Getinge AB (publ)

Thank you very much. Welcome to today's conference.

This is Mattias Perjos and with me I have our CFO, Lars Sandström who will present the detailed financials a little bit later here. So, let's move directly to page number two please.

Before we get into the figures and the facts related to the fourth quarter, I would like just to spend a few words on the COVID-19 situation. When we released the report for the third quarter, we were in the early days of the second wave as you probably remember and as you can see in the graph to the left, it took only days before we saw daily cases sore to a whole new level.

This is obviously a very tragic development that we're in the middle of here, but even despite that, there are also some positives to talk about I believe. And one of those is the fact that we didn't see the same steep decline in elective procedures as we saw in the second quarter.

This is of course great for all the patients that are in need of surgery. And I must say that I think it is remarkably well handled by the health care system now given the difficult preconditions.

We can also see that hospitals are starting to look beyond the COVID-19, which wasn't the case a couple of months ago. So, that's also positive and encouraging I believe.

One other thing that I'd like to mention is, of course, the vaccination rollout which gradually will take away the fear of going to hospitals for surgery among many patients. It will also gradually make the situation inside hospitals more normal enabling a reallocation of capacity to more elective surgery which is also very positive.

We at Getinge will do everything that we can to continue to support hospitals in the fight of the second wave of COVID-19 and as well ramp up -- as well the ramp-up of elective surgeries. We will, of course, also do everything that we can to support pharma companies now in producing vaccines at a fast pace and our world-leading offering in Sterile Transfer is an important component in there.

With that we can move over to page number three please. So, the key takeaways in regards to performance for the fourth quarter of 2020, you can see that sales continued to grow as we finalized the delivery of the promised 26,000 ventilators for 2020.

We actually did a little bit more than the 26,000. Order intake grew thanks to continued strong growth in products for ECMO therapies and Sterile Transfer products.

These are being used in the production of COVID-19 vaccine, but I want to underline that growth was there already before. And with vaccine production, it's always been a rather strong component in our portfolio.

Critical Care order intake also grew in the beginning of the quarter, but was softer in December. If we look at the sales side, the total net sales grew by 11.1% and order intake grew then by 6.1% organically.

So, the large volumes and the continued focus on productivity also resulted in higher margins and strengthened free cash flow and significantly lower net debt year-on-year. Our leverage continues to improve as well from 1.0 compared -- down to 1.0 compared to 2.5 one year ago.

So, that's a significant improvement. And the final part here is that the Board of Directors proposed a SEK3 per share dividend for 2020, which is doubling compared to the SEK1.5 per share for 2019.

So, after that we can move over to page number four please. If we take a closer look on where we are trend-wise in orders, it looks a little bit like this.

We can see clearly that the trends largely continue to converge as we discussed after the third quarter. The exception here is life science where growth was really exceptional in the fourth quarter.

Within Critical Care, we can see that orders continued to move into more normal territory after a record year with more than 26,000 ventilators ordered and delivered. Cardiopulmonary with our products for ECMO therapies continues to grow and this is something that we expect to continue for 2021 as well.

Our customers are making really good efforts to deal with the pandemic and part of the planned health care in parallel. This contributed in the quarter for example to our products for planned cardiovascular surgery also remaining at almost 90% of last year's sales.

So that's really good. We expect this to grow as more people get vaccinated and hospitals can focus on handling the backlog of the -- of surgeries, but it will not be an immediate come back.

We think the start of this year will continue to be a little bit dampened. We also start to see a recovery in Surgical Workflows as hospitals start to look beyond COVID-19, beyond vaccination and investing in a more effective infrastructure for the future.

We expect this recovery to continue and materialize in net sales growth in the second half of 2021. And then finally back to life science, where we see exceptionally strong demand for our Sterile Transfer products pushing order growth to 70% for the quarter organically.

We start to see signs of recovery in sterilizers and washers as well, which is also a good sign for 2021. So from the order dynamics we can move over to Page number 5.

So if we take the trends in regard to order intake that we just saw on the previous page and look at what this could mean in terms of the sales for 2021 compared to 2019, which is then pre-pandemic, it might look like something that you see on this picture here. In Cardiopulmonary, we expect the high demand on products for ECMO therapies to continue driving growth throughout the year.

And this is supported by gradually increasing capacity as well. As you may remember, we're in the midst of a capacity expansion program for this part of our product range.

In Critical Care, we expect the year to be on par with 2019 despite coming in a little bit stronger in 2020 than we maybe had expected and with order growth even throughout the fourth quarter. But we do see demand for advanced ICU ventilators linked to COVID-19 come down here during the year.

In products for cardiac and vascular procedures, we start off a bit more than 10% below 2019, but expect a gradual recovery as hospitals go back to normal. And from there we expect to grow to meet the demand linked to the backlog of surgeries.

There's been numbers or estimates that there's about 28 million surgeries globally that's been postponed because of COVID-19. In Surgical Workflows, we expect orders to recover in the first half of the year and then transform into net sales in the second half of the year.

As you will know very well by now there are much longer cycles in this business area. In life science, we expect approximately 100% net sales growth in Sterile Transfer mostly related to production of vaccines, but there is also a good underlying growth driver here.

In capital goods, we expect the recovery in orders in the first half to transform into increased sales in the second half of 2021. So all-in-all, this sums up to a somewhat muted first half of 2021 sales-wise, but a much more buoyant second half for the group as a whole.

With that, we can move over to Page number 6 please. If we move then further down the P&L and do the same exercise on adjusted EBITA and adjusted EBITA margin we see the following trends, where from 2018 to 2020 we see a steady underlying growth of the adjusted EBITA margin.

It's been about approximately 1% on average. And this is then for 2020 obviously after adjusting for the exceptional volumes and the cost impact linked to COVID-19 that we saw during 2020.

But it's one of the things that I've been actually most happy with about during 2020 that we've been able to continue to implement our strategy and really work in a structured way with this trend. And this improvement process continues.

We expect further gains from the activities in our plans. And another good thing is that we continue to find new things to improve along the way as well, which is really promising for the coming years.

We can then move over to Page number 7. So as a consequence of the things that we just discussed here we choose to provide the following guidance.

For 2021, we estimate that the sales will gradually strengthen as health care returns to normal capacity and will amount to a minimum of SEK27 billion for the year. I just want to underline that this is not a change of any long-term ambition and we do expect that the -- once all the pandemic effects are clear that we will be back to some, kind of, normal growth scenario again.

But this is mainly to say that it's not a change in the longer term outlook. We just wanted to provide some additional short-term guidance for the current year.

With that we can move over to page number 8. So if we touch on some of the key activities and events in the fourth quarter where a couple of things we want to highlight.

On the offering side we brought Solsus 66 to the market. This is a versatile and very cost efficient sterilizer, which comes now at a perfect time as well when hospitals need to take care of the growing number of procedures and at the same time have a good control over their finances.

So very, very positive timing I think for this. We also launched a brand-new Tegris operating room platform, supporting enhanced safety, quality and productivity in surgical procedures, which is also going to be very important as we start working down the backlog in the system.

In the quarter as well we completed a smaller but scalable acquisition within Surgical Workflows, which complements our infection control offering with cleaning and disinfectant. And finally as well we launched NICCI, which is our latest innovation in advanced hemodynamic monitoring.

It's a noninvasive solution. If you look on the right-hand side, we continue to make good progress in our productivity improvement programs and this is the case in all of our business areas.

We've also made some important decisions in the quarter, which will enable further profitable growth. So in short, we've decided to establish production of BetaBags in one of our existing factories in Merrimack in New Hampshire in the U.S.

as we see heightened demand not only driven by vaccine but for the foreseeable future. This would double our capacity for BetaBags with production plan to start late in 2021 after the validation process is done.

This is an investment that is expected to come with really good return on invested capital as we do it in an existing facility. So it doesn't require a huge amount of CapEx.

We've also decided to expand our capacity in grafts well in time for hospitals when they start taking care of the surgery backlog. We've also finalized the transfer of our low-temp sterilizer operations from Turkey to Poland in order to concentrate the competence and expertise in this area and also capture economies of scale for the longer term.

And last but not least, we have seen good progress in the consolidation of our three factories in New Jersey in the U.S. into one, and we expect this product to finalize in 2021.

And I think our different teams have done an exceptional job in very difficult circumstances to continue with this improvement initiative. With that we can move over to page number 9 please.

So just to dissect the growth in net sales and orders a little bit more, as I mentioned earlier order intake was 6.1% up organically in the quarter. The growth rate was especially strong in EMEA in the quarter, mainly due to large orders in Sterile Transfer in Life Science, and also Critical Care and Cardiopulmonary in Acute Care Therapies.

Americas was also positively impacted by the orders in BetaBag and Sterile Transfer while Asia Pacific was negatively impacted by still a muted development in Surgical Workflows and parts of Acute Care Therapies. On the sales side, we had 11.1% organic growth in the quarter.

We saw significant growth in all regions in Acute Care Therapies, mainly Critical Care and Cardiopulmonary here as well. In Surgical Workflows, we're still negative year-on-year in all regions.

Life Science net sales was down in Americas and EMEA due to lower activity -- low deliveries of mainly sterilizers and washer, but there were also some tough comparisons on the year-on-year figures. With that we can move over to page number 10.

We look at then order intake per business area. We had SEK7.137 billion of orders in the quarter.

For Acute Care Therapies there was a 3.7% organic growth, but minus SEK292 million in actual numbers. Acute Care Therapies continues to grow organically thanks to high demand for products for ECMO therapies mainly.

Orders received in advanced ICU ventilators increased in the quarter, albeit, at a lower rate than previously. Order intake in products for planned cardiovascular surgery continues to remain at nearly 90% of last year's level.

If you then look at Life Science, we had 70.5% organic growth in the quarter SEK571 million positive in actual numbers. And the good organic growth in Life Science is mainly attributable to Sterile Transfer products and to a large degree linked to vaccine manufacturing.

In Surgical Workflows, we were down 7.1% organically and down SEK336 million in actuals. Surgical Workflows order intake decreased compared to the previous year, but it does show a recovery compared to the third quarter of 2020 which is a good sign for the latter part of 2021.

With that we can move over to page 11. So if we do the same exercise for sales so you can see that net sales for the quarter amounted to SEK8.839 billion.

Currency impacted this negatively by SEK699 million. And capital goods continued to grow faster than consumables service and spare parts.

So in Acute Care Therapies, we were up 35.5% organically and just over SEK1 billion in actuals. Continued good sales in Acute Care Therapies that were attributable to advanced ICU ventilators and the ECMO therapy products in all of our regions.

While we could see that sales in cardiovascular surgery products were still at a lower level year-on-year. In Life Science sales-wise we were down 12.3% organically.

We were SEK59 million in actual numbers. Sales decreased there mainly as a result of lower activity in sterilizers and disinfectors.

In Surgical Workflows, we were down 14.9% organically or SEK652 million in actual numbers. And net sales in Surgical Workflows was negatively impacted by lower orders received in previous quarters like we flagged for in the -- primarily the second and the third quarter.

And this goes for all product categories and all regions. We can then move over to page number 12.

So if we look at then next step the gross profit and the gross profit margin development in the fourth quarter. Adjusted gross profit increased by SEK252 million to SEK4.556 billion in the quarter, driven mainly by the significant sales growth in ventilators and ECMO products within Acute Care Therapies.

The gross margin also continues to strengthen compared to the previous year mainly due to deliveries of ventilators linked to the higher order intake earlier in the year. The margin was dampened by negative currency effects and to some extent by product mix and under absorption within part of Acute Care Therapies and in Surgical Workflows.

With that we can move over to page number 14 and I hand over to you Lars.

Thank you, Mattias. Adjusted EBITA increased SEK144 million in the quarter attributable to high volumes in Acute Care Therapies.

Adjusted gross profit impact on the margin amounted to 2.1 percentage points due to the reasons Mattias just mentioned. Selling and admin expenses increased organically where the new ways of working continues to have a positive impact, but this was more than offset by approximately SEK 100 million in additional and variable cost for high level of sales and earnings this year.

In addition we have currency-related revaluation effect of approximately SEK 100 million hitting other OpEx in the quarter. Currency effects had a total negative impact of minus SEK 394 million on adjusted EBITA and 2.6 percentage points of impact on the margin and this includes the revaluation impact of approximately SEK 100 million just mentioned.

All in all, this resulted in adjusted EBITA of SEK 1.817 billion compared to SEK 1.673 billion in Q4 2019 and the margin increased from 19.7% to 20.6% year-on-year. Then let's move to Page 15 please.

Free cash flow was strengthened by SEK 864 million to SEK 2.283 billion mainly due to increased earnings and good control on working capital and with seasonal reduction of inventories. Working capital days continued to decrease which is of course helped by the increase in revenues.

We are below 100 days down some 32 days from the peak in Q2 2018. We also see a steep increase in our operating return on invested capital where we are at 19% on a rolling 12-month basis.

And one could expect to see some kind of reversal towards the long-term trend on working capital days and return on invested capital where net debt move more into normal territory here going forward. Let's move to Page 16.

Net debt was positively impacted by the free cash flow and revaluation due to FX taking us to SEK 7.5 billion compared to SEK 14.1 billion in Q3 2019. And if we adjust for pension liabilities we are at SEK 4.2 billion.

This brings a leverage of 1x EBITDA. And if we adjust for pension liabilities the leverage is at 0.6x EBITDA.

Liquidity increased somewhat even though we did reduction of our financial liabilities during the quarter here and amounted to approximately SEK 6.1 billion at the end of the quarter. And this is of course something we're looking closely as now and our attention is to have an effective balance sheet going forward.

Let's move to Page 18 and back to you Mattias.

All right. Thank you very much Lars.

Just to quickly summarize before we move to the Q&A. We can conclude that we've delivered what we promised when it comes to ventilators for 2020 and this has really been a good support for growth in net sales in the fourth quarter.

We have seen a strong order growth in areas offering a positive mix effect for the group, as well if we look at the Sterile Transfer and the Cardiopulmonary part of our business. It's also important to remember the underlying margin improvement of approximately 1% also in 2020 when we take out some of the pandemic effect here and that we continue to expect further gains from the activities that we have in plan.

We're very encouraged about the work done in 2020 and the results that this will bring in the coming years. We've also strengthened our free cash flow our return on invested capital and we have significantly lowered our leverage down to 1.0 so very positive.

Right now I feel we are in good shape to continue working with the healthcare system through the second wave of COVID-19 and in parallel work on the ramp up of elective surgeries to really work down the massive backlog that has been accumulated during the COVID-19 pandemic. And we will also work hand-in-hand with pharma companies to support the manufacturing of the vaccines.

So with that we will have I think very eventful 2021, but in a different way compared to 2020 and we really look forward to working with our customers. With that said I open up for questions.

Thank you.

Thank you, and good morning all. I was hoping to ask three questions, and I would like to begin with your fiscal year 2021 guidance.

There was no reference to margins yet in the text of your press release. You talked about sort of 100 basis points per annum.

Can I ask why -- how one should interpret that with respect to fiscal year 2021? Is it the underlying margin of 100 basis points that we've got to use and adjust for the one-offs if you like in ventilators, or is there a different message that you would like to present?

Secondly, when it comes to Life Sciences, on your BetaBag customers, can you comment on the concentration risk to a single customer, the length of these contracts and also whether there are some special ingredients or so to make these bags in terms of shortages or the wild -- or the ready availability of the components needed to make these things at your will and volume? And then thirdly, again on Life Sciences, the order book development the strength in the fourth quarter is really quite a surprise, given that we've had little in your numbers for Q3.

And then sort of magically we have this massive order number. How should one interpret this with respect to your customers, who are buying these BetaBags from you?

Was this an oversight by your customers that they didn't know that you have these bags, or is it something else that you've done that suddenly resulted in this amazing strength? Those would be those three questions please.

Yes, okay. Yes thank you.

If we start with the guidance piece, then I think the easy way to easiest way to interpret this is that, we were at 12.5% adjusted EBITA margin in 2019. When you take out the pandemic effects in 2020, we would have been at 13.5% and we're saying that this will continue then so to around 14.5%.

That's kind of the easiest way to look at this in terms of outlook for 2021. When it comes to the BetaBag concentration risk, I mean it's -- we have a broad customer base for BetaBags.

I mean, this is not something that we -- BetaBags have traditionally not been used for manufacturing vaccines. It's been used for biopharma production in general.

Now, we have a boost because of vaccine and the concentration risk is obviously connected to the manufacturers of vaccines. But we do have channels into most of the vaccine candidates here, so it is a limited risk in that regard.

Currently, we don't see any shortages here. I think, we've learned a lot from the ventilation ramp-up in the beginning of 2020 and have learned to work with a large -- a higher degree of transparency in the supply chain.

So, obviously there are risks as well with everything that goes into BetaBags, but it's a much less complex product, a much less complex supply chain. So, I do feel that we've taken all the precautions that we can in this regard.

And when it comes to the fluctuations, I really can't say whether it's poor planning or something else. We've had good underlying demand growth.

It's been a boost because, we can see now that vaccines are starting to be manufactured. So -- and this is a true consumables -- consumable really.

It's a one-off product that has a directly linear relationship with the vaccine output, so that's the main reason I'd say. I wouldn't say that it's poor planning, but it's obviously complex for our customers in pharma as well to build new facilities and plan for the ramp-up.

So it might be a little bit lumpy in that regard.

Can I briefly follow up on the BetaBag question in terms of the order book in the quarter or the strength? And is this a deal that you signed, that is now for the next 12 to 18 months i.e.

you've taken care of one customer and that's now what you'll record in terms of what you have to deliver over the next 12 to 18 months, or is it just an order for the quarter and you expect additional further increases in order books in Q3, Q4, maybe also Q1 of next year? The durability and the...

We don't – sure yes. So we don't disclose contract length, but it's not for more than a year.

And we do have the situation now. If you look at the dynamic in terms of supply capacity, we feel that we are ourselves the bottleneck.

It is important to ramp up quickly hence the investment in Merrimack manufacturing. And it's not related to one customer either.

I think that's important to be aware that we have a strong broader demand beyond just individual customers.

Okay. So this is the last question on the follow-up please is.

So would you suggest then that it is possible, when I say possible, reasonable possibility that we will continue to see the potential of an order book growth number in Q1, Q2, Q3 of maybe 30%, 40%, 50%. Is that feasible?

Is that a realistic view of life?

I don't want to give detailed guidance on individual parts of the business here. But we do see a strong demand, continued demand in Life Science and Sterile Transfer, that's quite clear.

But I'm not prepared to put any numbers on that in this call.

Okay. Thank you.

Thank you.

Yes. Good morning.

Thanks all for taking my questions. With regards to the margin guidance for 2021, could you give us a little more details on what the drivers are on the improvement, where you see the delta to come from?

That would be helpful. And also if you could perhaps talk a little bit about the outlook for the ventilator market, let's say end of this year and going into 2022?

If you have any insights into where you think that market will develop? Thank you.

Okay. If we start with the margin question and there's a number of drivers here in as I mentioned a couple of slides ago that we've been able to continue with a lot of the improvement work that we started already late 2017 and 2018.

Now – and this is really gaining good traction and momentum and we're finding more things along the way. So this involves everything from purchasing, logistics, warehousing.

We're running quality value engineering programs across our different product groups. We're obviously working with pricing as well.

And we expect to have a good absorption effect as well as demand comes back. You could see in the fourth quarter, we had under-absorption in some of our factories.

And since we worked down the cost, especially in Surgical Workflows, this is something that should be a positive lever once volumes bounce back. So it's really difficult to just point to one thing here.

This is several years of structured work we did that's gradually paying off. That I'd say is the main thing.

When it comes to the ventilator outlook, we do expect things to move back to kind of a normal year. So more in line with what 2019 was like.

We had a little bit higher demand towards the end of the – in the fourth quarter than maybe we expected and it's still quite an active market but we do expect it to slow down to normal levels. And it will also then take a little bit of a different shape than before.

What we can see when it comes to ventilators is that the since there's a shortage of skilled staff now in the health care system there is more demand for remote overview of the products. It's for clinical decision support and those type of tools and obviously, the big installed base now as well also created an aftermarket opportunity that we will need to address in a structured way.

So that's probably the best outlook I can give on the vent side.

Thank you. And if I may just quickly some follow-ups.

On the margin, is it fair to assume that you expect margin improvement in all three business areas not only in like Surgical Workflows? And on the ventilators, do you see a risk that the market will come down in 2022?

Well, we don't – we expect underlying improvement in all business areas. And obviously, Acute Care Therapies are not going to improve from where they ended the year in 2020.

But Life Science and Surgical Workflows should and everyone on an underlying basis has a lot of opportunity still. Right now, I really can't give any guidance on 2022 on the vent market that's a little bit too far out here.

So, we can only say that, we expect this year to be a year that goes back to kind of pre-COVID levels.

Sure. Thank you.

When I talked about the improvements in margins I referred to 2019 levels for ACT and not 2020 of course.

Well, I don't want to be more granular than what we said that we expect the underlying improvement of about 1% to continue for the group.

All right. Thank you.

Thank you.

Yeah. Hi.

Kristofer from Carnegie. Two questions.

The first on your comment about the margin in 2021. So, what have you assumed when it comes to currencies?

Of course, it will have a absolute negative impact on both sales and earnings. But what have you assumed when it comes to the margin impact from currencies?

And the second question refers to your statement about the balance sheet before that you want an effective balance sheet. Right now, it's super strong.

Dividend is increased. But of course there is room to do much more than that.

So how are you thinking – would you consider the buybacks as well, or are you more focused on using this balance sheet to become much more active doing M&A again? Thank you.

When it comes to the overall margin assumptions for 2021 of the overall guidance, I would say that, the currencies we – it's based on currencies the way they are now. And then there's of course some room for – room here, but we're not in the business of doing currency forecast.

The other key assumption is that, there is a comeback of elective surgeries in the second quarter of the year, and that we continue to see a gradual improvement for investments in capital goods as well, which we could see the green shoots in the fourth quarter, I believe. And we haven't factored in like a strong third wave of COVID.

We do expect that as vaccines get rolled out that we can avoid that and it's more about working through the second wave. So these are the key assumptions behind the guidance for 2021.

And when it comes to capital allocation, you're right we've increased the dividend now. We will work down the level of cash to a more effective structure.

But the priority is – there's no – there's been no discussion about share buybacks. I think the intention for us is more to continue to be active in M&A.

There are interesting opportunities to continue to build the portfolio in several of our areas where we are present today. So that's the number one priority together with continued investment in R&D and market development.

So when it comes to M&A would you say that this very strange 2020 has opened up opportunities, or is it rather that you have to focus so much on just making sure delivering the ventilators et cetera that you haven't had time to think about the potential acquisitions?

No. We've had time.

And we've been I think more active than maybe what's possible to see publicly. We've been in a number of processes.

We've evaluated a lot of targets and we're just mindful to stay disciplined with what we end up paying for target to make sure that we can actually create value from acquisitions as well. So we've had the bandwidth, I feel to do that also during 2020.

We will hopefully have a little bit more bandwidth now in 2021. And it is an active market, and we want to have the preparedness to act, if a possibility.

Okay. Thank you.

Thank you.

Good morning. Thank you.

I also had a couple of questions on the life science business. Could you update us, it would be very helpful that we'll hold on the breakdown between the lab-focused sterilization business and the drug development manufacturing side of the business.

And of course now that you have Applikon, the part of the business focused on bioprocessing, if you could give us some rough breakdown that would be helpful. And second question about life science is, the strength of the order book relative to the fourth quarter.

I'm just wondering if -- related to the earlier question with some sort of delayed deliveries there that caused that swing? I mean it is quite clear the acceleration the ramp-up in vaccine manufacturing that all the companies are speaking to.

I was just wondering if there was some delays to explain the weaker-than-expected fourth quarter? And finally, given the improved cash generation, is this scenario where we can see further bolt-on acquisitions particularly in consumables relating to bioprocessing?

Yes. Okay.

We start with the lab and production. Before the acquisition of Applikon, we were much more heavily weighted towards production than labs.

Applikon, a stand-alone company was more lab-oriented than production. So it's rebalanced a little bit, but we're still heavier geared towards production than lab.

That's the balance. There were some delayed deliveries in life science in the quarter here, where one of the things -- restrictions from the pandemic has been that it's a little bit more complicated to do acceptance test for example.

So there's been a few things that didn't make it on the -- on that side of New Year, so to speak. So there's been some delayed deliveries.

Nothing significant and nothing that causes problems for the customers, but we've had to work through those challenges through the whole of 2020 basically. And I think, yes, there is absolutely an opportunity to look at bolt-on M&A not only in life science as you said, but there are also other categories in our portfolio that are of interest here.

So we continue to remain active and it's definitely one of the reasons that we want to maintain a strong balance sheet to be able to act as well.

Thank you for that. Just a quick follow-up.

Also you mentioned, obviously, the importance of remote monitoring and managing the workflow as a result of COVID. You have got a fast-growing data analytics business within the surgical business.

Is that something you might be looking to add to?

Sorry, fast growing I didn't hear what type of business you were referring to in sort of workflows?

Yes. Just in terms of your Surgical Workflows in terms of the operating room, you have been starting to invest in effectively analytical and workflow solutions.

Is that something that we can see more investment in?

Yes. I think that is one of the key areas of interest for the future.

So we will absolutely have a very high priority for that. That's correct.

Thank you.

Thank you so much. Unfortunately, I didn't participate in the beginning of the call due to technical issues.

So I don't know, if you have talked about this. But can you say a little bit on how much additional capacity you would get in terms of BetaBags by the expanded capacity you have made in existing places, but also the one you're going to make in the U.S.?

And also are your clients asking for just deliveries for 2021 or will you assume that there will be deliveries of BetaBags also beyond 2021?

Yes. The capacity expansion is roughly a doubling of the current capacity.

That's the easiest way to look at this. And then there's obviously the opportunity to work with shifts, now that we've added shifts and so on in our factory in France.

And we have the same possibility to do that in the U.S. once we're up and running as well.

But roughly speaking it's a doubling of capacity. When it comes to deliveries it's been quite clear in communicating with our customers that they don't expect this to only be for 2021.

The dynamic of the vaccine and the way this seems to work now is that it's going to be a much longer-term need than 2021. That's the indication from everybody that we've talked to basically.

And then a follow-up question on the cardiac and pulmonary part of your business, which are as you say around index 90 right now. When should we expect the more urgent procedures to take more off?

Are this going to be like early Q2, or are we more into the second half of this year?

Annette, we believe it's in Q2. That's -- probably around the middle of Q2.

That's the main hypothesis that we have right now from the dialogue we have with our customers and from what we can see in terms of real actions as well.

Then there has been some discussions on pricing if hospitals are expecting more friendly pricing policy due to the COVID-19 costs they have been burdened with. Is that something you're seeing that ASP are going down that the hospitals feel that they need a hand in this aspect so to speak?

We don't see that in our daily reality so much. I mean there is talk of this.

Absolutely we've heard this as well. But there also seems to be a realization among customers that there needs to be a strong focus on increasing productivity and really working with different processes changing and improving the way we work rather than looking at prices per device and so on.

You can only achieve so much through that. So, we're supportive of that focus obviously as well.

So, right now, we don't expect any material impact on pricing. The underlying erosion that we flagged for before that is around 1% on average is something that we expect still to be there.

Okay. Thank you so much.

Good morning, guys. Thanks for questions.

So, first just in terms of the SEK 27 billion guidance, just wanted to clarify a couple of things. Firstly, your underlying assumptions around ventilators, because I think in a normal year you do about 10,000 ventilators.

Just wondering sort of what your expectations? I think I've interpreted that you are about the same level for this year.

Secondly, just in terms of your FX assumptions. What assumption in that SEK 27 billion is in there for foreign exchange and also contribution from acquisitions?

And then, just kind of again circling back on margins it would be helpful if we could just get your thoughts in terms if foreign exchange stays where it is now what the impact in terms of percentage points on your margin would be? Thanks.

Yeah, all right. The SEK 27 billion guidance is excluding acquisition.

It's not meant to be with the portfolio that we have now at the start of this year. So, M&A is not included in that number.

We expect -- it's based on currencies being where they are right now, and as I said in of the earlier questions here, we're not in the business of currency forecasting. So -- and you're probably well aware that we're most sensitive to the dollar development.

But there's also of course a euro/SEK relationship to be aware of here. When it comes to the vent assumption, you're right.

It's back to the 2019 levels and the SEK 27 billion is still valid even if there's a bit of a reduction from that. We had some bigger room in that scenario as well.

Then I'll leave it over to Lars, if you want to provide any additional color on the currency question.

No, I think what we said on the margin, it's the underlying improvements. And as we said, we don't give estimates on currency, as we know the Swedish krona strengthened during the second half of the year that we will have with us now when we come into the first half of the year as a comparison.

But, it's not the material given what -- where we are at the moment. And what happens with currency that is for others to forecast.

Okay. Maybe I can just circle back, because the currency impact in the fourth quarter was pretty big.

I think it did about what 15%, 20% of your EBITA. So I just wanted to know how we should be thinking for FY 2021?

Yes. No, I think you should -- one of the big impact this year is also the very high flow from that part.

The normal translation you have from currencies, when you translate the P&L so to say that is one thing. But then the very big flows from the high ventilators sales that we have was of course had an impact.

And this will now more normalize, given the more normalization of the volumes as well. And then of course, as I mentioned there, if you add the revaluation hitting in the quarter with SEK 100 million as well.

So that is how to explain -- to give you a little bit more insight on what's happening here in fourth quarter.

Okay. Thanks.

Yes. Good morning and thanks for taking the questions.

So first one please, a discussion on the underlying progress of your margin. And this time last year, if I recall correctly, you said that margin progression for the group would not be linear, and that one should be expecting disproportionate gains in 2021 given all of the efficiency measures that you make which were more materializing in 2021.

So I guess the question is, why would now all of a sudden your margin expectation be linear, or are you simply embedding a degree of conservatism here, particularly in light of the recovery of your high-margin elective business and so forth? So that's the first question please.

Second question, I wonder if you could comment on what has appeared to be a very intense consolidation of the sterilization/disinfection market more recently with STERIS and Cantel? And how that leaves Getinge's business structurally in the competitive landscape in that market please?

So if you could talk about your positioning there and how acquisitions affect that that would be helpful. And last question please more of a sort of a high-level question.

You've outlined in your medium-term aspirations to return to a 2% to 4% growth profile, which is below many other medical technology companies and of course Getinge growing faster than that in a couple of years prior to COVID. So what needs to happen for the group to reassess what is a reasonable medium-term profile for the company?

And is there any option that you can start to move up into that higher more med tech like a bandwidth? Thank you.

Yeah. Okay.

If we start with the underlying margin question, you have a good memory Scott and you're still correct that if you look at the impact of the improvement program that we've been running for a year, now it's expected to be a nonlinear impact. So there is a degree of conservatism embedded in what we've said yes.

So we do have things like remediation costs tailing off and so on that will also help a little bit disproportion. So there is a -- there's no underlying or fundamental change in what we've said before.

If we look at the guidance here we want to be a little bit prudent and conservative. So hopefully we can do a little bit better than that.

The question on the consolidation, I think it's a little bit early days to say. I mean, we're still one of the leading players in this field.

It's too early to say what it would mean in terms of changes. So I'd rather give that a pass for now.

And when it comes to the 2% to 4% growth commentary, it -- the purpose was really to say that the outlook of SEK 27 billion should not be seen as a change of the way we guide, it's a temporary way of looking at this. We're just saying that we haven't yet changed the view on the long-term growth.

It's a little bit too early to have a new base for this. We need -- 2020 has been very turbulent in one way.

2021 will have a different dynamic, but still will not be a normal year so to speak. And we would like to come back when we see that the dust has settled now from the second wave of the pandemic, when we see the effectiveness of vaccines and then say okay what is the long-term outlook now.

So it's simply a way of saying that we don't interpret this as any change for the long-term way of guiding. If there is an opportunity to be a little bit higher, yes possibly yes, I wouldn't rule that that out.

We're simply saying now that it's a little bit too early to make that conclusion.

Okay. Thanks very much indeed.

And just one quick follow-up, perhaps you can give us an update on the risk side of the equation, your current mesh liabilities and the FDA remediation course and maybe some realistic time line expectations, as to when those issues can finally be settled?

When it comes to the mesh litigation there's been additional delays because of COVID-19. So that's been pushed back from the beginning of this year, to the middle or second half of this year, the way it looks right now.

In the meantime, there's been no other material development related to the mesh litigation situation. When it comes to remediation that's also one of the things that have progressed rather well, during the pandemic and we are remediated in our U.S.

factories. And the work in Hechingen is continuing as well.

It's expected to be finalized in the second half of this year. The only delays that have occurred is in agreement with the FDA, where we stopped some of the aging test of products to make sure that we could supply the market instead.

But this is really minor in the scheme of the overall picture.

Okay. Thanks very much indeed.

Thank you.

Yes. Good morning.

Two questions for me. Just a quick check on the, Cardiopulmonary side, you said that, you saw a stronger H2, for that one.

Is that really based on demand, or did you say that this was more kind of supply chain from your side? And then, also on, Surgical Workflows if I may, when do you see kind of the real comeback in the margins?

I mean, of course, it has been delayed due to the pandemic, but how should we view the kind of ambition to sometime in the future, reach a double-digit margin in this business? Should it be two years from now, or how should we see that if you could elaborate a bit on that?

Thank you.

In Cardiopulmonary, it's been high demand all year along. And it's probably even higher right now, than it was a few months ago.

So this is a segment where we ourselves are the bottleneck. So the more we can increase our capacity, the more growth you will see there as well.

So we're in the middle of this capacity expansion program. It runs through this year, as well.

So we'll, I mean, gradually improve the situation. But it's a very attractive category with strong underlying growth and also strong margins.

So the key issue for us is, really our own capacity expansion here I would say. When it comes to Surgical Workflows and the margin development, I think one of the benefits of the pandemic is that, we've been able to continue to work with some of the improvements that we had in our plans.

You've seen now in the fourth quarter here that we've had some negative absorption effect because of the lower volumes. But the opposite of that is that, when volumes come back, we will have a positive leverage in that business as well.

So we do expect things to bottom out in Surgical Workflows and we see gradual improvement. But realistically speaking, we've lost a year.

So when we say that this -- we plan to turn this into a double-digit EBITA margin business, it's going to be into 2023, before we're there.

Okay. Thank you.

And also a follow-up is on the Life Science part. I mean, the BetaBags if I remember correctly that's a pretty, what you say scalable business.

You don't have to add a lot of operating expenditures to grow that. So should we see like -- should we expect a very strong kind of drop-through from the increased production there in 2021?

Yeah. It is a good margin category, as you say and not too heavy when it comes to OpEx either.

So the investment for us to bring capacity up is people in the factory. Its clean room capacity, so there's a CapEx investment related to this.

But it's not significant given that we're using existing facilities. So there should be good margin, drop-through from this business.

That's correct.

Okay. Thank you.

That's all for me.

Thank you.

Yeah. Thank you very much.

And thanks everybody for attending the call. I think we've already made the summary here.

And I appreciate the active Q&A, as well. So with that, I wish everybody, a good rest of the day.

Thank you very much.