The bad news for Sonova Holding AG, the world’s leading manufacturer of hearing aids, is that it will have to write off up to 200 million Swiss francs (CHF) or $217.8 million USD, to cover losses associated with the global recall of Hi-Res 90K cochlear implants made by its Advanced Bionics subsidiary. The good news is that it can afford to absorb the loss, even in a 2010-11 fiscal year when market conditions have prompted a revised forecast for slower growth than in the previous year.
Sonova, parent of leading global hearing aid brands Phonak and Unitron as well as Advanced Bionics, also issued an update on its guidance for financial analysts projecting 40-50 million CHF less in sales growth than an earlier forecast. That translates into 7 percent revenue growth versus the original projection of up to 10 percent growth. The company also said operating profits would be in the 20-21 percent range, approximately 20 percent lower than the earlier forecast of up to 26 percent operating profit. Sonova attributed the slower-than-anticipated growth to “an unclear regulatory situation in the U.S. market,” which has delayed the launch of new Phonak hearing instruments, as well as a slowdown in Unitron’s sales growth.
Additionally, the company said it would revise its 2009-10 fiscal year financial statement to reflect the goodwill impairment write-off of between 150 and 200 million Swiss francs to cover losses from the Advanced Bionics cochlear implant recall.
While the report made it clear the Sonova juggernaut has hit a speed bump, the company indicated it is intent on maintaining its position as the world’s number-one hearing-aid company with continued investments in new products and technologies. In addition to predicting continued growth with solid profitability, it also said it is expanding its new Spice sound processing platform, first introduced with Phonak products, to the Unitron hearing aid line, with multiple product announcements expected at next month’s AAA Congress in Chicago. Sonova is also working to fix the problems that prompted the recall of the Advanced Bionics cochlear implants, which are expected to drive growth and profitability for the parent company in future years.
However, the global hearing aid market leader’s slowdown gives both Oticon parent William Demant and ReSound parent GN Store Nord an opportunity to gain ground on Sonova. Both recently issued upbeat financial reports for 2010, crediting their success in part to strong sales of the new Oticon Agil and ReSound Alera hearing aids.