Yahoo Finance ConvaTec takes £1.2bn wound as US closure inflicts pain
Woundcare products maker ConvaTec was forced to row back on ambitious growth hopes on Monday after a botched shutdown of a US manufacturing plant triggered a logjam of customer orders.
The British medical group slashed annual organic revenue growth to as little as 1% — from more than 4% — after a snag shifting production lines from the US to the Dominican Republic.
That sent shares in the FTSE 100 firm down 23%, or 62.9p, to 216.5p, the biggest fall since it listed on the London stock market last October.
ConvaTec, which is in the middle of an ambitious programme to improve productivity levels, has moved a number of manufacturing lines from Greensboro in North Carolina to Haina in the Dominican Republic but a delay in obtaining regulatory clearance hit production.
The firm is now facing a backlog of orders for colostomy bags and surgical dressings. It said was making “progress” clearing the orders.
Chief executive Paul Moraviec said he was “disappointed” by the turn of events. The group’s Margin Improvement Programme has also seen many of its gains over the past 18 months wiped out by the debacle.
The bounce in margins has been lost, as well as “the majority” of the improvement made in 2016.
Despite the setback, ConvaTec’s third-quarter revenues appeared encouraging and Moraviec said that the company was “well-positioned”.
Group revenue was up 5.1% at constant exchange rates to $445.5 million (£335 million), with its two biggest divisions — advanced woundcare and ostomy care — growing by 3.5% and 2.2% respectively.
The two divisions account for 60% of group sales.
