US Competition Spooks Cochlear Investors

By Glenn Dyer | More Articles by Glenn Dyer

Cochlear shares dived more than 10% yesterday (Tuesday) after the company reported a higher interim result and dividend, but said it had lost market share in two of its biggest markets – the United States and Germany

Cochlear maintained guidance for its full-year earnings despite reporting lower than expected revenue growth for the December half year, up 11% to $712 million, while its net profit was up 16% to $128.6 million.

The company boosted its interim dividend 11% to $1.55 a share, fully franked.

The market ignored those positives and marked the shares down – they ended off 8% at $178.58.

“The US experienced a lower rate of growth with a loss of share following a competitor product launch,” said Cochlear chief executive Dig Howitt said in a statement accompanying the results.

“Western Europe growth was affected by a combination of factors including health budget constraints in a few markets and increased competitor activity, particularly in Germany.”

The result was driven by strong growth from its services division with revenue up 28%, which was ahead of analysts’ forecasts.

Mr. Howitt said that people over 65 continues to be its fastest-growing segment especially as it picks up more customers who currently use hearing aids.

He said a US damages award of$US268 million awarded against Cochlear last year was being strong defended after the applicants had requested to be paid $US123 million in “prejudgment interest.”

Cochlear said it intended to fight the judgment, which awarded damages to the Alfred E. Mann Foundation for Scientific Research (AMF) and Advanced Bionics (AB). The judgment found Cochlear had willfully infringed on patents.

“The board believes it is quite probably we will win on appeal,” Mr. Howitt told analysts on a conference call.

Despite the unexpected slowdown in revenue growth in the half, Cochlear reiterated its guidance for an underlying net full-year profit of $265 million to $275 million for 2018-19. The market has a forecast of $271 million.

“We expect to continue to deliver growth in revenue and earnings in the coming years, underpinned by the significant investments made in product development and market growth initiatives,” he said.

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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