Lars Rasmussen - President & CEO Anders Lonning-Skovgaard - EVP & CFO

Chris Cooper - Jefferies Romain Zana - Exane BNP Paribas Veronika Dubajova - Goldman Sachs Alex Gibson - Morgan Stanley Sebastian Walker - CBS Neil Leach - Karnige Christian Ryom - Nordea Markets

Thank you. Good afternoon and welcome to our Q2 2016/2017 conference call.

My name is Lars Rasmussen, and I'm CEO of Coloplast and I'm joined by CFO, Anders Lonning-Skovgaard, and our Investor Relations team. We will start with a short presentation by Anders and myself, and then we will open up for questions.

Please turn to Slide number 3. Today, Coloplast delivered 7% organic growth for Q2 and I'm very pleased to see continued strong performance in Europe across our business areas and double-digit growth in the U.S.

chronic care business, as well as improved momentum in the Chinese wound capital. The growth in wound and skin care in Q2 was below our expectations, due to timing effects the U.S.

skincare business was negatively impacted by DKK30 million in the first half of the year. The growth in U.S.

skincare is expected to rebound in the second half of the year, the wound care business in general is negatively impacted by price reforms in France and challenging dynamics in emerging markets. On a positive note, we continue to have a firm grip on our costs and we delivered 33% EBIT margin in fixed currencies for the first half of the fiscal year.

Today the Board of Directors approved an interim dividend of DKK4.5 per share corresponding to a total interim dividend payout of almost DKK1 billion. Our organic revenue guidance for 2016/2017 is unchanged at a growth of 7% - of 7% to 8%, our guidance in Danish kroner is also unchanged at 7% to 8%.

Our EBIT margin guidance is unchanged in fixed currencies at 33% to 34% and a Danish kroner around 33%. Please turn to Slide number 4.

Before we take a further look at the numbers I would like to take this opportunity to give a brief update on our LEAD20 strategy. Racing [ph] continues to be the cornerstone of our company, I'm very pleased to currently have a strong range of new product in the market across all of our business areas.

SenSura year-over-year contacts is currently being relaunched, now that we have expanded our production capacity to meet the strong demand in the markets. SpeediCath Flex, Biatain sizes and shapes and our most recent accessories launched rather protective shield can launched across all mature markets.

Within ostomy care we continue to strengthen our SenSura year-over-year product offering with a launch of our new hospital assortment in this quarter. We have increased our activity level with innovation and this is reflected in our R&D to sales way too which is currently focusing in year-to-date.

Our Coloplast carrying enrollments are growing according to plan and around 15% to 20% per year. We have now in excess of 0.5 million users in Coloplast Care and in excess of one million users in our database.

Coloplast Care is fully rolled out in more than 20 countries and we are continuous upgrading the offering to add value in each markets bearing in mind that market requirements are very different from market to market. The integration of the acquisition of Comfort Medical is developing according to plan and I'm excited about the last opportunity that we have tapped into within constant care in the U.S.

Finally, we are on-track with our innovation excellence efforts; SpeediCath Flex, rather protective seal and the new SenSura new hospital assortment are example of products launched where production has been ramped up directly in Hungary and China. We have also reduced the number of production employees in Denmark by 100 in the first half of the year.

Please turn to Slide number 5; year-to-date our revenues grew 6% organically and 5% in Danish kroner and amounted to DKK7.6 billion. The acquisition of Comfort Medical constituted DKK67 million or approximately to reap our growth in Danish kroner.

In ostomy care, organic growth was 7% and growth in Danish kroner was 5%. For Q2 in isolation, organic growth was 7%.

Growth continues to be driven by our SenSura and Brava accessory portfolios in larger markets like UK, Germany, U.S. and China.

In particular, SenSura Mio Convex continues to contribute to growth, and as mentioned above the production capacity of Convex was increased significantly at the end of March. Growth in Q1 was negatively impacted by the anticipated inventory reductions at our largest distributors in the U.S.

The inventory level is now fully normalized and in Q2 we saw double-digit organic growth in the U.S. Our SenSura as a portfolio; growth was driven by six rated performance in China, Russia and Argentina.

In Constant Care, organic growth was 6% and growth in Danish kroner as 5%. For Q2 in isolation, organic growth was 8%.

The SpeediCath used to beat catheters [ph] continue to drive growth and especially the compact versions performed well. In the compact segment we saw strong growth in the U.S.

as well as satisfactory growth in the UK and France. Growth in Q1 was negatively impacted by inventory reductions at our largest distributors in the U.S.

The inventory level is now fully normalized; and in Q2 we saw double-digit organic growth; in the U.S. driven by strong demand for hydrophilic catheters.

Our convenient collecting device portfolio posted slightly positive growth due to satisfactory growth in France and China. Finally, sales growth for our Peristeen products remained satisfactory, especially in the UK, U.S.

and France. SpeediCath Flex has now been launched in 13 markets and the feedback continues to be very positive which is reflected in the sales performance in Q2.

In Urology care, organic growth was 11% and growth in Danish kroner was 12%. For Q2 in isolation organic growth was 14%.

The growth was primarily driven by sales of female pelvic health products, a segment in which we have gained market share after a large competitor exited the market approximately one year ago. Our market share in female pelvic health in the U.S.

has increased from an estimated 10% to 15%, to 15% to 20%. We also continue to see satisfactory growth in the sales of the Titan range of range of inflatable penile implant devices.

And finally our endourology business saw satisfactory growth in Europe, in particular in France. In Wound and Skin Care, organic growth was - and growth in Danish kroner was 0%, organic growth for Wound Care in isolation was 5%.

For Q2, organic growth for the total business area was negative 4% and wound care in isolation, it was 2%. The growth continues to be driven by Biatain sales; in particular, Biatain Silicone in Europe and Biatain Super in Greece.

As mentioned earlier, the skincare business was challenged by a high baseline last year; in wound care the growth was challenging by price reforms in France and weaker momentum in a number of emerging markets including Brazil and Greece. IN Greece, performance in Q1 was lifted by stock building due to a shift to new product to a new product portfolio as a result of the healthcare reforms.

The inventory was partly the reduced in Q2 but the inventory reductions will continue throughout the year. In Q2 as mentioned earlier, China contributed to growth after a number of challenging quarters.

Finally, contract manufacturing of complete impacted growth negatively. Turning to our geographical segments, we saw organic growth of 6% year-to-date and 5% in Q2 in our European markets.

The growth continues to be satisfactory across the portfolio of countries, and in particular in the UK where Charter continues to take market share. The period also saw satisfactory growth in France and Southern Europe.

Organic revenue growth in other developed markets was 6% year-to-date and 8% in Q2. As mentioned earlier, the improvements in Q2 reflects the fact that the inventory levels at our largest distributors are now normalized and we saw - and we are seeing double-digit organic growth in our U.S.

chronic care business which now reflects the actual market demand. Our growth rates in Canada, Japan and Australia all remains satisfactory.

Revenue in emerging markets grew organically by 8% year-to-date and 10% in Q2. The growth was primarily driven by China, Argentina and Russia.

China contributed to growth due to satisfactory growth within ostomy care and as mentioned earlier, the growth momentum in China within the wound care business has improved compared to last year but it is not yet satisfactory. Finally, a lower tender value in Saudi Arabia had a significant impact on Q1 and Brazil continues to be negatively impacted by funding challenges.

With this I'll now give the floor to Anders. Please turn to Slide number 6.

Thank you, Lars and good afternoon everyone. Gross profit was up by 5% to around DKK5.2 billion.

This equals a gross margin of 68% which is on par with last year. We continue to see improvements in our production efficiency at our volume sites and in particular, a positive impact from the relocation of SenSura Mio and compete to Hungary which compensates for the negative gross profit impact from the launch of new products where the production economy is not yet fully optimized.

The gross profit was also impacted by a 15% increase in the minimum wage level in Hungary increasing the precision levels and costs associated with the relocation of production to Hungary. Q2was also impacted by DKK13 million in restructuring costs related to the reduction in the number of production employees in Denmark.

The distribution-to-sales ratio came in at 28% compared to 29% last year. The ratio was impacted by sales and marketing investments in the U.S.

and within Wound Care. The admin-to-sales ratio came in at 4% of sales on par with the recent trend.

Q1 was impacted by DKK7 million and transaction costs related to the acquisition of Comfort Medical. The R&D to sales ratio came in at 4% of sales compared with 3% for the same period last year.

The 7% increase in R&D cost reflects a higher general activity level. Overall this resulted in an increase in operating profit in fixed currencies of 8%and of 5% in actual currencies corresponding to an EBIT margin of 33% in fixed currencies and 32% in actual currencies.

Operating cash flow amounted to DKK558 million compared with the DKK 1.094 billion last year. The positive impact from higher absolute earnings was offset by payments from escrow accounts to settle mesh claims.

Year-to-date mesh payments totaled DKK1.5 billion and total mesh payments-to-date now amount to DKK3.9 billion. Cash flow from investing activities was impacted by the acquisition of Comfort Medical for approximately DKK1.1 billion and capacity expansion in machines for the production of existing and new products and the site expansion in Tatabanya in Hungary.

Investments in intangible assets and property, plant and equipment amounted to DKK262 million year-to-date, the sale of bonds provided DKK155 million cash contribution. Adjusted for payments made in connection with the mesh litigation and the acquisition of Comfort Medical the free cash flow amounted to approximately DKK1.3 billion compared to DKK1.8 billion last year.

The difference is explained by lower tax payments last year which means that the underlying cash flow is in line with last year. With respect to the mesh litigation George Goodwin stated last week that the end deal for Coloplast is in its final phase.

We have settled more than 95% of the known cases against Coloplast and at the end of this financial year we expect to have paid out DKK 5 billion of the total provision of DKK5.2 billion. Finally the second half of the approved share buyback program of in total DKK1 billion was initiated in the second quarter.

And at the end of the quarter shares worth of DKK137 million has been bought back. Please turn to slide number seven.

Our organic revenue guidance for 16-17 is unchanged at an organic growth of 7-8%. Our reported growth in Danish kroner is also unchanged and expected at 7-8%.

The acquisition of Comfort Medical is expected to contribute 1.5 percentage points to the reported growth. Our guidance assumes stable growth rates in Europe and higher growth rates in North America in the second half of the year.

We also assume that emerging markets growth will be in the range of 10-15% which reflects an improved growth trajectory of China Wound Care. We also assume an improved outlook for Skin Care and contract manufacturing in the second half of the year.

Finally, our guidance assume a positive impact for the remainder of the year from the relaunch of SenSura Mio Convex and a recent product launches including SpeediCath Flex and Brava Protected Seal. We expect a negative pricing pressure of around one percentage point on our top line and this is reflected in our guidance.

Yet today we have seen moderate pressure from pricing reforms within Wound Care in France and Greece. For 16-17 we continue to expect an EBIT margin of 33-34% in fixed currencies and around 33% in Danish kroner.

Higher growth from our new product launches still means pressure on the gross margin but we continue to relocate manufacturing out of Denmark to Hungary and have reduced a number of production employees in Denmark by 100 in the first half of the year. We expect the benefits to be absorbed by the cost of relocation and restructuring cost in 2016-17.

We also expected depreciations to increase at the same level as last year as a consequence of the last couple of years increasing CapEx. We continue to expect our net financials to end the financial year 16-17 at around –DKK100 million impacted primarily by cash flow hedge losses on the US dollar the Brazilian real and Argentinean peso offset by hedging gains on the British pound.

CapEx guidance for 16-17 is expected to be around DKK700 million and is driven particular by investments in more capacity and for new and existing products including SenSura Mio, Biatain Silicone and SpeediCath Flex as well as the Nyirbator expansion, which is expected to be operational during the first half of 2017 and 2018. Finally, our effective tax rate is expected to be around 23%.

This concludes our presentation. Thank you very much.

Operator, we are now ready to take questions.

Hi. Good afternoon, thank you for taking my questions.

I've got three please. Firstly to some manufacturing for Austin, can you just confirm exactly when the additional capacity of Tier came on stream?

I think some of us have been expecting a little bit more of a step up just due to 10th of - sure the 7% organic has met your expectations and also just how you expect that to trend through the rest of the second half? In the U.K.

charter thanks for taking share again. I know historically it's not always been easy to sustain some of these share gains in that market.

Can you just talk us through some of the drivers there and how you achieved that progress? And then lastly, I just want to know what your latest expectations were about the competitive bidding for them in the US please?

And previously the focus has been more on Austin and urology but I just wanted to gather your thoughts on whether you see any risk the capitals are placed on this too and also just whether the incoming administration made out more or less likely in your opinion. Thank you.

Thank you very much. For manufacturing for the Convex as you said case became online end of March and that is end of March.

It's not like the 15th of March but in the end of the month. It is end of March so meaning that's fully present at the present paper.

So that's in line with what we have communicated. So there's no effect from extra capacity in the quarter that we're just reporting.

It is pretty present from the beginning of this quarter. And for the U.K, so could you give me a little more flavor on your question for what it is that we're doing you want to understand what they expect to be doing to pick up more growth in the U.K?

Yes. I mean you commented prepared remarks that you know this is another quarter where you pick and share the charter and I think that affects in the growth numbers.

I just know historically it's not been - let's put it an easy market to sustain - over period. I just want to know what was happening in the market and why you haven't - in more recent share.

It is a - it's in a sense it's - it's a classic explanation so it is a combination of the past that we offering. So we have - we have new products across the board for the time being and then the service offering.

So we are selling charter healthcare with specific promises on what to expect when you are a patient in terms of response rate and delivery performance and so on and so forth and also a specification of KPI's that we're setting in when it comes service level you can expect when you are a professional person so mean in rush calling into Charter healthcare to sign off [indiscernible] of all of the things like that. So in that's sense it's quite specific what we're offerings and we also do use the channel of cost to cross sell, meaning that that we are selling - our promises was products also in that segment.

On to competitive bidding side the Trump administration have not pursued but you know it was part of the list that Obama government was pushing for but Trump have not pursued that and in that sense we actually consider it to be very found out on our riskless for the time being; also for Cath Flex in the US which is what you're asking for specifically.

Got it. Thank you and may perhaps at just do quick follow up - just on the last one.

I understood that the that the product had sort of remained on the provision and the Trump Administration obviously showing no intention at this stage apparently but the fact is that they will [indiscernible]. And just a quick follow up on the first one.

So it's two hours - that he's not on the list.

He's no longer on the list? Okay.

Thank you. That's helpful.

And just on the first one, now the capacity fully on the stream. I mean in your eyes is there any reason why we shouldn't expect double digit if not 13 in terms of performance of second half?

I'm not sure that I am prepared to give you a guidance for ostomy growth in the second half. But, of course, it's effect that we have at the hold back on pushing this product in in our diet hospital channel.

And we have not even launched the product in all places in the hospital channel. So of course with such a long time where we have been without sufficient capacity, we actually are not just bringing more new products online.

We do a real relaunch of the of the whole portfolio through the market. So we do expect, we certainly do expect any growth from this but I can't go as far to guide you on [indiscernible].

Very helpful. Thank you.

Yes. Good afternoon.

Thanks for taking my question. The first one will be on the margin side, it seems like the efficiency gains have been more or less partly offset by the wage inflation you mentioned in Hungary.

So what are you doing, to exempt - quick to all or something comforting and [indiscernible]. The second question is regarding the increase in the R&D activity you mentioned.

You did relate it specific fees and segment and should we couple it is - the sales ratio looking forward?

Yes. So in terms of the question related to our gross margin, we are seeing some tailwind from and the fact that we are moving out machines from Denmark to Hungary.

We had last year and also this year been moving out a number of machines that we have established in in Hungary and as part of our innovation excellence program we have also established the production of some of our new products directly in Hungary. So that is having a positive in impact.

On under negative side, we have in this quarter, the second quarter included restructure cost of the DKK13 million related to the reduction of production employees in Denmark. But I also expect that we will see a positive impact from that the rest of the year.

On top of that as you also were mentioning and we are seeing higher salary increase in Hungary and we're also seeing a higher depreciation levels due to the fact that we have a higher CapEx level than we've had previously. So for the first half it is more or less balancing the efficiency gains out with some of the extra cost that we have had.

But the inflation was it something you were expecting or?

The inflation rate that we are seeing this year of around 15% is something that was announced earlier this year and it is a bit higher than we originally expected.

So if I can just add to what Anders said then I also mentioned during my opening remarks. We actually have bought products now that we have ramped up equity in low cost conscious and that's part of this innovation excellence model that we are implementing and that means that for example a product SpeediCath Flex is started directly in Hungary where we have no basic you know sort of running curve where we have high cost but we stop all this from cost by.

It's a pretty big-big undertaking for us and it seems as if we are succeeding with it so actually very-very happy with it and that is also going forward I think that are helping us to improve on our cross marketing. When it comes to the increased on the de-cost but I have said many times that we are willing to take on board the beyond the spend which is necessary to drive the top line growth but we really see is good projects we'll also support them.

We have just launched across the boards a new products and we have a very compelling pipeline of the new products to come. So that's why we spent more money, we spend more money on that part and in the products that come out; so pretty well documented like for example the Convex product that came out now with a clinical documentation that does reduce leakage.

So that cost a little bit more but it's also having significant impact in the market. So that's right.

So if you look at the product portfolio we have it is across the board. It's not just in Australia or just in Convex care.

It is across the board.

Would you rule out that inflation of the ratio looking forward?

Say that again please.

I mean do you allow the sales ratio on R&D will decrease looking forward.

What we're guiding to the market and have done for pricing is that we expect R&D ratio to be around three to four in a sales. We have so much now in the pipeline that we at the top end of this and I consider it to be very positive because that is, that's the key element in driving high top line growth also going forward.

And just last question, very basic regarding the Wound Care. In H2 the catch up we're expecting - I mean how confident are you exhibit that - You have an…

I think that if you look at your per se it's very positive. It's only France that is standing out on a negative or in a negative way.

So in France there was, you know, a slight decrease of prices but they also decreased the number of products in the boxes from 60 to 10. So that means that when you have an ordering cycle where people normally they just order boxes.

Then they will figure out that they need to figure out that they need to order more frequently but when that kicks in you get a negative impact. So we've had that - So I expect that France will be better in the second half.

Then we had seen that --picking off quite well and we expect that to continue into the second half so that will that will help us in that respect. So those two of the big events that will take it back and then we also said that we had a little bit weaker sales in the U.K.

but if you - that actually public in market sales later in the U.K. and there you can see that all companies are to be in the bottom we just recording having a negative impact and we have probably the least of negative impact.

So we just expect that to kick off going into the second half of the year. So we feel quite confident that we will have a pickup and then to top it off.

Of course we have this very big negative one on skincare in the US. This is by one of the books.

Yes. Thank you very much.

Good afternoon and gentlemen thank you for taking my questions. I have three queries.

The first one is just looking to the balance of the year. Obviously the organic revenue growth today, it is at 6%.

The guidance is for 7 to 8. Lars, can you maybe talk about - would you feel comfortable right now at the lower or at the upper end of that our organic revenue growth guidance and what do you see as the biggest leverage for the second half of the year?

Just would be helpful for us to get an overview on that. My second question is a follow up on the gross margin dynamic for Anders and I think Anders, last time when we caught up your suggestion whether you would expect to see some modest gross margin improvement this year.

With the wage inflation now being ahead when should we instead assume that gross margins are flat? And any risk as you think about beyond the fiscal year that wage inflation remains a significant problem in Hungary.

And then my last question is just on the Slovakia announcement and your thoughts on the plots that you bought in Slovakia for a new plants. It's just kind of your thoughts on you adding another country into the network, are you - what's behind that and how soon will you start investing into that plot?

Thank you

Yes, all right. So if you take the balance off the sales; well I think that if you take - my take on this is that that in the first half we had to reduce the stocks in the US and that's to an amount of $10 million and then we had the one off on Skin Care which is not going back.

So those two alone is that 100 million which was hampering to pertain the first half and they will not come back. And then going into the second half of the year; then we have a relaunch of Convex, it's actually quite thick launch that we're doing there and end and we saw pick up on the first part of it.

So we expect to get an impact from that. We have flex which has been received really well in the market even though it's early days we are at of the launch forecast for that and then we have the problem rigs; it's a very competitive product but we have bought of the market and it's coming into the biggest single category which exist in the assessors markets.

So and where we have - I think you could call it a low market. So in that sense we only have 15% market share in there.

So we think that we can take a significant parts out of the market there with the offering that we come with and just to give you some flavor on this rings alone is there between 30 and 40% of the total accessory market. So it's quite important.

So those factors are the most important factors that we're looking at but then of course to top it off we have a positive growth now in the US and that novelty growth and we see that the Wound Care in China's coming back. So I am actually - I think it's very well-funded what we talk about for the company in the second half.

And when it comes to - let me take Slovakia out as I'm speaking. Then we have - I think we have quite big and hungry.

We are growing as a company so we need we need more manufacturing space and we're not yet ready to open up more manufacturing outside of Europe. The next place that you talked about that also will probably be somewhere in North America.

But that's not final so we have chosen to go to Slovakia, to spread the risk a little bit and that is in a region which is pretty close to Hungary. So we have some similarity in language and we think we can cover a lot of what needs to be done in the initial base from our set up here in Hungary at this point in time because of the geographical distance.

So that's the reason why it's Slovakia. We will see something up and running there within the next couple of years.

Yes. And Veronica in terms of the gross margin question.

So overall as you know we have launched our innovation excellence program where we are planning to reduce the number of fifty's production of teas in Denmark with around 300 people by the end of the next year. And so far since we introduced a program we have reduced to the around 200 FDs.

So overall we are on track with this program and I expect also that this program will contribute to the gross margin development in the second half of this year. Also because that.

I have or we have included the majority of the restructuring costs related to the innovation excellence program in the second quarter. So we have someone offs included in the ours is technical quota that will not come in the second half of the year.

So my expectation is that the gross margin will also contribute for us to deliver on the EBIT margin guidance of the 33 to 34%.

Okay. Thank you.

That's very clear. And Lars, if I can just follow up on - we've asked a lot of Ostomy but I think confidence if you looked sequentially didn't seem to accelerate much even though you had no destocking in the second quarter.

Anything there that worries you or that might explain why the growth wasn't that in the second quarter?

I think if you look at the organic growth of Continence Care I think that is showing some acceleration; we had 8% growth in Q2 and that 6% for the first half. So I'm actually quite pleased with that.

Excellent, very close. Thank you both very much.

Hi. Good afternoon.

It's Alex Gibson instead. I have to questions, the first one's on gross margin and the outlook more longer term.

So in the passage - the extension in EBIT margin has being driven a large by improvement in gross margin but if we look at the last few quarters and years there hasn't been much year-on-year improvement. What confidence do you have on maybe guidance on what to split, the margin improvement for the mid-term is going too down to gross margin and or operation?

And then my second question is on China and I believe that was a meaningful task force reduction or maybe just stabilization in the sales force in China. Can you comment on how much you're increasing sales force expansion in that market now?

Yes. So if I talk to the cross margin and so as you know our overall financial guidance is an improvement in our EBIT margin of 5200 basis points in a fixed currency scenario and our expectation is that the gross margin will also contribute overall in order for us to deliver on that financial ambition.

We have seen a gross margin in the last two to three years that has been more or less flat and the reasons are - there are a couple of reasons for that. One reason is that many of the new products we have been launching over the last couple of years that they have been produced in Denmark and that's also why we have initiated this innovation excellence program where we are moving production of those new products to Hungary.

So that's one element. The other element that we have also been impacted a bit from the currency on our gross margin is basically from the Sterling that has dropped quite a bit last year after breaks.

But we believe that with the innovation excellence program and the initiatives we're working on moving production of found new products that that will improve and the gross margin overtime when we are finished with the innovation excellence program and we still expect that that will be finalized by the end of 17-18 and we are expecting saving at that point in time of 80 to DKK100 million. So overall we are expecting that the gross margin development will contribute to our overall EBIT margin expansion.

So that's how we see it.

When it when it comes to China and the sales force in China, it's correct that we have quite a sizable sales force in China. For some years we were expanding every year also in a significant way; also inside of the inside of Wound Care.

But when we came into this this change in the way that products Re registered in the single hospitals in China a couple of years back we stopped scaling our set up in China due to change the model that we're working with. So the model we're working with currently is that we have to show that we are having a recurrence sale in the hospitals that we already are in and that we are growing our business the customers that we're already having and that is what is starting to show effect now.

As we see that that is being more and more successful response scaling again; so of course we would love to invest more but we love to invest in a profitable way and that was the problem that we ran into when we could not scale in a profitable way. So that's what we are expecting to see out of the out of the slight change of society that you have in China.

Okay. Thank you very much.

Hi there, Lars and Anders. Thanks for taking the question.

Just a couple; one on the Wound Care division: so you know at the capital markets that you talked about the ambition of doubling the size of that business. I mean just thinking out where do you where you stand on that?

What levers do you need to pull? It is certain geographies or product launches that will drive that?

And then the second question is more top level [indiscernible]; now I suppose you're EBIT margin guidance in that the 50 to 100 basis points of ongoing improvement. I suppose for 16 and 17 we're at the bottom end of the sales growth in organic terms.

Does that mean you're more comfortable with that bottom of the EBIT margin range or what are your thoughts there? Thanks.

On the Wound Care side there are couple of things that that need to work for us to deliver that the doubling of the business. We need to grow at a high pace in China and we're coming back to that now.

So that's of course a prerequisite that we see there. We need to see that emerging markets also working in a reasonable way and one of the big drivers in emerging markets also have over the years being in Greece and for the time being this is shift in Greece because the value for base have been low.

We have actually invested more in Greece in order to pick up a high unrest and this turmoil which is going on. But of course as we are switching from the formal high end portfolio products to the now you can say more medium range products, we see this transition coming in where we're basically replacing the whole stock that we have in Greece but we actually expect that to come back.

So both Greece and also China had a dip but we see them come back now. And then the third element that really needs to work when it comes to the sales organization is that we need to see the US is about to contribute in a meaningful way because we had never really invested in the US.

In the US we have to split the organization so it's now a separate organization reporting into Nicolai Bhulanas who is leading this tertiary business unit. We have we have the V.P.

in place who is who is leading that and we have building that as we're speaking. So we're actually investing in in the US and we are on plan when it comes to our expectations for that drive.

So I think that that part of it - this is basically what we do on the sales side. When it comes to the other part of it the new product offering beyond listing what it takes and also have the progress in the pipeline of products that we bring to the market to make sure that we have also and the pipeline behind us off product that we need in order to adopt the fish that you're looking into.

So we - I think that we are on track across the board but we have had a setback in China and also in Greece and we are recovering from that. So we're little bit behind on the plan but still committed to deliver on the docking of the business.

And in terms of you our question around our EBIT margin guidance. So we have an even margin guidance in that fixed currency scenario of 33 to 34% for the year.

After the first half we had an EBIT margin of 32.7 and then we believe that with the higher sales, the high absolute sales that we are expecting to pull the second half, it will generate more profits. So that will also drive more margin combined with the gross margin element that I talked about earlier and the good cost control across the board maybe expect that we will deliver able to live up within the 33 to 34% as we have guided

Great, thanks. Very helpful just one follow up if I may on a Wound as well more in the near term.

On the French reimbursement cuts, so if you give us some more detail there about what actually happened, was it was a price reimbursement cut? You mentioned something about the quantity of products needed box - and then also you know how do you responded to that is or how do you expect - why do you expect that the second half of that to prove --.

Thanks.

There's a smaller reduction of prices. But it is primarily the fact that the government had lowered the quantity of products in the boxes that have a quite significant effect once it's coming in where they went from 16 products per box down to 10.

It sounds a little bit crazy that it does have this effect but it has the effect because the professional ordering lot of the boxes. They're not always ordering the number of the single product that are inside of the boxes.

So therefore you see this effect and then it sort of normalizes afterwards when you just get a faster reordering again. But that's what we're seeing now.

So that's why we expect the past to come back. But we also have paid a little bit of this price for docs - but anyways, this is what it is.

If you look at the other markets in Europe we see we see a pretty strong performance not leased in Germany for example where we are growing at a very high speed but also all the other markets in Europe. So Europe is actually on average doing better than would be expected in our long term effect.

Great, thanks very much guys. Very helpful.

Hey. Good afternoon.

I have two questions. One question would be; would you expect any impact from the acquisition of Biram on the US market that was announced yesterday?

And my second question is about kind of more the long term trend of the Ostomy Care because we have seen in the past couple of years a number of new diagnostic test scores coming to the market and some of these claim that they can discover colon cancer at a much earlier stage and I'm obviously thinking about the Cologot test which seems to have gained enormous momentum in the past few quarters. Are you looking into these diagnostic test and kind of analyzing what kind of impact it will have to the long term growth of the Australia market and what kind of impact it's going to have on your strategic planning?

I think Q1 is the bottom was sick acquired by always a minus and so it's another - it's one dealer buying another dealer - one distributor buying another distributor. And we are making business with both of them already and in that sense we think that you know we could talk about maybe an impacted if it had been acquired by one of the other manufacturers but since it is that same type of business it's been a acquired into - expect to continue to have a positive relationship with them and we don't expect either positive or negative effect from this of this acquisition.

And for the long term it's quite rare that we're discussing this subject on these kind of course but it's right that correct that cancer screening have been on its rise for quite some years now. I think that the first time I was discussing a cancer screening program for larger population was actually in that market back in the at the end of the 1990s.

Then market plus a number of other conscious we have seen these. screenings in effect for many years now and that's maybe why we see that we continuously see that the number of the temporary store must are going so for example if you look at the colostomy then 40% of the stores are permanent and 60% are temporary now and for the last eight years to me it's actually the only 20% of the ones that a permanent and the other 80% being temporary.

Then you have the effect that that 15 to 20% of all the initially temporary actually end up being permanent because people don't want to take the risk of having a you know surgery to put everything back to what it was before. And we're keeping a very close eye on this but when we do that - the only way we can see this is that even in a market like Denmark where we have had the cancer screening awful for many years; we still see both the volume and value growth.

And it's very hard to figure out you know where - what is it coming from. Is it because peeler detected earlier so that they are now living for a longer period of time with ostomy and is directing craving at some point in time.

But what have happened is that the test they are now more, they are more advanced and the cordovan that you talked about it's also a test for humans blood in the stool as the other ones that doing but they also have been ninety in a market that comes from a cancer and so you can detect early on. They also have most positives.

So that's the downside with this one but it's been approved for - it's received the FDA approval as the first one in in the U.S. and it's priced pretty high, it's $500 per piece purchased at $15 to $25 tentative but Medicare have decided to cover it so you can actually get Medicare coverage for I guess every three years with Cologaurd and that's what's giving them the tailwind.

So it's adding to a movement that has been going on for many years. But - And we're following as I am saying but I also think that implicit in your question is will it - will this have and negative impact or will it have a positive impact, will we can't figure out, but we can see that that our markets over the last five years consecutively have to had more listing growth rates.

And would it make any sense at all for a company like you used to inter the testing market.

Well, it's not really - we have - we have process a set looked into it but at this point in time I don't - we have not made a decision for that.

Okay, very helpful, thank you.

Thank you very much. My question is more on speeding at in your patterning by here and the potential competitors like cosmotic [ph] most likely will launch this area, should we expect some of the anti-spending you have made there is going to be like a new upgraded version of the [indiscernible].

We as you know, market in a couple of business areas they globally and whatever it takes to defend and build those positions we do, and that means the service offerings and it means the product offerings, so of course we make sure that our portfolio is addressing both the opportunities but also the challenges that we see.

Okay. And then in Skin Care segment to me when you're talking about capturing up or going the gap you have compared to competitors, for me this two area including healing like the Acquacel [ph] from cosmetic, but also a negative wound pressure therapy, single use devices; are you considering any of these areas, are you still very reluctant to go into - for example the single use NVPD?

It's hard for me to be very specific on what we're bringing to market in the in both in the near future and also if it's longer term, but I think we have said very clearly at least by the negative pressure for therapy we are not having anything in the pipeline for that currently and with - the plan we have to double the business in this spend here, we don't think [indiscernible].

Okay, thank you very much.

Yes, hi this is Christian Ryom from Nordea markets, thank you for taking my questions, first on the U.S chronic care franchise, you're saying that you're seeing a double-digit growth rate in this quarter, can you elaborate a little bit about how the underlying growth momentum has developed compared to the most recent quarters, as I believe you've also been saying that you've seen double-digit growth rates in in the preceding quarters. And then secondly for Andres, could you give us an update on what you expect in terms of financial - net financial costs for the full year, thank you.

I think that the best way for me to comment on the - on the first part of your question, that is that yes, we have seen double-digit underline growth, we think that we are in stronger position today that we were just a quarter ago, plus we have capacity to really go for the convex statement and we have - there is a lot of users in the U.S that are using [indiscernible] and we have been fantastic operating with the product. So that is going to be the chief product for that which is going to now being relaunched in the U.S.

And then not least we have the flex product which is also a proof in the category which is a very high value category, and it is a product - it's an offering a significant benefit over other products that are in the market currently. So that's what we have to work with also, so yes we have had updated our online growth, but I expect that to - maybe to add to it, then we are also still waiting with tubes as you know we have more access to new hospital [indiscernible].

So that means that over the last - pretty just in this - just in this fiscal year we have had more winds in the tubes that we had before.

Thank you, that's very helpful.

And Christian, in terms of the financials, my expectation for the full year with the currency rates we have today is around $100 million minus, and year-to-date we had a $35 million minus.

Great, thank you.

Hi, thanks for taking my question. First I want to again a follow up on your performance of Wound Care, so just what timeframe to do you expect that the business from a drop perspective should normalize that would also correspond had said something, something to what is needed.

What your expectations regarding the time. The second question is just comments on moderate price pressure for general yours [indiscernible].

And finally on the SpeediCath Flex could you give some indication about the pricing premium to your traditional SpeediCath - and also potentially, updates how SpeediCath market share has developed in this advanced technology program in Medicare, I think you mentioned 40% in the last call. Thank you very much.

To take it from the other end, for Flex we have --it's - we have markets rates it's like the other high end product that we're having, so it's more - the facility [ph] about this product is it's also works fantastic and it will be used as a day product and the day category is priced at a very different levels but in the U.S. it is priced at an attracting level, and that's where it improves or given that the normal price levels of all those categories but I think there was publicly available.

But where - the today's category is priced that at approximately $6.60; so that is a quite big difference. I don't know if that was what you are asking for.

Yes, that is the indication, thank you.

For Wound Care we have a significantly better half than first half year, but to - I can't keep you in advance for next year if that is what you ask for.

Okay, thank you.

And in terms of your question related to [indiscernible]; so we are expecting negative price pressure, the level of 1% minus. Yet the data has been a bit low, but we are seeing a price pressure especially with the Wound Care area, we have talked early about the brand and we also see a negative price pressure increases due to the reimbursement reform that is going on in that market.

Yes, just from my understanding it was lower than 1% minus but that doesn't mean it was let's say worse than you have thought or still was a little better from what you have thought.

It is more less in line with the expectation we had when we started the year.

So lower is…

Okay, thanks very much.

We are ready for the last question.

I made it, thank you very much for taking the question. Good to make the last question.

Okay, I have several questions, so the first question is on R&D. I mean he said that there's a higher activity level and I was interested in whether we should expect to see a larger number of products coming out of that higher activity level, or is the activity level really relating to the quality of the product, I think historically he said the amount of R&D you were investing were really for delivering two to three major products to the business a year, so some comments on that would be great.

And then secondly, interested in your capacity for Flex, relating to your comment that you said is doing better than you had expected, just wondering whether there is a risk that we run into the same sort of situation as your come back to the product after well and you're short term capacity there. And we start with that those - start with those please, thank you.

Okay, on R&D what - what to what - we have the last number of products but I think that there what is adding more cost is what you have also see on the comments. It's the first product in the market which is - which has a clinical documentation that it does reduce leakage; so it is a clinically relevant product, it's [indiscernible] that we have sensed in our line of business it's a very hard to clinically proof that the product is doing well not the other, so therefore it tends to be a little bit anecdotal and then it's normally very curious with the usual products that this is a better product that what they usually have.

But clinically we have had difficulty in putting products on a table where we can show clinically that it's reducing leakage, or reducing cost or whatever, and the portfolio that we bring into market it is similar to products that we come with will be what you can call clinically differentiated, so that is new to the - the type of business that we are playing in. It has a cost, it also has some opportunities that we - and when it comes to the capacity for Flex, we have added the capacity that we have imagination to believe that we need plus something extra; so if we are also selling that capacity out we will be in - we will have some products that will live up across the year but we will also will adjust positively on everything else.

So it is a lot of capacity that we added online, so I don't think that the risk that we will [indiscernible].

And has a follow up on R&D, did you say that you do have a larger number of products coming out at the end of the process that you have anticipated.

We have a little bit more product then - than if you take the take the averages for the last five years but that's not what is driving the cost really, what is driving the cost of the clinically differentiation of the products, because it that we simply have to invest more in the clinical trials and takes a little longer to make those types of products.

Okay, so during your I think 2014 after to market state indicated that your R&D programs are set to deliver a product where hopefully you could get hire investment for, have you managed to achieve that with these launches so far and if not when should we expect to see that.

That's the whole idea about the clinical differentiated products, and it is you could say and it is it's actually building on that statement because if you want to have a high reimbursement, you also need to be able to prove clinically that are differentiated, that you are either saving money or that you certainly have to show that you save money either because people are using pure products or because they're listening complications or because they're - they get back to work early on or whatever it is that you are able to prove, and that that expected the point of becoming clinically differentiated products, that is that we're able to play a very high price for the product.

But have you managed to get the higher prices yet.

No, we have not, we have - well, yes but not on a consistent basis, so that the first product of the last day we have a clinical prove is the context product that one we could not wait to put to the market because we were not competitive we thought indicated we said we need to simply to have something to work with, but now we have a new product across the board, we have great products across the board, so we can afford to put a product in the market now where we can also wait a little bit to get a better price, because of course time to market will be a little bit longer when you go for clinically differentiated product but you need to get a clinical [ph] to achieve a higher price.

Okay, thank you and last question on Urology, how much of the growth that we've seen in the last few quarters that come from a store or going out, meaning that they say they went had about a year ago, so should we expect the growth rate to slow down as that effect on your life is?

Yes, it's of course we - of course, we get there - of course we get a higher growth from the fact that they're going out. So and that's of course for us to get - so what we have done is that we have invested in Surgery training last year, and that is what we are seeing the effects on now.

It's hard to say what is normal momentum for us is, but may be more around 10% than what we're seeing currently. But when that is - when that comes out I'd - I don't have a clear guidance on that.

Okay, thanks very much.

All right, I just want to say to everybody who listened and thank you for your questions and we'll see a lot of you in the coming years, thank you very much and have a great evening.