Smith & Nephew Buys Indian Trauma Business to Return to Growth
Smith & Nephew Plc (SN/), Europe’s biggest maker of artificial hips and knees, said it will buy an Indian trauma business and start a share-buyback program after first- quarter earnings missed analysts’ estimates.
Trading profit, which excludes reorganization and acquisition costs, declined to $241 million from $252 million a year earlier, the U.K.’s biggest medical-device maker said today in a statement. Excluding divestments and currency effects, trading profit was unchanged. Earnings excluding some items were 18.5 cents a share, missing the 19-cent average estimate of 11 analysts surveyed by Bloomberg.
Smith & Nephew said it plans to spend $300 million repurchasing shares and also agreed to acquire Adler Mediequip Private Ltd., and the brands and assets of Sushrut Surgicals Private Ltd. The U.K. company has said it wants to expand in wound-care and minimally invasive surgery and emerging markets to offset lower European sales. The company still expects profitability will decline this year.
“We will continue to invest in our growth products, franchises and geographies and maintain adequate headroom for further significant acquisitions,” Chief Executive Officer Olivier Bohuon said in the statement.
The acquisitions in India together with the purchase of the Brazilian distribution business Pro Cirurgia Especializada on May 2 totaled about $70 million, Smith & Nephew said.
Smith & Nephew rose 0.4 percent to 739.50 pence as of 8:30 in London, giving the company a market value of 6.7 billion pounds ($10.4 billion).
Revenue was unchanged at $1.08 billion, matching the average estimate of 11 analysts surveyed by Bloomberg. Excluding currency effects and the absence of the biologics and clinical therapies business, which was spun off in May 2012 as Bioventus, sales rose 1 percent.
Revenue for Advanced Surgical Devices, which includes implants, sports medicine and trauma, declined to $760 million from $839 million a year earlier and dropped 2 percent when excluding currency effects and acquisitions and disposals. On that basis, sales at the Advanced Wound Management business during the quarter advanced 12 percent to $315 million.
Sales from hip and knee implant franchises both fell 6 percent during the quarter. By comparison, Zimmer Holdings Inc. (ZMH) reported unchanged knee implant sales and a 2 percent decline in hip sales during the quarter. Sales from sports medicine joint repair and trauma both improved during the quarter, up 4 percent and 8 percent respectively, the company said.
“Despite the weaker hip and knee growth, Smith & Nephew delivered on the market’s profit expectations, demonstrating some of the efficiency improvement progress,” Ingeborg Oie, an analyst with Jefferies LLC, wrote in a note to investors.
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