El.En, the challenge is the relaunch of laser systems in China. Focus on innovation

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Relaunch business, and profitability, in China. Then: expand to the USA. Again: continue with product innovation. They are among El.En’s priorities to support the activity. Yes, the activity. The company, whose management was heard in the Letter to the Saver, produces laser systems and applications (beyond restoration) essentially for two sectors. The first – the main one (56.7% of revenues in 2023) – is the Medical one. Essentially three sub-sectors are included here: aesthetics, surgery and physiotherapy. The second (43.3% of turnover) is, however, the so-called Industrial sector. The prerogative of the sector in question are: sheet metal cutting, marking and laser sources.

Well: one focus, precisely, is the relaunch of the business in China. In the last financial year, at a consolidated level, the pocket-sized multinational, on the one hand, was characterized by increasing revenues (+3%); but, on the other hand, profitability has dropped. Ebitda settled at 90.86 million (-4.6%) while net profit (48.2 million) fell by 12.5%.

The former Middle Kingdom

On closer inspection, the red posted by activities in China, where El.En is essentially present in the Industrial segment, contributed to the trend. The trend was the result of a mix of factors. Primarily the dynamics of the economy had an impact, hindered by the crisis in the real estate sector, which put the group’s Chinese corporate clients under pressure. Furthermore, the ever-increasing clash between the West and the former Middle Kingdom was significant. A condition which, by limiting Chinese exports, has contributed – once again – to reducing the market’s demand for El.En. solutions. In such a scenario, on the one hand, strong competition has led to a decline in laser systems for industry; and on the other, although the company managed to maintain volumes, the group’s margins still slipped. Given this, the company intends to bring profitability back on track. As? First – it is underlined – there is the intervention to reduce costs and increase operational efficiency. Then – El.En always says – the aim is to increase direct company exports, in order to depend less on Chinese internal demand. In particular, towards the neighboring states of South East Asia such as, for example, Japan or South Korea. In this sense, although the creation of branches is not excluded a priori, on the one hand the expenses for the group’s commercial representatives are increased who travel to those countries; and, on the other hand, the presence in sector fairs has increased (always in the geographical area in question). The target? Achieve, in the medium term, tripling exports from China. The project is ambitious. El.En, however, says it is confident and – provided that market conditions remain the current ones – states that Chinese assets should return to balance in 2024.

Stalemate over IPO in China

More indecipherable, however – at least to date – are the prospects regarding the listing project of the “Laser cutting” business unit. Due to the impossibility of signing the application for the IPO – also in the wake of the bad results in China in 2023 -, the private equity firms that had invested in Penta Laser Zheijang started the contractual withdrawal procedure. To date – confirms El.En – the listing process has been interrupted and the possibility is being assessed that the same funds could still continue to be involved. If these, however, were to come out, the options on the table are different. From purely organic growth to the search for new partnerships up to the re-modulation of the stock market listing. Currently however, concludes El.En, the situation is fluid and the company does not give specific indications.

The world of the USA

But it’s not just a question of China. Another geographical area, together with Europe, on which the group has a focus is the United States. In America the company, although also present in the Industrial sector, is above all active in the Medical sector. In particular, in Aesthetics. Well: the aim is to accelerate business on site. As? Primarily with the offer of new products and technologies. Thus, among other things, the group is evaluating the concrete usefulness of marketing a new laser system, designed by El.En, for the treatment of inflammatory acne. Moreover. The company has received approval from the Food and Drug Administration for another laser with new technology (included in an already successful product) aimed at body reshaping (slimming treatments). Beyond product innovation, the company also aims to further develop relationships with commercial partners. This is a complex strategy, which the pocket-sized multinational wants to leverage to grow in the United States. So much so that, for the whole of 2024, the expectation is for an increase in turnover of around 10%.