Getinge Plunges on Forecast of First-Quarter Profit Drop

Getinge AB (GETIB) plunged the most since trading began in 1993 after the maker of hospital equipment said first-quarter profit will drop on higher costs to improve quality after regulatory inspections last year.

Getinge tumbled 20 percent to 185.90 kronor at 4:55 p.m. in Stockholm in trading of 9.4 million shares, about 15 times the daily average from the past three months. The company has a market value of 44.3 billion kronor ($6.93 billion).

Pre-tax profit will be 160 million kronor in the first quarter, the Getinge, Sweden-based company said in a statement today. Analysts predicted 628.7 million kronor, the average of six estimates compiled by Bloomberg.

The announcement marks the third time in little more than a year that Getinge has disappointed investors with its forecast. Getinge said in February 2013 that it wouldn’t meet its margin target, and in October it slumped after saying third-quarter profit would be less than forecast.

“At a time when management needs to rebuild trust, analysts and investors are left dumbfounded by a further surprise negative announcement,” Scott Bardo, an analyst with Berenberg Bank, said in a note to investors today. “Investor communication remains poor and this must be addressed.”

Getinge said last year that the U.S. Food and Drug Administration inspected a number of factories for Getinge’s Medical Systems unit, which makes products including surgical tables, surgical lamps and fully-equipped pre-manufactured operating rooms.

Quality Improvements

The company made “significant improvements to enhance the quality management systems” at its factories after the inspections, Getinge said in December.

Consultants hired as a result to improve quality controls will cost 125 million kronor a quarter beginning with the first quarter of this year and continue for a period of six to seven quarters, Getinge said today.

The first quarter will also be weak due to a “lower level of invoicing” for its capital goods, which represent 50 percent of its sales, the company said. Also, the cardiovascular division had a production disruption due to a change in raw materials by a supplier which cost 60 million kronor.

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

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

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