ResMed Down, But Solid

Shares in medical equipment maker ResMed Inc ended the day off 12% after surprising with a sharp fall in quarterly earnings due in most part to the stronger Australian dollar.

ResMed develops equipment to manage breathing and respiratory disorders that inhibit sleep.

The shares fell to a low of $2.56, off 14% ,after the group reported an 11% drop in September quarter earnings.

They closed down 12.6% or 38c at $2.62.

ResMed said its net profit for the three months to September 30 was $US50.5 million ($A48.35 million), down from $US56.7 million ($A54.28 million) in the previous corresponding period.

The company blamed the lower result on higher operating expenses in the quarter due to the appreciation of the Australian dollar and the euro against the greenback.

That offset higher net revenues in the first quarter, up 12% from the previous corresponding period to $US314.8 million ($A301.37 million).

Chief executive Peter Farrell said revenue in the Americas increased by 9% on the previous corresponding period, and revenue in its other markets was up 15%.

Research & Development expenses were $US26.2 million for the quarter ended September 30, or 8.3% of revenue.

"R&D expenses increased by 33% (an 18% increase on a constant currency basis) compared to the quarter ended September 30, 2010 reflecting ongoing investment in our product pipeline.

"Additionally, R&D expenses were negatively impacted by the appreciation of the Australian dollar against the U.S. dollar," the company said.

"Worldwide, our growth in flow generators was mainly driven by sales of the S9 AutoSet and VPAP Adapt SV," Mr Farrell said in a statement on Monday in the US (Tuesday Australian time).

"Patient interface sales continue to perform strongly in all regions."

Despite the bad headline profit news, the details of the quarterly result showed the company was performing solidly.

Operating profit for the September quarter was $US60.9 million and cash flow from operations was a record $US89.5 million.

During the quarter, ResMed repurchased 4.4 million shares at a cost of $US124.7 million, as part of its ongoing capital management program.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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