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VOL. 128 | NO. 86 | Thursday, May 2, 2013

Smith & Nephew Profit Falls 10 Percent

By Jennifer Johnson Backer

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Smith & Nephew PLC said it will start a $300 million share buyback program and buy an Indian orthopedic trauma company, after a first-quarter slump in profit.

The London-based global medical technology business said it will acquire Adler Mediequip Private Ltd., and the brands and assets of Sushrut Surgicals Private Ltd. 

First-quarter profit declined 10 percent to $143 million, compared with $159 million a year earlier. Revenue fell to $1.075 billion or 18.5 cents per share on an adjusted basis, compared with $1.079 billion, or 19.3 cents per share, a year earlier. Reuters reported the average analyst estimate had predicted revenue of $1.07 billion and adjusted earnings per share of 18 cents. 

Smith & Nephew’s Advanced Surgical Devices unit includes the Memphis-based Orthopaedic Reconstruction division and the Andover, Mass.-based Advanced Wound Management, Sports Medicine and Trauma unit.

“We will continue to invest in our growth products, franchises and geographies.”

–Olivier Bohuon
CEO, Smith & Nephew

Global Medical device makers, including Minneapolis-based Medtronic Inc. and London-based Smith & Nephew, have looked to emerging markets like China and India for growth as U.S. hospitals push for lower prices and European austerity plans trim procedures and profits. A new 2.3 percent U.S. medical device tax to help finance the health law also adds to manufacturers’ U.S. costs. Smith & Nephew said it expects overall profitability to decline this year.

Both Medtronic and Smith & Nephew employ large workforces in Memphis.

Smith & Nephew grew revenue by 19 percent in emerging markets, led by “excellent growth” in China and the Middle East, the company said in a prepared statement. Revenue in established markets (U.S. Europe, Canada, Japan, Australia and New Zealand) declined by 1 percent. 

“We will continue to invest in our growth products, franchises and geographies and maintain adequate headroom for further significant acquisitions,” Smith & Nephew CEO Olivier Bohuon said. 

The Indian acquisitions along with the purchase of a Brazilian trauma maker, Pró Cirurgia Especializada, on May 2 totaled about $70 million.

Revenue from sales of knee and hip implants declined 6 percent as conditions deteriorated in Germany, the company’s largest European market, and overall conditions in Europe remained weak. Bohuon told the Wall Street Journal in March he’s reducing the company’s exposure to difficult markets like orthopedics in Western markets. The device maker has been restructuring its hip and knee implant franchises over the last 18 months.  

Sales of advanced surgical devices, which include implants, sports medicine and trauma, declined to $760 million in the quarter compared with $839 million a year earlier.

The Daily News previously reported U.S. markets, including Memphis, may lose employees as global medical device makers look to faster-growing markets, such as India and China, for growth.

Medtronic Spine, the Memphis-based division of Medtronic Inc., told employees in April it will reduce overall costs by 5 percent through a variety of measures, including employee layoffs. Smith & Nephew’s Orthopedics division also recently eliminated 63 positions in Memphis, 20 in Andover, Mass., and a dozen in Europe. The company employs about 1,800 in the Memphis area.

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