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Sonova expects profit hit from in-doubt U.S. hearing aid contract

FILE PHOTO: Logo of Swiss hearing aid maker Sonova is seen in Staefa

By Agata Rybska and Louise Rasmussen

(Reuters) -Sonova, the world's largest hearing aid maker, cast doubt on the renewal of a major U.S. contract on Monday as it forecast full-year earnings at the lower end of its outlook.

The Swiss company also flagged subdued half-year sales in its higher-priced hearing aids markets and distribution channels, especially the U.S. private market.

Last month, major U.S. retailers began selling lower-cost over-the-counter (OTC) hearing aids under new Biden administration rules.

Sonova Chief Executive Arnd Kaldowski said the market could see an additional slowdown in the first couple of months after the change, but added there was likely little overlap between the people buying OTC devices and its existing customers.

"People need to spend extra effort right now in explaining why our device is better than what they hope they could get over the counter," Kaldowski told reporters.

The hearing care market, which had been recovering from COVID-related lockdowns that kept patients from seeing doctors or audiologists, is now facing soaring costs and subdued demand from inflation-hit consumers.

"If consumer sentiment stays where it is ... we would expect us to be rather on the lower half of the guidance," Kaldowski said after Sonova forecast sales and earnings at the low end of its previous forecast of 15-19% sales growth and a 6-10% rise in adjusted core profit (EBITA) in the year to the end of March.

Sonova said this also reflected the likelihood of a contract with a private U.S. label not being renewed, which Kaldowski said would have a meaningful impact on the results.

He would not name the individual customer, but analysts at Jefferies, Credit Suisse and UBS suggested the comments referred to U.S. wholesale group Costco.

Costco was not immediately available for comment.

Sonova reported half-year adjusted EBITA of 398.1 million Swiss francs ($420 million) compared with analysts' average forecast of 399.5 million francs.

($1 = 0.9471 Swiss francs)

(Reporting by Agata Rybska and Louise Breusch Rasmussen in Gdansk; Editing by Milla Nissi and Alexander Smith)