Dentsply Sirona details impact of coronavirus on its global business

Dentsply Sirona has estimated that the coronavirus will strip $60–$70 million from its sales in four Asian dental markets in the first quarter. Image: IgorGolovniov/Shutterstock)
TextJeremy Booth

CHARLOTTE, N.C., U.S.: CEO Donald M. Casey says that he does not anticipate disruption to the company’s supply chain, but a drop in sales in China, Japan, South Korea and Taiwan is expected during the first quarter.

“As you are aware, the impact of the virus has expanded beyond China and is affecting other countries, like Japan, Korea, Taiwan and even parts of Europe,” Jorge Gomez, Dentsply’s executive vice president and chief financial officer, told listeners in a webcast conference call. “As it is the case across all industries, our commercial operations in China and now in [other] areas are being affected by this fluid public health care situation,” he continued. Gomez said that Dentsply’s priority has been the safety and welfare of its employees and associates and that the company estimates that the outbreak will see its sales in the Chinese, Japanese, South Korean and Taiwanese markets fall by a cumulative $60–$70 million in the first quarter. Dentsply is the world’s largest manufacturer of dental products and technologies and around 10% of its global sales last year originated from these four Asian markets. Responding to an analyst’s question about the impact of the virus beyond the first quarter, Casey said that he does not anticipate supply chain disruptions and that the company is developing contingency plans relating to a potential sea change in the spread of the virus and how countries react to such a situation. He continued: “What we’re trying to quantify is what’s going on from a demand perspective and, as we look at the quarter and China, Japan, Taiwan, Korea and to a smaller extent Italy, we’re obviously seeing a dampening impact on demand creation there, and that’s what we tried to quantify when we offered the $60 million to $70 million sales number.”

“As it is the case across all industries, our commercial operations in China and now in [other] areas are being affected by this fluid public health care situation”
Dentsply Sirona CFO Jorge Gomez

Casey added: “What we are having a harder time doing is really trying to understand what happens if there is a significant change and how countries are trying to manage this in terms of if there is a significant shutdown in border-to-border transfers and other things beyond what we’re seeing today; and if there is a significant sea change, obviously we will work, plan and develop plans for that.” Gomez added that the spread of the virus is resulting in a slowdown in both the dental consumables and technology and equipment segments and that the recovery of sales in the following quarters in affected markets is currently difficult to predict: “At this point, it would be very hard for us to go beyond the first quarter,” Gomez commented. Dentsply’s comments on the virus follow similar statements from Align Technology and the Straumann Group concerning their commercial outlooks and guidance for 2020.

Strong performance in the US and in technology and equipment

Casey and Gomez made the comments as they discussed Dentsply’s financial results for the fourth quarter and for the full year 2019. Net sales at the company in the U.S. for the fourth quarter increased by 24.3% over the comparable period in 2018 to reach $392 million, or 34.0% of the company’s total revenue for the period. Net sales in Europe reached $427 million, and this represented a decline of 6.5%. Europe accounted for 40% of the company’s total revenue in the quarter, and the decrease posted for the region was due, in part, to disruption resulting from consolidation of the company’s distribution infrastructure in Venlo in the Netherlands. Net sales in all other regions accounted for 26.0% of total revenues in the quarter, and the reported $283 million in sales for those markets outside of the U.S. and Europe represented a 1.5% increase over those posted for the comparable period in 2018.

At $2.283 billion, net sales for the full year for the company’s technology and equipment segment increased by 5%

The company’s net sales for the fourth quarter amounted to $1.112 billion, up 4.9% on the comparable quarter in 2018, and net sales for the full year increased by 1.1% to top $4 billion. At $2.283 billion, net sales for the full year for the company’s technology and equipment segment increased by 5% over 2018 and accounted for 57% of the company’s total business. In the consumables segment, net sales of $1.705 billion for the full year represented a 4.3% decrease on sales in the segment in 2018. Dental consumable products accounted for 43% of total revenues for the year. Dentsply last year began a restructuring plan that was announced in late 2018. By streamlining the organization of the company, the plan aims to save Dentsply up to $225 million in annual costs by 2021. Cost savings already boosted the manufacturer’s results for 2019 and so too did a range of new product launches and increased commercial execution efforts to get these products into dental practices. “We achieved savings of about $88 million in 2019, and we have a number of initiatives in motion already that make me feel good about the fact that we are on track to delivering the total savings we have projected of $200 million to $225 million by the end of 2021,” Gomez said.

Doubling down on innovation in dentistry

Innovation is nothing new for a company that introduced the first electric dental drill 130 years ago and the first dental radiographic unit around a century ago, but Dentsply doubled down on its innovation pipeline last year, particularly in its digital dentistry portfolio. According to Casey, the company’s aggressive approach to innovation in the digital space can transform the standard of dental care for both patients and dentists. “From Palodent to Digital Dentures to TruNatomy to Primescan, 2019 was an important year for new products, and we are poised to push to higher levels of innovation going forward, but growth is not purely about launching new products. It is also important to have a world-class global commercial network, and that has been a critical area of focus for our organization,” Casey explained in the call.