Cochlear cuts guidance in response to coronavirus

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Cochlear (ASX:COH) has revised down its guidance for the current financial year in response to the expected impact of coronavirus in China.

In a statement, the company said it is reducing its expected underlying net profit for the year from $290-$300 million to $270-$290 million.

It said hospitals across China are currently deferring surgeries, including cochlear implants, to limit the risk of infection from the coronavirus.

According to CEO and President, Dig Howitt, “It has become clear that the coronavirus will impact the number of cochlear implant surgeries in Greater China, a top 5 market for Cochlear. Limiting the risk of exposure to the virus is an appropriate precaution. While we cannot predict how long surgeries will be delayed, the low end of guidance factors in a significant decline in sales for Greater China for the second half.

“During the SARS epidemic, Cochlear experienced a material reduction in sales in China over a three-month period, followed by an uplift as the backlog of delayed surgeries cleared. We are confident that many of the delayed surgeries will progress once hospitals resume normal operations. No allowance has been made for any impact on sales outside Greater China.”

Cochlear said it also assumes there will not be any material disruption to the supply chain, including the importation of components from China.

Mr Howitt continued, “Our Chinese suppliers are expected to resume production of components, which are used primarily for our sound processors and accessories, after the Lunar New Year shutdown. We have at least three months inventory of most components and at this stage do not expect any disruption to our ability to supply products to our customers.”

“Cochlear continues to invest in expanding its market presence and developing a manufacturing footprint in China as we believe in the long-term potential of the market. The Chinese cochlear implant market is important now and into the future and we remain committed to maintaining a leading position,” he added.