SORIN GROUP ANNOUNCES 2012 THIRD QUARTER RESULTS

Date: 
Oct, 31 2012

Consolidated results for the third quarter of 2012:

  • Revenues were €160.4 million;
  • Net profit was €0.2 million;
  • Free cash flowûwas €10.8 million;
  • Sorin Group estimates that the negative impact for the quarterfrom the manufacturing interruption of the Mirandola plant following the earthquakes of May 2012 was, respectively, around €30 million in revenue, €13 million in net profit and €5 million in cash flow. The income statement does not include yet any indemnification from the insurance policy program;
  • Revenues of the product segments not impacted by the earthquakes increased by 2.6%*over the third quarter of 2011.

 
For the fourth quarter of 2012, Sorin Group expects revenues of €185-190 million. The Company estimates that the product segments impacted by the earthquakes would have generated, under normal conditions, additional revenues of approximately €20 million.
 
For full year 2012, Sorin Group estimates the negative impact of the earthquakes on revenues at around €65-70 million, substantially better than the original outlook.
 
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Milan, 31 October 2012– At a meeting held today and chaired by Rosario Bifulco, the Sorin S.p.A. Board of Directorsapproved the results for the third quarter of 2012.
 
“Despite a challenging macro-economic environment and a quarter in which we were most significantly impacted by the earthquakes, we continued to perform well with good results in our base business and the full operational recovery of the Cardiopulmonary Business Unit”, stated Sorin’s Chief Executive Officer André-Michel Ballester, “As announced at our recent meeting with the financial community presenting Sorin’s Strategic Plan 2012-2017, we are making good progress implementing our long-term growth strategy, as confirmed by the recent CalMed acquisition and Cardiosolutions investment, both closed during the quarter”.
 
Consolidated Results for the Third Quarter of 2012
Sorin Group reported revenues of €160.4 millionfor the third quarter of 2012, a 6.4% decrease as reported over the third quarter of 2011. Revenues of the product segments not impacted by the earthquakes increased by 2.6%*over the same period in 2011.
 

  • The Cardiopulmonary Business Unit(heart-lung machines, extra-corporeal and autotransfusion blood circulation systems) posted revenues of €64.0 million. The heart-lung machines segment, which was not affected by the earthquakes, reported a 12.7%* growth in the quarter, driven by an excellent performance in the United States and in emerging markets. The Group estimates that the negative impact of the earthquakes on revenues is equal to approximately €30 million. As the Company was able to restart the production of both autotransfusion disposable kits and oxygenators significantly ahead of plan, the negative impact of the earthquakes on the top-line was lower than initially anticipated. In July 2012, Sorin Group acquired California Medical Laboratories (“CalMed”), a US-based manufacturer of high-quality cardiovascular cannulae.

 

(*)For details, see table “Consolidated revenues by Business Unit”
 
 

  • The Heart Valves Business Unit (mechanical, tissue and sutureless heart valves and valve-repair products) realized revenues of €28.4 million, a 1.0%* decrease compared to the third quarter of 2011. The mechanical valves segment experienced a contraction in revenues, in line with the continued shift of the market in developed countries toward biological valves. The Company posted a positive performance in tissue valves, thanks to the contribution of PercevalTM and the ongoing penetration of the US market, which more than offset the weak performance in Europe. During the quarter, the Company received CE mark for the Perceval MIS introducer (unique holder to allow minimally invasive procedures) and extended indications for patients over the age of 65. In the third quarter, Sorin Group purchased a minority interest with option-to-buy in Cardiosolutions, an early-stage company developing a platform technology to treat patients with mitral valve regurgitation.


(*) For details, see table “Consolidated revenues by Business Unit”
 
 

  • The Cardiac Rhythm ManagementBusiness Unit(implantable devices to manage cardiac rhythm disorders) reported revenues of €67.4 million, an increase of 1.2%* compared to the same period of 2011, despite the continued contraction of the CRM market. The Company’s growth is mainly attributable to the strong performance in the high voltage segment in Europe, driven by the penetration of Sorin’s CRT-D SonRTM premium device. During the quarter, the Company received the marketing approval from China’s State Food and Drug Administration (SFDA) for its REPLYTM and ESPRITTM pacemakers and commercially launched these products. As stated at the Company’s recent Analyst & Investor Meeting, in order to effectively compete in this rapidly changing environment, Sorin Group is currently evaluating a re-allocation of resources from the base business to its new growth platforms, as well as from developed countries to emerging markets.  


(*) For details, see table “Consolidated revenues by Business Unit”
 
Gross profitwas €98.4 million for the third quarter of 2012,or 61.3% of revenues, compared to 61.1% for the third quarter of 2011, with the slight improvement mainly attributable to a more favourable product mix.
 
Selling, General and Administrative(SG&A) expensesamounted to €76.2 million compared to €69.7 million for the third quarter of 2011, corresponding to a 9.3% increase. At constant foreign-exchange rates, SG&A expenses increased by 0.7% or €0.5 million in absolute terms.
 
Research and Development (R&D)expenses rose by 10.9% to €18.8 million, or 11.7% of revenues (9.9% in the third quarter of 2011).
 
EBITDA was €14.1 million (8.8% of revenues) compared to €27.9 million (16.3% of revenues) in the third quarter of 2011. The Company estimates that the negative impact of the earthquakes on EBITDA, due to lower revenues, was approximately €16 million.
 
EBIT was negative in the amount of €0.3 million compared to €18.1 million in the third quarter of 2011.EBIT before special items was €3.4 million. Special items include non-recurring charges related to the earthquakes in the amount of €3.2 million, such as costs for demolition and reconstruction. The remaining non-recurring charges refer to business development activities.
 
Financial charges amounted to €3.0 million compared to €2.0 million in the third quarter of 2011. The third quarter of 2012 incorporates a financial charge of €0.4 million for the unwinding of an over-hedging position resulting from a lower revenue level following the earthquakes. On a run-rate basis, interest expenses decreased by €0.3 million in the third quarter of 2012, mostly as a result of lower average debt.
Net profitwas €0.2 million compared to €12.1 million in the third quarter of 2011. The Company estimates that the negative impact on net profit related to the earthquakes amounted to approximately€13 millionin the quarter. The income statement does not take into account yet the first installment of €10 million received in July 2012 in relation to the partial insurance indemnification for the earthquakes.
Adjusted net profitwas €3.1 million compared to €12.0 million in the third quarter of 2011. This figure does not reflect the impact of the revenues lost as a result of the earthquakes.
 
Net financial debt as of September 30, 2012 was down to €89.1 million, compared to €122.4millionas of September 30, 2011 (€80.9 million as of June 30, 2012). Net debt was reduced by €33.3 millionin the 12 months ending September 30, 2012.Significant improvement in working capital was offset by special items in the amount of €35.5 million, out of which €31.8 million were associated to business development initiatives (see attached table for details).
 
In the third quarter of 2012, the Company's free cash flowûamounted to €10.8 million. Sorin Group estimates that the negative cash impact related to the earthquakes amounted to approximately€15 million, partially offset by the first installment of €10 million received in July 2012 in relation to the partial insurance indemnification, thus resulting in a negative net impact at cash level of approximately €5 million.
 
 
Consolidated results for the first nine months of 2012
For the first nine months of 2012, Sorin Group posted revenues of €540.3 million, gross profit of €329.8 million (61.0% of revenues),EBITDA of €71.9 million (13.3% of revenues) and net profit of €18.2 million (3.4% of revenues).
Sorin Group estimates that the negative impact for the first nine months 2012from the manufacturing interruption of the Mirandola plant following the earthquakes was, respectively, around €47 million in revenue, €24 million in net profit and €8 million in cash flow.
 
Guidance for the fourth quarter and full year 2012
For the fourth quarter of 2012, Sorin Group expects revenues of €185-190 million. The Company estimates that the product segments impacted by the earthquakes would have generated, under normal conditions, additional revenues of approximately €20 million.
For full year 2012, Sorin Group estimates the negative impact of the earthquakes on revenues at around €65-70 million, substantially better than the original outlook.
* * *
In order to better serve the cardiac surgery clinicians worldwide and leverage Sorin’s leading franchise in Cardiopulmonary, the Company decided to combine its cardiac surgery businesses (Cardiopulmonary and Heart Valves) under the leadership of Michel Darnaud, previously President of Cardiopulmonary and Intercontinental.
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Sorin S.p.A. informs that the Company, pursuant to Article 70, Paragraph 8 and Article 71, Paragraph 1-bis of the CONSOB Resolution no. 11971 of 1999, as amended by Resolution no. 18079 of January 20, 2012, avails itself to make exceptions, from the current date, to the compliance to make available to the public information documents in the event of significant mergers, spin-offs or share capital increase by means of the conferral of assets in kind, acquisition and assignment.  
 
 
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The corporate officer responsible for the company’s financial reports, Demetrio Mauro, declares, pursuant to Paragraph 2 of Article 154-bis of the Consolidated Law on Finance that the accounting information contained in this press release corresponds to the documented results and the accounting books and records.
 
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In addition to the conventional indicators recommended by the IFRS, this press release provides alternative performance indicators. These indicators should not be considered as replacements for the conventional indicators recommended by the IFRS, but rather as an additional source of information, representative of the income statement, balance sheet and financial position parameters used internally in the decision-making process. An explanation of the meaning and structure of these alternative performance indicators is provided in the financial statements at December 31, 2011.
 
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This press release contains forward-looking statements. These statements are based on the Group’s current expectations and projections about future events and, by their nature, are subject to inherent risks and uncertainties. They relate to events and depend on circumstances that may or may not occur or exist in the future, and, as such, undue reliance should not be placed on them. Actual results may differ materially from those expressed in such statements as a result of a variety of factors, including: continued volatility and further deterioration of capital and financial markets, changes in commodity prices, changes in general economic conditions, economic growth and other changes in business conditions, changes in laws and regulations (both in Italy and abroad), and many other factors, most of which are outside of the Group’s control
 
 
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About Sorin Group
Sorin Group (www.sorin.com) is a global company and a leader in the treatment of cardiovascular diseases. The company develops, manufactures and markets medical technologies and innovative therapies for cardiac surgery and for the treatment of cardiac rhythm disorders. With 3,750 employees worldwide, the Group focuses on three major therapeutic areas: cardiopulmonary bypass (extra-corporeal circulation and autotransfusion systems), cardiac rhythm management, and repair and substitution of heart valves. Each year, over one million patients are treated with the devices of Sorin Group in more than 80 countries.
 
 
For additional information, visit: www.sorin.com, or contact:
 

 
Martine Konorski
Director, Corporate Communications
Tel: +33 (0)1 46 01 33 78
Mobile: +33 (0)6 76 12 67 73
e-mail: martine.konorski@sorin.com
 
 
 
Francesca Rambaudi
Director, Investor Relations
Tel: +39 02 69969716
e-mail: investor.relations@sorin.com

 



XFree cash flow: net profit + depreciation, amortization and writedowns ± ∆ working capital – investments. This account is net of the impact of special items
*At comparable exchange rates and perimeter
 See press releases dated June 28, 2012 and July 30, 2012
Adjusted net profit: net profit before the after-tax treatment of non-recurring income and expenses (special items)