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Here’s What Dentsply Sirona Has Planned for Its Margins

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Dentsply Sirona’s margin improvement plan

Dentsply Sirona (XRAY) has a new management team that is working toward a more successful integration, because the company delivered lower-than-expected synergies in 2017 (due to the merger of Dentsply International and Sirona Dental Systems in early 2016). The legacy Dentsply business has more than 200 legal entities around the world, and these have led to significant operational inefficiencies.

The company has now put in place a new management team that has prioritized five key factors to focus on for the growth of the company (see the previous parts of this series). One of the company’s key priorities is to improve its operational growth through margin improvement.

For this aim, XRAY has laid out a $100 million cost-cutting plan for the next two years. New CEO Dentsply Sirona Donald M. Casey Jr. stated that margin improvement and business growth are two of the priority areas that he will see to himself.

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Dentsply Sirona’s $100 million cost-cutting plan

Dentsply Sirona has begun margin improvement initiatives in the areas of procurement, manufacturing footprint rationalization, and establishing an efficient operating model. The company expects to deliver margin improvement through a strategic plan in 2H18 and beyond. Dentsply Sirona stated that it plans to deliver $100 million in cost-cutting measures by the end of 2019.

According to Dentsply Sirona, one-third of these savings will come from already identified existing projects as part of the company’s 2018 budget, such as production facilities consolidation. The other major part of these savings is expected to come from efficiency improvement projects, which the company will start executing soon. The rest of the savings is expected to be generated through opportunity areas that Dentsply Sirona is currently evaluating.

By comparison, peers Danaher (DHR), Align Technology (ALGN), and Zimmer Biomet Holdings (ZBH) registered operating margins of 18.6%, 26%, and -1.8%, respectively, in their most recently reported quarters.

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