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Welcome to the Getinge AB Quarter 3 Report 2022. [Operator Instructions] Today, I'm pleased to present CEO, Mattias Perjos; and CFO, Lars Sandstrom. Please begin your meeting.
Thank you very much, and thanks, everyone, for joining today's conference. We can move straight away to Page #2, please. And looking at the key takeaways for the quarter. When it comes to performance, Q3 was very much about handling external challenges such as staffing constraints in hospitals, COVID restrictions in China and continued supply chain constraints, which, by itself, had a negative impact on sales of at least SEK 400 million in the quarter.
I think the organization has taken on these challenges in a good way, just as we did during the pandemic, which enabled us to keep the decline in net sales at 2.6% organically in the quarter. Order intake was down by 5% organically in the quarter. Here, it's worth mentioning that the comps were exceptionally hard to match due to a strong 21.8% organic growth last year.
It's also worth mentioning that the positive trend continues in product categories that were negatively impacted throughout the pandemic, despite the headwind from supply and staff shortages in hospitals. As a result of the overall uncertainty linked to external factors, we are lowering our outlook for organic sales growth, which is now expected to decrease by 3% to 6% for the full year 2022 versus the strong 2021 we had. And as one could expect as well, 3% to 6% lower sales volumes will have a negative impact on the margin as well. So from a pure and logical perspective, we could expect roughly 3 percentage point lower EBITDA margin for 2022 versus 2021, based on the new growth outlook. So that would take us to around 16%.
If we move to earnings, higher level of productivity and also currency effects helped keep margins up in the quarter, coming in stronger sequentially. We also made further progress in productivity improvement in our manufacturing, and this will be even more evident once volumes start to increase again. All in all, this took us to a free cash flow above SEK 1 billion in the quarter. So we remain in a very strong and solid financial position.
We can then move over to Page #3, please. So if we look at the quarter from an activities and events standpoint, I think one key highlight for us that we entered into a supply partnership with Medtronic, which recently received CE marking for the Radiant covered stent. It's the first covered stent for chimney endovascular aneurysm repair. So this is a really positive for us. We also had a case study at the SRH Klinikum in Karlsbad-Langensteinbach in Germany, and this revealed that the installation of getting sterile reprocessing solutions has achieved time and cost savings as well as improved safety for patients and employees. One example here is that the reprocessing batch time for complex spinal surgery instruments decreased by 40%, and at the same time, also reducing the consumption of water significantly. And that this is something that we see more and more in demand from customers putting more emphasis on sustainability going forward.
When it comes to sustainability improvements, in our own -- within our own scope so to speak, our successful efforts to reduce energy consumptions in the operations continued. We have, for example, one of our production facilities in France, succeeded in reducing its electricity consumption by 44% over a 3-year period. So this is a good achievement in these times.
We're also moving fast into renewable energy as old contracts roll off, so taking us to 67% renewable energy of total energy consumptions year-to-date, and this can be compared to 57% by end of June this year. So it was a good progress on that front as well.
We also had some changes in management. I'm very happy to welcome Joanna Engelke, our new Executive Vice President for Quality Compliance, Regulatory and Medical Affairs and also member of the Getinge executive team. She took up this position on October 6 this year. Joanna joins us most recently from Head of New Ventures and Chief Quality Officer at JUUL Labs. And prior to JUUL, she held leading positions as Senior Vice President, Global Quality and Regulatory Affairs at Boston Scientific Corporation, among others. And so Joanna brings a very broad and solid experience from areas of regulatory, health care in international and truly global companies.
We also continue our -- to improve our training offering for customers related to quality and how to use our products in the best possible way. So year-to-date, at 35,198 online session for customers this year.
We can then move over to Page #4, please. If we then look at the top line a bit more in detail. Order intake decreased by 5% and net sales decreased by 2.6% organically. As I said a moment ago, net sales and order intake didn't match our own expectations or the high growth that we had last year overall. From a regional perspective, orders are down in Americas, despite yet another strong quarter by Surgical Workflows, accomplishing close to 18% growth in the quarter. However, Acute Care Therapies and Life Science are down order-wise in Americas, and this is due to exceptional growth previous year linked to both life-saving devices and also BetaBags for vaccine production.
On net sales, Americas had support from more than 20% growth in Surgical Workflows. The positive development in EMEA is due to strong growth in Acute Care Therapies and Life Science on orders, whilst the growth in net sales is mostly attributable to Surgical Workflows. The year-on-year [ order of ] comps in Asia Pacific were especially tough this quarter due to us having an exceptionally strong order intake in all business areas with a 46.7% growth in the previous year. China specifically had a negative impact on sales in the quarter in many parts due to the continued challenges linked to the pandemic and the lockdowns that we continue to see.
We can move over to Page #5, please. So based on what I've been presenting so far regarding external factors impacting the short-term demand and also the supply chain challenges that we continue to face, we've decided to lower the expectations and our new outlook is for net sales to decrease by 3% to 6% organically in 2022.
Let's then move over to Page #6, please. So from an order intake perspective, we had tough comps in all of our business areas for this quarter. In Acute Care Therapies, we are down 5.9% organically. The decline in Acute Care Therapies is mainly due to challenging competitive figures in ventilators and ECMO therapy products last year due to exceptionally-strong growth during the year pandemic. If we then look at the order intake of cardiovascular surgery products and more elective surgery-related products, there we saw an increase year-on-year. So that is a positive. But we're still not back to pre-pandemic levels in these categories.
Life Science was down 5.3% organically. The order intake in Life Science fell mainly as a result of lower demand for products related to the production of COVID-19 vaccines. However, the order intake when it comes to sterilizers increased, and this contributed to the positive performance in EMEA.
Surgical Workflows then, 3% -- 3.4% decline organically. And this decline is primarily due to the lower activity in China that I mentioned a moment ago. And the root cause here is continued challenges related to the COVID-19 restrictions. EMEA also decreased due to challenging comparative figures last year. The positive trend in order growth in Americas is continuing for Surgical Workflows.
We can then move over to Page #7, please. So if we look at sales and the bridge between this quarter and the same quarter last year, Acute Care Therapies had a 6.8% organic decline. This decline in sales was primarily attributable to lower sales and volumes of ventilators. Net sales increased in products for elective cardiovascular procedures, but net sales have not yet reached the pre-pandemic levels. Sales of capital goods in Acute Care Therapies were negatively affected by the continuing shortage of components and also the lower demand for ventilators.
We then look at Life Science. Here, we were down 5.7% organically. And net sales -- the decline of net sales in Life Science was mainly a result of challenging comps in products related to COVID-19 vaccine and also major deliveries of washer disinfectors in the same quarter last year. One positive overall and especially in Life Science, I think it's the service business that is continuing to grow. Sales of capital goods on Life Science were negatively impacted by the continuing shortage of components that we've seen for quite some time now. Recurring revenue in Life Science declined as a lower -- result of lower volumes of consumables related to the production of COVID-19 vaccine, mostly BetaBags.
Surgical Workflows, here we saw a 7.2% organic growth of sales. This is a considerable increase, and it's mostly related to good net sales in operating room products in the quarter. We also saw an improvement in infection control, while Digital Health Solutions was weaker in the third quarter.
Net sales for Surgical Workflows in Asia Pacific fell as a result of lower activity in China, and this is again related to continuing restrictions, while the positive trend in America continues for us. Net sales increased substantially in capital goods as a result of the strong order bookings, mainly in operating room products and despite the shortage of components that we see from a rather broad perspective. Currency had a SEK 774 million or a 12.3% positive impact on net sales for the group in the quarter. And organic net sales of capital goods came down in the quarter due to tough comps, but also due to supply chain constraints. And the relatively lower decline in consumables, you can see is related to tough comparative figures in BetaBag.
We then move over to Page #8, please. If we look at the gross profit evolution then, adjusted gross profit increased by SEK 258 million to SEK 3,592 billion in the quarter where a positive FX effect accounted for SEK 450 million. For the group as a whole, the adjusted gross margin decreased by 1.1 percentage points as an effect of lower volumes, negative mix effects and increased cost linked to inflation and supply chain challenges. The effects were partly offset by price increases, productivity enhancing measures and also support from currency.
For Acute Care Therapies, the adjusted gross margin was marginally higher despite the lower sales volume, the shortage of components and also greater pressure on cost. This was offset by currency effect, a favorable mix within the business area and continuing productivity activities. For Life Science, the gross margin decreased by 4.2 percentage points, mainly as a result of unfavorable product mix within the BA and greater pressure on cost as a result of supply chain challenges. Favorable currency effects contributed positively to the margins in Life Science. When it comes to Surgical Workflows, the adjusted gross margin fell by 1.3 percentage points, and this is primarily as a result of greater pressure on costs, which could be partly offset by continuing productivity improvements and favorable currency effect, to some extent, pricing as well.
With that summary, I think we can move over to Page #10, and I leave over to you, Lars.
Thank you, Mattias. Adjusted EBITA increased by SEK 10 million compared to the same period last year, while the margin decreased to 16.9%, mainly due to lower adjusted gross profit margin, which ties back to the lower volume, unfavorable mix effects and supply chain-related costs and challenges overall. Adjusted for currency, GP had a 1.9 percentage point impact on the EBITA margin due to the reasons just mentioned. Organically, OpEx was largely unchanged despite higher R&D costs and a general increase in pressure on costs. This was mainly offset by lower variable employee related costs and positive realized currency effect. However, on the margin, currency adjusted OpEx had a minus 1 percentage point impact due to reduced operational leverage. Adjusted to currency, D&A didn't have any impact on the margin in the quarter. Currency had a positive impact of 1.4 percentage points on the market. All in all, this resulted in an adjusted EBITA of SEK 1.170 billion and a margin decrease of 1.5 percentage points.
Over to Page 11, please. Free cash flow was about SEK 1 billion for the quarter. The change in working capital is explained by a combination of seasonality with a buildup for the Q4 with higher deliveries coming and also increased inventory levels linked to component shortages and the current product mix in itself brings longer leads.
Working capital days continued to be well below 100. We are now at some 92.6 days, down 36.5 days from the peak in Q2 2018. We also see continued strong operating return on invested capital, where we are at 15.9% on a rolling 12-month basis and well above the cost of capital. As you can see, we are now closing in on the positive trend -- long-term trend on return on invested capital.
Let's move to Page 12. The change in net debt year-on-year was positively impacted by the cash flow taking us to SEK 3.2 billion. And if we adjust for potential liabilities, we are at SEK 0.7 billion. This brings us to a leverage of 0.5x EBITDA and if we adjust for pension liabilities, the leverage is at 0.1x EBITDA. Cash amounted to approximately SEK 4.8 billion by the end of the quarter.
And by that, let's move to Page 14 and back to you, Mattias.
All right. Thank you, Lars. Just a few key -- summary of the few key takeaways that we have from the third quarter. We've seen continued external challenges, both in terms of the staffing situation in hospitals and also demanding comps, of course, when it's just a relative performance to Q3 last year. We also continue to see external challenges related to supply chain. So -- and that's a challenge that we expect will continue. So when you combine these 2 headwinds, we have a new outlook for 2022, where we expect now our net sales to decrease by 3% to 6% organically.
I'm happy with the margins that we've seen in the quarter, which shows a good resilience in the business, and it shows the result of a lot of hard work over several years when it comes to continued productivity improvements and of course, also helped by the currency effect. Another evidence, I think, of this underlying strength is that our free cash flow above SEK 1 billion is really a change compared to the first half of this year. That's also positive, and we remain in a very strong financial position.
Finally, our customers' biggest challenge right now is to continue ramping up elective surgery. This has made more difficult due to the staff shortages, the cost pressure that they are experiencing and also the disruptions in supply chain, but we're continuing to do everything that we can to be as strong and supporting partner in this important task.
So with that, we open up for the Q&A part of this call.
[Operator Instructions] And our first question comes from Erik Cassel from ABG.
Just first on for some clarification. I mean, does the lack of comments on the adjusted EBITDA margin expectations imply that you see an unchanged guidance despite the relatively large cut on growth rates?
I'll hand it over to you, Lars, as I only heard part of the question.
Yes. No, I think what we are saying is that with lower revenues that will have an impact, of course, on the results for the full year as well, and that is what we are trying to say.
Could you potentially quantify that impact?
What we said is, when you do the math, this impact would bring us down towards 16%. And previously, we have said that we would expect that a 1% to 2% decline compared to last year. So that would add another 1% or 2% depending on where you are.
Okay. And then could you perhaps help us bridge the guidance cut a bit more and now explain where have you changed assumptions for the business areas in a bit more detail?
I think we can share a bit on the higher level perspective. And the changed assumptions from half year is related to both the challenges that we see with our customers when trying to work around the staffing shortages in the business. We don't see the real strength of the improvement that we need here for the remainder of the year and going into 2023. So that headwind is a bit more challenging. The other big part is the supply chain whack-a-mole that has continued for some time now. So we've resolved most of the challenges that we saw in the beginning of the year, but there's been new ones popping up and we had the expectations at media that we were going to be able to resolve those and leave this year mostly without remaining shortages and challenges. And we don't see that this year -- well, I don't think it will get any better from this level, actually, we will have to live with this for the remainder of 2022 and a bit into 2023.
Okay. I'll leave myself to one more, a short one. I mean how should we now think about the 2025 guidance? Do you see any need of revisiting those targets and thinking specifically on the margin targets?
No, I think it's too early to address that. I think our assumption is that we can see that there is a very strong underlying need for our product, but still in line with what we said when we talked about the long-term target. It's now hampered by these external factors when it comes to staffing challenges and to component supplies. We expect that we will be able to resolve this during 2023, and we should see a better -- much better momentum from there. So it's -- there's no change at this point to the longer-term outlook.
And the next question comes from Kristofer Liljeberg from Carnegie.
Two questions. The first one is what assumptions you have done in this new guidance when it comes to the flu season here in the fourth quarter? And my second question relates to ACT, even though margin is down year-over-year, we see quite good improvements quarter-over-quarter, if you could explain that.
Yes. When it comes to the flu season assumption, nothing has really changed, and we still expect a normal flu season, that's what's needed to hit the current guidance. And it's a bit too early to say we can see no signs of very stronger flu season in the U.S., for example. But we -- it's too early to speculate about the impact on our business. So that's something we'll have to wait. But our assumption is there will be a kind of a normal impact flu season for the fourth quarter.
When it comes to the...
A follow-up on that before taking the ACT margin. So if you take the range 3% to 6%, what's the difference in your assumption between minus 3% and minus 6%. Is this related to flu season? Or is it more related to supply issues and the staffing shortage for example?
It's more related to the challenges with supply chain and staffing shortages than the flu season.
And on the ACT margin, I think there has been a good job when it comes to productivity. That's one thing. There is a currency impact here as well that one should be aware of. So those, I think, are the main factors. Also pricing, I will probably mention when it comes to gross margin resilience, we will continue to do diligent work when it comes to rolling out price increases. So even if the net between cost increases and price improvement is still negative for us, we see a gradual improvement, and we expect it to turn positive next year.
And the next question comes from Victor Forssell from Nordea.
A follow-up on the gross margin bridge here or the margin bridge overall into the fourth quarter. I think this quarter showed more resilience and now it's turning the opposite way again in terms of year-over-year declines according to your new guidance. So if you could give some more context here and understanding the dynamics of why it reverses again here in Q4 compared to Q3, the delta then.
Yes. And I think we -- as you know, Q4 is our biggest quarter always, and we had quite a strong Q4 last year. And then, of course, the product mix a touch with increasing sales of SW. So that is impacting. And then, of course, the higher weight of SW and Life Science in the quarter compared to, I'd say, the previous quarters. So that is the impact here going into -- compared to last year. I think those are, I would say, the main areas.
And then you have the underlying cost inflation coming, which we are working with on the pricing side to offset partially, but we cannot offset so there will be a margin impact, let's say, from the net of pricing and cost inflation.
And curious when looking at your gross margin bridge here on your slides, of course, there's pressure from cost absorption inflation, et cetera. How do you see this play out into the first half of next year? Do you expect already to be flat margins in first half compared to this year? Should we expect this pressure to continue just to get a sense of the phasing of the margins next year, please?
We -- I think we don't give guidance on margins for next year, but I think we all know what's happening with inflation. It's continuing, and we are also continuing working with our pricing. So that is no change in that trend going forward, I think, so that will be something that we know it. That's why we work with it to offset as much as we possibly can. So then to be prepared for the uncertainties that we see going forward.
I think it's visible to everybody that we can -- who follows raw materials, for example, that in many parts, this has peaked, and we should see a little bit of less pressure on component pricing in next year. Also I think when it comes to logistics, for example, it has not only peaked. It has started to decline significantly. So that's one, I think, help or tailwind for next year.
And just finally, on your order intake since it's on a group level still quite muted and your expectations on how this will translate into sales next year. It seems reasonable at this stage, at least to believe that 4% to 6% growth can be challenging, especially with the weaker first half? Any sort of discussions here of the phasing of sales as well that you can bring?
No, I think we'll have to come back on this when we closed out this year. So no real color on that at this point.
And the next question comes from Oliver Reinberg from Kepler Cheuvreux.
The first question is also on the order intake. I mean I acknowledge the cash comp in Q3, but if I look at the average order growth for the last 3 years, this amounted to 2.8%. So I was also trying to get a feeling how confident are you that this is improving short term? And can you just confirm that you still expect the kind of shortfall of growth in 2022 to be compensated for in the periods '23 to '25 as part of your midterm guidance? That would be question number one.
And question number 2, on elective volumes, there were some kind of positive remarks from J&J actually yesterday, who talked about increasing procedure volumes later in Q3 and also in the rest of the world. Is that something you're seeing here as well?
And then the last question, just on China. I mean China is probably not a kind of huge exposure for you, I guess, high-single-digit percentage of sales. But can you just talk about the kind of level of restrictions that get worse? Any change in distribution patterns and generally, the kind of outlook for your Chinese business going forward?
Yes. All right. If we start with order intake, we -- there's nothing in the order intake that we see that makes us change the longer-term guidance right now. As you mentioned, we have a challenging comp. The underlying order when it comes to the different categories that suffered during the pandemic, we do see an improvement there that we expect to continue. It's not that we're very bullish about the outlook in the short term here. But as soon as there is available staff and some we do see improvements in elective surgery volumes, and that has a positive impact on our business as well. So yes, we see some evidence of the same thing that you're quoting. I won't comment on any kind of intra-quarter dynamic and this tends to be rather unreliable. We've probably talked about complete quarters when it comes to these types of trends.
When it comes to China, there's the headwind there is mostly related to Surgical Workflows. It is, as I said, partly related to some of these lockdowns and the COVID-19 restrictions that we continue to see in China, which makes life difficult, both from a supply point, but also from a sales and delivery to customer standpoint continues to be a challenge.
I also think that the initiatives that we see with favoring more made in China is a headwind for us there. That will also continue. That's something that we're factoring into the plans going forward.
And can you just confirm, I mean the shortfall of sales in 2022, do you still expect that to be compensated for in '23 to '25?
We think it's too early to think about changing these service plans. As I said to one of the earlier questions here, we do sense a strong underlying for our products. There's nothing that changes that compared to what we had guided for in the longer term. Of course, the uncertainty has increased now because 2022 is essentially last year when it comes to growth. But it's too early to have any updated view on the 2025 outlook in the longer term, so to speak.
And the next question comes from Peter Ostling from Pareto Securities.
Okay. A couple of questions. First, on China, they have had this zero tolerance policy for quite some time. And you've been asked questions about China in the previous calls, but it seems that it's never have been any problems. So what has happened now that you all of a sudden highlight China as one of the main problems being behind the lower 2022 guidance? That's my first question. We can start with that.
Yes. I think that's -- if anything is a misunderstanding, we have highlighted China earlier as well in our report. It has been a headwind throughout the year. It's maybe not as we haven't pointed out as much, but it's still there and it's continuing to be a challenge. But there's no dramatic change that compared to -- in Q3 compared to the previous quarter.
You said that the main headwind in China is related to Surgical Workflow. Is it so that you originally expected to deliver large part of your huge backlog in the fourth quarter. And now you see that, that will not happen, and it will probably spill over to 2023 instead. Is that the case?
That is part of it. We do see a reduction when it comes to both infection prevention, but also the Surgical [ Workflows ] or the operating room part of the order book with a lower level of deliveries than expected earlier. That's correct.
Okay. And then when we look at many of the large health care suppliers, both in the U.S. and the private ones that you get numbers on in Europe, they all mentioned and they all have difficulties with storm shortages and so forth. But most of them highlighted improvements in that area in the Q2 reports that had started to improve in Q3. Can you give a little bit more color, what do you see when it comes to staff shortages?
Yes, we can -- there are glimpses of improvement. Sometimes, if you look at individual months and so on. But I think overall, this is still a challenge. It's confirmed by customer discussions we had as last -- late as last week, actually, both in the U.S. and the U.K. that this -- will remain a challenge for some time still for them. So yes, in certain cases, some geographies, you can see improvements. But I think overall, this will remain a challenge for a little bit longer than anyone would have liked.
Okay. And finally, you have built up your inventory a bit over the last couple of quarters in order to get the safe, secure manufacturing and so forth for certain components. I guess those purchases have been at relatively high levels, high prices. Could you say anything about how long you believe it will take before this higher priced inventory has gone through the P&L and of course, will affect cost of goods sold for some time.
No, I think the short answer, and Lars may want to add some additional color, but this is not normally something we guide for, but...
I think the buildup inventory, you can see free fold. We have the seasonal buildup that we have normally after the baby deliveries in Q4, and that we have this year as well. And it's a little bit more than SW is growing as a total share of the total. So that is the product mix. Then you have the safety stock, as you mentioned, yes, we did that, especially during the first half of the year. And the cost of that is, of course, impacting. But in one way, you can argue it was also bought earlier on before the big inflation kicking in. So it's a mixed impact of that. And then, of course, the disturbances, we talked about it also ending up in a almost finished goods in our inventories now. So that has also impacted the buildup. So these 3 parts are there.
So that -- and as soon as we start getting deliveries out, that finished goods will come out. And then the safety stock, we will then stabilize and start bringing down during next year.
And the next question comes from Rickard Anderkrans from Handelsbanken.
All right. So first one, if you -- in past quarters, you've been able to quantify the year-over-year increase in the backlog plus 20% or so. So first, if you could share a figure on that would be very helpful. And secondly, if you can also comment a bit more on your visibility on access to components or deliveries here in the next few quarters as well as any slowdown in hospital CapEx discussions that you've seen signals for so far.
Yes. All right. Well, the backlog has continued to increase a bit [indiscernible] that trend is intact. When it comes to the component access, it is partly murky visibility that makes us change our guidance for this year as well. It is a bit more difficult to predict to get access to some IT components. We can also see the components that we actually have got delivered during the third quarter, sometimes failed quality tests, and we have to start over again. So there are these unexpected impacts when it comes to component supply. So the uncertainty is difficult to work with at the moment. We don't see any immediate improvement for the remainder of this year when it comes to resolving this.
And finally, on the CapEx budgets, anything cutting down or any negative signals there in the hospitals you work with?
Yes. I think negative signals in terms of talk and wording definitely from customers. We hear being restricted going forward. We don't see that as a bottleneck right now. It seems like the staffing shortages as much of a -- much more of an imminent problem to tackle. So we don't see really less business so much because of lower CapEx right now, but it's definitely something we'll keep monitoring.
And our next question comes from Ed Ridley-Day from Redburn.
I think if we could delve into the underlying growth perhaps in a different way when a discussion today about sort of the future of outlook we all understand [indiscernible] you can't really speak to at this point. But if we look at acute care in the third quarter, can you give us more color on the level of COVID hit, i.e., what you feel the underlying growth would have been roughly without the overhang from respiratory and ventilator revenue from COVID last year? I think that would be very helpful in terms of framing where you feel the underlying business is.
And secondly, just to confirm on the margins. Thank you for the commentary on the FX effect this quarter. Could you just confirm where you see FX effect on margin for the full year at current rates? And to confirm as well that the updated margin guidance is on a constant currency basis.
Well, if we start with the COVID effects, we cannot speculate what order intake or sales would have been if we didn't have these headwinds. On the ventilator front, it is largely in line with the weaker demand that we had expected because of the very high demand in 2020 and 2021. So we've had 4,600 vents sold year-to-date, and we expect to end up around 6,500, 7,000 for the full year. So that gives you some quantification of the headwind given that a normal year would have been between 8,000 and 10,000, so that's one factor.
Otherwise, I think the COVID headwinds are mostly related to the indirect impacts when it comes to staff choices when it comes to supply chain challenges. And those are impossible to quantify and say what it would have been if they were not there.
Mattias, just quickly to follow up on that. Just I mean in terms of the life support business, obviously, a high level of consumables obviously boosted by COVID as well. In terms of maybe looking at the underlying run rate then, say, this quarter and perhaps fourth quarter, would you say, therefore, really in these 2 quarters, you would expect a normalized run rate for the business? Or would you still potentially see some additional overhang into '23?
Yes. I don't -- I think it's difficult to dissect that. If you look at the underlying run rate of BetaBags, for example, we can see that the COVID demand has gone from this. The underlying demand is there, but it's still quite lumpy when it comes to orders and deliveries. It's very difficult to speculate and say what is a real underlying run rate here. So I really can't give you any more color on that either, unfortunately.
No, that's helpful though. And so the margin, sorry?
Yes. When we -- we don't know what the currency rates will be in the future. So when we talk about that is based on what we know today.
Yes, for sure. And just to confirm that the updated margin guidance is on a constant currency basis.
No, no. It is on where we are at the moment.
And the next question comes from David Adlington from JPMorgan.
Two, please. So firstly, I just wondered if you could talk a bit more color on the pricing environment. Maybe by division, is there any difference by division in terms of pricing and is that pricing sufficient to offset cost inflation?
And then secondly, just on your ventilator business between the larger installed base now. I just wondered what you're seeing in terms of attachment rates in terms of service relative to where you were historically?
Yes. Thanks, David. When it comes to pricing, I think it's one of the things that works rather well. We've had, on average, about 2% price improvement so far this year. It's a big difference between some of the areas when it comes to spare parts and service, where we have a much higher level of price increases. And then we have some categories where we're bound by contracts where there are no price increases. But the net -- the average is 2%.
A little bit more improvement in Acute Care Therapies where we have the shorter-cycle categories. We do see some improvement in Surgical Workflows. But here in that BA, the pricing effects take longer time to kick in. So that gives you a bit more color. In Life Science, it's a bit more difficult to measure actually because there are so many customized projects there. So we do have improvements there as well, especially when it comes to the service bit.
When it comes to the price -- positive price impact compared to the cost increases, it's still a net negative for us. So we expect this to change sometime during 2023. But right now, it is a burden for us.
And when it comes to the ventilator installed base, it's one of the areas where we do see improvements in service and better attachment rates. We don't disclose numbers on this externally, but the trend continues to be positive on the installed base as well.
And the next question comes from Robert Davies from Morgan Stanley.
My first one, could you give us a little more color around the backlog? Obviously, there's been a disconnect between the orders and the sales profile in the last couple of years. I just wondered in terms of expected time line of delivery. What's the kind of phasing of the backlog? How much of that can you deliver if and when supply chain start to ease through '23? Could you materially ramp that delivery? Or is it going to be phased over a couple of years? That was my first question.
And then the second one was just really around some of the supply chain issues. You've obviously flagged that a number of times during the call. What gives you conviction that sort of it's still going to sort of persist through 1Q '23? I guess the genesis of the question is, why do you think it's certainly going to get better by the middle of '23? Is that just you kicking the tire far enough down the road that you think broadly, these challenges will get better? Or are there specific things that you're putting in place that gives you conviction that sort of by the middle of next year, you'll be able to work your way around? Are you sort of changing suppliers, changing supply routes, you're getting more providers. Can you just kind of walk us through that?
Yes. All right. When it comes to the backlog phasing, I think yes, there is a little bit of a delay in delivering the backlog because of the supply chain constraints and the capacity issues at hospitals to receive goods as well. But we're not talking about multiple quarters here. We're talking about months, I would say, on average, where that gives you a little bit of flavor and color on that at least.
When it comes to supply chain, it's a complicated picture. I mean, as I said to one of the earlier questions, we have resolved the challenges, most of the channels that we had at the beginning of the year, new ones have popped up. So we do believe that they are quite well defined. In some cases, it's about helping suppliers ramp up. In some cases, it's about as I mentioned, getting a call it a batch that maybe didn't live up to the quality that we need actually. So we have to start again. So that's a different kind of rework.
In other areas, it's about redesign. We do have a fair amount of our engineering capacity, working on redesign and working around the component shortages as well. So we have relatively good transparency on that also. So we don't think that these issues will be gone during even the first half of 2023. It will be a challenge in the beginning as well, but that's the visibility we have. We do think it will gradually improve from year-end, but not within 2022. So that's the main reason for the updated guidance for this year.
And then maybe just as one follow-up, if I could, just around Surgical Workflows. Obviously, your margins are getting better off a low base or actually negative in the first quarter of the year. Just be curious to think how do you see the trajectory over maybe the back half of this year and into next year for that business given all the moving parts?
I mean, Surgical Workflows is one business where we have good operational leverage. So we expect to continue to see improvements when it comes to the margin evolution here in sync with the higher volumes for them. So -- but overall, I think it's all of getting that has done a good job when it comes to working with underlying productivity, and we do see that positive going forward.
And the next question comes from Patrik Ling from DNB Markets.
Maybe I can come back to a question that has already been asked about your minus 3% to minus 6% growth guidance for the full year here. And I mean you answered before that. I mean that implies a normal flu season. And you've also said that you expect supply headwinds and component shortages to be relatively stable from this point in time. So I mean what is it that's going to make the difference between 3% and 6%. I mean is it personnel shortages or -- maybe you can elaborate a little bit more on that, please.
I mean, yes, that's one factor because it really impacts the ramp-up at our customers when it comes to elective surgery. So the span of possible outcomes when it comes to staff shortage is definitely one of those. But also the flu season that you mentioned a normal flu season has -- includes a span actually as well in that. So it's not an absolute number. Supply chain, I'd say it's a very broad spectrum challenge right now. And the underlying assumption is that it won't improve for me, we will have to live with the current challenges that we have. But that also has the magnitude of possible outcomes. So that's also one reason for the breadth of the guidance span.
Okay. So maybe a follow-up then on staff shortages. I mean to me, that sounds like probably the fact that, that would have the longest impact. So can you give us some color on what you see longer term when it comes to supply issues because people leaving the health care systems do take time to get them back and educate new ones.
Yes. I think a little bit we can. This is really come from talking with customers. There's already a rather difficult situation especially nurses. And we've seen both the shortage, but also for hospitals, the cost of that is [indiscernible] the challenge. We're also in the discussion with customers, we get the indication that there is still expectations that you will have quite a few resignations of nurse staff and difficulties to replace this, well not the least in the U.K. So when you combine all these messages and [indiscernible] from customers, it makes us a bit concerned about this as a headwind definitely for the remainder of this year, as you rightly pointed out, I think it is what longer-term headwinds as whether we will need to work out. So we're making a lot of effort into supporting customers with product that require less -- that are less staff intense, so to speak. So more automation, more remote monitoring and those types of solutions is increasing in demand and we're trying to help customers. But it is a problem of significant magnitude.
And the next question comes from Michael from Jefferies.
I have 2, please. Firstly, following on from a previous question on the order backlog. You mentioned some customer delays, but have you started to see any order cancellations from customers? That's my first question.
And second question, can you talk about growth expectations for BetaBags and ECMO in 2023, please?
Yes. On the first question, we see no cancellations. We've heard this from some of our peers, but we've really gone through and looked in our order book, and we have nothing material to report when it comes to cancellations. When it comes to the growth of BetaBags in 2023, it's something we'll have to come back to you on. It's a little bit too early to say right now. We think, as I've pointed out, the COVID demand is gone. We're seeing some green shoots when it comes to the non-COVID-related demand, but to quantify that right now in -- for next year is too early, we cannot do that.
Okay. And just a follow-up as well on the ventilator, as you said, 6,500 to 7,000 is the expectation for this year. Year-to-date, 4,600. Any expectations for next year on kind of where that comes out in terms of unit -- ventilators on units?
No. Also too early to say. We have no guidance to give for '23 on that.
And the next question comes from Peter Ostling from Pareto Securities.
Just a quick follow-up on the FX impact launch. If the current rates remains, will we see a similar impact in Q4 that we saw in Q3.
Similar, yes, it's taking off a little bit. It's a little bit less since we have -- the weakened corona was already last year, starting that. So it's taking off a little bit, but of course, we have a bit higher volume as well when it comes to revenue, et cetera, in Q4. So rate impact will be a bit lower, but then we have a higher volume as well of order flows.
Because the reason for asking you this is, of course, this should be quite substantial help to support the margins even in Q4, even if volumes go down.
To some extent, yes.
But do you still believe that there would be around 3 percentage points difference between '21 and '22?
That is what we say when you do the technical adjustment of the top line.
No further questions at this time. And over to you, Mattias and Lars for any closing remarks.
Yes. All right. No, thanks, everyone, we're almost at time anyway. So I appreciate the dialog. No additional summary from our perspective, just thanks for joining the call, and have a good rest of the day.