Siemens Healthineers has reported 13% sales growth in the first quarter, leading it to dial up its expectations for the full year.
The normalization of non-COVID-19 businesses and continued demand for products related to the pandemic enabled Siemens to beat expectations and raise the midpoint of its full-year guidance by more than 50%.
Siemens ramped up its outlook in the belief demand for COVID-19 antigen tests will remain elevated until the back half of its fiscal year and the wider business will continue to recover.
Siemens’ performance in the first quarter was boosted, but not solely driven, by demand for its antigen test and other products used in the response to the pandemic. Speaking on a conference call with investors, Siemens CFO Jochen Schmitz said: “This was a great quarter. But we should not miss the fact that a fair share of this revenue growth would likely not have been there without the pandemic-related demand.”
The pandemic-related growth stemmed from demand for CT and X-ray imaging used in patients with COVID-19, sales of antigen tests and revenues from other diagnostics and government programs. Siemens estimates those three elements added seven percentage points to growth. That puts underlying, non-COVID-19 growth at “a very decent” 6%, Schmitz said.
Diagnostics and imaging were the two main growth drivers. Siemens sold €130 million ($158 million) worth of antigen tests in the first quarter. The core business also benefited from “a normalization of reagent volumes” and “some tailwind from customer pullins,” Siemens CEO Bernd Montag said. Sales of non-COVID-19 diagnostics grew in the mid single digits.
Montag expects antigen testing to make another “meaningful contribution” in the second quarter before tailing off in the second half of the year “due to increasing vaccination and price erosion.” Siemens expects full-year antigen test sales of up to €350 million.
In imaging, Montag said Siemens saw “exceptionally strong growth” in its CT and X-ray businesses, some of which was “clearly triggered by special demands related to the pandemic.” Regionally, China and Europe led the way, more than offsetting “temporarily softer performance in the U.S.,” Montag said. The CEO expects the U.S. market to rebound this year.
Montag acknowledged the imaging business benefited from “exceptional demand” but also argued the performance is more than a chance occurrence and is built on “the very attractive fundamentals” of the unit.
“The COVID-19 pandemic has clearly shown the high resilience of this business throughout the crisis."
Demand for imaging equipment drove order growth in the quarter. Schmitz singled out CT imaging equipment as a particular growth driver, noting that Siemens saw “significant demand driven by the pandemic.” The orders have added to Siemens’ confidence in its future. Management is now guiding for 8% to 12% comparable revenue growth in 2021, compared to its prior outlook of 5% to 8%.
Siemens will work to hit its growth target while trying to close and integrate its $16.4 billion takeover of Varian Medical Systems. Montag said he is “extremely satisfied” with the integration initiative so far. “What surprises me ... is how well it works in a virtual format,” the CEO said.