Sorin’s Q3 Revenues Show Recovery from 2012 Earthquake

Italian cardiac technologies company Sorin S.p.A had to endure an earthquake last year, which rather messed up its manufacturing operations in Mirandola. The plant, which makes Sorin’s  oxygenators and autotransfusion disposable kits saw production discontinued and product shipments temporarily interrupted in the aftermath. Little wonder then that sales of these product groups suffered so badly. Q3 2013 figures suggest things are much better this year as the core Oxygenator and Autotransfusion systems revenue streams bounced back to above pre-quake levels.

Background

In the third quarter 2013, Sorin Group posted revenues of €180.3 million, a 19.0% increase at comparable foreign exchange rates over the third quarter of 2012, representing the Company’s full recovery from the earthquakes of last year.

By product group:

Cardiac Surgery reported revenues of €119.2 million, 37.1% up on the equivalent period a year ago.

The heart-lung machine segment delivered an exceptional performance in every major market in the quarter, delivering 31.4% growth.

Strong revenue performance from Oxygenators (65% growth) and Auto Transfusion Systems (ATS) systems (48.8% growth) demonstrating Sorin’s full recovery from the earthquakes of 2012. Putting the impact of the earthquake into context, comparable revenue growth over 2011 is 3% on a like for like affected product basis.

Tissue valves performed well during the third quarter (+11.3%), mainly due to MitroflowTM growth in Japan and to continued penetration of PercevalTM. Notwithstanding the continued shift toward tissue valves in Europe and the US, the mechanical valves segment also showed a positive performance (+5.2%), which the company attributes to higher volumes in emerging markets.

Cardiac Rhythm Management reported revenues of €60.5 million, a 5.4% decrease compared to the third quarter of 2012.

Low voltage revenues (-8.8%) 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 positive performance in high voltage was driven by the CRT-D segment, which reported over 10% growth at comparable exchange rates thanks to the ongoing penetration of SonRTM in Europe and the first implants of SonRTM in the US in the RESPOND clinical trial.

Further down the income statement, Sorin saw gross profits (GP) increase to €106.1 million, albeit this represents a slight decrease in gross profit percentage compared with prior year (58.9% of revenue vs 61.3%). This is attributed to exchange rate effect and differences in product mix compared with the period impacted by the earthquake. The company points to manufacturing efficiencies, without which the GP% decline would have been greater.

So down to the very bottom of the income statement, earnings (EBITDA) were €32.1 million, or 17.8% of revenues, compared to €14.1 million, or 8.8% of revenues in the third quarter of 2012.

The bottom line seems to be that the company has bounced back from a serious hit to its business last year, but the revenue positives have occurred in the context of a few worries, not least the decline in mechanical valves and pacemakers. For the full year the company is anticipating revenue growth of about 5% with adjusted net profit of €58-60 million.

Company comments

“In the third quarter Sorin reported revenues in line with guidance and confirmed its track-record of net profit expansion and robust cash generation. The Cardiac Surgery business unit reported strong revenue growth and a full recovery for oxygenators and autotransfusion systems from the impact of the 2012 earthquakes, alongside, exceptional performance of heart-lung machines and improved results of the heart valve segment. The Cardiac Rhythm Management business unit is showing first signs of stabilization, although the outlook for the full year remains negative” stated CEO André-Michel Ballester. “We now expect sales for 2013 close to the low-end of guidance, while profitability will be in the high-end of the previously communicated guidance.”

Source: Sorin Group, S.p.A, Business Wire