Sonic Healthcare Ltd., Australia’s biggest provider of medical tests, said profit may rise less than previously forecast because of uncertain demand in the domestic market.
Net income will expand between 5 percent and 15 percent in the 12 months ending June 30, compared with a previous forecast of 10 percent to 15 percent, Sydney-based Sonic said today. That equates to profit of as little as A$308 million ($273 million), rising from net income of A$293 million for the fiscal year ended June 30 that the company reported today.
Cuts to Australian government subsidies for the X-rays and blood tests Sonic provides crimped demand and wiped as much as A$35 million from profit last financial year, Chief Executive Officer Colin Goldschmidt said. Net income this year depends on when demand returns in Australia, where Sonic generates 31 percent of pathology revenue, Goldschmidt said.
“Our expectation is for ongoing good growth in the USA and in Europe,” Goldschmidt said at a briefing in Sydney. “We have widened the guidance range because we are not absolutely sure where the growth is going to sit in Australian pathology. The growth will return, it’s just a matter of when.”
Sonic advanced 3.6 percent to A$10.80 at the 4:10 p.m. close in Sydney trading, the biggest gain since Aug. 28, when the company forecast full-year profit growth. The stock has dropped 30 percent in 2010, steeper than the 10 percent decline for Australia’s benchmark S&P/ASX 200 Index.
Better Than Competition
“Sonic’s FY10 result indicated that the company has performed well across the world, and better than its competition in Australia,” Stuart Roberts, a health-care analyst at Southern Cross Equities Ltd. in Sydney, wrote in a note. “The stock will enjoy a sharp rebound” once growth resumes in Australia, Roberts said.
Profit in the 12 months ended June fell 7 percent from A$315 million, without accounting for one-time costs in the last fiscal year related to writedowns of its New Zealand operations, Sonic said. Including those charges, net income rose 71 percent.
Sales dropped 0.6 percent to A$2.99 billion as the strength of the Australian dollar against the U.S. currency and euro cut revenue by A$263 million. Based on constant exchange rates and excluding the impact of acquisitions, sales expanded 6.3 percent in the U.S. and 4 percent in Europe.
Sonic said it will pay a dividend of 59 Australian cents for the year ended June 2010.
The company has an “active pipeline” of mergers and acquisitions, Goldschmidt said, without identifying targets. Sonic spent A$424.9 million on five acquisitions last fiscal year, including the A$277.7 million purchase of Antwerp, Belgium-based Medhold NV that gave the company access to a fourth European market. Sonic also owns laboratories in Germany, Switzerland and the U.K.