By Emma Koehn
The boss of ASX-listed sleep treatments giant ResMed says a global economic slowdown is likely on the way, but believes the recession-resistant nature of the company’s technologies will buoy it as several of the countries it sells into face tough times.
Mick Farrell told this masthead that looking across the portfolio of 140 countries that ResMed sells into, there are a number of worrying signs including slowing growth in China and challenges in the UK and Europe.
ResMed CEO Mick Farrell says it’s clear there’s a global slowdown coming - but demand for the ventilator maker’s products is still soaring.
“I saw Amazon’s numbers and Microsoft’s numbers, just this week – they’re down. And that is a good bellwether, that the tech industry is seeing pain. I think other consume products will decline too.”
ResMed is hoping to navigate through these conditions thanks to two key factors: the essential nature of its products for those with respiratory issues, and the impacts of a major and lengthy recall from the company’s major competitor, Philips.
The Philips recall was first confirmed in June 2021 and involved concerns about the safety of sound-abatement foam in the company’s sleep apnoea products. The situation looks set to drag out into 2023 as the company works to replace or repair some 5.5 million devices worldwide.
That has left a significant market opportunity for ResMed, which booked a five per cent jump in revenue to $US950.3 million ($1.5 billion) for the first quarter of 2023 on Friday. Income was also up by five per cent to $US275.7 million ($425.9 million).
“We actually were able to grow because of the excess demand, and because we’re in a recession resistant, slowdown-resistant [industry],” Farrell said.
Farrell said it’s not clear when Philips would be back in the market as a competitor but said it was fair to say the situation looked set to continue well into next year.
“I want them back, because we can’t keep up with the patient flow,” he said.
The company has been rushing to keep up with demand at a time when semiconductor chip shortages have put a cap on how much additional stock ResMed can produce. On Friday, the business confirmed that one of its strategies to mitigate this was working in the US market.
The group has reworked one of its sleep apnoea devices to take out the communications chip, which was in shortage, and go back to old SD cards.
“What’s great is that we sold a boatload of them in the quarter,” Farrell said, highlighting that many consumers were happy to go back to the old approach of using a card reader to upload their sleep data to the cloud.
Patients in the US, Canada and Latin America were the biggest adopters, with devices revenue up 23 per cent for the quarter.
ASX-listed health stocks have been hit hard in 2022, with the ASX200 health care index down 12.7 per cent for the year. However, ResMed shares have performed better than the overall sector, seeing a decline of 5.5 per cent year-to-date to sit at $33.75 on Friday.
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