2nd UPDATE:Straumann Says Worst Behind It; 1st Half Profit Beats Hopes
11 Agosto 2009 - 5:56AM
Dow Jones News
Swiss dental implant maker Straumann Holding AG (STMN.EB)
Tuesday reported a 16% drop in first-half net profit as the
economic downturn and the swiss franc's strength continued to hit
sales, but the figure beat expectations because of cost cutting and
a lower tax rate, and it said the worst may now be behind it.
Chief Executive Gilbert Achermann, who will become the company's
new chairman next year, said the market had deteriorated in the
second quarter compared to the first quarter, but he thinks the
company has now seen the bottom of the market.
Straumann still expects the dental market to shrink between 5%
and 10% this year, although the company should do better than that.
Achermann told Dow Jones Newswires the market should have returned
to high single-digit or low double-digit growth rates by 2011.
Straumann announced several management changes due to the
retirement of its Chairman, Rudolf Maag. From March 2010, Achermann
will be chairman, while Chief Financial Officer Beat Spalinger will
step up to become CEO. The company said the moves will "ensure
continuity and sustainability" as it continues to face the economic
downturn.
The Basel, Switzerland-based company said net profit was CHF84.6
million ($78.3 million) in the six months to June 30, down from
CHF100.5 million a year ago as sales fell 6.9% to CHF382.1 million.
The net profit figure beat analysts' forecasts of CHF74.62 million,
as lower tax payments and cost cutting went some way to offsetting
the hit from falling demand, low capacity utilization in its plants
and the impact of the strength of the swiss franc.
The company's margin between revenue and earnings before
interest and tax, on which it bases its 2009 guidance, came in at
24.4%, beating analysts' estimates.
However, Straumann's shares didn't manage to sustain early gains
and at 0806 GMT, the stock was trading down CHF4.90, or 2.1%, at
CHF231.10, underperforming a slightly higher Swiss market. The
stock has risen 27% so far in 2009 on hopes for a recovery in the
dental implants market.
"Though better-than-expected on the operating level, Straumann's
first-half figures show that the company is now suffering almost to
the same degree as competitors from the strong effects of the
recession," said Sarasin analyst David Kaegi, who rates the stock
at reduce.
"Very little signs of improvement are visible in this...market.
In our opinion, it is too early to jump in with hopes for a swift
recovery," he said, noting that the stock has a high valuation
compared to peers.
However, the company said it has taken market share from rivals
like market leader Nobel Biocare Holding AG (NOBN.VX) during the
recession because it believes its products are better priced.
Zurich-based Nobel Biocare will report its second quarter earnings
Wednesday.
Signaling its improved confidence, Achermann said Straumann has
no plans to cut any more jobs, while it managed to keep prices of
its products steady in the first half.
Analysts welcomed the margin development in the first half, even
though Straumann said the figure should be lower in the second half
and it is sticking to its full-year guidance for a margin of
20%.
"We view the figures positively," said Bernstein Research
analyst Jack Scannell, who has an outperform rating and a CHF250
price target on the stock. "While the sales miss was disappointing,
it is a question of when, not if, the implant market will turn
around."
"Importantly, the results showed the company can be managed for
better profitability. Margins are likely to improve when sales
growth picks up," Scannell added.
Straumann makes implants like crowns and bridges as well as
products for tissue regeneration and bone augmentation. It has seen
demand for its products fall during the recession as fewer people
go for expensive dental treatments, and has responded by cutting
jobs and writing down inventories. It was posting annual sales
growth of about 15% before the downturn.
-By Julia Mengewein, Dow Jones Newswires; +41 43 443 80 45;
julia.mengewein@dowjones.com