Our CEOs view on the business

Dear shareholders,

At Coloplast, we work to make life easier for people with intimate healthcare needs. This year, we continued to help more than two million users. We also welcomed more than 250,000 new users to our patient support programme, Coloplast® Care. Yet, many more should have access to better products, technologies and services. This is what we fight for. As the market leader, we build better standards of care, open access for more users and raise the bar with innovative products. We are making progress, but we also have more work to do.

 

This work supports our vision to build the consumer healthcare company of the future – a company that supports patients directly and enables them to take care of themselves at home. We believe this is where healthcare needs to go to effectively meet the demand from a world ageing at an unprecedented rate. The world needs healthcare companies to enable self-care for people with chronic conditions. This is what we are building.

 

Atos Medical acquisition
A key highlight for me this past year is the acquisition of Atos Medical, a company that I have followed and admired at a distance for their work on setting the standard of care for laryngectomy patients.

 

Coloplast and Atos Medical have many similarities: We serve chronic users, we are undisputed category leaders, and we believe in a commercial model centred on innovation, partnership with healthcare professionals, and a directto- consumer setup. We are also companies that serve markets where many more people should have access to better products and support.

 

With an organic growth expected at 8%-10% and an EBITDA margin in the mid-30s, the financial profile of Atos Medical is highly attractive. The acquisition is expected to be EPS accretive starting 2022/23.

 

Ten months into the acquisition, I am pleased to say that the attractiveness of the acquisition is confirmed, and the performance and integration are on track. I am excited to continue the growth journey of Atos Medical as part of the Coloplast family and enable selfcare for people with a laryngectomy or tracheostomy.

 

Solid 2021/22 results
Turning to the results for the year, we delivered another solid set of numbers with 6% organic growth, 31% EBIT margin before special items, and 27% return on invested capital after tax (before special items). China, a key focus market, continued to be negatively impacted by COVID-19. Elsewhere, growth is back, and the business performed largely in line with the Strive25 ambitions. The EBIT margin was negatively impacted by inflationary pressure on input costs, a normalisation of our spend post-COVID, as well as continued investments in innovation and growth initiatives.

Strive25 – Sustainable Growth Leadership
Let me share a few highlights from our Strive25 strategy around innovation and growth.

 

First, innovation. To address the key challenges users face and raise the standard of care, we continue the work in Chronic Care and are making solid progress on our Clinical Performance Programme. Heylo™, the new digital leakage platform in ostomy care, is in pilot launches in the UK and Germany, trialled by hundreds of users. Luja™, our new catheter platform with micro-hole zone technology, will be launched in the second half of 2022/23.

 

In Wound Care, we have the strongest portfolio to date, and solid momentum in Europe.

 

In Interventional Urology, we are strengthening the business through organic innovation and inorganic opportunities in attractive adjacent segments.

 

Second, growth. As COVID 19 began to release its grip on the healthcare systems, we started to see a comeback in growth across our businesses and geographies. Once again, we grew above the market and gained market shares across all business areas.

 

In the US, our ostomy care business delivered double-digit growth, on the back of the GPO wins and sales force expansion. In China, we maintain our strong ostomy care market share across channels despite the impact from COVID-19. The long-term potential of the Chinese market remains intact, and we remain fully committed to the
market.

 

Our Strive25 strategy is supported by key growth enablers – Efficiency, People and Culture, and Sustainability.

 

We continue to strive for unparalleled efficiency and industry leading margins. Within our Global Operations Plan 5 (GOP5), the automation programme is largely on track to deliver FTE neutrality in 2022/23, and our second volume factory in Costa Rica opened this year. We expect around 25% of the volumes to be produced in Costa Rica in 2025, providing a more robust and global network. Despite the progress made, our GOP5 is challenged by the inflationary environment and significant increases in raw material prices, electricity prices and wages in Hungary. Finally, we continue to see a positive scale effect in our business support organisation driven by further utilisation of our Business Centre in Poland.

At the core of delivering on Strive25 are our people and culture. We have a purpose driven organisation which has engaged employees who are motivated by helping our users. Despite a challenging job market, I am happy to say that the voluntary turnover level in 2021/22 was on par with last year.

I am also pleased to release this year’s Sustainability Report together with the Annual Report. In 2021/22, our carbon emission reduction targets were approved by the Science Based Target initiative, a recognition of our efforts to contribute towards solving the climate crisis. I am happy that in 2021/22 we increased our renewable energy use to 72%, from 67% last year, driven by the installation of electric heating pumps at our production sites in Hungary and China. We also signed the first Power Purchasing Agreement which secures new green power for Coloplast’s electricity consumption in Denmark.

 

Looking ahead
As we enter a new financial year, the world is in a very different place from where it was just a year ago and the list of challenges is long: war in Europe, inflation on the rise globally, a pandemic still ongoing in parts of the world, disrupted supply chains, and increasing interest rates – to name just a few.

 

Coloplast is not immune to these challenges. Inflationary pressure on energy prices in Hungary and raw material prices pose a headwind to our margin outlook for 2022/23. Inflation is challenging because we operate in an industry where a large share of sales comes from reimbursed categories, limiting our ability to pass on the inflationary pressure.

 

Despite the near-term challenges, I remain fundamentally optimistic about our future. Coloplast is a long-term growth company with industry-leading profitability. We remain one of the bestperforming medical device companies in the world.

 

Across our business areas and geographies, I see a lot of unmet user needs and untapped market potential. With our robust commercial model focused on innovation, partnership with healthcare professionals and direct-toconsumer setup, we are well positioned to continue the journey of building the consumer healthcare company of the future.

 

Finally, I would like to say thank you to all my colleagues at Coloplast for their continued commitment and hard work in another challenging year. I would also like to thank our customers and investors for their confidence.

 

Kristian Villumsen
President & CEO