Smith & Nephew's Strong Profits Beat Expectations

Smith & Nephew's strong profits beat expectations
February 2010

Smith & Nephew (S&N), the hips-and-knees maker, posted higher profits in the final quarter of last year after the replacement joints market stabilized.

The market suffered during the recession, but started to recover in the second half.

Traditional hip and knee ranges, like its Legion knee, did well, particularly in the US, while products designed for younger, more active patients, such as the bone-sparing Birmingham Hip Resurfacing System, were weak.

Younger patients were more likely to put off surgery than retirees because they did not want to take time off work or balked at the cost.

"Our largest business, orthopaedics, saw a good finish to a tough year," said chief executive David Illingworth. "Market conditions were a little less difficult than in the first half."

He said it’s too early to say when patients who deferred operations might have them done, and S&N is struggling to push through price increases as governments and private clients have tightened their budgets. But Illingworth was hopeful that the $12bn  global market for replacement joints would improve, with consumer confidence returning and unemployment now falling.

S&N expects revenues in orthopaedics to grow at the market rate this year after lagging in 2009.

Profits before tax rose to $175m in the fourth quarter from $162m a year earlier, with revenues 11 per cent higher at $1.07bn, helped by strong sales at the wound management division.

Analysts and investors welcomed the results, and the shares closed up 4.3 per cent at 660p.