‘Very, very challenging’: Costs hit ResMed as demand soars

Sleep treatment giant ResMed says rising freight costs and semiconductor chip shortages are curbing its ability to meet surging global demand for its devices.

The company’s chief operating officer Rob Douglas said at healthcare event for investment bank Oppenheimer overnight that the medtech was seeing almost “unlimited demand” for its products as a major recall from its competitor Philips continues.

ResMed is seeing incredibly strong demand for its products but cannot keep up because of

“We’re pulling out all stops there as to what we can. But unfortunately, there still will be a shortfall of treatment,” Mr Douglas said.

ResMed earlier this year allocated stock to its patients and partners with the most acute need for products.

Mr Douglas said that the business was working hard to manage costs as freight fees continued to be “very, very challenging” across south-east Asia in particular and were adding to the cost of goods sold.

Shortages of semiconductor chips and electrical components have been an issue throughout the COVID pandemic. The invasion of Ukraine has intensified this situation, with Russia producing about one fifth of the world’s palladium, which is used in semiconductor production.

Mr Douglas said the geopolitical situation “probably isn’t going to help chip shortages”, but noted that ResMed had already been feeling the sting of constrained supply of chips. “In the chip world, in the electronics world, typically, we’d be negotiating ongoing cost improvements. In times of shortage, you can’t - you don’t make any headway in doing that,” he said.

The company said it had benefited from the launch of its new device the Air11, and had passed on surcharges to some customers to help offset some rising costs.

ResMed is not the only medical device company feeling the impact of supply cost inflation, particularly when it comes to freight.

New Zealand-based, ASX listed ventilator maker Fisher and Paykel Healthcare warned investors on Wednesday of a 250 basis point hit to its long-term margin targets because of elevated freight costs.

The company posted a record full-year profit of $524 million in 2021, though revenues are expected to be lower in 2022 as the rush of demand from the pandemic subsides.

“Regardless of how COVID-19 effects unfold over the short term, we are confident our business
is well-placed to contribute to a positive change in clinical practice and improving outcomes for
respiratory patients in general over the long term,” Fisher and Paykel chief executive Lewis Gradon told investors.

ResMed’s ASX shares fell by 1.8 per cent in mid-afternoon trade to $33.78.

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