Slow growth in US puts a dent in Sonic
SONIC HEALTHCARE will be under pressure to reach its full-year forecast after it admitted it had been hit by "unprecedented" stagnant growth in the United States.
It also flagged possible cost-cutting to its Australian and US operations.
The Sydney-based pathology giant posted a rise in first half profits but warned its full-year result would be at the lower end of guidance.
The company blamed the cautious outlook on unexpected pathology fee cuts in the US and lower than expected growth because of superstorm Sandy.
On a constant currency basis, its profit was up 9 per cent to $155 million for the six months to December 31.
Sonic's chief executive, Colin Goldschmidt, said the business was battling harsh conditions in the US.
"Whether this is related to unemployment or other reasons, we're not sure, but nevertheless there's now been more than one year of flat-to-slightly-positive market growth in the US," he said. "We don't know when this is going to turn around but it's an almost unprecedented time."
Sonic shares fell sharply on the news to close $1.20 lower at $12.85.
The company is hoping for relief in the form of the "Obamacare" legislation of the US President, Barack Obama, which aims at giving more Americans access to health cover.
"If it does happen, we expect something like 10 per cent of the population in the US who don't have private healthcare to enter the healthcare market," Dr Goldschmidt said.
"[This] would feed through to the laboratory market."
Sonic Healthcare provides medical testing and X-rays for doctors. It employs about 25,000 people in Australia, Europe and the US. Dr Goldschmidt said cost-cutting might be needed to return the company to solid growth.
Wilson HTM analyst Shane Storey said the company would struggle to meet guidance but it was still on track for long-term growth. "There's no government around the world saying, 'let's spend more on pathology.' It's a tough environment," he said.
Sonic posted an interim dividend of 25¢ a share, up 4 per cent.