By Emma Koehn
The global semiconductor shortage has curbed ResMed’s ability to meet surging customer demand, but chief executive Mick Farrell is looking beyond the current supply chain crunch.
Revenues at the sleep treatments maker were up 14 per cent in constant currency terms at $US864.5 million ($1.2 billion) for the three months to March, while income from operations rose 5 per cent to $US234.3 million.
However, the company was forced to shave $US100 million off its predictions for the extra revenues it can make by winning new customers after a recall at competitor Philips left millions of patients in need of sleep apnoea devices.
ResMed has benefitted from a Philips recall which affected more than 3 million devices.
Mr Farrell told The Sydney Morning Herald and The Age that while the company had been forecasting extra revenues of between $US300 million and $US350 million because of the rival’s recall, those projections had been wound back to between $US200 million and $US250 million. This was largely due to chip suppliers “decommiting” - or winding back - orders made a year ago because they had no semiconductors chips to sell.
“It blows me away, I have never had that problem before,” Farrell said.
However, he said ResMed is expecting to capture more revenue from former Philips patients in the next few years as supply chain concerns resolve themselves. The company is hoping to hold on to the former Philips customers they have acquired during this period.
“I think the vast majority of the share that we take from them [Philips], they will never get back,” Farrell said.
ResMed shares fell sharply at Friday’s open and were down 5.1 per cent to $28.84. The company’s numbers slightly missed some analyst consensus forecasts, though some analysts had warned that the market was not fully pricing in the possibility that the company would have to reduce forecast revenue gained from the Philips recall.
“We believe this risk [was] well understood but not fully reflected in fourth-quarter estimates. We remain comfortable that this is largely a timing issue and ResMed remains well positioned,” JP Morgan analyst David Low said.
The company is being affected by chip shortages just like its industry peers but is better placed to mitigate them, he wrote in a note to clients.
ResMed CEO Mick FarrellCredit: The San Diego Union-Tribune
ResMed has been forced to introduce surcharges in some of its markets to counter rising costs, but Farrell said he believes the company will perform well in a higher interest rate, higher inflationary environment.
If a broader economic downturn eventuates, he hopes ResMed may also have better access to parts for its machines, given consumer electronics makers may see less demand for their products.
“I think we will get more chips because Tesla and Apple will say we don’t need as many of these chips right now,” he said.
“ResMed is a very recession-resistant company.”
The medtech giant’s stock is down 16 per cent year-to-date amid a broader sell-down of health care stocks, and closed at $30.38 on Thursday.
The company declared a 42 US cent dividend for the quarter, payable on June 16.
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