Smith & Nephew Fourth-Quarter Profit Falls as Europe Lags

Smith & Nephew Plc, Europe’s biggest maker of artificial hips and knees, reported fourth-quarter earnings declined on a sluggish European market, and it forecast lower profitability this year.

Trading profit, which excludes reorganization and acquisition costs, fell to $272 million from $279 million a year earlier, the U.K.’s biggest medical-device maker said today in a statement. Earnings excluding some items were 21.6 cents a share, topping the 21-cent average estimate of 12 analysts surveyed by Bloomberg.

Smith & Nephew is scouting for acquisitions and cutting costs as the London-based company seeks to reduce its exposure to orthopedics and Europe. Smith & Nephew has said it would borrow money to buy wound care and minimally invasive surgery assets and expand in emerging markets.

“Our choices to invest in products and geographic areas of higher growth are enabling us to drive greater value from existing resources,” Olivier Bohuon, chief executive officer, said in the statement.

Full-year trading profit was 23.3 percent of sales, beating the company’s forecast of a “modest increase” over the previous year’s 22.5 percent. The company forecast the margin to decline this year due to restructuring and a U.S. medical-device tax, though it aims to later reach a 24 percent margin.

Dividend Payout

The company proposed a final dividend of 16.2 cents a share, bringing the total payout from 2012 profit to 26.1 cents a share.

Fourth-quarter sales fell to $1.08 billion from $1.11 billion, beating the $1.07 billion average estimate of 11 analysts surveyed by Bloomberg. Revenue was reduced by the absence of the Biologics and Clinical Therapies business, which was spun out as Bioventus LLC in May. Smith & Nephew reports earnings in dollars, and the currency’s gains reduced revenue from business outside the U.S.

Last year the company said it would reduce its 11,000- person workforce by 7 percent over three years to save $150 million a year.

In November, Smith & Nephew said would buy Healthpoint Biotherapeutics for $782 million in cash to gain treatments for wounds that are difficult to heal.

Smith & Nephew fell 0.3 percent to close at 705.50 pence in London yesterday, giving the company a market value of 6.38 billion pounds ($10 billion). The stock has returned 3.8 percent this year.

To contact the reporter on this story: Allison Connolly in Frankfurt at aconnolly4@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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