A STABLE START TO THE YEAR IN AN UNCERTAIN ENVIRONMENT
CEO JAN WAHLSTRÖM COMMENTS ON Q1
Covid-19 is having an ever increasing impact on society and the level of uncertainty is very high. While being mindful and respectful of this, I am immensely grateful that in 2019 we succeeded in building a solid financial and organizational foundation for Elos Medtech. We entered 2020 and the ongoing global crisis having just posted the Group's strongest earnings to date. The pandemic has highlighted the benefits of our persistent efforts working on cost efficencies and of operating on several continents and across multiple segments. Despite this, we expect a significant decline in sales over the coming six months, particularly in Dental, and that's why we are working to further reduce our costs. As this has been a very different start to the year in which the focus is on the virus outbreak, we have chosen to expand the information provided in this report by adding an additional page where we describe our assessment of the situation and the measures we are taking, see page 4.
Covid-19 will of course have an impact on Elos Medtech but in the first quarter we experienced no major disruptions to sales, and we began the year on a stable footing despite the uncertain global environment. Nevertheless, the downturn for the first half of the year that we forecast in February is expected to have a significant impact on our next quarterly figures.
At SEK 159 million, net sales for the period were in line with the figures for last fall but were significantly lower than in the first quarter of 2019, in which we sold an inventory worth over SEK 13 million to Brüel & Kjær. Our operating profit was SEK 12 million, which is well in line with fall 2019. Earnings are hard to compare with the first quarter of last year due to significant non-recurring items in that period.
We have continued our efforts to streamline production flows and optimize processes in the same spirit as before. At the beginning of the year, our Chinese site was forced to remain closed for 21 days to covid-19, and I am very proud that our employees in China succeeded in handling the long closure without any delivery problems.
My current assessment is that the covid-19 outbreak will have a negative financial impact on the company throughout 2020 and I expect a significant decline in sales in the second and third quarters. We have placed around 200 employees at our production sites on short-term furloughs and are continuously monitoring customer demand to ensure that we are able to return to normal production as soon as the need returns. Based on what we know today, we expect to be able to continue to produce and deliver in line with our customers' requirements.
Certain types of products that we produce are prioritized by local authorities, and we are of course also giving priority to these products. Our Memphis site, for example, has been classified as a priority business by the authorities because of the trauma products that we manufacture. We have also seen a significant increased need for injection-molded components for ventilators from Getinge and have therefore to some extent adapted our production in Life Science to meet this need. Although the products account for a minor part of our overall production, these components play an important role in life-saving treatments and it is therefore crucial to ensure fast and secure delivery.
In other areas we have delayed product launches by our contract-manufacturing customers, and the effects of this will be felt throughout 2020. In view of the uncertain outlook, it is not possible to foresee what long-term impact the pandemic will have on Elos Medtech. We are keeping a close eye on developments to ensure that we are able to make quick and well informed decisions. Our primary focus is on ensuring the health and protecting the jobs of our employees while minimizing the company's financial risk.
Adjusting is about having the right attitude. By taking a flexible approach, we are preparing to meet both reduced and increased demand based on the adjustments that are made in health care as the crisis unfolds.
This information was distributed by Cision http://www.cisionwire.se/