Bloomberg News

Smith & Nephew Profit Beats Estimates Amid ‘Tough’ Market

February 02, 2012

(Updates to add closing stock price.)

Feb. 2 (Bloomberg) -- Smith & Nephew Plc, Europe’s biggest maker of artificial hips and knees, reported fourth-quarter earnings that surpassed analysts’ estimates and said a “tough” market will probably persist through this year.

Trading profit, which excludes reorganization and acquisition costs, increased to $279 million from $278 million a year earlier, the U.K.’s biggest medical device maker said today in a statement. Earnings excluding some items were 21.9 cents a share, topping the 21-cent average estimate of 10 analysts surveyed by Bloomberg. Trading profit was 25.2 percent of sales, beating the company’s forecast of 24 percent.

Smith & Nephew is cutting jobs and administrative costs to slim its orthopedics unit and shift spending toward emerging markets, research and development. The London-based company said today it will reduce its 11,000-person workforce by 7 percent over three years, including 220 positions cut to date, as it seeks to save $150 million a year.

“We are building a business which is sleek and effective for the future,” Chief Executive Officer Olivier Bohuon said on a conference call with reporters.

Spending on the workforce cuts will amount to $160 million in cash and it will add $40 million in non-cash costs, more than half of which will be booked this year, the company said.

Smith & Nephew rose 4.5 percent to 640 pence at the close of London trading, the most since Aug. 31.

Sales rose 3 percent to $1.11 billion, matching the average estimate of 12 analysts surveyed by Bloomberg.

Advanced Wound Management

This year, the sports medicine and advanced wound management units will expand more quickly than the market, Smith & Nephew said. Orthopedic reconstruction will grow at “close to” the market rate, while orthopedic trauma will lag behind the market, the company said.

Smith & Nephew doesn’t expect the orthopedic market to improve this year, Bohuon said.

Johnson & Johnson expects sales to rise in 2012 as medical spending for elective procedures such as hip and knee replacements appears to be hitting a trough, Chief Executive Officer William C. Weldon said on Jan. 24.

Smith & Nephew plans to make acquisitions and invest savings in emerging markets, particularly in India, Brazil and Russia for growth. The company announced on Jan. 30 its purchase of Aderma Dermal Pads Products from Focus Product Development Limited to beef up its wound-care business, which is growing at a faster pace than its other businesses.

--Editors: Thomas Mulier, Tom Lavell

To contact the reporters on this story: Naomi Kresge in Berlin at nkresge@bloomberg.net; Allison Connolly in Frankfurt at aconnolly4@bloomberg.net

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


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