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Smith+Nephew sees further pandemic pain as annual profit slumps

Tanishaa Nadkar
·2-min read

By Tanishaa Nadkar

(Reuters) - Medical products maker Smith+Nephew said on Thursday pandemic-led disruption would continue into the first half of 2021 with uncertainty on the timing of recovery, as its annual trading profit missed average analyst estimates.

Hospitals around the world had delayed elective surgeries last year, such as hip and knee replacement procedures, to accommodate COVID-19 patients, weighing on demand for orthopaedic implants and prosthetics made by the British firm.

Shares in the company traded down 5.2% at 1,485.5 pence by 1135 GMT after falling around 8% earlier.

"The only question we don't have an answer for is when exactly the recovery will be because that depends on the vaccines, the further spread of COVID-19, decisions taken by healthcare authorities, by governments ... the different mutations of the COVID-19 virus," Chief Executive Officer Roland Diggelmann told Reuters.

He added that Smith+Nephew encouraged its employees to get vaccinated.

The company expects headwinds to its 2021 profit margins, compared to 2019, from reduced production volumes on gross margin, increased investment in R&D and from recent acquisition completions.

But the company expects substantial underlying revenue growth in 2021, with its hip implants business outperforming knee implants, its sports medicine & ENT franchise performing strongly on market recovery and also forecasts better growth in its advanced wound-management business.

Smith+Nephew is also focusing on investing in research, launching new products and transforming operations which is expected to deliver around $200 million of annualised benefits by 2025 for a one-off cost of around $350 million.

"The company may have outlined a priority to get back to top line growth in 2021 but...this is entirely out of the company's hands and really depends on the course of the pandemic," AJ Bell's investment director Russ Mould said.

Trading profit slumped 42% to $683 million for the year ended Dec. 31, missing average analyst estimates of $712 million, with its fourth quarter being particularly hit by deferrals in the United States and Europe due to rising coronavirus cases.

(Reporting by Tanishaa Nadkar in Bengaluru, Editing by Sherry Jacob-Phillips, David Evans and Keith Weir)