China sounds good to Cochlear
COCHLEAR, the 31-year-old hearing implant developer, said China's growing affluence offered a "huge opportunity" for the Australian company as it tackles competition from Sonova Holding.
At least 30,000 babies are born each year in China with profound hearing difficulties who would benefit from an ear implant, chief executive Chris Roberts said on the ABC's Inside Business on Sunday.
Implants are devices that stimulate the hearing nerve in the inner ear and allow the user to perceive sound.
"China offers a huge opportunity in general as the country economically grows and shares that wealth throughout by growing a middle class with aspirations of having good healthcare," Dr Roberts said. "It's a huge potential market."
He said the bionic ear company wanted to keep manufacturing in Australia, but the government was not making it easy.
"That absolutely makes it more difficult for business, and that has already cost jobs in Australia. Jobs have already gone overseas because of those regulations," he said.
Dr Roberts has been a critic of federal Labor's Fair Work laws, which he says threaten Australian jobs.
But asked if Cochlear would move manufacturing offshore, Dr Roberts said the Sydney-based company wanted to remain in Australia while holding off on any mergers or acquisitions to help stave off Swiss competition. "If we drive manufacturing out of Australia, it's pretty hard for Cochlear to be the only company manufacturing here," he said.
He played down the possibility of moving manufacturing to Thailand, which has a free trade agreement with Australia.
"I don't believe we're at that stage yet, but I believe that we do need a better balance towards a healthy business environment," he said.
Cochlear's chief competitor, Swiss company Sonova, has expanded beyond hearing aids into bionic ears with the acquisition in 2009 of US company Advanced Bionics.
To compete, Dr Roberts said Cochlear had considered moving into hearing aids, to complement its existing hearing implants business.
"It's probably the $64,000 question: how do you really leverage these two areas? It's not obvious how we do that, but it's something we keep our eyes on," he said.
But expansion through mergers or acquisitions was off the agenda for now. "The main growth strategy for Cochlear is going to be through innovation, not mergers and acquisitions," Dr Roberts said.
Cochlear announced last week a first-half net profit of $77.7 million, up from a $20.4 million loss in the previous corresponding period when it was forced to issue a costly recall of its Nucleus C1500 series.
The improved first-half profit result coincided with a 27 per cent increase in sales.
InvestSMART FORUM: Come and meet the team
We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.
Want access to our latest research and new buy ideas?
Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.Sign up for free