 27.1% margin 17.0% 18.2% 9.2% 14.9% 14.4% 333 bps 382 bps Net profit 101.2 37.5 margin 14.9% 5.5% Basic EPS 6.55 2.43 Free Cash Flow 139.2 95.2 margin 20.5% 13.9% FY 2012 Change yoy 10 1 In 2013, Straumann adopted the revised IAS 19R regarding employee benefits. 2012 figures have been restated accordingly.
Organization adapted to match market development 2 452 2 517 2 361 2 201 2 170 2 217 2008 2009 2010 2011 2012 2013 Headcount reduced by 300 to preeconomic crisis level Overall restructuring/downsizing costs in 2013 amount to a net CHF 8m including severance packages and curtailed pension obligations 80% of leavers had found new jobs by year-end, helped by outplacement support Strong, engaged team of professionals retained Cost optimization measures implemented 11 Pick-up in H2 helps to restore margins to acceptable levels in CHF million H1 H2 FY 2013 excl. exceptionals excl. exceptionals Revenue 354.8 325.1 679.9 Change organic % (0.9%) 3.7% 1.2% Gross profit 276.2 259.7 535.9 margin 77.8% 79.9% 78.8% excl. exceptionals EBITDA 74.5 80.0 73.9 76.4 148.4 156.4 margin 21.0% 22.5% 22.7% 23.5% 21.8% 23.0% EBIT 56.8 62.3 59.0 61.5 115.8 123.8 margin 16.0% 17.6% 18.1% 18.9% 17.0% 18.2% Net profit 53.7 47.5 101.2 margin 15.1% 14.6% 15.0% Basic EPS 3.48 3.07 6.55 Free Cash Flow 34.7 104.5 139.2 margin 9.8% 32.2% 20.5% 12 12
Third year of efficiency gains in operations Significant efficiency gains achieved through: Broader application of lean manufacturing principles Insourcing Process re-engineering Design-to-cost initiatives 13 Bubble sizes illustrate market volume potential Gross profit margin further expanded In % of revenue +127bps 0.8% (0.3%) 0.4% 0.3% 0.4% (0.3%) 78.8% 77.5% 77.6% Gross profit 2012 FX effect Cost optimization charges Adj. gross profit @FX2013 Improved volume/mix offsets price effect 1 itero effect Inventory changes Manufacturing efficiency gains Gross profit 2013 14 1 Lower-margin intra-oral scanner sales discontinued October 2012
Successful reorganization drives EBIT improvement In % of revenue +382bps 4.3% 0.1% (1.2%) 5.6% 1.6% (2.2%) (0.4%) 14.4% 18.2% 17.0% 9.2% Restated EBIT 2012 FX effect Impairment & cost optimization Adjusted EBIT 2012 Gross profit Change in distribution costs Change in admin. expenses Other income EBIT 2013 excl. exceptionals Cost optimization Reported EBIT 2013 15 1 One time project costs of CHF 6m related to Straumann s reorganization, Neodent transaction and IAS19 2 Restructuring charges of CHF 13 million and a decrease in pension obligations of CHF 7 million Impressive cash conversion In CHF million 33.1 (11.9) 7.1 5.3 (0.3) 95.2 10.7 Restructuring charges included Days of sales outstanding 2013: 49 2012: 49 Days of supply 2013: 161 2012: 152 139.2 FCF margin 13.9% FCF margin 20.5% Free cash flow 2012 Improved gross profit (Cash) OPEX Higher working capital Lower CAPEX Less income taxes paid Others Free cash flow 2013 16
Solid cash position In CHF million 2012 Dividend of CHF 3.75 per share 199.2 14.0 2.9 139.2 54.2 57.8 140.5 Investments in portfolio expansion: Medentika GmbH Createch Medical S.L. 383.8 Cash & equivalents Jan 2013 Free Cash Flow Investments Dividend paid Bond proceeds Sale of treasury shares Others Cash & equivalents Dec 2013 17 Decline in Europe offset by solid growth elsewhere In CHF million (0.9%) in CHF (9.4) (5.4) (12.1) 13.6 1.2% organic 4.5 2.4 686.3 671.5 679.9 Change organic (1.5%) (0.8%) (3.2%) 8.1% 4.7% 8.4% Revenue FY FX effect 1 itero effect Revenue FY Europe North APAC ROW Revenue FY @ FX 2013 America 2012 2013 18 1 Discontinued of the intra-oral scanner business in October 2012
Double-digit growth in North America Pockets of improvement in Europe Revenue change (organic) Europe (5.6%) (7.7%) 0.2% 56% (3.4%) (1.4%) Q4 revenue lags behind prioryear period, reflecting challenging markets Contractions in Italy, Germany and Benelux 54% Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Spain and Nordics improve North America 27% 10.6% 11.0% 9.1% 1.8% 2.1% Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Second quarter of double-digit growth Growth across all businesses, led by implants and regeneratives Volume expansion and mix (upgrade to Roxolid) contribute to growth 19 Pie-chart segment indicates regional sales contribution to the Group Turnaround in Japan sustains pick-up in Asia Asia Pacific 14% Revenue change (organic) 56% 16.3% 7.9% 0.9% -0.9% -4.4% Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Double-digit increase in Q4; all subsidiaries posted growth China and South-East Asia distributor markets posted exceptionally strong orders Recent marketing approval in Japan for SLActive surface Rest of World 5% 35.1% 4.1% 1.8% -2.6% -10.4% Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q4 revenue up 2% (l.c.) after exceptionally strong Q3, reflecting erratic distributor ordering patterns in Middle East Good growth in LATAM; doubledigit growth (l.c.) in Brazil Currency headwind due to BRL depreciation steals 6% points from regional growth 20
Solid single-digit growth in implant and regenerative businesses offsets decline in prosthetics Implants Restorative 1 Regeneratives Straumann 21 1 Excluding the effects of the discontinuation of the intra-oral scanner distribution business in October 2012 Working on the fundamentals Marco Gadola, CEO
Tracking the progress of our key priorities Lean, high performance organization Cost reduction measures Continuing cost discipline New organizational set-up (customer focus) Address changed market dynamics Customer- and market-driven solutions ongoing Target unexploited growth markets Address value segment Increase presence in fast-growing underpenetrated markets ongoing ongoing 23 Full implant range now available in Roxolid /SLActive New Loxim transfer piece for easier handling Implants with high strength and excellent osseointegration open up new treatment possibilities Small-diameter implants avoid bone augmentation, saving trauma, discomfort and cost and increasing patients acceptance of treatment 24
A new attractive pricing concept Address changed market dynamics More value, same price campaign Upgrade to Roxolid SLA and SLActive implants with LOXIM transfer piece offered at same price as titanium equivalents with old transfer piece Implant pricing structure adjusted in Germanspeaking countries on 01/01/14; pricing of entry-level titanium SLA implant reduced to compete more effectively against value players Existing counter-screw transfer piece New Loxim lift-off transfer piece Bubble sizes illustrate market volume potential 25 State-of-the-art e-shop Address changed market dynamics New functionality, navigation and design Added value and convenience for customers Opportunities for cross-selling and efficiency gains 26 Bubble sizes illustrate market volume potential
Exciting roll-out program Customer- and market-driven solutions 4mm implant New Ceramic implant Reduces need for bone augmentation Highly esthetic, metal-free Straumann ONE Straumann Variobase Convenient, all-in-one package Original Straumann connection for multiple CADCAM systems 27 Covering the remaining white spots Customer- and market-driven solutions New ceramic implant Roxolid/SLActive 4mm implant Surgeons High-tech Ceramic implants Implants for narrow spaces Smaller, less invasive implants Fixed immediate edentulous solutions GPs Low-tech Cost-effective, open platform restoration Standard implant solution packages Esthetic, fast implant solutions with single crown / small bridge Simple edentulous solutions Single tooth Multiple tooth Edentulous Straumann ONE Straumann Variobase Premium Value 28 Bubble sizes illustrate market volume potential
SLActive launched in Japan Customer- and market-driven solutions Customers and patients in Japan now have access to the clinical benefits of SLActive1, 2, 3 First company to bring a proven documented hydrophilic dental implant surface to market in Japan SLA SLActive 1 Compared with grade 4 annealed and cold worked titanium; data on file, comparing material with specifications from standard ASTM F67; 2 Thoma DS et al. Preclinical findings presented at the AO Annual meeting, San Diego, USA, February 2009; Abs. SO4; 29 3 Al-Nawas B. Data presented at the EAO Annual Scientific Meeting, Monaco, October 2009 A visible cultural change New concept for marketing materials Fresh, emotive, lifestyle imagery To strengthen perception as professional, dynamic, reliable partner Target groups include young and female dentists 30
Expanding our offering Address changed market dynamics Limited offering Full-solution offering Innovation and clinical documentation Good enough 31 Chart for illustration purpose only Premium and value price range covered Addressing the value segment Ceramic implant Roxolid SLActive Roxolid SLA Titan SLA CM Smart Straumann 32
Dynamism at Neodent Addressing the value segment Strong value proposition Excellent price-quality ratio Multiple bone-level implant lines for various indications and requirements (handling, prosthetics, price) ILPAEO training/education faculty >5 million implants sold since founded Solid (domestic) performance 1 High-single digit growth in 2013 Net profit margin expanded to >30% Expansion underway Successful launch in Spain in Q4 Will cover 90% of Spanish market territories by year end Strong product pipeline US launch in March 33 1 On an adjusted basis Focus on fast-growing emerging markets Addressing the value segment Biodenta Founded in 2007 in Taiwan and Switzerland Specializes in comprehensive solutions for dentists and dental laboratories (dental implants, intraoral scanning, chairside milling and CADCAM with central milling) Focus on emerging market Global organization; regional hubs in Taiwan, US and Switzerland; >200 employees Cooperation aimed at opening synergies in emerging markets (China, Taiwan, India, Russia/Ukraine, Turkey, Middle East etc) as well as the USA and Switzerland Straumann has purchased a bond from Biodenta for CHF 6m, which can be converted into common shares Biodenta will pursue its planned growth strategy and, having completed a pre-listing in 2012, is working towards an IPO in the near-to-mid term 34
Outlook 2014 Barring unforeseen circumstances Straumann expects the global implant market to develop positively in 2014 and its revenue to grow in the low-single-digit range in local currencies The Group will continue to invest in dental growth markets and will extend the reach of its nonpremium offering Thanks to the full impact of the cost-reduction measures, Straumann aims to expand operating income margin in 2014 35 35 Confidence that we can outperform in 2014 based on. Leading innovation and solutions Only company with Roxolid small implants First company with hydrophilic implant surface in Japan Open CADCAM workflow; extended collaboration with 3Shape allowing users to design & order customized abutments with Straumann original connection More Value campaign Initiatives to address GP segment (T&E, dedicated product solutions) Investments in salesforces in growth markets and in selling skills Traction from ITI World Symposium Entrepreneurial value segment strategy With Neodent, Medentika, Createch and Dental Wings, Group satisfies a broader range of customer needs and budgets than other global implant companies 36
First step towards goal of restoring historic margin levels Underlying EBIT margin 25% 20% 27.4% 15-20% 20.7% @ 2013 FX rates 18.2% >20% 15% 10% 14.5% 10-15% 10-15% 10-15% 2008 2012 2013 Mid term Straumann Dental benchmark 1 37 1 Peers comprise Nobel Biocare, Dentsply, Patterson, Henry Schein, Osstem, and Sirona. 2014 An anniversary year 60th anniversary of Straumann 40th anniversary of our pioneering entry into implant dentistry 25th anniversary of Straumann Netherlands and USA Longevity demonstrates our sustainable business approach 38 Bubble sizes illustrate market volume potential
Questions & Answers 39 2013 Annual Report and IR twitter now available Comprehensive value reporting Corporate governance, compensation report, environmental report, outlooks, etc. Subscribe and receive regular investor related news under twitter.com/straumannir 40 40
Calendar of upcoming events 2014 27 February Investor meetings Frankfurt 28 February Investor meetings Paris 05 March Investor meetings New York 06 March Investor meetings Mid Atlantic 07 March Investor meetings Chicago 02 April Kepler Cheuvreux Swiss Conference Zurich 04 April Investor meetings Singapore 11 April Annual General Meeting Basel 15 April Dividend ex-date 30 April First quarter sales Webcast 26 August Half-year 2014 results Basel HQ Detailed calendar on www.straumann.com 41 Publication and corporate events 41 Straumann s currency exposure Revenue breakdown 2013 USD / CAD / AUD 28% Cost breakdown 2013 1 USD / CAD / AUD 22% Other 20% Other 12% CHF 12% EUR 40% EUR 21% Average exchange rates (rounded) FX sensitivity (+/- 10%) on... FY 2013 YTD 2014 Revenue EBIT EURCHF 1.23 1.24 +/- 25 million +/- 15 million USDCHF 0.93 0.92 +/- 17 million +/- 7 million JPYCHF 0.95 0.89 +/- 4 million +/- 2 million Development of Straumann s main exchange rates since 2012 1.4 1.3 1.2 1.1 1 0.9 CHF 45% 0.8 2012 2013 USDCHF EURCHF JPYCHF 42 1 These distribution charts represent the total net revenues and the total COGS as well as OPEX expenses in the various currencies. All numbers are rounded and based on 2013 figures.
Your contacts Fabian Hildbrand Corporate Investor Relations Tel. +41 (0)61 965 13 27 Email investor.relations@straumann.com Mark Hill Thomas Konrad Corporate Communications Tel. +41 (0)61 965 13 21 Tel. +41 (0)61 965 15 46 Email mark.hill@straumann.com Email thomas.konrad@straumann.com 43 International Headquarters Institut Straumann AG Peter Merian-Weg 12 CH-4002 Basel, Switzerland Phone +41(0)61 965 11 11 Fax +41(0)61 965 10 01 www.straumann.com