Cochlear Tones Down Outlook

By Glenn Dyer | More Articles by Glenn Dyer

Shares in hearing implant maker Cochlear (COH) were sold off yesterday after the company warned that it expects its profit growth to slow this year after posting a 30% profit increase in the year to 30 June.

The shares lost more than 5% in early trading, although that was trimmed for a loss of 2.8% to $125 by the close.

Investors just don’t like ‘bad news’ or surprises, even though in the case of Cochlear, the ‘badness’ of the news is relative.

Revenue and profits will continue to grow, but not at the solid rate of the past two years.

And the board is not worried, signing off on a higher final dividend for the year and for the six months – boards that are concerned about the future don’t do that.

The company told the ASX in its 2016 financial year results that net profit rose $189 million for the year to June.

But a combination of flat Chinese government sales, uncertainty about European health budgets and the stronger Aussie dollar as will produce a slowdown in the profit growth rate for 2016-17.

As a result the board is looking for profits in the range of $210 million-$225 million range for the year to June, 2017. That will be a rise of 10% to 20% (not a fall, as some early sellers may have misread).

The company said Chinese central government purchases will only match 2015-16 levels, and the company said it is aware of the possibility of uncertainty created by Britain’s decision to quit the European Union hitting public health budgets.

As well, it is forecasting an exchange rate of US75c this year, up from US73c in 2016.

Directors declared a 20 per cent higher final dividend of $1.20 a share, making a total of $2.30 for the year – that was up 21% for the full year and a 79% payout ratio for the year.

"Cochlear expects positive momentum to continue, with investments made in product development and market growth initiatives expected to underpin growth for FY17," chief executive Chris Smith said.

The latest result was struck on sales up 23% to $1.158 billion, helped by new products and double digit sales growth in developed economies.

The result was at the upper end of the company’s $189 million-$190 million guidance range.

“We have strengthened our market-leading position with the success of asuite of product releases made over the past 18 months,” Mr Smith added.

Glenn Dyer

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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