Dentistry ends year of uncertainties with cost-cutting measures

Jeremy Booth, Dental Tribune International

Fri. 10. March 2023

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LEIPZIG, Germany: The dental industry has quietly signed off the year of uncertainties that was 2022. Fourth-quarter reports from the industry’s largest companies showed significant sales declines in China and Russia and gradual increases in demand for capital equipment. Most major manufacturers aimed to reduce costs during the year, and Dentsply Sirona announced plans to cut its global workforce by 10%.

Global dental sales at Henry Schein in the fourth quarter were worth US$2 billion (€1.87 billion), a 2.6% drop in local internal sales growth that reflected a 3.4% decrease in North America and a cumulative 1.4% decrease in international markets. Dental equipment sales in North America reached US$536 million, up 10.8%.

For the 12-month period, Henry Schein sold US$5.71 billion worth of dental merchandise and US$1.77 billion worth of dental equipment. Total global dental sales for 2022 decreased by 0.9% year on year to US$7.47 billion. Global sales growth for dental equipment reached 4.7%. CEO and Chairman Stanley Bergman commented in a statement: “Demand for dental equipment in North America remains healthy, and our North America equipment order book is stable. Although we saw very good sales for traditional equipment and steady sales for digital imaging equipment, there was a decline in sales of digital restoration equipment compared to the corresponding prior year fourth quarter.”

Dentsply Sirona ends 2022 with operating loss of US$937 million

Fourth-quarter results marked the end of a challenging year for Dentsply Sirona, and President and CEO Simon Campion said in a statement that they represented an important milestone as the company works to improve its performance and rebuild investor confidence. Net sales of US$983 million for the period represented a 10.9% year-on-year drop, and operating income plunged by 62.0% year on year to US$65 million. Sales of technology and equipment amounted to US$602 million, and sales of consumables totalled US$381 million, representing year-on-year drops of 11.6% and 9.9%, respectively.

For the full year, the net sales of US$3.92 billion were 7.3% lower than those in 2021. Sales of technology and equipment totalled US$2.3 billion, and sales of dental consumables reached US$1.6 billion—both down by at least 7% year on year.

Align Technology CEO Joseph Hogan alerted investors to shrinking orthodontic case starts in November. (Image: edwardolive/Shutterstock)

Dentsply Sirona posted an operating loss of US$937.0 million for 2022, due largely to a non-cash charge of just under US$1.2 billion for goodwill impairment that was recorded in the third quarter.

The embattled goliath of dentistry is currently undergoing major operational changes, including reducing its global workforce by 10%. Campion said: “As we enter a new year, we are intently focused on the changes we are making to our organisation, operating model, and cadence, highlighted by the plan we recently announced.”

Dentsply Sirona has reshaped its leadership within the last 12 months through a number of executive appointments, the latest being that of Richard Rosenzweig, a 25-year veteran of the healthcare industry who will serve as senior vice president of corporate development, general counsel and secretary.

Envista holds on to growth

Envista Holdings underwent further transformation during 2022, divesting its low-profit KaVo treatment unit and instrument business and shifting its focus to more profitable growth segments. President and CEO Amir Aghdaei told investors that the company had shaved off more than US$30 million in structural costs during the year, which he said would “improve the customer experience while creating more flexibility to deal with uncertainties in the macro-environment”.

Revenue at Envista for the fourth quarter increased by 1.4% to US$660.8 million, and operating profit was US$88.0 million, compared with US$46.1 million in the comparable period of 2021. Chief Financial Officer Howard Yu told analysts that the company had seen very strong sales growth in Western Europe during the quarter and that this had been offset by weaker growth in North America. Sales in Russia and China declined significantly during the period, Yu said.

Core year-on-year growth in the company’s orthodontic portfolio topped 15% during the quarter. Aghdaei said that the number of Spark clear aligner case starts had increased to 300,000 during the period and that the number of dentists using Spark had doubled in 2022. Envista was the only multinational dental company to have its orthodontic products purchased by China as part of its new volume-based bulk procurement process, Envista said.

Core sales growth of 4.1% was recorded for the full year, a result that Aghdaei commended, particularly considering the volatile operating environment. Total sales at the company in 2022, at US$2.57 billion, increased by US$60.2 million compared with 2021.

Align Technology skips 2023 revenue guidance

Align Technology’s total sales for the fourth quarter were US$901.5 million. This represented a 1.3% sequential increase and a year-on-year decline of 12.6%. Sales of clear aligner trays generated US$731.7 million in cash during the period, representing a 10.3% decline, year on year.

Total sales for 2022 reached US$3.7 billion, including US$3.1 billion from clear aligner sales and US$662.1 million from systems and services. Invisalign case shipments for the full year totalled 2.4 million, 7.4% less than the 2.5 million shipped in 2021.

“We are cautiously optimistic for continued stability and improving trends as we move through the year.” – John Morici, Chief Financial Officer, Align Technology

Dental Tribune International reported last year that Align had got off to a rough start in 2022. Analysts had hinted at a slowdown in sales as early as the fourth quarter of 2021, and CEO Joseph Hogan alerted investors to shrinking orthodontic case starts in November. He was more upbeat during the company’s conference call with analysts on 1 February, pointing out that Align’s most recent results signalled a more stable operating environment.

Chief Financial Officer John Morici told investors in a conference call that Align had witnessed a stabler operating environment in North America and in markets in the Europe, Middle East and Africa (EMEA) region. Morici explained, adding a caveat: “We are cautiously optimistic for continued stability and improving trends as we move through the year. However, the macroeconomic environment remains fragile, and given continued global challenges and uncertainty, we are not providing full-year revenue guidance.”

Hogan confirmed that a US$18.6 million drop in operating expenses during the fourth quarter was due to cost rationalisation measures, which included controlled spending on advertising and marketing. Restructuring during the period cost the clear aligner manufacturer US$14.3 million, which included US$8.7 million in severance-related costs and US$5.6 million in costs related to the downsizing of its operations in Russia.

Market disruption: China announced plans for the government-led bulk procurement of dental implants in late 2022. (Image: GaroManjikian/Shutterstock)

Straumann expects market volatility and stable patient volumes in 2023

The quarter had ups and downs for Straumann as it topped CHF 1 billion (€1 billion) in sales for the first time in the EMEA region and recorded its first-ever sales drop in the Asia Pacific region. Straumann reported strong revenue growth in Swiss francs in all regions except Asia Pacific. Sales increased by 11.3% in EMEA, led by stalwarts Germany, France and Spain. In North America, sales were up by 13.7%, helped along by sales of premium implantology products and digital solutions. Latin America was Straumann’s fastest-growing region in the quarter, showing sales growth of 26.2%. The regional behemoth of Brazil was a major contributor to this growth. Total revenues for the quarter reached CHF 592 million, up 9.6% year on year.

Fourth-quarter revenue in the Asia Pacific region dropped by 5.5% year on year, owing to the impact of COVID-19 in China and the country’s introduction of volume-based procurement. Straumann said that its bid in the volume-based procurement programme had been accepted in the first two weeks of this year.

For the full year, Straumann banked CHF 2.3 billion in sales—14.8% more than it did in 2021—and revenue growth was reported in all regions. Sales increased by 14.0% in the EMEA region, by 15.9% in North America, by 7.7% in the Asia Pacific region and by 37.5% in Latin America.

Bucking the trend of cost rationalisation, Straumann added around 1,300 positions to its workforce during the year and spent more than CHF 100 million on research and development and expansion projects. Despite this, Straumann CEO Guillaume Daniellot confirmed that 2022 had been a year of uncertainties.

Looking ahead to this year, Daniellot told analysts: “From a global market perspective, we expect macroeconomic uncertainties and market volatility to remain in 2023. But as long as the unemployment rates remain low, we believe the global patient flow will remain stable. On a more specific implant market dimension, the Chinese market will go through a strong year of transition due to the execution of the volume-based procurement process.”

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