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Smith & Nephew Revenue Rises on ‘Stand-Out’ Emerging Markets

Aug. 1 (Bloomberg) -- Smith & Nephew Plc second-quarter revenue rose as growth in wound care and emerging markets helped to offset a weak Europe and disappointing hip and knee implant sales.

Sales climbed 4.4 percent from a year earlier to $1.07 billion, the U.K.’s biggest medical-device maker said today in a statement. That matched the average of 12 analyst estimates compiled by Bloomberg. Trading profit, which excludes reorganization and acquisition costs, was $232 million compared with $234 million a year earlier. Excluding divestments and currency effects, trading profit rose 1 percent.

Smith & Nephew is looking for growth through bolt-on acquisitions and emerging markets as sales in Europe continue to be weak. It announced it would buy an Indian trauma business and start a share buyback program after first-quarter results missed analysts’ estimates. The company still expects profitability will decline this year.

“We generated stand-out contributions from our areas of focused investment in the emerging and international markets and negative pressure wound therapy,” Chief Executive Officer Olivier Bohuon said in the statement. “As expected orthopedic reconstruction had a slow quarter and we anticipate a better second half.”

Smith & Nephew rose 0.4 percent to close at 787.50 pence in London, giving the company a market value of 7.1 billion pounds ($10.8 billion.)

Wound Management

Revenue for Advanced Surgical Devices, which includes implants, sports medicine and trauma, was $741 million compared with $774 million a year earlier and grew 1 percent when excluding currency effects and acquisitions and disposals. On that basis, sales at the Advanced Wound Management business during the quarter advanced 10 percent to $333 million.

Sales from hip and knee implant franchises both fell 1 percent during the quarter. The company has said it expects a boost from the introduction of its new knee implant called Journey II later this year. Sales from sports medicine joint repair and trauma both improved during the quarter, up 6 percent and 2 percent respectively, the company said.

The results are “reassuringly” in line with estimates as the second quarter was expected to be weak for orthopedics ahead of the introduction of the new knee product, Ingeborg Oie, an analyst with Jefferies in London, wrote in a note to investors today. She said the quarter is probably a “trough” for the business.

“On performance, this remains a tale of two divisions within one company,” as orthopedics continues to drag and wound care grows strongly, Lisa Clive, an analyst at Sanford C. Bernstein, wrote in a note to investors.

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

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

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