Demant A/S Charts 2026 Recovery Amid Market Headwinds

Demant A/S Unsponsored ADR ((WILYY)) has held its Q4 earnings call. Read on for the main highlights of the call.

Demant A/S used its latest earnings call to deliver a balanced message: operationally, the group is generating strong cash, launching successful new products and cementing its presence in key markets through acquisition, while at the same time acknowledging that profitability is under pressure from a weaker hearing-aid market, mix and FX headwinds, and higher leverage. Management laid out a detailed roadmap to restore margins by 2026, but investors are being asked to look through a period of restructuring, integration costs and competitive strain, especially in the U.S.

Group revenue and growth momentum

Demant reported full-year 2025 organic growth of 2%, or 5% in local currencies, as the business navigated a softer global hearing-aid market. Momentum clearly improved through the year: organic growth accelerated to 4% in the second half, showing a sequential recovery across all three business areas. This pattern signals that, despite macro and market challenges, underlying demand remains resilient and the company is gaining traction from new products and commercial initiatives as the year progresses.

Strong cash generation supports flexibility

Cash generation was a clear bright spot. Full-year cash flow from operations reached DKK 3.85 billion, with free cash flow above DKK 3.0 billion. In the second half alone, cash flow from operations was DKK 2.3 billion and free cash flow about DKK 2.0 billion. This robust cash profile provides Demant with financial flexibility to fund acquisitions such as KIND, absorb restructuring costs and continue investing in product development and commercial capabilities, even as margins temporarily come under pressure.

KIND acquisition expands Hearing Care footprint

The acquisition of KIND Group, closed in December 2025, is a strategic move that significantly enlarges Demant’s Hearing Care footprint, particularly in Germany where the company expects to become the number-one player. KIND is projected to contribute around DKK 300 million to EBIT before special items in 2026, with modelling based on roughly DKK 275 million for 11 months of consolidation. Beyond the near-term financial boost, the deal enhances Demant’s retail network, scale and customer access, positioning the group for stronger growth and better bargaining power in a consolidating industry.

Oticon Zeal product launch gains traction

The launch of Oticon Zeal in October 2025 has been a notable commercial success so far. Introduced initially in selected markets, Zeal received very positive user and channel feedback and has already lifted sales in the first four European markets. Importantly, the product is attracting more first-time users and is helping to pull through demand across Demant’s broader portfolio. The rollout is underway globally, with the U.S. launch completed and Canada and France next, suggesting Zeal could be a key driver of volume and mix improvement over the coming quarters.

Hearing Care and Diagnostics show Q4 strength

Despite overall market softness, the fourth quarter showcased strength in two of Demant’s core areas. In Hearing Care, Q4 revenue in local currencies grew 17%, with organic growth around 5%, supported by the first month of contribution from KIND. Diagnostics also delivered a solid performance, posting 8% organic growth in local currencies. Growth was broad-based, with strong results in the U.K. and Germany, robust services and consumables sales in the U.S. and Canada, and healthy instrument demand in Australia. These trends underline the resilience and diversification of Demant’s business model.

Clear 2026 financial targets and profitability program

Management laid out explicit 2026 financial targets, guiding to organic growth of 3–6% and EBIT before special items of DKK 4.1–4.5 billion. To support this, Demant is rolling out a company-wide cost program expected to deliver around DKK 250 million of EBIT improvement in 2026 and roughly DKK 500 million in annualized savings from 2028 onwards. The program spans operational efficiency, organizational streamlining and leveraging scale, particularly around the KIND integration, and is central to the margin recovery story presented to investors.

Sustainability progress and people metrics

Beyond financials, Demant highlighted progress on its sustainability and people agenda. The company reached 12 million individuals with its solutions, underscoring its social impact in hearing health. Scope 1 and 2 greenhouse gas emissions are down 16% compared with the baseline, on track toward a 46% reduction target by 2030. Gender diversity in top management has reached 33%, with a goal of exceeding 35% by 2030. Demant is also nearing full roll-out of “people-readiness” metrics, reflecting a focus on organizational capability and culture during a period of strategic change.

Profitability pressure and EBIT decline

Despite top-line resilience and strong cash flow, profitability declined in 2025. EBIT before special items came in at DKK 3.96 billion, corresponding to an EBIT margin of 17.2%, with management noting around a 10% drop in EBIT versus the prior year. Second-half EBIT was DKK 2.1 billion, highlighting lower operating leverage as costs grew faster than revenue in some areas. The margin squeeze underscores the combined effect of softer markets, unfavorable mix, rising operating expenses and continued investment in growth initiatives.

Gross margin and ASP headwinds weigh on results

Gross margin contraction was a key drag on earnings. For the full year, gross margin declined by about 0.6 percentage points, while the second half saw a sharper year-on-year contraction of roughly 2.6 percentage points. Average selling prices were estimated to be down around 2% in 2025, primarily due to channel and geographic mix effects, including a higher share of lower-priced segments such as the NHS and certain markets like France, and increased exposure to lower-priced channels. These dynamics weighed on margins despite solid unit volumes.

Market softness and U.S. share loss

The external backdrop also worked against Demant. Management estimated the global hearing-aid market grew only about 2% in value in 2025, below historical norms. The U.S. market was flat, and Demant reported a loss of share there, driven mainly by lower sales to a large retailer that expanded its supplier base. This combination of subdued market growth and channel-specific pressure in a key geography compounded the pricing and mix headwinds the company faced, and it remains a central risk in the near term.

Elevated leverage after KIND acquisition

Demant’s balance sheet has become more stretched following its acquisition push. Cash outflows for acquisitions totaled roughly DKK 5.4 billion, largely driven by KIND, resulting in a significant increase in net debt. The gearing ratio ended the year at 3.4x, above the company’s medium- to long-term target range of 2.0–2.5x. In response, management has paused share buybacks to prioritize deleveraging, signaling a clear focus on bringing leverage back within the target band over the next 18–24 months and reassuring investors about balance sheet discipline.

Special items and restructuring costs

Restructuring and integration efforts are another prominent feature of the near-term outlook. Demant recognized DKK 128 million in special items in the second half of 2025 and plans to book about DKK 325 million of special items in 2026. This includes DKK 125 million linked to the integration of KIND and DKK 200 million for one-off restructuring activities, with an additional DKK 100 million anticipated in 2027. The 2026 program will affect around 700 people globally, including about 150 within Demant, reflecting the scale of the organizational reshaping underpinning the cost savings plan.

FX and operational cost pressure

Currency and cost dynamics further tightened the profit picture. In 2025, FX—particularly a weaker U.S. dollar—acted as a headwind, and management expects FX to reduce 2026 EBIT by about DKK 200 million, split evenly between the first and second halves. On the cost side, operating expenses increased around 5% organically in the second half, partly due to unusually low comparables and spending holdbacks at the end of 2024, while full-year organic OpEx was up roughly 3%. This cost inflation limited the extent of margin recovery from revenue growth.

Competitive pressures in key channels

Competitive intensity is clearly rising in some of Demant’s key channels. Management cited tough competition in large retail formats and highlighted that competitors are launching in-ear devices at lower price points. These developments are increasing pricing pressure and complicating mix management, particularly in the U.S. market where the company is already contending with share losses. How effectively Demant can differentiate with products like Oticon Zeal, manage channel relationships and defend value will be central to stabilizing ASPs and regaining share.

Guidance and roadmap toward 2026 margin recovery

For 2026, Demant is guiding to organic growth of 3–6% and EBIT before special items of DKK 4.1–4.5 billion, assuming the global hearing-aid market grows 2–4% in value. The company models total acquisitive growth of about 8%, offset by a 2% negative FX impact and an FX-related EBIT headwind of DKK 200 million. The guidance incorporates an expected DKK 250 million EBIT uplift from a two-year cost program in 2026, progressing toward DKK 500 million in run-rate savings from 2028 onward, alongside a roughly DKK 300 million EBIT contribution from KIND. Special items of DKK 325 million will be recognized in 2026, with additional restructuring in 2027. Demant also assumes a 23% effective tax rate and maintains a pause on share buybacks while targeting a reduction in gearing from 3.4x back to 2.0–2.5x within 18–24 months, emphasizing a disciplined path to margin and balance sheet normalization.

In summary, Demant’s earnings call painted a picture of a company balancing solid strategic execution against a challenging operating environment. Strong cash flow, the successful Oticon Zeal launch and the KIND acquisition underpin a credible growth and margin-recovery path into 2026 and beyond. However, near-term profitability is squeezed by weaker markets, mix and FX headwinds, competitive pressures and restructuring costs. For investors, the story hinges on management’s ability to deliver the cost savings, integrate KIND smoothly and re-accelerate growth, especially in the U.S., while steadily deleveraging the balance sheet.