Letter to shareholders FY08 - Nobel Biocare Corporate

Dear Shareholders,2008 was a year of major economicdisorder, at times on a dramatic scale.Whole industries and many companiesexperienced difficult developments.A number of companies had to realignthemselves – including Nobel Biocare.Nobel Biocare posted revenues ofEUR 619.2 million and net profit ofEUR 109.7 million in 2008. We are notsatisfied with this result, as it came inbelow our original expectations. To alarge extent this result reflects the developmentsof the economy – which alsoimpacted us. But it also reflects theextensive realignment that we embarkedupon last year. The decline in profitabilityis largely attributable to the temporarylack of economies of scale; these willbe effective again when sales pick up.However, despite demanding conditions,we strengthened our balance sheetand further improved cash flow. That isespecially important in difficult timeslike these: it demonstrates that yourcompany, Nobel Biocare, remains on asolid financial foundation, is profitable,and prepared for the future.The broad realignment we are undertakinghas kept Nobel Biocare’s managementand workforce busy in 2008. It hasalready produced some initial results:for example, Nobel Biocare was able toquickly improve its reputation in certainmarkets. Without a doubt, we are ontrack to again becoming the benchmarkin the industry, as the leading providerof science-based innovations and excellentproduct quality. The culture of opendialog, much valued by management,is also very well received by customersand opinion leaders. This – alongwith the successful launch of the newNobelActive implant – helped NobelBiocare to consolidate its customer baseacross all regions, even though this isnot immediately apparent in the salesfigures for 2008.In North America, improving salesmo mentum was negatively impactedwhen the escalating financial crisis hitwith full force at the end of the thirdquarter. We pointed out over a year agothat developments in the financial andhousing markets might impact our ownbusiness. We too were surprised byits pace and intensity. In Europe, wherecorrective measures are beginning totake hold, revenues for 2008 nonethelesscame in below expectations. Asia continuedto achieve revenue growth in 2008,yet could not entirely escape the downwardeconomic trend toward the end ofthe year. Emerging markets like Russia,India and China continued to achievegrowth rates in double digits.We are confident that the initiatives ofthe past year will bring results in 2009.Nobel Biocare tackled the realignmentbroadly, energetically, and resolutely.Implementation progressed well: in thefirst half of the year we acquired Alpha-Bio Tec, an Israeli company. We strengthenedmanagement and sales force, andprofessionalized processes. In themedium term, this acquisition also se curesour access to some of the fastestgrowingsegments of the implant market,like orthodontic mini-screws and smalldiameterimplants. This acquisition alsosubstantially strengthens our marketpresence in Israel and various countriesin Eastern Europe and Latin America. Inthe second half we turned our attentionto advancing the product offering and

optimizing cost structure. We acquiredBioCad, the leader in prosthetic software,and joined in partnerships with technologyleaders like Optimet and ISI. Thus,in the spring of 2009, Nobel Biocarewill be in position to provide customerswith the broadest offering of implants,prosthetic products and materials, leadingscanner technology, prosthetic anddiagnostic software, treatment planningand guided surgery applications.Also key in 2008 was the continuousand open dialog with customers,regulators and medical associations.Improving our reputation in all marketsand strengthening customer relationshipsis a core concern of management.The change of style at Nobel Biocarehas been appreciated by customers anddental associations.Nobel Biocare formulated its scientificand clinical standards with further clarity,to meet the highest standards. The standardsthat new products must achievein tests and clinical studies were sethigher. The launch of Nobel Active in thefirst half of 2008 took place followingnew standards. With more than 130’000implants sold so far, the product hasexceeded our expectations and is alreadythe most successful product launch todate by Nobel Biocare. The innovativetechnology in Nobel Active comes fromAlpha-Bio Tec.Three experienced executives joined theNobel Biocare management team, all ofthem highly qualified and experienced:Dirk W. Kirsten (Chief Financial Officer),Hans Schmotzer (Executive Vice PresidentResearch and Development), andAlexander Ochsner (Vice President andGeneral Manager EMEA). Additionalpersonnel was also recruited furtherdown the management hierarchy, andthe sales organization was substantiallystrengthened. Overall, headcountgrew by 13 percent, or 299 employees.It is satisfying to see how effectiveNobel Biocare is at attracting leadingindustry experts and good salespeople– these people are convinced thatthe company is on the right track.Nobel Biocare again conducted a focusedhiring program in 2008; we wish toemerge from the current economic crisisas a stronger company. That sameobjective drives our continued improvementof our product portfolio. We aimto advance our top position in implantsand use Nobel Procera to extend ourleading offering in prosthetic solutions.We also want to be a pioneer and shapethe trend of digital dentistry. Of course,the current focus is also on cost-efficiency,improving our competitiveness andprofitability. All that requires endurance.We have already achieved some majormilestones, and are confident of graduallyputting Nobel Biocare back on trackin 2009 for sustained future growth.There is substantial growth potential inthe markets for dental implants as wellas all-ceramic prosthetic solutions likecrowns, bridges and laminates, andnot least in the increasing digitalizationof dentistry. Nobel Biocare has leadingproducts and innovative solutions ineach of these promising areas. The companyoperates in one of the most attrac -tive segments in healthcare: in themarket for restorative and esthetic dentalreplacement. Nobel Biocare remainsthe worldwide number 1 and has thepotential to strengthen this position.

Furthermore, Nobel Biocare is leadingin its commitment to research anddevelopment. We also protect our innovationswith the most comprehensivepatent portfolio in the industry. No othercompany in the industry has morecustomers, wider geographic coverage,or a more comprehensive productrange. All this will become apparentwhen the measures already implementeddevelop their full effect. At that pointwe will witness a return of confidencethat Nobel Biocare is definitely a goodinvestment.We thank you, our shareholders, foryour loyalty throughout a particularlydifficult year. We appreciate that this isnot to be taken for granted, and weare doing everything in our power tojustify your loyalty by advancing andstrengthening our company. On behalfof the Board of Directors and themanagement team, special thanks goto all our employees whose majorcommitment, loyalty and convictiondrive the realignment. Our thanks alsogo to customers for their partnership,and to patients for their trust.The value of a company is the sum ofthe quality of its products and their benefitto customers, the knowledge and commitmentof its employees, and the trustvested in it. In this respect we achievedmuch in 2008. Yet this was not reflectedin the development of Nobel Biocare’sshare price. The extent to which ourmarket capitalization suffered over theprevious year bears no relation to ourmarket leadership, our potential, orNobel Biocare’s strong balance sheet.For all that and particularly for the initiativeslaunched in 2008, Nobel Biocarecontinues to be the clear leader in thislong-term attractive market.Rolf SoironChairman of the BoardDomenico ScalaChief Executive Officer

Selected financialsin EUR million Full year 2008 Full year 2007 Growthin %Revenue 619.2 665.9 -7.0Revenue growth in local currencies at CER (%) –4.2 15.4Gross margin (%) 79.7 84.0Operating expenses in % of revenue 58.3 51.4Return on equity (%) 41.6 49.8Gross profit 493.6 559.3 -11.7Profit from operations (EBIT) 132.9 216.7 -38.7Operating (EBIT) margin (%) 21.5 32.5Profit before tax 159.4 212.0 -24.8Profit margin (%) 17.7 25.0Basic earnings per share, EUR 0.90 1.35 -33.3Non-current assets 275.1 195.8 40.5Current assets 422.4 460.0 -8.2Total equity 267.6 267.9 -0.1Total assets 697.5 655.8 6.4Cash and cash equivalents incl. bank overdraft 163.4 186.2 -12.2Net cash from operating activities 169.0 134.1 26.0Investments in property, plant and equipment and intangible assets 30.4 24.9 22.1Employees at end of period 2’541 2’242 13.3Regional revenue splitin EUR millionFull year2008Full year2007CERGrowth2007–2008Europe, Middle East and Africa (EMEA)* 289.4 314.9 –6.8%Proportion of total revenue 47% 47%North America 200.0 227.7 –6.3%Proportion of total revenue 32% 34%Asia/Pacific 109.5 99.2 9.4%Proportion of total revenue 18% 15%Latin America/Rest of the world* 20.3 24.1 –10.5%Proportion of total revenue 3% 4%Total 619.2 665.9 –4.2%*2007 restated to reflect management structureThe complete full year 2008 financial report can be downloaded at the Nobel Biocare website:http://investor.nobelbiocare.com/

CorporateNobel Biocare Holding AGP.O. Box, 8058 Zurich-FlughafenSwitzerlandPhone +41 43 211 42 00Fax +41 43 211 42 42Investor RelationsSüha DemokanHead of Investor RelationsPhone +41 43 211 42 30suha.demokan@nobelbiocare.comMedia RelationsNicolas WeidmannVP Global CommunicationsPhone +41 43 211 42 80nicolas.weidmann@nobelbiocare.comThis letter to shareholders contains forward-looking statementsbased on beliefs of Nobel Biocare‘s management.When used in this document, words such as “anticipate”,“believe”, “estimate”, “expect”, “intend”, “plan” and “project”are intended to identify forward-looking statements.They may involve risks and uncertainties, including technologicaladvances in the medical field, product demandand market acceptance, the effect of economic conditions,the impact of competitive products and pricing, foreigncurrency exchange rates and other risks. These forwardlookingstatements reflect the views of Nobel Biocare as ofthe date made with respect to future events and are subjectto risks and uncertainties. All of these forward-lookingstatements are based on estimates and assumptions madeby management of the company and are believed to bereasonable, though are inherently uncertain and difficult topredict. Actual results or experience could differ materiallyfrom the forward-looking statements. Nobel Biocare disclaimsany intention or obligation to update these forwardlookingstatements.www.nobelbiocare.com