Friday, February 12, 2010

Cochlear Sees 15% Annual Profit Growth on Products (Update1)

Cochlear Sees 15% Annual Profit Growth on Products (Update1)

Feb. 9 (Bloomberg) -- Cochlear Ltd., maker of the world’s best-selling hearing implant, forecast full-year profit growth of at least 15 percent on sales of new products. The shares rose the most in seven weeks.

The projection made by the Sydney-based company today indicates net income may be no less than A$150 million ($130 million) in the year ending June 30, rising from the A$130.5 million reported in August. Analysts anticipated A$147 million, according to the median of six estimates compiled by Bloomberg.

Cochlear said unit sales of the Nucleus 5 implant rose about 20 percent in the six months ended Dec. 31, spurred by its introduction in the U.S. The company plans to begin sales in France and Belgium this half. Sales from implant upgrades fell 29 percent because patients and doctors waited to buy the new product, said Andrew Goodsall, an analyst at UBS AG.

“It looks like a pretty lackluster first quarter followed by a burst of enthusiasm around the new product” in the second quarter, Goodsall, who rates Cochlear “buy,” said by phone today from Sydney. “They’re expecting that run rate to continue into the second half, hence their upgrade.”

Cochlear rose 3.5 percent to close at A$63.55 in Sydney trading, the most since Dec. 22. The S&P/ASX 200 Index of Australia’s 200 biggest companies by market value fell 0.4 percent.

Positive Feedback

Net income increased to A$75.2 million, or A$1.334 a share, in the first half, from A$69.9 million, or A$1.25, a year earlier, Cochlear said in a statement today. Analysts had anticipated profit of A$70.5 million.

“The customer feedback has been overwhelmingly positive,” Chief Executive Officer Chris Roberts told reporters on a conference call today. “There’s an enormous amount of work to introduce a product like this. It might take 18 months to roll out.”

Implant unit sales rose 7 percent to 9,811 in the half year, boosted by a 13 percent gain in the second quarter. Roberts declined to forecast second-half unit sales.

Revenue at the company, which gets more than 90 percent of its sales in foreign currencies, was reduced as the Australian dollar strengthened against the U.S. dollar and euro.

The Australian dollar averaged 87.1 U.S. cents in the six months ended Dec. 31, appreciating from 78.1 U.S. cents a year earlier, according to data compiled by Bloomberg. The Australian currency averaged 59.9 euro cents, compared with 55 euro cents a year earlier.

Half-year revenue fell 2 percent to A$347.6 million. Taking into account the effects of foreign exchange rates, sales rose 7 percent, the company said.

Titanium Skull Screw

Cochlear’s implants require a trained surgeon to install and help restore hearing to people with severe to profound hearing loss. A processor behind the ear picks up sounds and converts them into digital signals it sends to a receiver implanted in the cochlea, a bone in the shape of a snail shell in the inner ear. That stimulates the auditory nerve and the brain perceives the signals as sound.

The company also makes the Baha, or bone-anchored hearing aid. This requires less invasive surgery and works by transmitting sound vibrations via a titanium screw-like implant in the skull directly to the cochlea, bypassing the middle ear. Baha sales climbed 1 percent to A$46.4 million.

Roberts declined to comment on media speculation when asked whether the company is interested in buying Siemens AG’s hearing-aid unit.

“More companies die from indigestion than starvation,” Roberts said on the call. “I’ve never been a huge one to go out and buy. Cochlear’s growth is not growth by acquisition.”