Getinge AB

STO:GETI B

Earnings Call Transcript 2022-Q1

[Operator]

Welcome to the Getinge AB audiocast with teleconference Q1 2022. [Operator Instructions] Just to remind you, this conference call is being recorded. Today, I'm pleased to present Mattias Perjos, CEO; and Lars Sandstrom, CFO. Please begin your meeting.

[Mattias Perjos, executive]

Thank you very much, operator, and thank you, everyone, for joining today's earnings call. We can start directly with moving to Page #2, and I will take you through the key takeaways for the quarter. So if we look at the key takeaways on performance for the quarter, we have a net sales decrease of 6.4% and an order intake decrease of 4.4% organically in the quarter. If we adjust for the strong sales of ventilators in 2021, though, we grew organically both order intake and in net sales. So this is a natural shift at this stage of the pandemic and into the new normal, so to speak. The order book grew by 8% during the quarter and is now 21% larger than at the same period in 2021 if we adjust for currency fluctuations. We do have a strong order pipeline and the sales outlook for the full year remains.

Looking at our deliveries, these were negatively affected towards the end of the quarter as a result of temporary supply chain challenges. Our assessment is that net sales corresponding to about SEK 300 million have been delayed due to different constraints in the supply chain. Despite the lower volume, the gross margin held up very well in the quarter, and we could see that the lower volumes from ventilators and the negative mix effect as well as supply chain challenges had a dampening effect on the gross margin. Our EBITA margin was negatively impacted by the lower volumes as well and unfavorable mix effects hitting the gross margin. We do expect there was volumes increased towards the second half of the year but we would see a good recovery in margins overall in EBITA especially. Finally, also in terms of key takeaways, I want to highlight that the free cash flow continues to contribute positively to an already strong financial position. With that, we can move over to Page #3, please. We take a short step back here and look at some of the other key events during the quarter. From an offering perspective, I think I want to highlight that in February, our Aquadis 56, a new product family in the medium range washer-disinfectors was launched. These products offer efficient cleaning with high capacity and also environmental benefits, and this makes the product well suited for ambulatory care, for example, which is one of the faster-growing customer segments for Getinge. We also launched the IN2, a system consisting of wall, ceilings and floors and doors for modular rooms in the hospital environment. The new product line here offers high-quality and efficient infrastructure for operating rooms but also for intensive care units and sterile supply departments, and with selectable materials and different price levels to reaccommodate the needs and be flexible with the customer. In addition to this, Getinge was also awarded a breakthrough 3-year contract for anesthesia machines from Premier Inc., a leading U.S. health care company operating 4,400 hospitals and care facilities across North America. So this is very promising as we aim to grow our anesthesia business significantly in the North America region. I also want to highlight the DPTE-BetaBag capacity increase. So we continue to build capacity in the sterile transfer business. And with regards to the BetaBags, we had positive results from customer validations related to the new production line in Merrimack in the U.S. in the quarter, and the first commercial deliveries took place as well. So a really great effort by the whole team, both in our legacy factory in France and the new team in Merrimack. Production volumes are expected to increase gradually throughout the year here. So that's something that we look forward to. We also need to mention the Russian invasion and some of the supply chain challenges that we faced in the quarter. And first and foremost, Russia's invasion of Ukraine is a tragic and -- a tragic event and brings great suffering to the population, and Getinge condemns acts of violence and works actively to support humanitarian action in Ukraine. We do not have any major suppliers or production in these 2 countries, and Russia represented barely 1% of our net sales and net assets in 2021. However, we are indirectly affected, which might lead to increased input costs and delays, which ultimately will affect patients and hospitals worldwide. If we then zoom out and look at the status of the supply chain overall, our deliveries in the quarter were negatively affected mainly towards the end of the quarter. And as you may remember, our supply chain teams have done a great job here for the last 2 years and kept us at [ harness ]. But towards the end of the quarter there, beginning of 2022, it became a bit more challenging. We have both the general effect of the difficulties in the supply chain and have been exacerbated by the war in Ukraine and also some of the lockdown effects in China. So our assessment is that net sales corresponded to about SEK 300 million have been delayed due to components what it is. We do have a well-functioning way of working, though, to ensure access to components and transport, and I'm confident about the second half of the year when we're expected to have large deliveries. Cost increases regarding components have a negative impact on us, but we have, to some extent, compensated this through price adjustments. I want to highlight that our customers do have a good understanding of the situation, and they do value the products and the services that we offer, which provide a good basis for a dialogue in this current situation. If we then move to sustainability, we have a number of improvements to report here as well. So in January of this year, Life Science became the first of getting its business areas to operate all production carbon neutral. And this is an important milestone in the process to become a carbon-neutral company in our own operations. I also want to highlight that our products play an important role in tackling environmental challenges when they operate at the customer side. And this is why we apply eco-design principles and event features that bring down consumption of water, of energy and of chemicals. And on this last note, our efforts have also been recognized by the Journal of Clinical Monitoring and Computing and the study showing a reduction of 58% in waste of anesthetics by using our automatic gas control feature. As anesthetics are really potent greenhouse gases, multiple times more potent than CO2, this is a major success. And I also want to highlight this separate study by the University Hospital in Lund that estimates that the anesthesia gases corresponds to about 1/3 of the climate impact from any consumption hospital. This is definitely something that is material for our customers and are really positive thing that we can contribute with. With that, we can move over to Page #4, please. So we try to break down the order intake picture a little bit. We can see that order intake decreased by 6.4% and the net sales by 4.4%, sorry, the other way around, it's the order part that is 4.4% and sales 6.4%. And as I said previously, the net sales and order intake didn't match the high growth in ventilators last year that we saw due to the Delta variant at the time. And this is also what the main explanatory factor why EMEA is down significantly year-on-year, followed by Americas. We expect this to balance out throughout the year as we move into more of the new normal sales environment, so to speak. And adjusted for ventilators, we grew organically in both order intake and net sales, and we have a stronger order book today versus the same time last year. I'm also pleased to see that Surgical Workflows continues to do good order growth in Americas, and we expect North America to be an important market for this business area in the coming years. It's really good to see the traction there. We can then move over to Page #5, please. If we look at then the guidance for the full year, the outlook for the full year, we do have a 21% stronger order book than last year adjusted for FX. We see a strong pipeline when it comes to customer activities and the demand situation in general, and we expect the delayed net sales to be recovered here. So based on that, we reiterate our outlook for 2022 that the organic net sales growth is expected to be at the upper end of the 4% to 6% range for the full year. Let's then move to Page #6, please. We did have tough comps for ventilators in this quarter compared to last year. If you look at the Acute Care Therapies, we are down 7.9% organically. Order intake decreased as a result of challenging comps mainly. And we could also on the rent side, of course, but also products for ECMO therapy in first quarter of the 2021, and this is mainly related to Americas and EMEA from the pandemic wave. Order intake in cardiovascular surgery though continued to strengthen during the quarter, and this is something that we expect to continue as we move into this newer normal. At the end of the quarter, the order book in Acute Care Therapies was 6% larger than the previous year, also currency adjusted. If we then look at Life Science, we are down 1.1% organically. The organic order intake decreased slightly as a result of challenging comps for bioreactors, where you may remember that we had extremely strong growth in the same period last year. We saw also good growth in washer-disinfectors service and our DPTE-BetaBag product categories. At the end of the quarter, the order book in Life Science was 21% larger than the previous year, also adjusted for currency, of course. And if we then finally look at Surgical Workflows, organic order intake in operating room products remained strong in the quarter. However, growth for the business area as a whole was dampened by negative year-on-year development in digital health solutions. We saw a strong momentum in the Americas and APACs, while the challenging comps figures in digital health solutions in EMEA had a negative impact on the development there. At the end of the quarter, for Surgical Workflows, the order book was 29% larger than the previous year. And again, this is, of course, also currency adjusted. With that, we can move over to Page #7, please. So if we look at then the sales picture in Acute Care Therapies, we are down 14.3% organically. And organic net sales decreased as a result of the challenging comp figures for ventilators in the first quarter of 2021 and supply chain challenges in general, at the end of the quarter. Organic sales of cardiovascular surgery products continue to increase. So there's a positive takeaway and a positive momentum leaving the first quarter of this year. In Life Science, we had a 19% organic sales growth. We saw good organic growth in net sales in sterilizers, in DPTE-BetaBags, capital goods and sterile transfer and service and also spare parts. Net sales increased significantly in Asia Pacific, mainly as a result of large deliveries of sterilizers. And even though the growth number looks good for Life Science, we did have some challenges in the supply chain towards the end of the quarter that had a negative impact on sales. So part of that SEK 300 million delay also comes from Life Science. In Surgical Workflows, we're basically flat, so down 0.1% organically. Here, we saw net sales grow organically in products for the operating group, while net sales for infection control remained unchanged and in digital health solutions and net sales decreased. Challenges in the supply chain towards the end of the quarter had a negative impact on net sales for Surgical Workflows as well. And if we then finally look at currencies, currently at SEK 398 million or a 6.4% positive impact on net sales for the group in the quarter. Organic net sales of capital goods came down significantly in the quarter due to tough comps but also due to several supply chain constraints with customer a couple of times. We can then move over to Page #8, please. Here we can see that the volume and the mix effects impacting the gross margin in the quarter. So our adjusted gross profit decreased by SEK 24 million to SEK 3.261 billion in the quarter, where a positive effects of FX accounted for SEK 264 million. For the group as a whole, the adjusted gross margin decreased by 0.6 percentage points as a result of volume and mix effect as well as increased transport and material costs and supply chain disruption. This was in partly offset by price adjustments and previously announced rationalization. In Acute Care Therapies, the adjusted gross margin improved by 1 percentage point despite the lower sales volume. The margin strengthened mainly as a result of positive mix effects inside the business area and currency. Life Science, the adjusted gross margin increased by 0.3 percentage points as a result of the increased volumes, which outweighed the negative effects from mix and supply chain challenges. And in Surgical Workflows, finally, the adjusted gross margin decreased by 0.6 percentage points, mainly as a result of negative mix and supply chain challenges. So with that overview, we can move over to Page #10, and I'll leave it over to you, Lars.

[Lars Sandström, executive]

Thank you, Mattias. Then adjusted EBITA decreased by SEK 240 million compared to the same period last year, while the margin decreased to 13.6%, mainly due to mix and volume. Adjusted for currency, gross profit had a minus 1.4 percentage point impact on the margin due to the lower volumes and quite different BA mix compared to last year. As mentioned by Mattias, so ACT and Life Science had improved GP margins in the quarter. OpEx is down organically, but in actuals, it is up SEK 201 million year-on-year. Together -- this, together with the volume of -- and BA mix effects of the margin year-on-year, takes us to a margin impact of minus 1.7 percentage points. Depreciation and amortization is impacting the margin by minus 0.3 percentage points, and currency had a negative impact of minus 0.5 percentage points on the margin as a consequence of FX itself but also high volumes in accounts receivable last year. All in all, this resulted in an adjusted EBITA of SEK 839 million and a margin decrease of 3.9 percentage points. Over to Page 11, please. Free cash flow continues to be positive. Even if we don't reach last year's level, that was impacted by a higher level of deliveries and net sales together with operating profits and prepayments. This year, working capital have more of a normal seasonal pattern with some buildup of inventory for the strong second half of the full year. And supply chain challenges also had a negative impact on inventory from longer lead times and our willingness to take on supply in order to have a margin of safety. All in all, the free cash flow amounted to SEK 400 million in the quarter, and working capital days continue to be well below 100, and we are now at some 88 days, down more than 40 days from the peak in Q2 2018. We also see a continued strong operating return on invested capital, where we are at 18.1% on a rolling 12-month basis. And we are now closing in on the long-term trend on return on invested capital as net sales has started to move into more normal tariff. Let's move to Page 12, please. Net debt was positively impacted by the cash flow and revaluation effects related to FX and pensions taking us to SEK 3 billion. And if we adjust for pension liabilities, we are net cash positive by SEK 29 million. This brings us to a leverage of 0.5x EBITDA. And if we adjust for pension liabilities, leverage is at 0. Cash amounted to approximately SEK 4.3 billion by the end of the quarter. And then let's move to Page 14 and back to you, Mattias.

[Mattias Perjos, executive]

All right. Thank you, Lars. Then we can skip directly to the summary page here with the key takeaways from the first quarter. Overall, we continue to see a good activity when it comes to our strategy implementation journey. As you may remember, we've kept this going at full speed despite some of the turmoil caused by the pandemic. And I'm very pleased with the continued implementation here in the tail end of the pandemic and entering into the new normal, so to speak. We leave the quarter with a healthy order book and also a strong pipeline when it comes to request for quotes and proposals and the demand situation in general. Our guidance remains that organic net sales growth is expected to be in the upper end of the range with 4% to 6% for the full year 2022. And we expect our margins to strengthen as volumes increase in the coming 3 quarters as well. And we continue to generate cash and reinforce our already solid financial position. So with that summary, I open up for questions.

[Operator]

[Operator Instructions] The first question comes from Erik Cassel from ABG.

[Erik Cassel, analyst]

So first off, could you talk us through the current supply chain issues during Q2? Is the similar impact as in Q1 reasonable? Or is it more significant? And then also some information on the sort of visibility you seem to have for that improving into H2 would also be interesting.

[Mattias Perjos, executive]

Yes. I think we -- if we start in the first quarter, we continued the good momentum that we've had through 2021 when it comes to keeping the supply chain running. This year also started well, but we could see some increased challenges towards the end of the first quarter, and it's really the month of March that was most difficult. We do expect the challenges also in the second quarter, but we can see a gradual improvement. Already now in the beginning of April, we are beginning to receive components and materials. We can see that we are getting a better allocation from several of our suppliers as well, especially in the second half of the year. So we expect some disturbances still in the second quarter but a gradual improvement during the quarter and certainly for the second half of the year. And maybe to kind of add a little bit more as well, it's impacted, I think, generally by the type of the supply chain challenges that everybody talks about, especially related to electronic components. And of course, it's been made a bit more difficult by the war in Ukraine and also the lockdown situation in China. So these are the different factors impacting this.

[Erik Cassel, analyst]

Okay. And then on sort of the guidance and margins, I mean, we've previously talked about you thinking being able to maintain the sort of same EBITA margin as last year organically. Do you still think that's reasonable? Or do you have any other assumptions for the EBITA margin?

[Mattias Perjos, executive]

No, we've not changed our assumptions. They remain the same. We're actually quite happy the way gross margins held up in the quarter despite the lower volumes, and you can see the performance in Acute Care Therapies and Life Science especially. So nothing has changed in our outlook for the year or the message that we gave at the Capital Markets Day in November of 2021 that remains intact.

[Erik Cassel, analyst]

Okay. I'll limit myself to one last question. I mean, APAC was fairly strong this quarter, you said some [indiscernible]. But I guess it's fairer to assume that the sort of regional lockdowns has had some sort of significant impact on the run rate now into Q2. Is that a correct assumption?

[Mattias Perjos, executive]

Yes, we had close to SEK 100 million of delayed sales because of China lockdowns in the first quarter. We -- there is still challenges now in April due to this. We do expect an improvement in second half of May is the best outlook that we can see right now. But this remains, I guess, a little bit of a moving target depending on how the spread of the Omicron primarily continues in China.

[Operator]

The next question comes from Rickard Anderkrans from Handelsbanken.

[Rickard Anderkrans, analyst]

The first one, a little bit more on the sort of phasing of the recovery as we're starting up with the SEK 300 million delayed sales. Should we expect that most of it comes in Q2? Or will it be tilted towards H2? And is it reasonable to expect double-digit organic growth in the second half of the year starting there?

[Mattias Perjos, executive]

There's a phasing -- we do expect the whole of the SEK 300 million to be recovered in Q2 and Q3, but I can't break it down for you per quarter right now. And when it comes to the outlook for the year, the assumption is that to hit the -- we will grow what is required to [ hit ] the upper end of the guidance that we gave of 4% to 6%.

[Rickard Anderkrans, analyst]

All right. Fair enough. And can you talk a little bit about partly compensating inflationary pressures by adjusting prices? Can you quantify the magnitude there?

[Mattias Perjos, executive]

Yes, to some extent. I think this has been an ongoing exercise throughout the company. I think our teams have done a good proactive job so far. So we've been able to compensate ourselves to a rather large degree. There's about SEK 30 million in the quarter that we've been -- we had to absorb ourselves, but the rest of the inflationary pressure we've been able to pass on.

[Operator]

The next question comes from Karl Noren from Danske Bank.

[Karl Norén, analyst]

So I have a question on the OpEx side, which still is down organically year-over-year. It would be interesting if you could say anything about how much of the cost reductions that are sticky. And do you see that the OpEx is on a more normalized level now? Or are you still would you say, low -- artificially lower due to lower traveling due to COVID to some extent? Or do you see this as some good underlying level to be on?

[Lars Sandström, executive]

Yes. When it comes to OpEx, I think, yes, we see that some of the restructuring activities are supporting us and have been and continue to do that. Having said that, there is still some lower activity levels when it comes to traveling and marketing. We have some increase here already in Q1. So that has started a bit. And we would expect depending on, of course, how the pandemic develop and calms down here, but there will be some comeback on that. But we also had quite a lot of commissions last year that we connected to the high ventilator sales that this has come out now compared to the pace that we see.

[Karl Norén, analyst]

Okay. And then another question on the Surgical Workflows. The order intake seemed a bit light, I think, in the quarter, especially in EMEA. Could you maybe explain a little bit more? I think you said it was very much digital health, but have you seen any changes in the underlying market? Or what are you seeing? Is demand still strong, so to say?

[Mattias Perjos, executive]

Yes. The main thing from the comp perspective is on digital health. We don't see any underlying change in the demand perspective. We remain positive about the overall dynamic and the demand situation from customers, both in EMEA but also the rest of the world, of course. So nothing dramatic in terms of changes. There is, as you know, already a bit of lumpiness in this business because some projects are quite sizable. And if they fall on one on the other side or the other of the quarter, it does make the difference.

[Karl Norén, analyst]

Okay. And then just a last one on the Life Science side, where you now have ramped up or seems to have at least started deliveries from your new site in Merrimack for BetaBags. Can you just give us some kind of not guidance, but how should we think about this throughout the year? Will you be able to deliver a lot more now in Q2 versus Q1? Or how should we see that?

[Mattias Perjos, executive]

I think we can't break down and give more granular guidance on this. I think overall, the plans that we highlighted at the Capital Markets Day for Life Science with the expansion of production capacity and the volume that we expect for this year, they remain intact. Yes, it's a gradual ramp-up. And partly adding to site, partly replacing and some of the supply that we've done with extra shifts in France.

[Operator]

The next question comes from Kristofer Liljeberg from Carnegie.

[Kristofer Liljeberg-Svensson, analyst]

Coming back to the supply issues here on the SEK 300 million. First, you say that this SEK 300 million will be recovered in the second and the third quarter. At the same time, you say that you expect to have some challenges still, although the situation has improved. So if you take all this together, should we expect the supply issues to be less in the second quarter than what we saw in the first quarter? Is that correct assumption?

[Mattias Perjos, executive]

Yes, that's correct.

[Kristofer Liljeberg-Svensson, analyst]

Okay. And based on that, do you think it's reasonable to assume organic sales growth again in the second quarter?

[Mattias Perjos, executive]

We don't guide per quarter, Kristofer. You'll have to live with our full year guidance, of course.

[Kristofer Liljeberg-Svensson, analyst]

Okay. And the other question I have is despite the supply issues and cost inflations that come on rather impressed by the gross margin. So would you be able -- of course, you had some positive FX impact here. But what other things are you helping the gross margin here? And why are you able to protect it to well?

[Mattias Perjos, executive]

It's a number of different things. We have the impact on the rationalization programs that we've been running for several years now. So that is one factor. We do have a little bit less remediated cost as well in Acute Care Therapies. So that's another contributing factor.

[Kristofer Liljeberg-Svensson, analyst]

Okay. So you would say that's the 2 major factors there?

[Lars Sandström, executive]

Yes. Underlying, then, of course, you always have a bit of product mix. Now ventilators is coming back to somewhat low kind of the share of the total and the connected part, of course, and cardiopulmonary. So that is also impacting some of it. But I think what is -- especially in SW, there's good development. So even if it's a bit tough on the price increase. So we do price increases, yes, but it is a challenge then but also here together with all the good productivity work that we have done, and we reap the benefits of that. We are quite good in handling that and so margin, like…

[Kristofer Liljeberg-Svensson, analyst]

Sorry, I don't know if it's only me, but difficult is to hear you, seems to be some problem with the line here, maybe from my side.

[Lars Sandström, executive]

Okay. Just to repeat there on the SW side, we could see a somewhat lower GP margin here in Q1. I think here, we have price increases coming in supporting, but we also have somewhat cost increases coming and, of course, the supply chain issues that creates under absorption in the quarter here. But still, we are managing to offset a very large act of that coming from the good restructuring work that we have done and productivity activities in SW that we are taking with us now going forward into the rest of it.

[Kristofer Liljeberg-Svensson, analyst]

That was clear. Final question for me. I've seen a few companies talking about slower demand in the U.S. Is that something you have noticed or not?

[Mattias Perjos, executive]

No, I think it's a short answer. No.

[Operator]

The next question comes from Victor Forssell from Nordea.

[Victor Forssell, analyst]

A question regarding the backlog side of things and the decent -- or the visibility that you have to be fully confident that you could reach the upper end if by then material shortages, et cetera, would not have been an issue. At what point during this year, would you say that your order book is filled for reaching that number?

[Mattias Perjos, executive]

That's not something we can answer. It varies a lot between the business areas here and the delivery times. We have delivery times of over 18 months for some of our equipment, and we have within the week for other parts of our portfolio. So it's impossible to give an average [ number ].

[Victor Forssell, analyst]

Okay. And if you possibly can you explicitly put some numbers on how much the ventilators impacted from last year, i.e., how much you actually grew without that impact as you clearly stated here on both orders and sales level.

[Mattias Perjos, executive]

Yes, I think order -- yes, order intake on ventilators was about SEK 400 million lower than Q1 last year, and sales was SEK 500 million overall.

[Victor Forssell, analyst]

Great. That's excellent. And just a final one, touching upon the OpEx again. And if we could just talk a little bit about your ambitions for this year and how you see OpEx as a percentage of sales translating into previous ambitions and how you see that play out for this year?

[Lars Sandström, executive]

When it comes to OpEx, we -- what you could see here in Q1 is that we have somewhat higher OpEx connected to R&D, and there is more activity and on both on the OpEx side but also on the capitalization part that ends up, so to say, in the cash flow in that part. So there is somewhat higher activity here. And the other areas, we don't see big changes coming through. And of course, we have an inflation part that will come for like all other countries. But also here, we continue to work hard with different productivity measures that we have to offset as much as we possibly can on that.

[Victor Forssell, analyst]

So the ambition despite the inflationary pressures would be then to have some leverage from the OpEx when we close out this year, that's your current ambition and partly relating to your margin assumptions for this?

[Lars Sandström, executive]

Yes. Yes.

[Operator]

The next question comes from Oliver Reinberg from Kepler Cheuvreux.

[Oliver Reinberg, analyst]

The first one would be on the U.S. environment again. Can you just talk a bit, I mean, obviously, U.S. hospitals face some kind of headwinds from rising personnel costs and also funding is a bit more of an issue. So can you just talk about what kind of feedback we see from your clients in terms of demand for your products? And also, can you talk about the number of surgical procedures? How they develop over the course of the quarter? I guess, generally may have been a slower start on Omicron. And what are the procedure volumes at this stage? That will be question number one, please.

[Mattias Perjos, executive]

Yes. We don't have the number of procedure volumes that we can disclose. What we can say in general that we've not seen any real weakness in demand. Like in many other parts of the world, there is, of course, an operational challenge to ramp up. But in many aspects, it's gone better in the U.S. than in other portion. If you look at our elective surgery categories from an order perspective, we have double-digit growth there. So a continued good momentum. We highlighted as well the demand for Surgical Workflows also positive in North America.

[Oliver Reinberg, analyst]

And secondly, on pricing, is there any kind of chance to get a kind of quantification to what extent organic sales in the first quarter were impacted from pricing? Or if you don't want to quantify it, obviously, in the process of increasing prices at this stage. So compared to your expectations for the full year in terms of price increases, what share have you realized in the first quarter?

[Mattias Perjos, executive]

Yes. We don't quantify and break down and communicate externally the impact of price increases. As I mentioned in my presentation part here that there's been a good proactive work. And I think the important thing to be aware when it comes to pricing in our environment is that we have some areas, both from a geographic but also a category perspective, that we can change with a rather short notice. We have some that are pricing for longer contracts, which are difficult to adjust. Some of them have adjustment mechanisms, but not every contract. And there is, of course, also project supplies with long lead times where we also need to work with price and also the cost management side and pricing from our suppliers. So overall, good proactive work on this, but not something that we can break down and communicated externally.

[Oliver Reinberg, analyst]

But it's fair to assume that there is clearly much more support from pricing going to come in the coming quarters?

[Mattias Perjos, executive]

Yes. I think -- yes, it's a fair assumption.

[Oliver Reinberg, analyst]

Perfect. And last question, if I may, just on specific products. I think you talked about that the demand for ECMO therapies have been slightly down year-on-year. I was a bit surprised because my memory suggest that last quarter in Q1 last year, you were not actively pushing for orders. So can you just talk to the demand situation for ECMO therapies? And also what kind of demand you see for ventilators for the full year? Is that still a kind of a normal ventilator year the way you look at this?

[Mattias Perjos, executive]

If we start with the ventilator part, in money terms, we expect it to be a normal year. But like we highlighted before, the number of machines, probably a little bit lower, but more services connected to them. So overall, [ a normal connecting ] terms, so to speak. Yes. When it comes to cardiopulmonary, I think the main thing to highlight is the absence of the flu season, the start of this year. That's, I think, the only thing that has changed in the underlying environment when it comes to ECMOs.

[Oliver Reinberg, analyst]

So basically, 15% to 20% sales growth would still be reasonable assumption for ECMO?

[Mattias Perjos, executive]

Yes, roughly. We don't guide for quarters or particular years, but the underlying growth for the segment, I think we believe remains unchanged.

[Operator]

The next question comes from Edward Ridley from Redburn.

[Edward Ridley-Day, analyst]

First question is a follow-up on China. Thanks for the color that you have given. I mean, clearly, we can see the headlines. Can you give us more -- a little bit more color about why you feel confident that the deteriorating Chinese situation won't further affect your order book when dealing with the supply chain over the summer? Clearly, you must have some visibility on that to give you the confidence. And secondly, just on Life Sciences, obviously, very encouraging performance there. Can you give us any color on the extent to which COVID-related demand you feel is related to the performance this year and last year and where you feel your underlying growth is in that market?

[Mattias Perjos, executive]

Okay. We'll start with the last one. I think when it comes to COVID demand, we don't really have any positive effects anymore from this. I think that's easiest way to put it. When it comes to the confidence for the rest of the year, it's mainly based on -- if you look into China, I think it's something that there's a lot of uncertainty with -- it's not something that we can guide on. We're impacted like everybody else from lockdown. So I think that remains an uncertainty. When it comes to the other part of the supply chain, one of the things that we've done in the wake of the pandemic is to introduce more redundancy in the supply chain. So we very often now have an alternative that [indiscernible], for example, for critical components. We could see now already in the beginning of April that we are receiving more goods as well with more components, more materials. We are getting allocations when we look at the -- to a much higher extent, when we look at the remainder of this year. So that's the main for -- a bit more confident about the avoiding supply chain disruption for the rest of the year.

[Edward Ridley-Day, analyst]

Mattias, I mean just to sort of further on that, I mean, that may potentially -- that's including suppliers from other geographies that you put in place?

[Mattias Perjos, executive]

Yes, correct.

[Lars Sandström, executive]

Sorry, and also using our existing supplier base that we have good contracts with -- who had the capacity to produce both in China and Eastern Europe. So we can move rather easily between these sites to support our supply chain.

[Operator]

The next question comes from Craig Mcdowell from JPMorgan.

[Craig Mcdowell, analyst]

I think most of mine have actually been answered, but just one technical one to Lars probably. Can you help us understand the difference between the currency impact on the gross profit line and the EBITDA line, which looks to be quite large? What were the moving parts this quarter? How should we think about that going forward?

[Lars Sandström, executive]

Yes. When it comes to currency impact, when it comes to the normal translation impact, of course, that has a positive impact and also the transactional part with the weak [indiscernible]. What is also impacting here as you look at the other operating income sales line here, there we have the revaluation effects of internal accounts receivable and payables. And last year, we had a quite a positive impact of that. So the difference between the years of some SEK 60 million is mainly then related to this positive revaluation effects at last year and this year is rather flat. So that's why we get a lower impact in the year.

[Operator]

The next question comes from Patrik Ling from DNB Markets.

[Patrik Ling, analyst]

Maybe a follow-up on the last question on currency there. I mean given where currencies are right now, how should we think about these revaluations going forward? Because I as well noticed a big difference here between the gross profit impact and the EBITDA impact.

[Lars Sandström, executive]

When it comes to currency rates as of today, of course, it has a further somewhat positive impact related to the normal translation and transaction effect. When it comes to revaluation of accounts receivable and accounts payable, it will have less impact because last year, we had very high volumes of ventilators, which is creating the exposure, and that is coming down significantly. Now so we will have less impact when it comes to these revaluation impacts. So it's back to, let's say, no more normal translation and transaction effects reporting.

[Patrik Ling, analyst]

So if we look at the ratio here or how we should look at it between the impact on the EBITDA and gross profit, the relative impact -- positive impact on EBITDA would be larger in coming quarters. Is that the way I should interpret you?

[Lars Sandström, executive]

Yes, you should look at -- if you look at Q1 as is now this year and not so much compared to last year, this is the currency rate that we are having. And then we will have some -- if the currency as it is today, then of course, it will have a slightly more positive impact. That is how we should think.

[Operator]

The next question comes from Peter Ostling from Pareto Securities.

[Peter Östling, analyst]

Yes. 2 quick ones. Could you just talk a little bit about -- of course, you lost part of your margin from lower volumes of ventilators, but I guess that you regained or recovered some of that by increasing sales of the high-margin elective surgery business. Could you just talk a little bit about how much you recovered during the quarter?

[Mattias Perjos, executive]

Yes. We can't quantify it for you, but you're absolutely right about the dynamic there. And I think we had a higher order intake than sales of elective products as well. So we're leaving the quarter with good momentum from that perspective. And as you rightly pointed out, these categories in general have a higher gross margin than the average for the groups.

[Peter Östling, analyst]

Okay. And then why don't you think that you have seen any effect on U.S. demand from all these things that when it comes to staffing shortages in the hospitals?

[Mattias Perjos, executive]

There is probably some effect on our demand, but the demand is still good if you compare with where we were a year ago. So we are impacted as well. But if you compare with the momentum we had a year ago, it is better now. And then we do have overall double-digit growth in the elective categories.

[Operator]

The next question comes from Virendra Chauhan from AlphaValue.

[Virendra Chauhan, analyst]

Mattias, just one from me. So apologies if I missed that in your earlier comments. Can you comment on the split of the delayed deliveries between the different segments?

[Mattias Perjos, executive]

No. I think the SEK 300 million that we've given, I think they are -- for the group, it is across all 3 business areas, but we won't break down the spread.

[Operator]

The next question is a follow-up question from Erik Cassel from ABG.

[Erik Cassel, analyst]

I have 2 quick ones. I mean, first, you're saying that you're getting more allocation of components now in April. But is that, to an extent, a result of you paying up more than others or paying high spot prices from new suppliers?

[Lars Sandström, executive]

Yes, to some extent. But I think the spot prices are what they are. So it's more a question of being having good connections and good relationship with different traders and suppliers when it comes to that -- to find them because that has been, I think, the difference here. We have had this issue as all the companies all through last year as well. What has being more coming through now is that there is also a lag also in the spot market as such. So that has been what has impacted us more than that we are paying up much more than everyone else. I think the prices are what they are. It's a question of being quick and finding them.

[Erik Cassel, analyst]

Okay. So no large sequential uptick into Q2 on COGS?

[Lars Sandström, executive]

No, not material that impact the group. Of course, these components are considerably more costly than they were a couple of years ago, but that we saw also last year. So it's not that it's a big shift between Q4 and Q1. That is not the case.

[Erik Cassel, analyst]

Okay. And then just a last one on the timing of Surgical Workflows deliveries. I realize that there is some lag, but it seems to me like the installation readiness should have improved quite substantially now at the end of Q1. I'm just curious to see if you expect sort of a bump already in Q2 or if it should lag more into or towards Q3 instead.

[Mattias Perjos, executive]

We expect the gradual improvement during the year, but I think the seasonal pattern that you will see normally before the pandemic are going to be, unfortunately, back to a larger extent than we would have liked.

[Operator]

Perfect. This was the last question. I'll return the conference back to you, speakers.

[Mattias Perjos, executive]

All right. Thank you very much. I think we have already done the summary here. So nothing else to add from our end. I appreciate your time. Thank you for joining the earnings call here, and I wish everyone a good rest of the day. Thank you.

[Operator]

Thank you. This does conclude today's conference call. Thank you all for attending. You may now disconnect your lines.