Siemens Healthineers AG (SHL) Earnings Call Transcript & Summary

Welcome to our pre-close catch-up for Q3 fiscal year 2026, which was recorded on June 22, 2026. Its content will neither be amended nor updated at any time. With this Q3 episode of our pre-close catch-up, we aim at having everyone on the same page regarding our upcoming Q3 fiscal year 2026 before we go into silent period. We sum up and repeat relevant topics which were communicated in public as potentially relevant for the upcoming quarter and address current macro topics, for example, foreign exchange. Obviously, we are before closing and therefore, have no indications on our Q3 actuals with the quarter ending on June 30. And before we start with this episode, let me remind you of the safe harbor statement on our website for this recording. I'll start with some comments on the translational foreign exchange impacts on revenue. As usual, we try to triangulate the transactional impact from the latest foreign exchange movements to align the absolute revenue and organic growth numbers in the models. Let me quote our CFO on translation impact in Q3. "We see the year-over-year translation headwind easing in Q3 compared to Q2 as we will be going against an already weaker U.S. dollar from prior year." In Q2, we saw a translational headwind of around 7%. In Q3, we expect this to become significantly less negative since in prior year Q3, the U.S. dollar became weaker. However, we still expect a year-over-year weaker U.S. dollar in Q3. Assuming that on average, in Q3, the U.S. dollar would be around 3% to 4% weaker than in prior year quarter and assuming for simplification purposes, only 50% U.S. dollar exposure, this would mean roughly a translational headwind of 1 to 2 percentage points on nominal revenue. And now 2 effects on earnings, where the major headwinds on adjusted EBIT and EPS in fiscal year 2026 are FX, tariffs and additional inflation in the supply chain. As you know, we left our assumptions for the full fiscal year unchanged for FX and tariff headwinds. For FX, we assume a headwind of around $0.15 on EPS incrementally compared to fiscal year 2025. The majority of the FX headwinds impact Imaging and Advanced Therapies EBIT within the Precision Therapy segment. In H1, around EUR 0.11 of these EUR 0.15 had already materialized. So we would expect still some year-over-year headwind from FX in H2. Let me quote our CFO on Q3 FX dynamics from the last earnings call. "In the segments, we expect similar foreign exchange headwinds on margins as in Q2. On the margin, the year-over-year headwind as in Q2 persists because the hedging is rolling off." For tariffs, we also assume a headwind of around $0.15 on EPS incrementally compared to fiscal year 2025. Also here, the majority of the tariff headwinds impacts the Imaging and Advanced Therapies EBIT within the Precision Therapy segment. EUR 0.12 of these EUR 0.15 materialized in H1. And again, quoting our CFO from the last earnings call on Q3 tariff dynamics. "On tariffs, we do not expect a material impact year-over-year." Q3 is the first quarter where tariff costs are now in the comparable prior year period. Therefore, the year-over-year impact in Q3 is expected to be not material. This comment relates to tariff costs that occur on an ongoing basis. For the additional inflation in the supply chain, we assume a headwind in H2 fiscal 2026 of around EUR 0.05 on EPS incrementally compared to H2 fiscal year 2025. While the year-over-year tariff headwind is fading in Q3, we expect to see the first year-over-year headwinds from the additional supply chain impacting Q3 earnings. As you know, we said that around EUR 0.05 are equivalent to a mid- to high double-digit million euro EBIT headwind in H2. In absence of any additional color, it would be fair to distribute the EBIT impact equally between Q3 and Q4. In recent conferences, it was also discussed how this rolls into the next fiscal year. In these discussions, we stated that we expect the additional inflation from supply chain to be also an incremental headwind in fiscal year 2027. With these dynamics in mind, let me quote our CFO with our view on Q3 segment performance as outlined in the Q2 earnings call. "In the segments, this assumes Imaging to grow mid-single digit in line with the assumption for the year and Precision Therapy to accelerate growth in Q3, particularly in Advanced Therapies. We expect a year-over-year margin decline in Imaging and Precision Therapy due to the foreign exchange and additional cost inflation." We also received follow-up questions regarding the Imaging growth in Q3. We reiterated our statement of mid-single-digit revenue growth for Q3 also in the context of tough comps of 12% growth in the prior year quarter. Our understanding of mid-single digit is 4% to 6%. We also pointed to the fact that growth rates are always a function of the prior year quarters. So in absolute terms, we expect a normal revenue quarter in Q3 for Imaging. In absolute terms, sequentially above Q2 and growth likely sequentially below Q2. Some context regarding margins in Q3. Please bear in mind that the Imaging margin last year had a very favorable business mix. So year-over-year margin development will be even tougher than usual, also with the backdrop of headwinds from foreign exchange and additional cost inflation. Sequentially, the moving parts in Imaging should be much less. Compared to Q2 '26, the main moving part should be the additional inflation in the supply chain. For Precision Therapy, the year-over-year comparison should be more straightforward. Year-over-year, the main moving parts are FX headwind and additional inflation in the supply chain. Specifically on Diagnostics, we said, "For Diagnostics, we expect a year-over-year revenue decline also in Q3, but less than the 5% decline in the first half. For the Diagnostics margin, we expect a similar year-over-year margin decline as in Q2 of around 5 percentage points contraction against a very tough comp from prior year. Remember that it was more than 9% margin last year in Q3. Sequentially, we expect an improvement in margins due to recovering top line in absolute terms and further cost reductions from the transformation program." For the below-the-line items, in absence of any further color given on roadshows or conferences, as a reminder, our current assumption for fiscal year '26 for central items is for between minus EUR 250 million to minus EUR 200 million EBIT and for financial income, net around minus EUR 340 million. For central items, a quarterized pro rata of the midpoint assumption for the full year would be the best approach. For financial income net, a pro rata approach of the EUR 185 million remainder for H2 would be the best approach. H2 is a touch higher than H1, partly due to refinancing of a loan in March. For the tax rate, the midpoint of the 24% to 26% assumption would be the best approach. And with this final note, I shall close our pre-close catch-up. The Investor Relations team is available until our silent period starts on July 3. Stay safe and stay healthy. Bye-bye.