COVID demand lifts ResMed full year profit

A COVID-fuelled surge in demand for ventilators has boosted Redmed’s full year profit and made up for a slowdown in its other businesses.

Demand for ResMed’s conventional ventilator products has slumped during the coronavirus crisis but the company’s sales have been boosted by equipment manufactured to combat the pandemic. Picture: Supplied.

A new focus on out-of-hospital care as a result of the coronavirus crisis will stay in place in a post pandemic world, according to ResMed, and the medical device maker expects to benefit from it.

The company’s chief executive, Mick Farrell, said the COVID-19 pandemic has spurred a focus on lung health, as well as digital health and out-of-hospital care, which is good for ResMed in terms of getting people aware of sleep apnoea and other respiratory diseases.

“If I’d asked you 12 months ago the most important organ in the body is in terms of medial devises, you might have said the heart or the brain, you probably wouldn’t have said the lungs, but now, people are saying, ‘gosh lung health, how important is that’,” Mr Farrell told The Australian.

“Those three things – respiratory medicine, digital health and out-of-hospital care are part of ResMed’s 2025 strategy, and we think, in terms of coming back and growing this market, that those got accelerated and we will move faster towards them.”

Unveiling a bumper full-year result after ramping up its manufacturing of ventilators on the back of increased demand due to the COVID-19 outbreak, ResMed revealed on Thursday it had produced 150,000 ventilators in the six months through June to help fight the crisis in 140 countries.

That was 3½ times the number of ventilators produced in the same period a year ago.

“I’ve got to say I’m incredibly proud of the ResMed supply chain team, manufacturing team, distribution team and tech services team because that’s a huge pivot for a business,” Mr Farrell said.

“We probably saved hundreds of thousands of lives because these don’t just get used once, and we kept people breathing and as long as they could keep breathing before the virus filled up their lungs, then they lived and many, many, many people lived because of that production.”

 

San Diageo-based ResMed, which is dual listed on the NYSE and ASX, manufactures devices and cloud-based software solutions to diagnose and treat sleep apnoea and other respiratory conditions. Ventilator production is not the company’s core business.

For the full-year through June 30, the company booked a 13 per cent lift in revenue to $US3bn. Net operating profit increased 40 per cent and ResMed declared a dividend of US39c per share.

Still, the company’s outlook failed to impress investors and ResMed shares lost 7.4 per cent to $25.88 on Thursday, after the company flagged a “U-shaped” recovery in its core sleep apnoea business, with the single digit and EPS growth the company saw in July expected to continue for a 12-month period.

Meanwhile ResMed said it expected a slowdown in ventilator demand ahead as the coronavirus pandemic subsides, despite many countries unaffected by the first wave of the virus forecast by ResMed’s epidemiology models to be impacted by a second wave.

Parts of Latin America, the Middle East and parts of South East Asia are at risk of remaining underprepared for a potential outbreak.

“I think the orders that we have got so far in the book are well below what they should have,” Mr Farrell said.

“We’re certainly working very hard with those countries to maximise their probability of getting the ventilators they need.”

Aberdeen Standard Australian equities head Michelle Lopez said the company’s forward looking statements may have disappointed investors’ high expectations.

“There was a really strong run coming into the results so I think there were high expectations for the company,” she said.

“From a results point of view, it was good, there was nothing in it that made us worry about the longer term strategic of the business, in fact I think the structural tail winds are still very much in ResMed’s favour coming out of the pandemic environment that we are in.”

Ms Lopez said the fact that the company declared a dividend in this economic climate showed the strength of its cashflow and balance sheet.