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TOP NEWS: Smith & Nephew cuts guidance due to headwinds in China

31st Oct 2024 09:24

(Alliance News) - Smith & Nephew PLC on Thursday reduced its full-year outlook, following reduced demand in China during the third quarter of 2024.

The Watford, England-based medical technology company said revenue for its third quarter that ended September 30 grew 4.0% on both an underlying and reported basis to USD1.41 billion from USD1.36 billion last year.

However, excluding China, which was hit by "worse than expected headwinds across our surgical businesses", revenue growth was 5.9% on both an underlying and reported basis.

Shares in Smith & Nephew were down 13% at 955.40 pence each in London on Thursday morning.

"Overall performance was held back by China, where we have seen a period of reduced end-customer demand", the company said about its orthopaedics business. "As a result, orders from our distribution partners significantly slowed as they reduced their stock-levels in response, particularly towards the end of the quarter, and our expectation is that orders will remain low through the fourth quarter".

The group cut its forecast for full-year underlying revenue growth to around 4.5%, from a previous range of 5.0% to 6.0%.

It expects trading profit margin growth of "up to 50 basis points" from last year's 17.5%, which it said reflects "reduced operating leverage from slower revenue growth". Smith & Nephew had previously expected growth of "at least 18.0%".

Chief Executive Officer Deepak Nath said: "We delivered encouraging growth in most segments and markets in the third quarter as the twelve-point plan drove further financial improvements. We are making progress in both hip and knee implants in the US, although there is much more to do. China [volume based procurement] was a significant headwind that masked sports medicine's performance across the rest of the world. Advanced wound management delivered its best quarter this year, with all segments performing well.

"We continue to deliver on longer-term growth drivers, including robotics adoption and product innovation, as well as improving productivity. While the revised outlook reflects the headwinds across our surgical businesses in China, we remain convinced that our transformation to a higher growth company, with the ability to drive operating leverage through to the bottom line, is on the right course."

Looking ahead, Smith & Nephew expects to make "significant progress" in 2025, by "significantly expanding" its trading profit margin through "operating leverage, productivity improvements and cost reductions".

By Emily Parsons, Alliance News reporter

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Copyright 2024 Alliance News Ltd. All Rights Reserved.

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