Profits Drop 4% at Smith & Nephew

LONDON -- Smith & Nephew  (LSE: SN  ) (NYSE: SNN  ) reported quarterly revenue of $1.1 billion, which is essentially flat from a year ago, while pricing pressures and higher expenses resulted in earnings slipping 4%.

The company's knee and hip replacement operations have been suffering from a combination of tough markets in the U.S. and Europe, and some product-specific issues. As a result, revenue for the company's Advanced Surgical Devices division -- which makes up 70% of the overall business -- was down 9% from a year ago.

There was, however, good news from the company's Advance Wound Management division -- which treats chronic wounds caused by diseases like diabetes -- as sales were up 5% as the company took market share.

Smith & Nephew also reported strong growth in emerging markets -- an area specifically targeted for investment in CEO Olivier Bohuon's growth strategy. As part of executing this strategy, the company announced the acquisition of a distribution company in India today following on from a similar acquisition in Brazil last month.

Despite the drop in earnings, Smith & Nephew reported a strong gain in cash flow thanks to better management of inventory and bill collection. Free cash flow for the first quarter was up 43%, to $137 million, as the company's focus on improving cash generation paid dividends.

Thanks, in part, to this strong cash flow, the company announced a new $300 million share buyback program. This announcement follows last year's new dividend policy, which resulted in a 50% increase in the full-year dividend.

While Smith & Nephew faces tough economic conditions and intense competition, it appears to be making progress on its new strategic focus on the higher-growth Advanced Wound Management division, cash generation, and expansion into emerging markets.

It remains to be seen, however, if these faster-growing, but still small, markets can offset the slow growth that characterises Smith & Nephew's traditional developed market joint replacement business.

If this growth is too uncertain for you, or you already own Smith & Nephew and are looking for other buying opportunities, this exclusive wealth report reviews five particularly attractive possibilities.

Just click here for the report -- it's free.

link


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2405833, ~/Articles/ArticleHandler.aspx, 7/28/2014 12:40:45 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement