Sorin Group Announces Third Quarter 2010 Results: Continuous Cash Flow Expansion and Profitability Growth
- Consolidated revenues at € 180.3 million, up 11.2% (5.5%°*) versus Q3 2009;
- Gross Profit at € 106.1 million, 58.9% of revenues (56.6% in Q3 09);
- EBITDA at € 25.8 million, 14.3% of revenues (12.5% in Q3 09);
- Net Earnings at € 8.2 million, 4.5% of revenues (€ 3.9 million in Q3 09);
- Net financial debt as of September 30, 2010 decreased further to € 156.4 million, compared with € 171.2 million as of June 30, 2010 (€ 198.6 million as of September 30, 2009).
Guidance for the full year, which was revised upwards in July, is confirmed: revenue growth of 4-6%°* compared with 2009, EBITDA at 15-16% of revenues, net earnings at € 36-40 million. Net debt is seen at € 150 million at the end of the period.
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In application of IAS 39, from January 1st, 2010, the Group has implemented the tools and procedures for the application of hedge accounting on derivative financial instruments to cover the risk of fluctuation of exchange rates on highly probable foreign currency transactions (cash flow hedge). For a detailed analysis of the impact of the adoption of hedge accounting on the Company’s results, please refer to the attached table.
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Milan, October 26, 2010– The Board of Directors of Sorin S.p.A., meeting today under the Chairmanship of Rosario Bifulco, approved the results of the Third Quarter of 2010.
“This was a significant quarter in terms of innovation and development, most notably for the publication of the positive results on our Perceval STM sutureless valve. Our financial results continue to meet our expectations, in particular the continued reduction in net debt made possible by the increasing profitability,” said Chief Executive Officer André-Michel Ballester.
Results for the Third Quarter 2010
In the Third Quarter 2010 Sorin Group posted Revenues of €180.3 million, up 11.2% compared with the third quarter of 2009. Excluding discontinued operations°, growth would have been of 5.5% at constant exchange rates. The Cardiac Rhythm Management and Heart Valve business units in particular boosted revenues.
- The Cardiopulmonary Business Unit(heart-lung machines, extra corporeal and autotransfusionblood circulation systems) posted revenues of € 82.6 million, up 2.9%°*, registering a positive performance on all main markets.
The Heart-Lung machines segment maintained or increased its market share in all main geographic areas.
The Oxygenators segment benefited from the integration of Gish Biomedical, recently acquired to further strengthen the Group’s commercial presence in the United States. With the same consolidation perimeter, this segment was stable with positive sales trends in particular in Japan and in emerging countries.
The Autotransfusion segment posted a slight erosion in revenues despite the positive performances in Europe and in emerging markets. During the quarter the company commenced sales of its new generation autotransfusion system (Xtra™), following a launch event at the 24th EACTS annual meeting in Geneva in September. Xtra™ recently obtained FDA sale authorization for the United States.
- The Cardiac Rhythm ManagementBusiness Unit (devices to manage cardiac rhythm disorders) posted revenues of €68.3 million, up 7.7%* compared with the third quarter of 2009, driven in particular by the United States and by a solid performance on the major European markets. In both the High-Voltage and the Low Voltage segments the Business Unit improved its market shares.
In the High-Voltage segment, revenue growth was particularly significant, driven by the favorable penetration of ParadymTMCRT-D on the US and key European markets. ParadymTMshould receive approval on the Japanese market in early 2011.
The Low-Voltage segment grew in line with expectations on all main international markets.
- The Heart Valves Business Unit (mechanical and tissue heart valves and valve repair products) posted revenues of € 28.9 million, up 7.6%* compared with the third quarter of 2009. Contributing to the performance was solid growth in the United States and in the emerging markets in both business segments.
The biological valves confirmed the positive performance of the previous quarters, driven by growth of the MitroflowTM , in particular on the US market.
During the quarter, at the 24th EACTS annual meeting in Geneva, positive clinical results were presented for the first 180 patients implanted with the Perceval S™ Aortic Heart Valve. Between April 2007 and January 2010, 180 patients were enrolled in two consecutive clinical trials in 9 European centers to demonstrate the safety and effectiveness of the valve in high-risk patients. The clinical results indicate significant reduction of surgery duration both for isolated and complex aortic operations, very low morbidity and mortality rate and outstanding hemodynamic performance. To date, over 400 patients have been enrolled in the different phases of the clinical trials. The company confirms its plans to obtain the CE mark during the first half of 2011.
The mechanical valve segment showed an excellent performance driven by higher-than-market growth in the main geographical areas and in particular in the United States.
Gross Profit in the third quarter of 2010 rose 15.7% to € 106.1 million, or 58.9% of revenues compared with 56.6% in the third quarter of 2009. The positive performance was attributable mainly to continued reduction of manufacturing costs as well as to a more favorable product mix and to foreign exchange impact.
Selling, general and administrative (S,G&A) expenses were € 74.3 million, increased to 41.2% of revenues compared with 40.5% in the third quarter of 2009, due to the adoption of hedge accounting in 2010, which had a negative impact in the quarter for € 3.5 million. Net of this impact, SG&A declined in percentage terms, despite the higher investments in the Group’s commercial network and the accruals associated with the medium- and long-term management incentive plans.
Research and Development (R&D) expenses were € 16.3 million, or 9.1% of revenues, slightly down in relative terms if compared with the third quarter of 2009 (10.0% of revenues).
EBITDA grew 27.9% to € 25.8 million (14.3% of revenues) compared with € 20.2 million (12.5% of revenues) in the third quarter of 2009, mainly thanks to gross margin expansion.
EBIT rose 48.3% to € 14.4 million (8.0% of revenues) compared with € 9.7 million (6.0% of revenues) in the third quarter of 2009. Before special items, detailed in the tables, EBIT was € 15.5 million, or 8.6% of revenues (6.0% of revenues in the third quarter of 2009).
Net financial charges fell to € 1.3 million from € 1.8 million in the third quarter of 2009, mainly as a result of the reduction in average debt in the period.
Net Profit was € 8.2 million, or 4.5% of revenues, compared with € 3.9 million, or 2.4% of revenues, in the third quarter of 2009.
Net financial debt at September 30, 2010 decreased further to € 156.4 million, compared with € 171.2 million at June 30, 2010, significantly better than the guidance provided to the market for the period (€165 million) and driven by a solid operating cash flow.
In the last 12 months net debt fell by € 42.2 million (€198.6 million at September 30, 2009), due to the growing operating profitability. The positive and negative special items, amounting to an overall net impact € 0.2 million, were balanced in the period, as detailed in the attached table.
Full year 2010 Guidance
The Guidance for the full year 2010, revised upwards in July, is confirmed: revenue growth of 4-6%**compared with 2009, EBITDA at 15-16% of revenues, net profit at € 36-40 million. Net debt is expected to be € 150 million at the end of the period, taking into account the $ 10 million (approximately € 7.2 million) cash-out to settle the investigation by US Department of Justice, as announced first on March 12th and confirmed on October 22nd, 2010.
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The Board of Directors also adapted the By-laws to the norms and regulations relating to the shareholders rights introduced by legislative decree 27/2010.
In particular, new changes to the By-laws regard the rules and procedures for the presentation and publishing of candidate lists for the Company’s governance bodies and for intervention and representation at shareholders’ meetings (with the introduction of the possibility for electronic notification of the proxies).
The modified By-laws will be available on the Internet site of the Company at the address www.sorin.com, in the section dedicated to Governance, following registration with the Register of Companies.
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Finally, the Board of Directors appointed Massimo Tononi, named at the shareholders meeting of September 14, 2010, as member of the Executive Committee.
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The manager responsible for preparing 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 document results, books and accounting records.
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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 government regulation (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 3,600 employees worldwide, the Group focuses on three major therapeutic areas: cardiopulmonary bypass (extra-corporeal circulation and autotransfusion systems), cardiac rhythm management (CRM), and heart valves. Each year, over 1 million patients are treated with the devices of Sorin Group in more than 80 countries.
For more information, please visit www.sorin.com or contact
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° Excluding discontinued operations: “Angel” (April 2010) and “Endovascular” (March 2010)
*At constant exchange rates
**At comparable FX and perimeter of consolidation