Cochlear has reported its first loss since listing in 1995 following the mass recall of one of its key bionic ear devices.
The hearing implant maker on Tuesday reported a $20 million net loss for the half year to December 31, a massive turnaround from the $87.2 million net profit for the previous corresponding period.
While Cochlear’s earnings plunged into the red because of $100 million-plus cost of recalling faulty Nucleus CI500 devices, investors took heart from the fact the net loss was less than expected and the company’s market share was unharmed.
Shares in the company leapt by $4.41, or 7.6 per cent, to close at $62.52.
“Overall, the market has taken this as a positive,” CMC Markets chief market strategist Michael McCarthy said. “They’ve dealt with the problems and are now in a good position to capitalise on their slightly improved position this year.”
Mr McCarthy said Cochlear was fortunate that one of its major competitors, Swiss ear implant maker Sonova, had suffered recall problems of its own in 2011.
“It looks as if Cochlear have finished the year back where they started from, in terms of their market share,” he said.
Cochlear’s shares rose $4.41, or 7.6 per cent, to $62.52, on Tuesday.
Earlier, Cochlear described the first half of the financial year as challenging, mainly because of the global recall which had so far cost $138.8 million before tax.
Cochlear chief executive Chris Roberts said the company acted swiftly and decisively to replace the faulty implants after recalling them in September 2011.
“While the $20 million loss was disappointing, the recall costs have been quarantined and importantly, a record number of recipients received a cochlear implant in the first half,” he said.
Dr Roberts said the recall had little impact on the company’s market share and that Cochlear was still the market leader.
As of January 31, the proportion of Nucleus CI500 series implants reported as failed was 2.4 per cent of registered implants globally.
That was up from its estimate of 1.9 per cent a month earlier.
Cochlear said it did not expect it would experience supply shortages in the second half of the year, as it had in the final three months of 2011.
By December 2011, the weekly implant production levels were already ahead of pre-recall levels.
“The number of newly-reported device failures each month has decreased every month since October 2011,” Dr Roberts said.
Stripping out the effects of the recall, Cochlear’s net profit slid eight per cent to $80.1 million.
Revenue rose three per cent to $387.5 million.
Cochlear declared a partially franked dividend of $1.20 (franked to 60 per cent) per share – up 14 per cent on the prior corresponding period.
