Directors’ Report

Operation and structure

Arjo is a global supplier of medical devices and solutions that helps its customers improve their clinical and financial results. Arjo achieves this through solutions, services and products that improve safety and efficiency – and prevent avoidable injuries and complications. We always focus on the needs of the individual and thereby contribute to higher quality of care.

Arjo’s main customers are private and public institutions providing acute and long-term care.


Approximately 94% of sales are conducted through Arjo’s proprietary sales companies and the remaining 6% through distributors in markets for which Arjo Group lacks proprietary representation. Manufacturing is conducted at five production facilities in the Dominican Republic, Canada, China, Poland and in the UK.

Financial overview


Consolidated net sales increased 8.6% to SEK 8,925 M (8,217). Adjusted for corporate acquisitions, divestments and exchange-rate fluctuations, net sales rose 3.9%.

Western Europe represented the Group’s largest market, with 47.5% (50.2) of sales, followed by North America with 38.9% (36.7) and Rest of the World with 13.6% (13.1).

Exceptional items

During the year, the Group had exceptional items of SEK 53 M (156). Expenses for the year comprise restructuring costs related to efficiency measures in US rental operations and an efficiency program in the UK.

In 2018, exceptional items comprised restructuring costs (113), acquisition expenses (3) and adjustments of pension liabilities (40).


EBITDA before exceptional items amounted to SEK 1,728 M (1,312). The introduction of IFRS 16 Leases had a positive effect of SEK 347 M. The EBITDA margin before exceptional items was 19.4% (16.0) and excluding IFRS 16 was 15.5%.

Operating profit

The Group’s operating profit increased to SEK 671 M (493), corresponding to 7.5% (6.0) of net sales.

Net financial items

Net financial items amounted to SEK –129 M (–98). The introduction of IFRS 16 Leases had a negative impact of SEK 39 M on net financial items.

Profit after financial items

The Group’s profit after financial items increased to SEK 542 M (395), corresponding to 6.1% (4.8) of net sales.


The Group’s tax expense amounted to SEK 139 M (99), corresponding to 25.6% (25.1) of profit after financial items (see Note 10).

Tied-up capital

Inventories amounted to SEK 1,144 M (1,117) and accounts receivable to SEK 2,001 M (1,802). The average consolidated operating capital was SEK 11,082 M (9,946). Return on operating capital was 6.5% (6.5). Goodwill totaled SEK 5,413 M (5,259) at the end of the fiscal year.


Investments amounted to SEK 750 M (642), of which SEK 231 M (197) pertains to intangible assets and SEK 519 M (445) to tangible assets. Investments primarily pertained to equipment for rental and IT investments.

Financial position and equity/assets ratio

Shareholders’ equity at year-end amounted to SEK 5,914 M (5,427), corresponding to an equity/assets ratio of 41.0% (41.3). The Group’s net debt totaled SEK 5,903 M (4,630), corresponding to a net debt/equity ratio of 1.0 (0.9). Net debt increased primarily as a result of the introduction of IFRS 16 Leases. Net debt excluding IFRS 16 amounted to SEK 4,746 M. Interest-bearing net debt/adjusted EBITDA1 multiple totaled 3.0 (3.5). Excluding IFRS 16 it amounted to 3.4%, which is a more fair presentation since it was not affected by the favorable transition effect to IFRS 16.

1) Before exceptional items

Cash flow

Cash flow from operations amounted to SEK 1,252 M (991). The introduction of IFRS 16 had a positive effect of SEK 313 M. Cash conversion was 74.7% (84.0).

Shareholders’ equity

For information regarding the trading of shares in Arjo, the number of shares, the classes of shares and the rights associated with these in the company, see the Arjo Share section.

Group-wide events during the year

Product launches

Arjo carried out two major product launches during the year. Auralis – a mattress system developed for patients with restricted mobility and sensitive skin, who are either at risk of getting or already have pressure injuries – was launched in pressure injury prevention. Arjo also launched a new product in wound care, WoundExpress, a patented and pioneering treatment of venous leg ulcers. WoundExpress was initially introduced in the UK.

MDR audit

Arjo has been audited to evaluate whether the company complies with the EU’s new regulation for medical devices (Medical Device Regulation, MDR) and the results were favorable. MDR will enter into force in May 2020 and Arjo is now awaiting certification. MDR stipulates that medical devices must have more comprehensive clinical information and more stringent controls after they are released on the market.

Atlas Lift Tech

Arjo made a significant investment in Silicon Valley-based Atlas Lift Tech. The company offers Lift Coaches and an innovative software platform that helps the healthcare sector to drive programs that provide better and safer patient handling and mobility. The partnership creates a strong platform that offers a unique, full-coverage solution for the US market. The aim is to reduce injury among healthcare professionals, improve quality of care and to increase customers’ efficiency.

Acquired and divested operations

Divestment of low-spec medical beds business

In 2018, Arjo signed an agreement to divest Acare, the Group’s low-spec medical beds business, to China-based CBL. The divestment was completed at the end of February 2019 and did not result in any material effect on earnings or cash flow.

The divestment is a key part of the Group’s action plan to improve profitability in the product category of medical beds. The Group’s strength is found outside the value segment and that is also the area where continued focus will help maintain and further strengthen Arjo’s leading positions in the market.

Arjo acquired the Chinese company Acare Medical Science Ltd. in 2012. Arjo decided to focus on the premium segment for medical beds, where the company already holds strong market positions and where profitability is significantly better.

The divestment involves a production and sales unit in Zhuhai, China, with about 180 employees and sales of approximately SEK 85 M in 2018.

Acare was recognized in the balance sheet on December 31, 2018 as assets and liabilities held for sale.

Research and development

The foundation of all research and development at Arjo is an in-depth understanding of the customer and customer needs. A customer-focused research and development process helps allocate resources to develop solutions that contribute to enhancing the efficiency of healthcare and solving the challenges Arjo’s customers face. Arjo has, with about 60 years of market presence, developed competitive processes in this field. Innovation of new products and the renewal of existing product lines is one source of growth for Arjo and for the market as a whole. Arjo has continuously prioritized product design and ease of user-friendliness in developing new and existing products In 2019, Arjo’s research and development costs amounted to SEK 212 M (201), corresponding to 2.4% (2.4) of net sales. Of this amount SEK 139 M (141) was expensed during the year.


Arjo has employees from throughout the world and the Group’s development depends on them. The Group’s corporate culture is based on Arjo’s Guiding Principles, which permeate our entire business and aim to promote a customer-centered culture that forms the basis of a sustainable and profit-driving company. Arjo endeavors to be an attractive company in which all employees have equal opportunities, regardless of age, ethnicity, religion or gender. Arjo has established a strategy with clear goals for diversity and specific measures for inclusion. For further information, refer to Arjo’s sustainability report. At December 31, 2019, there were 6,141 (6,165) employees, of whom 186 (162) were employed in Sweden. Arjo has employees in a total of 29 countries.

Remuneration to senior executives

The Annual General Meeting held on May 7, 2019 resolved on guidelines for the remuneration to senior executives. Refer to Note 5 for a description of these guidelines and amounts expensed.

Proposed guidelines for remuneration to senior executives – Arjo AB

The Board of Arjo AB (publ) proposes that the 2020 AGM resolve on guidelines for remuneration to senior executives.

1. Scope of the guidelines

These guidelines refer to remuneration and other employment conditions for the individuals who are members of the Arjo Management Team during period that the guidelines apply, referred to jointly below as “senior executives.” The guidelines are applicable to remuneration agreed, and amendments to remuneration already agreed, after adoption of the guidelines by the 2020 AGM. These guidelines do not apply to any remuneration resolved or approved by the general meeting.

2. Promotion of Arjo’s business strategy, long-term interests and sustainability, etc.

A prerequisite for the successful implementation of the company’s business strategy and safeguarding of its long-term interests, including its sustainability, is that Arjo is able to recruit and retain qualified personnel. The basic principle is that remuneration and other employment terms and conditions for senior executives is to be market-based and competitive in every market where Arjo is active so as to attract, motivate and retain skilled and competent employees. Individual remuneration levels are to be based on experience, skills, responsibility and performance and be on market terms in the country in which the executive has their employment.

3. Principles for different types of remuneration

The total remuneration to senior executives is to be on market terms and comprise basic pay (fixed cash remuneration), variable remuneration, pension and other benefits. Additionally, the general meeting may – irrespective of these guidelines – resolve on, among other things, share-related or share price-related remuneration.

Fixed remuneration

Fixed remuneration for each executive is determined based on a global position evaluation system and external market salary data. The fixed remuneration, or basic pay, is to be based on the individual executive’s area of responsibility, authorities, skills and performance.

Variable remuneration

The allocation between basic pay and variable remuneration should be proportionate to the executive’s responsibility and authority. Variable remuneration is limited to a maximum amount and linked to predetermined and measurable criteria, designed with the aim of promoting the company’s business strategy and long-term value creation.

The company’s sustainability work is integrated into its operating activities. If the company’s sustainability directives or ethical guidelines are not followed, the company has the option of not paying any variable remuneration or reclaiming remuneration paid. The annual variable remuneration is structured in such a manner that it supports Arjo’s strategy of developing products and solutions over the long term that help improve clinical outcomes, create a more efficient care process, enable a better work environment for care professionals and enhance the quality of life for patients. If the activities above are performed in an efficient and sustainable manner, one consequence will be improved financial results and enhanced capital efficiency, which form the basis of the variable remuneration.

Annual variable remuneration (STIP)

The annual variable remuneration for senior executives (annual bonus) is to be a maximum of 50% – and in exceptional cases as warranted by the nature of the position, competitive situation and country of employment, 80% – of the fixed annual basic pay. Variable remuneration is based on the targets set by the Board. These targets are related to earnings, volume growth, operating capital and cash flow. All members of the Management Team have the same target for annual variable remuneration in order to promote shareholder interests, the company’s core values and joint efforts in achieving the company’s business strategy, long-term interests and the sustainable development of the company.

No variable remuneration will be paid if profit before tax is negative. The Board shall have the possibility, under applicable law or contractual provisions, to in whole or in part reclaim variable remuneration paid on incorrect grounds.

Variable long-term cash bonus (LTIP)

In addition to basic pay and the annual variable remuneration above, senior executives may receive a variable long-term bonus (LTI bonus) that rewards defined, target-related, measurable performance and is conditional on the executive remaining employed at the end of the LTI bonus earning period (with standard exceptions). The criteria for payment of the LTI bonus are to be designed so that they promote Arjo’s business strategy and long-term interests, including its sustainability, by having a clear link to the business strategy. The criteria for the LTI bonus are related to earnings per share, adjusted for any acquisitions, divestments, restructuring costs and/or material non-recurring costs. A community of interests is created by linking the targets to the shareholders’ overall objectives, thereby also promoting Arjo’s business strategy and long-term interests. The earning period for the LTI bonus must be at least three fiscal years and the LTI bonus shall be a maximum of 100% of one year’s basic pay for each three-year period, meaning one third of an annual salary per year. Senior executives in the Management Team are to reinvest at least 50% of the payment (net after tax) from each LTI program in Arjo shares, until an amount corresponding to one annual salary (gross) has been reinvested in shares in the company using the funds that the senior executive has received in payment under the LTI program issued by the company. The senior executives must retain these shares for at least three years from the date of investment.

Determination of outcome for variable remuneration, etc.

The extent to which the criteria for awarding variable cash remuneration have been satisfied shall be determined by the Board, based on a proposal from the Remuneration Committee when the measurement period has ended. In assessing whether the criteria have been satisfied, the Board, based on a proposal from the Remuneration Committee, has the possibility to grant exemptions from established targets on the grounds stipulated in item 5 below. For financial targets, the evaluation shall be based on the latest financial information made public by the company with any adjustments that the Board decided in advance when implementing the program. Variable cash remuneration may be paid after the measurement period has been completed (annual variable remuneration) or be subject to deferred payment (LTI bonus).

Arjo works actively to ensure that the company is operated as sustainably, responsibly and effectively as possible, and that it complies with applicable legislation and other regulations. Arjo also applies internal rules that include a Code of Conduct and various Group-wide governing document (policies, instructions and guidelines) in a number of areas. No variable remuneration is to be paid, nor any variable remuneration reclaimed, if the senior executive has contravened these rules, principles or the company’s Code of Conduct. No variable remuneration will be paid if profit before tax is negative. The Board shall have the possibility, under applicable law or contractual provisions, to in whole or in part reclaim variable remuneration paid on incorrect grounds.

Other types of variable remuneration

Further variable cash remuneration may be awarded under extraordinary circumstances, provided that such extraordinary arrangements are only made on an individual basis for the purpose of recruiting or retaining executives. Such remuneration may not exceed an amount corresponding to 50% of basic pay and may not be paid more than once each year per individual. Any decision on such remuneration shall be made by the Board based on a proposal from the Remuneration Committee. In addition to the aforementioned variable remuneration, approved share or share-related incentive programs as above may be included.


For the CEO, pension benefits shall be premium-defined. The pension premiums for premium-defined pension shall amount to not more than 30% of the fixed basic pay. Variable cash remuneration shall not qualify for pension benefits.

Other senior executives are to be included in either the ITP 1 or ITP 2 plans and pension benefits are to be premium-defined. For other executives, pension benefits shall be premium-defined unless the individual concerned is subject to defined-benefit pension under mandatory collective agreement provisions. If this is the case, the structure of the total remuneration package will take this into account. The pension premiums for premium-defined pension shall amount to not more than 30% for portions exceeding the limit of the applicable ITP plan.

For employments governed by rules other than Swedish, pension benefits and other benefits may be duly adjusted for compliance with mandatory rules or established local practice, taking into account the overall purpose of these guidelines to the extent possible.

Other benefits

Other benefits, such as company cars, additional health insurance or occupational health services, may be provided to the extent that this is deemed to be on market terms for senior executives in corresponding positions in the labor market in which the executive works. The total value of these benefits shall be on market terms and reasonable in relation to basic pay.

Termination of employment

Senior executives shall be permanent employees. The notice period for the CEO is 12 months if notice of termination of employment is made by the company. For other senior executives, the notice period may not exceed 12 months if notice of termination of employment is made by the company. The period of notice may not exceed six months without any right to severance pay when termination is made by the executive.

A senior executive may receive remuneration for non-compete undertakings after termination of employment, but shall only be paid in so far as severance pay is not paid for the corresponding period of time. The purpose of such remuneration is to compensate the executive for the difference between the monthly basic pay at the time of termination and the (lower) monthly income received, or that would be received, from a new employment contract, assignment or self-employed business. Remuneration shall be paid during the time the non-compete undertaking applies, however for not more than 12 months following termination of employment.

Salary and employment conditions for employees

In the preparation of the Board’s proposal for these remuneration guidelines, salary and employment conditions for employees of the company have been taken into account by including information on the employees’ total income, the components of the remuneration and increase and growth rate over time, in the Remuneration Committee’s and the Board’s basis for decision when evaluating whether the guidelines and the limitations set out herein are reasonable. The development of the gap between the remuneration to executives and remuneration to other employees will be disclosed in the remuneration report.

4. The decision-making process to determine, review and implement the guidelines

The Board has already established a Remuneration Committee, whose tasks include preparing the Board’s decision to propose guidelines for remuneration to senior executives. The Board shall revise these guidelines every year and submit them to the AGM. The guidelines shall be in force until new guidelines are adopted by the general meeting. The Remuneration Committee shall also monitor and evaluate programs for variable remuneration to executive management and the application of the guidelines for executive remuneration as well as the current remuneration structures and compensation levels in the company. The CEO and other members of the executive management do not participate in the Board’s handling of and resolutions regarding remuneration­-related matters in so far as they are affected by such matters.

5. Derogation from the guidelines

The Board may temporarily resolve to derogate from the guidelines, in whole or in part, if in a specific case there is special cause for the derogation and a derogation is necessary to serve the company’s long-­term interests, including its sustainability, or to ensure the company’s financial viability. As set out above, the Remuneration Committee’s tasks include preparing the Board’s resolutions in remuneration-related matters. This includes any resolutions to derogate from the guidelines.

6. Other

These guidelines entail a remuneration level that mostly corresponds to the 2019 fiscal year.

Information on remuneration, etc. to senior executives for the 2019 fiscal year is presented here (part of Note 5) in the 2019 Annual Report.


Malmö, January 2020.

The Board of Directors of Arjo AB (publ)

Sustainability agenda

Arjo endeavors to build up a sustainable, financially profitable company, while at the same time assuming responsibility for social, ethical and environmental issues. This is regarded as crucial for achieving long-term success.

Arjo’s sustainability agenda is primarily driven in four focus areas: environmental impact, quality standards and regulations, employees and society, and ethical business methods. Arjo’s sustainability work is reported according to the ESG (Environmental, Social, Governance) model and supports the UN Sustainable Development Goals (SDGs) through global and local initiatives.

Arjo has a governance structure that facilitates clear ownership of each focus area, and a global reporting system to capitalize on the sustainability insights of our customers and cooperative partners. Arjo management pursues a sustainability agenda and the Board receives an annual report to support the development of key initiatives.

Read more about the Group’s sustainability efforts here.

Environmental impact

Arjo works systematically to impact the efficiency of its operations to contribute to a reduced environmental footprint, while at the same time generating cost-savings across our entire supply chain. Initiatives to reduce Arjo’s environmental impact are partly a result of the national and international regulations that Arjo must comply with and to fulfill the Group’s own internal objectives and live up to the Group’s policies.

To ensure that production is conducted in accordance with legislation and international rules, the Group has introduced environmental-­management systems at its production facilities, which are certified according to the international standard ISO 14001. The implemented management system provides solid conditions for structured and proactive environmental work. The management system also includes regular updates to the environmental impact of the facilities.

To reduce Arjo’s climate impact, the Group has mainly focused on minimizing its energy consumption and CO2 emissions and on improving waste management.

Further information concerning Arjo’s environmental work is presented here.

Risk management

Customers and healthcare reimbursement systems

A considerable share of Arjo’s revenue is derived from sales of products to public sector entities. A political discussion taking place in many countries concerns whether private healthcare providers should be able to offer publicly funded healthcare services. There is a risk that authorities in countries where Arjo operates will decide to limit or completely discontinue public funding of private healthcare, which could affect the establishment of new hospitals and other healthcare facilities and their purchasing of healthcare products, such as Arjo’s emergency and long-term care products.

Sales of the Group’s products are also dependent on various reimbursement systems in each of Arjo’s markets. In many of Arjo’s markets (such as the US), it is often the patient’s insurance company that – within the framework of the existing political reimbursement system – funds or subsidizes products for the patient’s emergency or long-term care. Some of the success for sales of Arjo’s products in these markets is dependent on whether Arjo’s products have been approved for reimbursement under the various reimbursement systems.

Since Arjo conducts operations in many different countries and markets, the above-named risks are limited for the Group as a whole.

Research and development

Arjo’s future growth is also dependent on the continued expansion of new product segments and new product types in existing product segments, which is dependent on the Group’s ability to influence, predict, identify and respond to changing customer preferences and needs. Arjo invests in research and development in order to produce and launch new products, but there is no guarantee that any new products will achieve the same degree of success as in the past. Nor is there any certainty that Arjo will succeed in predicting or identifying trends in customer preferences and needs, or that Arjo will identify them earlier than its competitors. To maximize the return on research and development efforts, the Group has a highly structured selection and planning process to ensure that the Group prioritizes correctly when making decisions about potential projects. This process includes careful analyses of the market, technological progress, choice of production method and selection of subsuppliers. Development activities are conducted in a structured manner and the deliveries of every project undergo a number of fixed control points. Arjo is focused on product launches that will lead to more efficient care, in which more diseases can be treated, which is expected to drive demand from end customers and therefore market growth. Product development that leads to a broader product range is a means for increasing organic growth in the market in which Arjo operates.

Product liability and damage claims

As a medical device supplier, Arjo, like other healthcare industry players, may sometimes be subject to claims related to product liability and other legal issues. Such claims could involve large financial amounts and significant legal expenses. A comprehensive insurance program is in place to cover any property or liability risks (e.g. product liability) to which the Group is exposed.

Protection of intellectual property rights

Arjo invests significant financial amounts in research and development, and is continuously developing new products and technological solutions. To secure revenue from these investments, new products and technologies must be protected from unlawful use by competitors. If possible and appropriate, Arjo protects its intellectual property rights by registering patents, copyrights and trademarks. The Group is also dependent upon know-how and trade secrets that cannot be protected under intellectual property law.

Changes related to general economic and political conditions

Arjo operates in several parts of the world and, like other companies, is affected by general global economic, financial and political conditions. Demand for Arjo’s medical devices and solutions is influenced by various factors, including general macroeconomic trends.

Uncertainty about future economic prospects, including political concerns, could adversely affect customers’ decisions to buy Arjo’s products, which would adversely affect Arjo’s operations, financial position and results. Furthermore, changes in the political situation in a region or country, or political decisions affecting an industry or country, could also have a material adverse impact on sales of Arjo’s products. Since Arjo operates in a large number of geographical markets, this risk is limited for the Group as a whole.

Authorities and supervisory bodies

The healthcare market is highly regulated in all of the countries in which Arjo operates. Arjo’s product range is subject to legislation, including EU Directives, Regulations and implementing acts regarding medical devices, and the US Food and Drug Administration’s (FDA) regulations and related quality systems requirements, which also encompass comprehensive evaluation, quality assurance and product documentation.

Arjo devotes considerable efforts and resources to implementing and applying guidelines to ensure regulatory compliance. Annual audits are performed by designated certification bodies to ensure compliance with requirements for CE marking of Arjo’s products and assess our compliance with international regulatory requirements including those of the FDA, MDSAP and MDR.

During 2019, Arjo continued efforts to meet the requirements of the European regulation, EU MDR, which goes into effect in May 2020. Arjo has had an organization-wide plan in place since 2017 to reach MDR compliance and has successfully passed an audit conducted at the end of 2019, and is now awaiting certification.

All of the Group’s production facilities are also certified according to ISO 13485 (Medical devices – quality management systems) and/or ISO 9001 (Quality management systems) by BSI Netherlands.

Financial risk management

Through its operations, Arjo is exposed to a number of financial risks. Arjo’s risk management is regulated by a finance policy established by the Board. Ultimate responsibility for managing the Group’s financial risks and developing methods and policies for mitigating these risks lies with Group management and Group Finance. The Group’s financial risks comprise currency risk, interest-rate risk and credit and counterparty risk, of which the most important is currency risk.

Currency risks

Currency risks comprise exchange-rate fluctuations, which have an impact on the Group’s earnings and shareholders’ equity. Currency exposure occurs in connection with payments in foreign currency (transaction exposure) and when translating foreign subsidiaries’ balance sheets and income statements into SEK (translation exposure). The effect of exchange-rate fluctuations on earnings calculated using volumes and earnings in foreign currencies is presented in Note 26.

Transaction exposure

Payment flows as a result of sales income and cost of goods sold in foreign currencies cause currency exposure that affects Group earnings in the event of exchange-rate fluctuations. The Group’s payment flows in foreign currencies consist mainly of the income generated by export sales. The most important currencies are USD, EUR, GBP, CAD, PLN, CNY and AUD. In 2019, the most important currency exposures were hedged based on the forecast currency flows. Hedging took place using currency forward contracts. In the final quarter of the year, Arjo changed its policy and from the end of 2019 hedges only transactions that have occurred and no longer hedges any forecast currency flows. For more information, see Note 26 Financial risk management.

Translation exposure – income statement

When translating the results of foreign Group companies into SEK, currency exposure occurs, which affects the Group’s earnings when exchange rates fluctuate.

Translation exposure – balance sheet

Currency exposure occurs when translating net assets of foreign Group companies into SEK, which can affect the Group’s other comprehensive income.

Sensitivity analysis

Arjo’s earnings are affected by a series of external factors. The table below shows how changes to some of the key factors that are important to Arjo could have affected the Group’s Profit after financial items in 2019.

Change SEK M
  Förändring Mkr
Price change Prisförändring ± 1% ± 1% ± 89
Cost of goods sold Kostnad sålda varor ± 1% ± 1% ± 50
Salary costs Lönekostnader ± 1% ± 1% ±34
Interest rates Ränta +/- 1 percentage point ± 1 %-enhet ± 63

The effect of a ±1 percentage point change in interest rates on Arjo’s profit after financial items was calculated based on the Group’s interest-­bearing liabilities, excluding pension liabilities, at year-end 2019. The impact of a ±1 percentage point change in interest rates on equity is about SEK 50 M. Consideration was given to the effect of the various risk-management measures that Arjo applies in accordance with its approved policy.


Arjo is a global company with operations in many countries. Through its operations, the Group contributes to society through taxes and fees. The global environment entails the risk of double taxation and tax disputes since the Group’s transactions and business dealings involve exposure to the areas of corporate tax, customs duties, social security contributions, income tax and value added tax.  Arjo follows national and international tax legislation and pays taxes and fees in accordance with local laws and regulations in the countries where it operates. Arjo follows the OECD guidelines for transfer pricing, which means that gains are allocated and taxed where the amount is generated.

The OECD’s guidelines on internal pricing can be interpreted in different ways, which may mean that the tax authorities in different countries may question the results of Arjo’s transfer pricing model, despite the fact that the company follows the OCED guidelines. This may entail the risk of tax disputes in the Group when Arjo and the local tax authorities have differing interpretations.

Coronavirus (COVID-19) – after the end of the reporting period

Arjo is closely monitoring developments and is successively making business decisions to ensure production and deliveries to the healthcare sector in this serious situation.

Higher demand for medical beds and therapeutic mattresses has been noted since the spread of the coronavirus. Demand has also risen in rental operations. Slightly lower demand can be expected for the product categories that do not directly address the immediate needs caused by COVID-19.

Arjo has not to date experienced any production disruptions due to the outbreak of the coronavirus. The organization has managed the situation well and is maintaining a close dialogue with subsuppliers to ensure access to key components. Production capacity for medical beds has been increased to handle higher demand.

It is currently too early to estimate any financial consequences that this may have for the Group.

Outlook 2020

Organic sales growth for 2020 is expected to be in the upper part of the 2–4% interval.

Operating expenses are expected to continue to decline slightly as a percentage of sales in 2020.