Sonova reports strong results across all businesses

Media Release Sonova reports strong results across all businesses Stäfa
(Switzerland), 20 May 2014 - Sonova Holding AG, the world's leading provider
of hearing solutions, announces today strong results for the financial year
2013/14 across all of its businesses. The Group generated double-digit organic
growth, resulting in sales of CHF 1,951.3 million. This represents an increase
of 8.7% in reported Swiss francs or 11.7% in local currencies. Group EBITA
reached CHF 430.1 million, up 11.6% in Swiss francs or 16.7% in local
currencies compared to the normalized EBITA for the prior year. The Board of
Directors proposes a dividend of CHF 1.90 per share, up 19% from the
distribution in the prior year. Highlights

  *Group sales of CHF 1,951 million - up 8.7% in Swiss francs and 11.7% in
    local currencies
  *EBITA of CHF 430.1 million - up 11.6% in Swiss francs and 16.7% in local
  *Hearing instruments segment - sales of CHF 1,756 million, up 9.5% in local
    currencies, EBITA margin expanding by 50 bps to 23.8%
  *Cochlear implants segment - sales of CHF 195 million, up 36.0% in local
    currencies, EBITA margin reaching 6.6%
  *Free cash flow of CHF 289 million - up 10.0% from last year
  *Solid balance sheet - net cash position of CHF 311.5 million
  *The Board of Directors proposes a dividend increase of 19% to CHF 1.90 per
  *Outlook - for FY 2014/15, sales are anticipated to grow by 7% to 9% and
    EBITA to rise by 11% to 15%, both measured in local currencies

Commenting on the results, Lukas Braunschweiler, CEO of Sonova said: "We are
very pleased to announce another strong result that reflects the dedication of
our teams and the benefit of Sonova's constant pursuit of customer
driven-innovation. Through a high number of successful product introductions
our hearing instruments business achieved a significant organic sales
increase, outpacing the estimated market growth. Our cochlear implants
business benefited from the strength of the combined Phonak and Advanced
Bionics R&D organization, as clearly reflected in the substantial sales and
earnings growth. We are confident to achieve our mid-term financial targets by
continuing to build on our market-leading positions and maintaining a high
pace of innovation."

Double-digit organic sales growth in local currencies

In the financial year under review, Group sales increased by 8.7% in reported
Swiss francs or 11.7% in local currencies to CHF 1,951.3 million (2012/13: CHF
1,795.3 million). The main driver of the increase was double-digit organic
growth, which reached 11.0% in local currencies. The Swiss franc strengthened
against all of the most relevant currencies except the euro during the
financial year, reducing reported sales growth by CHF 54.2 million or 3.0%.

In line with its strategy, Sonova made selected acquisitions of retail
distribution businesses within its hearing instruments segment, albeit to a
smaller extent than in previous years. External growth in sales for 2013/14
stemming from these acquisitions and the full-year effect of acquisitions from
the previous year represented CHF 12.5 million or 0.7%.

Broad-based growth across all regions

All major regions posted a solid sales increase in local currencies. Sales in
the EMEA region (Europe, Middle East, and Africa), which accounted for 41% of
Group sales, rose by 12.4% in local currencies. In the hearing instruments
segment, key markets such as Germany, the United Kingdom, and France posted a
strong increase, while the Netherlands and Denmark showed the continuing
adverse impact of reimbursement changes. In all major regions, the cochlear
implants segment grew even more strongly than the hearing instruments segment.

Sales in the United States, which accounted for 37% of Group sales in fiscal
year 2013/14, increased by 11.0% in local currency. In the hearing instruments
segment, growth was driven by solid development of both the commercial market
and business with the US Department of Veterans Affairs (VA). Strong
acceleration of cochlear implant sales in the second half of the financial
year also added to growth. Cochlear implant processor sales rose sharply
following US regulatory approval of the new Naída CI Q70 sound processor in
late August 2013.

Sales in the rest of the Americas (excluding the US) grew by 9.6% in local
currencies and accounted for 11% of Group sales. Strong growth in Brazil and
other Latin American countries was in part offset by a significant currency
headwind, which reduced reported sales by around CHF 20 million or nine
percentage points. The main driver of the 14.0% sales increase in local
currencies in the Asia/Pacific region was strong performance from the hearing
instrument business in China, Australia, New Zealand, and Japan. The region
contributed 11% to Group sales.

Sustained margin improvement

Gross profit reached CHF 1,340.4 million (2012/13: CHF 1,239.8 million), an
increase over the prior year of 8.1% in reported Swiss francs or 11.3% in
local currencies. This corresponds to a gross margin of 68.7%, down from 69.1%
the prior year. This decrease is caused by the higher share of cochlear
implants business, which has a modestly lower gross profit margin than the
hearing instruments segment.

Maintaining the group's high pace of innovation requires significant and
continuing investment in research and development (R&D). R&D expenses grew by
11.3% in local currencies to CHF 125.7 million or 6.4% of sales in 2013/14.
Gross R&D spending (including the net increase in capitalized development
costs) amounted to CHF 142.9 million, corresponding to 7.3% of sales.

Sales and marketing costs increased by 5.5% in Swiss francs or 8.3% in local
currencies to reach CHF 589.6 million. As a percentage of sales, reported
costs stood at 30.2%, down from 31.1% in the prior year. This favorable trend
is due to continuous cost discipline and was achieved despite significant
product launch activity (particularly in the cochlear implants segment), extra
costs for re-branding and process harmonization in our US retail business, and
accelerated engagement in web-based B2C marketing.

General and administrative expenses rose by 7.6% in Swiss francs or 9.4% in
local currencies, below reported sales growth. As a percentage of sales,
general and administrative expenses stood at 10.0%. A favorable cost ratio
development from strict cost control, was offset by extra costs for deeper
integration of our US retail business.

Other income amounted to CHF 0.2 million. The CHF 203.6 million reported in
the prior year under "other expenses" represented one-off costs, principally
the increased product liability provision related to Advanced Bionics' Vendor
B product recall in 2006.

In summary, total operating expenses rose by 6.5% in Swiss francs or 8.9% in
local currencies, both normalized for prior year one-off costs in the "other
expenses" category. This is well below the reported sales growth. Operating
profit before acquisition-related amortization (EBITA) was therefore CHF 430.1
million, which represents an increase of 11.6% in Swiss francs or 16.7% in
local currencies compared to the normalized EBITA for the prior year. EBITA
margin rose to a solid 22.0%, up from a normalized EBITA margin of 21.5% last
year. Strong operating margin improvements were partly offset by the
unfavorable currency development that reduced the reported EBITA by CHF 19.6
million and the EBITA margin by 40 basis points.

Operating profit (EBIT) reached CHF 404.0 million, an increase of 12.5% in
Swiss francs or 17.7% in local currencies compared to the normalized prior
year value. This reflects the strong EBITA growth and the fact that
acquisition-related amortization were unchanged from prior year, as the modest
increases from acquisitions were offset by currency effects. Net financial
expenses rose from CHF 7.1 million to CHF 9.5 million, mainly due to the
unwinding of the discount on the product liability provision and a lower
profit from associates.

Solid growth in EPS

Income taxes for the financial year totaled CHF 47.2 million, up from CHF 37.6
million in 2012/13, representing an effective tax rate of 12.0%. Reported
income after taxes was CHF 347.4 million, up 12.9% from the normalized result
in the previous year. Basic earnings per share (EPS) therefore reached CHF
5.08 (normalized EPS 2012/13: CHF 4.60), a solid rise of 10.4% over the
previous year.

Workforce increases to 9,529

At the end of the 2013/14 financial year, the Group's total workforce stood at
9,529 full time equivalents - an increase of 577 over the previous year. This
growth is broadly based across our sales and distribution organization and
also includes modest additions from retail acquisitions. Our manufacturing
work force also increased, particularly at the Vietnam operations center,
which has taken over assembly of our Lyric product from our US operations.

Hearing instruments segment - New products driving organic growth

Driven almost exclusively by organic growth, sales in the hearing instruments
segment reached CHF 1,756.0 million, representing an increase of 6.5% in
reported Swiss francs and 9.5% in local currencies. With an organic growth
rate of 8.8% in local currencies, the business outpaced estimated market
growth rates and further extended the Group's leading market position.
Acquisitions added CHF 12.5 million or 0.7% to sales growth, including the
full-year effect of acquisitions completed during the previous financial year.

Once again, both the Group's wholesale and retail businesses contributed to
growth in the hearing instruments segment. A key driver of this strong
development was the success of the Phonak Quest platform, particularly the
highly popular Receiver-In-Canal (RIC) form factor introduced at the
AudiologyNOW! congress in April 2013. Lyric, the first and only invisible
extended wear solution in the industry, also supported the sound organic sales
increase with a growth rate of approximately 50% in 2013/14. Unitron posted
particularly strong growth in Germany, France, the UK, and China. Growth in
the retail business continued to be driven by strong performance from the
partnership with Boots, the UK's leading pharmacy-led health and beauty
retailer, but it was also supported by solid sales growth in several
Asia-Pacific markets.

Looking at the different product categories, Premium hearing instruments
posted an above average growth rate, achieving a sales increase of 12.8% in
local currencies. The Premium category also includes Lyric. The Standard
category showed the strongest growth, up 15.3% in local currencies. This was
helped in part by strong growth in the German market following a change in the
reimbursement system in November 2013. The Advanced category also contributed
to growth, albeit to a lesser extent, with a sales increase of 3.6% local
currencies. Premium and advanced hearing instruments each accounted for 22% of
Group sales, while Standard accounted for 29%. Supported by the introduction
of Roger, the all-new 2.4 GHz based system, sales of wireless communication
systems grew by 9.9% in local currencies. Sales of miscellaneous products and
services grew by 3.1% in local currencies in 2013/14, accounting for 13% of
Group sales. This category mainly consists of revenues from services and from
the distribution of accessories and batteries.

The strong sales increase and stringent cost discipline lifted EBITA for the
hearing instruments segment by 8.8% in Swiss francs and 13.9% in local
currencies, reaching CHF 417.3 million. Excluding the unfavorable currency
impact, operating margin rose by 90 basis points. As reported, EBITA margin
rose by 50 basis points to 23.8%. These margin increases demonstrate operating
leverage and were achieved despite extra costs for deeper integration of our
US retail business, such as establishing common branding and centralizing back
office systems and support processes.

Cochlear implants segment - Drawing from a complete portfolio

The performance of the cochlear implants segment was another highlight in the
year under review. The segment achieved sales of CHF 195.3 million, an
increase of 33.1% in Swiss francs and 36.0% in local currencies. Supported in
particular by the launch of the Naída CI Q70 sound processor in summer 2013,
sales accelerated over the course of the year, exceeding a year-on-year growth
of 50% in the second half of 2013/14. Europe and North America in particular
responded very well to the new sound processor that incorporates many
industry-first innovations shared with Phonak hearing aids. The balanced
portfolio of electrodes and Advanced Bionics' swimmable processor also
supported growth, which reflected both the addition of new customer clinics
and increased penetration at existing accounts. As in the previous year,
cochlear implants sales included the fulfillment of a central government
tender in China.

Profit from the cochlear implants segment improved strongly during financial
year 2013/14, in line with our business plan, despite significant expenses
from the launch of new products, particularly the new Naída CI Q70 sound
processor. EBITA for the segment reached 12.8 million, representing an
operating margin of 6.6%. This is an important step towards our goal of
bringing the EBITA margin of the cochlear implants business closer to the
corporate average. Normalized for one-off costs, principally the increased
product liability provision related to Advanced Bionics' Vendor B product
recall in 2006, the cochlear implants segment had achieved an EBITA of CHF 1.8
million in the previous financial year. In 2013/14 the relevant parameters for
the said product liability provision developed fully in line with the
assumptions considered in the accounts of the previous financial year. Thus no
releases or additions with P&L effect were booked to the provision in the year
under review.

Significant free cash flow

Cash flow from operating activities rose by 6.2% to CHF 411.0 million in the
period under review. The increase reflects the rise in EBITA of 11.6% versus
the prior year (normalized for the effect of one-off costs) and CHF 43.4
million of cash spent for the settlement and defense of product liability
claims in connection with the Advanced Bionics' Vendor B product recall
(2012/13: CHF 2.9 million). This includes the settlements announced in October
2013, which covered the majority of claims pending at that time. Investments
in tangible and intangible assets increased by 15.0% to CHF 94.7 million,
resulting in an operating free cash flow of CHF 318.4 million, unchanged from
prior year. The cash consideration for acquisitions, including earn-out
payments for prior period acquisitions, dropped from CHF 56.2 million last
year to CHF 29.8 million during the reporting period. In summary, this
resulted in a free cash flow of CHF 288.6 million, up 10.0% from last year.

The cash outflow from financing rose to CHF 309.1 million in the period under
review, from CHF 21.8 million last year. This in part reflects the higher
distribution to shareholders as well as the purchase of shares to serve the
equity-based incentive plans; in previous years, the shares for these plans
were created out of conditional capital. Sonova also decided on an early
repayment of CHF 150 million of its CHF 230 million bank debt assumed in
connection with the acquisition of Advanced Bionics in 2009. The remainder of
this bank debt will mature in December 2014, rendering the Group essentially

Maintaining a solid balance sheet

The reported net working capital was at CHF 190.6 million compared to CHF
187.1 million at the end of the 2012/13 financial year. Capital employed was
largely unchanged at CHF 1,463 million. Helped by its strong free cash flow,
the Group ended the period with a net cash position of CHF 311.5 million, up
CHF 125.7 million from CHF 185.8 million at the end of the prior year. The
return on capital employed (ROCE) was 27.7% compared to 22.6% in the prior
year (normalized for the effect of one-off costs), showing that we are on
track to reach our mid-term financial targets.

In light of its strong performance during the 2013/14 financial year, as well
as the solid financial position of the Sonova Group, the Board of Directors
will propose to the Annual General Shareholders' Meeting on June 17, 2014 a
dividend of CHF 1.90. Compared to the prior year, the proposed distribution is
up 19% and represents a slightly higher payout ratio of 37%.

Outlook 2014/15

Sonova remains committed to achieve profitable growth through continuous
innovation and to further expand our strong market positions. We expect
continued solid growth in sales and earnings in 2014/15, both in the hearing
instruments and cochlear implants segment. Group sales are expected to grow by
7%-9% and EBITA to increase by 11%-15%, both measured in local currencies.

While actual reported results may vary based on currency fluctuations, Sonova
continues to mitigate the impact of the strong Swiss franc on earnings growth
through its long-term global resource allocation strategy. At current foreign
exchange conditions and including ongoing mitigation efforts, the Group EBITA
in reported Swiss francs is expected to increase by 8-12%.

The Annual Report 2013/14 is available on our website:

The presentation of the Full-Year Results 2013/14 can be downloaded at:

- End -


Investor Relations                           Media Relations
Thomas Bernhardsgrütter                      Michael Isaac
Phone   +41 58 928 33 44                     Phone   +41 58 928 33 24
Mobile  +41 79 618 28 07                     Mobile  +41 79 420 29 56
Email  Email
Corinne Hofmann                              Patrick Lehn
Phone   +41 58 928 33 22                     Phone   +41 58 928 33 23
Email           Mobile  +41 79 410 82 84
Nicole Jenni
Phone   +41 58 928 33 22


This Media Release contains forward-looking statements, which offer no
guarantee with regard to future performance. These statements are made on the
basis of management's views and assumptions regarding future events and
business performance at the time the statements are made. They are subject to
risks and uncertainties including, but not confined to, future global economic
conditions, exchange rates, legal provisions, market conditions, activities by
competitors and other factors outside Sonova's control. Should one or more of
these risks or uncertainties materialize or should underlying assumptions
prove incorrect, actual outcomes may vary materially from those forecasted or
expected. Each forward-looking statement speaks only as of the date of the
particular statement, and Sonova undertakes no obligation to publicly update
or revise any forward-looking statements, except as required by law.

About Sonova

Sonova Holding AG, headquartered in Staefa, Switzerland, is the leading
manufacturer of innovative hearing care solutions. The Group operates through
its core business brands Phonak, Unitron, Advanced Bionics and Connect
Hearing. Sonova offers its customers one of the most comprehensive product
portfolios in the industry - from hearing instruments to cochlear implants to
wireless communication solutions. Founded in 1947, the Group is currently
present in over 90 countries across the globe and has a workforce of over
9,000 dedicated employees. Sonova generated sales of CHF 2.0 billion in the
financial year 2013/14 and a net profit of CHF 347 million. By supporting the
Hear the World Foundation, Sonova pursues its vision of a world where everyone
enjoys the delight of hearing and therefore lives a life without limitations.

For more information please visit and

Sonova shares (ticker symbol:SOON, Security no: 1254978, ISIN: CH1012549785)
have been listed on the SIX Swiss Exchange since 1994. The securities of
Sonova have not been and will not be registered under the U.S. Securities Act
of 1933, as amended (the "U.S. Securities Act"), or under the applicable
securities laws of any state of the United States of America, and may not be
offered or sold in the United States of America except pursuant to an
exemption from the registration requirements under the U.S. Securities Act and
in compliance with applicable state securities laws, or outside the United
States of America to non-U.S. Persons in reliance on Regulation S under the
U.S. Securities Act.

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