2014 Full-year results Conference presentation for investors, - - PDF document

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1

2014 Full-year results

Conference presentation for investors, analysts & media

Basel, 27 February 2015

2

This presentation contains certain forward-looking statements that reflect the current views of

• management. Such statements are subject to known and unknown risks, uncertainties and
• ther factors that may cause actual results, performance or achievements of the Straumann

Group to differ materially from those expressed or implied in this presentation. Straumann is providing the information in this presentation as of this date and does not undertake any

• bligation to update any statements contained in it as a result of new information, future

events or otherwise. The availability and indications/claims of the products illustrated and mentioned in this presentation may vary according to country.

Disclaimer

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3

• Rejoined Straumann on 1 December 2014
• Oerlikon Drive Systems (4 years): CFO
• Straumann (6 years): Business

Development, Head Group Controlling

• Geistlich Biomaterials (2 years): Director

Orthopedic Marketing & Sales

• McKinsey (2 years): Consultant
• Education: PhD in Biochemistry and

Molecular Biology; Business Administration studies

Dr Peter Hackel, Straumann’s new CFO

Full-year highlights

Marco Gadola, CEO

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Strong growth and strategic expansion

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REVENUE BEST PERFORMERS GROWTH STRATEGY

CHF

710m

APAC & RoW

Geographic & segment expansion

FY: +6%1 Q4: +9%1 14% growth1 in both regions New hybrid approach to dynamic Chinese market; further investment in Instradent (value) platform EMERGING MARKETS MULTI-BRAND PLATFORM CURRENCY IMPACT

16%

• f Group

Portfolio expanded Mitigating actions

China & Brazil fuel mid-teen growth in EMs, which now contribute 16% of Group revenue (14% in 2013) New products/solutions (botiss, BLT, Pro Arch etc.); Investments in MegaGen, T-Plus, Rodo Medical Cost-savings & other initiatives to reduce impact of strong CHF, without impairing ability to grow business

1 Organic growth – i.e. excluding the effects of acquisitions, divestitures and currency exchange rates

Rightsizing and re-organisation measures * Straumann, Nobel Biocare, Zimmer Dental, Biomet 3i, Dentsply Implants - based on company and SEC reports as well as management comments.

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Outpacing the market for 7 consecutive quarters

1 Straumann, Nobel Biocare, Zimmer Dental, Biomet 3i, Dentsply Implants, based on company and SEC reports, as

well as management comments. 6 Q4: revenue of CHF 187m (+9% organic)

• 15%
• 10%
• 5%

0% 5% 10% 15% Market for tooth replacement & restoration (leading companies) Straumann

1

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Profitable growth

Organic revenue growth1

• Adj. gross margin 1

(in %)

• Adj. EBIT margin1

(in %)

• Adj. EPS1,2

(in CHF) 667.4 710.3 2013 2014 78.5 78.7 2013 2014

+6.4%

17.6 20.9 2013 2014

+20bps

1 Excl. currency exchange rate effects and restructuring costs in 2013 2 Excl. one-time benefit from capitalization of deferred tax assets in 2014 amounting to CHF 27m related to Neodent

7.00 8.40 2013 2014

+330bps +20%

2008 2012 2013 2014

Significant impact from currency exchange rates

Operating profit margin

15-20% 9.2% 10-15% 17.0% 20.9% 27.4%

Straumann Dental peers benchmark1

1 Average operating income margin for the following companies: Dentsply, Patterson, Henry Schein, Osstem,

Sirona, and Nobel Biocare ( 2014 9M)

10% 15% 20% 25%

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10-15% 10-15%

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Business and regional review

Peter Hackel, CFO

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Significant profitability improvements

in CHF million

FY 2014

Reported Reported

• excl. FX
• excl. FX and

exceptionals Reported

• excl. FX and

exceptionals

Revenue 710.3 679.9 667.4 667.4 Organic growth% 6.4% Gross profit 558.7 535.9 524.0 524.0 6.6% margin 78.7% 78.8% 78.5% 78.5%

( 20 bps) 20 bps

EBITDA 176.2 148.4 142.0 149.9 17.5% margin 24.8% 21.8% 21.3% 22.5%

300 bps 230 bps

EBIT 148.3 115.8 109.6 117.5 26.2% margin 20.9% 17.0% 16.4% 17.6%

390 bps 330 bps

Net profit 157.8 101.2 margin 22.2% 14.9% Basic EPS 10.15 6.55 Adjusted EPS 8.40 7.00 Free cash flow 128.4 139.2 margin 18.1% 20.5% Change (rounded)

FY 2013

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78.8% (0.3%) 78.5% 0.9% 0.3% (1.0%) 78.7% Gross profit margin FX effect

• Adj. gross profit

margin Price / volume / mix Inventory change COGS (higher volumes) Gross profit margin

In % of revenue, rounded

Higher implant sales offset FX and mix effects

11

1 Change in finished and semi-finished goods in 2014 compared with prior year 1

2014 2013 +20 bps

EBIT margin above 20%

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+330 bps 2014 2013

1 Exceptional costs of CHF 8 million related to cost optimization measures in 2013.

In % of revenue, rounded

1

17.0% (0.6%) 1.2% 17.6% 0.2% 3.2% (0.1%) 20.9%

Reported EBIT margin FX effect Restructuring costs Adjusted EBIT margin Gross margin effect Lower OPEX intensity Other income Reported EBIT margin

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139.2 27.8 (16.1) (5.5) (2.1) (2.1) (7.6) (5.2) 128.4

Free cash flow 2013 EBITDA improvment Higher net working capital Higher CAPEX investments Higher interest payments Higher tax payments Difference in non-cash OPEX Various Free cash flow 2014

Strong cash generation constrained by working capital increase

FCF margin 18.1% FCF margin 20.5%

In CHF million

13 Chart shows cash-relevant changes Jan-Dec 2014 compared with the same period 2013

1 Mainly changes in share-based payments and provisions

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1

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All regions drive growth

6.4% in l.c.

Revenue development (in CHF million, rounded)

4.5% in CHF 2013 2014

Change in l.c. (1.9%) 7.8% 14.2% 3.2% 14.0% 679.9 (12.5) 667.4 11.6 14.0 13.1 4.2 710.3

Revenue FY 2013 FX Effect Revenue FY 2013 @ FX 2014 Europe North America APAC ROW Revenue FY 2014

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Strong finish in Europe; share gains in N. America

56%

• Europe grew 8% in Q4 amid tough

competition

• Best quarterly growth rate since

2008, contributing almost half of

• verall growth in Q4
• Strong performers: UK, Spain and

the Nordic countries; Germany solid

7.6% 2.7% (1.5%) 4.1% (1.4%) (3.4%)

Q4 2014 Q3 2014 Q2 2014 Q1 2014 Q4 2013 Q3 2013

Europe North America

• N. America posts strong Q4 on top
• f high base line
• High demand for Roxolid and

SLActive implant lines

• New Bone Level Tapered implant

well received in controlled release Revenue change (organic)

27%

15 9.3% 11.4% 5.4% 5.2% 11.0% 9.1%

Q4 2014 Q3 2014 Q2 2014 Q1 2014 Q4 2013 Q3 2013

53%

Boost from China and Japan

56%

• China delivers strong increase;

good progress in establishing new hybrid sales model

• Strong growth in Japan, region’s

largest market

• Straumann outperforms Japanese

market, driven by SLActive launches

14.5% 17.0% 15.3% 8.3% 16.3% 7.9%

Q4 2014 Q3 2014 Q2 2014 Q1 2014 Q4 2013 Q3 2013

Asia Pacific Rest of World

18.2% 3.0% 9.0% 28.6% 1.8% 35.1%

Q4 2014 Q3 2014 Q2 2014 Q1 2014 Q4 2013 Q3 2013

• Back to double-digit growth in Q4,

driven by strong demand for implants in most markets

• Good performances in Brazil,

Mexico and Middle East

• Neodent posts high single-digit

growth in 2014

15% 5%

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Revenue change (organic)

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Implants

Double-digit growth in implant volumes drives revenue increase

Restorative Regeneratives

17 17 18

Foreseeable impact of currency rates on 2015 results

In CHF m (rounded) FX rates 16 Jan Ø FX rates after 16 January

Revenue (75) (55) EBIT (40) (31)

EURCHF 1.02 1.05 USDCHF 0.87 0.92 0.2 0.4 0.6 0.8 1 1.2

01.01 16.01 31.01 15.02

EURCHF USDCHF BRLCHF JPYCHF

Development of Straumann’s main currency exchange rates YTD 2015 Theoretical FX impact on 2014 revenue and EBIT

Source: Thomson Reuters Ø 16 January – 27 February

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Short-term measures expected to deliver >CHF 20 million:

• Compensation reductions for Directors and all employees in CH;

96% of staff in agreement

• Hiring and replacement only to fill business-critical positions
• Tighter cost control (e.g. travel), additional efficiency measures
• Re-negotiation of supplier contracts

Mid-term:

• Further optimization of cost base; improve order-to-cash process
• Improve natural hedge – balance manufacturing capacity, production expansion
• utside CH, supplier contracts not in CHF, ensure suppliers pass on FX benefits
• Long-term growth opportunities not compromised
• ‘Swiss label’ comes at a price but adds value to premium brand

Mitigating the impact of the strong Swiss franc

Update on our strategic progress

Marco Gadola, CEO

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Mastering challenges and turning them into

• pportunities

CHF

Strong Swiss franc Limitations of our current culture

GP

Increasing number of GPs placing implants

BRIC

Future growth markets are outside Western Europe Increase in discounters claiming compatibility Growing segment of corporate clinics / dental chains Advanced innovation cycle

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In 2014, we started a ‘cultural journey’ to promote and foster: delegation, empowerment, responsibility, risk-taking, challenging and creative thought, which are predominant behavioral styles in high-performance

• rganizations.

Our journey to create a high-performance culture

Straumann’s current culture Our ideal

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Straumann USA lacks presence in GP segment

1 Straumann dentists survey of 120 GPs performed by Exevia, Fall 2014 2 iData, MRG and Straumann estimates

0% 10% 20% 30% Estimated share of US GP market based on survey data1 Estimated overall implant market share (units) 2

Estimated US dental implant market share by customer segment

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• More effective approach to fast-growing segment
• f surgically active GPs
• JADA study points to lower implant success rates

in general practices1

• Straumann takes responsible approach together

with Patterson Dental and Spear Education

• Straumann Smart One package designed to help

GPs perform straightforward indications

• SMART One exclusively available through

Patterson in US, with Spear’s interdisciplinary curriculum

Collaboration to address GP segment and to enhance the standard of care

Straumann SMART One

1 Da Silva JD et al, JADA 2014;145(7):704-713

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GP

Product manufacture, coordination

Targeting and customer leads

Education Mentoring, coaching

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Interdisciplinary relationship between specialists, GPs and labs

Experienced surgeon

Value and technology platforms expand

Brazil (49%) Germany (51%) Taiwan (Convertible)

• S. Korea

(Convertible) Common platform of technology & Production Spain (30%) Canada (44%) Germany (Option 30%) Germany (100%)

Premium Value

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US (13%) Taiwan (43% in 2015)

Implants CADCAM/prosthetics Regeneratives

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The latest addition to our Instradent platform

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• A leading local dental implant company in Taiwan
• Instradent to acquire approximately 43% of T-

Plus in March/April 2015; option to increase to 90% by 2020

• T-Plus has the products, regulatory clearance

and customer proximity to penetrate the fast- growing value segment in China

• Injection of capital will accelerate T-Plus’ growth

strategy and international expansion plans

• Deal subject to approval by Taiwan Investment

Commission

Investments targeted at markets with high growth potential

North America

Marketing & sales expanded; CADCAM site in Arlington upgraded and expanded

Brazil

Straumann’s sales power increased

China

Own organization built up; Distributor activities taken over; Leadership in premium segment; Preparing entry into value segment

Japan

Building CADCAM production

LATAM

Initiative underway to gain direct access to key S. American markets with Straumann & Instradent

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0% 20% 40% 60% 80% no teeth lost 1-14 15-27 lost all teeth US Brazil Germany 29

1 Source: Straumann proprietary study based on >11000 respondents in the US/BR/DE conducted by

AFG Research in 2012

Today patients expect:

• fixed, reliable, natural-looking,

long-lasting replacements

• minimal discomfort
• shorter (immediate) treatments
• affordability
• more than a smile, a changed life

Patient expectations have changed – especially for multi-teeth interventions

Incidence of tooth loss among middle-aged and elderly population1

>1/4 HAVE LOST HALF THEIR NATURAL TEETH

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• ClearChoice is the leader in full-arch restorations

and does more implant procedures than any other US network

• Straumann enters dental chain segment
• Straumann & Instradent to serve ClearChoice as

a preferred partner, starting Q1 2015

• >90% of centers technically equipped; most

switching expected by end of Q1

• CADCAM production in Arlington expanding to

meet ClearChoice requirements

• 38 million adults in the US estimated to need one
• r two full dentures by 20201

Preferred partner of leading US network in full-arch replacement

ClearChoice centers in the US

1 Douglass CW, Shih A, Ostry L. Will there be a need for complete dentures in the United States in 2020?

J Prosthet Dent. 2002 Jan;87(1):5-8

Straumann Pro Arch solution

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Addressing a significantly larger market through partnership and licenses

34% 17% 8% 38% 4% Membrane Xenograft Tissue regeneration Allograft Synthetic

US regeneratives market by category (market estimated at USD 260m in 20141)

1 Source: Millennium Research Group 2014

31

>2014 >2015/16

Straumann Membrane C+ Straumann Xenograft Straumann Emdogain Straumann Allograft Straumann Bone Ceramic

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• Controlled release underway since September

2014; products well received

• Full launch in Europe and N. America expected

Q2/Q3 2015

• BLT opens door for Straumann to compete head

to head in the largest implant segment (>60% of all implants are tapered/conical)

• Good primary stability combined with rapid

secondary stability (SLActive) and Roxolid strength make this a new-generation BLT

• BLT an important element in securing

agreement with ClearChoice

New BLT implant – a significant growth

• pportunity in 2015

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Outlook 2015

34

Confirmation that we are working on the right things

Drive Straumann high performance culture & organization Target unexploited growth markets & segments Become total solution provider for tooth replacement

Our strategic priorities:

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• Further improvement in global implant

market expected

• Revenue expected to grow organically in

mid-single-digit range

• Further investments in strategic growth

markets and projects

• Cost reduction measures including

compensation reductions in CH, strict hiring and travel restrictions

• 2015 EBIT margin target >20% (organic),

assuming exchange rates remain more or less at recent levels1

Guidance 2015

Barring unforeseen circumstances

35

1 Average spot rates since 16 January: Euro=CHF 1.05 ; USD=CHF 0.92

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• Straumann will consolidate Neodent fully as of 1 March 2015, irrespective of

whether and when it might exercise its step-up option

• Consolidation will trigger ordinary fair-value adjustments:

 Formal purchase price allocation (PPA) process to be conducted  One-time effects: revaluation of initial 49% book value; inventory step-up to fair value; FX losses on current equity position through P&L  Recurring effects: Annual amortization charge to be communicated once PPA process is complete

• Decision regarding option to increase ownership is still outstanding

Effects of Neodent consolidation

Option to increase to 75% Option to increase to 100% 03.2015 08.2016 02.2018 11.2019 IFRS consolidation Initial stake 49% 05.2012

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Questions & Answers

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2014 Annual report now available online

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Get an update on our latest innovations

If you would like to join us for this event, please write us an email at investor.relations@straumann.com Cologne, 10‐14 March

SEE YOU SOON IN COLOGNE!

Hotel Dorint

Calendar of upcoming events

2015

27 February Full‐year 2014 results Basel HQ 05 March Investor meetings London 06 March Investor meetings Paris 12 March Investor breakfast IDS, Cologne 17 March Investor meetings Toronto 18 March Investor meetings Chicago 19 March Investor meetings New York 27 March Kepler Cheuvreux Swiss Seminar Zurich 10 April Annual General Meeting 2014 Basel Congress Center 14 April Dividend Ex‐date (16th payment date) 17 April Investor meetings Madrid 23 October First‐quarter results Webcast 15‐16 March Investor meetings London

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40 Results publication and corporate events. More information on straumann.com → Events

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Straumann’s currency exposure

Cost breakdown 20131 Revenue breakdown 2013

1 These distribution charts represent the total net revenues and the total COGS as well as OPEX expenses in the various

• currencies. All numbers are rounded and based on 2014 figures.

Average exchange rates (rounded) FX sensitivity (+/- 10%) on... 2014 2013 Revenue EBIT EURCHF 1.21 1.23 +/- 27 million +/- 17 million USDCHF 0.92 0.92 +/- 17 million +/- 7 million JPYCHF 0.86 0.95 +/- 4 million +/- 3 million BRLCHF 0.39 0.43 +/- 2 million +/- 1 million

41 EUR 39% CHF 11% USD / CAD / AUD 29% Other 21% EUR 20% CHF 45% USD / CAD / AUD 22% Other 13%

60 80 100 120 2013 2014 2015 Development of Straumann’s main exchange rates since 2013 USDCHF EURCHF JPYCHF BRLCHF

Results from our Q4 buy- and sell-side survey

26.02.2015 22 Perception survey last December: Respondents...

40% 25% 30% 5%

Fund Manager Buy-side analyst Sell-side analyst Equity sales

23% 5% 2% 9% 54% 5% 2%

UK US Scandinavia France Switzerland Germany Other

...by job ...by country

Gizmo survey with a sample size of 59 respondents out of approx. 220 questionnaires (26% response rate) 43

Shareholding and recommendation levels

Buy‐side Sell‐side

44

32% 16% 8% 43%

We were invested in the past, but not now (valuation) We were invested in the past, but not now (fundamental industry concerns) We never owned STMN shares We are shareholders

50% 20% 5% 25%

I am neutral on the stock / don't recommend it to my clients I am negative on the stock considering the current share price I am negative on the stock due to fundamental industry concerns I recommend my clients to be long in the stock

26.02.2015 23 Why are you a shareholder / not invested at the moment (Top 4 responses ranked by order)

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Why are you a shareholder? Why are you not invested?

Likely outperform its peers and can leverage its fixed cost base (100%) Industry growth does not match valuation Find management convincing Increasing marketing efforts needed to maintain growth I think the entry into value segment will stimulate cashflows Industry has low entry barriers Advantage of dedicated implant player in a consolidating industry I think the entry into the value segment will dilute reported margins

Data based on buy-side sample only, i.e. 65% of the respondents

Medium-term growth of the modern tooth replacement market1

46 Question: What do you reckon will the entire global tooth replacement market p.a. grow in the coming 3 years (implant, abutments and CADACAM combined; in value terms)?

1 Market includes total business, i.e. implant, abutments and CADCAM abutments and SRBBs. .

By value (in % of respondents) By volume (in % of respondents)

16 63 19 2

Double-digits 7-9% 4-6% 1-3% Flattish Decreasing

2 32 60 7

Double-digits 7-9% 4-6% 1-3% Flattish Decreasing

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Your contacts

Fabian Hildbrand Corporate Investor Relations Tel. +41 (0)61 965 13 27 Email investor.relations@straumann.com Mark Hill Thomas Konrad Corporate Communications Tel. +41 (0)61 965 13 21 Tel. +41 (0)61 965 15 46 Email mark.hill@straumann.com Email thomas.konrad@straumann.com

47 International Headquarters Institut Straumann AG Peter Merian-Weg 12 CH-4002 Basel, Switzerland Phone +41(0)61 965 11 11 Fax +41(0)61 965 10 01 www.straumann.com