Cochlear confident new hearing device will boost US returns
The company - one of Australia's biggest healthcare groups with a market capitalisation of $3.3 billion - unveiled its latest results on Tuesday.
Excluding one-off expenses relating to the recall of one of its hearing aids last year, net profit fell to $132.6 million from $158.1 million. Revenue was down 3 per cent at $752.7 million.
Cochlear makes high-tech hearing implants and prosthetics sold around the world. It does most of its business in the US and has been struggling to cope with the slowdown in that market.
While US sales were down 4 per cent, chief executive Chris Roberts said regulatory approval of its new device, Nucleus 6, would help drive growth. "Approval for sale of Nucleus 6 in Europe has just been received and product roll-out is now under way," he said.
Cochlear shares rose 1.4 per cent on Tuesday to close at $60.
The emphasis on the new device has unnerved some analysts, who have watched Cochlear's competitor, Advanced Bionics, launch a similar device already.
"It's likely Cochlear and Advanced Bionics will go head to head in US," UBS healthcare analyst Andrew Goodsall said. "The clinics in Europe that have both products already are seeing market share go to Advanced Bionics."
Mr Goodsall said Cochlear's results also revealed it endured a difficult second half, with its cash flow collapsing 59 per cent and its debt rising from zero to $118 million.
Wilson HTM analysts said the company's weakness in the US and Europe suggested a loss of market share in those regions. However, it said the market could be underestimating Cochlear's ability to bounce back from a difficult 2012.
Cochlear warned the market in June that its net profit would be lower than expected, due to weaker full-year sales. However, implant sales were up 16 per cent.
While profits were buoyed by growth in the Asia Pacific region, Mr Roberts said that was unlikely to continue into the current period.
"It was an exceptionally good year driven by the central Chinese tender," he said. "It's not obvious that that's going to be repeated."
The company declared a final, partially franked dividend of $1.27 per share, up from $1.25.
Frequently Asked Questions about this Article…
Cochlear reported underlying net profit (excluding one-off recall costs) of $132.6 million, down from $158.1 million the prior period. Revenue fell 3% to $752.7 million. The company has a market capitalisation of about $3.3 billion.
Cochlear's US sales were down 4%. The slowdown in the US market contributed to a reduction of about 16% in underlying full‑year profits.
Nucleus 6 is Cochlear's new hearing implant. Management says regulatory approval and roll‑out (Europe approval has just been received and roll‑out is underway) should help drive growth—particularly in the US—but the device will face direct competition from Advanced Bionics' similar product.
Cochlear's cash flow fell sharply, described as a 59% collapse in the second half, and the company's debt rose from zero to $118 million during the period.
Some analysts are cautious: UBS warned Cochlear may face head‑to‑head competition with Advanced Bionics and noted clinics with both products are seeing market share shift to Advanced Bionics. Wilson HTM flagged weakness in the US and Europe suggesting some loss of market share, but also said the market could be underestimating Cochlear's ability to bounce back from a difficult 2012.
Cochlear shares rose 1.4% on the trading day reported to close at $60. The company declared a final partially franked dividend of $1.27 per share, up from $1.25 previously.
Profit growth was helped by the Asia Pacific region, particularly an exceptionally strong year driven by a central Chinese tender. Management indicated that this strength is unlikely to be repeated in the current period.
Cochlear incurred one‑off expenses related to a recall of one of its hearing aids last year. Excluding those one‑off costs, the reported net profit was $132.6 million, down from $158.1 million.
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