Competitive threat overshadows Cochlear result
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.
Frequently Asked Questions about this Article…
Cochlear reported a turnaround first‑half profit of $77.7 million, but shares fell to three‑month lows because investors worried about market‑share pressure and currency headwinds. The stock dropped $7.50 (9.3%) to close at $72.96 as concerns about competitive threats and the rising Australian dollar outweighed the profit news.
Cochlear recorded a first‑half profit of $77.7 million, a recovery from a $20.4 million loss in the same period a year earlier. The company also noted that, excluding the cost of the recall process, net profit after tax was down about 3% from an underlying profit of $80.1 million in the previous corresponding period.
Cochlear is still recovering from a September 2011 recall of one of its embedded hearing devices that cost about $140 million. The recall damaged the company's blue‑chip reputation, contributed to a prior half‑year loss, and continues to factor into investor concerns and reported results.
Cochlear's CEO, Chris Roberts, said the rising Australian dollar reduced potential profits. He estimated that if exchange rates had remained the same as the prior half, profit would have been roughly $20 million higher, meaning currency swings materially trimmed reported earnings.
No. Cochlear's result of $77.7 million missed analyst expectations, which were around $81.2 million, and that shortfall helped raise questions about growth and market positioning.
The results raised questions about Cochlear's grip on market share. UBS analyst Andrew Goodsall highlighted strong competitive pressure in China that forced implant prices down. He noted there's been no growth in America and Europe and that China is a major driver of the company's growth — without it, overall growth would be low.
The article specifically names Advanced Bionics as a competitor that has narrowed Cochlear's market lead by introducing new hearing devices. Analysts described the competitive threat as growing: Cochlear is now up against a competent, aggressive rival that is pressuring prices and market share.
Cochlear said it plans to reintroduce the recalled CI500 series implant but did not provide a specific date. CEO Chris Roberts said the company wants to do more work on the product before reintroduction.
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