Sorin Doesn’t Let an Earthquake Halt Profit Progress

The press release that accompanies quarterly or annual financials can be an opaque and dry affair, so we’re bringing you a snapshot of Italian cardiovascular device company Sorin’s recently announced numbers. In summary, they’re pretty punchy and despite a few product-lifecycle challenges appear to indicate that the financial impact of the recent earthquake experienced at one of the company’s facilities are well behind it.

Background

These are the preliminary, unaudited consolidated results for 2013, starting with Q4 and comparing it with the equivalent period a year ago:

Revenues of €191.8 million (vs €190.8 for Q4 2012), a 5.3% increase over the fourth quarter of 2012 when adjusted for currency. For the full year,  reported revenues of €738.5 million, represent a 4.8% currency adjusted increase compared to 2012.

By division

Cardiac Surgery revenues of €128.0 million (vs €119.9 million in Q4 2012). Annual revenues of €481.8 million, up 12.1% (after currency adjustment) compared to 2012.

  • The heart-lung machine segment delivered a strong performance in every major market in the quarter and throughout the year.
  • The oxygenator and ATS system segments also reported a positive performance, confirming Sorin’s full recovery from the earthquakes of 2012.
  • Strong performance of Perceval™  more than compensated weak sales of traditional tissue valves in Europe.
  • Mechanical valves’ volume growth in Emerging markets was offset by the continued shift toward tissue valves in Europe and the US.

Cardiac Rhythm Management revenues of €63.0 million, a 6.5% decrease compared to €70.3 million in Q4 2012. Revenue was €253.9 million for 2013, a 6.8% currency adjusted decline compared to 2012

Low voltage revenues continue to be affected by a challenging pricing environment in Europe and lower volumes in Japan due to the penetration of Magnetic Resonance Imaging (MRI) compatible pacemakers.

The high voltage segment also reported a slightly negative performance, notwithstanding the continued success of SonR™  in Europe (5% growth over the year). Over the year, high voltage revenues were affected by a challenging pricing environment in the implantable defibrillator segment.

Gross profit in 2013 was €436.8 million, or 59.1% of revenues, compared to 60.6% of revenues in 2012. The decrease in Gross margin is mainly due to the effect of foreign exchange rates and to a normalized product mix after the full recovery from the earthquakes, partially offset by ongoing manufacturing efficiencies.

Selling, general and administrative (SG&A) expenses

€280.3 million compared to €309.6 million for 2012, which is substantially flat on constant currency basis, notwithstanding the €2.7 million impact of the US medical device excise tax.

Research and development (R&D) expenses

€73.7 million (10.0% of revenues) compared to €75.4 million (10.3% of revenues) in 2012. R&D activity was primarily focused on the new product releases, clinical studies and product development, notably of the REPLYTM 200 and KORATM 100 pacemakers and the internal neuromodulation projects.

EBITDA

€131.1 million, or 17.8% of revenues, up 28.8% compared to €101.8 million, or 13.9% of revenues in 2012.

EBIT

€70.1 million compared to €36.9 million in 2012. EBIT before special items was €82.8 million in 2013 compared to €58.0 million in 2012.

Net profit €49.9 million compared to €23.0 million in 2012.

Guidance

For 2014, the Company expects currency adjusted revenues to grow by 3-5% over 2013.

Company comments

André-Michel Ballester, Sorin Group’s Chief Executive Officer commented; “In 2013 Sorin Group successfully recovered from the consequences of the earthquakes, reported results in line with guidance and generated a robust cash flow. During the year, the Company launched new breakthrough products, such as the new InspireTM- HeartlinkTM- ConnectTM System and KORATM, the only pacemaker with MRI automatic mode feature, and continued the successful roll-out of SonRTM and PercevalTM. In 2013, the Company also closed several important deals, including the acquisition of Brazilian manufacturer Alcard, the joint-venture with MicroPort for the Chinese CRM market and the greenfield project for cardiopulmonary products in China, thus executing on its medium-long term growth objectives.”

“Notwithstanding the anticipated adverse foreign-exchange impact, the Company is well positioned to drive top-line growth in 2014 across a variety of new products and geographies as well as to continue sustaining its longer-term growth strategy with further geographic expansion initiatives and investments in innovation.”

Full release here

Source: Sorin, SPA

 

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