In its Q3 2024 Interim Management Statement, Demant announced an organic revenue growth of 2%, primarily supported by strong performance in its Hearing Care segment. Despite increased competition and challenging market dynamics, Demant’s proactive cost-saving measures helped to stabilize expenses, positioning the company to meet its projected annual targets.
Financial Performance and Revenue Breakdown
The Group achieved total revenue of DKK 5,401 million (~USD $790 million), a 4% increase from the previous year. Organic growth contributed 2%, while acquisitions, particularly in Hearing Care and Hearing Aids, accounted for an additional 3%. Foreign exchange fluctuations, however, had a negative impact, reducing reported growth by 1%.
In the Hearing Aids division, external revenue saw a slight decline of 1% year-over-year, primarily attributed to a challenging market environment and high competitive pressure. Internal revenue within Hearing Aids increased significantly by 18%, totaling DKK 600 million (~USD $88 million), driven by effective product and channel strategies.
The Hearing Care segment experienced robust organic growth of 7%, propelled by strong demand in North America and stable performance across several European markets. Revenue in Hearing Care reached DKK 2,400 million (USD $350 million), a 12% increase compared to Q3 2023.
In contrast, the Diagnostics business faced a 4% decline in organic growth, largely due to weakened demand for diagnostic instruments, particularly in China.
Market Dynamics and Segment Insights
The overall hearing healthcare market exhibited slower growth in Q3, with unit growth across key regions like Europe and North America remaining relatively low. In the Hearing Aids segment, the negative growth was offset by a positive trend in average selling prices, driven by a favorable mix of products and channels. Demant maintained its market share in North America despite challenges in managed care, where the company continued to experience negative growth.
In Europe, growth in Hearing Aids remained stable in medium-sized markets but was constrained in larger regions like France and Germany. The Hearing Care segment, however, recorded substantial growth across multiple markets, including a notable increase in Poland. North America also posted solid gains in Hearing Care, with growth accelerating in Q3 despite lower traffic from managed care customers. Additionally, Demant’s acquisitions in Germany and Belgium provided a further boost to the segment’s growth.
Demant’s Diagnostics division continued to face headwinds, with a 4% decline in organic growth as market demand softened, especially for diagnostic instruments in Asia. In China, the “Made in China” initiatives contributed to a decrease in demand, impacting the division’s performance.
Profitability and Strategic Measures
Demant’s EBIT before special items came in slightly below expectations due to adverse foreign exchange impacts, though this was partially offset by cost-saving initiatives and the positive performance of the Hearing Care segment. Despite reduced operating leverage in some areas, the Group maintained a solid cash flow, although cash flow from operating activities (CFFO) and free cash flow (FCF) were lower than in the prior year due to higher financial expenses.
The company’s proactive acquisition strategy, combined with share buy-backs totaling DKK 1,746 million (USD 255 million), kept net interest-bearing debt stable compared to the end of Q2, within the company’s target gearing range.
“In the third quarter, the Group’s organic revenue growth was 2%, thanks to very strong performance in our Hearing Care business area. In Hearing Aids, strong comparative figures and an increased competitive environment weighed on our performance, while we also saw an impact from soft markets in the quarter for both the Hearing Aids and Diagnostics business areas. As we look to the rest of the year, we remain focused on delivering on our expectations and on our ambition to improve the lives of as many people living with hearing loss as possible”
–Søren Nielsen, President & CEO of Demant
Outlook for 2024
Demant reaffirmed its full-year 2024 guidance, projecting organic growth between 2-4% and an EBIT before special items in the range of DKK 4,300-4,600 million (~USD $628-671 million). The company anticipates continued acquisition activity and steady performance in its Hearing Care segment, alongside modest growth in OPEX due to its cost-control initiatives.
The Group expects the global hearing aid market’s unit growth for 2024 to remain at the lower end of the 4-6% structural rate, with average selling prices expected to be stable for the year. Demant also projects a loss after tax of around DKK 550 million (USD $80 million) from discontinued operations, primarily stemming from restructuring costs in its Communications business.
About Demant
Demant is a world-leading hearing healthcare and technology group built on a heritage of care, health and innovation since 1904. The Group offers innovative technologies, solutions and know-how to help improve people’s health and hearing. In every aspect, from hearing care, hearing aids and hearing implants to diagnostic equipment and services and audio solutions, Demant is active and engaged. Headquartered in Denmark, the Group employs more than 21,000 people globally and is present with solutions in 130 countries where we create life-changing hearing health. William Demant Foundation holds the majority of shares in Demant A/S, which is listed on Nasdaq Copenhagen as a blue chip stock.
Source: Demant
