Smith & Nephew (FTSE:SN, NYSE:SNN) shares slid a bit on Wall Street today after the medical device company reported its lowest quarterly sales of the past 7 years.
Smith & Nephew posted profits of $134 million, or 14.9¢ per share, on sales of $952 million during the 3 months ended Sept. 29. That’s a slight bottom-line gain of 0.8% but a top-line slide of 7.8% compared with the same period last year.
SNN shares were down 1.4% to $52.25 as of about 3:30 p.m. today on Wall Street.
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"I am pleased to report an underlying 10% increase in trading profit for the quarter to $207 million. The benefits of our efficiency improvements have helped to offset the impact of on-going tough conditions in Europe, and we continued to make good commercial progress in the emerging markets. Our Advanced Wound Management business continued to thrive, growing at twice the market rate," CEO Olivier Bohuon said in prepared remarks. "Smith & Nephew’s strategic priorities are about making choices for the long-term benefit of our business, by allocating resources to the areas where we can achieve the greatest returns. I am confident that by following this strategy we are shaping the group to respond to the market conditions and opportunities we face."
SNN’s advanced surgical devices segment reported sales of $698 million, flat compared with Q3 2011 on an adjusted, constant-currency basis.
"Revenue in the U.S. was flat, whilst our other established markets declined by -1% and overall we saw weaker market conditions, particularly in Europe. We achieved a 3% increase in the emerging and international markets. This increase, lower than recent quarters, mainly reflects distributor buying patterns and is against a strong comparable. In China we continue to grow at over 20%," the company said.
Knee implant sales slid 1%, 3% under Smith & Nephew’s estimate.
"This reflects both the increased weakness in the European market where we have a proportionately larger market position, and also our position in the knee new product cycle. Our new Journey II system is in clinical evaluation and full global market release is expected in late 2013 or early 2014. The Legion hinge knee system with its leading kinematic design was launched in the US last quarter and will be introduced in Europe early next year," according to the filing.
Hip implant sales, excluding metal-on-metal devices, also posted flat sales growth, on par with the overall hip market. Newer implants delivered "good growth," Smith & Nephew said.
Including MoM sales, SNN’s hip franchise’s revenues fell 4%, including a 36% slide for the Birmingham hip resurfacing device.
Sports medicine/joint repair revenues were up 8%; arthroscopic device sales slipped 3%; trauma franchise sales were up 2%; and advanced wound management sales were up 4%, including an 11% jump in the U.S.
Smith & Nephew left its outlook for the rest of the year unchanged, with a caveat: "we continue to see variation in performance at a product franchise level."
"We are seeing significant challenges in Europe, where we have about 30% of our revenues, and expect this to continue," according to a press release. "In advanced wound management, we are seeing excellent growth relative to the market, driven by NPWT market share gains. Conversely in hips we have seen stronger and longer-lasting BHR headwinds and we are seeing a slightly lower knee growth relative to market than we had expected. Sports medicine and trauma continue performing in line with our expectations."