Cochlear chief calls on Canberra to improve R&D policy

Cochlear boss Dig Howitt has called on Canberra to do more to help attract global R&D funds.

Cochlear CEO Dig Howitt at the Cochlear facility in Macquarie Park. Ryan Osland/ The Australian

Cochlear chief executive Dig Howitt has called on the federal government to continue to adapt policies to improve Australia’s global competitiveness in attracting research and development funds.

Mr Howitt, who reported the hearing implant maker’s annual results today, said there was a determination from the Morrison government to put policy settings in place to help improve Australia’s international competitiveness.

But the head of the $11 billion global company argued that the policy settings around the R&D tax incentive, which was tweaked before the last election, needed work to help improve the country’s global competitiveness.

“We have seen R&D spending in Australia declining as a portion of GDP and for that to turn around it needs stable policy from government,” Mr Howitt said.

“There needs to be governments investing in R&D and businesses need to invest in R&D, plus universities need to work closely with the business community. We have the right environment to do all that but we need stable policy settings that make it competitive to do R&D in Australia.

“Other countries compete aggressively for technology companies and for R&D, because they see that around R&D you can build companies and industries that have high paying jobs.”

Mr Howitt added that while there had been tax changes to Australia’s R&D tax incentive, there had not been movement on direct investment into R&D, which he said was the next step that needed to be addressed.

Cochlear said in its results that it continued to invest around 12 per cent of its sales revenue each year on R&D. It also highlighted that it had an exciting portfolio of products to be launched over the next 18 months.

The Australian-listed company reported that its net profit was 13 per cent higher at $276.7 million, while sales revenue was 7 per cent higher at $1.4 billion. It also forecast that for next year it expected its underlying profits to increase 9-13 per cent.

Shares in the company are up 5.1 per cent to $211.85.

Mr Howitt added that while he did not watch the share price closely, he did keep a close eye on global trade and macro issues.

He said in most developed countries, healthcare spending was insulated from macro economic conditions.

“We do see in emerging economies that macroeconomic volatility does affect healthcare spending and you saw that in Argentina and Turkey in the last 12 months,” he said.

The Cochlear chief also said today that it was important for the US and China to resolve trade tensions given the global impact it had.

“Like everyone we hope it gets solved,” Mr Howitt said.

“We are a company that is dependent on global trade for our success as is the Australian economy, so most of us would like to see this get resolved in an amicable way relatively soon.”

The annual results also showed that Cochlear’s implant unit sales fell by 3 per cent to 34,083, driven by weakness in emerging market volumes, The company said it hoped new products would help to restore growth.

“We expect strong growth in cochlear implant units in fiscal 2020, driven by a number of new products launched late in fiscal 2019 and the continued investment in market awareness and access activities,” Mr Howitt said.

The results also revealed that shareholders would get a final dividend of $1.75 a share, up from $1.60 a year ago and bringing the full-year payout to $3.30.