Cochlear bucks the buck

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Healthcare leader Cochlear (COH) announced its first half (HY) earnings result to the market today, with a net-loss of $20.4 million, mainly due to the costs of its recent recall of its headline product, covered here at MacroBusiness.

Cochlear actually surprised to the upside, with consensus forecast earnings before recall costs of $76 million expected, instead of over $80 million reported. In addition, the actual cost of the product recall, at $138 million, came in on the lower side of the expected range of $130-150 million.

Cochlear’s total revenue was up only 3%, with sales down 1% but in constant currency (i.e before the inexorable rise of the AUD) terms up 5%. Here is another world leading Aussie company that fights against a high currency….

In a move that must have also helped the stock price go up nearly 6% in trade this morning, the company announced an increased interim dividend to $1.20 per share (same as last years final dividend, but 14% higher than the corresponding interim, implying higher yields ahead) and highlighting the balance sheet and financial strength of the company.

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Net debt levels remain extremely low as the company continues to deleverage, even though banking facilities were increased and free cashflow expanded, a healthy sign.

Overall, a good result, and one the market is enjoying. A lower AUD would help Cochlear for the rest of FY12, as it still receives over 70% of its sales abroad. This is its core macro risk, in addition to the risk of deterioration of Europe’s economy through slashing public spending (obviously including healthcare).

Disclosure: I have an interest in Cochlear via my family superannuation fund (being a core holding), which I added to yesterday before this result.

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