Smith & Nephew (NYSE:SNN) announced today that it is withdrawing its 2020 full-year financial guidance and projecting a sizeable decline in first-quarter revenue growth as a result of the COVID-19 pandemic.
The London-based medtech giant’s guidance, issued on Feb. 20, assumed a normalization of the coronavirus outbreak early in the second quarter. However, given the rapid expansion of the virus beyond its origin in China, Smith & Nephew determined that its projection of underlying 2020 revenue growth between 3.5% and 4.5% is no longer accurate.
Smith & Nephew said it is too early to determine the overall impact of COVID-19 on the company’s business, and it can’t predict how long the situation will last or the pace of normalization that follows. As a result, it won’t update the year’s guidance until things become clearer.
The company said its first-quarter results will still be reported on May 6, with a projected revenue decline of -8%. It also anticipates that second-quarter revenue and first-half trading margin will take a hit compared to the previous year’s results.
Elective procedures have restarted in China but remain below pre-outbreak levels, the orthopedic and wound care treatment developer said in a news release. Plus, in the U.S. and Europe, various policies implemented have stopped all but the most urgent surgical procedures, limiting the company’s ability to do business.
Last month, Smith & Nephew froze all but the most crucial new hires, slowed some planned capital expenditure and initiated other actions to save money in areas including travel, events, advertising, promotion and consultancy in an effort to offset the financial impact of the virus.
The company said it has a strong balance sheet and access to significant liquidity. At the end of 2019, Smith & Nephew reported net debt of $1.6 billion (excluding lease liabilities) compared to committed facilities of $2.9 billion and a further $550 million in senior notes set to be drawn down in June.
Smith & Nephew CEO Roland Diggelmann said in the news release that the company’s immediate focus is the well-being of employees and the support of patients and medical practitioners. The company plans to remain engaged in its communities and Diggelmann said it is supporting employees with healthcare experience who wish to volunteer in front-line care while the company is using its R&D and manufacturing expertise to support the battel against coronavirus.
“Looking beyond the immediate future, Smith & Nephew operates in attractive markets with excellent growth fundamentals,” Diggelmann said. “We are financially strong with a proven strategy and unique portfolio. Our major manufacturing and distribution facilities are all active and we are ready to meet pent-up demand when the time comes.”