Straumann profit slumps on Japan quake charge – Reuters
Tue Aug 16, 2011 6:41am EDT
* Straumann H1 net profit 38.5 mln Sfr vs 62 mln Sfr forecast
* Considers launching share buyback of up to 100 mln Sfr
* Still expects to outperform the market
* Shares down 0.4 pct (Adds shares, comments from CEO interview, analyst comment)
By Katie Reid
ZURICH, Aug 16 (Reuters) – Swiss dental implant maker Straumann’s net profit slumped 53 percent in the first half, as the group took a writedown on its Japanese unit following the earthquake there in March.
Straumann said on Tuesday it had taken a 40 million Swiss franc ($51 million) impairment charge related to its acquisition of a Japanese distributor in 2007.
The group said it had to revalue the intangible assets after the quake and tsunami dented consumer confidence, weakening prospects for dental market growth in coming years.
That charge and the strong franc dragged the group’s net profit down to 38.5 million Swiss francs, trailing the average estimate of 62 million in a Reuters poll of analysts.
Investors said the figures were broadly in line with expectations when the one-off impact from Japan was stripped out.
Straumann said it would consider buying back up to 100 million francs of shares over an unspecified period and depending on the share price, which also cheered investors.
The shares will be held as treasury shares, meaning Straumann could use them for acquisitions.
“All in all, good set of results, outlook of high teens EBIT margin for 2011 excluding Japan is in line with our expectation. The share buy back is good but also no surprise in view of Straumann’s high net cash position,” Vontobel analyst Daniel Jelovcan said in a note.
Shares gave back early gains and were trading down 0.4 percent, slightly underperforming a 0.3 percent drop in the Stoxx 600 European healthcare index at 1026 GMT.
Before Tuesday’s results, Straumann shares had lost nearly 24 percent of their value since the start of this year as investors worried about the potential impact the strong franc, which has hit one record high after another against the euro and the dollar this year, could have on the group.
STRONG FRANC
Straumann’s first-half sales rose 4.8 percent at constant exchange rates, outpacing growth at local rival Nobel Biocare , which it has already replaced as the No.1 player in the dental implant market.
Including the impact of the franc, sales were down 6.4 percent in the first six months of the year.
Straumann cautioned the franc would put further pressure on profits, and it lowered its operating margin to be in the high teens, down from the around 20 percent it had previously guided for.
The group is taking steps to shield itself from the impact of the franc’s strength, such as boosting the contribution of the United States to global production, and re-negotiating supplier contracts in euros or dollars rather than Swiss francs.
Straumann said it was still on track to outperform the market, which it now expects to grow in the low-to-mid-single digit range over the full year, slightly lower than previously forecast as the recovery in its main markets is set to be hampered by economic uncertainty.
Spalinger told Reuters in an interview the group had not seen any deterioration of the market in the third quarter so far compared with the second quarter.
Last week, Nobel Biocare warned it might not share in the growth of the global dental implants market this year and lowered full-year operating profit margin guidance after missing second-quarter profit forecasts.
The dental implant industry was hit hard during the economic downturn as patients put off non-urgent dental treatment generally not reimbursed by insurers.
After some signs the industry was starting to recover, investors are now worrying that clouds over the global economic outlook could cast shadows over this sector again.
But analysts view the long-term prospects for the sector as bright thanks to ageing populations, as well as an increased awareness of the cosmetic advantages of implants and veneers. ($1 = 0.781 Swiss Francs) (Editing by David Cowell and Erica Billingham)
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