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UPDATE 2-Australia's Cochlear books record half-year profit but China slump a worry

Published 14/02/2017, 02:24 pm
UPDATE 2-Australia's Cochlear books record half-year profit but China slump a worry
AXJO
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COH
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* Sales under China govt tender scheme fall sharply

* Shares fall 3 pct

* Strong showing for U.S. sales help H1 profit surge 19 pct (Recasts, adds CEO and analyst comments)

By Tom Westbrook

SYDNEY, Feb 14 (Reuters) - Australia's Cochlear Ltd COH.AX , the world No.1 hearing implants maker, posted record half-year profit on a robust U.S. sales but a slump in China tender orders pushed its share price 3 percent lower.

While Cochlear has come back from a damaging recall in 2011 to book strong results over the past two years on soaring sales to China, fewer sales under Beijing's national tender scheme for implants has created new uncertainty for the company.

The number of implants for young children it sold under the tender scheme fell to 1,100 in the first half from 1,700 a year earlier and Cochlear cut its full-year outlook for those units to be lower than 2016 results instead of in line.

"That's a significant decrease ... that's an important number for us, because remember, with the China tender, you're either in or you're out, you either ship or you don't," Chief Executive Chris Smith told a conference call.

Disappointment in China was, however, offset by a strong showing in North America due to several new products, including a thinner implant which allows less intrusive surgery. Net profit for the six months to end-December surged 19 percent to a record A$111.4 million ($85.1 million).

"The new processor and implant introduced in the second quarter really seems to have caused a bounce in the U.S.," said Morningstar health stock analyst Chris Kallos.

Its fastest sales growth, of 10 percent, was in Cochlear's biggest market in the Americas, which comprises almost half the company's revenue. Asian sales, which account for almost a fifth, climbed 4 percent.

Overall, the maker of about two-thirds of all hearing implants sold globally is tracking toward the upper end of its own guidance for a full-year profit of between A$210 million and A$225 million.

On an earnings-per-share basis the first-half result of A$1.94 came in slightly below analyst expectations of A$1.96 but it raised its interim dividend to A$1.30 per share from A$1.10.

Cochlear shares fell 3 percent in afternoon trade to give the firm a market value of A$7.4 billion ($5.7 billion), while the broader Australian market .AXJO was flat. ($1 = 1.3045 Australian dollars)

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