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Carl Zeiss Meditec AG Deep Dive Q&A | Financial Outlook and Cost Reduction Plans

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Carl Zeiss Meditec AG Deep Dive: Q&A

Financial and Strategic Outlook: Insights from Sebastian Frericks, Head of Investor Relations at Carl Zeiss Meditec AG

US Equipment Sales and Market Dynamics

Why Were US Equipment Sales, Especially in Microsurgery, Weak in Q3?

  • Market Context: Weakness in microsurgery sales was driven by the late product cycle of older equipment and the launch of the new KINEVO 900 S neurosurgical platform in October 2024. Transition periods between product generations are typically slower.
  • Financing Challenges: Private equity-backed clinics in the US, a significant customer segment, delayed investments due to high interest rates and expectations of an economic turnaround.
  • Recovery Outlook: With the launch of KINEVO 900 S and early stabilization in order entries at the start of FY25, ZEISS anticipates returning to growth in the US market by 2025.

Cost-Cutting Plans and Margin Impact

Can You Summarize Your Cost-Cutting Plans and Their Impact on Margin Goals?

  • Background: R&D expenses peaked at 17% of sales in FY22 due to investments in digitalization, AI, and cloud-based infrastructure. These investments have built a robust ecosystem of integrated solutions.
  • Optimization Strategy:
    • Adjusted R&D prioritization by focusing on high-impact products.
    • Implemented more responsive planning tools to align R&D investments with market conditions.
    • Reduced or slowed down investments in areas with longer monetization timelines or less immediate commercial potential.
  • Impact on Margins: These adjustments aim to improve productivity and preserve innovation while maintaining ZEISS’s leadership as the most R&D-intensive company in the ophthalmology industry.

Bridging 2024 Guidance to 2025 Profitability

How Do You Bridge 2024 Guidance to the Profitability Step-Up Expected in 2025E?

  • Drivers of Recovery:
    • Full-year contribution from the DORC acquisition.
    • Recovery in the Chinese market from inventory destocking.
    • Continued cost efficiencies in R&D and sales operations.
    • Stabilized equipment sales and new product launches, including the KINEVO 900 S and QUATERA 700.
  • Macro Conditions: While macroeconomic uncertainty persists, ZEISS expects a gradual improvement in consumer sentiment and demand across key markets.
  • Profitability Targets: The company targets an EBIT margin recovery of 16-20%, depending on macroeconomic developments.

R&D Strategy Under Cost Reduction Plan

What Is Your R&D Strategy Under the Cost-Reduction Plan, and Where Will Savings Occur?

  • Digital Investments: With foundational investments in cloud infrastructure complete, future spending will focus on developing applications and monetizable use cases.
  • Integration of DORC: Streamlined development plans across cataract and retinal product lines, leveraging synergies from the DORC acquisition.
  • Portfolio Focus: Narrowed the portfolio of premium IOLs to concentrate on high-potential products with the best commercial return.
  • Innovation Commitment: Despite cost reductions, ZEISS maintains the highest R&D-to-sales ratio in the industry to ensure continued innovation leadership.

Strategic and Financial Outlook

  • Innovation as a Growth Driver: ZEISS remains committed to advancing technologies such as AI, robotics, and automation to create market-differentiating solutions.
  • Focus on Profitability: Cost discipline and improved economies of scale are expected to drive margin expansion and position ZEISS for long-term growth.
  • Balanced Investment: Strategic prioritization ensures that ZEISS can navigate current market challenges while building a strong foundation for future opportunities.

Conclusion

With a clear focus on profitability, innovation, and market recovery, Carl Zeiss Meditec AG is well-positioned for long-term growth. The company’s strategic initiatives, including the launch of advanced products like the KINEVO 900 S and optimized R&D investments, highlight its resilience and ability to adapt to evolving market dynamics.

Questions
  • Why were US equipment sales, especially in Microsurgery, weak in Q3?
  • Can you summarize your cost-cutting plans and their impact on margin goals?
  • How do you bridge 2024 guidance to the profitability step-up expected in 2025E?
  • What is your R&D strategy under the cost-reduction plan, and where will savings occur?
Resources
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Sebastian Frericks
Head IR | Carl Zeiss Meditec AG

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Thu Anh Klimpke
IR | Carl Zeiss Meditec AG

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Release Date

January 10, 2025

Duration

10:33

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