Competitive threat overshadows Cochlear result

SHARES in the hearing implant maker Cochlear have fallen to three-month lows, despite it recording a turnaround first-half profit of $77.7 million, as concerns grew about its market share and currency woes.

Cochlear shares fell $7.50, or 9.3 per cent, to close at $72.96 on Tuesday.

The profit is up from a $20.4 million loss in the same period last year.

The company is still recovering from a $140 million recall of one of its embedded hearing devices in September 2011, which tainted its blue chip reputation and drove it into a loss in the first half of last financial year.

The share price has since recovered from an initial plunge to $45, rising to an 18-month high of $81 last week.

Cochlear's chief executive, Chris Roberts, said the results were "pleasing" but had been affected by the rising Australian dollar, which had taken a chunk out of its potential profits.

"If the same currencies had prevailed as the prior half, our profit would have been 20-odd million more," he said.

Without factoring in the cost of the recall process, Cochlear's net profit after tax was down 3 per cent from an underlying profit of $80.1 million in the previous corresponding period.

The results were below analyst expecations of $81.2 million, and have raised questions about the company's grip on market share - particularly in China and the developing world, where growth is crucial.

UBS healthcare analyst Andrew Goodsall said the company had faced strong competition over a contract in China, forcing the price of implants down significantly.

"There's been no growth in America and Europe, and 33 per cent growth in China," he said.

"China is a huge feature in this result. Without China there will be low growth."

Mr Goodsall said competitor Advanced Bionics had also significantly narrowed Cochlear's lead in the market with the introduction of new hearing devices.

"The key issue is competitor threat. They have been competing against inconsistent competitors for a decade, and now they are competing against a quite competent, aggressive competitor."

Mr Roberts said Cochlear planned to reintroduce the recalled CI500 series implant but would not give a specific date.

"We want to do more work on this product," he said.