2020 Annual Report HIGHLIGHTS SHAREHOLDER MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX LETTER COMMENTARY REPORT GOVERNANCE REPORT REPORT 2
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2020 Annual Report HIGHLIGHTS SHAREHOLDER MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX LETTER COMMENTARY REPORT GOVERNANCE REPORT REPORT 2 CONTENTS #TogetherStrong Highlights 3 #TogetherStrong is a tag-name that covers #TogetherStrong aptly describes how we countless initiatives we took to address progressed through and emerged from this Letter to shareholders 7 pressing needs in the dental community extraordinary year. Management commentary 11 in 2020. Straumann Group in brief 12 Strategy in action 17 #TogetherStrong is forward-looking; it Products, solutions and services 21 It started with a website offering scientific expresses purpose, teamwork, courage, Innovation 26 and practical information to help Markets 29 determination, perseverance, moving Business performance (Group) 35 customers and staff through the corona forward and succeeding in turbulent Business performance (Regions) 38 virus crisis. Soon it became a holistic, Business performance (Financials) 44 surroundings – themes that are captured Share performance 46 omni-channel response including a in the pictures and contents of this report. Risk management 49 massive education platform. Sustainability report 57 The #TogetherStrong concept has Corporate governance 80 extended to thousands of activities Compensation report 107 and millions of communications. It demonstrates how the events of 2020 Financial report 123 fuelled our resourcefulness, innovation Appendix 184 and passion for creating opportunities. Global Reporting Initiative (GRI) 185 GRI content index 189 Points to note 193 2020 Annual Report Straumann’s Annual Reports for online users Straumann Group Straumann http://annualreport.straumann.com HIGHLIGHTS SHAREHOLDER MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX LETTER COMMENTARY REPORT GOVERNANCE REPORT REPORT 3 HIGHLIGHTS Group key figures High staff engagement in CHF million score (4 pts above global 2020 2019 Change (%) Revenue in CHF benchmark) Revenue 1 426 1 596 −11 Gross profit 1 030 1 200 −14 Core 1 1 038 1 207 −14 1.4bn 78 EBITDA 406 481 −16 Core 1 421 505 −17 Operating profit (EBIT) 157 387 −59 Core 1 333 432 −23 CHF cash from operating Investment in staff learning Net profit 92 308 −70 activities ≈ 2019 level in CHF Core 1 261 338 −23 Cash generated from operating activities 377 378 0 Capital expenditure 82 150 −45 377m >3m Free cash flow 295 230 28 Basic EPS (in CHF) 5.75 19.33 −70 Core 1 16.20 21.21 −24 Employees (at year end) 7 340 7 590 −3 Oil and solvent Notes to core figures Core EBIT margin consumption 1 To facilitate a like-for-like comparison of the underlying business performance the Group presents ‘core’ results in addition to the results reported under IFRS. A detailed explanation and reconciliation is provided on p. 124 ff. of the Financial Report. 23% –8% 2020 Annual Report Gross profit in CHF Greenhouse gas emissions Straumann Group Straumann >1bn –2% HIGHLIGHTS SHAREHOLDER MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX LETTER COMMENTARY REPORT GOVERNANCE REPORT REPORT 4 Revenue (more on p. 35 ff.) Operating and net profit (more onp. 36 ff.) Cash flow and investments (more onp. 36 ff.) Return (more on p. 45 ff.) in CHF million in CHF million in CHF million in % 5-year CAGR: 12% in CHF (14% organic growth) 500 400 60 350 50 400 1500 300 40 300 250 1000 200 30 200 150 20 500 100 100 10 50 0 0 0 0 2016 2017 2018 2019 2020 20161 20171 20182 20192 20202 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Reported revenue Operating prot (EBIT) Operating cash ow Return on equity (ROE) Net prot Capital expenditure Return on capital employed (ROCE) 1 Excluding exceptionals Acquisitions & participations 2 Core 5y organic revenue Core EBIT in CHF Invested over 5y Free cash flow growth (CAGR) in the future in CHF margin 2020 Annual Report 14% 333m >1bn 21% Straumann Group Straumann HIGHLIGHTS SHAREHOLDER MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX LETTER COMMENTARY REPORT GOVERNANCE REPORT REPORT 5 Performance by region By year-end, organic growth had returned to all regions. Being the least heavily affected, APAC rebounded to high-teen growth in Q4 to complete the year almost in line with 2019. EMEA and North America reported mid-single digit declines, while Latin America had to overcome the biggest challenge and achieved Europe, Middle 85% of its prior year organic revenue. East, Africa Change in CHF Revenue in CHF −8% Change organic North America Change in CHF −7% −10% Revenue in CHF 615m Change organic −5% 432m Asia/Pacific Change in CHF −5% Revenue in CHF Change organic Latin America −1% 2020 Annual Report Annual 2020 Change in CHF 289m Revenue in CHF −35% Change organic −15% Straumann Group Straumann 90m HIGHLIGHTS SHAREHOLDER MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX LETTER COMMENTARY REPORT GOVERNANCE REPORT REPORT 6 Share information Relative share price development Total shareholder return Total in CHF in % shareholder return 1200 80 70 60 9.4% 1000 50 40 800 30 20 10 600 Market capitalization 0 –10 in CHF –20 400 2016 2017 2018 2019 2020 Straumann 16.4bn SMIM Total Return Index 200 2016 2017 2018 2019 2020 StraumannSwiss Mid Cap index (SMIM) adjusted STOXX® Europe 600 index (in CHF) adjusted Dividend per share in CHF Share information Details about share performance 3 in CHF on p. 46 ff. 5.75 2020 2019 2018 2017 2016 Earnings per share (EPS) 16.201 21.20 1 18.16 1 15.13 2 11.94 2 Ordinary dividend per share 5.753 5.75 5.25 4.75 4.25 2020 Annual Report Payout ratio 36%1 27% 1 29% 1 31% 2 36% 2 Share price at year end 1031.50 950.40 618.00 688.50 397.50 Share price 1 Based on core results. performance 2 Based on results excluding exceptionals. 3 Payable in April 2021 subject to shareholder approval. Straumann Group Straumann 8.5% HIGHLIGHTS SHAREHOLDER MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX LETTER COMMENTARY REPORT GOVERNANCE REPORT REPORT 7 Dear Shareholder, As a company we have learned, innovated, adapted, relinquished, matured and persevered in 2020. Above all, we have understood the value of bringing and keeping people, ideas and things together when traditional approaches are no longer possible. This is why #TogetherStrong aptly describes how we progressed through and emerged from this extraordinary year. #TogetherStrong aptly describes how we progressed through and emerged from this extraordinary year. In 2020, building on five years of double-digit growth, we made a promising start until March, when dental practices closed temporarily or were limited to essential treatment. During the crisis months our focus was on safety, business continu- ity, mitigating financial impacts and helping dentists get back to treating patients. When lock- downs eased, revenue picked up, lifted by pent-up demand. Considering the disruptions and taking 2020 Annual Report the record-level results from 2019 as a comparison, we achieved solid results in 2020. Organic revenue was down 6%, while strong currency headwind widened the gap in Swiss francs to 11% as revenue reached CHF 1.4 billion. Straumann Group Straumann Gilbert Achermann, Chairman of the Board of Directors Guillaume Daniellot, Chief Executive Officer HIGHLIGHTS SHAREHOLDER MANAGEMENT SUSTAINABILITY CORPORATE COMPENSATION FINANCIAL APPENDIX LETTER COMMENTARY REPORT GOVERNANCE REPORT REPORT 8 The pandemic put our original objectives for with further payments expected in the coming improved profitability in 2020 beyond reach. Thanks to our agile response, years. We continued to expand manufacturing However, thanks to rapid mitigation of near-to- capacity (CHF >50 million) which, together with mid-term financial impact, including operating cost we outperformed the market. investments in information technology and other reductions, subsidized working-hour reductions, fixed assets, resulted in capital expenditures of global restructuring and postponed investments, CHF 82 million (CHF 150 million in 2019). Cash we alleviated the heavy pressure on profitability. REBOUNDING ACROSS REGIONS AND BUSINESSES from operating activities amounted to CHF 377 Our core EBITDA, EBIT and net profit margins By year-end, organic growth had returned to all million (CHF 378 million in 2019) and free cash flow reached 29.5%, 23.4% and 18.3% respectively, regions (see p. 35 ff.). APAC rebounded to high-teen reached CHF 295 million (CHF 230 million in 2019). which is very presentable in the circumstances. We growth in Q4 to complete the year almost in line commend our Finance team for their work and for with 2019. EMEA and North America reported mid- MARKETS, ENVIRONMENT – TRENDS securing liquidity to ensure continuity, including single digit declines, while Latin America, facing We estimate that the global market for implant CHF 480 million raised through two straight bonds the biggest challenge, achieved 85% of its 2019 dentistry is worth approximately CHF 4 billion1, to refinance a maturing bond and for general revenue. after contracting by 10–15% due mainly to the corporate purposes. pandemic lockdown. Thanks to our agile response, The value implant, digital and orthodontics busi- we outperformed the market. The drivers of mid- nesses all achieved full-year organic growth, the and long-term market growth remain valid and latter reporting the highest increase. Premium include innovation, the growing and aging popula- We were able to continue implants, our largest revenue driver, were con- tion, awareness of esthetics, increasing availability strained by the pandemic’s impact on predomi- and affordability. investing in innovation nantly premium affluent markets. Notwithstand- to provide faster, better ing, strong sales of innovative products like Our second largest market, clear aligners, is worth Straumann’s BLX implant led to share gains in the approximately CHF 3.5 billion2 (see p. 33 f.) and was treatments. immediacy and other segments. Sales of intraoral growing at 20% prior to COVID-19. In 2020, it was scanners also rose, reflecting the increasing trend almost flat due to the lockdown interruptions.