Despite raising more than $1 billion in new capital in March, we had a timely reminder yesterday from Cochlear that it is not out of the woods so far as the continuing impact of the COVID-19 pandemic.
Cochlear CEO Dig Howitt warned in another trading update that it’s still too early to predict the true impact of coronavirus on the hearing implant maker, which is in “unchartered territory” due to economic slowdowns and pauses on elective surgery.
The company told the ASX sales revenue across the entire group had dropped 60% in April compared to a year prior, while sales of cochlear implants declined 80 percent in developed markets.
“We’re only a small way into this. The reduction [in treatments] happened in line with our expectations — but it’s still very difficult to determine what the outcome will be,” Mr. Howitt told analysts and media on a call on Monday conference call.
Cochlear shares reacted positively to the update, even though it was bad news. The shares rose more than 10% in early trading but eased over the rest of the session to end the day up 5.1% at $1.91.
The fundraising announced in late March was done at 4140 a share, so those shareholders who took up the issue and kept the shares, are looking at a fat $50 a share profit, or a return of more than 35%.
Cochlear revealed in the update that it is looking to take advantage of JobKeeper subsidies and has slashed spending after the company saw a drop in revenue of 60% last month due to the coronavirus pandemic.
Mr. Howitt said the potential for second waves of the virus was making it difficult to predict the long-term impacts on operations.
“In Japan in particular and in Singapore, we’ve actually seen surgeries, after coming back, decline again,” he said.
In late March and early April Cochlear, raised a total of $1.1 billion (it was the first major raising of current COVID-driven crop) and warned of a $30 million profit hit this financial year due to COVID-19 and the impact it was having on sales and surgeries.
On Monday management said sales of implants were hit as hospitals shut down or postponed implant procedures across the US and western Europe (sales in China took the first hit, especially in February and March).
Management said implant procedures were returning to normal across China, where the majority of Cochlear implant operations were for children.
Mr. Howitt said on Monday the gradual resumption of elective surgeries across the world was positive, but the company would have to build operations back up slowly.
“At this early stage, we are expecting a gradual recovery with expectations that hospitals will proceed cautiously with the resumption of elective surgery while prioritising caseloads,” he said.
