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SMITH & NEPHEW PLC

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Smith & Nephew hurt by tough markets in China and Gulf states

02/09/2017 | 06:50am EDT

LONDON (Reuters) - Smith & Nephew (>> Smith & Nephew plc), Europe's biggest manufacturer of artificial hips and knees, reported a 7 percent drop in full-year trading profit, missing analysts' forecasts, as tough conditions in China and Saudi Arabia kept growth in check.

LONDON (Reuters) - Smith & Nephew (>> Smith & Nephew plc), Europe's biggest manufacturer of artificial hips and knees, reported a 7 percent drop in full-year trading profit, missing analysts' forecasts, as tough conditions in China and Saudi Arabia kept growth in check.

The company has focused on emerging markets in recent years to boost sluggish demand in the United States and Europe, where it competes with Zimmer (>> Zimmer Biomet Holdings Inc) and Stryker (>> Stryker Corporation).

However, a slowdown in China has been compounded by destocking by distributors, the company said, while trading in the oil-dependent Gulf states had been "very difficult".

Smith & Nephew reported trading profit of $1.02 billion (0.81 billion pounds) on revenue up 2 percent on an underlying basis at $4.67 billion.

Chief Executive Olivier Bohuon said the company had delivered growth, but not at the level it had wanted.

"Market conditions in China and the Gulf states together shaved more than a percentage point of growth off the group in 2016," he said on Thursday, adding that China had returned to growth in the second half.

Bohuon said he expects growth to improve in 2017 and that the company's forecasts, which were unusually precise for Smith & Nephew, underline his confidence.

The group expects underlying revenue to grow by 3-4 percent and the trading profit margin to improve by 20-70 basis points, based on a combination of efficiency and product innovation.

Robotic procedures would expand from partial knee reconstructions to the total knee, Bohuon said, and the company had launched new knee implants and sports medicine products.

Shares in Smith & Nephew, which also makes treatments for chronic wounds such as leg ulcers and pressure sores, fell as much as 4 percent to eight week lows after the results. At 1128 GMT they were down 2.4 percent at 11.72 pounds.

Analysts at J.P.Morgan Cazenove said the midpoint of the guidance would lead to a 1.6 percent downgrade in the consensus revenue forecast, which stood at $4.82 billion.

They said a downgrade could leave the shares trading nearer 11 pounds than 12 pounds in the short term.

Berenberg, meanwhile, said: "Expectations were fairly low running into these results, in our view, and the results did little to change that."

Analysts had on average expected 2016 revenue of $4.69 billion and trading profit of $1.04 billion, according to a company-supplied consensus.

(Editing by Keith Weir and David Goodman)

By Paul Sandle


ę Reuters 2017
Stocks mentioned in the article
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CHANGE INC. 2.39% 2697 End-of-day quote.-23.49%
LETS HOLDINGS GROUP CO., LTD. -1.35% 6.57 End-of-day quote.-15.55%
NEXT PLC 0.25% 8112 Delayed Quote.14.20%
SMITH & NEPHEW PLC -2.19% 1520.5 Delayed Quote.2.95%
STRYKER CORPORATION 0.33% 263.53 Delayed Quote.7.19%
THE LEAD CO., INC. -1.36% 653 End-of-day quote.-22.26%
ZIMMER BIOMET HOLDINGS, INC. -0.20% 159.65 Delayed Quote.3.82%
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Financials (USD)
Sales 2021 5 371 M - -
Net income 2021 463 M - -
Net Debt 2021 1 850 M - -
P/E ratio 2021 29,3x
Yield 2021 2,43%
Capitalization 13 336 M 18 432 M -
EV / Sales 2021 2,83x
EV / Sales 2022 2,62x
Nbr of Employees 17 914
Free-Float 98,7%
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Smith & Nephew Plc Technical Analysis Chart | SN. | GB0009223206 | MarketScreener
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Mean consensus OUTPERFORM
Number of Analysts 17
Last Close Price 15,19 $
Average target price 23,64 $
Spread / Average Target 55,7%
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Managers and Directors
Roland D. Diggelmann Chief Executive Officer & Non-Executive Director
Anne-Francoise Nesmes Chief Financial Officer & Executive Director
Roberto Quarta Chairman
Vasant Padmanabhan President-Research & Development
Mark Gladwell President-Global Operations & Business Services
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