AUGUST 2 2007 12:09h
British medical devices firm Smith & Nephew posted a 19 percent rise in second-quarter.
Smith & Nephew, Europe's biggest medical devices firm, posted a 19 percent rise in underlying second-quarter earnings, boosted by strong demand for a new hip implant, and said its drive to improve profitability had got off to a strong start.
Chief Executive David Illingworth also said on Thursday he was confident the firm's new Birmingham hip would keep its market lead in the face of competition from bigger U.S. rival Stryker.
"We do not expect to lose our market leading position, even though Stryker is a good competitor," he told reporters.
The Birmingham hip was the first of a new kind of less-invasive implant, called hip resurfacing, to be approved by U.S. regulators.
However, Britain's Corin Group won U.S. approval for its rival Cormet implant last month, which will be marketed by Stryker in the United States.
Smith & Nephew (S&N), said it made earnings per share before goodwill of 12.4 U.S. cents in the three months to June 30 on a 12 percent rise in revenue to $813 million.
Analysts' forecasts ranged from 11 cents to 13 cents for earnings and $752 million to $828 million for revenue, according to a company poll.
Revenues from elective joint implants rose 15 percent, within a market growing 9 percent. That included a 50 percent rise in U.S. hip revenues powered by the Birmingham device.
Illingworth said the outlook for the orthopaedics market was "fairly robust," with an ageing population in the world's wealthiest countries and new technologies offsetting pressure on healthcare budgets.
At 1209 GMT S&N shares were up 2.5 percent at 600.50 pence, valuing it about 5.3 billion pounds ($10.8 billion), while the DJ Stoxx European healthcare sector index was up 0.6 percent.
"We believe these results underpin strong operational outlook and are likely to provide comfort on full-year forecasts rather than drive significant upgrades," Cazenove analysts wrote in a research note, keeping an "in line" rating on the stock.
S&N said its drive to improve profitability had started well, with its trading margin rising 1.3 percentage points in the second quarter to 20.5 percent.
In May the firm unveiled plans to boost trading margins by at least 1 percent a year for the next four years by improving information technology, procurement and sales and marketing, and using more low-cost manufacturing and sourcing.
It has said in the past that the margins of its different businesses lag their "best in class" by between 3 and 5 percentage points, in part because of its investment in innovation and due to its smaller size than big U.S. rivals.
Chief Financial Officer Adrian Hennah said it was too early to talk about upgrading margin growth forecasts.
"We will inevitably see some fluctuation quarter by quarter. What it shows is that we've made a very strong start," he told reporters.
Illingworth said S&N remained "very committed" to its woundcare business, which has lagged growth at its other businesses and been tipped by some analysts for sale.