Coloplast (COLO) Q3 23/24 earnings summary

Executive summary

• Achieved 8% organic growth for 9M 2023/24 and Q3, with reported revenue up 10% to DKK 20,077 million and EBIT margin before special items at 27%, impacted by Kerecis acquisition and currency headwinds.

• Kerecis acquisition contributed 4 percentage points to reported growth, with underlying growth of 35% and EBIT margin (excl. PPA amortisation) around 10%.

• Broad-based growth across all business areas and regions, with strong product launches and continued market share gains.

• Integration and performance of Kerecis are on track, with the business gaining share in advanced wound care.

• Established a new U.S. distribution center, resulting in short-term supply disruptions and extraordinary costs, expected to normalize by end of Q4.

Financial highlights

• Reported revenue for the first nine months increased by DKK 1.8 billion (10%) year-over-year to DKK 20,077 million; organic growth contributed 8%, and Kerecis acquisition added 4%.

• Gross margin improved to 68% (up from 67% last year), supported by Kerecis, favorable input costs, and lower freight, energy, and raw material costs.

• Operating profit before special items rose 7% to DKK 5,483 million, with EBIT margin before special items at 27% (down from 28% last year), impacted by Kerecis and currency headwinds.

• Free cash flow for the first nine months was an outflow of DKK 186 million, mainly due to a DKK 2.5 billion extraordinary tax payment; adjusted free cash flow was an inflow of DKK 2.3 billion.

• Net working capital to sales at 27%, up from 26% last year.

Outlook and guidance

• Full-year 2023/24 organic revenue growth expected around 8%, with reported growth 10-11%, EBIT margin before special items of 27-28%, and gross margin around 68%.

• CapEx guidance adjusted to DKK 1.3 billion, mainly for new manufacturing site in Portugal and product innovation.

• Net financial expenses expected at DKK -850 million; effective tax rate at 22%.

• Extraordinary costs from the U.S. distribution center expected to end after Q4.

• Long-term organic growth guidance 8-10% p.a., EBIT margin above 30% beyond 2024/25.