ConvaTec results hit by supply problems; sees tough 2018 H1

Medical equipment maker ConvaTec on Thursday said its 2018 first half would be hit by the problems that led to a profits warning last year, as supply issues continued to weigh on the catheter and colostomy bag maker.

The company reported better-than-forecast 2017 organic revenue growth of 2.3% to £1.76bn, although it described the annual results as “disappointing”ConvaTec reported operating profit $247.8m, up 60.9% year on year.

Adjusted operating profits were down 3.3% to $456.8m due to increased investment in growth and inclusion of plc costs.“Performance was affected by supply constraints in both advanced wound care and ostomy care, and the revenue contribution from new products was lower than anticipated,” the company said.

“This reduced our full year organic revenue growth. Headwinds and cost increases more than offset the productivity improvements delivered, resulting in a negative impact on adjusted gross margin compared to our initial expectation of further improvement in 2017.”

“While we have addressed the issues in manufacturing reported in October, there will be an ongoing impact on performance in 2018, especially in the first half.”

ConvaTec said its fundamentals remained “strong” and it expected to return to market levels of revenue growth in the medium-term, “although progress will be delayed as we address the factors that negatively impacted on our 2017 performance”.