Supply-chain hit medical firm ConvaTec Group has announced Q3 revenue of $445.5m, 6.8% up on Q3 2016. It said the growth equalled 5.1% at constant exchange rates and 3.3% organic growth.
ConvaTec said its expected full year growth would be 1% to 2%, if it can resolve “remaining supply issues, fulfilment of backorders and recovery of orders in both Advanced Wound and Ostomy Care in the fourth quarter”.
Dominican Republic delays
The trading statement this morning said: “The supply issues principally relate to the movement of Advanced Wound Care manufacturing lines from Greensboro in the US to Haina in the Dominican Republic, including delays in obtaining regulatory certification, as well as the movement of the final two Ostomy manufacturing lines.
“The costs associated with these supply issues are expected to result in the loss of the 40 bps of margin benefit achieved as a result of the MIP programme in the first half of this year, and the majority of the 90 bps delivered in 2016.”
Despite the decline in revenue expectations, ConvaTech said it expect to cut adjusted operating costs to 35% of full year revenue, compared to 37% in the first half of the year.
The company said: “Once the supply issues in Haina are resolved the group expects to be able to achieve progress on margin improvement.”
- Group revenue of $445.5m
- Advanced Wound Care revenue grew 1.4%2 on an organic basis
- Ostomy Care revenue grew 0.5% at constant exchange rates or declined 1.8% organically
- Continence & Critical Care revenue grew 9.8% at constant exchange rates or 4.5% organically, due to a strong 180 Medical performance
- Infusion Devices revenue grew 17.3% organically
Paul Moraviec, group chief executive officer, said:
"In the third quarter we delivered an acceleration in organic revenue growth to 3.3%, and continued to expand our product portfolio across products and geographies.
"However, I am disappointed that our performance in the third quarter was severely affected by supply issues in both Advanced Wound and Ostomy Care and a lower than anticipated revenue contribution from new products, leading to a reduction in our full year organic revenue growth expectations.
“The costs associated with these issues have also impacted delivery of our MIP programme.
"Despite these setbacks, the business remains well positioned in large, structurally growing chronic care markets, with strong brands, differentiated products and a strong and innovative R&D pipeline.
“We understand the operational issues we need to address, and are determined to drive performance and to deliver margin improvement in the future. However, given what we have experienced in the third quarter, we are reviewing the financial implications for growth and margins in FY2018 and will provide further guidance at our preliminary results in early 2018."