Q1 Insights:

Siemens Healthineers, a market leader in diagnostic imaging, said fiscal first-quarter revenue and profit were curbed amid falling sales of rapid COVID-19 antigen tests, pandemic-related diagnostic disruption in China and supply chain delays at radiation oncology business Varian.

Still, CFO Jochen Schmitz said that even with those challenges, management expects sales growth to accelerate this quarter. 

“Excluding rapid antigen sales, we saw soft revenue growth of 0.7% in Q1 due to lower diagnostics revenue impacted by lower testing volumes in China and Varian revenues being held back by the known supplier issue,” Schmitz told investors on an earnings call. “While the [supplier] issue was resolved in the course of Q1, it did still lead to substantial parts of Q1 revenues being pushed out into the next quarters. After seeing a strong month of December with significant growth, we are confident of strongly accelerating revenue growth in Q2.”

Shares of Healthineers rose 8%, or €3.92 ($4.31), to €53.08 in early trading Thursday.

Securing supply for Varian

Varian’s supply chain delays caused sales at the unit, which Healthineers bought for €16.4 billion to add a growth driver, to fall 4.5% on a comparable basis in the first quarter.

“We have one supplier of a key electronics component who has shifted production from China to Mexico and has faced significant yield problems,” CEO Bernd Montag said. “The situation is under control. We have in December already had a very normal delivery schedule and now the team is catching up with deliveries.” 

Montag framed the problem as an example of why Varian will benefit from being part of Healthineers in the long run. As a standalone business, the unit decided to source the component from a third party. However, the larger Healthineers group typically sources such electronics components from internal units. Montag said switching to in-house supply makes it easier to manage disruptions. 

A €200M diagnostics deal

Healthineers published its results alongside news of a €200 million, multiyear agreement with diagnostic service provider Unilabs. The deal positions Unilabs to buy more than 400 laboratory devices from Healthineers, starting with immunoassay and clinical chemistry analyzers, sample handlers, hemostasis analyzers and automation systems.

Atellica CI 1900 devices are among the immunoassay and clinical chemistry analyzers covered by the agreement. Montag said the launch of the device at the end of last year informed Healthineers’ plan to restructure its diagnostics business, telling investors that the new product puts the company in a “strong position to simplify our overall portfolio and diagnostics as part of our transformation program.” 

Forecast: 

Healthineers is maintaining its full-year forecasts. Excluding COVID-19 antigen tests, sales are forecast to grow by 6% to 8%, while adjusted basic earnings per share are expected to fall from the €2.29 delivered in 2022 to between €2.00 and €2.20.