Cochlear expects another year of profit growth

Cochlear has forecast another rise in annual profit, as new hearing implants gain traction.

Being fitted with a cochlear implant. Picture: Alison Wynd

Cochlear has forecast another rise in annual profit, as new hearing implants gain traction with customers to end a period of weak unit sales.

Cochlear, the world’s biggest hearing implant maker, said it expects a net profit of between $290 million and $300 million in the 12 months through June 2020. That would be higher than the $276.7 million net profit reported for the 2019 fiscal year.

Cochlear, which developed the world’s first hearing implant in the 1970s after its founder experimented with a blade of grass inside a shell found on an Australian beach, has relied on innovation, deal-making and investment in manufacturing capacity to defend its market share.

The company launched its Nucleus Profile Plus implant in the US in late June, and Morgan Stanley this month said the product is proving popular with customers, based on early feedback. The new implant allows users to have MRI scans without the need to remove an internal magnet or use a head wrap.

Cochlear’s implant unit sales fell by 3 per cent to 34,083 in the recent year through June, driven by weakness in emerging market volumes, but management said it hopes new products will help to restore growth.

“We expect strong growth in cochlear implant units in FY20, driven by a number of new products launched late in FY19 and the continued investment in market awareness and access activities,” chief executive Dig Howitt said. “While still early in the year, we have seen an uplift in sales since the launch of the Nucleus Profile Plus series cochlear implant which is currently being rolled out across the developed markets as regulatory approvals are received.”

Cochlear’s fiscal 2019 net profit was a touch above guidance for between $265 million to $275 million, and higher than $245.8 million achieved a year ago.

Directors of the Sydney-based company declared a final dividend of $1.75 a share, up from $1.60 a year ago and bringing the full-year payout to $3.30. The company has held to a policy of paying out about 70 per cent of annual profit to shareholders as dividends for nearly two decades.

Some analysts think Cochlear is at the start of a growth cycle that could last years. Fewer than 5 per cent of people with impaired hearing around the world are currently being treated with implants. World Health Organization data suggest there will be 630 million people with significant hearing loss by 2030.

Cochlear hopes to accelerate growth by bridging the divide between patients using hearing aids and those who could be treated with implants. In 2017, Cochlear bought Sycle in a deal worth up to $US78 million, gaining ownership of software that analyses patients’ audiograms and determines whether they are suitable for an implant.

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