Medical technology business Smith & Nephew Plc (SN.L, SNN) Friday reported higher third-quarter profit despite a decline in revenues, driven by lower costs and expenses.
The company's third-quarter attributable profit was US$ 128 million or 14.4 cents per share, compared to US$ 74 million or 8.3 cents per share last year. Profit before taxation rose to US$ 173 million from US$ 119 million in the same period last year.
The London, UK - based company's adjusted earnings per share increased 38% to 16.8 cents or 84 cents per American Depositary Share, or ADS, in the quarter.
Quarterly revenue declined to US$ 915 million from US$ 930 million in the prior-year quarter. Underlying revenue growth was 1%.
On average, four analysts polled by Thomson Reuters expected earnings of US$ 0.66 per share for the quarter on revenues of US$ 908.50 million. Analysts' estimates typically exclude one-time items.
For the preceding quarter, the company reported attributable profit of US$ 118 million or 13.3 cents per share, on revenues of US$ 926 million.
The company's third-quarter trading profit reached US$ 208 million, up from US$ 174 million in the third quarter of fiscal 2008. On an underlying basis, trading profit grew 22%.
Commenting on the results, David Illingworth, chief executive of Smith & Nephew, stated, "We are encouraged by improvements in some key parts of our business, including US Reconstruction, arthroscopic repair and Negative Pressure Wound Therapy, together with continued strength in our European Advanced Wound Management and European Endoscopy businesses and our growth from emerging markets."
Based on businesses, Orthopaedics, which consists of Reconstruction, Trauma and Clinical Therapies, generated revenues of US$ 503 million in the quarter, which was unchanged from last year on an underlying basis. Geographically, Orthopaedics declined 3% in Europe, while it grew 1% in the US as well as in the rest of the world.
Endoscopy revenues edged up 1% to US$ 195 million, as the strong performance of the repair segment was offset by continued weakness in capital equipment related sales. European revenue rose 9% and the rest of the world grew 13%. Meanwhile, US revenues were down 8%. Major markets such as the UK and Australia delivered double digit growth and emerging markets were again strong, the company noted.
In addition, the company's Advanced Wound Management business posted a 3% rise in revenues to US$ 217 million, reflecting the recent trend of softer market conditions. Geographically, Europe grew 8%, partly due to the growth in Negative Pressure Wound Therapy. The rest of the world revenues remained unchanged on an underlying basis, and US revenues dropped 5%, Smith & Nephew stated.
For the nine-month period, Smith & Nephew's attributable profit was US$ 344 million or US$ 38.8 cents per share, compared with US$ 260 million or US$ 29.1 cents per share last year. Revenue rose to US$ 2.71 billion from US$ 2.84 billion in the prior-year period.
Going forward, the company said that there are some early signs that markets are stabilizing, although it remains cautious about the exact pace of the expected future improvement in market conditions.
The company also said that its overall revenue guidance remains unchanged from the last quarter, with stronger Reconstruction performance expected to balance weaker performance in Trauma. In the fourth quarter there is one additional sales day compared to last year.
The company also remains focused on driving operational efficiencies and tightly managing its costs. In addition, Smith & Nephew said that it continues to be confident in its ability to deliver a good outcome for the full year.
"We continue to invest in new products and medical education programmes and we are well positioned as market conditions improve," he added.
Among others in the sector, Johnson & Johnson (JNJ) posted higher profit for the third quarter, despite a 5.3% downturn in sales, as weak sales of its prescription drugs Topamax and Risperdal were negatively impacted by generic competition. The New Brunswick, New Jersey-based company's third-quarter net income was US$ 3.35 billion, up 1.1% from US$ 3.31 billion earned a year earlier. Earnings per share improved 2.6% to US$ 1.20 from US$ 1.17 in the same quarter of 2008. Quarterly sales totaled US$ 15.1 billion, down from US$ 15.9 billion in the previous year.
Another medical technology company Stryker Corp. (SYK) reported a 16.4% drop in its profit for the third quarter, predominantly hit by restructuring charges. The Kalamazoo, Michigan-based company's net earnings dropped to US$ 229 million from US$ 273.8 million in the year-earlier quarter. On a per share basis, earnings slid 13.4% to US$ 0.58 from US$ 0.67 in the year-ago quarter. Meanwhile, net sales for the recent third quarter were flat with US$ 1.65 billion last year
Zimmer Holdings Inc.'s (ZMH) third-quarter net earnings declined 30% from last year as operating expenses overshadowed the slight increase in revenues. Net earnings were US$ 149.9 million or US$ 0.70 per share, compared with US$ 215 million or US$ 0.95 per share in the year-ago quarter. Net sales rose 2.4% to US$ 976 million.
SN.L is trading at 536 pence on the LSE, down 4 pence, on a volume of 1.74 million shares.
SNN closed Thursday's trading at $ 44.91, up $ 0.32, on 139,800 shares.
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