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Ladies and gentlemen, welcome to the Straumann Group First Quarter 2019 Results Conference Call and Live Webcast. I'm Sherry, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Marco Gadola, CEO. Please go ahead, sir.
Thank you, and good morning, everyone, and thanks for joining this Conference Call on Straumann's 2019 First Quarter Results. We will be referring to the presentation slides that's published on our website this morning. As usual, we kindly ask you to take careful note of the disclaimer on Slide 2 regarding forward-looking statements. As customary, I will run through the highlights, and then our CFO, Peter Hackel, will review the business and regional performances. I will follow with an update on our recent strategic initiatives and the outlook, after which, we will look forward to answering your questions.As you can see in Slide 5, we have made a good start to the year and have more or less maintained the strong pace that we achieved last year. In the first quarter of 2019, our underlying growth exceeded 17%, driven by strong performances across all regions and businesses. Currency headwind trimmed growth to 15% in Swiss francs, bringing revenue to CHF 372 million. All our regions achieved double-digit organic growth with Asia Pacific and Latin America both keeping momentum at around 20%. Those of you who joined us at the International Dental Show in March caught the feeling of the energy that is driving innovation across the Straumann Group. We presented more than 100 new articles and launched a number of key products there and at other trade fairs around the world. I'm particularly excited about the launch of our clear aligner business in Brazil, Europe and China. To broaden our options in the nonpremium implant segment, we increased our ownership of Anthogyr and Zinedent to 100%. We also increased our stake in Medentika to more than 90% and gained control of Valoc, our partner for removable prosthetic fixtures. Looking ahead to the rest of the year, our good first quarter results and our launch pipeline indicate that we are on track to deliver the full year organic growth and profitability targets that we communicated in February.Putting Q1 in a sequential context, you can see in Slide 6 that we are just 180 basis points off last year's very strong momentum at group level. This is an excellent result in lieu of the fact that we have continually raised the bar with double-digit growth over the past 4 years. With this growth rate, we believe that we have outpaced the market again and have strengthened our competitive position in all regions.For the details on how we achieved this, I will now hand over to Peter.
Thank you, Marco, and good morning, everybody. As you can see in Slide 8, our top line increased 15% on a reported basis to CHF 372 million. You can see on the left of the chart that our first quarter revenue in 2018 would have been almost CHF 7 million lower at this year's currency rates mainly due to the depreciations in the euro, the Brazilian real and the Turkish lira. The effect of acquisitions was negligible in Q1 because we passed the first anniversaries of our ClearCorrect and Batigroup transactions in Q4 and will not consolidate on the year until June 1. Using CHF 318 million as the base for a like-for-like comparison, our revenue increased 17% in organic terms in the first quarter of 2019. While Asia Pacific continued to be our fastest-growing region, EMEA and North America were the largest contributors and together generated 2/3 of the group's organic growth as you can see on the right.Looking at the details in Slides 8 and 9. With organic growth exceeding 14%, EMEA benefited from dynamic increases in Russia, Austria and Turkey. The region's largest market, Germany, also reported a strong rate with a further contribution coming from our new subsidiary in South Africa. In addition, the region benefited from the late Easter break in 2019, which were entirely in the second quarter. Business-wise, the performance was led by implants with positive developments across the board, except in digital equipment where customers were held back from ordering in anticipation of promotional offers and new products at the biennial IDS.Across the Atlantic in North America, we reported a 13th consecutive quarter of double-digit growth. Organic revenue climbed 17%, which was impressive, but sequentially slower than in Q4 which was exceptionally strong. The performance was driven by both the U.S. and Canada. Straumann BLT, the Neodent range and our cost-effective Medentika solutions were the key growth contributors. Biomaterials benefited from the launch of Jason membrane and cross-selling activities as the Neodent team began to target these customers with the group's Biomaterials portfolio.Apart from this, our dynamic clear aligner business made a major contribution to growth in the region. Asia Pacific edged up from the preceding quarter to post organic growth of 22%. The performance was strong in all major markets, especially in China, which is benefiting from continued sales force expansion and a dynamic end market. In addition, we rolled out Anthogyr's new fully tapered implant which was well received. Elsewhere in the region, Japan reported strong results, and we entered the nonpremium segment in Australia, Indonesia and Thailand with the launch of Neodent.Our smallest region, Latin America, also performed well with top line growth reaching almost 20%. Argentina, Chile, Colombia and Mexico continued to deliver strong growth, while Brazil achieved a solid single-digit raise. Having entered the Biomaterials market a year ago, we launched our clear aligner business, bringing us one step closer to being a total solution provider for aesthetic dentistry in Brazil.Looking at our overall growth from a business perspective. Implants were the main contributor with sales climbing more than 10%. Our market share gains are driven by our efforts to become the leading player in the nonpremium segment as well as our increasing share of tapered implants which are outpacing the more traditional design [ set ]. We are making inroads into the nonpremium segment especially in China, Mexico, Turkey, the U.S. and the distributor markets, thanks to Neodent, Anthogyr, Medentika and Zinedent. Our prosthetics business has grown at a double-digit rate for more than 2 years, reflecting our efforts to improve the abutment-to-implant ratio through cost-effective value-based abutments and premium implants.Our clear aligner business continued to develop dynamically as the number of global cases increased more than 70%, driven primarily by North America. Biomaterials was our fastest-growing business, with double-digit expansion in all region. This partly reflects the interruption of Emdogain sales in the U.S. last year. Also demand for the product and the group's bone regeneration portfolio was generally strong. And with that, I'll hand back to Marco.
Thank you very much, Peter. In regard to our strategic highlights, I will begin with our initiatives to penetrate the fast-growing nonpremium implant segment on Slide 13.Our latest acquisition, Anthogyr, is a very established brand with a 3rd-tier heritage in implant dentistry. It develops, manufactures and sells high-quality, innovative implant and CADCAM solutions for the positions in the upward of the value segment. It offers a comprehensive portfolio, including fully and apically tapered designs as well as parallel-walled tissue and bone-level implants. It also had a strong clinical network of key opinion leaders and is the largest supplier of nonpremium implant solutions in its home market, France. Our 2 companies are a good cultural fit, and our partnership over the past 3 years has been highly successful. Anthogyr provided us with timely footholds in the nonpremium segments in China and Russia, leading to strong growth. Going forward, our goal is to drive its international expansion together with Neodent, Medentika and our other value brands, offering high quality, a wider choice and a broader range of price options than other companies.The integration is already underway, and we will consolidate the companies as of June 1. Including its distribution business with Straumann, Anthogyr generated revenues of CHF 57 million in the past 12 months with a global team of 400 employees. Eliminating these intracompany sales, the acquisition effect will amount to approximately CHF 50 million.In Q1, we also increased our stake in Medentika from 51% to 91%. Medentika is a highly successful German manufacturer of attractively priced implant prosthetics that are used with most leading implants and CADCAM systems. Medentika also offers competitive alternatives to popular implants sold by leading companies. The increased stake gives us greater influence over the business and almost a full share of its profits. This was also the rationale for obtaining full ownership of Zinedent, the joint venture we started with our former distributor in Turkey. Zinedent enables us to address the lower-value segment in Turkey, the Middle East, North Africa and Eurasian countries. At the bottom of Slide 14, you see that we also obtained the controlling stake in Valoc, our partner for innovative prosthetic fixation devices. We provided you with details of that transaction in February and have only included this deal for completeness.Slide 15 shows you how these and our other brands fit together in the group's expanding portfolio of solutions in aesthetic dentistry. You will also note the addition of our preventive business and the portfolio of brands that we are currently piloting in selected markets.Moving on to Slide 16. The IDS in Cologne and the CIOSP in Sao Paulo are the world's largest dental shows and are important highlights in Q1, together with the AO and Chicago Midwinter meetings. We used these events to launch key innovations and to showcase more than 100 new items. In addition, we started a new communication concept hosting more than 50 live sessions and lectures which were broadcast on the Internet, attracting thousands of online viewers. I warmly recommend the link video to you which provides a concise overview of our activities and the general excitement at the IDS.As you can see in Slide 17, immediacy was a key topic at the IDS. The launch of Straumann BLX, together with new angulated solutions for BLT, our new mini-implants and our comprehensive prosthetic range put us in a strong position to win share from our competitors in this important field. Other major launches included our fully ceramic 2-piece implant, Straumann SNOW, a new intraoral and in-lab scanner which you can see in the video and in Slide 18. The latest addition to our in-lab scanner portfolio is the attractively priced T-series supplied by Medit in Korea. We have obtained distribution and cobranding rights for these scanners which complement our Dental Wings range and we expect to launch later this year. Importantly, our agreement promotes the integration of our DWOS platform which Medit endorses as its preferred CAD software.Moving on to Slide 19, our clear aligner business achieved several important milestones in Q1. We used CIOSP to launch ClearCorrect in Brazil and the IDS for the European rollout, supported by a fresh new branding campaign, at the same time in the fast-growing Chinese market with our new Smyletec brand. China has already become the world's second-largest market for clear aligners, and Brazil has the potential to achieve a top 5 rank in this business. In addition to our distribution network, we offer a monitoring service that adds to the attractiveness of our aligner solutions. With significant growth opportunities in Latin America, we need to expand our local manufacturing capacity for ClearCorrect as we meet growing demand for our implants. Slide 20 shows you the first images of the new factory we have started to build in Curitiba close to our existing Neodent plant. Construction is underway, and we expect to open the facility in the fourth quarter of the year.Slide 21 summarizes our recent patent settlement with Align. In brief, we have agreed to pay them CHF 35 million to end the long-standing patent dispute with this operator. As part of the settlement, we signed a nonbinding Letter of Intent to explore the development and distribution of Align's iTero scanners that will be fully integrated into our DWOS workflow. If this potential agreement does not materialize, we will pay Align an additional $16 million, in which case, we would expect a minimum one-time related expense of CHF 24 million in our 2019 half year 1 results. This includes the CHF 8 million mentioned in the settlement's media release and the considerations determined in the ClearCorrect acquisition agreement.Turning to Slide 22. As you know, significantly more women are now entering dentistry than men. To address this trend and to help meet the needs of female practitioners, Straumann has been running an initiative called WIN, which is short for women in dentistry. The aim is to build a community of female key opinion leaders, experts and mentors in implantology. In March, we held the WIN EMEA summit, the first event of its kind, attracting 160 female dental professionals from 27 nations. In parallel, we have started internal programs designed to empower women at Straumann and to help them unlock their full potential, in line with the aspiration of our continuing cultural journey to bring out the best in every employee at the Straumann Group.That brings me to the outlook on Slide 24 which as always is barring unforeseeable events and circumstances. Our guidance for 2019 remains unchanged. We expect growth in the global implant market to continue at 4% to 5%, and we are confident that we can outperform by achieving organic revenue growth in the low teens. In other words, around 13%. Assuming fairly stable exchange rates, we expect further improvements in the EBITDA and EBIT margins in spite of further investments and excluding exceptionals. This also excludes the impact of acquisitions and of the new leasing accounting standard, IFRS 16. We have provided an estimate for this on Slide 25.And now I would like to open the question-and-answer session. [Operator Instructions] So Chorus Call, can we have the first question, please?
The first question from the phone comes from the line of Patrick Wood, Bank of America.
I have 2, please. The first will be on the digital equipment side that you guys highlighted. It'd be really helpful if you can just remind us very roughly how large that business is for you guys and roughly what the effects that you think contributed on the negative side in Q1 would be. That will be very helpful. And then on the second side, I'm just curious, if you're thinking of a typical implantologist, to your best estimate, what do you think of their caseload? What do you think fully edentulous patients represent as a proportion of the typical implantologist's caseload? Just curious because we're seeing a little bit of work on that.
First question, Peter, will you take that one, on the digital equipment? I will answer then on the second question.
Yes. As we have mentioned in the call, the digital equipment sales in the first quarter were rather soft because we had the expected upcoming launches on the biennial IDS and the customers were waiting for these launches to place their order. Overall, the total amount of the digital equipment business is still a rather low amount, a very low double-digit percentage rate of total sales. And the effect that we have compared to previous year where we had the strong quarter, first quarter 2018, was a mid-single-million-digit sales figure which was sales below previously in the first quarter.
About your second question, Patrick, when it comes to edentulous cases, our estimate is that roughly 30% of all implants placed on an annual basis are placed in edentulous cases. The number of cases, as a percentage of total cases, we estimate to be roughly 10%. And obviously, we see strong growth in emerging markets. Actually oral health is less of a topic than in developed markets.
Next question comes from the line of Julien Dormois from Exane.
Two questions on my side. The first one just relates to the Easter effect, whether you think it had an influence in Q1 and possibly helped you in Q1, and if you could just give us a rough assumption of what you think the effect was. And is that one of the reasons why you have decided to keep your guidance unchanged despite a very good growth in Q1? And the second question, I'm just curious whether you could give us an update on the GP market approach that you highlighted in October of last year. Where do you stand on the pilot projects which I think was dedicated to the U.K., Germany and Italy? So any update here would be interesting.
Now just looking at the working days in Q1 of '19 versus '18, we have roughly 1 working day less in Q1 2018 compared to -- 2019 compared to 2018. And we also expect to have roughly half a day less working days in Q2. But honestly, this has nothing to do with the fact that we are not actually updating our guidance. We just want to wait also for the second quarter. That's actually what we normally do. We wait the first 2 quarters before we challenge or renew our guidance, so stay tuned. Obviously in half year 1, when we are going to present our half year 1 results, we will also say something related to the guidance for the full year of 2019. And on your second question on the GP pilots, we have -- just roughly 2 months ago, we have started the pilot in the U.S., and we would actually like to wait until we have first results out of that pilot before we comment on the overall development of our entry into the GP or preventive segment. So also here, stay tuned for half year 1. During half year 1 presentation, we will actually paint more color on this topic.
The next question comes from the line of Sebastian Walker, UBS.
Two as well, if I could. So firstly, on BLX, I was wondering if you could quantify the contribution in the quarter and when do you think that will start to become more meaningful. And then the second question is, so just in the context of your guidance for improving margins, can you talk about whether mix has been a headwind or a tailwind in Q1?
When it comes to BLX, just keep in mind that we launched BLX at IDS late March. So almost at the end of Q1. So in Q1 2019, the impact of BLX has been -- yes, rather low. We now expect obviously from Q2 onwards that BLX will contribute positively to our growth rate. On your second question, yes, Peter, why don't you comment on that?
So your second question was if the mix had an impact on the margins, and obviously we have only published a sales growth in the first quarter and obviously we were also aware that the IDS will take place in the first quarter, which will probably help digital equipment sales in the first quarter. And as we all know, the digital equipment sales have a lower gross margin than the other product categories on average. So if we have a low share of digital equipment sales, that will have a positive, further positive impact on the gross margin. However, that is fully reflected in the full year margin, and the sales development was as expected in the first quarter, so I don't see any impact on the full year guidance in this respect to margins because of that.
Next question comes from the line of Daniel Buchta, Vontobel.
The first one is a bit broader one. Can you provide some feedback on how your main product launches were perceived? So I'm thinking about, for example, the scanner offering, the preventives, BLX and so on. And you were mentioning that digital was weak into the numbers. Can you share whether -- yes, this has recovered since then already, the growth here? And the second one, on the implant side. I mean, we have seen another quarter of double-digit organic revenue growth with BLT as main growth driver. So you mentioned recently that you have already a significant market share here in the apically tapered premium market. Can you shed a bit more light on how we can expect this trend to continue and how much market share gains are still possible? What does that mean for the next quarters and next 2 to 3 years?
Thank you for your question, Daniel. Again, I'm aware I'm answering most of the questions with [ today's council ]. All these major new launches we launched at IDS, and keep in mind, IDS was actually at the end of March. So in Q1, we have seen relatively low impact of all the launches you mentioned in our results, being it BLX, being it our 3D printing range, being it our new intraoral scanners, so the Virtuo Vivo. All this has not had real material impact on the growth rates of Q1. When it comes to BLT, our estimate is that we have a roughly 30% share in the premium apically tapered segment with BLT. And honestly, we believe we can do better. 30% is not the end of the story. We believe that we should be able to at least get to 50%. And I also want to highlight here, we might see some cannibalization of BLT to BLX because some of our users might decide to use BLX also for indications they used in the past for BLT.
Next question comes from the line of Michael Jungling, Morgan Stanley.
I have 2 questions. Firstly, if I look at Q2 organic growth. If your momentum in Q1 does not improve in Q2, it seems that mathematically, your growth would be slowing to around 12% organically in the second quarter. Is this the right range to look for in the second quarter? And secondly, on ClearCorrect, is the 70% growth in case growth in line with revenue growth? And you -- could you please disclose in ClearCorrect what your customer base growth was in Q1? You've previously given us this information.
Your momentum calculation, yes, you're obviously aware that we do this calculation, Michael. Should we only post 12% organic growth in Q2, honestly, we would be hugely disappointed. I cannot tell you more. As pointed out before, all the new launches, which we actually presented at IDS, they will start to kick in, in Q2. So like BLX, like the 3D print portfolio, we also believe that our digital equipment sales will start to pick up again from Q2 onwards. So yes, your calculation might indicate a 12% growth in Q2 organic growth, but again, for us, this will really be -- this will be a disappointment. Your question related to clear aligners, the revenue growth is more or less in line with the case growth. And our provider base, we call our customers providers, providers of cases to patients, have increased in the high double-digit -- single, double-digit range.
Next question comes from the line of Veronika Dubajova, Goldman Sachs.
Can I just follow up a little bit on the BLX feedback? I'm not asking for what the contribution was in the quarter, but now that the product has been out in the market for a month, if you can, Marco, share maybe a little bit of experience from the field and what the initial customer feedback has been more qualitatively, that would be helpful. Let me ask that first, then I have a follow-up after that.
So the feedback from the customers who have already tried BLX now in patients has been very, very positive, very, very positive. However, as I pointed out, we were in a so-called limited market release of -- through IDS. We only have 10 days or so of full market release in Q1. The contribution of BLX to our net revenue was in the low single-digit Swiss franc millions in Q1. Obviously, if you look at -- if I look at the forecast for Q2 and Q3, we are now expecting more and more of potential customers trying BLX, doing cases with BLX, becoming confident with BLX. So over the course of the year, we're actually anticipating a significant pickup when it comes to the volumes of BLX. So that's actually also the experience we had when we launched BLT.
And just to do a follow-up, Veronika, sorry, for the provider base for ClearCorrect because we had some audio issues before, it was close to 20%, just to make that clear.
And can I ask a follow-up, Marco? In terms of sort of pricing on BLX, how we should be thinking about it? And any comment you can make on competitive dynamics in the market now that you've launched this? I know Nobel has a new material coming. Are you seeing any changes at all in terms of the competitive dynamics in the premium segment?
So the pricing of BLX will be above BLT due to 2 factors. One is higher manufacturing costs because it's a very complicated product to manufacture. And secondly, because we also pay some royalties to the coinventor of the product. However, our aim is actually to price BLX slightly below Nobel Active from a list price point of view obviously because we can obviously not influence the discounting behavior of the Nobel sales force. And we have seen -- to be honest, we have seen some pretty aggressive campaigns from Nobel ahead of our BLX launch, trying obviously to fill the inventories of some of their core or large customers. So in other words, to prevent them from embarking on the BLX journey rather sooner than later.
Next question comes from the line of Chris Gretler, Credit Suisse.
I have 2 questions. The first relates to the digital equipment business. First, could you kind of tell us how this potential iTero distribution development agreement ties in with your current 3Shape business? And actually on the equipment side, if you could share with us kind of some metrics of order intake during IDS so we could see kind of how successful the product range is. That's on the equipment side. And on the clear aligner side, I was just wondering whether you could discuss your pricing strategy in these target markets coming up, Brazil, China and Europe maybe.
Yes. Obviously, iTero would be an alternative to 3Shape. So the probability that going forward we're going to distribute iTero and 3Shape is relatively low. So we will have to make a decision between iTero and 3Shape. And as we speak, we are carefully considering the pros and cons of each one of these options. We haven't made a decision yet, so we are actually still in, obviously, negotiations with both parties. When it comes to the uptake of our own intraoral scanner, the Virtuo Vivo, during IDS, very positive, very positive. We are pretty bullish when it comes to Virtuo Vivo for the rest of the year in terms of volumes we're going to place and sell. And your third question, the ClearCorrect pricing, the strategy of ClearCorrect pricing. In Brazil, it will be the same like we currently apply in the U.S. and that's also the strategy in all the other geographies. We are placing the ClearCorrect offering roughly 20% to 30% below the Align offerings.
Next question comes from the line of Tom Jones, Berenberg.
I just have one broad one about the market in general. You have given a market growth guidance for this year of 4% to 5%, very similar to the around 4% you gave last year. But if we look at a lot of these soft economic indicators and even in markets like Germany, some of the harder numbers, it does look like things might be softening a little bit. So I wondered if you could comment on what you're seeing in the market in terms of case starts, case inquiries? Because in previous economic slowdowns, what we've seen is that your sales actually held up quite well for a couple of quarters as dentists do cases that have already been started, implant, et cetera, et cetera. So there's a little bit of a lag effect. So it'd be intriguing to see what your sense is when you're looking at inquiries, case starts, et cetera, and how confident you are that the market itself is going to grow at the same rate this year as it did last year. And then my second question is probably one for Peter on Anthogyr. You've given us some revenue guidance, but my understanding is Anthogyr is a business that's kind of trying to do an awful lot of things and isn't generating spectacularly good margins. So maybe some steer as to what the initial margin impact of that business could be and perhaps what investments you might -- or what level of investment you might need to make in it to drive it to a more acceptable level of profitability.
On your first question, Tom, if you look at the global economic situation in Q1 compared to Q4, Q3 of last year, we have not seen any significant change. And nothing has actually significantly improved, neither the situation between the U.S. and China nor the Brexit situation or the situation in Europe. So we haven't seen any improvements on the global side. We believe honestly that actually on a global level, we see more opportunities than risks going forward. Hopefully -- we hope not to be proven the other way around, but so far, we have not seen any kind of an economic downturn in any of the markets you mentioned in our numbers. Peter, do you want to comment on the second question?
Yes. Tom, your second question was on the margin impact of the Anthogyr business that we acquired, right?
Correct.
Yes, yes. I mean, our underlying strategy will stay the same, and Tom, we want to expand business, we want to push growth, and at the same time, we want to incrementally increase our overall margin. I mean, Anthogyr is a profitable business. We can integrate that in our nonpremium sales organization that we have, and obviously, we can also leverage then certain synergies that we have when we integrate that business. That might then lead to some restructuring costs because we probably need to shut down an entity, take over the people, integrate them into our own organization. And we'll have some legal costs there, but I would not expect a significant impact on the margin due to the integration of the Anthogyr business for the full year. And please keep in mind that we only consolidate Anthogyr 1st of June so it will only have a significant impact on the sales or margins in the first half of this year.
Next question comes from the line of Maja Pataki, Kepler Cheuvreux.
I will stick to 2 questions as well. First of all, since we're seeing your international expansion contributing nicely to growth, I was wondering whether you could give us a bit of a color on those, let's say, newer markets. What is the overall market growth like? And how stable is it? Do you see more volatility? I'm talking more specifically about North Africa and Russia and Turkey? And then the second question relates to your Q1 growth in North America. Since you have been flagging that we've seen a nice pickup of Biomaterials in the U.S., I was wondering whether you could talk a bit about the underlying momentum in implant and the growth, somewhat slower momentum in implant in North America in Q1.
On emerging markets, you were highlighting obviously some of our key emerging markets, Russia and Turkey. In addition to that, I would also mention China which for us is still an emerging market, a very important emerging market. Our share in Russia is still relatively small. The Russian market is more than 1 million implant market, and our share in the Russian market is just slightly above 5%. And so since we actually took over our distributor a couple of years ago, we have obviously made inroads into this market, but we are still far away from market shares we actually enjoy in other markets. So even if the Russian market might see a little bit slower growth rates when it comes to implants, due to the fact that we have very low shares in that market, we are very optimistic that actually we're going to continue to grow significantly in that market. In Turkey, we have already a relatively strong market position, to be honest, especially having taken over the M.I.S. distributor last year. We are there the #1 player in the Turkish market. So obviously Turkey, should the economy really drastically change, this might have an impact on our business. China, again, on the other hand, China, we strongly believe that China will continue to be the growth engine when it comes to implants worldwide. The penetration rate is still extremely low. It's still below 10 implants based on 10,000 inhabitants per year, which is compared to other emerging markets, extremely low. Education of dentists is continuing to grow, so we are making big efforts when it comes to training dentists to place implants and so do our competitors, and we have more and more dentists able to place implants. Keep in mind that the Chinese market, the problem or the issue in the Chinese market is not a lack of demand, it's more a lack of supply and a lack of dedicated dentists being able to place implants. When it comes to the North American business, yes, in Q1, we had overproportionate growth on the Biomaterials side in North America due to still the catch-up on Emdogain. You might -- keep in mind, you might remember that during the first 2 quarters of last year, we were not able to deliver Emdogain to our U.S. customers, but also the implant business is actually continuing to grow double digit-ly in the North American market.
Understood. Just quickly, some follow-up. On the North American market, Marco, I'm just trying to understand whether there is some phasing from the product side in the quarter that we should be aware of. I know that the BLX is going to be rolled out in the second half of the year, but was there anything else specifically to Q1 why we would see a bit of a swing? Or is it just the normal patterns that we see? And then last to the emerging markets, fully understand that the penetration rates in Russia are low, but I'm just trying to understand the dynamics of the market, let loose from how you are positioned in it to get a bit of a better understanding. So do you think the volatility in market growth in those markets is greater than in other areas?
It depends from which angle you look at it. If you say the market is only growing 6% instead of 10%, 4% swing, if you would apply that to European markets between 0% and 4%, obviously the impact is -- would be the European markets look like much more important. But again, for us, like in China, in China, the market is still growing very, very positive. The market is now growing in China 30% or 25%. Honestly, it's still significant growth. And to come back to Russia, even if the market would only grow 6% instead of 10%, with the shares we have there, we will continue to overproportionately grow. I cannot tell you more. Now the U.S., 17.4% organic growth overall, I don't think that's actually kind of a slowdown. Yes, we were growing last year 29.2% in local currencies. Organic, it was also 17.2% compared to 17.4% this year. So I don't think we see -- really see a slowdown in terms of growth. We are actually growing or we had been growing in Q1 '19 almost at the same level like in Q1 '18.
The next question comes from the line of Kit Lee, Jefferies.
I just have a question on the clear aligner production capacity. Just where are you now in terms of the volume capacity? And what's your plan for expanding that over the midterm? And then a second question is related to that. I'm just wondering, would you have any capacity issues on clear aligner for 2019 as you roll out the business in Europe, Brazil and China?
You have mentioned here an important point. To be honest, yes, we have issues with capacity with our clear aligner business. If you grow 70%, 73% your case volume, this is tremendous. This is actually important. We have rented additional space. We have employed more than 100 additional people in production in Round Rock, Texas. So we are constantly ramping up production to make sure that we actually keep up with the increase in demand. But it is a challenge. Keep in mind that for Brazil, in Brazil, we manufacture the aligners on spot in Brazil. So we have there our own production site. Also keep in mind that China, we actually are distributing products which are manufactured by a third-party company. Yes, Europe is actually on top, that's correct. And again, yes, capacity in our clear aligner business is a constant challenge.
And just to follow up, when do you think you can catch up with the demand with the current production capacity just given your run rate now of adding people and volume? Do you think you can resolve this issue this year? Or is that something that you'll have to keep tackling on for the next year?
Well, we have concrete plans to significantly increase our capacity in Round Rock. We're also looking at setting up additional production sites, for example, in Europe to shift some of the product volume from Round Rock into Europe. So the supply situation I mentioned is temporary.
Next question is from Daniel Jelovcan, Mirabaud.
Just one left amongst the clear aligner business. I mean, you mentioned that North America was the key contributor towards your overall 73% global case increase. That was actually higher than in last year. Can you shed some light why that was higher? Was that a function of customer wins or also because you are cheaper than the market leader or because you have expanded the product for new indications or just on that?
It's a combination of different factors. We have always been roughly 20% to 30% below Align already in Q1 of 2018. So this is -- it has nothing to do with us now being more aggressive on pricing. But we have obviously now more people in the field so we have increased our feet on the ground when it comes to penetrating the GP segment in the U.S. We have now also combined the commercial structures of Straumann U.S. with ClearCorrect. So we have now more commercial synergies we can exploit. Lead generation through the dental sales force of the U.S. business. So this has actually contributed that we have seen an increase of the growth rate. But keep in mind that also in Q1 of 2018, our growth rate was above 50%. So it's not like we had only a single-digit growth in Q1 of 2018 and now we have 73%. We have those in Q1 2018 already significant growth in our U.S. business.
And just on ClearCorrect, I mean, on the clear aligner business in China, you mentioned that with Smyletec you have now launched in March, just to understand, how quick is the uptake there? I mean, do you need a lot of training? Or are the Chinese dentists quickly ready after the first call or how can I imagine...
No. To be honest, the case volumes we have seen coming through in April so far has been -- yes, I would say homeopathic, if this is the right word, because as you said, it's first about training, it's training the sales force, training the customers. So we expect only from the second half year onwards that actually that business may contribute significantly to the growth rates in our Chinese business.
Okay. I mean it's just for me to understand, is it similar like a dental implant, I mean, that the uptake, the speed? Or does it need more training or...
No. Obviously, dentists, first of all, could do 1 or 2 cases, like this implant, it's the same as [ clear aligner ]. They want to be convinced that the product works. And we don't see results -- it's clear you cannot charge if actually the aligners will work after 2 or 3 months. It takes longer. So that's why in Europe we already saw last year with pilot cases to build a base, a base of customers, who have now obviously today already 12 months and more experience with ClearCorrect, and they are now confident that ClearCorrect delivers the result they want, and they are now building on the experience of the first case, vis-Ã -vis we will have to do the same in China.
The next question comes from the line of Oliver Metzger, Commerzbank.
My first one is on the implant material discussion. So over last years, it's only -- it's been titanium and ceramic. And it seems like ceramic gained some tractions but just from a low base. But in particular on the IDS, there seemed to be more discussion of some alternative materials like certain types of plastics. Could you share with us your view, whether you believe that these alternative materials might be worth to be considered as implants going forward? Or do you believe that titanium or ceramic will be also the materials in the future? My second question is on Slide 17. You highlighted also many implants. Could you comment about your view on the mini-implant market? Some years ago, it seemed to be a much bigger topic, but in particular on this IDS, it did not play a major role. So how do you describe and evaluate the market potential, please?
On your first question, obviously we are watching what's happening in our industry very, very carefully and very much in detail. We strongly believe that the next really big thing in implantology will be ceramic implant. That's why we have put a lot of emphasis, on one hand, to develop a compelling range of traditionally manufactured ceramic implants, based on milling technology, and we have entered the joint venture with Maxon when it comes to manufacturing injection molded ceramic implants. And we are ready to launch our first injection molded ceramic implants during the course of the fourth quarter of this year. PEEK implants or anything like this, to be honest, we don't see this as a threat at least not for the foreseeable future. We have now some experience when it comes to PEEK, for example, in connecting implants and abutments, so PEEK screws. And what we have seen so far is that this is very problematic. So we have actually stayed away from this very consciously because we have seen that the results were actually absolutely not up to what we would have expected. On your second question when it comes to mini-implants, our estimate is that the market for mini-implants is larger than 1 million units per year. Mini-implants are a very compelling alternative for elderly patients' traditional older dentures, more cost effective, less pain, easier to place. So we believe that this is actually a trend. Mini-implants will be a trend when it comes to elderly patients. And that's the reason why we have decided to actually launch our own mini-implant offering, and the reaction and the take-up when it comes to sales so far have been rather promising.
The next question comes from the line of Markus Gola, MainFirst Bank.
I just have one left, and it is regarding your DSO business unit. Could you provide us with some update on how the ramp-up is progressing here? And would you be willing to share with us the growth rate of this business in Q1 and whether you expect this to accelerate going into the year?
What we are willing to share with you is the fact that our DSO business has overproportionately grown compared to the rest of the business. So it has an accretive impact on our overall organic growth number. And we expect a further acceleration of that business because we have a very compelling pipeline when it comes to opportunities with DSOs. And also, this DSO is a little bit similar to what I explained before when it comes to clear aligners. You don't step into a DSO and you get your order the next day. This is a process, a relatively lengthy process. You have to convince several stakeholders within a DSO, starting with the CEO, the clinical director, obviously the buyers, the doctors rounding the clinics. So they also have pilot, they want to test. So it's not a business where you step in and a couple of weeks later you get big orders. We have been focusing on that business now since more than 1 year. You remember we actually launched our own dedicated DSO organization in January of 2018, and the pipeline is constantly filling up. And we are very excited about the progress we have seen coming through, and we are convinced that this business will actually accentuate when it comes to growth rate.
We have a follow-up question from Sebastian Walker.
So just going back to growth guidance, on your commentary earlier where you said that low teens growth in Q2 will be hugely disappointing. I was just wondering whether there's any reason we should expect a slowdown in the second half as implied by your guidance.
We didn't say that actually Q2 will slow down. What I said is that we want to wait until the end of Q2 before we're actually going to potentially consider a change of our guidance. That's the statement I made. And that's more or less consistent with our practice over the last years.
We have a follow-up question from Michael Jungling.
I have 2 more questions. Firstly, on foreign exchange, can you comment on the transactional EBIT margin impact from the negative currency development for the first half and for the full year? And then secondly, on acquisitions, you commented this morning in an interview with Reuters that you could be buying a 3D printing business. Did you mention this because you are dealing with something larger that we need to be aware of? And if so, are these types of transactions for you initially earnings enhancing or earnings dilutive?
Well, I'll answer the second question, Michael, on the Reuters interview. I also have to mention that this is the last question because we have reached our full hour. When I talked this morning about 3D printing business, I talked about 3D material printing business, okay? So it's about resins to print models, to print [indiscernible], to print surgical guide and to print potentially down the road all the temporary crowns and dentures. So these businesses are still relatively small so you have many small companies having a mixing station, they have recipes and they actually mix different resins for 3D printing. So we are not talking here potentially about a large acquisition. This is actually a single-million Swiss francs turnover business max. So we don't know if it's double-digit millions. In terms of dilution or accretion, obviously, if you can in-source the manufacturing of 3D printing resins, it will have a very positive impact on our gross margin levels. But so far, when it comes to 3D printing materials, we are buying all these materials from third parties. So we're actually kind of a distributor of these materials, and as you know, the margins, the corresponding margins, are obviously much lower compared to the products we manufacture ourselves. Peter, do you want to make a comment on the...
On the FX rates, Michael, you might remember that especially in the second half year, basically all the major currencies, depreciated relative to Swiss francs. And in the first quarter now, we have especially a negative impact from the euro, from the Brazilian real and from the majority of the other currencies, and we had a positive impact from the U.S. dollar which is a little bit mitigating that negative impact we are seeing on the sales figure. It was minus CHF 6 million negative impact. We also have the sensitivity on the margin. We also have the respective backup of our document solution. If we look at the current impact on the EBIT margin, then I would expect if the currencies stay as they are, currently I would expect a bigger impact in the first half compared to the second half year. However, currently, it's a good double-digit number of base points on the EBIT margin right now.
So thank you for your interest and your excellent questions. In closing, I would like to draw your attention to the Investor Relations calendar which you can find on Slide 27 and on our website. Thank you again for joining us. Have a good day. Goodbye.
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